Exhibit 10.11
SUBORDINATION, ATTORNMENT
AND LESSEE-LESSOR ESTOPPEL AGREEMENT
(2902 Corporate Place, Chanhassen, MN)
     THIS SUBORDINATION, ATTORNMENT AND LESSEE-LESSOR ESTOPPEL AGREEMENT (this
“Agreement”) is entered into as of June 1, 2008, by and among LTF REAL ESTATE
VRDN I, LLC, a Delaware limited liability company, whose address is 2902
Corporate Place, Chanhassen, MN 55317 (“Lessor”), LTF CLUB OPERATIONS COMPANY,
INC., a Minnesota corporation, whose address is 2902 Corporate Place,
Chanhassen, MN 55317 (“Lessee”), and GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, whose address is Suite 470, 8400 Normandale Lake
Boulevard, Minneapolis, Minnesota 55437 (“GECC”).
RECITALS:
     A. Lessee is the present lessee, and Lessor is the current lessor, under
that certain Lease Agreement dated as of June                     , 2008 (as
amended with the consent of GECC, the “Lease”) between Lessor, as lessor, and
Lessee, as lessee, demising all or a portion of the premises in Chanhassen,
Carver County, Minnesota, commonly known as 2902 Corporate Place, Chanhassen,
MN, and more particularly described on Exhibit A attached hereto (the “Leased
Premises”). Capitalized terms used herein but not defined herein shall have the
meanings
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ascribed to such terms in the Lease unless otherwise specified herein, in each
case, without giving effect to any amendment or supplement to the Lease not
consented to by GECC.
     B. Lessee acknowledges that the Lease has been or will be assigned by
Lessor to GECC as security for the obligations under the Reimbursement Agreement
dated as of June 1, 2008 (the “Reimbursement Agreement”) among Lessor, GECC and
GE Government Finance, Inc., which obligations are secured by, among other
things, a Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Filing (the “Security Instrument”) to be recorded contemporaneously
herewith covering the Leased Premises.
     C. A condition precedent to GECC’s entering into the Reimbursement
Agreement is that Lessor obtain this Agreement from Lessee in order to confirm
certain matters and to subordinate the Lease and Lessee’s interest in the Leased
Premises to the lien of the Security Instrument.
     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
     1. Lessee represents and warrants to GECC as follows:
     (a) Lessee has accepted possession and is in occupancy of the Leased
Premises pursuant to the terms of the Lease, and the Lease is in full force and
effect.
     (b) The improvements and space required to be furnished according to the
Lease have been completed in all respects, all amounts owing from Lessor to
Lessee in connection with delivery and construction of the Leased Premises
(including, without limitation, tenant improvement costs, liquidated damages and
charges for construction delays) have been paid and Lessee hereby waives any and
all rights and remedies which Lessee may have against Lessor (including, without
limitation, any right to terminate the Lease) as a result of any breach by
Lessor of any of its obligations under the Lease relating to the delivery,
construction or initial condition of the Leased Premises.
     (c) Lessor has done everything that it promised to do in order to induce
Lessee to enter into the Lease. All conditions to the commencement of the Lease
have been satisfied. There are no concessions or inducements which have been
promised by Lessor or any other party to Lessee other than as set forth in the
Lease.
     (d) The Lease as described above has not been modified, altered or amended.
     (e) There are no offsets or credits against rentals, nor have rentals been
prepaid under the Lease.
     (f) Rental commenced to accrue on June ___, 2008 (the “Commencement Date”),
current Basic Rent equals the sum of 49% of the Loan Obligations and there is
currently no outstanding unpaid rent. The primary Lease term (the “Initial
Term”) commenced on the Commencement Date and expires on July 31, 2023.
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     (g) Lessee has no notice of a currently effective assignment, hypothecation
or pledge of rents on the Lease to any party other than GECC and the lender (if
any) whose loan is being repaid upon closing.
     (h) The Lease does not contain, and Lessee does not have, an outstanding
option to extend or renew the term of the Lease except as follows: five
extension options of five years each.
     (i) Lessee has no claim to or interest in the Leased Premises, legal or
equitable, or any contract or option therefor other than as a lessee under the
Lease. The Lease does not contain, and Lessee does not otherwise have, an
outstanding option to purchase the Leased Premises, other than a first offer
right contained in Article 27 of the Lease pursuant to which Lessee has the
right of first offer to purchase the Leased Premises.
     (j) Sufficient parking facilities for Lessee’s purposes under the Lease are
located on the Leased Premises.
     (k) Lessor is not in default of any of its obligations under the Lease,
and, to the best of Lessee’s knowledge, no event has occurred which, with
notice, the passage of time or both, would constitute a default in any of
Lessor’s obligations under the Lease.
     (l) Lessee has not paid Lessor a security or similar type deposit.
     2. Lessee shall promptly provide GECC at its address first shown above with
a written notice of any default on the part of the Lessor under the Lease.
Except in accordance with Section 5 below, Lessee agrees that it shall not
terminate the Lease or withhold Rent, nor invoke any of its remedies under the
Lease or any other remedies available to Lessee at law or in equity without the
prior written consent of GECC.
     3. Without the prior written consent of GECC, Lessee shall not (a) modify
or in any manner alter the terms of the Lease; (b) pay the rent or any other
sums becoming due under the terms of the Lease more than one month in advance;
(c) accept Lessor’s waiver of or release from the performance of any obligation
under the Lease; (d) assign the Lease to any entity that is not a Life Time
Affiliate or sublet the Leased Premises covering more than 34% of the rentable
area of the Improvements, in aggregate; (e) assign the Lease as collateral
security or mortgage or otherwise encumber its leasehold interest; (f) make any
Alterations, except as permitted under the Reimbursement Agreement; (g) make any
Supervised Alterations; or (h) except as provided in Section 5, terminate or
agree with Lessor to terminate the Lease. Until the Loan and the Loan
Obligations are indefeasibly paid in full, Section 15.5 of the Lease shall not
be effective unless GECC has consented to the related leasehold mortgage.
     4. Until the Loan and the Loan Obligations are indefeasibly paid in full or
instructed otherwise by GECC in writing, Lessee shall make all future Rent and
any other payments under the Lease directly to (a) until the Notes are paid in
full, Trustee and (b) after the Notes are paid in full, GECC. Until the Loan and
the Loan Obligations are indefeasibly paid in full, Lessor hereby irrevocably
directs Lessee to make such payments directly to Trustee or GECC, as applicable,
or as otherwise directed by GECC and agrees that Lessee shall not be liable to
Lessor for any
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payments actually paid to Trustee or GECC or as otherwise directed to GECC
pursuant to this Section 4.
     5. If a casualty or a Taking occurs, and in connection therewith Tenant has
the right to terminate the Lease pursuant to either Section 9.4 or Section 10.1
thereof, Tenant may not exercise such termination right unless, simultaneously
therewith, Tenant pays to Landlord, as additional Rent, an amount equal to 49%
of the sum of the outstanding principal amount of the Loan, interest accrued on
the Loan through the date of such payment and all other Loan Obligations that
are due and owing. This Section 5 modifies Sections 9.4 and 10.1 of the Lease.
Accordingly, it is the intent of the parties that this Agreement, rather than
the Lease, control with respect to all matters concerning Lessee’s rights to
terminate the Lease upon the occurrence of any casualty or Taking.
     6. No determination of Fair Market Value or Fair Rental Value shall be
effective unless GECC has given its written approval of such determination. No
consent of Lessor under the Lease will be effective without GECC’s prior written
consent. In any case under the Lease which requires that Lessor’s consent not be
unreasonably withheld, it will be reasonable for Lessor to withhold its consent
if GECC has not consented thereto in writing.
     7. The Lease and all right, title and interest of Lessee in, to and under
the Lease (including, without limitation, all options or rights of first refusal
to purchase the Leased Premises) are now, and shall at all times continue to be,
unconditionally subject and subordinate in each and every respect, to the
Security Instrument and to any and all renewals, modifications, extensions,
substitutions, replacements and/or consolidations of the Security Instrument.
For so long as the Security Instrument is a lien on the Leased Premises, Lessee
shall not mortgage or otherwise encumber its leasehold interest or subordinate
the estate of Lessee in the Lease to any other mortgage or deed of trust or any
other security instrument.
     8. No provision of this Agreement may be changed, waived, discharged, or
terminated except by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, successors and permitted assigns. Upon recorded
satisfaction of the Security Instrument, this Agreement shall become null and
void and be of no further effect.
     9. To the extent that the Lease shall entitle Lessee to notice of any
mortgage, this Agreement shall constitute such notice to Lessee with respect to
the Security Instrument, and Lessee hereby waives notice of any and all
renewals, modifications, extensions, substitutions, replacements and/or
consolidations of the Security Instrument. The term First Mortgagee or
“mortgagee,” as used in the Lease, shall be deemed to include GECC, its
successors and assigns, including anyone who shall have succeeded to Lessor’s
interest by, through or under foreclosure of the Security Instrument or deed in
lieu of such foreclosure. The term First Mortgage, “mortgage,” or any similar
term, shall be deemed to include the Security Instrument to be recorded
contemporaneously herewith.
     10. This Agreement shall be construed under the laws of the State of
Minnesota applicable to contracts made and to be performed therein (excluding
its choice-of-law
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principles). For purposes of determining the parties’ respective rights and
obligations in connection with any Event of Default, this Agreement will be
considered a part of the Lease.
     11. This Agreement may be executed in any number of counterparts all of
which taken together shall constitute one and the same instrument, and any of
the parties or signatories hereto may execute this Agreement by signing any such
counterpart.
     12. To the extent of any conflict between the provisions of any Loan
Document (as defined in the Reimbursement Agreement) and the Lease which govern
the application and disbursement of insurance and condemnation proceeds, the
payment of Taxes, impounds or impositions, the repair and maintenance of the
Property, maintenance of insurance with respect to the Property, the provisions
of such Loan Document shall control. Notwithstanding anything in the Lease to
the contrary, Lessee may not terminate the Lease because of damage to or
condemnation of the Leased Premises except as permitted pursuant to Section 5 of
this Agreement.
     13. In the event suit or action is instituted to enforce or interpret this
Agreement, the prevailing party shall be entitled to recover all expenses
reasonably incurred at, before or after trial and on appeal, whether or not
taxable as costs, or in any bankruptcy proceeding, including, without
limitation, attorneys’ fees, witness fees (expert and otherwise), deposition
costs, copying charges and other expenses.
     14. Lessee hereby agrees that if GECC elects at any time to have the Lease
superior to its Security Instrument and gives notice of its election to Lessee,
then the Lease shall be superior to the lien of any such and all renewals,
modifications, extensions, substitutions, replacements and/or consolidations
thereof, whether the Lease is dated or recorded before or after the Security
Instrument. If GECC shall become the owner of the Leased Premises, or if the
Leased Premises shall be sold by reason of foreclosure or other proceedings
brought to enforce the Security Instrument, or if the Leased Premises shall be
transferred by deed in lieu of foreclosure, then at GECC’s sole option (a) the
Lease shall continue in full force and effect as a direct lease agreement
between Lessee and the then owner of the Leased Premises (including GECC or the
grantee under any deed given as a result of any foreclosure or in lieu of
foreclosure), upon and subject to all of the terms, covenants and conditions of
the Lease for the balance of the term thereof remaining and any extensions or
renewals thereof which may be effected in accordance with any option therefor in
the Lease, and (b) Lessee shall attorn to GECC or any other such owner as its
Lessor, said attornment to be effective and self-operative without the execution
of any further instruments. From and after GECC’s or other such owner’s
succession to the interest of Lessor under the Lease, Lessee shall have the same
remedies against GECC or such other owner for the breach of any covenant
contained in the Lease that Lessee might have had under the Lease against
Lessor, except that neither GECC nor any other such owner shall be:
     (a) liable for any act or omission of, or for the performance of any
obligation of, any prior lessor (including Lessor), including without limitation
any obligation to repair, restore or expand any part of the Leased Premises;
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     (b) subject to any offsets or defenses which Lessee might have against any
prior lessor (including Lessor);
     (c) bound by any prepayment of rent or additional rent which Lessee might
have paid for more than the current month or by payment of any security deposits
to any prior lessor (including Lessor), except such security deposits as have
actually been received by GECC or such other owner;
     (d) bound by any amendment or modification of the Lease or by any waiver or
forbearance on the part of any prior lessor (including Lessor) made or given
without the written consent of GECC or any subsequent holder of the Security
Instrument;
     (e) bound by any representations or warranties of Lessor under the Lease;
     (f) bound by Sections 9.4, 10.1, 15.3, 15.4, 15.5 or 30.1 or Article 27 of
the Lease.
     15. Except as otherwise provided in this paragraph, GECC shall not be bound
by any nondisturbance provisions of the Lease. In such case, GECC or such other
owner shall not be required to recognize the rights of Lessee under the Lease,
and the rights of Lessee thereunder (including any options thereunder) shall at
the sole election of and upon notice by GECC or such other owner cease and
terminate upon acquisition of title to or upon possession of the Leased Premises
by GECC, or such owner or their respective successors and assigns, including any
purchaser at a foreclosure sale. However, if at any time after the date of this
Agreement, (a) Lessee ceases to be a Life Time Affiliate (other than pursuant to
a Change of Control (as defined in the Reimbursement Agreement) that creates an
“event of default” under Reimbursement Agreement) or (b) Lessor or Lessee
transfer their respective interests in any portion of the Leased Premises or the
Lease pursuant to a transfer that is (i) expressly permitted or not prohibited
(and does not create an “event of default”) under this Agreement, the Lease, or
the Reimbursement Agreement or (ii) otherwise approved by GECC, and as a result
of (a) or (b), the entities holding the respective interests of lessor and
lessee under the Lease become unaffiliated, then provided no Event of Default
exists, GECC shall comply with the nondisturbance provisions of the Lease,
provided however, that if there exists any circumstance that with the passage of
time or the giving of notice (or both) would constitute an Event of Default
under the Lease, GECC shall only be obligated to proceed in accordance with this
paragraph to the extent that Lessee cures such Event of Default within the cure
period established therefor under the Lease.
     16. Lessee hereby waives any rights it may have to an award for a taking by
eminent domain, except to the extent that the award (a) compensates Lessee for
moving expenses, business interruption or taking of Tenant’s Property (other
than Lessee’s leasehold interest), (b) is awarded separately in the eminent
domain proceeding and (c) does not reduce the amount of Lessor’s award in the
eminent domain proceeding.
     17. Any option or right of first refusal that Lessee may have to purchase
the Leased Premises shall not apply to a sale by foreclosure or a deed in lieu
of foreclosure and shall automatically be void and of no further force and
effect following such sale by foreclosure or a
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deed in lieu of foreclosure. Lessee shall execute promptly whatever documents
GECC may request from time to time in order to confirm the foregoing.
     18. If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
     19. Any and all notices, elections, demands, or requests permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election, demand or request, and shall be delivered
personally, or sent by registered, certified or Express United States mail,
postage prepaid, or by Federal Express or similar service requiring a receipt,
to the other party at the address stated above, or to such other party and at
such other address within the United States of America as any party may
designate in writing as provided herein. All such notices, requests, demands and
other communications shall be deemed to have been given on (a) the date received
if personally delivered, (b) when deposited in the mail if delivered by mail, or
(c) the date sent if sent by overnight courier.
     20. LESSEE, LESSOR AND GECC HEREBY KNOWINGLY, VOLUNTARILY AND INTELLIGENTLY
WAIVE ANY AND ALL RIGHTS THAT EACH PARTY MAY NOW OR HEREAFTER HAVE UNDER THE
LAWS OF THE UNITED STATES OF AMERICA OR THE STATE OF MINNESOTA, TO A TRIAL BY
JURY OF ANY AND ALL ISSUES ARISING DIRECTLY OR INDIRECTLY IN ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY RELATED TRANSACTIONS. IT IS
INTENDED THAT THIS WAIVER SHALL APPLY TO ANY AND ALL DEFENSES, RIGHTS, CLAIMS
AND/OR COUNTERCLAIMS IN ANY SUCH ACTION OR PROCEEDING.
     LESSEE, LESSOR AND GECC UNDERSTAND THAT THIS WAIVER IS A WAIVER OF A
CONSTITUTIONAL SAFEGUARD, AND EACH PARTY INDIVIDUALLY BELIEVES THAT THERE ARE
SUFFICIENT ALTERNATE PROCEDURAL AND SUBSTANTIVE SAFEGUARDS, INCLUDING, A TRIAL
BY AN IMPARTIAL JUDGE, THAT ADEQUATELY OFFSET THE WAIVER CONTAINED HEREIN.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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     IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE, AMONG OTHER THINGS, IT AFFECTS THE PRIORITY OF YOUR LEASE AND
BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL
PROMISES NOT CONTAINED IN THIS WRITTEN AGREEMENT MAY BE LEGALLY ENFORCED. YOU
MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
     IN WITNESS WHEREOF the undersigned parties have executed this Agreement
under seal as of the day and year first above written.

                  LESSEE:    
 
                LTF CLUB OPERATIONS COMPANY, INC.,
a Minnesota corporation    
 
           
 
  By        
 
 
 
   
 
  Name:   Eric J. Buss    
 
  Title:   Secretary    

     
STATE OF MINNESOTA
  )
 
  ) ss.
COUNTY OF HENNEPIN
  )

     This instrument was acknowledged before me on June                     ,
2008 by Eric J. Buss, as Secretary of LTF Club Operations Company, Inc.

                       
 
  Notary Public        
 
  My commission expires:        
 
     
 
   

[EXECUTION PAGE OF LESSEE TO SUBORDINATION, ATTORNMENT
AND LESSEE-LESSOR ESTOPPEL AGREEMENT]
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                  GECC:    
 
                GENERAL ELECTRIC CAPITAL CORPORATION,
a Delaware corporation    
 
           
 
  By        
 
     
 
   
 
  Name    
 
     
 
   
 
  Title  
 
   
 
     
 
   

     
STATE OF MINNESOTA
  )
 
  )  ss
COUNTY OF HENNEPIN
  )

Personally appeared before me,
                                                            , a Notary Public,
                                                            , with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
who, upon oath, acknowledged that he/she executed the within instrument for the
purposes therein contained, and who further acknowledged that he/she is a Risk
Analyst for General Electric Capital Corporation, a Delaware corporation, and is
authorized to execute this instrument on behalf of said corporation.
WITNESS my hand, at office, this                      day of
                                        , 2008.

                       
 
  Notary Public, State of        
`
  My Commission Expires:  
 
   
 
     
 
   

[EXECUTION PAGE OF GECC TO SUBORDINATION, ATTORNMENT
AND LESSEE-LESSOR ESTOPPEL AGREEMENT]
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     Lessor joins in the execution of this document for the purpose of
acknowledging and confirming the matters herein set forth.

                  LESSOR:    
 
                LTF REAL ESTATE VRDN I, LLC,
a Delaware limited liability company    
 
           
 
  By        
 
  Name:  
 
Eric J. Buss    
 
  Title:   Secretary    

     
STATE OF MINNESOTA
  )
 
  )  ss.
COUNTY OF HENNEPIN
  )

     This instrument was acknowledged before me on June                     ,
2008 by Eric J. Buss, as Secretary of LTF Real Estate VRDN I, LLC.

                       
 
  Notary Public        
 
  My commission expires:        
 
     
 
   

Prepared by, recording requested by
and after recording, return to:
Andrew P. Romshek
Kutak Rock LLP
The Omaha Building
1650 Farnam Street
Omaha, NE 68102-2186
[EXECUTION PAGE OF LESSOR TO SUBORDINATION, ATTORNMENT
AND LESSEE-LESSOR ESTOPPEL AGREEMENT]
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EXHIBIT A
LEGAL DESCRIPTION
Parcel 1: Lot 2, Block 1, LIFE TIME FITNESS 2ND ADDITION, according to the
recorded plat thereof, Carver County, Minnesota.
Torrens Property-Certificate of Title No. 33647.0
Parcel 2: Non-exclusive easements as contained in the Declaration of Cross
Access, Parking, Sanitary Sewer, Storm Water and Water Easements dated
February 18, 2008, recorded March 19, 2008, as Document No. 166225.
Chanhassen, MN