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EXHIBIT 10.84
PARTICIPATION AGREEMENT
OCTOBER 27, 1998
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PARTICIPATION AGREEMENT
BETWEEN
MILLENNIUM PARTNERS LLC,
AND
THE SPORTS CLUB COMPANY.
DATED AS OF OCTOBER 27, 1998
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PARTICIPATION AGREEMENT (this "AGREEMENT") made as of the _____
day of October 1998, between MILLENNIUM PARTNERS LLC, a New York limited
liability company, having an office c/o Millennium Partners, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("MILLENNIUM") and THE SPORTS CLUB COMPANY, a
Delaware corporation, having an office at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("SCC").
WITNESSETH:
WHEREAS, Millennium and SCC have entered into that certain Option
on Future Clubs agreement dated as of the date hereof (the "OPTION AGREEMENT")
whereby SCC has the option to elect to have a related entity of SCC enter into a
lease for an Athletic Club in up to five (5) Projects (as such terms are
hereinafter defined);
WHEREAS, Millennium has or will have, directly and indirectly, a
majority of the interests of certain entities (each a "MILLENNIUM ENTITY" and
collectively, the "MILLENNIUM ENTITIES") which hold or which will hold both fee
and leasehold title to certain real property located in San Francisco,
California, Boston, Massachusetts, Washington, D.C., Atlanta, Georgia, Miami,
Florida and Toronto, Canada, and other locations upon each of which Millennium
intends to cause the construction of a mixed-use development (for purposes of
this Agreement each such real property exclusive of real property located in ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and Los Angeles, California is hereinafter
referred to as a "PROJECT" and collectively, the "Projects");
WHEREAS, Millennium intends to have a first-class coed athletic
club (with respect to each Project, an "ATHLETIC CLUB" and with respect to the
Projects, collectively the "ATHLETIC CLUBS") operated by an operator with
first-class expertise, reputation and experience in each Project;
WHEREAS, Millennium desires to cause a Millennium Entity to
demise and let to a related entity of SCC subject to and in accordance with the
Option Agreement (with respect to each Project, an "SCC ENTITY" and with respect
to the Projects, collectively the "SCC ENTITIES") and SCC desires to cause a
related entity of SCC to lease from Millennium Entity subject to and in
accordance with the Option Agreement and an agreement of lease (with respect to
a Project, an "AGREEMENT OF LEASE" and with respect to the Projects,
collectively the "AGREEMENTS OF LEASE") certain space (individually and
collectively the "LEASED PREMISES") in a Project for the operation of an
Athletic Club; and
WHEREAS, in order to induce Millennium to cause a Millennium
Entity to enter into an Agreement of Lease with an SCC Entity, SCC has agreed to
pay, or cause to be paid, to Millennium with respect to each Leased Premises,
not to exceed six (6) in the aggregate, an amount equal to twenty percent (20%)
of the Adjusted Net Distributable Cash (as hereinafter defined) derived
therefrom by the applicable SCC Entity or any Affiliate (as hereinafter defined)
thereof (to the extent derived by any such Affiliate from the same applicable
Leased Premises (exclusive of any management fee payable on account of such
Leased Premises)) or any successor or assign of such SCC Entity or Affiliate.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
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ARTICLE 1
EFFECTIVE DATE OF AGREEMENT
Section 1.1 This Agreement and all of the terms and conditions hereof
shall be effective as of the date hereof (the "EFFECTIVE DATE") and shall end
(the "EXPIRATION DATE") on the date on which the last Agreement of Lease shall
expire or be canceled or terminated pursuant to any of the terms and conditions
therein or pursuant to law.
ARTICLE 2
DEFINITIONS
Section 2.1 For purposes of this Agreement, each of the following terms
shall have the meaning given such term in this Section 2.1 or in the Section of
this Agreement indicated:
(a) "NET DISTRIBUTABLE CASH" shall mean "EBITDA" for the
applicable SCC Entity and any Affiliate (as hereinafter defined) thereof
(to the extent derived by any such Affiliate from the same applicable
Leased Premises (exclusive of any management fee payable on account of
such Leased Premises)) and any successor or assign of such SCC Entity
and/or Affiliate from a Leased Premises determined in accordance with
United States generally accepted accounting principles consistently
applied from period to period ("GAAP"), for the period for which Net
Distributable Cash is being determined.
(b) "ADJUSTED NET DISTRIBUTABLE CASH" shall mean an amount equal
to the Net Distributable Cash derived by the applicable SCC Entity or
any Affiliate thereof (to the extent derived by any such Affiliate from
the same applicable Leased Premises (exclusive of any management fee
payable by any such Affiliate to the applicable SCC Entity)) or any
successor or assign of such SCC Entity or Affiliate from a Leased
Premises for a Lease Year minus the sum of (i) a reasonable and
customary portion of such Net Distributable Cash (including, without
limitation, unearned initiation fees, prepaid dues and prepaid services)
for reasonably anticipated expenditures required to maintain and operate
an Athletic Club in such Leased Premises ("RESERVES") plus (ii) the
Management Fee with respect to such Leased Premises for such Lease Year
plus (iii) the Percentage Equity Return Payment with respect to such
Leased Premises for such Lease Year plus (iv) the aggregate amount of
Percentage Equity Return Payments for prior Lease Years which have not
been paid to the applicable SCC Entity, together with interest thereon
at the Prime Rate (as hereinafter defined) from the date payable to the
applicable SCC Entity until the date paid to the applicable SCC Entity.
(c) "LEASE YEAR" shall mean each successive twelve (12) month
period during the term (the "TERM") of an Agreement of Lease commencing
on January 1 and ending December 31 (or such other twelve (12) month
period as shall be reasonably designated by the applicable Millennium
Entity), provided that the first Lease Year shall begin upon the
commencement date of an Agreement of Lease and end on December 31 of the
calendar year in which such commencement date occurs, and the last Lease
Year shall end on the last day of the term of such Agreement of Lease or
the last day of the last exercised lease extension thereunder.
(d) "MANAGEMENT FEE" shall mean an amount equal to six percent
(6%) of Gross Cash Receipts with respect to a Leased Premises for a
Lease Year.
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(e) "GROSS CASH RECEIPTS" shall mean all revenue and income of
any nature derived by the applicable SCC Entity or any Affiliate thereof
(to the extent derived by any such Affiliate from the same applicable
Leased Premises (exclusive of any management fee payable on account of
such Leased Premises)) or any successor or assign of such SCC Entity or
Affiliate from a Leased Premises or from the use or operation thereof,
including, without limitation, proceeds from business interruption
insurance, governmental allowances and awards and other forms of
payments or awards from any source whatsoever, which is properly
attributable to a Lease Year, determined in accordance with GAAP.
(f) "PERCENTAGE EQUITY RETURN PAYMENT" shall mean an amount equal
to an eleven percent (11%) per annum cumulative, compounding return on
the aggregate Outstanding Capital Investment with respect to a Leased
Premises.
(g) "CAPITAL INVESTMENT" shall mean the aggregate hard and soft
costs and expenses actually incurred by the applicable SCC Entity in the
development of a Leased Premises and in the ordinary course of business
in maintaining and operating an Athletic Club in a Leased Premises from
time to time during the term of an Agreement of Lease (but only to the
extent such costs and expenses are not included in the calculation of
Net Distributable Cash) exclusive of (i) any and all debt service not
directly associated with the financing of the acquisition and/or
construction of any assets of the applicable SCC Entity, including,
without limitation, the work performed by the applicable SCC Entity to
prepare a Leased Premises for use and occupancy (collectively, the
"IMPROVEMENTS") and athletic equipment, machines, furniture and other
personal property used in a Leased Premises (collectively, the "TRADE
FIXTURES) and (ii) any contributions or payments made by Millennium or
any Millennium Entity to a SCC Entity on account of any work or
installations made in a Leased Premises (collectively, the ALLOWANCE").
(g) "OUTSTANDING CAPITAL INVESTMENT" shall mean an amount equal
to the Capital Investment with respect to a Leased Premises which has
not, as of such date, been recouped by SCC or the applicable SCC Entity.
SCC shall, or shall cause each SCC Entity, to apply any and all Adjusted
Net Distributable Cash with respect to a Leased Premises against the
Capital Investment with respect thereto in accordance with customary
accounting practices consistently applied.
(h) "PERSON" shall mean any individual, corporation, partnership,
joint venture, limited liability company, limited liability partnership,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other
form of business or legal association or entity.
(i) "AFFILIATE" shall mean a Person which shall (i) Control (as
hereinafter defined), (ii) be under the Control of, or (iii) be under
common Control with the Person in question, and "CONTROL" or "CONTROL"
shall mean ownership of fifty percent (50%) or more of the outstanding
voting stock of a corporation or other majority equity and control
interest if not a corporation and the possession of power to direct or
cause the direction of the management and policy of such corporation or
other entity, whether through the ownership of voting securities, by
statute or according to the provisions of a contract.
ARTICLE 3
NDC RENT
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Section 3.1 (a) Subject to the terms and conditions of this Article 3
and provided Millennium shall not be in default of any of Millennium's monetary
obligations under this Agreement after the expiration of any applicable notice,
grace and/or cure periods (a "MILLENNIUM EVENT OF DEFAULT"), SCC shall pay, or
shall cause to be paid, to Millennium in the manner hereinafter provided, twenty
percent (20%) of the amount, calculated on an aggregate basis for all Leased
Premises and calculated based on the assumption that all of the Leased Premises
constitute a single business operation, equal to (i) the aggregate amount of
Adjusted Net Distributable Cash for each Lease Year or partial Lease Year
derived from all of the then Leased Premises minus (ii) the aggregate amount of
Outstanding Capital Investment as of the day of the period for which Adjusted
Net Distributable Cash was determined for such Lease Year or partial Lease Year
with respect to all such Leased Premises (the "NDC RENT"); provided, however,
that notwithstanding anything to the contrary contained herein, in the event of
a Millennium Event of Default, SCC shall pay, or cause to be paid, to Millennium
the portion of NDC Rent which exceeds the amount of the Millennium Event of
Default and in the event SCC shall not pay, or shall not have caused to be paid,
to Millennium all or any portion of NDC Rent as a result of a Millennium Event
of Default, SCC shall pay, or cause to be paid, any such unpaid NDC Rent to
Millennium promptly following the date on which any such Millennium Event of
Default is cured or it has been determined in accordance with Article 5 hereof
that no Millennium Event of Default exists. NDC Rent shall be payable on a
quarterly basis (as estimated by SCC, or an SCC Entity, as applicable, in good
faith based on SCC's, or an SCC Entity's, as applicable, 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 of each Agreement of
Lease, SCC shall deliver, or cause to be delivered, to Millennium a
quarterly statement (each a "QUARTERLY STATEMENT") signed and certified
by the chief financial officer of SCC, if SCC is a corporation, by a
managing member, if SCC is a limited liability company, or by the chief
financial officer of a corporate general partner of SCC, if SCC is a
partnership (such person, the "FINANCIAL OFFICER"), to be true and
correct to the best knowledge of the Financial Officer disclosing the
Adjusted Net Distributable Cash for the preceding quarterly period and
an itemization of the EBITDA, the Management Fee, the Percentage Equity
Return Payment and the Outstanding Capital Investment for such period
which were used to compute the Adjusted Net Distributable Cash.
(ii) SCC shall submit, or cause to be submitted, to
Millennium, 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 each
Agreement of Lease, as to which SCC's obligation to pay NDC Rent
shall survive the Expiration Date or sooner termination of this
Agreement) an auditor's report (each, a "NDC STATEMENT"), which
shall (1) be prepared, at SCC's sole cost and expense, by a
so-called "Big 6" accounting firm ("SCC'S ACCOUNTING FIRM") and
(2) disclose the Adjusted Net Distributable Cash for such Lease
Year. Each NDC Statement shall disclose the Adjusted Net
Distributable Cash for such Lease Year or fraction of a Lease
Year and an itemization of the EBITDA, the Management Fee, the
Percentage Equity Return Payment and the Outstanding Capital
Investment for such period which were used to compute the
Adjusted Net Distributable Cash. Subject to Millennium's right
to dispute such NDC Statement pursuant to Article 4 hereof, if
such NDC Statement shall show that the amounts, if any, paid to
Millennium under Section 3.1(a) hereof exceed the amount
actually due under such NDC Statement for such Lease Year, then
Millennium shall credit SCC, or the applicable SCC Entity, the
amount of such overpayment (together with interest thereon at
the Prime Rate from the date such overpayment was paid to
Millennium to the date such overpayment is credited or refunded,
as applicable, as provided in this Section 3.1(b)(ii) if the
actual amount of NDC Rent actually received by Millennium under
Section 3.1(a) hereof was more than ten percent (10%) higher
than the actual amount due and payable to Millennium pursuant to
Section 3.1(a) hereof) against the next accruing installment(s)
of NDC Rent and if the amount of the credit exceeds the amount
of the
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subsequent installment(s) of NDC Rent due under this Agreement,
the excess, together with the aforementioned interest, shall be
refunded to SCC, or the applicable SCC Entity, within thirty
(30) days of the receipt of such NDC Statement. If such NDC
Statement shall show that the amounts, if any, paid to
Millennium under Section 3.1(a) hereof are less than the amount
actually due under the NDC Statement for such Lease Year, then
SCC shall pay, or cause to be paid, the underpayment to
Millennium contemporaneously with the delivery of such NDC
Statement to Millennium, together with interest thereon from the
date such payment was due to the date such payment is paid 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 plus two percent (2%) (the "PRIME RATE") if the actual
amount of NDC Rent payable to Millennium under Section 3.1(a)
hereof was more than ten percent (10%) higher than the amount
paid to Millennium. The acceptance by Millennium of such NDC
Statement, or payments of NDC Rent with respect thereto, shall
be without prejudice and shall in no event constitute a waiver
of Millennium's right to claim a deficiency in the payment of
NDC Rent or to audit SCC's or any SCC Entity'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 Millennium
does not notify SCC in writing of any dispute as to any NDC
Statement within such twenty-four (24) month period, then
Millennium shall waive its right to dispute such NDC Statement.
Section 3.2 (a) Provided that (i) SCC shall not then be in default of
any of SCC's monetary obligations under this Agreement after the expiration of
any applicable notice, grace and/or cure periods and (ii) the SCC Entities shall
not then be in default of any of their respective monetary obligations under
this Agreement and the Agreements of Lease after the expiration of any
applicable notice, grace and/or cure periods (collectively, an "SCC EVENT OF
DEFAULT"), then, in such event, if and to the extent the aggregate amount of
fixed annual rent actually paid by SCC or the SCC Entities in accordance with
the Agreements of Lease for a Lease Year (but without regard to any adjustment
that was made to any fixed annual rent to take into account any change in the
applicable index for "hard" construction costs applicable to the corresponding
Leased Premises) exceeds the Average Leased Premises Rent (as hereinafter
defined), the amount of any such excess (the "EXCESS AVERAGE RENT"), together
with interest at the Prime Rate on the amount of any outstanding Excess Average
Rent, from time to time, which exceeds any existing Outstanding Capital
Investment, from time to time, shall be credited against the installment(s) of
NDC Rent payable by SCC and the SCC Entities to Millennium for such Lease Year
in accordance with this Agreement, it being agreed that Excess Average Rent
shall not be treated as rent by the parties. Notwithstanding anything to the
contrary contained in this Section 3.2, in the event of an SCC Event of Default,
the portion of any Excess Average Rent which exceeds the amount of the SCC Event
of Default shall be credited against the installment(s) of NDC Rent as described
in the immediately preceding sentence and in the event all or any portion of
Excess Average Rent is not credited against the installment(s) of NDC Rent as
described in the immediately preceding sentence as a result of an SCC Event of
Default, any such non-credited Excess Average Rent shall be so credited promptly
following the date on which any such SCC Event of Default is cured or it has
been determined in accordance with Article 5 hereof that no SCC Event of Default
exists.
(b) For purposes of this Agreement, Average Leased Premises Rent
shall mean at any time, the product of $27.50 times the total number of rentable
square feet for all Leased Premises in existence at such time; provided,
however, that, for this purpose only, any Leased Premises in San Francisco,
California, Boston, Massachusetts and Washington, D.C. shall be deemed to
constitute exactly 100,000 rentable square feet, but such deemed size shall not
have any precedential value as to how the rentable square footage of any other
Leased Premises shall be calculated.
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Section 3.3 The application of the formulas described in Sections 3.1(a)
and 3.2 hereof is illustrated in the examples set forth in Schedule A attached
hereto (which examples are used for illustration purposes only and are not
intended to limit or expand any rights, liabilities or obligations of SCC
hereunder).
ARTICLE 4
BOOKS AND RECORDS
Section 4.1 (a) (i) In the event SCC or an SCC Entity fails to maintain
such books of account or other records as required hereunder adequate for
Millennium 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 for such Lease Year shall be the amount which,
in the opinion of SCC's Accounting Firm, reflects a fair and accurate estimate
of the Adjusted Net Distributable Cash for such first Lease Year, subject to
Millennium's right to dispute such estimate pursuant to this Article 4.
(ii) SCC shall cause each SCC Entity to prepare and keep
in each such SCC Entity'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 for such period is pending),
true, complete and accurate books of account and records of the
EBITDA, the Management Fee, the Percentage Equity Return Payment,
the Capital Investment and the Outstanding Capital Investment
from which the Adjusted Net Distributable Cash can be determined.
(iii) Millennium 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 Millennium
(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 6" accounting firm to
perform on behalf of Millennium a complete audit to be made in
accordance with standard auditing practices of all Required
Records pertaining to the Adjusted Net Distributable Cash 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 may be tested or
determined) of the Adjusted Net Distributable Cash disclosed in
any statement given to Millennium; and as to SCC's and each SCC
Entity's books of account and records, SCC shall make and shall
cause each SCC Entity to make all such books of account and
records with respect to the Adjusted Net Distributable Cash
available for such examination in the United States of America at
the office where the same are regularly maintained. Millennium
and Millennium's accounting firm shall have the right, at
Millennium's sole cost and expense, to copy and duplicate such
information as Millennium may require and use SCC's and each SCC
Entity's duplicating machines in connection therewith. SCC shall
cooperate, and cause each SCC Entity to cooperate, with
Millennium and Millennium's accounting firm in connection with
any such audit and shall furnish to Millennium and Millennium's
accounting firm within ten (10) days after written demand
representations signed and certified by the Financial Officer of
SCC and/or SCC Entity to be true and correct as may be necessary
for the issuance of an audit opinion by Millennium's accounting
firm with respect to Adjusted Net Distributable Cash for any
Lease Year. Millennium shall promptly provide SCC with a copy of
any such audit.
(iv) If any such audit discloses that, with respect to the
period for which Millennium conducted such audit, SCC and/or an
SCC Entity paid less NDC Rent than SCC and/or an SCC
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Entity was obligated to pay in accordance with the terms and
conditions of this Agreement, then SCC shall pay, or cause to be
paid, Millennium the amount of such underpayment (with interest
thereon at 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
Millennium was more than five percent (5%) higher than the
amount paid, or caused to be paid, by SCC 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 Millennium was more than ten percent (10%) higher
than the amount paid, or caused to be paid, by SCC as a result
of any such inaccuracy, then SCC shall, in addition to such
additional NDC Rent plus interest, pay, or cause to be paid, to
Millennium the reasonable actual out-of-pocket cost of such
audit and examination incurred by Millennium (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 Millennium conducted such audit, SCC and/or a
SCC Entity paid more NDC Rent than SCC and/or a SCC Entity was
obligated to pay in accordance with the terms and conditions of
this Agreement, then Millennium shall credit the amount of such
overpayment (with interest thereon at the Prime Rate from the
date such overpayment was paid to Millennium to the date such
overpayment is credited or refunded, as applicable, as provided
in this Section 4.1(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 Agreement, the excess shall be refunded to SCC,
or the applicable SCC Entity, within thirty (30) days after any
such audit by Millennium. If any audit shall be commenced by
Millennium or if there shall arise a dispute concerning the
Adjusted Net Distributable Cash, 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 SCC shall fail to prepare and deliver, or shall fail to
cause to be prepared and delivered, any NDC Statement, Millennium shall
have the right, in addition to any other rights or remedies Millennium
may have hereunder, to audit the Required Records, and to prepare the
statement or statements which SCC has failed to prepare and deliver, or
which SCC has failed to cause to be prepared and delivered. Such audit
shall be made and such statement(s) shall be prepared by an independent
certified public accountant selected by Millennium. Subject to SCC's
arbitration rights under Article 5 hereof, the statement(s) prepared by
Millennium shall be conclusive and binding upon SCC, and SCC shall pay,
or cause to be paid, within fifteen (15) days after rendition of a ▇▇▇▇,
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 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, either party may by notice to the other submit
the dispute to arbitration pursuant to Article 5 hereof. Pending the
determination of such dispute, SCC shall pay, or cause to be paid, all
amounts not in dispute in accordance with Section 3.1(a) hereof. If such
arbitration shall mandate that additional amounts are due Millennium,
then SCC shall pay, or cause to be paid, to Millennium such amount with
interest thereon at the Prime Rate from the date such payment was due
hereunder.
(d) Millennium 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 Agreement or any Agreement of
Lease, and (ii) provided that the recipients of such information agree
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in writing to hold same in confidence (1) carry out the obligations set
forth in this Agreement or any Agreement of Lease or documents
evidencing and/or securing any ground leases or underlying leases which
may now exist or hereafter be executed affecting any or all of the
Leased Premises, any lien of any mortgage or deed of trust which may now
exist or hereafter be executed in any amount for which any or all of the
Leased 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 any or all
of the Projects, (2) obtain legal, financial and/or tax advice from
Millennium's attorneys, accountants and financial advisors, (3)
negotiate or complete a transaction with a lender to Millennium or any
Millennium Entity secured by Millennium's and/or any Millennium Entity's
interest in any or all of the Projects, any or all of the buildings
situated on Projects or any or all of the Agreements of Lease
(including, without limitation, a pledge of rents payable thereunder) or
purchaser of any or all of the buildings situated on Projects or any or
all of the Projects or (4) negotiate or complete a public or private
syndication or similar offering with respect to any or all of the
Agreements of Lease, Millennium or any or all of the Millennium
Entities, the interests of any of the members of Millennium or any or
all of the Millennium Entities, any or all of the Projects and/or any or
all of the buildings situated on any or all of the Projects.
ARTICLE 5
ARBITRATION
Section 5.1 In each case specified in this Agreement in which resort to
arbitration shall be required, such arbitration (unless otherwise specifically
provided in other Sections of this Agreement) shall be in New York City with
respect to the first, third, fifth and each subsequent odd arbitration entered
into in connection with this Agreement and in Los Angeles, California with
respect to the second, fourth, sixth and each subsequent even arbitration
entered into in connection with this Agreement in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and the provisions of
this Agreement, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
Section 5.2 Either party may request arbitration of any matter in
dispute wherein arbitration is expressly provided in this Agreement 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 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
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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.
Section 5.3 The arbitrators shall have the right to retain and consult
experts and competent authorities skilled in the matters under arbitration. The
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 Agreement. Judgment may
be had on the decision and award of the arbitrators so rendered, in any court of
competent jurisdiction.
Section 5.4 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 consistently with the provisions
of this Agreement.
Section 5.5 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 wilfully 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.
Section 5.6 In the case of any arbitration hereunder, the arbitrators
shall be instructed and will give effect to the intent of this Agreement.
ARTICLE 6
BILLS AND NOTICES
Section 6.1 Except as otherwise expressly provided in this Agreement,
any bills, statements, consents, notices, demands, requests or other
communications given or required to be given under this Agreement shall be in
writing and shall be deemed sufficiently given or rendered (a) if delivered by
hand (against a signed receipt) or (b) if sent by registered or certified mail
(return receipt requested) or (c) overnight courier (e.g., Federal Express) or
(d) facsimile transmission (with confirmed answer back) addressed:
(i) if to Millennium at Millennium's address set forth in this
Agreement, Attention: Chief Financial Officer with a copy to Battle ▇▇▇▇▇▇ LLP,
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.;
and
(ii) if to SCC at SCC's address set forth in this Agreement,
Attention: Chief Financial Officer with copies to SCC Sports Club, Inc.,
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
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90025, Attention: Real Estate Department and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.; or
to such other or additional address(es) as Millennium or SCC may designate as
its new address(es) for such purpose by notice given to the other in accordance
with the provisions of this Article 6. Any such ▇▇▇▇, statement, consent,
notice, demand, request or other communication shall be deemed to have been
rendered or given on the date when it shall have been had delivered provided
receipt or refusal is acknowledged or seven (7) days from when it shall have
been mailed or on the next business day if sent by overnight courier, or on the
day of receipt if sent by facsimile transmission with confirmed answer back, as
provided in this Article. Any notice, demand or request sent by facsimile
transmission shall be promptly (within one (1) business day) followed by such
notice, demand or request being sent or delivered, as the case may be, as
provided in (a), (b) or (c) in this Section. Any notice, demand or request sent
by Millennium to SCC may be sent by Millennium's attorneys and any notice,
demand or request sent by SCC to Millennium may be sent by SCC's attorneys.
ARTICLE 7
MISCELLANEOUS
Section 7.1 If SCC shall fail to pay, or shall fail to cause to be paid,
NDC Rent within seven (7) days after same shall be due hereunder, SCC shall pay
to Millennium, in addition to such NDC Rent then due and payable, interest
thereon at an amount based upon the Prime Rate (i.e., the Prime Rate applied to
the amount due), for the period from the date on which the NDC Rent payment was
due until the date of payment thereof in full. Notwithstanding the foregoing, on
the first occasion in any calendar year on which any such amount would be due
and payable by SCC hereunder, SCC shall not be obligated to pay any such amount
unless Millennium shall have first given SCC notice that NDC Rent is past due
and SCC shall have failed to pay such sum within seven (7) days after receipt of
such notice.
Section 7.2 If any default shall occur and be continuing, Millennium may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for damages, specific performance (to the
extent permitted by law) of any covenant or agreement contained in this
Agreement or in the aid of the exercise of any power granted in this Agreement.
Section 7.3 No right or remedy conferred upon or reserved to Millennium
under this Agreement is intended to be exclusive of any other right or remedy,
and every right and remedy shall be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing under applicable
law. Every right and remedy given by this Agreement or by applicable law to
Millennium may be exercised from time to time and as often as may be deemed
expedient by Millennium.
Section 7.4 If any legal action or proceeding is brought against
Millennium or SCC by the other with respect to this Agreement, then the
non-prevailing party shall pay the prevailing party's attorneys' fees and
disbursements arising out of or incurred in connection with such action or
proceeding.
Section 7.5 No failure or delay on the part of a party to this Agreement
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
other or further exercise thereof or the exercise of any other right or power
hereunder. No modification or waiver of any provision of this Agreement and no
consent to any departure by any party to this Agreement therefrom shall be
effective unless the same shall be in writing and signed by the party against
whom such modification, waiver or consent is being sought to be enforced
against, and then such modification, waiver or
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consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on any party to this Agreement in any case
shall, of itself, entitle such party to any other or further notice or demand in
similar or other circumstances.
Section 7.6 This Agreement may only be modified, amended, changed,
discharged or terminated by an agreement in writing signed by all of the parties
hereto.
Section 7.7 Each of the parties to this Agreement (and the undersigned
representatives of such parties, if any) has the full power, authority and legal
right to execute this Agreement and to keep and observe all of the terms,
covenants and provisions of this Agreement on such parties' respective parts to
be performed or observed.
Section 7.8 If any term, covenant or provision of this Agreement shall
be held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such term, covenant or provision.
Section 7.9 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Section 7.10 This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the specific matters agreed
to herein and the parties hereto acknowledge that no oral or other agreements,
understandings, representations or warranties exist with respect to this
Agreement or with respect to the obligations of the parties hereto under this
Agreement, except those specifically set forth in this Agreement.
Section 7.11 THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS
AGREEMENT.
Section 7.12 This Agreement is, and shall be deemed to be, a contract
entered into under and pursuant to the laws of the State of New York and shall
be in all respects governed, construed, applied and enforced in accordance with
the laws of the State of New York. No defense given or allowed by the laws of
any other state or country shall be interposed in any action or proceeding
hereon unless such defense is also given or allowed by the laws of the State of
New York.
Section 7.13 The parties hereto agree to submit to personal jurisdiction
in the State of New York or California in any action or proceeding arising out
of this Agreement and, in furtherance of such agreement, the parties hereto
hereby agree and consent that without limiting other methods of obtaining
jurisdiction, personal jurisdiction over any of the parties hereto in any such
action or proceeding may be obtained within or without the jurisdiction of any
court located in the City of New York or the City of Los Angeles and that any
process or notice of motion or other application to any such court in connection
with any such action or proceeding may be served upon the parties hereto by
registered or certified mail or by personal service at the last known address of
the parties hereto, whether such address be within or without the jurisdiction
of any such court.
Section 7.14 This Agreement may be executed in one or more counterparts
by some or all of the parties hereto, each of which counterparts shall be an
original and all of which together shall constitute a single agreement.
Section 7.15 This Agreement may be executed in any number of duplicate
originals and each such duplicate original shall be deemed to constitute but one
and the same instrument.
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Section 7.16 Notwithstanding anything to the contrary set forth herein,
but subject to the provisions set forth in the Option Agreement, neither
Millennium nor any Millennium Entity shall have any obligation or liability to
SCC or any SCC Entity with respect to any Project unless and until an Agreement
of Lease with respect thereto has been unconditionally executed and delivered by
all parties thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MILLENNIUM PARTNERS LLC
By: Millennium Partners Management LLC, a New York
limited liability company, its managing member
By: Millennium Manager I, Inc., a New York
corporation, its manager
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:
THE SPORTS CLUB COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
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Schedule A
[attached hereto]
