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EXHIBIT 10.88
WASHINGTON D.C. LEASE
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ATHLETIC CLUB LEASE
2200 M Street
Washington, D.C.
LANDLORD: 2200 M STREET LLC
TENANT: WASHINGTON D.C. SPORTS CLUB, INC.
DATE: As of March ___, 1999
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INDEX OF MAJOR DEFINED TERMS
DEFINED TERM PAGE
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AAA 16
Abatement Notice 57
Actual Statement 17
Additional Rent 10
Affiliate 9
All-risk 33
Allowance 1
Annual Base Rent 10
Antennae 59
Assignment Date 46
Assignment Notice 46
Athletic Club Agreement 9
Athletic Club Fee 8
Building 1
Building Improvements 1
CC&R 19
Claims 32
Club 1
Commencement Date 3
Common Area Expenses 11
Common Areas 2
Condominium Association 19
Condominium Documents 19
Control 47
CPI 53
Cure Period 57
Deadline Date 59
Default 42
Depository 39
Development 1
Financial Officer 38
First-class 19
Floor Area 3
Force Majeure 58
Hazardous Materials 20
Hotel Management Agreement 9
Improvements 1
In-Lieu Tax 26
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DEFINED TERM PAGE
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Initial Annual Base Rent Amount 10
Initial Mortgagee
Non-Disturbance Agreement 48
Initial Term 3
Land 1
Landlord 1
Landlord Delay 5
Landlord Offer 38
Landlord's Contribution 1
Landlord's First Substantial
Completion Estimate Notice 6
Landlord's Insurance 35
Landlord's Second Substantial
Completion Estimate Notice 7
Lease 1
Lease Year 7
Minimum Landlord's Work 4
Monthly Base Rent 10
New York Athletic Club Lease 15
Non-Disturbance Agreement 48
Noticed Lender 57
Operating Expenses 11
Option 7
Option Date 7
Option Period 7
Option Periods 7
Options 7
Other Primary Hotel Operator 22
Partial Taking 41
Person 47
Premises 1
Primary Hotel 8
Primary Hotel Bill 8
Primary Hotel Guests 8
Prime Rate 43
Property 2
real property taxes 26
Receipts Tax 26
Rent 10
Ritz Carlton Standard 22
Scheduled Completion Date 3
Secured Lender 40
Senior Interest Holders 48
Senior Interests 48
Signage Approval Factors 56
Similar Premises 34
Substantial Taking 41
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DEFINED TERM PAGE
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Substantially Complete 4
Tax Year 24
Taxes 24
Temporary Closures 42
Tenant 1
Tenant Acceptance Notice 38
Tenant Delay 4
Tenant Installation 59
Tenant Revision 5
Tenant Termination Costs 38
Tenant's Insurance Share 40
Tenant's Share 15
Tenant's Work 3
Term 7
Termination Notice 57
Total Taking 41
Trade Fixtures 2
Unexpired Lease Term 38
Uninsured Contribution Amount 37
Work Letter 1
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ATHLETIC CLUB LEASE
2200 M Street
Washington, D.C.
THIS LEASE (this "LEASE") is made as of the ___ day of March, 1999, by
and between 2200 M STREET LLC, a Delaware limited liability company ("LANDLORD")
and WASHINGTON D.C. SPORTS CLUB, INC., a Delaware corporation ("TENANT").
1. Premises and Common Areas.
Premises. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the space (the "PREMISES") in a building (the "BUILDING") to be
constructed on that certain parcel of real property, in which the
Improvements (as defined herein) are to be constructed, more
particularly described in Exhibit A attached hereto and made a part
hereof (the "LAND") and to constitute part of a development (the
"DEVELOPMENT") to be located on the Land. This Lease is subject to all
matters of record affecting the Property (as defined herein) and all
matters that would be revealed by an accurate survey of the Property.
The Premises are designated on the non-hatched portions of the floor
plans attached hereto as Exhibit B and made a part hereof, with all
depictions thereon being subject to normal construction variances and
tolerances, and as otherwise provided in this Lease. Landlord, at its
sole cost, shall, in accordance with the work letter agreement attached
hereto as Exhibit C and made a part hereof (the "WORK LETTER"), perform
Landlord's Work (as defined therein) and as part of Landlord's Work,
shall cause the utility connections specified in the Work Letter to be
available in the locations specified in the Work Letter.
Construction of Premises.
Tenant shall cause the Premises to be improved with improvements (the
"IMPROVEMENTS") in accordance with the Work Letter (defined as the
"BUILDING IMPROVEMENTS" in the Work Letter) and, subject to Force
Majeure (as defined herein), to the extent provided herein and within
the time(s) set forth in the Work Letter. The Improvements are to be
used as a first-class athletic club facility (the "CLUB") more
particularly described in Article 8 hereof. The design of the
Improvements shall be subject to Landlord's approval, as provided in the
Work Letter. In accordance with the terms of the Work Letter, Landlord
shall provide Tenant with a contribution in an amount not to exceed Nine
Million Five Hundred Thousand and 00/100 Dollars ($9,500,000.00) (the
"LANDLORD'S CONTRIBUTION" and/or the "ALLOWANCE"). Tenant shall equip
the Club with all required Trade Fixtures (as defined herein) as may be
necessary to operate the Club in accordance with Section 8.1 hereof.
Title to the Improvements and all alterations and additions thereto and
replacements thereof (other than Trade Fixtures) thereafter constructed
or installed on the Premises shall be and remain in Landlord. All Trade
Fixtures, however, shall remain Tenant's property, subject to permitted
customary third (3rd) party financing subject to and in accordance with
Section 46 hereof, upon the expiration or earlier termination of this
Lease; provided, however, Tenant shall not have
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the right to remove any Trade Fixtures until Tenant shall cure any
Default (as defined herein) or, at the termination of the term hereof as
a result of any such Default, until Tenant complies with its payment
obligations set forth herein. "TRADE FIXTURES" means Tenant's athletic
equipment and machines and all of Tenant's furniture and other personal
property not affixed to the Premises in such a manner as to do material
damage upon their removal. The Premises and the Improvements are
sometimes hereinafter collectively referred to as the "PROPERTY."
As a condition to the effectiveness of this Lease, Landlord shall
cause Millennium Partners LLC to execute and deliver to Tenant a
guaranty with respect to the Allowance in the form and substance set
forth in Exhibit F attached hereto.
Common Areas. Tenant shall have the non-exclusive right to use the Common Areas
(as defined herein), in common with other tenants and/or occupants of
the Development, subject to the Condominium Documents (as defined
herein), the CC&R (as defined herein) and any other nondiscriminatory
rules and regulations that Landlord and/or the Condominium Association
(as defined herein), as applicable, shall adopt for the Development so
long as such CC&R and rules and regulations do not (i) materially
interfere with Tenant's ability to conduct normal business operations;
(ii) materially increase Tenant's obligations under this Lease, or (iii)
materially decrease Tenant's rights under this Lease. "COMMON AREAS"
means all common areas and facilities of the Development that are now or
hereafter made available for the non-exclusive and general use,
convenience and benefit of Tenant and/or Tenant's customers, employees,
agents and invitees, including common monuments and signs;
transportation facilities areas including bus stops, taxi-limousine
stands, and bicycle parking areas; trash enclosures; landscaped areas;
areas designated as pedestrian walkways or pedestrian bridges; and
parking areas.
Control of Common Areas. Provided Landlord does not unreasonably interfere with,
hinder or obstruct Tenant's use of the Premises or Tenant's ability to
conduct business from the Premises, and does not otherwise materially
diminish any of Tenant's rights pursuant to this Lease, Landlord
reserves, the right from time to time:
To make changes to the Common Areas, or their design, including
changes in the location, size, shape and number of driveways, entrances,
parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas and walkways. Landlord shall keep Tenant
apprised as to any proposed change to the Common Areas or their design;
and
To close temporarily any portions of the Common Areas for
maintenance purposes so long as reasonable access to the Premises
remains available, including reasonable access from the parking areas of
the Building to the Premises.
Landlord agrees that rerouting of pedestrian walkways within the Common
Areas and/or rerouting of vehicles within the Common Areas shall not be
done in a manner which
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would materially hinder or obstruct Tenant's ability to conduct business
from the Premises.
Definition of Floor Area. The term "FLOOR AREA" as used in this Lease shall mean
the rentable square footage of the Premises (or, where applicable, of
other premises located or proposed in or outside the Development),
measured from the exterior surface of building walls (and from
extensions thereof, in the case of openings), and from the exterior
surface of any demising partitions. At such time as the Improvements
have been constructed, Landlord shall deliver to Tenant a notice which
sets forth the Floor Area of the Premises together with reasonable
documentation evidencing Landlord's determination of the Floor Area of
the Premises. Tenant shall have ten (10) days following the receipt of
Landlord's notice of the determination of the Floor Area in which to
deliver to Landlord a notice objecting to such determination. In the
event Tenant does not so deliver such objection notice, then, in such
event, Landlord's calculation shall be deemed accepted by Tenant and
incorporated herein by this reference. In the event that Tenant delivers
such a notice to Landlord, Landlord and Tenant shall have thirty (30)
days in which to work together to calculate the Floor Area of the
Premises. In the event Landlord and Tenant cannot so agree, then, until
agreement is reached, either party may submit such dispute to
arbitration in accordance with the Commercial Arbitration Rules of the
District of Columbia chapter of the AAA (as defined herein) and the
party deemed less correct in such dispute shall pay the other party's
costs of such arbitration. Except as expressly provided to the contrary
in this Section 1.5, the procedure for arbitration shall be governed by
the proceedings set forth in Section 7.3 hereof. Landlord and Tenant
acknowledge that the projected Floor Area of the Premises shall be
approximately 100,000 square feet.
2. Term.
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Commencement. This Lease constitutes a binding agreement and the obligations of
Landlord and Tenant hereunder shall be effective upon execution and
delivery of this Lease by both Landlord and Tenant. 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 upon which
Tenant commences normal business operations from the Premises (it being
understood that 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 (ii) the date (a) which is the later of (1)
six (6) months after Landlord shall "Substantially Complete" (as defined
herein) the Minimum Landlord's Work (as defined herein) and (2) twelve
(12) months after the installation of the concrete deck for the fourth
(4th) floor of the Building (the "SCHEDULED COMPLETION DATE"), the
Scheduled Completion Date being extended by any period that Tenant using
reasonable diligence shall have been unable (aa) to 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) and/or (bb) to conduct normal
business operations in the Premises as a result of the non-completion of
Landlord's Work by the Scheduled Completion Date (subject to extension
due to Tenant Delays (as defined herein)) and (b) on which the Premises
are reasonably accessible (A) from the parking areas of the Building and
the parking areas of the Building are reasonably accessible and usable
for parking purposes and (B) by pedestrians from the Common Areas.
"SUBSTANTIALLY COMPLETE" means (as certified by Landlord's architect)
complete subject to the completion of minor punch-list type items or
other minor components of Landlord's Work or the Minimum Landlord's
Work, as applicable, the performance of which will not materially
interfere with Tenant's Work to ready the Premises for Tenant's use and
occupancy thereof. Landlord shall diligently proceed to complete said
punch list items. "MINIMUM LANDLORD'S Work" means Landlord's Work as
describe in the Work Letter exclusive of base building systems,
mechanical systems and operational elevators. If Landlord shall be
delayed in substantially completing Landlord's Work, the Minimum
Landlord's Work and/or the Common Areas and such delay shall be caused
by or shall arise out of or in connection with any of the following
(each a "TENANT DELAY"):
(1) Tenant's direction that Landlord delay in proceeding
with any segment or part of Landlord's Work, the Minimum
Landlord's Work and/or the Common Areas (except under
circumstances where the basis for such direction is the fact
that Landlord must rectify an error in Landlord's Work, the
Minimum Landlord's Work and/or the Common Areas that is not
otherwise attributable to Tenant); or
(2) the performance of work by any person, or entity
employed or hired by Tenant or on behalf of Tenant that actually
delays Landlord in the completion of Landlord's Work, the
Minimum Landlord's Work and/or the Common Areas, provided that
if Landlord shall be aware of any such delay, Landlord shall
immediately notify Tenant thereof and Tenant fails to remedy any
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such delay by the end of the second (2nd) day following receipt
of Landlord's notice of any such delay; or
(3) any acts or omissions of Tenant, or of any Affiliate
(as defined herein) of Tenant that actually delays Landlord in
the completion of Landlord's Work, provided that if Landlord
shall be aware of any such delay, Landlord shall immediately
notify Tenant thereof and Tenant fails to remedy any such delay
by the end of the second (2nd) day following receipt of
Landlord's notice of any such delay; or
(4) Tenant's unreasonable delay or refusal in making
changes to the Work Letter reasonably requested by Landlord; or
(5) any breach of any of the terms of this Lease by
Tenant that actually delays Landlord in substantially completing
Landlord's Work, the Minimum Landlord's Work and/or the Common
Areas, provided that if Landlord shall be aware of any such
delay, Landlord shall immediately notify Tenant thereof and
Tenant fails to remedy any such delay by the end of the second
(2nd) day following receipt of Landlord's notice of any such
delay; or
(6) any unreasonable failure on Tenant's part to
cooperate with Landlord in connection with Landlord's
performance of Landlord's Work, the Minimum Landlord's Work
and/or the Common Areas;
then notwithstanding anything in this Lease to the contrary, Landlord's
Work and/or the Minimum Landlord's Work shall be deemed to be
Substantially Complete as of the date that substantial completion would
have occurred but for such delay and the Common Areas shall be deemed to
be accessible and reasonably usable as of the date that the Common Areas
would have been accessible and reasonably usable but for such delay, as
applicable.
If Tenant desires a change in the Work Letter or Tenant requests for any
materials, finishes or installation not originally contemplated by this
Lease or contained in the Work Letter, Tenant shall submit to Landlord
the proposed change or request (herein called a "TENANT REVISION"). A
Tenant Revision shall be subject to Landlord's approval, which approval
shall not be unreasonably withheld or delayed, and, if so approved,
Landlord shall cause to be prepared and shall submit to Tenant for its
approval or disapproval, an estimate of the delays in performance of
Landlord's Work resulting from Tenant's request for a Tenant Revision
and an estimate of the incremental increased cost to Landlord to
complete Landlord's Work as a result of such Tenant Revision, as
reasonably determined by Landlord. Tenant shall approve or disapprove
the estimate within five (5) days after receipt of such estimate. In the
event Tenant shall approve any such estimate, any delays resulting from
a Tenant Revision shall be deemed a Tenant Delay and Tenant shall be
solely responsible for any increased cost to complete Landlord's Work
resulting from a
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Tenant Revision and all such costs shall be paid by Tenant to Landlord
within thirty (30) days after rendition of a bill therefor. If Tenant
shall fail to respond within such five (5) day period, then a Tenant
Revision shall be deemed withdrawn. Notwithstanding Tenant's approval or
disapproval of Landlord's estimate with respect to a Tenant Revision,
Tenant shall be responsible for all professional fees associated with
Landlord's review of a Tenant Revision and the preparation of Landlord's
estimate(s) and revised construction documents in connection therewith.
For all purposes hereof, "LANDLORD DELAY" means the delay in the
Substantial Completion of Tenant's Work to be the extent caused by or
arising out of or in connection with any of the following:
(i) Landlord's direction that Tenant delay in proceeding
with any segment or part of Tenant's Work (except under
circumstances where the basis for such direction is the fact that
Tenant must rectify an error in Tenant's Work that is not
otherwise attributable to Landlord); or
(ii) the performance of work by any person, or entity
employed or hired by Landlord or on behalf of Landlord that
actually delays Tenant in the completion of Tenant's Work,
provided that if Tenant shall be aware of any such delay, Tenant
shall immediately notify Landlord thereof and Landlord fails to
remedy any such delay by the end of the second (2nd) day
following receipt of Tenant's notice of any such delay; or
(iii) any acts or omissions of Landlord or of any
Affiliate of Landlord that actually delay Tenant in the
completion of Tenant's Work (except in connection with the
exercise of any of Landlord's rights expressly set forth in this
Lease and/or the Work Letter), provided that if Tenant shall be
aware of any such delay, Tenant shall immediately notify Landlord
thereof and Landlord fails to remedy any such delay by the end of
the second (2nd) day following receipt of Tenant's notice of any
such delay; or
(iv) any breach of any of the terms of this Lease by
Landlord, including, without limitation, the funding of the
Allowance subject to and in accordance with the terms and
conditions of this Lease, that actually delays Tenant in
substantially completing Tenant's Work provided that if Tenant
shall be aware of any such delay, Tenant shall immediately notify
Landlord thereof and Landlord fails to remedy any such delay by
the end of the second (2nd) day following receipt of Tenant's
notice of any such delay; or
(v) the non-completion of Landlord's Work as of the date
on which the concrete deck for the fourth (4th) floor of the
Building is installed and Tenant commences the performance of
Tenant's Work if and to the extent any such delay would not have
occurred had Landlord's Work been Substantially Completed as
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of such date and Tenant has endeavored, in good faith, to use
good construction practice, but at no additional cost to Tenant,
to complete Tenant's Work as expeditiously as reasonably
possible under the circumstances and notwithstanding such
non-completion of Landlord's Work as of the date on which the
concrete deck for the fourth (4th) floor of the Building is
installed, provided that if Tenant shall be aware of any such
delay, Tenant shall immediately notify Landlord thereof.
Without limiting any provisions of this Lease, any dispute between the
parties as to whether a Tenant Delay or Landlord Delay has occurred or
the amount of such delay shall be subject to arbitration pursuant to
Section 7.3 hereof.
The parties shall execute an acknowledgment that Landlord's Work and/or
the Minimum Landlord's Work has been completed (or deemed to be
completed) and that the Common Areas are accessible and reasonably
usable (or deemed to be accessible and reasonably usable) and that the
Commencement Date has occurred, as soon as reasonably practicable
thereafter. Neither Landlord's failure to request, nor Tenant's failure
to execute, such agreement shall affect the Commencement Date. Landlord
shall provide Tenant (i) notice not less than one hundred twenty (120)
days prior to the date that Landlord anticipates Landlord shall
Substantially Complete Landlord's Work ("LANDLORD'S FIRST SUBSTANTIAL
COMPLETION ESTIMATE NOTICE") and (ii) a second notice to Tenant
("LANDLORD'S SECOND SUBSTANTIAL COMPLETION ESTIMATE NOTICE") not less
than thirty (30) days prior to the date that Landlord anticipates
Landlord shall Substantially Complete Landlord's Work, in each case
without taking into account any acceleration of the date Landlord's Work
shall be deemed to have been Substantially Complete as a result of one
or more Tenant Delays. The Initial Term shall terminate on the twentieth
(20th) anniversary of the Commencement Date. Reference in this Lease to
"LEASE YEAR" shall mean each successive twelve (12) month period during
the Term (as defined herein) commencing on January 1 and ending December
31 (or such other twelve (12) month period as shall be reasonably
designated by Landlord), provided that the first Lease Year shall begin
upon the Commencement Date and end on December 31 of the calendar year
in which the Commencement Date occurs, and the last Lease Year shall end
on the last day of the Initial Term or the last day of the last
exercised Option Period (as defined herein) hereunder. "TERM" as used
herein shall mean the Initial Term and all validly exercised Option
Periods.
Access Prior to Commencement Date. Until the earlier of (i) the Commencement
Date and (ii) the date on which a termination notice is served by either
Landlord or Tenant pursuant to Section 54 hereof, and subject to all
applicable laws and ordinances, Tenant shall be entitled to maintain an
office either within the Development or at a location suitable therefor
reasonably acceptable to Landlord and Tenant, or, at Landlord's
election, on the surface parking area (if any) adjacent to said
Development, all at no cost to Tenant for Monthly Base Rent, Common Area
Expenses or real property taxes (as such terms are defined herein), for
its pre-opening and construction period activity. Tenant shall be
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entitled to hang a banner or other signage in the Development, subject
to compliance with applicable laws, regulations, permits, approvals,
ordinances, the Condominium Documents (if applicable) and the CC&R and
subject to Landlord's prior approval of all Signage Approval Factors (as
defined herein). Such office shall be deemed to constitute a part of the
Premises for all purposes (including, without limitation, Article 19
hereof (Indemnification) and Article 20 hereof (Insurance) and Tenant's
obligation to pay for utilities), but Tenant shall not be required to
pay Monthly Base Rent, Common Area Expenses or real property taxes with
respect thereto. If Landlord makes available the surface parking area
for the purpose of such temporary office, it shall be Tenant's
obligation, at its sole cost, to provide a trailer for Tenant's use on
such parking area and to pay all costs and expenses and bear all
liabilities associated therewith.
3. Options to Extend.
Landlord hereby grants to Tenant three (3) successive options (each an
"OPTION" and collectively, the "OPTIONS") to extend the term of this Lease, each
for a one hundred sixty-eight (168) month period (each an "OPTION PERIOD" and,
collectively, the "OPTION PERIODS"), upon the same terms and conditions as those
set forth in this Lease for the Initial Term (except that no options to extend
other than the Options are granted). In order to exercise an Option, Tenant must
give notice to Landlord of its intention to exercise the applicable Option on or
before the date (the "OPTION DATE") which is six (6) months prior to the end of
the Initial Term or the previous Option Period, as applicable; provided,
however, that it shall be a condition precedent to the exercise of each Option
that Tenant shall not be in Default as of the respective Option Date. Tenant's
election not to exercise an Option, or the passage of an Option Date without
exercise of the subject Option, shall thereby terminate the subsequent Option or
Options. The Options are personal to Tenant and may not be assigned except in
connection with a permitted assignment of Tenant's interest in this Lease.
Landlord shall deliver to Tenant a notice reminding Tenant of Tenant's right to
exercise an Option not more than six (6) months and not less than thirty (30)
days prior to the date Tenant may first exercise an Option, provided that in no
event shall Landlord's failure to deliver such notice impose any liability on
Landlord's part; however if Landlord fails to deliver such notice the time for
Tenant's exercise of an Option shall be extended, if necessary, to the date
which is thirty (30) days from the date of delivery of such notice from
Landlord.
4. Membership.
Tenant agrees to provide both daily passes and membership on the
following terms and conditions set forth in this Article 4. In addition, all
Club daily passes and memberships shall be subject to the nondiscriminatory
rules and regulations promulgated by Tenant for use of the Club.
Hotel Guests. Tenant shall permit room guests of the to-be constructed hotel
in the Development, currently contemplated to be operated as a Ritz
Carlton Hotel (such hotel (which, for purposes of this Lease, shall
include any extended stay or time share facilities
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operated in connection therewith or otherwise by Landlord, the operator
thereof or a successor or assign of either), the "PRIMARY HOTEL", and
such room guests of such hotel (including such extended stay component),
the "PRIMARY HOTEL GUESTS") to have access to the Club to use the
facilities therein at such times as the Club is open for business in
consideration for a daily fee payment not to exceed seventy-five percent
(75%) of the then applicable daily fee payment for room guests of other
hotels (other than the Primary Hotel) to have access to the Club to use
the facilities therein or a monthly fee payment pursuant to a separate
written agreement between the owner of the Primary Hotel and Tenant (the
"ATHLETIC CLUB Fee"), a copy of which Tenant shall promptly deliver to
Landlord. The operator of the Primary Hotel shall pay the Athletic Club
Fee to Tenant on a monthly basis as provided in this Section 4.1. Tenant
shall issue the operator of the Primary Hotel a bill for each monthly
Athletic Club Fee ("PRIMARY HOTEL BILL") payable on the later to occur
of the tenth (10th) day of each calendar month and the tenth (10th) day
following the receipt of the Primary Hotel Bill by the Primary Hotel. If
the operator of the Primary Hotel does not pay in full the Primary Hotel
Bill within thirty (30) days from its receipt of the Primary Hotel Bill,
then, in such event, Tenant may deliver a termination notice to the
operator of the Primary Hotel terminating the right of the Primary Hotel
and Primary Hotel Guests to use the Club until payment in full of all
amounts due. Such termination notice shall be delivered by Tenant and be
effective five (5) days following delivery of such notice to the
operator of the Primary Hotel. In the event the Primary Hotel shall fail
to perform any of the terms and conditions contained in this Section 4.1
on its part to be performed, Landlord shall be under no obligation or
liability whatsoever to Tenant; provided, however, that until such time
as Tenant and the Primary Hotel shall have entered into an agreement
with respect to this Section 4.1 (the "ATHLETIC CLUB AGREEMENT"), a copy
of which Tenant shall promptly deliver to Landlord, (a) Landlord shall
reasonably cooperate with Tenant in seeking to obtain the performance of
the Primary Hotel with respect to such applicable terms and conditions
of this Section 4.1 and (b) so long as Landlord or an Affiliate (as
defined herein) of Landlord is the owner of the Primary Hotel, Landlord
shall pay to Tenant the portion(s) of any Primary Hotel Bill which the
operator of the Primary Hotel does not pay to Tenant in full in
accordance with this Section 4.1 within thirty (30) days after
Landlord's receipt of the applicable Primary Hotel Bill and a statement
describing in reasonable detail the portion(s) thereof which remain due.
Without limiting any provisions of this Lease, any dispute between
Landlord and Tenant as to any Primary Hotel Bill shall be subject to
arbitration pursuant to Section 7.3 hereof. For purposes of this Section
4.1, "AFFILIATE" shall mean a Person (as defined herein) which shall (1)
control (as defined herein), (2) be under the control of, or (3) be
under common control with the Person in question.
0.4 Performance by Primary Hotel. If the Primary Hotel shall default in any
of the Primary Hotel's obligations under Section 4.1 hereof, or there
shall exist a bona fide dispute with the Primary Hotel under Section 4.1
hereof and Tenant notifies Landlord in writing that Tenant has
previously notified the Primary Hotel of such dispute and that such
default or notice has been disregarded or not reasonably satisfactorily
acted upon, then upon Tenant's request and provided Tenant is not in
default under this Lease, Landlord shall
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use reasonable efforts to enforce Landlord's rights under the hotel
management agreement with the Primary Hotel (the "HOTEL MANAGEMENT
AGREEMENT") for Tenant's benefit, including, without limitation, giving
notices, claims and demands to and on the Primary Hotel. Tenant shall
reimburse Landlord for all costs incurred in connection with the
enforcement of such rights. Notwithstanding the foregoing, Landlord
shall have no obligation to commence any action at law or in equity to
obtain any relief sought by Tenant by reason of the Primary Hotel's
breach of the Primary Hotel's obligations under Section 4.1 hereof. If,
after request from Tenant, Landlord shall fail or refuse to take
appropriate action for the enforcement of Landlord's rights against the
Primary Hotel with respect to Section 4.1 hereof, Tenant shall have the
right to take such action in Tenant's own name, and for such purpose and
only to such extent, all of the rights of Landlord under the Hotel
Management Agreement are hereby conferred upon and conditionally
assigned to Tenant and Tenant hereby is subrogated to such rights to the
extent that the same shall apply to Section 4.1 hereof; provided,
however, that (i) Tenant shall only have such rights if Tenant shall not
be in default under this Lease and (ii) Landlord shall have the right to
require Tenant to discontinue such action if in the reasonable opinion
of Landlord such action may cause a default, cancellation, forfeiture or
termination of the Hotel Management Agreement or any Senior Interest. If
any such action against the Primary Hotel in Tenant's name shall be
barred by reason of lack of privity, non-assignability or otherwise,
Tenant may take such action in Landlord's name provided Tenant has
obtained the prior consent of Landlord, and that copies of all papers
and notices of all proceedings shall be promptly given to Landlord so
that Landlord may be kept fully informed in respect thereof.
0.5 Residential Occupants. Tenant agrees that all applications for
membership in the Club submitted by the residential occupants and their
families at the Development shall be automatically and promptly accepted
provided that each such individual shall observe the rules and
regulations reasonably promulgated by Tenant from time to time with
respect to the use of the Club which rules and regulations shall be
consistent with the rules and regulations customarily promulgated by
operators of first-class coed athletic clubs and shall not be enforced
in a discriminatory manner.
0.6 Other Occupants. Subject to availability, Tenant agrees that all
applications for membership in the Club submitted by employees or
principals of any of the tenants in the Development shall be
automatically and promptly accepted provided that each such individual
shall observe the rules and regulations reasonably promulgated by Tenant
from time to time with respect to the use of the Club which rules and
regulations shall be consistent with the rules and regulations
customarily promulgated by operators of first-class coed athletic clubs
and shall not be enforced in a discriminatory manner.
5. Rent.
Rent shall be calculated and payable as follows:
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Annual Base Rent. During the Initial Term Tenant agrees to pay Landlord annual
base rent for the Premises (the "ANNUAL BASE Rent") at the rate of Three
Million and 00/100 Dollars ($3,000,000.00) per annum (the "INITIAL
ANNUAL BASE RENT Amount"). In addition to Annual Base Rent, Tenant
agrees to pay as "ADDITIONAL RENT" (sometimes referred to as "ADDITIONAL
RENT") all other charges payable by Tenant pursuant to the terms of this
Lease. Annual Base Rent together with all such additional rent is
collectively referred to herein as "RENT". Tenant shall pay Annual Base
Rent and, except as provided otherwise herein, Additional Rent, in equal
monthly installments on the first day of each month (each such equal
monthly installment of Annual Base Rent is referred to herein as
"MONTHLY BASE RENT"). If for any reason the Initial Term (or any Option
Period) commences or ends on a day other than the first day of a
calendar month (other than a termination resulting from a Default), then
Rent for the first month and for the last month of the Term shall be
prorated in the proportion that the number of days during the first and
last months of the Term bears to the actual number of days in such
months. All Rent shall be paid to Landlord, without prior demand or
notice, in lawful money of the United States of America, at such place
as Landlord may from time to time reasonably designate in writing and
shall be due and payable on the first day of each month. Rent shall be
paid to Landlord on the date due without notice or demand, and without
abatement, deduction or set-off except as otherwise expressly set forth
in this Lease. No payment by Tenant or receipt by Landlord of a lesser
amount than the Annual Base Rent or Additional Rent, nor shall any
endorsement or statement on any check or in any letter accompanying any
check or payment, as Annual Base Rent or Additional Rent, be deemed an
accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such
Annual Base Rent and Additional Rent or pursue any other remedy provided
in this Lease or by law.
6. Club Name.
Tenant shall be entitled to operate the Club under the name "The Sports
Club/Washington, D.C.," although Tenant has no obligation to use such name.
Tenant shall not use the name "Millennium" or the name of the Primary Hotel in
the operating name of the Club. If Tenant shall not operate the Club under the
operating name "The Sports Club/Washington, D.C." or under an operating name
which incorporates the phrase "Sports Club/LA" in conjunction with a geographic
designation with respect to the city in which the Club is located or such other
operating name to which a substantial number of then existing comparable
athletic club facilities operated by Tenant and affiliates of Tenant are being
operated under, the operating name of the Club shall be subject to the prior
approval of Landlord, which approval shall not be unreasonably withheld or
delayed.
7. Common Area Expenses/Operating Expenses.
Definition. Commencing upon the Commencement Date, Tenant shall pay, in addition
to Monthly Base Rent, all assessments and charges which are assessed
against or incurred in connection with the Premises and/or the Common
Areas, all assessments and charges
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which are assessed against or incurred in connection with the CC&R which
are reasonably allocable to the Premises and/or the Common Areas and all
charges assessed with respect to the Premises by the Condominium
Association (collectively, "COMMON AREA EXPENSES"). If at any time
during the Term the Premises shall not be subject to a condominium form
of ownership, then in lieu of paying charges assessed by the Condominium
Association, Tenant shall pay to Landlord Tenant's Share (as defined
herein) of Operating Expenses (as defined herein). "OPERATING EXPENSES"
shall mean all costs incurred by Landlord (except as hereafter defined)
in connection with the operation of the Development for each successive
twelve (12) month period (as designated by Landlord) occurring in whole
or in part during the Term (and any renewals). Tenant hereby
acknowledges that Operating Expenses shall include the following costs
(by way of illustration, but not limitation): real property taxes and
assessments and any taxes or assessments hereafter imposed in lieu
thereof with respect to the Building, including the Common Areas; water
and sewer charges; dues and fees paid to civic organizations and
associations in which Landlord is a member in the jurisdiction in which
the Building is located, provided that it is then customary for
landlords of similar buildings to be members of such organizations and
associations and to charge tenants any such dues and fees by means of
operating expenses or otherwise; accounting fees; legal fees; management
fees with respect to the Development, (not in excess of four percent
(4%) of the total revenue derived by Landlord from Landlord's operation
of the Development and not in excess of the management fees which are
included as an operating expense or otherwise in the other leases for
commercial space in the Building between Landlord and other commercial
tenants of the Building); utilities; janitorial services; parking
patrol; labor; utilities surcharges or any other costs levied, assessed
or imposed by, or at the direction of, or resulting from, statutes or
regulations or interpretations thereof, promulgated by any federal,
state, regional, municipal or local government authority in connection
with the use or occupancy of the Building, including the Common Areas;
the cost in excess of net insurance and condemnation proceeds of any
capital improvements (amortized over such period as Landlord shall
determine together with interest at the rate actually incurred by
Landlord from a third party lender on the unamortized balance) made to
the Building, including the Common Areas, but only if incurred by
Landlord (i) to comply with any governmental law, rule or regulation
which may become effective after the date of this Lease or any CC&R
(other than in connection with the initial construction of the
Development by Landlord (exclusive of Tenant's Work and/or any Tenant
Revision)), or (ii) where the present value of the projected costs of
the improvement (including, original purchase cost, installation and
subsequent repairs and replacements) is less than the present value of
the amount reasonably anticipated to be saved with respect to the
applicable component(s) of Operating Expense(s) or Common Area
Expense(s), as applicable, payable by Tenant subject to and in
accordance with this Article 7 as the result of such capital improvement
over the remainder of the Initial Term or an exercised Option Period, as
applicable; supplies; materials; equipment; tools; payroll expenses;
rental of personal property used in the maintenance and other upkeep of
the Building (to the extent related to the Premises and/or the Common
Areas (e.g., those service facilities and/or areas of the Building which
are used to provide Building services
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to the Premises and/or the Common Areas or used in connection with the
operation and maintenance of the Premises and/or the Common Areas)),
including the Common Areas; costs and expenses of gardening, landscaping
and irrigation; maintenance of signs; personal property taxes levied on
or attributable to personal property used in connection with the
Building (to the extent related to the Premises and/or the Common Areas
(e.g., those service facilities and/or areas of the Building which are
used to provide Building services to the Premises and/or the Common
Areas or used in connection with the operation and maintenance of the
Premises and/or the Common Areas)), including the Common Areas;
reasonable audit or verification fees in connection with this Article 7;
and costs and expenses (whether or not capitalized) of repairs,
resurfacing, maintenance, painting, lighting, cleaning, steam cleaning,
refuse removal, parking patrol, sweeping, sealcoating, restriping and
similar items to the extent includable in Operating Expenses or Common
Area Expenses, as applicable, subject to and in accordance with this
Article 7. Operating Expenses and Common Area Expenses, as applicable,
shall not include: depreciation of any kind, including on any buildings
or parking structures located within the Development or on any
equipment; construction costs incurred in improving or modifying space
for new tenants of the Development or renovating space vacated by any
tenant; any costs which are reimbursable by (i) tenants of the
Development (other than through their payment of Operating Expenses
and/or Common Area Expenses, as applicable), (ii) other third parties,
or (iii) proceeds of insurance; Landlord's executive salaries; real
estate brokers' commissions; or principal or interest on any
indebtedness (except as specifically permitted above).
Exclusions. In addition to the exclusions from Operating Expenses and Common
Area Expenses set forth in Section 7.1 hereof, Operating Expenses and
Common Area Expenses shall not include the following:
the cost of capital expenditures except for those specifically
described in Section 7;
costs incurred with respect to goods or services (including
utilities, capital improvements, maintenance and repair) supplied to the
Common Areas to the extent that such goods or services are designed for
the exclusive or primary use or benefit of another tenant or tenants
(provided that if such goods or services are for the primary use or
benefit of another tenant or tenants, the cost thereof shall be included
in Operating Expenses and Common Area Expenses, as applicable, to the
extent it is fair and equitable to do so);
costs incurred to the extent that such costs are reimbursed by
insurance;
any ground lease or master lease payments;
legal fees incurred by Landlord in connection with (1) the
preparation, negotiation and enforcement of leases, subleases and lease
renewals, (2) the purchase or transfer or
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disposition of all or any part of the Development or any interest
therein and (3) any financing or refinancing with respect to the
Development;
all leasing costs with respect to the Development, including hard
and soft costs of tenant improvements and preparation of any premises,
tenant concessions, advertising costs and brokerage commissions;
costs of purchasing or installing artwork or signage (it being
agreed that the cost of any such signage that identifies the Development
may be included within Common Area Expenses and Operating Expenses, as
applicable);
costs of any rental or lease of equipment or capital items that
if purchased (whether outright or financed) would otherwise be excluded
from Operating Expenses or Common Area Expenses, as applicable;
costs paid to Affiliates of Landlord in excess of market rates;
fines, penalties, late payment charges, and interest thereon, and
other amounts imposed in lieu thereof, the payment of which is
attributable to Landlord's failure to act in a commercially reasonable
manner;
costs to the extent arising from or relating to the negligence or
willful misconduct of Landlord or Landlord's agents, principals,
employees, licensees or Affiliates;
Landlord's general overhead and general administrative expenses;
costs for repair or maintenance covered by warranties or service
contracts (however, the costs of the warranties or service contracts
shall be includable in Common Area Expenses and Operating Expenses, as
applicable);
expenditures required by Landlord's failure to comply with laws,
regulations or orders, which are required to be complied with by
Landlord under this Lease (except to the extent expressly permitted in
Section 7.1 hereof);
costs to repair latent or patent defects with respect to the
Development or Landlord's Work;
costs incurred due to the violation by Landlord or any other
occupant of the Development of the terms or conditions of any lease;
costs arising from or relating to the presence of Hazardous
Materials (as defined herein) in or about the Development;
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any costs associated with the initial construction of the
Development and failure by Landlord to construct the Development in
accordance with applicable legal requirements as of the date Landlord
shall Substantially Complete Landlord's Work (exclusive of any such
costs arising out of Tenant's Work and/or any Tenant Revision);
insurance premiums, but only if and to the extent Landlord is
reimbursed for the cost thereof by Landlord's insurers;
bad debt expenses resulting from Landlord's negligence or
improper acts;
costs of charitable or political contributions and fees and dues
paid to trade associations (other than as provided in Section 7.1
hereof);
any cost payable by Tenant pursuant to other Sections of this
Lease; and
any Operating Expenses or Common Area Expenses, as applicable,
reasonably allocable to any parking structure located within the
Development.
Building Insurance. Except for Landlord's cost of the all-risk property
insurance for the Improvements, as addressed in Section 20.4 hereof, if
Landlord's cost of obtaining Landlord's Insurance (as defined herein)
for the Property and/or the Building and the operations thereof exceeds
the cost of obtaining such insurance for the first twelve (12) months
following the Commencement Date, Tenant shall pay to Landlord, in a
manner similar to this Section 7.3 within thirty (30) days after being
billed therefore, an amount equal to Tenant's Share of such increased
cost.
"TENANT'S SHARE" shall mean a percentage equal to the quotient obtained
by dividing the Floor Area of the Premises (subject to Section 7.6
hereof) by the total number of square feet of Floor Area in the other
tenantable portions of the Development as of the date of the Actual
Statement (as defined herein) for the applicable Lease Year. Landlord
and Tenant acknowledge that at this time it is not possible to determine
the equitable allocation of all components of Operating Expenses or
Common Area Expenses, as applicable. Accordingly, Landlord shall use
commercially reasonable efforts from time to time (i) to equitably
adjust Tenant's Share of some or all of the components of Operating
Expenses to a percentage other than that which would be arrived at by
the methodology hereinbefore described for the determination of Tenant's
Share, so as to ensure that (a) Tenant will pay Tenant's equitable share
of Operating Expenses and (b) if and to the extent applicable and the
same shall not result in an increase in the payment of Common Area
Expenses or Operating Expenses, as applicable, by Tenant in accordance
with this Article 7, the methodology employed by Landlord to determine
Tenant's equitable share of Operating Expenses is substantially
consistent with the methodology employed in connection with that certain
lease between an Affiliate of Landlord, as landlord and an Affiliate of
Tenant, as tenant, for certain space in New York, New York (the "NEW
YORK ATHLETIC CLUB LEASE") for calendar years 1996 and 1997 or (ii) to
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equitably adjust some or all of the components of Common Area Expenses,
so as to ensure that Tenant will pay Common Area Expenses in accordance
with the methodology hereinbefore described in Section 7.1 hereof and,
if and to the extent applicable and the same shall not result in an
increase in the payment of Common Area Expenses or Operating Expenses,
as applicable, by Tenant in accordance with this Article 7, the
methodology employed in connection with the New York Athletic Club Lease
for calendar years 1996 and 1997 (it being agreed and acknowledged that
in each instance in which the methodology employed in connection with
this Lease shall contradict or be inconsistent with the aforementioned
methodology employed in connection with the New York Athletic Club
Lease, such aforementioned methodology employed in connection with the
New York Athletic Club Lease shall prevail and govern if and to the
extent applicable and such employment shall not result in an increase in
the payment of Common Area Expenses or Operating Expenses, as
applicable, by Tenant in accordance with this Article 7.) In the event
Tenant shall dispute Landlord's determination as to the equitable
allocation of any component of Operating Expenses or Common Area
Expenses, as applicable, and if Landlord and Tenant shall have been
unable to resolve such dispute, within thirty (30) days following the
date that Tenant shall have notified Landlord of such dispute, then,
provided that Tenant shall pay all such amounts as billed by Landlord on
or before the due dates for payment, Tenant may submit such dispute to
binding arbitration in accordance with the Commercial Arbitration Rules
of the AAA and the following provisions hereof within ten (10) days next
following the giving of any notice by Tenant to Landlord stating that it
wishes such dispute to be determined by arbitration. Landlord and Tenant
shall each give notice to the other setting forth the name and address
of an arbitrator designated by the party giving such notice within ten
(10) days after Landlord's receipt of Tenant's arbitration notice. If
either party shall fail to give notice of such designation within said
ten (10) days, then the arbitrator to be chosen by such party shall be
chosen in the same manner as hereinafter provided for the appointment of
the third arbitrator in the case where the two arbitrators chosen
hereunder are unable to agree upon such appointment. The two arbitrators
shall designate a third arbitrator. If the two arbitrators shall fail to
agree upon the designation of a third arbitrator within ten (10) days
after the designation of the second arbitrator, then either party may
apply to the American Arbitration Association or any successor
organization thereto ("AAA") for the designation of such arbitrator;
provided, however, nothing contained herein shall be construed to
require submission of any dispute to the AAA. All arbitrators shall be
persons who shall have had at least ten (10) years experience in the
business of operating or managing commercial real estate in Washington,
D.C. and shall not be affiliated with either Landlord or Tenant. The
three arbitrators shall conduct such hearings as they deem appropriate
in accordance with the Commercial Arbitration Rules of the AAA, making
their determination in writing and giving notice to Landlord and Tenant
of their determination within ten (10) days, if at all possible, after
the designation of the third arbitrator; the concurrence of any two of
said arbitrators shall be binding upon Landlord and Tenant. Any award of
the arbitrators shall be limited to the determination as to whether
Landlord made an equitable allocation of the component(s) of Operating
Expenses or Common Area Expenses, as applicable which are the subject of
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such dispute. If it is determined that Landlord has not equitably
allocated a component(s) of Operating Expenses or Common Area Expenses,
as applicable, then the arbitrators shall determine the equitable
allocation thereof. The determination in any arbitration held pursuant
to this Section 7.3 shall be final and binding upon Landlord and Tenant.
Each party shall pay its own counsel fees and expenses, if any, in
connection with any arbitration under this Section 7.3, and each party
shall pay the fees and expenses of the one of the two (2) original
arbitrators appointed by or for such party and the fees and expenses of
the third arbitrator shall be shared by the parties equally; it being
agreed that (1) if it shall be determined in the arbitration that
Landlord has not equitably allocated a component(s) of Operating
Expenses or Common Area Expenses, as applicable, and as a result thereof
Tenant shall have made an overpayment of Operating Expenses or Common
Area Expenses, as applicable, by more than five percent (5%), then,
Landlord shall pay the reasonable actual out-of-pocket cost of the
arbitration proceeding incurred by Tenant not to exceed $7,500.00, and
the amount of any such overpayment shall be credited against the next
installment (or installments if the credit exceeds the amount of the
next installment) of Monthly Base Rent due under this Lease and if the
amount of the credit exceeds the amount of the subsequent installment(s)
of Monthly Base Rent due under this Lease, the excess shall be refunded
to Tenant within thirty (30) days after the aforementioned arbitration
determination with interest thereon at the Prime Rate (as defined
herein) from the date of such overpayment, and (2) if it shall be
determined in the arbitration that Landlord has equitably allocated the
components of Operating Expenses or Common Area Expenses, as applicable,
then, Tenant shall pay the reasonable actual out-of-pocket cost of the
arbitration proceeding incurred by Landlord not to exceed $7,500.00 and
if it shall be determined in the arbitration that Tenant shall have made
an underpayment of Operating Expenses or Common Area Expenses, as
applicable, Tenant shall pay to Landlord the amount of any such
underpayment within thirty (30) days after the aforementioned
arbitration determination with interest thereon at the Prime Rate from
the date of such underpayment.
Statements. As soon as possible after the beginning of the Initial Term,
Landlord shall give to Tenant a statement estimating the Common Area
Expenses or Operating Expenses, as applicable for the first Lease Year.
Thereafter, Landlord shall give Tenant, prior to the expiration of each
Lease Year, a statement estimating the Common Area Expenses or Operating
Expenses, as applicable for the following Lease Year. The estimated
Common Area Expenses or Operating Expenses, as applicable, shall be the
applicable estimated amounts described in this Section 7. The estimated
Common Area Expenses or Operating Expenses, as applicable, shall be
divided into twelve (12) equal monthly installments (or, as to the first
and last Lease Year, divided by the number of calendar months in such
Lease Year), and Tenant shall pay to Landlord Tenant's monthly
installment of such Common Area Expenses or Operating Expenses, as
applicable, on the first day of each month during the Term as additional
rent. If, in any Lease Year, the actual Common Area Expenses or
Operating Expenses, as applicable, are less than the estimated payments
made by Tenant for such Lease Year, as evidenced in Landlord's statement
(the "ACTUAL STATEMENT") of actual Common Area Expenses or Operating
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Expenses, as applicable, for such Lease Year (which Landlord shall
deliver to Tenant within ninety (90) days after the expiration of each
Lease Year), then any overpayment made by Tenant on the monthly
installment basis shall be credited towards the next monthly
installment(s) falling due and the estimated monthly installments of
Common Area Expenses or Operating Expenses, as applicable, shall be
adjusted to reflect such lower amounts. Similarly, if, in any Lease
Year, the actual Common Area Expenses or Operating Expenses, as
applicable, are greater than the estimated payments made by Tenant for
such Lease Year as evidenced in the Actual Statement for such Lease
Year, then Tenant shall pay the amount of such difference to Landlord
within thirty (30) days after invoice; provided, however, that if the
amount due exceeds 1/2 of Monthly Base Rent then in effect, Tenant may
pay such amount in thirty (30) day installments with each installment in
the amount of the lesser of the remainder due or 1/2 of the Monthly Base
Rent then in effect. Notwithstanding that the Term may have terminated
or expired and Tenant has vacated the Premises, when the final
determination is made of the actual Common Area Expenses or Operating
Expenses, as applicable, for the last Lease Year, Tenant shall
immediately pay to Landlord any increase due over the estimated Common
Area Expenses or Operating Expenses, as applicable, paid by Tenant and,
conversely, any overpayment made in the event actual Common Area
Expenses or Operating Expenses, as applicable, decrease, shall be
rebated by Landlord to Tenant within thirty (30) days after such
determination. The foregoing provision shall survive the expiration or
earlier termination of this Lease.
Audit. Upon prior notice, but not more frequently than once each Lease Year,
Tenant shall have the right to examine Landlord's books and records with
regard to Common Area Expenses or Operating Expenses, as applicable,
during normal business hours. If Tenant disputes the amount of Common
Area Expenses or Operating Expenses, as applicable, set forth in any
Actual Statement delivered by Landlord or otherwise paid by Tenant,
Tenant must notify Landlord of such dispute in writing within three (3)
months following Tenant's receipt of the Actual Statement. Tenant's
failure to notify Landlord of a dispute within said three (3) month
period shall be deemed Tenant's acceptance and approval of the accuracy
of the Actual Statement. Provided Tenant has timely given the required
dispute notice and has paid the amounts claimed to be due under the
Actual Statement (including the disputed amount), Tenant shall have the
right, to be exercised, if at all, not later than three (3) months after
the date Tenant gave the dispute notice, to cause Landlord's books and
records with respect to the relevant Lease Year to be audited by a
certified public accountant, or by another Tenant representative
mutually acceptable to Landlord and Tenant. The amounts payable under
Section 7.4 hereof by Landlord to Tenant or by Tenant to Landlord, as
the case may, be shall be appropriately adjusted on the basis of such
audit. If such audit discloses a liability for further refund by
Landlord to Tenant in excess of five percent ( 5%) of the Common Area
Expense payments or Operating Expense payments, as applicable,
previously made by Tenant for such Lease Year, Landlord shall pay for
the reasonable cost of the audit not to exceed $7,500.00; otherwise,
Tenant shall pay for the cost of the audit. Notwithstanding the
foregoing, if any audit conducted by Tenant discloses that Landlord
over-reported Common Area
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Expenses or Operating Expenses by more than five percent (5%) for the
period covered by the audit, then Tenant shall be entitled to audit
Common Area Expenses or Operating Expenses, as applicable, for all
preceding years as to which records are available. Landlord shall be
obligated to maintain said records for sixty (60) months (but for no
such longer period of time) after the end of each Lease Year except if a
dispute with respect thereto is then pending under Section 7.3 hereof.
Notwithstanding anything to the contrary contained herein, if in any Lease Year
during which Tenant shall be paying Operating Expenses the total Floor
Area of buildings in the Development which are tenantable is not fully
occupied, then the Operating Expenses for such Lease Year shall be
deemed to be an amount that would be incurred if such total Floor Area
were occupied for such Lease Year, but in no event shall Tenant be
required to pay more than ninety-five percent (95%) of the actual
Operating Expenses.
Cost Abatement
Provided that Tenant shall not then be in default of any of
Tenant's obligations under this Lease (following notice thereof), Tenant shall
be entitled to an aggregate credit of $1,000,000 to be applied against (i) the
monthly installments of Common Area Expenses or Operating Expenses, as
applicable, payable by Tenant in accordance with this Section 7, (ii) the
installments of Taxes (as hereinafter defined) payable in accordance with
Section 12 hereof and (iii) the sums payable by Tenant in accordance with
Section 36 hereof for use of parking spaces located at the Development.
8. Use.
Permitted Use. The Premises shall be used exclusively for a first-class coed
athletic club operated by an operator with first-class expertise,
reputation and experience, and Tenant shall not use or permit the
Premises to be used for any other purpose, or by an operator other than
Tenant or an Affiliate of Tenant, without the prior consent of Landlord,
which may be withheld in the sole and absolute discretion of Landlord.
As used herein, "FIRST-CLASS" shall mean comparable to other athletic
clubs with comparable facilities operated by Tenant or Tenant's
Affiliates as of the date hereof. As a part of the athletic club
operated from the Premises, Tenant shall be entitled to use portions of
the Premises for uses complementary to an athletic club (but only in
support of Tenant's primary operation as an athletic club), such as a
pro shop, child care facility, delicatessen, so long as the type and
quality of such complementary uses are consistent with the services
offered in other first-class athletic clubs; provided, however, no food
or beverages (other than primarily for consumption at the Premises)
shall be sold from the Premises. Any complementary uses may be achieved
through a license, which license shall (i) be subject to all terms and
conditions of this Lease but shall not otherwise require Landlord's
prior approval and (ii) other than with respect to the complimentary
uses in the Reebok Sports Club/New York as of the date hereof, not
conflict with an exclusive use granted by
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Landlord to any then current tenant or any future tenant or occupant of
the Development of which Landlord has advised Tenant.
Compliance with Laws.
Tenant shall not use or occupy the Premises in violation of (a)
law or the certificate of occupancy issued for the Improvements or the
Building, (b) any condominium declaration, offering plan, by-laws, house
rules, and other requirements, instruments or declarations (collectively
the "CONDOMINIUM DOCUMENTS") now or hereafter ratified by any
condominium association or equivalent (the "CONDOMINIUM ASSOCIATION")
having jurisdiction over the Premises, (c) any private covenants,
conditions or restrictions or reciprocal easement agreements
(collectively, the "CC&R") which may now or hereafter be recorded
encumbering the Development or (d) any liquor license issued with
respect to the Club, and shall, upon notice from Landlord, discontinue
any use of the Premises which is in violation of law or of said
certificate of occupancy, or is a violation of the Condominium
Documents, the CC&R or said liquor license. Notwithstanding the
foregoing, after the date hereof Landlord shall not amend or modify any
existing CC&R or create new CC&R's or Condominium Documents which
materially adversely affect any of Tenant's rights hereunder or
materially increase its obligations hereunder.
Tenant shall comply with any law or directive of any governmental
authority having jurisdiction which by reason of the nature of Tenant's
particular use or occupancy shall impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or
occupancy thereof.
Tenant shall not do or permit to be done anything which will
increase the cost of (unless Tenant pays such increased cost) or which
will invalidate any fire, extended coverage or any other insurance
policy covering the Improvements and/or property located therein or the
Building. In the event Tenant does or permits anything to be done which
increases the cost of any insurance maintained by Landlord hereunder,
Tenant shall promptly, upon demand, as Landlord's sole remedy for such
increase (but without limiting any other remedies that may be available
to Landlord if the cause of such increase is otherwise violative of any
provisions of this Lease), reimburse Landlord for such increase. Tenant
shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Development, or use or allow the Premises to
be used for any unlawful purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises; Landlord, however,
acknowledges that certain noise and vibration are incident to Tenant's
use of the Premises, and that to the extent the same shall not exceed
noise levels generated by other athletic clubs in similar types of
buildings and shall not otherwise exceed the legally permissible decibel
levels, the same shall not constitute a nuisance for the purposes
hereof.
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Tenant shall not commit or suffer to be committed any waste in
or upon the Premises.
Tenant shall be responsible for obtaining, at Tenant's sole cost
and expense, all required licenses and/or permits authorizing the use of
the Premises for an athletic club and Tenant's cooking operations with
respect to the Club subject to and in accordance with this Lease and any
other are being conducted in the Premises, as permitted under this
Lease.
Hazardous Materials.
Tenant shall not use or permit any hazardous, toxic or
radioactive materials ("HAZARDOUS MATERIALS")to be brought upon, kept or
used in or about the Premises, the Improvements or any portion of the
Development by Tenant, its agents, employees or contractors, unless such
Hazardous Materials are necessary or useful to and customarily used in
Tenant's business and will be used, kept and stored in a manner that
complies with all laws regulating any such Hazardous Materials. In
addition, Tenant shall be entitled to use general office supplies,
normal janitorial supplies, supplies used in maintaining its equipment
and swimming pool supplies in a manner that complies with all laws
regulating their use. If Tenant breaches the covenants and obligations
set forth herein or, if the presence of Hazardous Materials on, in or
about the Premises, the Improvements or any other portion of the
Development caused or permitted by Tenant, its agents, employees or
contractors results in contamination of the Premises, the Improvements
or any other portion of the Development, then Tenant shall indemnify,
defend and hold Landlord and the owner(s) and operator(s) of the Common
Areas free and harmless from and against any and all claims, judgments,
damages, penalties, fines, costs, liabilities and losses (including
diminution in the value of the Premises and/or the Common Areas, damages
for the loss or restriction on use of rentable or useable space or of
any amenity of the Premises, the Improvements or any other portion of
the Development, and sums paid in settlement of claims, attorneys' fees
and costs, consultants' fees and expert fees) which arise during or
after the Term as a result of such contamination. This indemnification
by Tenant of Landlord and the owner(s) and operator(s) of the Common
Areas, includes any and all costs incurred in connection with any
investigation of site conditions or any clean up, remedial, removal or
restoration work required by any federal, state or local governmental
agency or political subdivision because of the presence of such
Hazardous Materials in, on or about the Premises, the Improvements or
any portion of the Development, including the soil or ground water on or
under the Development. The provisions of this Section 8.3(i) shall
survive the expiration or earlier termination of this Lease.
Landlord shall not cause or permit any Hazardous Materials to be
brought upon, kept or used in or about the Premises or any other portion
of the Development by Landlord, its agents, employees or contractors
unless such Hazardous Materials are used, kept and stored in a manner
that complies with all laws regulating such Hazardous
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Materials. If Landlord breaches the covenants and obligations set forth
herein or if contamination of the Premises or any other portion of the
Development by Hazardous Materials otherwise occurs which is caused by
Landlord or its agents, then Landlord shall indemnify, defend and hold
Tenant free and harmless from and against any and all claims, judgments,
damages (but not consequential damages), penalties, fines, costs and
liabilities and losses (including any diminution in the value of the
Club, and sums paid in settlement of claims, attorneys' fees and costs,
consultants' fees and expert fees) which arise during or after the Term
as a result of such contamination. This indemnification by Landlord of
Tenant includes any and all costs incurred in connection with any
investigation of site conditions or any clean up, remedial, removal or
restoration work required by any federal, state or local governmental
agency or political subdivision because of the presence of such
Hazardous Materials in or about the Premises. The provisions of this
Section 8.3(ii) shall survive the expiration or earlier termination of
this Lease.
Restrictions.
So long as this Lease remains in full force and effect and Tenant
is operating a Club and facilities related to the operation of such Club in at
least seventy-five percent (75%) of the Premises subject to Temporary Closures
(as defined herein), Landlord hereby agrees that neither Landlord, nor any
individual(s), firm or corporation controlled by, controlling or under common
control with Landlord shall lease to, sublease to, consent to an assignment or
sublease to, operate, own or become financially interested in, (i) any other
Club within the Development, provided that an athletic club may be operated
within the Primary Hotel not to exceed 840 square feet of Floor Area in the
aggregate, or (ii) any tenant or occupant of the Development which provides spa
services or operates a beauty salon within the Development provided Tenant is
providing spa services in the Premises and/or operating a beauty salon in the
Premises (a) subject to and in accordance with this Lease and subject to
Temporary Closures (after a reasonable period of time after the Commencement
Date to prepare the Premises for same) and (b) if the operator of the Primary
Hotel is the Ritz Carlton or an Affiliate thereof, in a manner consistent with
the typical standard of operation with respect thereto of the Ritz Carlton in
the United States as of the date hereof (the "RITZ CARLTON STANDARD") or
otherwise in a manner consistent with the typical standard of operation with
respect thereto of the then operator of the Primary Hotel in the United States
(the "OTHER PRIMARY HOTEL OPERATOR"); provided, however, that with respect to
the standard of operation of an Other Primary Hotel Operator any such standard
of operation shall not increase (except to a de minimis extent) the cost and
expense to Tenant (which will not be recouped by Tenant) to provide spa services
in the Premises and/or operate a beauty salon in the Premises beyond that which
Tenant would have incurred in connection with the Ritz Carlton Standard and
Tenant shall not be required to remodel and/or reformat the portions of the
Premises providing spa services and/or being operated as a beauty salon as a
direct result of the conversion from the Ritz Carlton Standard to the standard
of operation of an Other Primary Hotel Operator.
9. Notices.
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All notices, requests, consents, approvals, determinations and other
communications required or permitted to be given hereunder must be in writing
and may be given only by personal delivery, overnight delivery, facsimile
transmission or by mail, and if given by mail shall be deemed sufficiently given
only if sent by registered or certified mail, return receipt requested, to the
following address of the party to receive such notice. Notices shall be deemed
received if sent in compliance with the aforesaid requirements, upon actual
receipt for notices given by personal delivery or facsimile and upon the earlier
of actual receipt or three (3) business days after deposit of any notice in the
United States mail if sent by registered or certified mail.
If to Landlord: c/o Millennium Partners
1995 Broadway, 3rd Floor
New York, New York 10023
Attention: Chief Financial Officer
Fax: (212) 579-0662
With a copy to: Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Eric R. Landau, Esq.
Fax: (212) 856-7805
If to Tenant: Washington D.C. Sports Club, Inc.
11100 Santa Monica Boulevard
Suite 300
Los Angeles, California 90025
Attention: Real Estate Dept.
Fax: (310) 479-8879
With a copy to: Resch Polster Alpert & Berger LLP
10390 Santa Monica Boulevard
Fourth Floor
Los Angeles, California 90025
Attention: Ronald M. Resch, Esq.
Fax: (310) 552-3209
Either party may specify a different address for notice purposes by
notice to the other pursuant to this Article 9.
10. Brokers.
Landlord and Tenant each warrant to the other that such party has not had any
dealings with any real estate broker or agent in connection with the negotiation
of this Lease, and that such party knows of no real estate broker or agent who
is or might be entitled to a commission in
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connection with this Lease. If Landlord or Tenant has dealt with any person or
real estate broker or agent with respect to the transaction contemplated by this
Lease, the party so dealing with such person or broker or agent shall be solely
responsible for the payment of any fee due such person or broker or agent and
such party shall hold the other free and harmless from and against any liability
in respect thereto, including attorneys' fees and costs.
11. Holding Over.
If Tenant holds over after the expiration or earlier termination of this
Lease without the express consent of Landlord, Tenant shall become a tenant at
sufferance only, at a rental rate equal to one hundred twenty-five percent
(125%) of the Monthly Base Rent in effect upon the date of such expiration or
earlier termination (prorated on a daily basis), plus one hundred percent (100%)
of the other elements of Rent, and otherwise subject to the terms, covenants and
conditions herein specified, so far as applicable. Acceptance by Landlord of
Rent after such expiration or earlier termination shall not result in a renewal
of this Lease. The foregoing provisions of this Article 11 are in addition to
and do not affect Landlord's right of re-entry or any rights of Landlord
hereunder or as otherwise provided by law.
12. Taxes.
Payment. Commencing upon the Commencement Date, Tenant shall be liable for and
shall pay to Landlord, as additional rent and in the manner hereinafter
provided, all (i) real property taxes, (ii) personal property taxes,
(iii) general and special assessments, (iv) water and sewer taxes,
bonds, assessments and related charges, (v) excises, levies, license and
permit fees and (vi) all other governmental charges, general and
special, ordinary and extraordinary, of any kind and nature whatsoever,
which at any time during or applicable to the Term may be assessed,
levied, confirmed, imposed upon, or become due and payable out of or in
respect of, or become a lien on the Premises, the Improvements or any
portion thereof (collectively "TAXES"). Tenant's payment of Taxes shall
be payable by Tenant in the same number of installments as taxes are due
from Landlord to the applicable taxing authorities and shall be due from
Tenant to Landlord thirty (30) days prior to the date such taxes, or
installments thereof, are due from Landlord to the taxing authorities.
If during the Term, Taxes are required to be paid to the taxing
authorities in full or in monthly, quarterly or other installments, on
any other date or dates than as presently required, then, the Taxes
shall be correspondingly accelerated or revised so that same are due
thirty (30) days before the date such Taxes, or installments thereof,
are due from Landlord to the taxing authorities. Notwithstanding the
foregoing, if Landlord is obligated to make monthly escrows of Taxes to
any Senior Interest Holder and as a result thereof, Landlord requires
all tenants of the Building under leases with Landlord to make escrows
of Taxes, then in lieu of the manner of payment referred to above, on
the first day of the month following the furnishing to Tenant of a
statement of Taxes, Tenant shall pay to Landlord a sum equal to 1/12th
of the payment of Taxes shown thereon to be due for such fiscal year for
real estate tax purposes adopted by the applicable taxing authority then
imposing taxes (the "TAX YEAR") multiplied by the number of months of
the Term
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then elapsed since the commencement of such Tax Year. Tenant shall
continue to pay to Landlord a sum equal to 1/12th of the payment of
Taxes shown on such statement on the first day of each succeeding month
until the first day of the month following the month in which Landlord
shall deliver to Tenant a new statement of Taxes. If the escrows of
Taxes required to be made by Landlord with any Senior Interest Holder
are required to be made other than monthly, then the obligations of
Tenant referred to in the immediately preceding two (2) sentences shall
be appropriately modified so that Tenant shall make the payment of Taxes
to Landlord in the same number of installations as Landlord is required
to make to such Senior Interest Holder. In the event the escrows of
Taxes required to be made by Landlord with any Senior Interest Holder
are held in an interest bearing account, then Tenant's payment of Taxes
shall be reduced by Tenant's Share of the actual interest received by
Landlord in connection therewith. If Landlord shall not furnish to
Tenant a statement of Taxes prior to the commencement of such Tax Year,
then Tenant shall continue to make monthly installment payments based
upon the previous Tax Year's statement of Taxes until Landlord shall
furnish a new statement of Taxes with respect to the then current Tax
Year. If Landlord furnishes a statement of Taxes for a Tax Year
subsequent to the commencement thereof, promptly after the statement of
Taxes is furnished to Tenant, Landlord shall give notice to Tenant
stating whether the amount previously paid by Tenant to Landlord for the
current Tax Year was greater or less than the installments of Tenant's
payment of Taxes for the current Tax Year, and (1) if there shall be a
deficiency, Tenant shall pay the amount thereof within thirty (30) days
after demand therefor, or (2) if there shall have been an overpayment,
such excess shall be refunded to Tenant within thirty (30) days of the
rendition of the aforementioned statement to Tenant. If there shall be
any increase or decrease in Taxes for any Tax Year, whether during or
after such Tax Year, then Landlord shall furnish a revised statement of
Taxes for such Tax Year, and Tenant's payment of Taxes for such Tax Year
shall be adjusted and paid or credited, as the case may be,
substantially in the same manner as provided in the preceding sentence.
If the Tax Year established by the applicable taxing authority shall be
changed, any Taxes for the Tax Year prior to such change which are
included within the new Tax Year and which were the subject of a prior
statement of Taxes shall be apportioned for the purpose of calculating
Tenant's payment of Taxes payable with respect to such new Tax Year.
If a separate real property tax bill is not issued for the
Premises at any time during the Term, but Landlord receives a tax bill
for a larger parcel of real property including the Premises, Landlord
shall bill Tenant for a pro rata share of such taxes. Landlord shall
provide Tenant with an invoice therefor together with a detailed
explanation of any proration, which proration shall be made on the basis
of Tenant's Share of the ratio between Floor Area of the Premises and
the total square feet of the Floor Area of the other tenantable portions
of the taxed unit of which the Premises form part. If Landlord shall
receive any bills, assessments or other official notices regarding any
such taxes or other charges, it shall promptly forward the same to
Tenant, but an inadvertent failure (or failures) to do so shall not be
deemed a breach hereof. All such taxes, assessments, charges and the
like billed directly to Tenant or passed on to Tenant by Landlord and
paid
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by Tenant pursuant to the provisions of this Section 12.1 shall be
excluded from Common Area Expenses or Operating Expenses, as applicable.
All taxes becoming a lien upon the Premises or any portion thereof
during the first and last Tax Year shall be prorated between Landlord
and Tenant to the first and last day of the Term, respectively. Upon
Tenant's request, Landlord shall furnish to Tenant proof reasonably
satisfactory to Tenant of payment of the matters referred to in this
Article. If the Premises are separately assessed for real property
taxes, Tenant shall have the right, following notice to Landlord, to
protest, contest or object to the amount or validity of any such taxes,
impositions or assessments; provided, however, that this right to
contest shall not be deemed or construed to relieve, modify or extend
Tenant's obligation to pay any such tax, imposition or assessment before
delinquency thereof unless Tenant has provided a bond or other security
satisfactory to Landlord. Tenant shall indemnify and defend Landlord and
save Landlord harmless from all costs, liabilities and expenses incurred
in connection with such proceedings.
Trade Fixtures. Tenant shall be liable for and shall pay, before delinquency,
all taxes levied against Trade Fixtures.
Protest. Tenant shall have the right, at its sole cost, to request Landlord, by
notice to Landlord given not less than ten (10) days before the last
date for filing any necessary protest or petition or taking any other
necessary action, to initiate and prosecute any proceeding for the
purpose of reducing the assessed valuation of the Premises for tax
purposes. In the event that Tenant in good faith shall request Landlord,
pursuant to the preceding sentence, to initiate and prosecute any
proceeding, Landlord shall, subject to the requirements imposed by any
mortgage of Landlord's interests in the Development, at Tenant's sole
expense, take all steps reasonably necessary to commence such proceeding
and thereafter shall diligently prosecute the same to completion. Any
actual out-of-pocket costs, including reasonable attorneys' fees and
costs, incurred by Landlord in connection with any such proceeding
brought at Tenant's request shall be payable upon demand, as Additional
Rent, by Tenant to Landlord. Any refund of moneys received by Landlord
resulting from such proceeding attributable to the Premises and relating
to real property taxes which may have been paid by Tenant shall be
refunded by Landlord to Tenant, together with all accrued interest which
is awarded thereon and received by Landlord; provided that if any such
refund shall be made with respect to Landlord's property other than the
Premises, then Tenant's right to the same shall be limited to its pro
rata portion thereof, after payment or credit first (to the extent such
monies are received by Landlord from the taxing authority), to Tenant
for Landlord's costs previously paid by Tenant to Landlord as above
provided and second (after all costs incurred by Landlord have been
recovered), for any other actual out-of-pocket costs, including
reasonable attorneys' fees and costs, incurred by Tenant in connection
with any such proceeding. Tenant's rights to refunds under this Section
12.3, if any, shall survive the expiration of this Lease.
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Definition. As used in this Article 12, the term "REAL PROPERTY TAXES" shall
include any form of assessment, license fee, license tax, business
license fee, commercial rental tax, levy, charge, tax or similar
imposition, imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement or special
assessment district thereof, as against any legal or equitable interest
of Landlord in the Premises, including, but not limited to, the
following: any tax on Landlord's "right" to rent or "right" to other
income from the Premises or as against Landlord's business of leasing
the Premises; any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge
previously included, within the definition of real property taxes
("IN-LIEU TAX"); any assessment, tax, fee, levy or charge allocable to
or measured by the area of the Premises or the rent payable hereunder
("RECEIPTS TAX"), including any gross income tax or excise tax levied by
the state, city or federal government, or any political subdivision
thereof, with respect to the receipt of such rent, or upon or with
respect to the possessing, leasing, operating, managing, maintaining,
altering, repairing, using or occupying by Tenant of the Premises or any
portion thereof; any assessment, tax, fee, levy or charge upon this
transaction or upon any document to which Tenant is a transferring party
creating or transferring an interest or an estate in the Premises; any
assessment, fee, levy or charge by any governmental agency related to
any transportation plan, fund or system instituted within the geographic
area of which the Premises are a part; and reasonable legal and other
professional fees, costs and disbursements incurred in connection with
proceedings to reasonably contest, determine or reduce real property
taxes. Notwithstanding any provision of this Article 12 expressed or
implied to the contrary, Tenant shall not be required to pay any
documentary transfer taxes or recording taxes incurred by Landlord or
Landlord's federal or state income, franchise, inheritance or estate
taxes or any local income, franchise, inheritance or estate taxes, or
other taxes in lieu thereof, except for any In-Lieu Tax or any Receipts
Tax.
13. Condition of Premises.
Landlord's Work. Landlord hereby agrees to cause to be completed those acts
and/or improvements described as the Landlord's Work in the Work Letter
within the time(s) set forth therein, subject to Force Majeure or any
Tenant Delay. Landlord hereby agrees that all work to be performed by
Landlord pursuant to the Work Letter shall be constructed by Landlord or
Landlord's contractor in a good and workmanlike first-class manner and
in full compliance with all governmental regulations, ordinances and
laws existing at the time of construction. Landlord agrees to abide by
its obligations, if any, under the CC&R. By taking possession of the
Premises upon completion of the Landlord's Work and for commencement of
the construction of the Improvements, Tenant shall be deemed to have:
(i) acknowledged that Landlord's Work is substantially complete and is
accepted "as is" and "with all faults"; (ii) accepted the Premises as
suitable for the purposes for which the Premises are leased; and (iii)
acknowledged that the Premises are in a good and satisfactory condition,
except as otherwise expressly provided in the Work Letter. Landlord
hereby disclaims, and Tenant hereby waives to the full extent permitted
by law,
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any implied warranty that the Premises are suitable for Tenant's
intended commercial purpose, and any and all other implied warranties
(whether arising by virtue of statute, case law or otherwise). The
foregoing provisions shall not be construed to relieve Landlord from its
obligations which are expressly set forth in this Lease.
Design Changes. In order to provide Landlord with the necessary flexibility in
the planning and organizing of the Building, Tenant agrees that the
design of the Building (including the location of the demising walls for
the Premises) and elements of Landlord's Work shall be subject to such
changes as Landlord shall deem to be necessary or beneficial to the
Building or its tenants; provided, however, that the resulting Premises
shall be substantially equivalent for Tenant's purposes as prior to such
changes.
14. Alterations.
Landlord's Approval. From and after the later of (i) the Commencement Date, or
(ii) completion of the Improvements, Tenant, without obtaining
Landlord's prior consent, may only make alterations, additions or
improvements in or to the Premises which (a) are nonstructural in
nature, and (b) do not affect the exterior of the Premises or other
exterior portions of the Improvements (but only to the extent generally
visible from the Common Areas). All alterations, additions and
improvements other than those described in clauses (a) and (b) hereof
shall require Landlord's prior consent. Before proceeding with any
alteration, addition or improvement which requires Landlord's prior
consent hereunder, Tenant shall submit to Landlord plans and
specifications, including any applicable mechanical, electrical and
plumbing drawings, for the work to be done, which plans and
specifications shall require Landlord's approval. If Landlord shall
disapprove of any of Tenant's plans and specifications, Tenant shall be
advised of the reasons for such disapproval.
Requirements. Tenant agrees to provide Landlord with notice of all alterations,
additions or improvements Tenant intends to make to the Premises whether
or not they require Landlord's prior consent as provided above. Tenant
shall cause Tenant's contractor to obtain on behalf of Tenant and at
Tenant's sole cost and expense all necessary governmental permits and
certificates for the commencement and prosecution of any alteration,
addition or improvement and for final approval thereof upon completion.
All such work shall be done at such times and in such manner as Landlord
may from time to time designate. Tenant covenants and agrees that all
work done by Tenant shall be performed in full compliance with the
Condominium Documents, the CC&R, in full compliance with all laws,
rules, orders, ordinances, regulations and requirements of all
governmental agencies, offices, and boards having jurisdiction, and in
full compliance with the rules, regulations and requirements of any
insurance rating bureau having jurisdiction of the Premises or the
Building. Before commencing any work, Tenant shall give Landlord at
least ten (10) days notice of the proposed commencement of such work in
order to provide Landlord with an opportunity to post notices of
nonresponsibility. Tenant further covenants and agrees that any
mechanic's lien recorded against the Premises or the Building for work
claimed to have been done for, or materials claimed to
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have been furnished to Tenant, will be discharged by Tenant, by bond or
otherwise, as provided in Article 16 hereof. All alterations, additions
or improvements upon the Premises made by either party, including all
wallcovering, built-in cabinetry, paneling and the like, shall, at
Landlord's option, upon the expiration or earlier termination of this
Lease become the property of Landlord, and shall, at such time, remain
upon, and be surrendered by Tenant with the Premises, as a part thereof.
Removal. All articles of personal property and movable furniture, including
Trade Fixtures and any other of Tenant's furniture and equipment which
are installed by Tenant at its expense in the Premises shall be and
remain the property of Tenant and may be removed by Tenant at any time
during the Term provided Tenant repairs any damage caused by such
removal. If Tenant shall fail to remove all of its effects from the
Premises upon the expiration or earlier termination of this Lease, for
any cause whatsoever, Landlord may, at it option, remove the same in any
manner that Landlord shall choose, and store said effects without
liability to Tenant for loss thereof so long as Landlord exercises
reasonable care in doing so. In such event, Tenant agrees to pay
Landlord upon demand any and all reasonable expenses actually paid to
third parties incurred in such removal, including court costs and
attorneys' fees and costs and storage charges on such effects for any
length of time that the same shall be in Landlord's possession. Landlord
may, at its option, upon at least ten (10) business days' prior notice
to Tenant of the date, time and place of the sale of such effects, or
any of the same, sell any such affects at a private sale and without
legal process, for such price as Landlord may obtain and apply the
proceeds of such sale to any amounts due under this Lease from Tenant to
Landlord and to the expense incident to the removal and sale of said
effects. Any rights of Landlord under this Section 14.3 shall be subject
to the rights of lienholders with a security interest in Tenant's
personal property pursuant to Section 1.2 hereof.
15. Repairs.
Tenant's Obligations. Except as otherwise hereinafter provided, Tenant, at
Tenant's sole cost and expense, shall (i) keep, maintain (including
necessary replacements) and preserve the Property and every portion
thereof, all equipment, facilities and amenities used in connection
therewith and all items located on or about the Property, including
elevators servicing the Premises, plumbing, mechanical systems, floors
and utility systems (including HVAC system) and all portions thereof in
first-class condition and repair, (ii) when and if needed, at Tenant's
sole cost and expense (subject to the damage and destruction provisions
herein), make all repairs to the Property and every portion thereof
including the interior walls but excluding the structural columns
described in Section 15.2 hereof, (iii) repaint the interior and the
exterior of the Improvements as necessary, (iv) replace all broken
window glass, and (v) repair all facilities except for the structural
elements described in Section 15.2 hereof. Tenant's obligation to keep,
maintain, preserve and repair the Premises shall specifically extend to
the cleanup and removal of all Hazardous Materials to the extent
required by Tenant in Article 8 hereof. Tenant shall, upon the
expiration or earlier termination of the Term, surrender the Property to
Landlord
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in its condition as of the commencement of Tenant's operation of the
Club for member use, usual and ordinary wear and tear and any
alterations, additions and improvements permitted under this Lease
excepted, and except as otherwise provided in Articles 21 and 22 hereof.
Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Property or any part thereof, except as provided
in Section 15.2 hereof and except for cleanup and removal of Hazardous
Materials to the extent required in Article 8 hereof. The parties hereto
affirm that Landlord has made no representations to Tenant respecting
the condition of the Property except as specifically set forth in
Article 13 hereof. In addition, the parties hereto affirm that Landlord
shall have absolutely no obligation to keep, maintain or repair any
portion of the interior of the Premises except as herein expressly
provided. Landlord shall be responsible for repairs to the Property
caused by the negligence or willful misconduct of Landlord or its
employees, agents, or contractors. Notwithstanding the foregoing, to the
extent that insurance carried by Landlord or Tenant provides coverage
for the cost of any maintenance or repair or replacement which is
Tenant's obligation pursuant hereto, Tenant shall be entitled to all
benefits of such insurance.
Landlord's Obligations. Landlord shall (subject to reimbursement therefor
pursuant to Section 7 hereof) keep, maintain and repair, or cause to be
kept, maintained and repaired, the Building (exclusive of the Property)
and the Common Areas in a first-class manner and be responsible for the
repair and maintenance of the structural elements of the Development
except to the extent that the necessity for any repair or maintenance
shall be attributable to alterations performed by or through Tenant or
by the negligence or willful misconduct of Tenant or its employees,
agents, contractors, licensees or invitees. Notwithstanding the
foregoing, Landlord shall (without being subject to reimbursement
therefor pursuant to Section 7 hereof) repair all defects in Landlord's
construction of the Club (if and to the extent expressly provided in the
Work Letter) and Common Areas. Landlord shall grant easements and/or
grant rights of way to the extent necessary for utility companies to
bring those services identified in the Work Letter to the Premises.
16. Liens.
Except with respect to a security agreement, financing statement,
financing lien or other instrument securing the financing of Trade Fixtures and
Tenant's other furniture, fixtures, equipment and improvements approved by
Landlord, Tenant shall not permit to be recorded against the Premises or any
portion of the Development or against Tenant's leasehold interest in the
Premises, any mechanics', materialmen's or other liens, including any state,
federal or local Hazardous Material clean-up liens for which Tenant is
responsible under Article 8 hereof. Landlord shall have the right at all
reasonable times to post and keep posted on the Premises any notices which it
deems necessary for protection from such liens. If any such lien is recorded,
and is not discharged by Tenant by bond or otherwise within thirty (30) days
after the recording thereof, Landlord may, without waiving its rights and
remedies based on such breach of Tenant and without releasing Tenant from any of
its obligations, cause such liens to be released by any means it shall deem
proper, including payment in satisfaction of the claim giving rise to such
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lien. Tenant shall pay to Landlord on demand, upon notice by Landlord, any sums
incurred by Landlord to remove such liens, together with Landlord's reasonable
attorneys' fees and costs and other expenses incurred by Landlord in connection
with obtaining such release and interest on such sums at the lesser of (i) the
rate of twelve percent (12%) per annum and (ii) the highest rate then legally
permissible from the date of such payment by Landlord. Tenant expressly reserves
the right to contest the validity of any such liens and to post bonds suitable
to cause the release of any such liens so long as (a) prior to any such contest
(and no later than thirty (30) days after such lien has been filed) Tenant at
its sole expense provides to Landlord a bond indemnifying against such lien that
complies with all applicable laws, and (b) Tenant contests such lien diligently
and in good faith; provided, however, the foregoing right of Tenant to contest
any such lien shall not impair or otherwise affect Tenant's indemnification and
other obligations with respect to such lien.
17. Entry by Landlord.
During normal business hours upon giving at least one (1) business day's
prior notice to Tenant (except in the case of emergencies, in which case no
notice shall be necessary), Landlord reserves and shall at any and all
reasonable times have the right to enter the Premises and the Improvements to
(i) inspect the same, (ii) show the Premises and the Improvements to prospective
lenders or purchasers (and prospective tenants during the last twelve (12)
months of the Term), (iii) post notices of nonresponsibility, and (iv) alter,
improve or repair the Common Areas or any other portion of the Development, all
without being deemed guilty of any eviction of Tenant or breach of quiet
enjoyment and without abatement or reduction of rent. Landlord shall provide
Tenant with the opportunity to escort Landlord with regard to any entry pursuant
hereto (except in case of an emergency). Landlord shall indemnify Tenant and
hold Tenant harmless from and against any and all claims, damages, losses or
costs (excluding consequential damages) actually incurred by Tenant as a result
of Landlord's entry upon the Premises pursuant to this Article 17 to the extent
not covered by insurance carried by Tenant or required to be carried by Tenant
hereunder. Landlord may, in order to carry out such purposes, erect scaffolding
and other necessary structures if reasonably required by the character of the
work to be performed, provided that to the extent within Landlord's reasonable
control, the business of Tenant shall be interfered with as little as is
reasonably practicable (it being agreed that Landlord shall not be required to
employ overtime or premium labor). It is understood and agreed that no provision
of this Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed herein by
Landlord.
18. Utilities and Services.
From and after Substantial Completion of Landlord's Work, Tenant agrees to pay
all charges for utilities and services used by it in the Premises,
including, but not limited to, gas, electricity, telephone, sanitary
sewer, storm drainage, water, and trash collection. Landlord shall
supply hot water for heat as described in the Work Letter to such
distribution facilities designated in the Design Development Plans (as
defined in the Work Letter). Tenant shall maintain in good working order
and make all necessary
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repairs and replacements to such distribution facilities to the extent
the same are located within or exclusively service the Premises, at
Tenant's own cost and expense. Such hot water shall be supplied to the
Premises at such times and periods as Tenant shall reasonably require
for conducting its business at the Premises in the manner contemplated
by this Lease and the Work Letter (not to exceed eighteen (18) hours per
day). Landlord shall supply (or cause to be supplied) condenser water to
the Premises as described in the Work Letter at such hours (not to
exceed eighteen (18) hours per day) as Tenant may designate. Within
thirty (30) days following demand therefor, Tenant shall pay to
Landlord, as Additional Rent, Landlord's then established charges which
shall not exceed one hundred percent (100%) of Landlord's out-of-pocket
costs for the quantities of such hot water and condenser water (except
as otherwise specifically provided in the Work Letter) as Tenant may
consume, as shown on the meter(s) installed by Landlord (but maintained
by Tenant). Subject to Landlord's obligation to make utility easements
and rights of way available pursuant to the provisions of Section 15.2
hereof and to bring utility lines to the Premises pursuant to Section
1.1 hereof, Landlord shall not be liable for damages or otherwise for
any failure or interruption of any utility or other service furnished to
the Premises, unless such failure shall be due to the negligence or
willful misconduct of Landlord, its agents, licensees or employees and
is not covered by rent abatement and business interruption insurance
carried or required to be carried by Tenant. Subject to Landlord's
obligation to make utility easements and rights of way available
pursuant to the provisions of Section 15.2 hereof and to bring utility
lines to the Premises pursuant to Section 1.1 hereof, Landlord does not
warrant that any of the utilities and services mentioned herein will be
free from interruptions caused by repair, renewals, improvements,
alterations, strikes, lockouts, accidents, inability of Landlord to
obtain fuel or supplies, or any other cause or causes beyond the
reasonable control of Landlord. Any such interruption of service shall
never be deemed an eviction or disturbance of Tenant's use and
possession of the Premises, or any part thereof, or give Tenant any
right to terminate this Lease.
Tenant agrees that it will not install any equipment which will exceed or
overload the capacity of any utility facilities, and that if any
equipment installed by Tenant shall require additional utility
facilities in excess of those specified in the Work Letter, the same
shall be installed at Tenant's expense in accordance with plans and
specifications to be approved in writing by Landlord in accordance with
the standards set forth in Article 14 hereof.
19. Indemnification.
Tenant's Indemnity. Notwithstanding (i) the limits of Tenant's insurance
specified in Section 20.1 hereof and (ii) whether Tenant's insurance
shall be in full force and effect, Tenant shall indemnify, defend and
hold Landlord and the Condominium Association (if applicable) harmless
from all costs, expenses, penalties, claims, demands and liabilities
("CLAIMS") arising from Tenant's use of the Property or the conduct of
its business or from any activity, work, or thing done by Tenant in or
about the Premises. Tenant shall further indemnify, defend and hold
Landlord and the Condominium Association (if
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applicable) harmless from all Claims arising from any Default, or
arising from any act, neglect, fault or omission of Tenant or of its
agents, employees or licensees in the Premises, or arising from any act,
neglect, fault or omission of Tenant's invitees in the Premises, and
from and against all costs, attorneys' fees and costs, expenses and
liabilities incurred in connection with such Claim or any action or
proceeding brought thereon, but this indemnity shall not extend to
Claims to the extent resulting from negligent acts or omissions or
willful misconduct of Landlord or the Condominium Association, as
applicable, their respective employees, agents, licensees or invitees,
to consequential or punitive damages or to Claims that are as applicable
covered by property insurance carried by Landlord or the Condominium
Association or required to be carried by Landlord hereunder. In case any
action or proceeding shall be brought against Landlord and/or the
Condominium Association, as applicable, by reason of any such Claim,
Tenant, upon notice from Landlord and/or the Condominium Association, as
applicable, shall defend the same at Tenant's expense by counsel
approved by Landlord and/or the Condominium Association, as applicable.
Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in, upon or
about the Property from any cause whatsoever, except that for which
Landlord may be liable pursuant to the indemnity contained in Section
19.2 hereof.
Landlord's Indemnity. Landlord shall indemnify, defend and hold Tenant harmless
from any and all Claims arising from any activity, work, or thing done
by Landlord in or about the Development (exclusive of the Premises).
Landlord shall further indemnify, defend and hold Tenant harmless from
all Claims arising from any breach or default in the performance of any
obligation to be performed by Landlord under the terms of this Lease or
arising from any act, neglect, fault or omission of Landlord or of its
licensees, invitees, agents or employees within the Development
(exclusive of the Premises) (provided, however, it is agreed that
tenants or other occupants of the Development and their respective
licensees, invitees, agents or employees shall not be deemed to be
Landlord's licensees, invitees, agents or employees) and from and
against all costs, attorneys' fees and costs, expenses and liabilities
incurred in connection with such Claims or any action or proceeding
brought thereon, but this indemnity shall not extend to Claims to the
extent resulting from the negligent acts or omissions or willful
misconduct of Tenant, its employees, agents or licensees, to
consequential or punitive damages or to Claims that are covered by
property insurance carried by Tenant or required to be carried by Tenant
hereunder. In case any action or proceeding shall be brought against
Tenant by reason of any such Claims, Landlord, upon notice from Tenant,
shall defend the same at Landlord's expense by counsel approved by
Tenant; it being agreed that Battle Fowler LLP and/or counsel designated
by Landlord's insurer are acceptable to Tenant for such purpose.
No Release of Insurers. Tenant's and Landlord's indemnification obligations
under Sections 19.1 and 19.2 hereof are not intended to and shall not
relieve any insurance carrier of its obligations under policies carried
by Landlord or Tenant, and such indemnification obligations shall
survive the expiration or earlier termination of this Lease.
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20. Insurance.
Tenant's Insurance. Tenant shall, during the Term and any other period of
occupancy of the Premises, at its sole cost and expense, keep in full
force and effect the following insurance:
Property. Standard form property insurance insuring against the
perils of fire, extended coverage, vandalism, malicious mischief,
special extended coverage ("ALL-RISK") and sprinkler leakage, covering
all property owned by Tenant, for which Tenant is legally liable or that
was installed solely at Tenant's expense, and which is located on the
Premises, including interior improvements, furniture, fittings,
installations, Trade Fixtures, equipment, facilities and any other
personal property and any alterations, additions and improvements
constructed by Tenant pursuant to Section 14.1 hereof (but excluding any
property required to be insured by Landlord under Section 20.4 hereof),
in an amount not less than the full replacement cost thereof. All
proceeds from the insurance required under this Section 20.1(i) shall be
used for the repair, restoration or replacement of the damaged or
destroyed property unless this Lease terminates pursuant to Section 21
hereof, in which event the provisions of Section 20.3 hereof shall
control.
Liability. Comprehensive General Liability Insurance insuring
Tenant against any liability arising out of the lease, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be in the amount of not less than $5,000,000.00 Combined
Single Limit for injury to, or death of, one or more persons in an
occurrence, and for damage to tangible property (including loss of use)
in an occurrence. Any such coverage requirement may be satisfied by an
umbrella policy. Such policies shall insure the hazards of premises and
operations, independent contractors, contractual liability (covering the
indemnity contained in Section 19 hereof) and shall (a) name Landlord,
the Condominium Association (if applicable) and any mortgagee of
Landlord as additional insureds, (b) contain a cross liability
provision, and (c) contain a provision that "the insurance provided
Tenant hereunder shall be primary and noncontributing with any other
insurance available to Landlord or the Condominium Association," so long
as such provision may be available. The limit of insurance required
pursuant to this Section 20.1(ii) shall be subject to review by Landlord
and, to the extent that the amount of such insurance is less than the
limits normally and customarily maintained with respect to Similar
Premises (as hereinafter defined), Landlord, from time to time, may
require Tenant to increase, or cause to be increased, such limit (but
Landlord shall not require such increases more frequently than once
every ten (10) years). Any dispute as to the reasonableness of any such
increase in the insurance limit which Landlord shall purport to require
of Tenant under this Section, from time to time, shall be submitted to
arbitration pursuant to Section 7.3 hereof; provided, however, that
Tenant shall maintain insurance for the disputed policy limit during the
pendency of any such arbitration proceeding. As used herein, the term
"SIMILAR PREMISES" shall mean the first-class mixed-use buildings being
located in Washington, D.C., or other first-class mixed-use buildings or
premises having business operations of a nature and character
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substantially similar to the nature and character of the business
operations being conducted at the Premises, and being located in
Washington, D.C.
Workers' Compensation. Workers' Compensation and Employer's
Liability insurance (as required by state law).
Rental Interruption. Twelve (12) months rent abatement and
business interruption insurance which shall cover Tenant's monetary
obligations under this Lease and any direct or indirect loss of earnings
attributable to perils insured against under extended coverage all-risk
property insurance; provided, however, that Tenant shall be entitled to
self-insure such risk.
Liquor. Liquor liability insurance coverage with commercially
reasonable coverage limits, but in no event less than $5,000,000.00 per
occurrence, naming Landlord, the Condominium Association and any
mortgagee of Landlord as additional insureds. Any such coverage
requirement may be satisfied by an umbrella policy.
Requirements. All policies required of Tenant shall be written by an insurer
satisfactory to Landlord. Such policies shall name Landlord and the
Senior Interest Holders (as hereinafter defined) of which Tenant has
notice as additional insureds. Prior to the date Tenant enters the
Premises, but in no event later than sixty (60) days after the execution
of this Lease, Tenant shall deliver to Landlord copies of policies or
certificates evidencing the existence of the amounts and forms of
coverage required (or, in the event of self-insuring as permitted in
Section 20.1(iv) hereof only, evidence of the net worth of Tenant or a
Person providing a guaranty of this Lease to Landlord of not less than
$10,000,000). No such policy shall be cancelable or reducible in
coverage except after thirty (30) days' prior written notice to
Landlord. Tenant shall, within thirty (30) days prior to the expiration
of any such policies, furnish Landlord with renewals, certificates of
insurance, or "binders" thereof, and, if Tenant fails to do so within
ten (10) days following notice of such failure, then, upon an additional
notice to Tenant, Landlord may order such insurance and charge the cost
thereof to Tenant as Additional Rent. If Landlord obtains any insurance
that is the responsibility of Tenant under this Article 20, Landlord
shall deliver to Tenant a statement setting forth the cost of any such
insurance and showing in reasonable detail the manner in which it has
been computed, and, if obtainable, a certificate of insurance naming
Tenant as the insured or as an additional insured. Tenant's obligation
to carry insurance provided for in this Article 20 may be satisfied by
inclusion within the coverage of any blanket policy or policies of
insurance carried or maintained by Tenant, provided that the coverage
required herein will not be reduced or diminished by reason of the use
of such blanket policies of insurance.
Proceeds Upon Termination. In the event of damage to or destruction of the
Improvements resulting in termination of this Lease pursuant to Article
21 hereof, (i) Landlord shall be entitled to all proceeds of the
insurance required to be maintained under Section 20.4 hereof (subject
to Landlord's obligation to cause such proceeds to be disbursed for the
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purposes of restoration, as herein provided) and (ii) Tenant shall
immediately pay to Landlord all of its property insurance proceeds, if
any, plus any deductible amount (subject to the limitation described
below) relating to the Improvements and all other items of property
which would have become Landlord's property upon expiration or earlier
termination of this Lease absent such damage or destruction (but not
relating to Trade Fixtures or Tenant's other equipment, furniture or
personal property). Notwithstanding the foregoing, Tenant shall not be
required to pay any such deductible amounts to Landlord unless Landlord
can reasonably demonstrate that Landlord has entered into a new lease
with a non-Affiliate of Landlord for an athletic club in the Premises
for a lease term of not less than ten (10) years within twelve (12)
months after the termination of this Lease.
Landlord's Insurance. Landlord may, but shall not be obligated to, take out and
carry any form or forms of insurance ("LANDLORD'S INSURANCE") as it may
reasonably determine advisable, or as may be required by Landlord's
mortgagee; provided, however, that Landlord shall be required to carry
(i) Comprehensive General Liability Insurance in amounts not less than
those required of Tenant pursuant to Section 20.1 hereof and (ii)
insurance against any peril insurable under an all-risk property
insurance policy covering the Improvements, exclusive of any item
insured by Tenant pursuant to Section 20.1(i) hereof, in an amount which
is one hundred percent (100%) of the full replacement cost of the
Improvements. Landlord's obligation to carry the all-risk property
insurance provided for in this Section 20.4 may be satisfied by
inclusion of the Improvements within the coverage of any blanket policy
or policies of insurance carried or maintained by Landlord, provided
that the coverage required herein will not be reduced or diminished by
reason of the use of such blanket policies of insurance. Tenant shall
reimburse Landlord, as Additional Rent payable in equal monthly
installments, the cost of the all-risk property insurance for the
Improvements required by this Section 20.4 commencing within thirty (30)
days following demand therefor, and the premiums for such insurance will
not be included in the Insurance Escalation (as defined herein). In the
event such all-risk property insurance covers improvements other than
the Improvements, Tenant's pro rata share will be that proportion that
the Floor Area of the Improvements bears to the total Floor Area of all
improvements covered by such policy.
Insurance Escalation. Except for Landlord's cost of the all-risk property
insurance for the Improvements, as addressed in Section 20.4 hereof, if
Landlord's cost of obtaining Landlord's Insurance for the Property
and/or the Building and the operations thereof exceeds the cost of
obtaining such insurance for the first twelve (12) months following the
Commencement Date, Tenant shall pay to Landlord, as Additional Rent,
within thirty (30) days, after being billed therefore, an amount equal
to Tenant's Share of such increased cost.
Compliance. Landlord and Tenant shall promptly comply with all reasonable
requirements of the insurance authority or of any insurer now or
hereafter relating to the Premises.
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Waiver of Subrogation. All policies of all-risk, fire, extended coverage or
similar property insurance which either party obtains or is required to
maintain in connection with the Development, and the insurance required
to be obtained by Tenant pursuant to the provisions of Section 20.1 (iv)
hereof, and, if obtainable, all liability policies, shall include or
shall be deemed to include a clause or endorsement denying the insurer
any rights of subrogation against the other party. Landlord and Tenant
waive all rights of recovery against the other for injury or loss due to
hazards covered by insurance containing or deemed to contain such a
waiver of subrogation clause or endorsement to the extent of the injury
or loss covered thereby.
21. Damage or Destruction.
(i) Tenant's Reconstruction. In the event the Improvements shall be damaged by
fire or other perils and this Lease shall not be terminated as hereafter
provided, Tenant, at its sole cost and expense, shall within a period of
thirty (30) days thereafter, commence repair, reconstruction and
restoration of the Improvements to their condition existing immediately
prior to such damage and prosecute the same diligently to completion in
compliance with all applicable laws, and this Lease shall continue in
full force and effect unless this Lease is terminated as hereinafter
provided. Any such repair, reconstruction and restoration shall be
performed strictly in accordance with the provisions of Article 14
hereof and Tenant shall be entitled to apply the insurance proceeds to
the repair, reconstruction and restoration in the manner provided in
Section 21.2 hereof. If at any time Tenant shall fail to prosecute such
work of repair or rebuilding with diligence, then Landlord may give to
Tenant notice of such failure and if such failure continues for twenty
(20) days thereafter, then Landlord, in addition to all other rights
which it may have, may, at Tenant's sole cost and expense, enter upon
the Premises, provide labor and/or materials, cause the performance of
any contract and/or take such other action as it may deem advisable to
prosecute such work. For this purpose, any contracts made by Tenant for
purposes of accomplishing repair, reconstruction and restoration of the
Improvements shall be in a form assignable to Landlord and shall be
subject to Landlord's approval. Landlord shall be entitled to
reimbursement for its costs and expenses in performing such work from
any insurance proceeds and any other moneys held by the Depository (as
defined herein) for application to the cost of such work in accordance
with Section 21.2 hereof. All costs and expenses incurred by Landlord in
carrying out such work for which it is not reimbursed by the Depository
shall be paid by Tenant upon demand, which demand may be made by
Landlord periodically as such costs and expenses are incurred, in
addition to any damages to which Landlord may be entitled hereunder.
(ii) Uninsured Casualty. In the event the Improvements shall be
damaged by peril which is not covered by insurance required to be
maintained hereunder (or which is otherwise maintained, if to a greater
standard), and if a duly qualified contractor certifies, in good faith
and fair dealing, that the amount required to repair such damage exceeds
the Uninsured Contribution Amount (as defined herein), Tenant shall have
the option to
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terminate this Lease upon giving notice to Landlord of its exercise of
such termination option within sixty (60) days after such damage or
destruction. Upon such termination of this Lease, the parties shall be
released without further obligations to the other coincident with the
surrender of possession of the Premises to Landlord, except for items
which theretofore accrued and are then unpaid and any obligations
specified in this Lease which are to survive the termination of this
Lease. Notwithstanding the foregoing, in the event that Tenant exercises
its option to terminate this Lease pursuant to the provisions of this
Section 21.1 (ii), Landlord shall have the option, exercisable within
thirty (30) days after Landlord's receipt of Tenant's termination
notice, to notify Tenant that Landlord elects to fund the amount
required to repair such damage and destruction in excess of the
Uninsured Contribution Amount (as defined herein), in which case such
repair, reconstruction and restoration shall be performed pursuant to
the procedures set forth in this Section 21.1(ii), except that Tenant
shall contribute the Uninsured Contribution Amount and Landlord shall
fund any additional amounts necessary to accomplish such repair,
reconstruction and restoration. The "UNINSURED CONTRIBUTION AMOUNT"
shall be Five Hundred Thousand ($500,000.00) Dollars if the casualty
occurs during the first (180) calendar months of the Initial Term, which
amount shall be reduced at the beginning of the one hundred ninety third
(193rd) calendar month of the Initial Term, and every twelve (12) months
thereafter, by One Hundred Thousand ($100,000.00) Dollars, until (but
not including) the beginning of the last twelve (12) months of the
Initial Term. The One Hundred Thousand ($100,000.00) Dollars Uninsured
Contribution Amount in effect for the last twelve (12) months of the
Initial Term shall remain throughout any Option Periods.
(iii) Landlord Termination. In the event that any portion of the
Development (including the Building) shall be damaged to such an extent
that Landlord, the Condominium Association or any of Landlord's lenders
shall elect not to restore same, then Landlord shall have the right to
terminate this Lease within ninety (90) days following the date of the
damage or destruction or, if applicable, within a reasonable time after
Landlord shall have been notified of the Condominium Association's or
lender's decision not to restore. Upon such termination of this Lease,
the parties shall be released without further obligations to the other
coincident with the surrender of possession of the Premises to Landlord,
except for items which theretofore accrued and are then unpaid and any
obligations specified in this Lease which are to survive the termination
of this Lease. Subject to the rights of Landlord's lenders and/or the
Condominium Association, Landlord shall not elect to terminate this
Lease unless a material portion of the Development (i.e., more than
twenty five percent (25%)) shall have been damaged. Landlord agrees that
if (1) this Lease is terminated by Landlord pursuant to this Section
21.1(iii) and Landlord thereafter reconstructs, restores or repairs the
Building or the Premises, (2) at the time of such casualty Tenant is
then operating a Club (including support facilities) within at least
seventy-five percent (75%) of the Premises, (3) at the time of such
casualty no monetary Default (as defined herein) and/or material Default
shall have occurred and be continuing under this Lease, (4) at the time
of such casualty, the Unexpired Lease Term (as defined herein) is at
least five (5) years or Tenant
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exercises an Option for an Option Period, regardless of whether Tenant
then would otherwise have the right to exercise same, by delivering
notice to Landlord simultaneously with the delivery to Landlord of the
Tenant Acceptance Notice (as defined herein) subject to and in
accordance with this Section 21.1(iii), (5) within one-hundred eighty
(180) days following the termination of this Lease pursuant to this
Section 21.1 (iii), Tenant shall deliver to Landlord a statement signed
and certified by the chief financial officer of Tenant, if Tenant is a
corporation, by a managing member, if Tenant is a limited liability
company, or by the chief financial officer of a corporate general
partner of Tenant, if Tenant is a partnership (such person, the
"FINANCIAL OFFICER"), to be true and correct disclosing in reasonable
detail the aggregate amount of costs and expenses actually incurred by
Tenant as the result of the cessation of Tenant's business operations in
the Premises and such termination of this Lease (e.g., including,
without limitation, the unrecouped costs and expenses actually incurred
by Tenant in connection with the development of a Club in the Premises
and reimbursement to Tenant's Club members of membership fees) which are
not covered by insurance maintained by Tenant or otherwise reimbursed to
Tenant (collectively, the "TENANT TERMINATION COSTS") and (6) at the
time of the Landlord Offer (as defined herein), Tenant or an Affiliate
of Tenant is then operating a first-class coed athletic club, Landlord
shall not operate a Club in the Premises or offer to lease or accept any
offer to lease the Premises to any party within a period of five (5)
years after such termination of this Lease unless Landlord shall have
first offered in writing (the "LANDLORD OFFER") to lease the Premises to
Tenant on the terms and conditions of this Lease (including, without
limitation, any unexercised Option Periods) for a term equal to the
unexpired portion of the term of this Lease as of such termination date
(the "UNEXPIRED LEASE TERM") calculated as if this Lease had not been
terminated and Tenant shall not have accepted such offer by notice to
Landlord within thirty (30) days after such offer is given to Tenant
(the "TENANT ACCEPTANCE NOTICE"). Notwithstanding the foregoing, in the
event that Tenant exercises its option to lease the Premises pursuant to
this Section 21.1 (iii), Landlord shall have the option, exercisable
within thirty (30) days after Landlord's receipt of the Tenant
Acceptance Notice, to nullify the Tenant Acceptance Notice by delivering
to Tenant notice and paying to Tenant the Tenant Termination Costs. Upon
Tenant's receipt of such nullification notice and the payment of the
Tenant Termination Costs, the Tenant Acceptance Notice shall be deemed
null and void and of no force and effect and Tenant shall be deemed to
have waived and relinquished its right to lease the Premises and
Landlord shall at any and all times thereafter be entitled to lease all
or any portion of the Premises to others at such rental and upon such
terms and conditions as Landlord in its sole discretion may desire.
Depository. The "DEPOSITORY" shall be a bank or trust company authorized to do
business in the District of Columbia, with a net worth of at least
$10,000,000.00 selected by Tenant and approved by Landlord; provided,
however, that if (i) Tenant does not make such a selection within ten
(10) business days after notice and demand by Landlord, then Landlord
may select the Depository and (ii) if Landlord has a lender whose loan
is secured by the Property, then anyone, excluding Landlord or any
Affiliate of Landlord,
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designated by such lender shall be the Depository. Subject to Section
21.5 hereof, all property insurance moneys recovered on account of
damage or destruction to the Improvements shall be applied to the
payment of the cost of repairing and replacing the Improvements. If net
available insurance moneys shall be insufficient to pay the entire cost
of such work, then Tenant shall bear the cost thereof in excess of the
net available insurance moneys. Except for work which is reasonably
expected to cost less than $100,000.00 (with respect to which Landlord
shall hold the proceeds), the Depository shall hold insurance proceeds
with respect to the Improvements and shall disburse said proceeds during
the course of the work of repair, reconstruction and restoration in
accordance with the provisions set forth below unless the Depository is
Landlord's lender or a designee of such lender, in which event the
provisions of the loan documentation shall control. The Depository shall
not be required to make disbursements more often than at thirty (30) day
intervals. Landlord, Tenant and the Depository shall reasonably,
promptly and in good faith prepare and execute reasonable and
appropriate instructions for disbursement of the proceeds which shall
include a procedure for receipt of certificates, plans, notices, lien
releases and applications for payment. Notwithstanding anything to the
contrary contained herein, disbursement of such insurance proceeds shall
in all events (i) be subject to such requirements as may be imposed by
the Condominium Association and/or any mortgagee of Landlord and (ii)
include a procedure for a retainage of ten percent (10%) of the cost of
the work from each draw disbursed in connection with such restoration
until at least thirty (30) days after the completion of all work. If,
after all of said work shall be completed in accordance with the terms
of this Lease and all governmental approvals and permits required have
been obtained, there are funds held by the Depository for application to
the cost of such work in excess of the amounts withdrawn, then such
funds (after first applying such funds to the costs and expenses of the
Depository) shall be delivered to Tenant; provided, however, that if the
funds held by the Depository are a result of any insurance carried by
Landlord or Section 21.5 hereof, such funds shall be delivered to
Landlord. The Depository may retain free of trust its reasonable fees
and expenses for acting as such. In the event there are not sufficient
funds held by the Depository to pay its fees and expenses, Landlord and
Tenant shall share equally the fees and expenses of the Depository.
No Termination or Rental Abatement. No destruction of or damage to the
Property or any part thereof, whether such destruction or damage be
partial or total or whether such destruction or damage shall have been
covered by insurance or not, shall entitle or permit Tenant to surrender
or terminate this Lease (except as provided in Section 21.1(ii) hereof)
or relieve Tenant from liability to pay in full the rents and other sums
and charges payable by Tenant hereunder (except as provided in Section
21.4 hereof), or from any of its obligations under this Lease. Tenant
hereby waives any rights now or hereafter conferred upon it by statute
or other law to surrender this Lease or to quit or surrender the
Property or any part thereof, or to receive any suspension, diminution,
abatement or reduction of the rent or other sums and charges payable by
Tenant hereunder on account of any such destruction or damage, except as
otherwise expressly provided in this Lease.
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Limited Rental Abatement. Notwithstanding anything to the contrary contained
herein, in the event that the Improvements shall be damaged by peril
which is not covered by insurance required to be maintained hereunder
(or which is otherwise maintained), then, to the extent not covered by
the rent abatement insurance or business interruption insurance required
to be carried by Tenant pursuant to Section 20.1 (iv) hereof (whether by
self insuring or otherwise), Tenant shall be entitled to abate its
obligations to pay Monthly Base Rent and, as applicable, Common Area
Expenses or Operating Expenses, for the period from the date of such
peril until the earlier of (i) the date upon which Tenant opens for
operation of its business, or (ii) the date which is twelve (12) months
after the date of such peril, provided that such twelve (12) month
period shall be reduced to the extent that Tenant does not diligently
seek to repair the damage caused as a result of such peril and/or
re-open the Premises for the operation of its business. From and after
the expiration of such rental abatement, Tenant's obligation to pay
Monthly Base Rent and, as applicable, Common Area Expenses or Operating
Expenses shall once again commence.
Lender's Prior Rights to Insurance Proceeds. Notwithstanding anything to the
contrary herein, Tenant acknowledges that the rights of any lender
holding a mortgage or deed of trust against the Premises ("SECURED
LENDER") to any insurance proceeds applicable to the Improvements,
except for Tenant's Insurance Share (as defined herein), shall be
superior to the rights of Landlord and Tenant to such proceeds.
"TENANT'S INSURANCE SHARE" is equal to Tenant's "pro rata share" (as
determined in accordance with Section 22.1 hereof) of the insurance
proceeds payable for the damaged Improvements. Landlord agrees to use
commercially reasonable efforts to cause the Secured Lender to make the
insurance proceeds in which the Secured Lender has a prior interest
available to Tenant for reconstruction as contemplated in this Lease.
If, within two hundred seventy (270) days following a casualty, a
Secured Lender has not made such proceeds available for reconstruction,
then at Tenant's election this Lease shall terminate as of said 270th
day, unless Landlord gives notice to Tenant on or before said 270th day
that Landlord is willing to provide the sums necessary for
reconstruction in excess of any deductibles and Tenant's Insurance
Share, in which case this Lease shall not terminate and Landlord shall
deposit such sums with the Depository and Tenant shall reconstruct the
Premises in accordance with the provisions of this Article 21 hereof.
The disbursement of any insurance proceeds applicable to the
Improvements shall be subject to the control of the Secured Lender
notwithstanding anything to the contrary in Section 21.2 hereof.
22. Eminent Domain.
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Permanent Taking. In case all of the Property (a "TOTAL TAKING"), or such part
thereof as shall substantially interfere with Tenant's use and occupancy
thereof to the extent Tenant cannot operate the Club (a "SUBSTANTIAL
TAKING"), shall be taken for any public or quasi-public purpose by any
lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent, or in lieu of, such
taking, this Lease shall automatically terminate effective as of the
date possession is required to be surrendered to said authority. In the
event the amount of property or the type of estate taken shall not
substantially interfere with the conduct of Tenant's business (a
"PARTIAL TAKING"), Tenant shall restore the Property to substantially
its same condition prior to such Partial Taking and a fair and equitable
allowance shall be made to Tenant for the rent corresponding to the time
during which, and to the part of the Property of which, Tenant shall be
so deprived on account of such taking. Tenant shall not assert any claim
against Landlord for any compensation because of such taking. In the
event of a Total Taking, Substantial Taking or Partial Taking, any award
shall belong to and be paid to Landlord subject to the rights of any
mortgagee of Landlord's interest in the Premises or the beneficiary of
any deed of trust which constitutes an encumbrance thereon, except that
Tenant shall be entitled to any portion of such award related to (i)
Trade Fixtures or Tenant's other equipment and/or personal property
which is taken, (ii) Tenant's moving expenses and loss of goodwill,
(iii) Tenant's "pro-rata share" of the straight-line (on a 20-year
basis) unamortized costs of the Improvements taken, and (iv) in the case
of a Partial Taking only, the amount required to restore the Property to
substantially its same condition prior to such Partial Taking which
shall be held by the Depository for Landlord and shall be disbursed to
Tenant for the purposes of such restoration upon the same terms and
conditions as if they were insurance proceeds under Article 21 hereof.
For the purposes of this Section 22.1, "pro-rata share" shall be
determined by the proportion that the cost paid by Tenant for the taken
Improvements bears to the total of those costs paid therefor by Landlord
and Tenant. Nothing contained in this Section 22.1 shall be deemed to
give Landlord any interest in any award made to Tenant for the taking of
Trade Fixtures or Tenant's other personal property, fixtures and
goodwill and for relocation expenses. Landlord agrees not to interfere
with Tenant's right to participate in any condemnation proceedings. The
provisions of this Section 22.1 shall survive the termination of this
Lease.
Temporary Taking. In the event of taking of the Property or any part thereof for
temporary use, (i) this Lease shall be and remain unaffected thereby and
rent shall not abate, and (ii) Tenant shall be entitled to receive for
itself such portion or portions of any award made for such use with
respect to the period of the taking which is within the Term provided
that if such taking shall remain in force at the expiration or earlier
termination of this Lease, Tenant shall then pay to Landlord a sum equal
to the reasonable cost of performing Tenant's obligations under Article
15 hereof with respect to the surrender of the Property and upon such
payment shall be excused from such obligations. For purpose of this
Section 22.2, a temporary taking shall be defined as a taking for a
period of ninety (90) days or less.
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Waiver. Landlord and Tenant each hereby waive any statutory rights of
termination which may arise by reason of a taking.
23. Defaults and Remedies.
Defaults. The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant ("DEFAULT"):
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 thirty (30) days following notice from Landlord to Tenant
of the need for such cure (the parties agree, 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; Tenant shall use commercially reasonable efforts to
complete any and all such work, from time to time, in an expeditious and
non-disruptive manner).
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; provided, however, Tenant shall be entitled to such notice and
opportunity to cure on only two (2) occasions during any Lease Year;
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, other than as specified in Sections 23.1(i) or
(ii) hereof, where such failure shall continue for a period of thirty
(30) days after 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;
(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
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assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged within 120 days; or
The failure by Tenant to open for business to the general public
within twelve (12) months following Substantial Completion of the
Premises, subject to Force Majeure, within thirty (30) days following
notice from Landlord to Tenant of the need for such cure.
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(iv) 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.
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:
the worth at the time of award of any unpaid Rent which had been
earned at the time of such termination; plus
the worth at the time of award of the amount by which the unpaid
Rent which would 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
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%). 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.
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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 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)
complimentary 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 owned above for each month during the 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
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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 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.
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.
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.
24. Assignment and Subletting.
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Landlord's Consent. Except as otherwise expressly provided in the last sentence
of Section 8.1 hereof and in Section 24.3 hereof, Tenant shall not,
either voluntarily or by operation of law, assign, sublet, pledge,
encumber, hypothecate or otherwise transfer this Lease, without the
prior consent of Landlord, which consent may be granted or withheld in
Landlord's sole and absolute discretion. Without limiting the foregoing,
it shall be a condition to Landlord's consent hereunder that the
assignee execute, acknowledge and deliver to Landlord an agreement
whereby such assignee agrees to be bound by all of the covenants and
agreements in this Lease which Tenant has agreed to keep, observe or
perform.
Notice. Subject to the provisions of Article 46 hereof, in the event Tenant
desires to assign, sublet, pledge, encumber, hypothecate or otherwise
transfer this Lease, then at least thirty (30) days prior to the date
when Tenant desires the transaction to be effective (the "ASSIGNMENT
DATE"), Tenant shall give Landlord a notice (the "ASSIGNMENT NOTICE"),
which shall set forth the name, address and business of the proposed
assignee or sublessee, information (including references) concerning the
character, ownership, and financial condition of the proposed assignee
or sublessee, the Assignment Date, and any ownership or commercial
relationship between Tenant and the proposed assignee or sublessee. If
Landlord requests additional detail within ten (10) days after Tenant's
initial submission, the Assignment Notice shall not be deemed to have
been received until Landlord receives such additional detail, and
without otherwise limiting the provisions of Section 24.1 hereof,
Landlord may withhold consent to any assignment or sublease until such
information is provided to it.
Ownership Transfers. Except as otherwise expressly provided in this Section
24.3, any dissolution, merger, consolidation, or other reorganization of
the corporation which constitutes Tenant, or the sale or other transfer
of fifty percent (50%) or more of the corporate stock of the
corporation, or the sale of fifty percent (50%) or more of the value of
the assets of the corporation, shall be deemed an assignment prohibited
by this Article 24 unless Landlord's prior consent is obtained, which
consent shall not be unreasonably withheld or delayed provided and on
condition that: (i) the principal purpose for such assignment is not the
circumventing of the restrictions and limitations contained in this
Article 24; (ii) Tenant shall notify Landlord, in writing, of any such
proposed assignment not less than twenty (20) days prior to the date on
which Tenant proposes to assign its interest in this Lease; (iii) the
assignee shall be reputable and shall have in the reasonable judgment of
Landlord, sufficient financial worth to perform the obligations of
Tenant under this Lease (after consideration of the then net worth of
each Person providing a guaranty or surety of this Lease to Landlord) as
evidenced by the submission to Landlord of financial and other
information regarding the proposed assignee, including, without
limitation, its business experience, a current financial statement and
such other information as Landlord may reasonably request; (iv) Tenant
shall within ten (10) days after an assignment is executed deliver to
Landlord a copy of such assignment; (v) such assignee shall execute,
acknowledge and deliver to Landlord an agreement, in form and substance
reasonably satisfactory to Landlord, whereby such assignee shall assume
the
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obligations and performance of this Lease and agree to be personally
bound by and upon all of the terms and conditions of this Lease on the
part of Tenant to be performed or observed; (vi) each Person providing a
guaranty or surety of this Lease to Landlord shall deliver an agreement
in form and substance reasonably satisfactory to Landlord reaffirming
such Person's obligations and liabilities under its respective
agreement, guaranty or surety to Landlord and that such agreement,
guaranty or surety remains binding and enforceable against such Person
in accordance with its terms; (vii) the assignee shall use and occupy
the Premises only for the purposes set forth in this Lease, and for no
other purposes, in compliance with the terms and conditions of this
Lease; (viii) neither such assignment nor the acceptance of rent by
Landlord from such assignee shall, in any way, release, relieve or in
any manner affect the liability of Tenant under this Lease, it being the
agreement and understanding of the parties that assignor shall be and
remain liable under all of the terms and conditions of this Lease; and
(ix) neither such assignment nor the acceptance of rent by Landlord from
such assignee shall, in any way, release, relieve or in any manner
affect the liability of any Person providing a guaranty or surety of
this Lease to Landlord.
Notwithstanding anything to the contrary contained herein, the transfer
of shares of Tenant (if Tenant is a corporation) for purposes of this Section 24
shall not include the sale of shares by persons other than those deemed
"insiders" within the meaning of the Securities Exchange Act of 1934, as
amended, which sale is effected through the "over-the-counter market" or through
any recognized stock exchange.
The term "PERSON" as used in this Lease 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, and the term "CONTROL" as
used in this Section 24.3 shall mean the direction of the management and
policies of a person or entity, whether through the ownership of voting
securities, by contract or by law.
No Release. Any sale, assignment, subletting, hypothecation or transfer of
this Lease that is not in compliance with the provisions of this Article
24 shall, at Landlord's option, be void. The consent by Landlord to any
assignment or sublease shall not be construed as relieving Tenant or any
assignee of this Lease from any liability or obligation hereunder
whether or not then accrued. This Article 24 shall be fully applicable
to all further sales, hypothecations, transfers, assignments and
sublettings of any portion of the Premises by any successor or assignee
of Tenant.
25. Subordination.
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, and at the election of Landlord or any
mortgagee with a lien on the Premises or the Development, or any portion thereof
or any ground lessor with respect to the Premises, this Lease shall be subject
and subordinate at all times to: (i) all ground
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leases or underlying leases which may now exist or hereafter be executed
affecting the Premises, (ii) the 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 (iii) the Condominium Documents (as same may now or
hereafter exist) and (iv) any CC&R (as may now or hereafter exist) that do not
materially increase Tenant's obligations hereunder nor materially decrease
Tenant's rights hereunder nor materially interfere with the conduct of Tenant's
normal business operations (all of the foregoing, collectively the "SENIOR
INTERESTS" and the holders of the Senior Interests shall be referred to as
"SENIOR INTEREST HOLDERS"). Notwithstanding the foregoing, Landlord shall have
the right to subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. In the event that any ground
lease or underlying lease terminates for any reason or any mortgage or deed of
trust is foreclosed or a conveyance in lieu of foreclosure is made for any
reason, Tenant shall, notwithstanding any subordination, attorn to and become
the tenant of the successor in interest to Landlord. Tenant covenants and agrees
to execute and deliver within fifteen (15) business days after demand by
Landlord and in the form requested by Landlord, any additional documents
evidencing the subordination of this Lease with respect to any such ground
leases or underlying leases, the lien of any such mortgage or deed of trust, the
Condominium Documents or the CC&R, and, effective upon a failure to do so,
Tenant hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to
execute, deliver and record any such document in the name and on behalf of
Tenant. In consideration of, and as a condition precedent to, Tenant's agreement
to be bound by the subordination provisions of this Article 25, Landlord shall
provide to Tenant for Tenant's execution, a commercially reasonable
subordination, attornment and nondisturbance agreement ("NON-DISTURBANCE
AGREEMENT"), in recordable form, that in any event shall not provide for any
material increase in Tenant's obligations nor any material decrease in Tenant's
rights under this Lease and shall be executed by all future ground lessors,
mortgage holders and deed of trust beneficiaries of any of Landlord's interest
in the Premises desiring to subordinate this Lease to the ground lease, mortgage
or deed of trust, as applicable. In the event Landlord fails to obtain any
Non-Disturbance Agreement, then, as to the mortgage, deed of trust or ground
lease which would have been the subject thereof, this Article 25 shall be void
and of no force or effect.
As a condition to the effectiveness of this Lease, for the benefit of
Tenant Landlord shall deliver to Tenant a non-disturbance agreement in form and
substance identical to the specimen annexed hereto as Exhibit D from Fleet Bank,
National Association (the "INITIAL MORTGAGEE NON-DISTURBANCE AGREEMENT") and
such Initial Mortgagee Non-Disturbance Agreement shall be deemed to satisfy the
requirements described in this Article 25. Tenant agrees to execute the Initial
Mortgagee Non-Disturbance Agreement, provided the agreement conforms to the
agreement attached hereto as Exhibit D.
26. Estoppel Certificate.
Delivery. Within fifteen (15) business days following any request which Landlord
or Tenant may make from time to time, the other party shall execute and
deliver to the requesting party a statement certifying: (i) the
Commencement Date; (ii) the fact that this Lease is unmodified and in
full force and effect (or, if there has been modification hereto, that
this
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Lease is in full force and effect, and stating the date and nature of
such modification); (iii) the date to which the rental and other sums
payable under this Lease have been paid; (iv) that to the best of the
certifying party's knowledge, there is no current default under this
Lease by either Landlord or Tenant except as specified in the statement;
and (v) such other matters reasonably requested by the requesting party.
Landlord and Tenant intend that any statement delivered pursuant to this
Section 26.1 may be relied upon by any mortgagee, beneficiary, purchaser
or prospective purchaser of the Premises, the Club or any interest in
either, and said statement shall so state.
Failure to Deliver. Landlord's or Tenant's failure to deliver any statement
required pursuant to Section 26.1 hereof within such time shall be
conclusive upon such failing party (i) that this Lease is in full force
and effect, without modification except as may be reasonably represented
in good faith by Landlord or Tenant, (ii) that there is no uncured
default in Landlord's or Tenant's performance, and (iii) that not more
than one month's rental has been paid in advance.
Financial Statements. Within thirty (30) days after Landlord's request, Tenant
shall furnish to Landlord (i) no more often than once per
calendar-quarter, the most current existing audited financial statements
of Tenant (which shall, at a minimum, include a balance sheet and income
statement), and (ii) if at any time Tenant is not a publicly-traded
entity or an Affiliate thereof which files consolidated financial
statements, such other information relating to Tenant's financial
condition as may be reasonably required by Landlord. Landlord shall at
all times maintain the confidentiality of the aforementioned financial
statements which are not available to the general public, except to the
extent reasonably necessary to (a) 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 (b)
provided that the recipients of such information agree in writing to
hold the same in confidence, (1) carry out the obligations set forth in
this Lease or documents evidencing and/or securing any Senior Interest,
(2) obtain legal, financial and/or tax advice from Landlord's attorneys,
accountants and financial advisors, (3) negotiate or complete a
transaction with a lender to Landlord secured by Landlord's interest in
the Development, the Building or this Lease (including, without
limitation, a pledge of rents payable hereunder) or purchaser of the
Building or the Development or (4) negotiate or complete a public or
private syndication or similar offering with respect to this Lease,
Landlord, the interests of any of the members of Landlord, the
Development and/or the Building.
27. Construction.
This Lease is to be governed by and construed in accordance with the
laws of the District of Columbia (excluding choice of law provisions). Whenever
the context so requires herein, the neuter gender shall include the masculine
and feminine, and the singular number shall include the plural, and vice versa.
This Lease shall be construed as having been drafted by both parties, jointly,
and not in favor of or against one party or the other. When used herein, the
terms
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"including," "include," "including, without limitation," and similar terms shall
be construed as prefacing examples, components or illustrations rather than
exhaustive definitions, unless a contrary intent is specifically stated, such as
"including and expressly limited to," or in similarly unambiguous terms.
28. Successors and Assigns.
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
29. Surrender of Premises.
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation hereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies. Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Premises and, subject to the provisions of Article 14
hereof, all alterations and additions thereto, in good order, repair and
condition, reasonable wear and tear excepted.
30. Attorneys' Fees and Costs.
If Landlord should bring suit for possession of the Premises, or if
Landlord or Tenant should bring suit for the recovery of any sum due under this
Lease or because of the breach of any provisions of this Lease, or for any other
relief against the other hereunder, or in the event of any other litigation
between the parties with respect to this Lease, including any action for
declaratory relief filed by Landlord or Tenant, then the prevailing party shall
be entitled to an award of all costs and expenses, including reasonable
attorneys' fees and costs, in addition to all other relief awarded.
31. Performance by Landlord.
If Tenant shall fail to pay any sum of money owed hereunder, or if
Tenant shall fail to perform any other act on its part to be performed
hereunder, and (except in the event of an emergency) such failure shall continue
beyond the cure periods set forth in Section 23. 1 hereof, Landlord may, without
waiving or releasing Tenant from the obligations of Tenant, but shall not be
obligated to, make any such payment or perform any such other act to be made or
performed by Tenant. All sums so paid by Landlord and all necessary incidental
costs together with interest thereon at the rate of twelve percent (12%) per
annum, from the date of such payment by Landlord, shall be payable to Landlord
upon demand as Additional Rent.
32. Late Charge and Interest.
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Tenant acknowledges that the late payment by Tenant to Landlord of any
sums due under this Lease will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of such costs being extremely difficult and
impractical to fix. Such costs include processing and accounting charges, and
late charges that may be imposed on Landlord by the terms of any encumbrance or
note secured by any encumbrance covering the Premises. Therefore, if any
installment of Monthly Base Rent or any other sum of money due hereunder is not
timely paid by Tenant and such failure continues for ten (10) days after notice
thereof from Landlord, Tenant shall pay to Landlord, as Additional Rent, the sum
of four percent (4%) of the overdue amount as a late charge; provided, however,
Tenant shall be entitled to such ten (10) day notice and opportunity to cure on
only two (2) occasions during any twelve (12) month period. To the extent
permitted by applicable law, such overdue amount shall also bear interest
commencing upon the due date, as Additional Rent, at the lesser of the maximum
rate than permitted by law and twelve percent (12%) per annum. Landlord's
acceptance of any late charge or interest shall not constitute a waiver of
Tenant's default with respect to the overdue amount or prevent Landlord from
exercising any of the other rights and remedies available to Landlord under this
Lease or any law now or hereafter in effect. Notwithstanding anything to the
contrary contained herein, in no event shall Tenant be required to pay any
amounts that would be characterized as interest under applicable law in excess
of the amounts that could be lawfully charged, collected and received by
Landlord under applicable law. Landlord and Tenant intend to comply with all
usury laws with respect to this Lease.
33. Mortgagee Protection.
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage given by Landlord covering the Premises whose address shall have been
furnished to Tenant, and shall offer such beneficiary or mortgagee the same
opportunity to cure Landlord's default as provided to Landlord under Article 49
hereof plus an additional period of sixty (60) days. In addition, in those
instances which reasonably require such beneficiary or mortgagee to be in
possession of, or have title to, the Development (or any portion thereof) to
cure any such default, the time herein allowed to such beneficiary or mortgagee
to cure such default shall be deemed extended to include the period of time
reasonably necessary to obtain such possession or title with due diligence, and
in those instances in which such beneficiary or mortgagee is prohibited by any
process or injunction issued by any court or by reason of any action by any
court having jurisdiction of any bankruptcy or insolvency proceeding involving
Landlord from commencing or prosecuting foreclosure or other appropriate
proceedings in the nature thereof, the time herein allowed such beneficiary or
mortgagee to prosecute such foreclosure or other proceeding shall be extended
for the period of such prohibition.
34. Definition of Landlord.
The term "Landlord," as used in this Lease, so far as covenants or obligations
on the part of Landlord are concerned, shall be limited to mean and include only
the owner or owners, at the time in question, of Landlord's interest under this
Lease. In the event of any transfer, assignment
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or other conveyance or transfer of such title, Landlord herein named (and in
case of any subsequent transfer or conveyance, the then grantor) shall (in
absence of a writing hereafter described) be automatically freed and relieved
from and after the date of such transfer, assignment or conveyance of all
liability with respect to the performance of any covenants or obligations on the
part of Landlord contained in this Lease thereafter to be performed, and in
absence of any writing to the contrary, the transferee shall be deemed to have
assumed same. Landlord may transfer its interest in the Premises or this Lease
without the consent of Tenant and such transfer or subsequent transfer shall not
be deemed a violation on Landlord's part of any of the terms or conditions of
this Lease.
35. Waiver.
A waiver of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of any subsequent breach of the
same or any other term, covenant or condition herein contained, nor shall any
custom or practice which may grow up between the parties in the administration
of the terms hereof be deemed a waiver of or in any way affect the right of
Landlord or Tenant to insist upon the performance by Tenant or Landlord,
respectively, in strict accordance with said terms. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent. No acceptance by Landlord of a lesser sum than the Monthly Base Rent and
Additional Rent then due shall be deemed to be other than on account of the
earliest installment of such rent, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such installment
or other amount or pursue any other remedy provided in this Lease.
36. Parking.
So long as this Lease remains in full force and effect and Tenant is
operating a Club and facilities related to the operation of such Club in at
least seventy-five percent (75%) of the Premises, Landlord shall make up to 150
parking spaces (individually, a "PARKING SPACE" and collectively, the PARKING
SPACES") available on a non-exclusive basis, with such Parking Spaces to be
located at the Development, in Landlord's discretion, for daily use during such
times as the Club is open for business, by Tenant and Tenant's members subject
to the terms and provisions of this Article 36. Tenant shall pay to Landlord, as
Additional Rent, within fifteen (15) days after Tenant's receipt of any bill or
statement therefor, an amount equal to $150 per calendar month per Parking
Space, such $150 being subject to increase every five (5) Lease Years during the
Term by the CPI Increase (as defined herein); provided, however, that
notwithstanding the foregoing, each such CPI Increase shall not exceed twelve
percent (12%) (the "PARKING CHARGE").
Provided Tenant is not in default beyond the expiration of applicable
notice or cure periods under any of the terms, provisions and conditions of this
Lease, Tenant shall have the
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option to use up to an additional 200 parking spaces subject to and in
accordance with the terms and provisions of this paragraph, with such parking
spaces to be located at the Development, in Landlord's discretion, by giving
irrevocable written notice (the "ADDITIONAL PARKING SPACE NOTICE") to Landlord
not later than six (6) months after the date upon which Tenant commences normal
business operations from the Premises with the general public. If Tenant gives
the Additional Parking Space Notice to Landlord pursuant to the immediately
preceding sentence, then, subject to the terms and provisions of this Article
36, (i) so long as this Lease remains in full force and effect and Tenant is
operating a Club and facilities related to the operation of such Club in at
least seventy-five percent (75%) of the Premises, Landlord shall make the number
of parking spaces indicated in the Additional Parking Space Notice (not to
exceed 200 parking spaces in the aggregate) available on a non-exclusive basis
for daily use during such times as the Club is open for business, by Tenant and
Tenant's members and (ii) Tenant shall pay to Landlord, as Additional Rent in
accordance with the immediately preceding paragraph, the Parking Charge with
respect to each such additional parking space.
In addition to the foregoing, Tenant and Tenant's members may use in
connection with the Club the parking spaces located at the Development which are
designated as general public parking spaces if and to the extent available on a
"first come, first serve" basis. The foregoing shall not be deemed to be a
representation that the aforementioned general public parking spaces shall be
available for use by Tenant and Tenant's members. Landlord shall charge Tenant
an amount equal to the then market rate for such spaces, with the market rate
for such spaces to be based on the market rate for similarly located parking
spaces in the vicinity of the Building (as reasonably determined by Landlord).
If and to the extent any of the aforementioned parking spaces are valet
or attendant parking for the general public, Landlord shall provide any such
valet or attendant parking to Tenant's members at the rate of $1.75 per vehicle
(such $1.75 being in addition to the Parking Charge with respect to any such
parking spaces and being subject to increase each Lease Year by the CPI
Increase). Notwithstanding anything to the contrary contained herein, if the
delivery times in any calendar month of the vehicles of Tenant's members parked
in any such valet or attendant parking spaces exceed four (4) minutes more than
80% of the time during any such calendar month, then, Tenant, without
limitation, shall have the right, but not the obligation, to cease the use of,
and Landlord shall cease to have the obligation to furnish, any or all of such
valet or attendant parking spaces by giving prior written notice, together with
documentation reasonably evidencing such delivery times, to Landlord within
fifteen (15) days after the end of such calendar month. If Tenant shall deliver
such notice and documentation, then the right of Tenant to use, and the
obligation of Landlord to furnish, the number of valet or attendant parking
spaces set forth in such notice to Landlord shall end as of the last day of the
calendar month in which Landlord shall receive such notice and documentation, it
being understood and agreed that notwithstanding the foregoing the terms and
provisions of this Lease shall continue in full force and effect in accordance
with their terms.
The term "CPI" shall mean the Consumer Price Index for all Urban
Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor for Washington, D.C.
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- - MD - VA, All Items (1982-84=100), or a successor or substitute index
reasonably selected by Landlord appropriately adjusted to reflect a constant
base year. In the event that the CPI ceases to use 1982-84=100 as the basis of
calculation, or if a substantial change is made in the terms or number of items
contained in the CPI, then the CPI shall be adjusted to the figure that would
have been arrived at had the manner of computing the CPI not been altered. In
the event such CPI (or a successor or substitute index) is no longer published,
a reliable governmental or other non-partisan publication evaluating the
information theretofore used in determining the CPI shall be used. No
adjustments or recomputations, retroactive or otherwise, shall be made due to a
revision which may later be made in the first published figure of the CPI for
any month. Whenever any provision hereof provides that an amount shall be
adjusted by the CPI Increase, then such amount shall be multiplied by a
fraction, the numerator of which shall be the CPI for the calendar month
immediately preceding the Lease Year for which the amount is to be determined
and the denominator of which shall be the CPI for the calendar month during
which the Commencement Date has occurred.
37. CC&R.
Tenant shall faithfully observe and comply with the Condominium
Documents, and all reasonable and nondiscriminatory rules and regulations
Landlord shall adopt for the Development (as the same may be changed from time
to time) and the CC&R. Landlord shall not be responsible to Tenant for the
violation or nonperformance by any other tenant or occupant of the Development
of the Condominium Documents (if applicable), any of said rules and regulations
or the CC&R. Landlord agrees that future amendments to the CC&R and any such
rules and regulations shall not materially interfere with or interrupt Tenant's
ability to operate a first-class Club in accordance with the terms and
provisions of this Lease and shall not materially increase Tenant's obligations
hereunder nor materially decrease Tenant's rights hereunder, nor be enforced as
to Tenant discriminatorily.
38. Headings.
The Article and Section headings of this Lease are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof.
39. Examination of Lease.
Submission of this instrument for examination or signature by Landlord
or Tenant does not constitute a reservation of or option for lease, and it is
not effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant.
40. Intentionally Omitted.
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41. Prior Agreement; Amendments.
This Lease, together with the addenda and exhibits attached hereto,
contains all of the agreements of the parties hereto with respect to any matter
covered or mentioned in this Lease, and no prior agreement or understanding
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest (subject
to the consent requirement in Article 24 hereof). The parties acknowledge that
all prior agreements, representations and negotiations are deemed superseded by
this Lease to the extent they are not incorporated herein.
42. Severability.
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
43. Limitation on Liability.
It is expressly understood and agreed that any money judgment against
Landlord resulting from any default or other claim arising under this Lease
shall be satisfied only out of Landlord's interest in (i) the Premises, if the
Premises shall then be subject to a condominium form of ownership or (ii) the
Development, if the Premises shall not then be subject to a condominium form of
ownership. No other real, personal or mixed property of Landlord, wherever
situated, shall be subject to levy on any such judgment obtained against
Landlord. If Landlord's interest in the Premises or Development, as applicable,
is insufficient for the payment of such judgment, Tenant shall not institute any
further action, suit, claim or demand, in law or in equity, against Landlord for
or on the account of such deficiency. Tenant hereby waives, to the fullest
extent waivable under law, any right to satisfy said money judgment against
Landlord except from Landlord's interest in the Development or Premises, as
applicable, and except as otherwise provided above.
44. Riders.
Clauses, plats, exhibits, addenda and riders, if any, affixed to this
Lease are a part hereof.
45. Modification for Lender.
If, in connection with obtaining construction, interim or permanent
financing for the Premises or the Development, or any part thereof, or consent
of Landlord's existing or potential lenders to the terms of the transactions
contemplated pursuant to this Lease, a lender shall request reasonable
modifications in this Lease as a condition to such financing or the granting of
its consent, Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not materially increase the
obligations of Tenant hereunder,
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materially decrease Tenant's rights hereunder or materially adversely affect the
leasehold interest hereby created. If, in connection with obtaining financing
for Tenant's Trade Fixtures subject to and in accordance with Section 1.2
hereof, tenant's lender shall request reasonable modifications to this Lease,
Landlord agrees to make reasonable nonmaterial modifications to this Lease and
further agrees not to unreasonably withhold, delay or defer its consent with
respect to such modifications provided such modifications do not decrease the
monetary obligations of Tenant hereunder or materially affect Landlord's rights
hereunder; provided, however, that Landlord shall have no obligation to agree to
any such modifications unless such modifications are approved by the Senior
Interest Holders.
46. Security Agreements/Leasehold Mortgages.
Tenant covenants and agrees that Tenant shall not encumber or
place or permit to be placed any mortgages or other encumbrances on the
leasehold interest granted hereunder and that no security agreement,
whether by way of conditional bill of sale, chattel mortgage or
instrument of similar import, shall be placed upon any improvement made
by Tenant which is affixed to the realty.
In the event that any of the machinery, fixtures, furniture and
equipment installed by Tenant in the Premises are purchased or acquired
by Tenant subject to a chattel mortgage, conditional sale agreement or
other title retention or security agreement, Tenant undertakes and
agrees that no such chattel mortgage, conditional sale agreement or
other title retention or security agreement or Uniform Commercial Code
("UCC") filing statement shall be permitted to be filed as a lien
against the Building and real property of which the Premises form a part
and to cause to be inserted in any of the above described title
retention, chattel mortgage, security agreements, conditional sale
agreement or UCC filing statement the following provision:
"NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS CHATTEL
MORTGAGE, CONDITIONAL SALE AGREEMENT, TITLE RETENTION AGREEMENT,
SECURITY AGREEMENT OR UCC FILING STATEMENT SHALL NOT CREATE OR BE
FILED AS A LIEN AGAINST THE LAND, BUILDING AND IMPROVEMENTS
COMPRISING THE REAL PROPERTY IN WHICH THE GOODS, MACHINERY,
EQUIPMENT, APPLIANCES OR OTHER PERSONAL PROPERTY COVERED HEREBY
ARE TO BE LOCATED OR INSTALLED."
In addition to any other rights that Landlord may have by reason
of Tenant's failure to comply herewith, if any such leasehold mortgage
or other encumbrance, lien or UCC filing statement, based on an
agreement as above described, is filed as an encumbrance, as applicable,
against the Building or improvements of which the Premises form a part,
the Premises and/or any interest thereon, Tenant shall, within thirty
(30) days following notice thereof from Landlord, cause such leasehold
mortgage or other encumbrance, lien or filing statement to be removed or
discharged at Tenant's own cost
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and expense, and Tenant's failure to do so shall constitute a breach of
a material provision of this Lease.
47. Authorizations.
Each individual executing this Lease on behalf of Landlord or Tenant
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of Landlord or Tenant, respectively, in accordance with the
provisions of duly adopted corporate resolutions, and that this Lease has been
duly and properly executed and delivered by Landlord or Tenant, respectively.
48. Signage.
Tenant agrees that any and all exterior building signs on the Premises
shall be subject to the approval of Landlord (and if applicable the Condominium
Association) with respect to the graphics, materials, color, design, lettering,
language, lighting, specifications and exact location ("SIGNAGE APPROVAL
FACTORS"). All signage shall be of a size not in excess of that permitted by
applicable law and shall otherwise comply with applicable laws, regulations,
permits, approvals, ordinances, the Condominium Documents and CC&R; provided,
however, that no change in the CC&R shall require Tenant to modify its original
(or, if theretofore modified, its then-existing,) exterior signs. At the
expiration or earlier termination of this Lease, Tenant shall, at Tenant's sole
cost and expense, cause all such signage to be removed from the exterior of the
Improvements and shall cause the exterior of the Improvements to be restored to
the condition existing prior to the placement of such signage. If Tenant fails
to remove such signs and restore the exterior of the Improvements by the
expiration or earlier termination of this Lease, then Landlord may perform such
work, and all costs and expenses incurred by Landlord in so performing shall be
reimbursed by Tenant to Landlord within ten (10) days after Tenant's receipt of
an invoice therefor. In addition to the foregoing, at all times Tenant shall be
entitled to erect and maintain, as needed in Tenant's judgment but subject to
Landlord's approval, throughout the Development, appropriate directional signage
with respect to Tenant's parking.
49. Default by Landlord.
Landlord shall not be in default hereunder unless Landlord fails to
perform the obligations required of Landlord within a reasonable time, but in no
event later than thirty (30) days after notice by Tenant to Landlord and to the
holder of any first mortgage or deed of trust covering the Premises whose name
and address have been furnished in writing to Tenant ("NOTICED Lender"),
specifying wherein Landlord has failed to perform such obligation; provided,
however, that if the nature of Landlord's obligation is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion (the "CURE PERIOD"). In
addition, the Noticed Lender shall be entitled to such additional period of time
to cure any such default as is set forth in Section 33 hereof. Notwithstanding
anything in this Lease to the contrary, if access to the Premises is unavailable
as
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a result of any blockage occurring in the Common Areas that is caused by
Landlord or its agents, Tenant shall have the right to give Landlord and any
Noticed Lender notice of such events (an "ABATEMENT NOTICE"). If the blockage in
the Common Areas which denies access to the Premises has not been repaired
within the Cure Period or such additional period of time for the Noticed Lender
to cure any such default as is set forth in Section 33 hereof (not to exceed
thirty (30) days after the Cure Period), Tenant's obligations to pay Monthly
Base Rent and Common Area Expenses (or if applicable, Operating Expenses) shall
be abated for the period after the Abatement Notice until the cure of the
condition giving rise to such notice for the entire amount of Monthly Base Rent
and Common Area Expenses (or if applicable, Operating Expenses), provided (i)
the condition giving rise to such abatement right is a denial of access to the
Premises due to a blockage of the Common Areas that is caused by Landlord or its
agents and (ii) Tenant is actually unable to and actually does not use any of
the Premises for the conduct of its business. In the event that for a period of
ninety (90) consecutive days following the Abatement Notice, the condition
giving rise to such notice has not been cured and Tenant has not conducted its
business from the Premises during such ninety (90) day period, Tenant shall have
the right to deliver an additional notice (a "TERMINATION NOTICE") to Landlord
and the Noticed Lender specifying that such item has not been cured within such
period and if such condition is not then cured within thirty (30) business days
after the Termination Notice, Tenant may terminate this Lease by giving notice
thereof to Landlord and the Noticed Lender prior to the date upon which such
condition is cured. The foregoing rights and remedies are in addition to all
other rights and remedies available to Tenant at law or in equity. Except as
provided in this Article 49, Tenant shall not have the right to terminate this
Lease as a result of Landlord's default hereunder. Landlord's liability
hereunder in the event of a default shall be limited as set forth in Article 43
hereof. Notwithstanding anything to the contrary contained herein, if the
blockage occurring in the Common Areas is the result of a fire or other casualty
or a taking in eminent domain, then this Article 49 shall be inapplicable and
Articles 21 and 22 hereof shall govern the rights of the parties.
50. Reasonable Consents.
Except for any matter which has a material impact on the exterior
appearance of the Improvements or except as otherwise provided herein, any time
the consent, approval, determination, designation, or other discretionary
judgment is required of Landlord or Tenant under this Lease, such consent,
approval, determination, designation, or other discretionary judgment shall not
be unreasonably delayed, withheld, conditioned, exercised or decided,
notwithstanding the presence in some instances of words to that effect and their
absence in other instances.
51. No Recording.
It is expressly agreed that Tenant may not and shall not record this
Lease or any memorandum hereof, except as otherwise expressly provided in this
Lease. Tenant and Landlord shall execute and deliver a statutory form of
memorandum of this Lease for the purpose of recording, but said memorandum of
this Lease shall not in any circumstances be deemed to
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modify or to change any of the provisions of this Lease. Upon the expiration or
sooner termination of this Lease, Tenant covenants that it will, at the request
of Landlord, execute, acknowledge and deliver an instrument canceling any
memorandum of lease which is recorded and all other documentation to record
same.
52. Force Majeure.
The occurrence of any of the following events shall be referred to
herein as "FORCE MAJEURE" and shall excuse such obligations of Landlord or
Tenant as are thereby rendered impossible or reasonably impracticable for so
long as such event continues: strikes; lockouts; labor disputes; acts of God;
inability to obtain labor, materials or reasonable substitutes therefor;
governmental restrictions, regulations or controls; judicial orders; enemy or
hostile governmental action; civil commotion; fire or other casualty; and other
causes beyond the reasonable control of the party obligated to perform
(excluding financial inability). Notwithstanding the foregoing, the occurrence
of such events shall not excuse Tenant's obligations to pay Monthly Base Rent,
Common Area Expenses or any other sums hereunder (but may delay the commencement
of such obligations to the limited extent expressly provided for in Section 2.1
hereof) or excuse such obligations as this Lease may otherwise impose on the
party to obey, remedy or avoid such event.
53. Guaranty.
Currently with the execution hereof by Tenant and as a condition to the
effectiveness of this Lease, Tenant shall cause The Sports Club Company to
execute and deliver to Landlord a guaranty of this Lease in the form and
substance set forth in Exhibit E attached hereto which is acceptable to
Landlord.
54. Condition Precedent.
Landlord and Tenant shall each have the right to terminate this Lease on
thirty (30) days notice to the other party (without penalty) if Landlord shall
not have closed upon financing for the construction of the portions of the
Development to be performed by Landlord (all such approvals and terms with
respect thereto to be acceptable to Landlord in its sole and absolute
discretion) not later than March 31, 1999 ("DEADLINE DATE"). In the event that
Tenant shall serve a termination notice pursuant to this Article 54 and Landlord
shall secure the necessary financing within the aforesaid thirty (30) day period
or Landlord shall fund such construction without the required financing (it
being expressly agreed that Landlord shall have no obligation whatsoever to do
so), then Tenant's termination notice shall be of no force and effect. In the
event Landlord or Tenant shall terminate this Lease, as aforesaid, neither party
shall have any further rights or obligations hereunder.
55. Communication Equipment and Antenna.
In the event Landlord shall make a communications antenna or satellite dish
located on the roof of the Building (generically, the "ANTENNA")
available for the non-exclusive and general
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use of the tenants and occupants of the Building, then, in such event,
Tenant may use the antenna in connection with the conduct of Tenant's
normal business operations in the Premises provided and on condition
that: (a) Tenant's use of the antenna shall be subject to Landlord's
reasonable approval, (b) Tenant shall pay to Landlord the monthly
Building charge for the use of the antenna as established by Landlord
from time to time within thirty (30) days after receipt of an invoice
with respect thereto, (c) Tenant shall, at its sole cost and expense,
install all necessary lines, risers, conduits and cables from the
antenna to the Premises required for Tenant's use thereof (collectively,
the "TENANT INSTALLATION"), (d) the Tenant Installation is performed in
accordance with all legal requirements and in compliance with the terms
and conditions of this Lease; (e) Tenant shall indemnify and hold
Landlord harmless from any liability, cost or expense (including
reasonable attorneys' fees and costs and disbursements) connected with
or arising from the Tenant Installation of any nature whatsoever, unless
such liability, cost or expense results solely from the acts or
omissions of Landlord, or its agents, servants or employees; (f) Tenant
shall promptly repair any damage caused to the roof of the Building or
any other portion of the Building by reason of the Tenant Installation
including, without limitation, any repairs, restorations, maintenance,
renewals or replacement of the roof of the Building necessitated by or
in any way caused by or relating to the Tenant Installation; and (g)
Tenant shall remove the Tenant Installation and repair any resulting
damage to the Building and restore the portion of the roof of the
Building and the Building affected by the Tenant Installation to the
condition which existed prior to the Tenant Installation, reasonable
wear and tear and damage by casualty excepted, all at or prior to the
expiration of the term of this Lease, at Tenant's sole cost and expense.
The antenna is for the sole use of Tenant in the conduct of Tenant's business
and for no other purpose or by any other parties. Tenant shall not
resell in any form the use, or rights to the use, of the antenna
including the granting of any license or other rights. The rights
granted in this Article 55 are given in connection with, and as part of
the rights created under, this Lease and are not separately transferable
or assignable other than in connection with an assignment or subletting
permitted by this Lease.
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IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD: 2200 M STREET LLC
By: Millennium Partners LLC, its manager
By: Millennium Partners Management LLC,
its manager
By: Millennium Manager I, Inc.,
its manager
By: /s/ Brian Collins
-------------------------------
Name: Brian Collins
Title: Vice President
TENANT: WASHINGTON D.C. SPORTS CLUB, INC.
By: /s/ John M. Gibbons
-------------------------------
Name: John M. Gibbons
Title: President
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