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EXHIBIT 10.77
THIS FIRST SUPPLEMENTAL AGREEMENT OF LEASE (this "AGREEMENT") made as of the
27th day of March, 2001, between NEW COMMONWEALTH CENTER LIMITED PARTNERSHIP, a
Massachusetts limited partnership, having an office c/o Millennium Partners,
0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("LANDLORD"), and WASHINGTON D.C. SPORTS
CLUB, INC., a Delaware corporation, having an office c/o SCC Sports Club, Inc.,
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000
("TENANT").
WITNESSETH:
WHEREAS, pursuant to that certain Athletic Club Lease, dated as of November 5,
1999 (as the same has been or may hereafter be amended, the "LEASE") between
Landlord and Tenant, Landlord leased to Tenant and Tenant hired from Landlord
certain premises to be located in the Building (as defined in the Lease), such
premises being shown on the delineations annexed to the Lease as EXHIBIT B; and
WHEREAS, Landlord and Tenant desire to amend and modify the Lease to provide for
certain modifications, all as more particularly set forth herein. NOW,
THEREFORE, in consideration of the agreements herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
TERMS
Section 1.1. Except as otherwise defined herein, all terms used in this
Agreement shall have the meanings provided in the Lease.
ARTICLE 2
EFFECTIVE DATE OF AGREEMENT
Section 2.1. Subject to Sections 12.9 and 12.14 hereof, this Agreement
and all of the terms, provisions and conditions hereof shall be effective as of
the date first written above (the "EFFECTIVE DATE").
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ARTICLE 3
COMMENCEMENT OF TERM
Section 3.1. Effective as of the Effective Date, the second sentence of
Section 2.1 of the Lease shall be deemed modified and restated in its entirety
as follows:
"However, the initial term ("INITIAL TERM") of this Lease shall
commence upon the date (the "COMMENCEMENT DATE") which is the earlier
of:
(i) the date on which Tenant commences normal business
operations from the Premises, or any material portion thereof; it being
understood, however, that (a) the use of the Development as described in
Section 2.2 hereof shall not be deemed to constitute normal business
operations from the Premises by Tenant, and (b) the use of the Club by
all of its members for free or at membership rates of no more than
twenty-five percent (25%) of what those rates would otherwise be (as
opposed to discounts or rebates offered to attract members or reduction
in membership rates as a result of the Club not being substantially
completed by Tenant for normal business operations) for up to, but not
more than, a total of ninety (90) days due to Landlord not yet having
Substantially Completed (as defined herein) the Landlord's Work (as
defined herein), including without limitation the work described in
Section 2.1(ii)(c) hereof, shall not be deemed to constitute normal
business operations from the Premises by Tenant (it being understood and
agreed that this Section 2.1(i)(b) shall be inapplicable from and after
the date that Landlord's Work is Substantially Complete); and
(ii) the date which is the last of:
(a) the sixth (6th) month anniversary of the date on which
Landlord shall Substantially Complete the Minimum Landlord's
Work,
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(b) August 1, 2001 (the "SCHEDULED COMPLETION DATE"), the
Scheduled Completion Date being extended by any actual period
that Tenant, using reasonable diligence, shall have been unable
to (1) substantially complete the Improvements in accordance
with the Work Letter (collectively, "TENANT'S WORK") by the
Scheduled Completion Date due to Landlord Delays (as defined
herein) occurring after March 27, 2001 or by reason of an event
of Force Majeure (as defined herein) occurring after March 27,
2001 and/or (2) conduct normal business operations from the
Premises as a result of the non-completion of Landlord's Work by
the Scheduled Completion Date (as adjusted in accordance with
the applicable provisions of this Lease due to Tenant Delays (as
defined herein)) but only if and to the extent that such
non-completion resulted from matters occurring after March 27,
2001; it being agreed that no extensions thereof shall be
aggregated if and to the extent concurrent,
(c) the day on which (i) the Common Areas reasonably
required for the operation of the Club by Tenant (including the
entrance and lobby serving the Club, all required means of
egress and all other public areas immediately adjacent to the
Club's entrance, if any) are Substantially Completed and (ii)
the base building systems and mechanical systems which interface
with and affect the operations of the Club are Substantially
Completed, and
(d) the day on which the parking areas for the Club located
on the B-2 level of the Building are reasonably accessible and
usable for parking purposes, without material impairment by any
on-going construction at the Development."
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ARTICLE 4
LANDLORD'S CONTRIBUTION/ALLOWANCE
Section 4.1. Effective as of the Effective Date, the fourth sentence of
Section 1.2(i) of the Lease shall be deemed modified and restated in its
entirety as follows:
"Subject to and in accordance with the terms and conditions of
the Work Letter and the Lease, Landlord shall provide Tenant with a
contribution in the amount of Eleven Million Five Hundred Thousand and
00/100 Dollars ($11,500,000.00) (the "LANDLORD'S CONTRIBUTION" and/or
the "ALLOWANCE") in connection with hard and soft costs and expenses
actually incurred by Tenant in the performance of certain improvements
by Tenant to be made in and to the Premises approved by Landlord and in
connection with furniture, fixtures and equipment, in each such case, to
initially prepare the Premises for the operation of the Club, and to
build out the presale office for the Club; it being agreed, however,
that such soft costs shall not include any development or other fee paid
to Tenant or any Affiliate."
Section 4.2. Disbursement of the Allowance shall be subject to all of
the terms and conditions set forth in Section 1.2 of the Lease and Article 8 of
the Work Letter; provided, however, that in addition to such terms and
conditions at the time of each Tenant request for disbursement of the Allowance,
Tenant shall deliver to Landlord a certificate from Tenant's architect setting
forth in reasonable detail any delays which have occurred which may affect the
Construction Schedule and/or the Tenant Work Budget and any revisions,
amendments or modifications to the Tenant Plans and Specifications.
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ARTICLE 5
TENANT COMPLETION OF THE IMPROVEMENTS
Section 5.1. (a) Tenant, at its sole cost and expense, shall complete
the Improvements shown on the plans and specifications listed on EXHIBIT A
annexed hereto (collectively, the "TENANT PLANS AND SPECIFICATIONS") in
accordance with the terms and provisions of the Lease (as amended by this
Agreement), the Work Letter, the Construction Schedule and the Tenant Work
Budget. Tenant shall not revise, amend or modify the Tenant Plans and
Specifications without the prior written consent of Landlord.
(b) Annexed hereto as SCHEDULE 1 is the schedule, as of the date
set forth on such schedule, for the performance and completion of Tenant's Work
(the "CONSTRUCTION SCHEDULE"). Annexed hereto as SCHEDULE 1-A is a schedule of
the Tenant's Actual Improvement Costs, as of the date set forth on such
schedule, for Tenant's Work (the "TENANT WORK BUDGET"). Tenant represents and
warrants that the Construction Schedule and the Tenant Work Budget were prepared
in accordance with good construction practice and reflect, to Tenant's actual
knowledge after due and diligent inquiry, the true and correct schedule for the
performance and completion of Tenant's Work, as of the date set forth on the
Construction Schedule, and the true and correct itemization of all of the
Tenant's Actual Improvement Costs for Tenant's Work, as of the date set forth on
the Tenant Work Budget. Tenant shall promptly inform Landlord of any revision,
amendment or modification to the Construction Schedule or the Tenant
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Work Budget; it being agreed that Landlord's prior written consent, not to be
unreasonably withheld, delayed or conditioned, shall be required for any such
revision, amendment or modification the likely effect of which would be to delay
the scheduled opening date of the Club (which is August 1, 2001 as of the date
hereof) from what it would otherwise have been if no such revision, amendment or
modification were made. Notwithstanding anything to the contrary contained
herein and/or in the Lease, Tenant remains obligated for all of Tenant's Actual
Improvements Costs for Tenant's Work.
(c) As a material inducement to and in consideration of Landlord
entering into this Agreement, Tenant shall (i) use commercially reasonable
efforts (which shall include for purposes of this Agreement and the Lease, the
completion of the Improvements on a "work around" schedule basis) to diligently
prosecute to completion and complete the Improvements in accordance with the
terms and provisions of the Lease (as amended by this Agreement) and Work Letter
and open the Premises to the general public for the ordinary conduct of the
business described in Section 8.1 of the Lease contemporaneously with the
opening of the Primary Hotel to the general public (subject to extension for
actual delays resulting from an event of Force Majeure and/or a Landlord Delay
and it being agreed and acknowledged that no such extensions shall be aggregated
if and to the extent concurrent) and (ii) thereafter continuously conduct the
business described in Section 8.1 of the Lease in the Premises in a first-class
manner and during the hours comparable to other
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athletic clubs with comparable facilities operated by Tenant or any Affiliate of
Tenant as of the date hereof (subject to events of Force Majeure and Temporary
Closures). Landlord represents and warrants to Tenant that, to Landlord's actual
knowledge after due and diligent inquiry, the Primary Hotel, as of the date
hereof, is expected to open to the general public on August 1, 2001.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Article 23 of the Lease shall be deemed modified and
restated in its entirety as follows:
"23. DEFAULTS AND REMEDIES.
23.1 Defaults. The occurrence of any one or more of the
following events shall constitute a default hereunder by Tenant
("DEFAULT"):
(i) The vacation or abandonment of the Premises by Tenant or
failure to continuously operate the Club in accordance with Article 8
hereof where Tenant has failed to cure such vacation, abandonment or
failure to operate within fifteen (15) days following notice from
Landlord to Tenant of the need for such cure (which time period is
subject to extension for actual delays resulting from an event of Force
Majeure, and Tenant shall provide reasonable notification thereof to
Landlord), it being understood and agreed, however, that cessation of
operations of business from the Premises from time to time for the
purpose of remodeling the Premises or making alterations, additions or
improvements to the Property (collectively "TEMPORARY CLOSURES") shall
not be considered vacation or abandonment of the Premises provided and
on condition that (1) Tenant shall use commercially reasonable efforts
to complete any and all such work, from time to time, in an expeditious
and non-disruptive manner, (2) Tenant shall have given
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Landlord at least one hundred twenty (120) days prior written notice of
any such Temporary Closure (except with respect to an event of Force
Majeure, and Tenant shall provide reasonable notification thereof to
Landlord), (3) any such Temporary Closure shall not exceed ninety (90)
days in the aggregate (which time period is subject to extension for
actual delays resulting from an event of Force Majeure, and Tenant shall
provide reasonable notification thereof to Landlord), (4) Tenant shall
reasonably cooperate with Landlord in order that any such Temporary
Closure shall not unreasonably disturb the normal operations of the
Primary Hotel and (5) Tenant shall reasonably cooperate with Landlord in
order to provide a temporary means to accommodate the Primary Hotel
Guests during any Temporary Closure, such as the temporary relocation of
a reasonable number of exercise machines and equipment to other areas of
the Premises or to an area in the Primary Hotel for use by the Primary
Hotel Guests during any such Temporary Closure (it being understood and
agreed that all costs and risks associated with such relocation, the use
of any such other areas and such machines and equipment therein, and the
relocation of such machines and equipment back to the Premises when such
use is no longer necessary shall all be the sole obligation and
liability of Landlord);
(ii) Subject to Temporary Closures as provided in Section
23.1(i) hereof and events of Force Majeure, the failure by Tenant to
permit Primary Hotel Guests to have access to the Club to use the
facilities therein subject to and in accordance with the provisions of
Section 4.2 of this Lease, where such failure shall continue for a
period of five (5) business days following notice thereof from Landlord
to Tenant;
(iii) The failure by Tenant to make any payment of Rent or any
other payment required to be made by Tenant hereunder (including the
Work Letter), where such failure shall continue for a period of ten (10)
business days following notice from Landlord to Tenant that such payment
is due;
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provided, however, Tenant shall be entitled to such notice and
opportunity to cure on only two (2) occasions during any Lease Year;
(iv) Other than as expressly specified in Sections 23.1(i),
(ii), (iii), (v) or (vi) hereof or Section 12.10 of the First
Supplemental Agreement of Lease dated as of March 27, 2001 between
Landlord and Tenant, in which case the notice and cure periods specified
therein shall apply, the failure by Tenant to observe or perform any of
the covenants or provisions of this Lease (including the Work Letter) to
be observed or performed by Tenant, where such failure shall continue
for a period of thirty (30) days following notice thereof from Landlord
to Tenant. If the nature of the Default is such that more than thirty
(30) days are reasonably required for its cure, then Tenant shall not be
deemed to be in Default if Tenant shall commence such cure within said
thirty-day period and thereafter diligently prosecutes such cure to
completion, which completion shall occur not later than one hundred
twenty (120) days from the date of such notice from Landlord;
(v) (a) The making by Tenant of any general assignment for the
benefit of creditors; (b) the filing by or against Tenant of a petition
to have Tenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy unless, in the case of
a petition filed against Tenant the same is dismissed within one hundred
twenty (120) days; (c) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within one hundred twenty (120) days; or (d) the
attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where such seizure is not discharged within 120 days; or
(vi) The failure by Tenant to complete the Improvements in
accordance with the terms and
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provisions of this Lease and the Work Letter and/or open the Premises to
the general public for the business described in Section 8.1 of this
Lease within the later of (a) twelve (12) months following the
Substantial Completion of the Minimum Landlord's Work or (b) eighteen
(18) months after the installation of the concrete deck on the fifth
(5th) floor of the Premises, subject to extension due to Force Majeure
and/or Landlord Delay, it being agreed that no such extensions shall be
aggregated if and to the extent concurrent, where such failure shall
continue for a period of thirty (30) days following notice from Landlord
to Tenant.
Any notice provided for in this Section 23.1 shall be in
addition to, and not in lieu of, any statutorily required notice
regarding unlawful detainer actions.
In the event that this Lease is terminated by notice as provided
for in Section 23.1(v) hereof and Tenant shall thereafter seek
protection under the Federal Bankruptcy Laws or any state equivalent,
then Tenant if a debtor-in-possession agrees to consent to any
application by Landlord to terminate the automatic stay provisions of
the Federal Bankruptcy Code on the grounds that there is no equity in
this Lease as a result of the pre-petition termination notice.
23.2 Remedies. In the event of any Default, in addition to any
other remedies available to Landlord at law or in equity, Landlord shall
have the immediate option to terminate this Lease and all rights of
Tenant hereunder. In the event that Landlord shall elect to so terminate
this Lease then Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid Rent which would
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have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid Monthly Base Rent for the balance of the Term after the time of
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided.
As used in Section 23.2(i) and (ii) hereof, the "worth at the
time of award" is computed by allowing interest at the prime, base or
reference rate of The Chase Manhattan Bank of New York, or its
successors, from time to time, charged to its most favored customers on
commercial loans having a 90-day duration (the "PRIME RATE") plus two
percent (2%) (for example, if the Prime Rate was 8%, then the worth at
the time of the award would be computed using a per annum interest rate
of 10%). As used in Section 23.2(iii) hereof, the "worth at the time of
award" is computed by discounting such amount by the Prime Rate at the
time of award. Notwithstanding anything to the contrary contained in
this Lease, neither Landlord nor Tenant shall be liable for
consequential or punitive damages which may be suffered by the other as
a result of a default by Landlord or default by Tenant under this Lease.
23.3 Re-entry. In the event of any Default, Landlord shall also
have the right, without demand or notice, without terminating this
Lease, to re-enter the Premises and remove all persons and property from
the Premises, either by summary proceedings or by action at law, without
being deemed guilty of trespass and without prejudice to any remedies
for nonpayment or late payment of any Rent or breach of any covenant.
Such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. If Landlord
elects to re-enter the Premises, Landlord may terminate this Lease, or
from time to time, without terminating this Lease, may relet all or any
part of the Premises as agent for Tenant for such
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term or terms and at such rental and upon such other terms and
conditions as Landlord may deem advisable, with the right to make
alterations and repairs to the Premises as Landlord, in Landlord's
reasonable judgment, considers advisable and necessary for the purpose
of reletting the Premises. No re-entry or taking possession of the
Premises by Landlord pursuant to this Section 23.3 shall be construed as
an election to terminate this Lease unless notice of such intention is
given to Tenant or unless the termination thereof is decreed by a court
of competent jurisdiction.
If Landlord terminates this Lease or re-enters the Premises
pursuant to this Article 23, Tenant shall remain liable (in addition to
accrued liabilities) for: (i) any unpaid Rent due at the time of
termination, plus interest thereon from the due date at the Prime Rate;
provided, however, that if such interest is limited by law to a lesser
amount, Landlord shall be entitled to the maximum amount of interest
permitted by law, (ii) subject to clause (v) of this paragraph, Rent
until the date this Lease would have expired had such termination not
occurred; (iii) any and all reasonable expenses (including all
reasonable attorneys' fees, costs and brokerage fees) incurred by
Landlord in re-entering and repossessing the Premises, in making good
any Default by Tenant, in protecting and preserving the Premises by use
of watchmen and caretakers and in reletting the Premises (subject to the
provisions of the immediately preceding paragraph and provided that
Tenant shall not be liable for any expenses incurred by Landlord with
respect to alterations which are not consistent with the use of the
Premises as an athletic club and/or a use(s) complementary to an
athletic club); and (iv) any other amount reasonably necessary to
compensate Landlord for any other detriment actually caused Landlord by
Tenant's failure to perform its obligations under this Lease, less (v)
the net proceeds received by Landlord from any reletting prior to the
date this Lease would have expired if it had not been terminated. Tenant
agrees to pay to Landlord the amount so owed above for each month during
the
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Term, at the beginning of each such month. Any suit brought by Landlord
to enforce collection of such amount for any one month shall not
prejudice Landlord's right to enforce the collection of any such amount
for any subsequent month. In addition to the foregoing, and without
regard to whether this Lease has been terminated, Tenant shall pay to
Landlord all costs incurred by Landlord, including reasonable legal fees
and costs, with respect to any lawsuit or action instituted or taken by
Landlord to enforce the provisions of this Lease. Tenant's liability
shall survive the institution of summary proceedings and the issuance of
a warrant or writ thereunder.
If Landlord terminates this Lease, Landlord shall have the right
at any time, at its sole option, to require Tenant to pay to Landlord on
demand, as liquidated and agreed final damages in lieu of Tenant's
liability hereunder: (i) the then present cash value of the Rent, and
all other sums which would have been payable under this Lease from the
date of such demand to the date when this Lease would have expired if it
had not been terminated, minus (ii) the fair market value of the
Premises for the same period; provided, however, that if such damages
are limited by law to a lesser amount, Landlord shall be entitled to
prove as liquidated damages the maximum amount permitted by law.
Landlord shall use commercially reasonable efforts to relet the
Premises in the event this Lease is terminated pursuant to the
provisions of this Article 23.
Tenant, on its own behalf and on behalf of all persons claiming
through Tenant, including, but not limited to, all creditors, does
hereby waive any and all rights and privileges, so far as is permitted
by law, which Tenant and all such persons might otherwise have under any
present or future law: (i) to redeem the Premises; (ii) to reenter or
repossess the Premises; (iii) to restore the operation of this Lease,
with respect to any dispossession of Tenant by judgment, warrant or writ
of any court or judge, or any re-entry by Landlord, any expiration or
termination of
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this Lease, whether such dispossession, re-entry, expiration or
termination of this Lease shall be by operation of law or pursuant to
the provisions of this Lease; or (iv) to the service of any notice of
intention to re-enter or notice to quit which may otherwise be required
to be given. The words "disposition," "re-enter", and "re-elected" as
used in this Lease shall not be deemed to be restricted to their
technical meanings.
In the event of any breach or threatened breach by Tenant or any
persons claiming through Tenant of any of the provisions contained in
this Lease, Landlord shall be entitled to enjoin such breach or
threatened breach and shall have the right to invoke any right or remedy
allowed at law, in equity, or otherwise.
23.4 Cumulative Rights. Except as otherwise expressly provided
in this Lease, all rights, options and remedies of Landlord contained in
this Lease shall be construed and held to be cumulative, and no one of
them shall be exclusive of the others, and Landlord shall have the right
to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law, whether or not stated in this Lease. No
waiver of any Default shall be implied from any acceptance by Landlord
of any rent or other payments due hereunder or any omission by Landlord
to take any action on account of such Default if such Default persists
or is repeated, and no express waiver shall affect Defaults other than
as specified in said waiver.
23.5 Waiver of Trial by Jury. Tenant hereby waives all right to
trial by jury in any claim, action, proceeding or counterclaim by
Landlord against Tenant on any matters arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant,
and/or Tenant's use or occupancy of the Premises."
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ARTICLE 7
NDC RENT
Section 7.1. A new Article 58 is added to the Lease to read in its
entirety as follows:
"58. NDC RENT.
58.1 Definitions: For purposes of this Lease, each of the
following terms shall have the meaning given such term in this Section
58.1 or in the Section of this Lease indicated:
(n) "NET DISTRIBUTABLE CASH" for any period after the opening of
the Club for business shall mean the amount, if any, by which Gross Cash
Receipts (as defined below) exceed the sum of Expenditures (as defined below)
and additions to Reserves (as defined below) if and to the extent permitted in
this Article 57, in each instance, for such period.
(o) "GROSS CASH RECEIPTS" for any period after the opening of the
Club for business shall mean all revenue and income of any nature derived by
Tenant or an Affiliate (exclusive of the Management Fee) for such period from
the Premises or the use or operation thereof, including, without limitation,
amounts released from Reserves, rent, fees, proceeds from business interruption
insurance, governmental allowances and awards and other forms of payments or
awards from any source whatsoever, determined on a cash basis, but exclusive of
any proceeds from (1) Tenant's financing of the leasehold created by this Lease,
(2) any sale, direct or indirect, of any interest in Tenant or Tenant's
operations (it being agreed, however, that the proceeds from any sale of used
Trade Fixtures or Improvements, for salvage value or otherwise, that are not a
part of any sale, direct or indirect, of any interest in Tenant or Tenant's
operations would constitute Gross Cash Receipts), (3) any assignment of Tenant's
interest in this Lease and (4) any subletting of all of the Premises if,
immediately after such subletting, Tenant or an Affiliate shall no longer be in
day to day control of the operations of the Club; provided, however, that in the
event of any subletting immediately after which Tenant or an Affiliate shall no
longer be in day-to-day control of the operations of the Club, NDC Rent shall
continue to be calculated, and due from Tenant, as set forth in this Lease but
as if such subtenant were the tenant under this Lease. Gross Cash Receipts shall
further include, without limitation, any income derived by Tenant or an
Affiliate (whether such income is derived from cash or the receipt of other
non-cash assets such as stock) from the exploitation in connection with the
Premises or the use or operation thereof of any trademark, tradename or other
intellectual property of
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Tenant or an Affiliate, including, without limitation, from the "naming" of the
Club and the sale of any branded merchandise at the Club; it being agreed,
however, that if and to the extent any such intellectual property is exploited
other than in connection with the Premises or the use or operation of the
Premises, then Gross Cash Receipts shall include only the equitable portion, if
any, of cash and only the equitable portion, if any, of the fair market value of
any non-cash assets received from the exploitation of such intellectual
property, in each such instance, in connection with the Premises or the use or
operation of the Premises.
(p) "EXPENDITURES" for any period after the opening of the Club
for business shall mean all cash expenditures made by Tenant or on behalf of
Tenant for such period solely in connection with the Premises, the use or
operation of the Premises or activities outside the Premises but, in the case of
any activities outside the Premises, only if and to the extent that the revenue
and income therefrom is included in Gross Cash Receipts. Without limiting the
foregoing, Expenditures shall include, if and to the extent expended in
connection with the Premises or the use or operation thereof, (i) financing
payments (including principal and interest) and lease payments for fixtures,
furniture and equipment (collectively "FF&E PAYMENTS"); it being agreed,
however, that no such payments shall be included in Expenditures in connection
with any financing or leasing of more than $2,000,000 worth of the initial
fixtures, furniture and equipment needed to open the Club, (ii) the cost of
operating, repairing and maintaining the Premises, (iii) capital expenditures,
(iv) the Management Fee (as defined below) and (v) Start Up Costs (as defined
below) as if incurred the day after the Club opens for business. Expenditures
shall exclude (1) general overhead and administrative expenses, other than the
Management Fee, (2) non-cash expenses, including depreciation, (3) debt service
(including loan amortization) (other than FF&E Payments, which shall be included
in Expenditures if and to the extent set forth above), (4) federal and state
income taxes (it being agreed that Expenditures shall include any sales taxes,
business taxes, gross receipts taxes, or other taxes of a similar nature
assessed at the local level), (5) the hard and soft costs and expenses incurred
by Tenant in the development of the Premises in order to open the Club (other
than FF&E Payments, if and as aforesaid), and (6) NDC Rent (as defined below).
(q) "RESERVES" for any period after the opening of the Club for
business shall mean a reasonable and customary portion of Gross Cash Receipts
(including, without limitation, unearned initiation fees, prepaid dues, prepaid
services, prepaid rents, prepaid payments and security deposits solely with
respect to the Premises) for such period that are set aside by Tenant from such
Gross Cash Receipts for reasonably anticipated expenditures required to
maintain, repair and operate the Club in the Premises in the future in a manner
comparable to other clubs operated by Tenant or an Affiliate (exclusive of the
exclusions from Expenditures set forth in clauses (1) through (6) of the
definition
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of Expenditures); provided that Reserves for any Lease Year shall not include an
amount for capital expenditures greater than 3% of Gross Cash Receipts for such
Lease Year and then only if and to the extent such amount is actually set aside
for capital expenditures. Security deposits shall be added to Reserves at the
later of when received and the Club's opening and shall be deemed released only
if, as and when forfeited or refunded.
(r) "MANAGEMENT FEE" shall mean an amount equal to six percent
(6%) of Gross Cash Receipts for a Lease Year or partial Lease Year; it being
agreed, however, that Gross Cash Receipts, for this purpose only, shall exclude
(i) prepaid dues and initiation fees until earned and released from Reserves,
(ii) prepaid rents and other prepaid payments until applied and released from
Reserves, (iii) security deposits until forfeited and released from Reserves and
(iv) any monies being released from Reserves (for example, but without
limitation, for capital expenditures) if such monies were previously included in
the calculation of a Management Fee when first received by Tenant.
(s) "ADJUSTED NET DISTRIBUTABLE CASH" shall mean an amount equal
to the Net Distributable Cash for a Lease Year minus, in the following order,
the sum of (i) the Percentage Operating Loss Return Payment (as hereinafter
defined), if any, for such Lease Year plus (ii) the aggregate amount of
Percentage Operating Loss Return Payments for prior Lease Years, if any, which
have not been paid to Tenant (other than in violation of the last sentence of
this Section 57.1(f)), plus (iii) the then Outstanding Operating Loss (as
defined below), if any, plus (iv) the Percentage Equity Return Payment (as
hereinafter defined), if any, for such Lease Year plus (v) the aggregate amount
of Percentage Equity Return Payments for prior Lease Years, if any, which have
not been paid to Tenant (other than in violation of the last sentence of this
Section 57.1(f)) plus (vi) the then Outstanding Capital Investment, if any.
Tenant shall apply any and all Net Distributable Cash against the preceding
items (i) through (vi) in such order and in accordance with customary accounting
practices consistently applied.
(t) "OPERATING LOSS" for a period shall mean an amount, if any,
by which the sum of Expenditures and additions to Reserves if and to the extent
permitted in this Article 57 for such period exceeds Gross Cash Receipts for
such period.
(u) "PERCENTAGE OPERATING LOSS RETURN PAYMENT" shall mean an
amount equal to a ten percent (10%) per annum cumulative, annual compounding
return on the aggregate Outstanding Operating Loss (as hereinafter defined).
(v) "OUTSTANDING OPERATING LOSS" shall mean the portion, if any,
of the aggregate of all Operating Losses which have not, as of such date,
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been recouped by Tenant (other than in violation of the last sentence of Section
57.1(f) hereof).
(w) "PERCENTAGE EQUITY RETURN PAYMENT" shall mean an amount equal
to an eleven percent (11%) per annum cumulative, annual compounding return on
the aggregate Outstanding Capital Investment (as hereinafter defined).
(x) "CAPITAL INVESTMENT" shall mean the aggregate hard and soft
costs and expenses actually incurred by or on behalf of Tenant prior to the
opening of the Club for business in order to open the Club for business,
including, without limitation, costs of tenant improvements, furniture, fixtures
and equipment and the costs of building out the presale office of the Club, but
exclusive of (A) any fixtures, furniture or equipment that is the subject of any
FF&E Payments if and to the extent such FF&E Payments are included in
Expenditures, (B) the Allowance and any other contributions or payments made by
Landlord to Tenant on account of any work or installation made in the Premises
and (C) Start Up Costs; it being agreed, however, that Capital Investment, as of
the Commencement Date, shall not exceed $12,500,000 in the aggregate.
(y) "OUTSTANDING CAPITAL INVESTMENT" shall mean an amount equal
to that portion, if any, of the Capital Investment which has not, as of such
date, been recouped by Tenant. Tenant shall apply any and all Adjusted Net
Distributable Cash against the then Outstanding Capital Investment in accordance
with customary accounting practices consistently applied.
(z) "START UP COSTS" shall mean all costs incurred by or on
behalf of Tenant prior to the opening of the Club solely in connection with the
opening of the Club that are not hard and soft costs of the performance of
improvements in and to the Premises (such improvements including, without
limitation, the build out of the presale office for the Club) or of furniture,
fixtures and equipment. Start Up Costs include, without limitation, costs
incurred in connection with the sale of memberships before the opening of the
Club and the hiring and training of Club personnel, including, without
limitation, costs incurred in connection with operating any pre-sale office,
personnel costs, commissions and marketing.
58.2 NDC Rent.
(a) Tenant shall pay to Landlord, as Additional Rent and
in the manner hereinafter provided, an amount equal to twenty-five
percent (25%) of any Adjusted Net Distributable Cash for a Lease Year or
partial Lease Year (the "NDC RENT").
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NDC Rent shall be payable on a quarterly basis (as estimated by Tenant
in good faith based on Tenant's books and records) contemporaneously
with the delivery of a Quarterly Statement (as hereinafter defined).
(b) (i) On or before the thirtieth (30th) day following
the expiration of each quarterly period during the Term, Tenant shall
deliver to Landlord a quarterly statement (each a "QUARTERLY STATEMENT")
signed and certified by the Financial Officer of Tenant to be true and
correct to the best knowledge of the Financial Officer of Tenant
disclosing the Adjusted Net Distributable Cash for the preceding
quarterly period and an itemization of the Net Distributable Cash, the
Gross Cash Receipts, the Expenditures, the Reserves, the Management Fee,
the Operating Loss, the Percentage Operating Loss Return Payment, the
Outstanding Operating Loss, the Percentage Equity Return Payment and the
Outstanding Capital Investment for such period which were used to
compute the Adjusted Net Distributable Cash and the NDC Rent for such
period.
(ii) Tenant shall submit to Landlord, on or before the
ninetieth (90th) day following the end of each Lease Year (including,
without limitation, the last Lease Year or partial Lease Year during the
Term of the Lease, as to which Tenant's obligation to pay NDC Rent shall
survive the Expiration Date or sooner termination of this Lease) an
auditor's report (each, a "NDC STATEMENT"), which shall (A) be prepared,
at Tenant's sole cost and expense, by a so-called "Big 5" accounting
firm ("TENANT'S ACCOUNTING FIRM") and (B) disclose the Adjusted Net
Distributable Cash and the NDC Rent for such Lease Year. Each NDC
Statement shall disclose the Adjusted Net Distributable Cash and the NDC
Rent for such Lease Year or fraction of a Lease Year and an itemization
of the Net Distributable Cash, the Gross Cash Receipts, the
Expenditures, the Reserves, the Management Fee, the Operating Loss, the
Percentage Operating Loss Return Payment, the Outstanding Operating
Loss, the Percentage Equity
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Return Payment and the Outstanding Capital Investment for such period
which were used to compute the Adjusted Net Distributable Cash and the
NDC Rent. Subject to Landlord's right to dispute such NDC Statement
pursuant to Article 59 hereof, if such NDC Statement shall show that the
amounts, if any, paid to Landlord under Section 58.2(a) hereof exceed
the amount actually due under such NDC Statement for such Lease Year,
then Landlord shall credit Tenant the amount of such overpayment
(together with interest thereon at the Prime Rate less five percent
(5%)) (e.g., if the Prime Rate was 8%, then interest thereon would be
calculated at a per annum rate of 3%), but not less than three percent
(3%), from the date such overpayment was paid to Landlord to the date
such overpayment is credited or refunded, as applicable, as provided in
this Section if the actual amount of NDC Rent actually received by
Landlord under Section 58.2(a) hereof was more than ten percent (10%)
higher than the actual amount due and payable to Landlord pursuant to
Section 58.2(a) hereof) against the next accruing installment(s) of NDC
Rent and if the amount of the credit exceeds the amount of the
subsequent installment(s) of NDC Rent due under this Lease, the excess,
together with the aforementioned interest, shall be refunded to Tenant
within thirty (30) days of the receipt of such NDC Statement. If such
NDC Statement shall show that the amounts, if any, paid to Landlord
under Section 58.2(a) hereof are less than the amount actually due under
the NDC Statement for such Lease Year, then Tenant shall pay the
underpayment to Landlord contemporaneously with the delivery of such NDC
Statement to Landlord, together with interest thereon from the date such
payment was due to the date such payment is paid at the Prime Rate less
five percent (5%) (e.g., if the Prime Rate was 8%, then interest thereon
would be calculated at a per annum rate of 3%), but not less than three
percent (3%), if the actual amount of NDC Rent payable to Landlord under
Section 58.2(a) hereof was more than ten percent (10%) higher than the
amount paid to Landlord. The acceptance by Landlord of such NDC
Statement, or payments of NDC Rent with respect thereto, shall be
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without prejudice and shall in no event constitute a waiver of
Landlord's right to claim a deficiency in the payment of NDC Rent or to
audit Tenant's books and records (as hereafter set forth) for a period
of twenty-four (24) months from the date of receipt of such NDC
Statement. If Landlord does not notify Tenant in writing of any dispute
as to any NDC Statement within such twenty-four (24) month period, then
Landlord shall waive its right to dispute such NDC Statement."
ARTICLE 8
BOOKS AND RECORDS
Section 8.1. A new Article 59 is added to the Lease to read in its
entirety as follows:
"59. BOOKS AND RECORDS.
59.1 (a) (i) In the event Tenant fails to maintain such books of
account or other records as required hereunder adequate for Landlord to
perform an audit of the accuracy of the NDC Statement ("REQUIRED
RECORDS") as provided herein for the first Lease Year, then, in such
event, the Adjusted Net Distributable Cash and the NDC Rent for such
Lease Year shall be the amount which, in the opinion of Tenant's
Accounting Firm, reflects a fair and accurate estimate of the Adjusted
Net Distributable Cash and the NDC Rent for such first Lease Year,
subject to Landlord's right to dispute such estimate pursuant to this
Article 59.
(ii) Tenant shall prepare and keep in Tenant's main
accounting office in the United States of America for a period of not
less than twenty-four (24) months following the end of each Lease Year
(plus any additional time during which an audit or dispute with respect
to the Adjusted Net Distributable Cash or the NDC Rent for such period
is pending), true, complete and accurate books of account and records of
the Net Distributable Cash, the Gross Cash Receipts, the Expenditures,
the Reserves, the Management Fee, the Operating Loss, the Percentage
Operating Loss Return Payments, the
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Outstanding Operating Loss, the Percentage Equity Return Payments and
the Outstanding Capital Investment from which the Adjusted Net
Distributable Cash and the NDC Rent can be determined.
(iii) Landlord shall have the right, at any time and from
time to time for a period of twenty-four (24) months following the
submission of each NDC Statement to Landlord (which period shall be
extended for any additional time during which an audit with respect
thereto is pending), upon reasonable written notice, to cause a
so-called "Big 5" accounting firm to perform on behalf of Landlord a
complete audit to be made in accordance with standard auditing practices
of all Required Records pertaining to the Adjusted Net Distributable
Cash and the NDC Rent and of any one or more NDC Statements, and in
connection with such audit, to examine the books of account and records
(including, without limitation, all supporting data and any other
records from which the Adjusted Net Distributable Cash and the NDC Rent
may be tested or determined) of the Adjusted Net Distributable Cash and
the NDC Rent disclosed in any statement given to Landlord; and as to
Tenant's books of account and records, Tenant shall make all such books
of account and records with respect to the Adjusted Net Distributable
Cash and the NDC Rent available for such examination in the United
States of America at the office where the same are regularly maintained.
Landlord and Landlord's accounting firm shall have the right, at
Landlord's sole cost and expense, to copy and duplicate such information
as Landlord may require and use Tenant's duplicating machines in
connection therewith. Tenant shall cooperate with Landlord and
Landlord's accounting firm in connection with any such audit and shall
furnish to Landlord and Landlord's accounting firm within ten (10) days
after written demand representations signed and certified by the
Financial Officer of Tenant to be true and correct as may be necessary
for the issuance of an audit opinion by Landlord's accounting firm with
respect to Adjusted
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Net Distributable Cash and the NDC Rent for any Lease Year. Landlord
shall promptly provide Tenant with a copy of any such audit.
(iv) If any such audit discloses that, with respect to the
period for which Landlord conducted such audit, Tenant paid less NDC
Rent than Tenant was obligated to pay in accordance with the terms and
conditions of this Lease, then Tenant shall pay Landlord the amount of
such underpayment (with interest thereon at the greater of ten percent
(10%) per annum or the Prime Rate from the date such payment was due to
the date such payment is paid) within thirty (30) days after demand
therefor and, if the audit discloses that a NDC Statement was inaccurate
and the actual amount of NDC Rent payable to Landlord was more than five
percent (5%) higher than the amount paid by Tenant as a result of any
such inaccuracy and/or if the audit discloses that a Quarterly Statement
was inaccurate and the actual amount of NDC Rent payable to Landlord was
more than ten percent (10%) higher than the amount paid by Tenant as a
result of any such inaccuracy, then Tenant shall, in addition to such
additional NDC Rent plus interest, pay to Landlord the reasonable actual
out-of-pocket cost of such audit and examination incurred by Landlord
(not to exceed $7,500.00 in each instance) within thirty (30) days after
demand therefor. If any such audit discloses that, with respect to the
period for which Landlord conducted such audit, Tenant paid more NDC
Rent than Tenant was obligated to pay in accordance with the terms and
conditions of this Lease, then Landlord shall credit the amount of such
overpayment (with interest thereon at the Prime Rate from the date such
overpayment was paid to Landlord to the date such overpayment is
credited or refunded, as applicable, as provided in this Section
59.1(a)(iv)) against the next accruing installment(s) of NDC Rent and if
the amount of the credit exceeds the amount of the subsequent
installment(s) of NDC Rent due under this Lease, the excess shall be
refunded to Tenant within thirty (30) days after any such audit by
Landlord. If any audit shall be commenced by
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Landlord or if there shall arise a dispute concerning the Adjusted Net
Distributable Cash and/or the NDC Rent, then, and in any such event, the
books of account and records required to be maintained shall be
preserved and retained until such audit has been completed or there has
been a final resolution or final determination of such dispute or any
related litigation.
(b) If Tenant shall fail to prepare and deliver any NDC
Statement, Landlord shall have the right, in addition to any other
rights or remedies Landlord may have hereunder, to audit the Required
Records, and to prepare the statement or statements which Tenant has
failed to prepare and deliver. Such audit shall be made and such
statement(s) shall be prepared by an independent certified public
accountant selected by Landlord. Subject to Tenant's arbitration rights
under Article 60 hereof, the statement(s) prepared by Landlord shall be
conclusive and binding upon Tenant, and Tenant shall pay within fifteen
(15) days after rendition of a xxxx, all expenses incurred in the
preparation of such statement(s) and all sums, if any, as may be shown
by such audit to be due as NDC Rent, together with interest thereon at
the greater of ten percent (10%) per annum or the Prime Rate from the
date such payment was due hereunder.
(c) If a dispute arises with respect to the determination
of the Adjusted Net Distributable Cash or NDC Rent payable hereunder
which dispute is not resolved within thirty (30) days after the date
that NDC Rent is due hereunder, then, at any time within twenty-four
(24) months following submission of the applicable NDC Statement to
Landlord (which period shall be extended for any additional time during
which an audit with respect thereto is pending), either party may by
notice to the other submit the dispute to arbitration pursuant to
Article 60 hereof. Pending the determination of such dispute, Tenant
shall pay all amounts not in dispute in accordance with Section 58.2
hereof. If such arbitration shall mandate that additional amounts are
due Landlord, then Tenant shall pay to Landlord such
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amount with interest thereon at the greater of ten percent (10%) per
annum or the Prime Rate from the date such payment was due hereunder. If
such arbitration shall mandate that Tenant paid more NDC Rent than
Tenant was obligated to pay in accordance with the terms and conditions
of this Lease, then Landlord shall credit the amount of such overpayment
(with interest thereon at the Prime Rate from the date such overpayment
was paid to Landlord to the date such overpayment is credited or
refunded, as applicable, as provided in this Section 59.1(c)) against
the next accruing installment(s) of NDC Rent and if the amount of the
credit exceeds the amount of the subsequent installment(s) of NDC Rent
due under this Lease, the excess shall be refunded to Tenant within
thirty (30) days after any such arbitration decision.
(d) Landlord shall at all times maintain the
confidentiality of the Quarterly Statements and the NDC Statements,
except to the extent reasonably necessary to (i) comply with applicable
laws, regulations, court or administrative orders, or to prosecute or
defend any claim or suit by litigation or otherwise under this Lease,
and (ii) provided that the recipients of such information agree in
writing to hold same in confidence (A) carry out the obligations set
forth in this Lease or documents evidencing and/or securing any ground
leases or underlying leases which may now exist or hereafter be executed
affecting the Premises, any lien of any mortgage or deed of trust which
may now exist or hereafter be executed in any amount for which the
Premises is specified as security, and any condominium documents and any
private covenants, conditions or restrictions or reciprocal easements
which may now or hereafter be recorded encumbering the Development, (B)
obtain legal, financial and/or tax advice from Landlord's attorneys,
accountants and financial advisors, (C) negotiate or complete a
transaction with a lender to Landlord or any Affiliate of Landlord
secured by Landlord's and/or such Affiliate's interest in the
Development, any building situated on the Development or this Lease
(including, without limitation, a pledge of rents payable thereunder) or
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purchaser of any building situated on the Development or the Development
or (D) negotiate or complete a public or private syndication or similar
offering involving this Lease, Landlord or any Affiliate of Landlord,
the interests of any of the members of Landlord or any Affiliate of
Landlord, the Development and/or any building situated on the
Development."
ARTICLE 9
ARBITRATION
Section 9.1. A new Article 60 is added to the Lease to read in its
entirety as follows:
"60. ARBITRATION.
60.1 In each case specified in Articles 58 and 59 of this
Lease in which resort to arbitration shall be required, such arbitration
(unless otherwise specifically provided in other Sections of this Lease)
shall be in New York City with respect to the first, third, fifth and
each subsequent odd arbitration entered into in connection with said
Articles and in Los Angeles, California with respect to the second,
fourth, sixth and each subsequent even arbitration entered into in
connection with said Articles in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and the
applicable provisions of this Lease, and judgment upon the award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
60.2 Either party may request arbitration of any matter in
dispute wherein arbitration is expressly provided in Articles 57 and/or
58 this Lease as the appropriate remedy. The party requesting
arbitration shall do so by giving written notice to that effect to the
other party, specifying in such notice the nature of the dispute and the
name and address of the person designated to act as an arbitrator on its
behalf. Within fifteen (15) days after the service of such notice, the
other party shall give notice to the first party specifying the name and
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address of the person designated to act as an arbitrator on its behalf.
If the second party fails to notify the first party of the appointment
of its arbitrator, as aforesaid, within the time above specified, then
the appointment of the second arbitrator shall be made in the same
manner as hereinafter provided for the appointment of a third arbitrator
in a case where the two arbitrators appointed hereunder and the parties
are unable to agree upon such appointment. The two arbitrators so chosen
shall meet within ten (10) days after the second arbitrator is appointed
and if, within thirty (30) days after the second arbitrator is
appointed, the two arbitrators shall not agree upon the question in
dispute, they shall together appoint a third arbitrator. In the event of
their being unable to agree upon such appointment within thirty (30)
days after the appointment of the second arbitrator, the third
arbitrator shall be selected by the parties themselves if they can agree
thereon within a further period of fifteen (15) days. If the parties do
not so agree, then either party, on behalf of both and on notice to the
other, may request such appointment by the American Arbitration
Association (or any organization successor thereto) in accordance with
its rules then prevailing or if the American Arbitration Association (or
such successor organization) shall fail to appoint said third arbitrator
within fifteen (15) days after such request is made, then either party
may apply, on notice to the other, to the Supreme Court in the County of
New York or in the County of Los Angeles, as applicable (or any other
court having jurisdiction and exercising functions similar to those now
exercised by such court) for the appointment of such third arbitrator.
Such third arbitrator chosen or appointed pursuant to this Section shall
be a disinterested person and each arbitrator chosen or appointed shall
have at least ten (10) years' experience in the County of New York or in
the County of Los Angeles, as applicable, in a calling connected with
the dispute.
60.3 The arbitrators shall have the right to retain and
consult experts and competent authorities skilled in the matters under
arbitration. The
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arbitrators shall render their award, upon the concurrence of at least
two (2) of their number, within sixty (60) days after the appointment of
the third arbitrator. Such award shall be in writing and shall be final
and conclusive on the parties and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Lease. Judgment may be had on the decision and award
of the arbitrators so rendered, in any court of competent jurisdiction.
60.4 If for any reason whatsoever the written decision and
award of the arbitrators shall not be rendered within sixty (60) days
after the appointment of the third arbitrator, then at any time
thereafter before such decision and award shall have been rendered
either party may apply to the Supreme Court of the State of New York or
to the Supreme Court of the State of California, as applicable, or to
any other court having jurisdiction and exercising the functions similar
to those now exercised by such court, by action, proceeding or otherwise
(but not by a new arbitration proceeding) as may be proper to determine
the question in dispute consistent with the provisions of this Lease.
60.5 Each party shall pay the fees and expenses of the one
of the two original arbitrators appointed by or for such party, as well
as the attorneys' fees, witness fees and similar expenses incurred by
such party, and the fees and expenses of the third arbitrator and all
other expenses of the arbitration shall be borne by the parties equally.
Notwithstanding the foregoing, if a majority of the arbitrators
determine that the position of either party was taken willfully and is
without merit or the consent of either party was unreasonably withheld
or delayed, the arbitrators may require such party to bear all the
expenses of the arbitration as well as the prevailing party's witness
fees, attorney fees and similar expenses.
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60.6 In the case of any arbitration hereunder, the
arbitrators shall be instructed and will give effect to the intent of
this Lease."
ARTICLE 10
OPERATIONAL BUDGETS AND OPERATIONAL STRATEGIES
Section 10.1. A new Article 61 is added to the Lease to read in
its entirety as follows:
"61. OPERATIONAL BUDGETS AND STRATEGIES.
61.1 On an annual basis, Tenant shall prepare a written
line item budget in reasonable detail and substantially in the form of
SCHEDULE 2 annexed hereto ( the "INITIAL OPERATIONAL BUDGET") of all
anticipated Net Distributable Cash, Gross Cash Receipts, Reserves,
Management Fees, Adjusted Net Distributable Cash, Operating Losses,
Percentage Operating Loss Return Payments, Outstanding Operating Losses,
Percentage Equity Return Payments, Outstanding Capital Investment, and
NDC Rent for the next fiscal year of Tenant (each such budget, a
"BUDGET" and each such fiscal year, a "FISCAL YEAR") and shall submit
such Budget to Landlord for its information and review as and when the
same shall be prepared by Tenant in the course of its ordinary business
practice but not later than the commencement of such Fiscal Year.
Simultaneously with the delivery of the Budget for each Fiscal Year,
Tenant shall also deliver to Landlord for its information and review a
reasonably detailed operations, sales and marketing strategy for the
Premises (said strategy, the "STRATEGY"). Tenant shall also prepare and
submit to Landlord, for its information and review, within 30 days after
the end of each month after the general opening of the Club to its
members, reasonably detailed information regarding that month's
operating revenue, expenditures, membership level, membership sales and
marketing activities. Notwithstanding the foregoing, however, Tenant
shall not be required to prepare and deliver to Landlord pursuant to
this Section 61.1 any information not otherwise already
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being prepared by Tenant for its own internal use. Tenant shall give
good faith consideration to any comments Landlord may have regarding any
such Budget, Strategy or monthly information but shall not be required
to implement any of the same. Landlord shall keep all such Budgets,
Strategies and monthly materials confidential, except that Landlord may
disclose such materials (i) if and then only to the extent as may be
required by process of law, (ii) to its professional advisors if they
agree to keep such materials confidential on the same terms as Landlord
is required to keep them confidential and (iii) to any potential
purchaser of the Premises or any interest therein, any lender
potentially making a loan secured in whole or in part by the Premises,
or any potential purchaser of any interest, direct or indirect, in
Landlord, but in each such case, only if the party in question agrees to
keep such materials confidential on the same terms as Landlord is
required to keep them confidential.
ARTICLE 11
BROKERAGE
Section 11.1. Tenant and Landlord each represent and warrant that
neither consulted or negotiated with any broker or finder with regard to the
terms of this Agreement. Tenant and Landlord each agree to indemnify, defend and
save the other party harmless from an against any claims for fees or commissions
from anyone with whom the indemnifying party has dealt in connection with the
terms of this Agreement.
ARTICLE 12
MISCELLANEOUS
Section 12.1. Except as may be expressly modified or amended by
this Agreement, the terms, covenants and conditions of the Lease are hereby
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ratified and confirmed and shall be and remain in full force and effect in
accordance with their terms. Except insofar as reference to the contrary is made
in any such instrument, all references to the "Lease" in the Lease and any
future correspondence, notice or instrument shall be deemed to refer to the
Lease as modified by this Agreement.
Section 12.2. This Agreement shall not be binding upon Landlord
and Tenant unless and until it is signed by both parties hereto and a signed
copy hereof is delivered by Landlord to Tenant.
Section 12.3. This Agreement constitutes the entire agreement
among the parties hereto with respect to the matters stated herein and may not
be amended or modified unless such amendment or modification shall be in writing
and signed by the party against whom enforcement is sought.
Section 12.4. The terms, covenants and conditions contained in
this Agreement shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns (subject in any event to the limitations
and prohibitions set forth in the Lease on Tenant's right to assign its interest
therein).
Section 12.5. This Agreement shall be governed in all respects by
the laws of the Commonwealth of Massachusetts.
Section 12.6. Article 9 of the Lease is modified by changing all
references to "Battle Xxxxxx LLP" to "Paul, Hastings, Xxxxxxxx & Xxxxxx LLP."
Section 12.7. Except as expressly modified herein, the parties
hereto affirm that the Lease is in full force and effect.
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Section 12.8. Tenant hereby grants the residents of the
condominium units in the Building, if and for so long as valet parking within
the Development shall also be reasonably available to such residents, the
non-exclusive use of the elevators located in the Premises for access to and
from the Building garage from and to the Building lobby.
Section 12.9. This Agreement shall be subject to the approval of
Landlord's lender, Fleet Bank National Association (the "LENDER"). After the
date this Agreement is executed and delivered by both parties hereto, Landlord
agrees to promptly submit this Agreement to the Lender for its approval and
Landlord shall use commercially reasonable efforts thereafter to diligently
obtain the approval of the Lender, including the funding of additional funds or
the depositing of additional funds with the Lender reasonably required by the
Lender (but not in excess of an additional $2,000,000 in the aggregate in
respect of the increase in the Landlord Allowance from the $9,500,000 originally
set forth in the Lease to the $11,500,000 set forth in the Lease as amended by
this Agreement) in order to obtain the approval of the Lender. In connection
with the foregoing, Tenant agrees to reasonable cooperate with Landlord to
obtain the approval of the Lender and Tenant hereby consents to any non-material
modifications to this Agreement reasonably requested by the Lender. If the
Lender disapproves of this Agreement, (a) this Agreement shall be cancelled and
be of no further force or effect and neither party hereto shall have any further
rights, liabilities or obligations hereunder, it being agreed and understood,
however, that if this
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Agreement is not approved by the Lender, then the parties' respective rights,
duties, obligations and positions in respect of the Lease shall remain unchanged
by this Agreement and shall be what they would have been if this Agreement had
never been signed, and (b) thereafter Landlord and Tenant shall negotiate in
good faith so that Landlord and Tenant shall obtain the benefits of the material
terms set forth in this Agreement, including, without limitation, the Landlord
Contribution and the obligations of Tenant described in Article 5 hereof,
whether by means of the execution of a certain subsequent agreement(s) between
the parties which is mutually acceptable or in such other mutually agreeable
manner.
Section 12.10. Tenant agrees that Tenant shall take no willful
action, not otherwise permitted in accordance with the terms and conditions of
this Lease, the effect of which shall be to materially interfere with the
operations, use or enjoyment of any portion of the Development, other than the
Premises, by the occupants or users thereof. Landlord agrees Landlord shall take
no willful action, not otherwise permitted to be taken by Landlord in accordance
with the terms and conditions of this Lease, the effect of which shall be to
materially interfere with the operations, use or enjoyment of the Premises or
its associated parking and other Common Areas by Tenant, any permitted
subtenant, members of the Club or other permitted occupants or users of the
Premises; provided, however, that the use by Landlord or a Person other than
Tenant of any space within the Development that is not a part of the Common
Areas shall not be a violation of this Section 12.10 if and for so long as such
use is not prohibited by
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Section 8.4 of the Lease. Landlord further agrees that it shall promptly and
diligently exercise any rights and remedies it may have under any documents
pertaining to the Project (including, without limitation, any covenants,
conditions and restrictions and any declaration of any condominium association
for all or any part of the Project) so as to prevent or halt any act or omission
which materially interferes with the operations, use or enjoyment of the
Premises or its associated parking and other Common Areas by Tenant, any
permitted subtenant, members of the Club or any other permitted occupants or
users of the Premises. Landlord further agrees that, for so long as it is the
owner of the parking associated with the Premises, it shall not permit any
operator of such parking, whether under a parking lease, a parking management
contract, or otherwise, to take any willful action, not otherwise permitted to
be taken by Landlord in accordance with the terms and conditions of this Lease,
the effect of which shall be to materially interfere with the parking rights
granted Tenant under Section 36 of the Lease. If Landlord shall, at any time,
not own the parking associated with the Premises, then Landlord, before Landlord
shall have ceased to own the same, shall have taken such actions as are
reasonably necessary in order for the owner of the parking spaces to which
Tenant has rights hereunder to acknowledge and agree (i) to preserve such
parking rights, subject to the terms and conditions of this Lease applicable to
such parking spaces, and (ii) that Tenant is an express third party beneficiary
of the agreement described in the immediately preceding clause (i) and is
entitled to enforce the same against
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such owner, as a non-exclusive remedy and at such owner's expense if Tenant is
the prevailing party, as if such agreement had been made directly with Tenant.
The failure of Landlord or Tenant to perform under this Section 12.10, if and
for so long as such failure shall continue for a period of three (3) days
following notice thereof from the other party, shall constitute, as applicable,
a Default by Tenant or a default by Landlord, in each case, without there being
any additional notice and cure period applicable thereto, whether under Section
23 of the Lease or otherwise; provided, however, that if there shall be two such
failures by a party in any consecutive twelve (12) month period, then any
additional such failure by such party during such twelve (12)-month period shall
continue to be, as applicable, a Default by Tenant or a default by Landlord even
if such failure shall subsequently be cured after the expiration of the three
(3)-day period commencing upon notice thereof from the other party.
Section 12.11 Notwithstanding anything to the contrary contained in the Lease,
in no event shall the payment of any interest due under the Lease, from time to
time, be calculated at a rate higher than the maximum permitted legal rate.
Section 12.12 The following new Section 46.4 is hereby added to the Lease as
follows:
"In the event that any of the machinery, fixtures, furniture and
equipment installed by Tenant (collectively, "COLLATERAL"), from time to
time, in the Premises are purchased or acquired by Tenant subject to a
chattel mortgage, conditional sale agreement or other title retention or
security agreement, Landlord agrees, at Tenant's sole cost and expense,
reasonably to cooperate in connection therewith, including, without
limitation, executing, acknowledging and delivering any commercially
reasonable consent that the third party to
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such chattel mortgage, conditional sale agreement or other title
retention or security agreement may require of Landlord; provided that
(i) Landlord shall be under no obligation to preserve or protect any of
the Collateral at any time, (ii) following a Default by Tenant under
this Lease and/or a default or breach by Tenant under any applicable
chattel mortgage, conditional sale, or other title retention or security
agreement, the third party or parties thereunder must reimburse Landlord
for any and all reasonable costs incurred by Landlord in storing any of
the Collateral and in restoring the Premises upon the removal of any of
the Collateral, and (iii) Landlord shall be under no obligation to
release any of the Collateral except as may be provided in the
applicable consent or absent such consent as ordered by a court of
competent jurisdiction in the event of any bankruptcy filing by Tenant."
Section 12.13. By executing this Agreement, The Sports Club Company, a Delaware
corporation, hereby confirms that all references to the "Lease" in the Guaranty
of Lease, dated as of November 5, 1999, from The Sports Club Company to Landlord
means the Lease as modified by this Agreement.
Section 12.14 This Agreement shall be subject to the parties' mutual agreement
upon an exhibit, to be attached hereto as Exhibit B if and when so mutually
agreed upon (the "CONSTRUCTION RELATED MATTERS EXHIBIT"), regarding the
settlement of various construction related charges, such as hard and soft costs
(including overtime charges if required). The parties shall negotiate the
Construction Related Matters Exhibit diligently and in good faith. If the
parties have not mutually agreed upon the Construction Related Matters Exhibit
on or before March 29, 2001, then either party thereafter may cancel this
Agreement, by written notice to the other party. If this Agreement shall be
canceled as a result of any such failure to have agreed upon the same, then this
Agreement shall be of no further force or effect, and neither party hereto shall
have any further rights, liabilities or obligations hereunder; it being agreed
and understood, however, that in such case the parties' respective rights,
duties, obligations and positions in respect of the Lease shall remain unchanged
by this Agreement and shall be what they would have been if this Agreement had
never been signed.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Agreement as of the day and year first above written.
LANDLORD:
NEW COMMONWEALTH CENTER LIMITED PARTNERSHIP,
a Massachusetts limited partnership
By: New Commonwealth Center Corp., a Massachusetts
corporation, its general partner
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title:
TENANT:
WASHINGTON D.C. SPORTS CLUB, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X'Xxxxx
---------------------------------------
Name: Xxxxxxx X'Xxxxx
Title: President and Chief Financial Officer
If the Lender approves of this Agreement and if it is not terminated pursuant to
Section 12.14, then The Sports Club Company hereby confirms, acknowledges and
agrees that the terms and provisions of that certain Guaranty of Lease, dated as
of November 5, 1999, are hereby extended to include this Agreement and all of
the terms and provisions contained herein (including, without limitation,
Section 12.13 of this Agreement), and that such Guaranty remains in full force
and effect and the legal, valid and binding obligation of the undersigned,
enforceable in accordance with its terms.
THE SPORTS CLUB COMPANY,
a Delaware Corporation
By: /s/ Xxxxxxx X'Xxxxx
----------------------------------
Name: Xxxxxxx X'Xxxxx
Title: Chief Financial Officer
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