Document:

Unassociated Document

    Exhibit
10.1

    

    

    THE
REGENCY HOTEL

    

    

    THIS LEASE is made on November 20, 2001
between 61ST &
PARK AVE. CORP., having an office at 667 Madison Avenue, New York, New York
10021-8087 (hereinafter “Landlord”) owning and operating THE REGENCY HOTEL at
540 Park Avenue, New York, New York 10021 (hereinafter the “Hotel”) and you, the
Tenant, Preston Robert Tisch and Joan Tisch, whose address is 540 Park Avenue,
New York, New York 10021 (hereinafter collectively “you” or
“Tenant”).

    

    1.           APARTMENT AND
USE

    

    Landlord agrees to lease to you
Apartment 17A on the seventeenth (17th) floor
in the Hotel. The Apartment is unfurnished.

    

    You shall use the Apartment for living
purposes only. The Apartment may be occupied by the Tenant or Tenants named
above and by the immediate family of the Tenant or Tenants.

    

    2.           LENGTH OF
LEASE

    

    The term of this Lease shall commence
on November 16, 2005 and shall end on the date that is ninety (90) days after
the later to occur of (i) the date of the death of Preston Robert Tisch and (ii)
the date of the death of Joan Tisch, unless the term of this Lease is sooner
terminated in accordance with the terms of this Lease. At any time from and
after the third (3rd) anniversary of the commencement of the Lease, Tenant has
the option to end this Lease, for any reason or for no reason, by giving
Landlord notice at least (a) one hundred and eighty (180) days before the date
that Tenant wishes the Lease to end if both Preston Robert Tisch and Joan Tisch
are alive when such notice is given or (b) ninety (90) days before the date that
Tenant wishes the Lease to end if only one of Preston Robert Tisch or Joan Tisch
is alive when such notice is given. If Tenant sends Landlord such notice, the
Lease will end on the date specified in Tenant's notice.

    

    3.           RENT

    

    Your monthly rent for the Apartment is
$55,000. From and after January 1, 2007, whether or not the term of this Lease
has commenced, your monthly rent for the Apartment shall be adjusted upward, if
applicable, January 1 of each year during the term of this Lease and shall be
equal to the product of $55,000, and a fraction the numerator of which is the
“Consumer Price Index” for the last calendar month of the immediately preceding
year and the denominator of which is the “Consumer Price Index” for the first
calendar month of the immediately preceding year. “Consumer Price Index” means
the Consumer Price Index for All Urban Consumers published by the Bureau of
Labor Statistics of the United States Department of Labor, New York - Northern
New Jersey - Long Island, NY-NJ-CT area, All items (1982 - 1984 = 100), or any
successor thereto, appropriately adjusted. If the Consumer Price Index ceases to
be published, and there is no successor, another index agreed to by Landlord and
you, acting reasonably, as appropriately adjusted, will be substituted for the
Consumer Price Index. If the Consumer Price Index ceases to use 1982 - 1984 =
100 as the basis of the calculation, the Consumer Price Index will be adjusted
accordingly. You must pay Landlord the rent, in advance, on the first
day

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    of each
month, without setoff or deduction, either at Landlord's office or at another
place that Landlord may inform you of by written notice. You may be required to
pay other charges to Landlord under the terms of this Lease. They are to be
called “added rent”. This added rent is payable as rent, together with the next
monthly rent due. If Tenant fails to pay the added rent on time, Landlord shall
have the same rights against you as if you had failed to pay rent.

     

    4.           CAPTIONS

    

    In any dispute arising under this
Lease, in the event of a conflict between the text and a caption, the text
controls.

    

    5.           CARE OF YOUR APARTMENT; END
OF LEASE; MOVING OUT

    

    A.           You
will keep, and at the end of the Term, return the Apartment and the fixtures and
equipment therein clean and in good order and repair and will not permit or do
any damage to it, except for damage which occurs through ordinary wear and tear
and damage by the elements. You shall make, as necessary, as a result of misuse
or neglect by you all repairs to fixtures and equipment including replacement if
needed. You will move out on or before the ending date of this Lease and leave
the Apartment in good order and in the condition described in paragraph 7B,
except for ordinary wear and tear and damage caused by fire or other casualty.
If you default, Landlord has the right to make repairs and charge you the cost.
The cost will be added rent.

    

    B.           When
this Lease ends, you must remove all of your movable property and restore and
repair the Apartment to a reasonably good condition. You have not moved out
until all persons, furniture and other property of yours is also out of the
Apartment. If your property remains in the Apartment after the Lease ends,
Landlord may either treat you as still in occupancy and charge you for use, or
may consider that you have given up the Apartment and any property remaining in
the Apartment. In this event, Landlord may either discard the property or store
it at your expense. You agree to pay Landlord for all costs and expenses
incurred in removing and/or storing such property. The provisions of this
Article will continue to be in effect after the end of this Lease.

    

    6.           CHANGES AND ALTERATIONS TO
APARTMENT

    

    You must obtain Landlord’s prior
written consent to install any structural alterations, which consent Landlord
shall not unreasonably withhold. You may make any reasonable non-structural
alterations without Landlord’s consent, provided you comply with all applicable
city, state and federal laws and regulations affecting the Hotel or the
Apartment and the rules and regulations of the Building. If a lien is filed on
the Apartment or the Hotel for any reason relating to your work, you must,
within thirty (30) days, pay or bond the amount stated in the lien. Landlord may
pay or bond the lien if you fail to do so within 30 days after you have notice
of the lien and Landlord’s costs will be added rent. Without Landlord’s prior
written consent, you cannot install or use in the Apartment any of the
following: dishwasher machines, clothes washing or drying machines, electric
stoves, garbage disposal units, heating, ventilating or air-conditioning units
or any other electrical equipment which, in Landlord’s reasonable opinion, will
overload the existing wiring installation in the Hotel or interfere with the use
of such electrical wiring facilities by other tenants of the Hotel. Also, you
cannot place in the Apartment water-filled furniture. Landlord acknowledges that
all furniture and improvements located in the 

    
       

      
        
          
             

          

           

        

        
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    Apartment as of the date of this
Lease are the property of Tenant and Tenant has the right to remove and/or
replace the same at any time during the Term of this Lease.

     

    7.           YOUR
DUTY TO OBEY AND COMPLY WITH

                  LAWS, REGULATIONS AND LEASE
RULES

    

    A.           Government Laws and
Orders.  You will obey and comply (1) with all present and
future city, state and federal laws and regulations which affect the Hotel or
the Apartment, and (2) with all orders and regulations of insurance rating
organizations which affect the Apartment and the Hotel. Notices received by you
from any authority or group must be promptly delivered to Landlord.
You will not allow any windows in the Apartment to be cleaned from the outside,
unless the equipment and safety devices required by law are used.

    

    B.           Landlord's Rules Affecting
You.  You and your servants, employees, agents, visitors and
other registered occupants will obey Landlord's rules listed in this Lease and
all future reasonable rules of Landlord or Landlord's agent, provided Landlord
gives written notice to Tenant of such rules. Landlord shall not be responsible
to you for the violations of any rule or regulation or the breach of any
provision of any lease, by any other tenant or occupant of the
Hotel.

    

    C.           Your
Responsibility.  You are responsible for the behavior of
yourself, your immediate family, your employees, your agents, your servants
and people who are visiting you. You will reimburse Landlord as additional rent
upon demand for the cost of all losses, damages, fines and reasonable legal
expenses incurred by Landlord because you, members of your immediate family,
employees, agents, servants or people visiting you have not obeyed government
laws or rules of this Lease. Landlord is not liable for loss, expense or damage
to any person or property, unless due to Landlord’s negligence or the negligence
of Landlord’s employees, agents or representatives.

    

    8.           SERVICES AND
FACILITIES

    

    A.           Services.  Landlord
will provide heat or air conditioning as and when reasonably necessary, hot and
cold water, electricity, mechanical refrigeration, gas, window washer service
and other similar services that are free of charge by other apartment hotels in
New York City of similar character and standing. You are not entitled to any
rent reduction or abatement because of a stoppage or reduction of any of the
above services unless it is provided by law. Landlord will also provide valet
and laundry service and room service for food and drinks for which charges will
be made at the same rates as those charged to other tenants in the Hotel. A safe
is available for valuable possessions but the Landlord's liability for any
personal property is limited by Section 200 of the New York State General
Business Law. You shall take reasonable precautions to safeguard any and all
valuables.

    

    B.           Additional
Charges.  If the Landlord should have to make any expenditure
for which you are liable for under this Lease or if you shall fail to make any
payment to Landlord for disbursements, cash advances, CODs accepted for you,
restaurant charges, telephone charges, maid, valet, laundry or any other
service, the amount due by you for these services shall be deemed “added rent”
and shall be due and payable to the Landlord as provided for in Article 1
hereof. If you do not pay the added rent, Landlord shall have the same remedies
and rights that Landlord has for the non-payment of the fixed rent. You also
agree to pay the

     

    
       

      
        
          
             

          

           

        

        
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    charges
specified above if incurred by any registered occupant or servant, agent,
visitor or guest. If you fail to pay any bill, charge, rent or additional rent
or any part thereof as provided for in this Lease, or are in breach of any other
provision of this Lease, Landlord may discontinue all or any of the
aforementioned services without notice to you, and without giving you any
reduction in your rent.

    

    9.           INABILITY TO PROVIDE
SERVICES

    

    Because of a strike, labor trouble,
national emergency, repairs, or any other cause beyond Landlord's reasonable
control, Landlord may not be able to provide or may be delayed in providing any
services or in making any repairs to the Hotel. In any of these events, any
rights you may have against Landlord are only those rights which are allowed by
laws in effect when the reduction of service occurs.

     

    10.           ENTRY TO
APARTMENT

    

    During reasonable hours and with
reasonable advance notice, except in emergencies, Landlord may enter the
Apartment for the following reasons:

    

    A.           To
erect, use and maintain pipes and conduits in and through the walls and ceilings
of the Apartment; to inspect the Apartment and to make any necessary repairs or
changes Landlord reasonably decides are necessary. Your rent will not be reduced
because of any of this work, unless required by law;

    

    B.           To
show the Apartment to persons who may wish to become owners or lessees of the
entire Hotel or may be interested in lending money to Landlord;

    

    C.           For
ninety (90) before the end of the Lease, to show the Apartment to persons who
wish to rent it;

    

    D.           If
at any time you are not personally present to permit Landlord or Landlord's
representative to enter the Apartment and entry is necessary or allowed by law
or under this Lease, Landlord or Landlord's representatives may nevertheless
enter the Apartment. Landlord may enter by force in an emergency. Landlord will
not be responsible to you, unless during this entry, Landlord or Landlord's
representative is negligent or misuses your property.

    

    11.           ASSIGNMENT;
SUBLETTING

    

    You cannot assign this Lease or sublet
the Apartment without Landlord's advance written consent in each instance to a
request made by you. Landlord may refuse to consent to a lease assignment for
any reason or for no reason. The first and every other time you wish to sublet
the Apartment, you must get the written consent of Landlord. If you fail to pay
your rent, Landlord may collect rent from subtenant or occupant without
releasing you from the Lease. Landlord will credit the amount collected against
the rent due from you. However, Landlord's acceptance of such rent does not
change the status of the subtenant or occupant to that of direct tenant of
Landlord and does not release you from this Lease.

     

     

    
      
        
          
             

          

           

        

        
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    12.           DEFAULT

    

    A.           You
default under the Lease if you act in any of the following ways:

    

    (1)           You
fail to pay rent on the due date; and

    

    (2)           You
fail to carry out any other agreement or provi­sion of this
Lease;

    

    If you do default in any one of these
ways Landlord may serve you with a written notice to stop or correct the
specified default within five (5) days. You must then either stop or correct the
default with­in five (5) days, or if you need more than five (5) days, you
must begin to correct the default within five (5) days and continue to do all
that is necessary to correct the default as soon as possible.

    

    B.           If
you do not stop or begin to correct a default within five (5) days, Landlord may
give you a second written notice that this Lease will end three (3) days after
the date the second writ­ten notice is sent to you. At the end of the
three-day period, this Lease will end. You then must move out of the Apartment.
Even though this Lease ends, you will remain liable to Landlord for unpaid
rent up
to the end of this Lease, the value of your occupancy, if any, after the Lease
ends, and damages caused to Landlord after that time as stated in this
Lease.

    

    C.           If
you do not pay your rent when this Lease requires within five (5) days after a
personal demand for rent has been made, or within three (3) days after a
statutory written demand for rent has been made, or if the Lease ends, Landlord
may do the following:  (1) enter the Apartment and retake possession
of it if you have moved out; or (2) go to court and ask that you and all other
occupants in the Apartment be compelled to move out.

    

    Once this Lease has been ended, whether
because of default or otherwise, you give up any right you might otherwise have
to reinstate or renew the Lease.

    

    13.           REMEDIES OF LANDLORD AND
YOUR LIABILITY

    

    If this Lease is ended by Landlord
because of your default, the following are the rights and obligations of you and
Landlord:

    

    A.           You
must pay your rent until this Lease has ended. Thereafter, you must pay an equal
amount for what the law calls “use and occupancy” until you actually move
out.

    

    B.           Once
you are out, Landlord may re-rent the Apartment or any portion of it for a
period of time which may end before or after the ending date of this Lease.
Landlord may re-rent to a new tenant at a lesser rent or may charge a higher
rent than the rent in this Lease.

    

    C.           Whether
the Apartment is re-rented or not, you must pay to Landlord as
damages:

    

    (1)           the
difference between the rent in this Lease and the amount, if any, of the rents
collected in any later lease or leases of the Apartment for what would have been
the remaining period of this Lease; and

    

    (2)           Landlord's
expenses for attorney's fees, advertise­ments, broker's fees and the cost of
putting the Apartment in good condition for re-rental.

     

    

      
        
          
             

          

           

        

        
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    D.           You
shall pay all damages due in monthly installments on the rent day established in
this Lease. Any legal action brought to collect one or more monthly installments
of damages shall not prejudice in any way Landlord's right to collect the
damages for a later month by a similar action. If the rent collected by Landlord
from a subsequent tenant of the Apartment is more than the unpaid rent and
damages which you owe Landlord, you cannot receive the difference. Landlord's
failure to re-rent to another tenant will not release or change your liability
for damages, unless the failure is due to Owner's deliberate
inaction.

    

    14.           ADDITIONAL OWNER
REMEDIES

    

    If you do not do everything you have
agreed to do, or if you do anything which shows that you intend not to do what
you have agreed to do, Landlord has the right to ask a court to make you carry
out your agreement or to give the Landlord such other relief as the court can
provide. This is in addition to the remedies in Articles 12 and 13 of this
Lease. Mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy, in law or in equity.

     

    15.           FEES AND
EXPENSES

    

    A.           Landlord's
Right.  You must reimburse Landlord for any of the following
fees and expenses incurred by Landlord:

    

    (1)           Making
any repairs to the Apartment or the Hotel which result from misuse or negligence
by you, or persons who live with you, visit you, or work for you;

    

    (2)           Repairing
or replacing any furniture, appliance, fixture or furnishing belonging to
Landlord and damaged by your misuse or negligence;

    

    (3)           Correcting
any violations of city, state or federal laws, or orders and regulations of
insurance rating organizations concerning the Apartment or the Hotel which you
or persons who live with you, visit you, or work for you have
caused;

    

    (4)           Any
legal fees and disbursements for legal actions or proceedings brought by
Landlord against you because of a Lease default by you or for defending lawsuits
brought against Landlord because of your actions;

    

    (5)           
Removing all of your property after this Lease is ended; and

    

    (6)           All
other fees and expenses incurred by Landlord because of your failure to obey any
other provisions and agreements of this Lease.

    

    These fees and expenses shall be paid
by you to Landlord as additional rent within thirty (30) days after you receive
Landlord's bill or statement. If this Lease has ended when these fees and
expenses are incurred, you will still be liable to Landlord for the same amount
of damages.

    

    16.           PROPERTY LOSS, DAMAGES OR
INCONVENIENCE

    

    Unless caused by the negligence or
misconduct of Landlord or Landlord's agents or employees, Landlord or Landlord's
agents and employees are not responsible to you for any of

     

     

    
      
        
          
             

          

           

        

        
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    the
following:  (1) any loss of or damage to you or your property in the
Apartment or the Hotel due to any accidental or intentional cause, even a theft
or another crime committed in the Apartment or elsewhere in the Hotel; (2) any
loss of or damage to your property delivered to any employee of the Hotel (i.e., doorman, maid,
etc.); or (3) any damage or inconvenience caused to you by actions, negligence
or violations of a lease by any other tenant or person in the Hotel except to
the extent required by law. Storerooms shall be used by you only for storage of
trunks, suitcases, bags and packing cases, all of which shall be empty. Although
the relationship of the parties to this Lease is that of landlord and tenant and
is governed by the terms of this Lease, this Lease is not meant to waive any of
Landlord's rights to limitation of liability under any provision of law
applicable to Hotels.

    

    17.           FIRE OR
CASUALTY

    

    A.           If
the Apartment becomes unusable, in part or totally, because of fire, accident or
other casualty, this Lease will continue unless ended by Landlord under
paragraph C below. If the Apartment cannot be used because of fire or other
casualty, you are not required to pay rent for the time the Apartment is
unusable. If part of the Apartment cannot be used, you must pay rent for the
usable part. Landlord need only repair damage to the structural parts of the
Apartment. Landlord is not required to repair or replace any equipment,
fixtures, furnishings or decorations unless originally installed by Landlord.
Landlord is not responsible for delays due to settling insurance claims,
obtaining estimates, labor and supply problems or any other cause not fully
under Landlord’s control.

     

    B.           Landlord
will repair and restore the Apartment, unless Landlord decides to take actions
described in paragraph C below.

    

    C.           After
a fire, accident or other casualty in the Hotel, Landlord may decide to tear
down the Hotel or to substantially rebuild it. In such case, Landlord need not
restore the Apartment but may end this Lease. Landlord may do this even if the
Apartment has not been damaged, by giving you written notice of this decision
within ninety (90) days after the date when the damage occurred. If the
Apartment is usable when Landlord gives you such notice, this Lease will end
ninety (90) days after you receive the notice.

    

    D.           Unless
prohibited by the applicable insurance policies, to the extent that such
insurance is collected, you and Landlord release and waive all right of recovery
against the other or anyone claiming through or under each by way of
subrogation. You hereby expressly waive the provisions of Section 227 of the
Real Property Law and agree that the foregoing provisions shall govern and
control in lieu thereof.

    

    18.           PUBLIC
TAKING

    

    The entire Hotel or a part of it can be
acquired (condemned) by any government or government agency for a public or
quasi-public use purpose. If this happens, this Lease shall end on the date the
government or agency takes title. You shall have no claim against Landlord for
any resulting damage.

     

    

      
        
          
             

          

           

        

        
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    19.           SUBORDINATION CERTIFICATE
AND ACKNOWLEDGMENTS

    

    All leases and mortgages of the Hotel
or of the land on which the Hotel is located, now in effect or made after this
Lease is signed, come ahead of this Lease. In other words, this Lease is
“subject and subordinate to” any existing or future lease or mortgage on the
Hotel or land, including any renewals, consolidations, modifications and
replacements of these leases or mortgages. Without limiting the foregoing, this
Lease is subject and subordinate to a certain lease dated April 24, 1961 made
between First Sterling Corporation, as landlord, and Landlord herein, as tenant.
If certain provisions of any of these leases or mortgages come into effect, the
holder of such lease or mortgage can end this Lease. If this happens, you agree
that you have no claim against Landlord or such lease or mortgage holder. If
Landlord requests, you will sign promptly an acknowledgment of the
“subordination” in the form that Landlord reasonably requires. You also agree to
sign (if accurate) a written acknowledgment to any third party designated by
Landlord that this Lease is in effect, that Landlord is performing Landlord's
obligations un­der this Lease and that you have no present claim against
Land­lord.

    

    20.           ATTORNMENT

    

    If, at any time during the term of this
Lease, Landlord's ownership of the Hotel or rights to the land on which the
Hotel is located shall terminate or be terminated because of Landlord's default
or any other reason, you agree that upon demand of any owner of the premises
which include the Hotel, or of any hold­er of a leasehold affecting the
Hotel, or of any mortgagee in posses­sion thereof, to accept as new landlord
any such owner, holder or mortga­gee, upon the terms and conditions set
forth in this Lease for the remainder of the Lease term. You also agree to sign
a written acknowledgment of such attornment to any owner, holder or
mortgagee.

     

    21.           BILLS AND
NOTICES

    

    A.           Notices to You.  Any
notice from Landlord or Landlord's agent or attorney will be considered properly
given to you if it (1) is in writing; (2) is signed by or in the name of
Landlord or Landlord's agent; and (3) is addressed to you at the Apartment and
delivered to you personally or sent by registered or certified mail to you at
the Apartment.

    

    B.           Notices to
Landlord.  If you wish to give a notice to Landlord, you must
write it and deliver it or send it by registered or certified mail to Landlord
at the address noted on page 1 of this Lease, to the attention of its Corporate
Secretary, or at another address of which Landlord or Landlord's agent has
giv­en you written notice.

    

    22.           GIVING UP RIGHT TO TRIAL BY
JURY AND COUNTERCLAIM

    

    A.           Both
you and Landlord agree to give up the right to trial by jury in a court action,
proceeding or counterclaim on any matters concerning this Lease, the
relationship of you as ten­ant, and Landlord as landlord, or your use or
occupancy of the Apartment. This agreement to give up the right to a jury trial
does not include claims for personal injury or property damage.

    

    B.           If
Landlord begins any court action or proceeding against you which asks that you
be compelled to move out, you cannot make a counterclaim unless you are
claiming that Landlord has not done what Landlord is supposed to do about the
condition of the Apartment or the Hotel.

     

    

      
        
          
             

          

           

        

        
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    23.           NO WAIVER OF LEASE
PROVISIONS

    

    A.           Even
if Landlord accepts your rent or fails once or more often to take action against
you when you have not done what you have agreed to do in this Lease, the failure
of Landlord to take action or Landlord's acceptance of rent does not prevent
Landlord from taking action at a later date if you again do not do what you have
agreed to do.

    

    B.           Only
a written agreement between you and Landlord can waive any violation of this
Lease.

    

    C.           If
you pay and Landlord accepts an amount less than all the rent due, the amount
received shall be considered to be in payment of all or a part of the earliest
rent due. It will not be considered an agreement by Landlord to accept this
lesser amount in full satisfaction of all of the rent due.

    

    D.           Any
agreement to amend or end this Lease and also to end the rights and obligations
of you and Landlord must be in writing, signed by you and Landlord. Even if you
give keys to the Apartment and they are accepted by Landlord or any employee or
agent of Landlord, this Lease is not ended unless you and Landlord have executed
a written document to that effect.

    

    24.           CONDITION OF THE
APARTMENT

    

    When you signed this Lease, you did not
rely on anything said by Landlord, Landlord's agent or employee about the
physical condition of (a) the Apartment; (b) the Hotel or the land on which it
is built; (c) the furniture, furnishings, equipment and fixtures therein; and
(d) the services to be furnished to you. You did not rely on any promises as to
what would be done, unless what was said or promised is written in this Lease
and signed by both you and Landlord or found in Landlord's floor plans or
brochure shown to you before you signed this Lease. Before signing this Lease,
you have inspected the Apartment and you accept it in its present condition “as
is”.

    

    25.           SUCCESSOR
INTERESTS

    

    A.           The
agreements in this Lease shall be binding on Landlord and you and on those who
succeed to the interest of Landlord or you by law or by transfer or, in the case
of Tenant, by approved assignment.

    

    B.           Landlord’s
obligations end when Landlord’s interest in the Building is transferred and the
transferee assumes the Landlord’s obligations under the Lease.

    

    26.           NO RENT
REGULATION

    

    In signing this Lease, you acknowledge
that both you and the Landlord relied upon the fact that neither the Lease nor
the Apartment is registered or subject to the City Rent Law (rent control) or
the Rent Stabilization Law of 1969, as amended. You have no right to have this
Lease renewed. Without limitation, you waive any claim, defense or action based
upon the allegation that this Lease, your tenancy created under this Lease or
the Apartment is subject to any form of governmental supervision or
regulation.

     

     

    
      
        
          
             

          

           

        

        
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    27.           QUIET ENJOYMENT AND
HABITABILITY; BROKER

    

    A.           Subject
to the terms of this Lease, as long as you are not in default you may peaceably
and quietly have, hold and enjoy the Apartment for the Term. Landlord states
that the Apartment and the Hotel are fit for human living and there is no
condition dangerous to health, life or safety.

    

    B.           You
and Landlord represent that you have not dealt with any Broker in connection
with this Lease.

    

    28.           RULES AND
REGULATIONS

    

    Landlord's Rules and Regulations
attached to this Lease form a part of this Lease.

     

    TO CONFIRM OUR AGREEMENTS, LANDLORD AND
YOU RESPECTIVELY SIGN THIS LEASE AS OF THE DAY AND YEAR FIRST WRITTEN ON PAGE
1.

    

    

    
      
        	 
      	
                Landlord:

              	 
      
	 
      	 
      	
                      

              
	 
      	
                61st
      & PARK AVE. CORP.

              	 
      

      

    

    

    

    
      	 
      	
              By:

            	
              /s/
      Jack S. Adler

            
	 
      	 
      	
              Jack
      S. Adler, President

            

    

    

    

    
      
        	 
      	
                Tenant:

              	
                      

              

      

    

    

    

    
      	 
      	 
      	
              /s/
      Preston Robert Tisch

            
	 
      	 
      	
              Present
      Robert Tisch

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              /s/
      Joan Tisch

            
	 
      	 
      	
              Joan
      Tisch

            

    

    

    
      
        
           

        

         

      

      
        - 10
-exhibit102tclpform10q080409.htm

Exhibit 10.2

MANAGEMENT SERVICES AGREEMENT

 

 

This Management Services Agreement is made and entered into as of the 1st day of January, 2002, by and between PG&E Gas Transmission Service Company, LLC, a Delaware limited liability
company ("ServiceCo"), and North Baja Pipeline, LLC, a Delaware Limited Liability Company ("Pipeline").

 

WHEREAS, Pipeline is in the process of developing, and will own and operate, a FERC-regulated interstate natural gas pipeline extending from an interconnection with El Paso Natural Gas near Ehrenberg, Arizona to an interconnection with Gasoducto Bajanorte near the U.S.-Mexico border between Yuma, Arizona and Mexicali, Baja California, Mexico;

 

WHEREAS, ServiceCo is an entity engaged in managing and operating natural gas pipeline facilities; and

 

WHEREAS, Pipeline and ServiceCo desire to enter into this Management Services Agreement pursuant to which ServiceCo shall manage the day-to-day affairs of Pipeline;

 

NOW, THEREFORE, in consideration of the promises and mutual covenants and provisions contained in this Agreement and subject to all terms and conditions set forth below, Pipeline and ServiceCo
hereby agree as follows:

 

	
1.  
	
Appointment as Manager. Subject to the terms and conditions of this Management Services Agreement, Pipeline hereby appoints ServiceCo to act as Manager hereunder, and ServiceCo hereby
accepts such appointment and agrees to act pursuant to the provisions of this Management Services Agreement.  The Manager shall function as an independent contractor under this Management Services Agreement, and shall in no event ever act as, or be considered to be, an employee of Pipeline.

 

	
2.  
	
Manager's General Authority. The Manager is authorized to conduct the business and affairs of Pipeline in accordance with the Annual Business Plan (as defined in Section 4 herein) and
other provisions of this Agreement.  Except as otherwise expressly provided in this Management Services Agreement, the Manager shall have full and complete authority, power and discretion to execute contracts and manage and control the business, affairs and properties of Pipeline, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of Pipeline's business.  Without limiting the foregoing, the Manager shall
have the authority to make decisions with respect to the engineering, design, construction, regulatory approvals for, and operation (including physical operation, scheduling and dispatch of gas inventory) of Pipeline.  The Manager shall not exceed the authority granted to the Manager by this Management Services Agreement.

 

	
3.  
	
Manager's Specific Duties.

	 	
 

The Manager shall be responsible for the operation of Pipeline's interstate pipeline facilities in accordance with sound, workmanlike and prudent practices of the natural gas pipeline industry and in compliance with Pipeline's FERC Gas Tariff and with all applicable laws, statutes, ordinances, safety codes, regulations, rules and authorizations and requirements
of governmental authorities having jurisdiction.  Accordingly, subject to the provisions of this Management Services Agreement, the Manager shall:

 

	
3.1.1  
	
Provide or cause to be provided the day-to-day operating and maintenance services, administrative liaison and related services to Pipeline, including, but not limited to, customer support, legal, accounting, human resources, procurement, electronic bulletin board, engineering, construction, repair, replacement, inspection, operational planning, budgeting,
tax and technical services, and insurance and regulatory administration.

 

	
3.1.2  
	
Upon prior approval by Pipeline, file, execute and prosecute applications for the authorizations required by Pipeline for the acquisition, construction, ownership and operation of facilities and the provision of the transportation services on the facilities.  The Manager also shall make routine and periodic filings required of Pipeline by governmental
authorities having jurisdiction.

 

 

 

36

 

 

	
3.1.3  
	
Review from time to time the rates and fees charged for the transportation services, recommend appropriate rate revisions to Pipeline, prepare, and upon prior approval by Pipeline, file, execute and prosecute rate change filings.

 

	
3.1.4  
	
Review from time to time the services offered by Pipeline, and recommend and implement improvements or additions to such service.

 

	
3.1.5  
	
Prepare financing plans for Pipeline and negotiate financing commitments, if any, to be entered into by Pipeline, subject to final approval by Pipeline.

 

	
3.1.6  
	
Negotiate and execute contracts for the purchase of services, materials, equipment and supplies necessary for the operation of Pipeline.

 

	
3.1.7  
	
Prepare, negotiate and execute in the name of company rights-of-way, land in fee, permits and contracts, and, unless otherwise directed by Pipeline, initiate, prosecute and settle (if applicable) eminent domain condemnation proceedings, necessary for construction, operation and maintenance of the Facilities, and resist the perfection of any involuntary
liens against Pipeline property.

 

	
3.1.8  
	
Construct and install, or cause to be constructed and installed, facilities necessary for the safe and efficient operation of Pipeline, including expansions thereto.

 

	
3.1.9  
	
Make reports to and consult with Pipeline regarding all duties, responsibilities and actions of the Manager under this Management Services Agreement in the form and at the times reasonably requested by Pipeline.

 

	
3.1.10  
	
Maintain accurate and itemized accounting records for the operation of the Pipeline, together with any information reasonably required by Pipeline relating to such records.

 

	
3.1.11  
	
Prepare financial reports.

 

	
3.1.12  
	
Cause the operation of the Pipeline to be in accordance with all applicable laws, statutes, ordinances, safety codes, regulations, rules and authorizations and requirements of all governmental authorities having jurisdiction, including, but not limited to, local, state and federal environmental laws and the requirements of the United States Department
of Transportation set forth in 49 C.F.R. Parts 192 and 199, and in accordance with sound, workmanlike and prudent practices of the natural gas industry and Pipeline's FERC Gas Tariff, and provide or cause to be provided such appropriate supervisory, audit, administrative, technical and other services as may be required for the operation of the Pipeline.

 

	
3.1.13  
	
Prepare and file all necessary federal and state income tax returns and all other tax returns and filings for Pipeline.  The Pipeline shall furnish to the Manager all pertinent information in its possession relating to Pipeline operations that is necessary to enable such returns to be prepared and filed.

 

	
3.1.14  
	
Maintain and administer bank and investment accounts and arrangements for company funds, draw checks and other orders for the payment of money and designate individuals with authority to sign or give instructions with respect to those accounts and arrangements.

 

	
3.1.15  
	
Negotiate, execute and administer the gas transportation contracts in accordance with Pipeline's FERC Gas Tariff, including, but not limited to, the preparation and collection of all bills to the shippers for services rendered thereunder; provided that the Manager shall execute gas transportation contracts for discounted firm or interruptible transportation
services only to the extent the discounts are in accordance with Pipeline's discounting policy in effect from time to time, and provided further that any gas transportation contracts which require the construction of additional facilities for the performance thereof shall be subject to the prior approval of Pipeline.

 

 

 

37

 

 

	
3.1.16  
	
Receive requests for service from shippers and potential shippers and issue confirmations for service in accordance with Pipeline's FERC Gas Tariff.

 

	
3.1.17  
	
Recommend and establish guidelines for sale of capacity, including sales at discount and/or negotiated rates on a non-discriminatory basis.

 

	
3.1.18  
	
Propose to Pipeline such procedures as may be reasonable and appropriate to comply with or to obtain an exemption from the marketing affiliate rules set forth in Part 161 of the FERC's regulations (as the same may be amended or superseded), and seek to implement such procedures as are approved by Pipeline.

 

	
3.1.19  
	
Dispatch and allocate daily scheduled nominations for, and effectuate the physical receipt and delivery of, the natural gas quantities to be received, transported and/or delivered on behalf of the shippers in accordance with Pipeline's FERC Gas Tariff.

 

	
3.1.20  
	
Utilize electronic flow measurement equipment for volume determinations and natural gas chromatographs as deemed appropriate by the Manager for heating value determinations at applicable metering points, as further described in Pipeline's FERC Gas Tariff.

 

	
3.1.21  
	
Except as otherwise provided by applicable laws or governmental regulations or as otherwise directed by Pipeline, retain all books of account and Pipeline tax returns for three (3) years from the date of completion of the activity to which such records relate.

 

	
3.1.22  
	
Procure and furnish on behalf of Pipeline all materials, equipment, supplies, services and labor necessary for, and perform, repairs to Pipeline's facilities that Manager determines to be appropriate and prudent.

 

	
3.1.23  
	
Perform such other duties as are reasonably necessary or appropriate in the Manager's discretion and enter into such other arrangements as reasonably requested by Pipeline to discharge the Manager's responsibilities under this Management Services Agreement.

 

	
4.
	
Manager's Budget and Annual Business Plan. Manager shall prepare an annual operating plan and budget for each year ("Annual Business Plan"), as it may be adjusted from time to time, setting forth estimates of management costs and other costs and expenses
anticipated by Manager in connection with operating Pipeline.  The approval by Pipeline of such Annual Business Plan shall constitute authorization for the Manager to incur the costs, expenses and expenditures set forth in such budget.

 

	
5.
	
Claims.  Any and all claims against Pipeline instituted by anyone other than the Manager arising out of the operation of the Facilities that are not covered by insurance in accordance with Section 9 of this Management Services Agreement
shall be settled or litigated and defended by the Manager in accordance with its reasonable judgment and discretion except when (a) the amount involved is stated to be (or estimated to, as the case may be) greater than $1,000,000, or (b) criminal sanction is sought.  The settlement or defense of any claim described in (a) or (b) above shall be decided by Pipeline.  The Manager shall provide notice to Pipeline as soon as practicable of any claims instituted against Pipeline (regardless
of the amount or nature of the claim).

 

 

 

38

 

 

	
6.
	Employees, Consultants and Subcontractors.

 

	
6.1  
	
Initial Adoption by Manager of Pipeline Employees and Employee Obligations.  Upon the Effective Date of this Management Services Agreement, Pipeline shall transfer to Manager
all employees and employment-related agreements, and Manager shall employ all such employees and shall adopt, honor and continue all obligations and commitments related to such employees, specifically including, without limitation, salary and benefit agreements and elective deferral agreements under Internal Revenue Code Section 401k and employee elections under a cafeteria plan under Internal Revenue Code Section 125.  Notwithstanding the foregoing, Pipeline shall remain responsible for, either primarily
or as a successor employer, any assets or liabilities of any employee benefit plans, arrangements, commitments or policies provided by the Manager or any affiliate of the Manager; and if and to the extent that Pipeline is deemed by law or otherwise to be liable as a successor employer for such purposes, the Manager shall indemnify Pipeline for the full and complete costs, fees and other liabilities which result.  In particular, but without limiting the generality of the foregoing, Pipeline shall not
assume liability for any group health continuation coverage or coverage rights under Internal Revenue Code Section 4980B and ERISA Section 601 and related provisions which exist as of the Effective Date or which arise as a result of the Manager's dissolution and/or termination of its or any of its affiliate's group health plan or plans, and if and to the extent that Pipeline is deemed by law or otherwise to be liable as a successor employer for such group health continuation coverage purposes, the Manager shall
indemnify Pipeline for the full and complete amount of any resulting costs, fees and other liabilities.

 

	
6.2  
	
Manager's Employees, Consultants, Subcontractors and Independent Contractors.  The Manager shall employ or retain and have supervision over the persons (including Manager's
affiliates, consultants and professional service or other organizations) required or deemed advisable by the Manager to perform its duties and responsibilities hereunder in an efficient and economically prudent manner.  The compensation for the Manager's employees shall be determined by the Manager, provided that the amount and terms of such compensation billed to Pipeline shall be comparable to those prevailing in the natural gas industry for similar work.

 

	
  
	
6.3
	
Standards for Manager and its Employees.  The Manager shall perform its services and carry out its responsibilities hereunder, and shall require all of its employees and consultants, and contractors, subcontractors and materialmen furnishing
labor, material or services for the operation of Pipeline to carry out their respective responsibilities in accordance with sound, workmanlike and prudent practices of the natural gas pipeline industry and in compliance with Pipeline's FERC Gas Tariff and with all applicable laws, statutes, ordinances, safety codes, regulations, rules, authorizations and requirements of governmental authorities having jurisdiction applicable to Pipeline's facilities.  The Manager shall take reasonable measures to monitor
the compliance of such employees and consultants, and contractors, subcontractors and materialmen, to these standards.

 

	
  
	
6.4
	
Non-Discrimination and Drugs.  In performing under this Management Services Agreement, the Manager shall not discriminate against any employee or applicant for employment because of race, creed, color, religion, sex, national origin, age
or disability, and will comply with all provisions of Executive Order 11246 of September 24, 1965, and any successor order thereto, to the extent that such provisions are applicable to the Manager or Pipeline.  Neither Pipeline nor the Manager shall condone in any way the use of illegal drugs or controlled substances.  Any person known by the Manager to be in possession of any illegal drug or controlled substance will be disciplined by the Manager and/or removed in accordance with the Manager's
policies and procedures.  In addition, the Manager shall meet all the applicable requirements imposed by the Department of Transportation as specified in 49 C.F.R., Parts 40 and 199 (as the same may be amended or superseded).  Furthermore, upon request and to the extent permitted by law, the Manager will furnish Pipeline copies of the records of employee drug test results required to be kept under the provisions of 49 C.F.R. Part 199.  The provisions of this Section 6.4 shall be
applicable to any employees, contractors, consultants and subcontractors retained in connection herewith, and the Manager shall cause the agreements with any contractor, consultant or subcontractor to contain similar language.

 

 

 

39

 

  

	
7.
	Financial and Accounting.

 

	
7.1  
	
Accounting and Compensation.  

 

	
  
	
7.1.1
	
The Manager shall keep a full and complete account of all costs, expenses and expenditures incurred by it in connection with its obligations hereunder in the manner set forth in the Accounting Procedure attached hereto as Exhibit A, and shall otherwise keep a full and complete account of all accounts that Pipeline is required to maintain.

 

	
  
	
7.1.2
	
The Manager shall be reimbursed by Pipeline at the rate and in the manner set forth in the Accounting Procedure for all costs and expenses of the Manager incurred in accordance with this Management Services Agreement and in connection with the operation of Pipeline or otherwise to fulfill the Manager's duties under this Management Services Agreement.

 

	
  
	
7.1.3
	
Disputed Charges.  Pipeline may, within the audit period referred to in Section 7.1.4 hereof, take written exception to any bill or statement rendered by the Manager for any expenditure or any part thereof on the ground that the same was
not appropriate for reimbursement under the terms of Section 7.1.2 above.  Pipeline shall nevertheless pay in full when due the amount of all statements submitted by the Manager.  Such payment shall not be deemed a waiver of the right of Pipeline to recoup any contested portion of any bill or statement.  If the amount as to which such written exception is taken or any part thereof is ultimately determined not to be appropriate for reimbursement under the terms of Section 7.1.2
of this Management Services Agreement, such amount or portion thereof (as the case may be) shall be refunded by the Manager to Pipeline, together with interest thereon at a rate (which in no event shall be higher than the maximum rate permitted by applicable law) equal to two percent (2%) per annum over the prime rate of Citibank, N.A. (or its successor) from time to time publicly announced and in effect, during the period from the date of payment by Pipeline to the date of refund by the Manager.

 

	
  
	
7.1.4
	
Audit and Examination.  Pipeline shall have the right during normal business hours to audit or examine all books and records maintained by the Manager, including support for costs charged by the Manager's contractors, relating to the operation
of Pipeline. The right to conduct an audit or examination shall include the right to meet with the Manager's internal and independent auditors to discuss matters relevant to the audit or examination.  Pipeline shall have the right to conduct one (1) audit of the Manager's records for any twelve (12) month period.

  

	
8.
	Indemnification. 

 

	
8.1  
	
By Manager.  Manager shall indemnify, defend, save, and hold harmless Pipeline and its affiliates, and all of their respective officers, directors, employees, agents, partners,
shareholders and representatives, from and against any and all claims arising out of any actions by Manager, its officers, directors or employees which are outside the scope of Manager's authority under this Management Services Agreement, or actions or failures to act of Manager, its officers, directors or employees which in each case constitute gross negligence or willful misconduct; provided, however, that Manager's total aggregate liability hereunder during the term of this Management Services Agreement shall
in no event exceed $500,000 over and above the amount covered by insurance.

 

	
8.2  
	
By Pipeline.  Pipeline shall indemnify, defend, save, and hold harmless Manager, its constituent partners and their affiliates, and all of their respective officers, directors,
employees, agents, partners, shareholders and representatives, from and against any and all claims arising out of the acts (or failures to act), or for any obligation, liability, or commitment incurred by or on behalf of Pipeline as a result of any such acts (or failures to act); provided, however, that Manager, its officers, directors and employees shall not be entitled to indemnification hereunder for any claims resulting from their gross negligence or willful misconduct.

 

 

 

40

 

 

	
8.3  
	
Other Claims.  Except as otherwise provided in Sections 8.1 and 8.2, any and all suits or claims against Pipeline asserted by anyone other than Manager arising out of the design,
construction, supervision, operations, maintenance or administration of Pipeline that are not covered by insurance shall be litigated and defended by Manager on behalf of Pipeline, in accordance with Manager's reasonable judgment and discretion.

 

	
8.4  
	
Indemnification Notices.  Whenever a party entitled to indemnification under Section 8.1 or 8.2 of this Management Services Agreement (an "Indemnitee") shall learn of a claim
which, if allowed (whether voluntarily or by a judicial or quasi-judicial tribunal or agency), would entitled such Indemnitee to indemnification under Section 8.1 or 8.2 of this Management Services Agreement, before paying the same or agreeing thereto, the Indemnitee shall promptly notify the party required to pay such indemnification (the "Indemnitor") in writing of all material facts within the Indemnitee's knowledge with respect to such claim and the amount thereof; provided, however, that the Indemnitee's
right to indemnification shall be diminished by the failure to give prompt notice only to the extent that the Indemnitee's failure to give such notice was prejudicial to the interests of the Indemnitor.  If, prior to the expiration of fifteen (15) days from the giving of such notice, the Indemnitor shall request, in writing, that such claim not be paid, the Indemnitee shall not pay the same, provided that the Indemnitor proceeds promptly to settle or litigate, in good faith, such claim.  The
Indemnitee shall have the right to participate in any such negotiation, settlement or litigation.  The Indemnitee shall not be required to refrain from paying any claim which has matured by a court judgment or decree, unless an appeal is duly taken therefrom and execution thereof has been stayed, nor shall it be required to refrain from paying any claim where the delay to pay such claim would result in the foreclosure of a lien upon any of the property of the Indemnitee, or where any delay in payment
would cause the Indemnitee an economic loss, unless the Indemnitor shall have agreed to compensate the Indemnitee for such loss.

  

	
9.
	Insurance.

 

	
  
	
9.1
	
Required Insurance.  The Manager shall carry and maintain, or cause to be carried and maintained, for the benefit of and on behalf of Pipeline and the Manager, with insurance companies and deductibles and retentions selected by the Manager
(unless otherwise required by Pipeline), the insurance described below.  The parties agree that they shall cooperate reasonably with one another in an effort to reduce insurance costs hereunder.

 

	
  
	
9.1.1
	
General and/or Excess Liability insurance with limits of not less than $10,000,000 per occurrence for bodily injury and property damage combined.  Limits in excess of $10,000,000 will only be procured with Pipeline approval.  This insurance will include coverage for personal injury, contractual liability, broad form property damage, independent contractors, products/completed operations, cross liability,
explosion, collapse and underground hazards.

 

	
  
	
9.1.2
	
At all times during the operation of the facilities and covering all employees of the Manager, (a) Worker's Compensation insurance complying with the laws of the state(s) having jurisdiction over each employee, and (b) Employer's Liability insurance with limits of not less than $1,000,000 per accident.  To the extent permitted by applicable law, the Manager may self-insure the Worker's Compensation and Employer's
Liability Insurance required herein.

 

	
  
	
9.1.3
	
At all times during the operation of the facilities, Automobile Liability insurance with a combined single limit of $1,000,000 per occurrence for bodily injury and property damage, including coverage for all owned, non-owned and hired vehicles, covering all vehicles owned or used by or on behalf of the Manager.

 

 

 

41

 

 

	
  
	
9.1.4
	
Any other insurance deemed necessary or appropriate by the Manager.

 

	
  
	
9.2
	
Conditions.  The following conditions shall apply to the foregoing insurance provisions:

 

	
9.2.1  
	
For the insurance required in Sections 9.1.1 and 9.1.3 above, (a) Pipeline and the Manager will be additional insureds under the policies, (b) the affiliates of the Manager will be additional insureds with respect to Pipeline and the operation of the facilities, (c) the insurance will be primary for such additional insureds, and (d) the Manager will
provide certificates of insurance upon request.

 

	
9.2.2  
	
For the insurance required in Section 9.1.3 above, the policies will provide for a waiver of all rights of subrogation in favor of Pipeline, and the Manager and their respective affiliates.

 

	
9.2.3  
	
For the insurance maintained pursuant to Sections 9.1.3 and 9.1.4 above, the Manager will provide a certificate of upon request.

 

	
9.2.4  
	
For the insurance required in Section 9.1.4 above, Pipeline and the Manager and their affiliates will be additional insureds under the policies with respect to Pipeline and the operation of Pipeline.  Such insurance will be primary for such additional insureds.

 

	
9.3  
	
Reimbursement. The costs for premiums, deductibles and retentions for the insurance maintained by the Manager pursuant to this Management Services Agreement shall be reimbursable costs
pursuant to Section 7.1.2 of this Management Services Agreement.  In addition, in the event that the Manager self-insures the Workers' Compensation and/or Employer's Liability insurance required above, the Manager shall be reimbursed as provided in Section 3.09 of the Accounting Procedure.

 

	
10.  
	
Term and Termination.

 

	
10.1  
	
Term. This Management Services Agreement shall be effective as of January 1, 2002 (the "Effective Date") and shall continue for a Term of thirty (30) years unless terminated sooner pursuant
to Section 10.2 below.

 

	
10.2  
	
Termination.

 

	
10.2.1  
	
Continuing Default by Manager.  Unless caused by an event of "force majeure" as defined in or pursuant to Pipeline's FERC Gas Tariff, if the Manager materially defaults in
the performance of its obligations under this Management Services Agreement and such material default continues for a period of 45 days after notice thereof by Pipeline to the Manager, Pipeline may, by notice to the Manager, terminate this Management Services Agreement; provided, however, that no such termination shall occur if the Manager has initiated action to cure such material default but, despite its good faith efforts, has been unable to complete such cure within such 45 day period, and the Manager's actions
to complete such cure continue in good faith beyond the end of the 45 day period until such cure is completed.  If, during the 45 day period, an emergency or other situation requiring prompt action arises and the Manager is not reasonably responding in a prompt fashion, Pipeline shall have the right to take such remedial action as it deems appropriate, provided that Pipeline shall use all reasonable efforts to notify the Manager prior to the taking by Pipeline of such action.

 

	
10.2.2  
	
Continuing Default by Pipeline.  Unless caused by an event of "force majeure" as defined in or pursuant to Pipeline's FERC Gas Tariff, if Pipeline materially defaults in the
performance of its obligations under this Management Services Agreement and such material default continues for a period of 45 days after notice thereof by the Manager to Pipeline, the Manager may, by notice to Pipeline, terminate this Management Services Agreement; provided, however, that no termination shall occur if Pipeline has initiated action to cure such material default but, despite its good faith efforts, has been unable to complete such cure within such 45 day period, and the actions of Pipeline
to complete such cure continue in good faith beyond the end of the 45 day period until such cure is completed.

 

 

 

42

 

 

	
10.2.3  
	
Additional Events of Termination.  In addition to termination in accordance with Sections 10.2.1 and 10.2.2, this Management Services Agreement shall terminate if (a) Pipeline
and the Manager mutually agree to terminate this Management Services Agreement, or (b) either party, upon six (6) months prior written notice to the other party, terminates this Management Services Agreement.

 

	
11.  
	
Rights upon Termination and Survival of Obligations.

 

	
11.1  
	
Rights Upon Termination.  Upon Pipeline's termination of this Management Services Agreement, ServiceCo shall deliver to Pipeline at Pipeline's principal place of business all
records, documents, accounts, files and other materials of Pipeline or pertaining to Pipeline's business as Pipeline may reasonably request, provided that ServiceCo may retain copies of any such items delivered to Pipeline.  Pipeline shall assume and become liable for any contracts or obligations that ServiceCo may have undertaken with third parties in connection with its obligations hereunder, and ServiceCo shall execute all documents and take all other reasonable steps requested by Pipeline which
may be required to assign to and vest in Pipeline all rights, benefits, interests and titles in connection with such contracts or obligations.

 

	
11.2  
	
Termination Payment.  In the event of a termination of this Management Services Agreement pursuant to Section 10, ServiceCo shall be entitled, in addition to all other amounts
due hereunder as of the date of termination, to a cancellation payment equal to all costs and expenses reasonably incurred by ServiceCo as a direct result of such termination, including all reasonable severance and relocation costs incurred with respect to third parties.  Such amount shall be due and payable by Pipeline within fifteen (15) days of ServiceCo's submission of an invoice therefore.

 

	
11.3  
	
Survival of Obligations.  Expiration or termination of this Management Services Agreement shall not relieve any party hereto of liability that has accrued or arisen prior to
the date of such expiration or termination.  The obligations of confidentiality and indemnification set forth herein shall survive expiration or termination of this Management Services Agreement.

 

	
12.  
	
Law of the Contract and Dispute Resolution.

 

	
12.1  
	
Law of the Contract. THIS MANAGEMENT SERVICES AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.

 

	
12.2  
	
Dispute Resolution.  Resolution of any and all controversies, disputes or claims, arising out of, relating to, in connection with or resulting from this Agreement (or any written
amendment hereto or any transaction contemplated hereby), including as to its interpretation, performance, non-performance, validity, breach or termination, including any claim based on contract, tort, regulation, rule, statute or constitution and any claim raising questions of law, whether arising before or after termination of this Agreement (collectively, "Disputes"), shall be exclusively governed
by and settled in accordance with the provisions of this Section 12.  Unless otherwise agreed in writing, the parties will continue to honor their obligations not subject to Dispute under this Management Services Agreement during the course of dispute resolution pursuant to the provisions of this Section 12 with respect to all matters not subject to such dispute, controversy or claim.

 

 

 

43

 

 

	
12.3  
	
Negotiation.  The parties shall make a good faith attempt to resolve any Dispute through negotiation.  Within thirty (30) days after notice of a Dispute is given
by one party to another party or parties, each such party shall select one or more representatives of such party, which representatives shall meet and make a good faith attempt to resolve such Dispute and shall continue to negotiate in good faith in an effort to resolve the Dispute.  If a settlement is mutually agreed upon as a result of the negotiation, then such settlement shall be recorded in writing, signed by the affected parties, and shall be binding on them.  If such representatives
fail to resolve a Dispute within thirty (30) days after the first meeting of the representatives, such Dispute shall be referred to the chief executive officers of the applicable parties for resolution.  During the course of negotiations under this Section 12.3, all reasonable requests made by one party to any other party for information, including requests for copies of relevant documents, shall be promptly honored.  The requesting party shall compensate the providing party for the reasonable
costs, if any, of creating, gathering and copying such requested information.  The specific format for such negotiations shall be left to the discretion of the designated representatives but may include the preparation of agreed upon statements of fact or written statements of position furnished by a party to another party or parties.

 

	
12.4  
	
Alternative Dispute Resolution.

 

	
a.  
	
Alternative Dispute Resolution.  In the event that any Dispute is not settled by the parties within fifteen (15) days after the first meeting of the chief executive officers
under Section 12.3, the parties may attempt to resolve such Dispute by mediation and/or arbitration and in accordance with the terms and conditions (including allocation costs and expenses) established by the parties.  If the parties elect to mediate the Dispute, once mediation has commenced, no litigation for the resolution of such Dispute may be commenced until the parties have completed in good faith the mediation.  If a settlement is mutually agreed upon as a result of the mediation,
then such settlement shall be recorded in writing, signed by the parties, and shall be binding on them and their respective successors and assigns.  If the Parties elect to arbitrate the Dispute (either in lieu of or after mediation), the parties shall be deemed to have waived their right to litigate such Dispute in court and may not commence a court action pursuant to Section 12.4(b) of this Agreement.  Any arbitration shall be governed by the Commercial Arbitration Rules of the American
Arbitration Association.

 

	
b.  
	
Court Actions.  In the event that a party, after complying with the provisions set forth in Section 12.3 and, if applicable, the mediation provisions of Section 12.4(a),
desires to commence a court action, suit or other proceeding (an "Action") in respect to a Dispute, such party may, subject to the other provisions of this Management Services Agreement, submit the Dispute to any court of competent jurisdiction.  If there is any court Action between any parties pursuant to this Section 12.4(b), the unsuccessful party to such court Action shall pay the prevailing
party all costs and expenses, including reasonable attorneys' fees and disbursements, incurred by such prevailing party in such court Action and in any appeal in connection therewith.  If such prevailing party recovers a judgment in any such court Action or appeal, such costs, expenses and attorneys' fees and disbursements shall be included in and as part of such judgment.

 

	
c.  
	
Specific Performance.  Notwithstanding Sections 12.2 and 12.3 and paragraphs (a) and (b) of this Section 12.4, Manager and Pipeline agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that Manager and Pipeline shall be entitled to injunctive relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof.

 

 

 

44

 

 

	
13.  
	
Special and Consequential Damages.  Except as provided in Section 8 of this Management Services Agreement, neither party shall have any liability hereunder to the other party
for any special, indirect, consequential or punitive damages.

 

	
14.  
	
Manager's Obligations Not Exclusive.  The Parties agree that Manager's obligations under this Agreement are not exclusive, and nothing in this Agreement shall be deemed to
limit Manager's right to offer or provide management services to any other entity (a "Third-Party Customer").

 

	
15.  
	
General.

 

	
15.1  
	
Effect of Agreement; Amendments.  This Management Services Agreement reflects the whole and entire agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral and written, between the parties with respect to the subject matter hereof.  This Management Services Agreement can be amended, restated or supplemented only by the written agreement of the Manager and Pipeline.

 

	
15.2  
	
Notices.  Unless otherwise specifically provided in this Management Services Agreement, any notice or other communication shall be in writing and may be sent by (a) personal
delivery (including delivery by a courier service), (b) telecopy to the following telecopy numbers (until changed in accordance with this Section 15.2) or (c) registered or certified mail, postage prepaid, addressed as set forth below (or at such other address as may be designated in accordance with this Section 15.2):

 

If to the Manager:

 

PG&E Gas Transmission Service Company, LLC

	
  
	
1400 SW Fifth Avenue, Suite 900

Portland, OR  97201

Attention:  Robert T. Howard

Telecopy number:  503-833-4927

 

If to Pipeline:

 

North Baja Pipeline LLC

1400 SW Fifth Avenue, Suite 900

Portland, OR 97201

Attention:  Legal Department

Telecopy number:  503-402-4004

 

	
  
	
Notices shall be deemed given upon receipt.   Either party may change its address and/or telephone numbers for notice purposes by providing notice of such change to the other party.

 

	
15.3  
	
Counterparts. This Management Services Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

 

	
15.4  
	
Waiver.  No waiver by either party of any default by the other party in the performance of any provision, condition or requirement herein shall be deemed to be a waiver of,
or in any manner release the other party from, performance of any other provision, condition or requirement herein, nor shall such waiver be deemed to be a waiver of, or in any manner a release of, the other party from future performance of the same provision, condition or requirement.  Any delay or omission of either party to exercise any right hereunder shall not impair the exercise of any such right, or any like right, accruing to it hereafter.

 

	
15.5  
	
Assignability; Successors.  This Management Services Agreement, and the rights, duties, and obligations hereunder, may not be assigned or delegated by either party without
the written consent of the other party, except with respect to delegation by either party of all or a portion of its rights and obligations hereunder to its affiliates so long as such party remains responsible for all obligations (including any liability resulting from any defaults) of said affiliates; provided, however, that such consent shall not be unreasonably delayed or withheld.  This Management Services Agreement and all of the obligations and rights herein established shall extend to and be
binding upon and shall inure to the benefit of the respective successors and permitted assigns of the respective parties hereto.  Unless consent to the assignment has been obtained, any assignment of this Management Services Agreement shall not relieve the assigning party of any of its obligations hereunder.

 

 

 

45

 

 

	
15.6  
	
Third Persons.  Except as otherwise provided in this Management Services Agreement nothing herein expressed or implied is intended or shall be construed to confer upon or to
give any person not a party hereto any rights, remedies or obligations under or by reason of this Management Services Agreement.

 

	
15.7  
	
Laws and Regulatory Bodies. This Management Services Agreement and the obligations of the parties hereunder are subject to all applicable laws, rules, orders and regulations of governmental
authorities having jurisdiction, and to the extent of conflict, such laws, rules, orders and regulation of governmental authorities having jurisdiction shall control.

 

	
15.8  
	
Section Numbers; Headings.  Unless otherwise indicated, references to Section numbers are to Sections of this Management Services Agreement.  Headings and captions
are for reference purposes only and shall not affect the meaning or interpretation of this Management Services Agreement.

 

	
15.9  
	
Severability. Any provision of this Management Services Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of that prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of that provision in any other jurisdiction.

 

	
15.10  
	
Further Assurances.  Each party agrees to execute and deliver all such other and additional instruments and documents and to do such other acts and things as may be reasonably
necessary more fully to effectuate the terms and provisions of this Management Services Agreement.

 

IN WITNESS WHEREOF, the parties have caused this Management Services Agreement to be executed by their duly authorized representatives as of the date first above written.

 

 

	 	
MANAGER:

 

	 	
PG&E Gas Transmission Services Company, LLC

 

	 	
By:  /s/ Robert T. Howard

Name:  Robert T. Howard

Title:     Vice President

 

 

	 	
PIPELINE:

 

	 	
North Baja Pipeline LLC

 

	 	
By: /s/ Peter G. Lund

Name:   Peter G. Lund

Title:              Vice President 

 

 

 

 

 

46

 

 

 

	
EXHIBIT A

TO

MANAGEMENT SERVICES AGREEMENT

 

ACCOUNTING PROCEDURE 

 

 

	
ARTICLE I 

 

General Provisions

 

 

	
1.01  
	
Statements and Billings.  The Manager shall bill Pipeline on or before the tenth (10th) Day of
each Month or as soon as reasonably possible thereafter for the costs and expenses for the prior Month, including any adjustment that may be necessary to correct prior billings.  Bills will be summarized by appropriate classifications indicative of the nature thereof and will be accompanied by such detail and supporting documentation as Pipeline may reasonably request.

 

	
1.02  
	
Payment by Pipeline.  Pipeline shall pay all bills presented by the Manager as provided in this Management Services Agreement on or before the fifteenth (15th)
Day after the bill is received.  If payment is not made within such time, the unpaid balance shall bear interest until paid at a rate (which shall in no event be higher than the maximum rate permitted by applicable law) equal to two percent (2%) per annum over the prime rate of Citibank, N.A. (or its successor) from time to time publicly announced and in effect.  Payment by or on behalf of Pipeline shall not be deemed a waiver of the right to recoup any amount in question

 

	
1.03  
	
Financial Records.  The Manager shall maintain accurate books and records in accordance with FERC and FASB accounting procedures covering all of the Manager's actions under
this Management Services Agreement.

 

 

	
ARTICLE II 

 

Capital Items, Non-Capital Items, and Contribution of Inventory and Facilities

 

	
2.01  
	
Capital Items

 

	
2.01.01  
	
Definition of Capital Items.  The term "Capital Items" as used herein shall mean any item of real and/or personal property that, if owned by and utilized for a FERC-regulated
interstate pipeline company, would qualify for treatment as a capital expense under standard FERC accounting practices.

	
  
	 

	
2.01.02  
	
Certain Capital Items Owned by Manager.  To the extent the Manager or any of its affiliates own any Capital Items necessary or desirable for the operation of the Pipeline ("Manager's
Capital Items"), that Manager or such affiliates in its sole discretion (subject to Section 2.01.03 below) is willing to transfer for consideration to Pipeline, the Manager or such affiliates may, if approved by Pipeline, transfer such property to Pipeline.  In the event of such a transfer, the Manager may charge Pipeline the net book value thereof (as reflected on the books of the Manager or such affiliates on the date of transfer).  To the extent the Manager or any of its affiliates own
Manager's Capital Items, and the Manager or such affiliates in its sole discretion chooses not to transfer such property to Pipeline, Manager may include as part of its costs to be reimbursed by Pipeline carrying costs and overhead expense related to such property, provided, however, Manager shall not charge carrying costs and overhead expense related to such property above the total costs (including return on equity) to which Pipeline would be entitled to collect from ratepayers if such property were owned by
Pipeline.

 

 

 

47

 

 

	
  
	
2.01.03
	
Purchase of Additional Capital Items.  Capital Items intended for the sole use of Pipeline shall be purchased by Manager on behalf of Pipeline and be owned by Pipeline.  Capital Items intended to be utilized by Manager on behalf
of Pipeline as well as Third-Party Customers (as defined in the Management Services Agreement) shall, at Manager's descretion, (i)  be owned by Manager, subject to reimbursement by Pipeline of an allocated share of purchase costs, including carrying costs and overhead expense, as specified in Section 2.01.02 above or (ii) be owned by Pipeline in proportionate share with Third Party Customers.

 

 

	
2.02  
	
Non-Capital Items

 

	
2.02.01  
	
Contribution by Pipeline.  Pipeline owns or holds rights to certain non-capital inventory and assets, such as office equipment and office space ("Expense Items"), that Manager
may desire to use from time to time in providing service to Pipeline and/or Manager's other activities.   Manager shall credit Pipeline for utilization of such Expense Items at fair market value.

 

	
ARTICLE III 

 

Costs and Expenses

 

Subject to the limitations hereafter prescribed and provisions of this Management Services Agreement, the Manager shall charge Pipeline for all reasonable costs and expenses in providing
services to Pipeline under this Management Services Agreement, including, but not limited to, the following items, to the extent reasonable and actually incurred or allocated to Pipeline:

 

	
3.01  
	
Rentals.  All rentals paid by the Manager.

 

	
3.02  
	
Labor Costs.

 

	
  
	
3.02.01   Salaries and wages of employees of the Manager and its affiliates engaged in connection with the management of Pipeline and, in addition, amounts paid as salaries and wages of others temporarily employed in connection therewith.  Such salaries and wages shall be loaded to include the Manager's actual costs of bonuses, holiday, vacation, sickness and jury service benefits and other
customary allowances for time not worked paid to persons whose salaries and wages are chargeable under this Section 3.02.01.

 

	
3.02.02  
	
Expenditures or contributions made pursuant to assessments imposed by Governmental Authority that are applicable to salaries, wages and costs chargeable under Section 3.02.01 above, including, but not limited to, FICA taxes and federal and state unemployment taxes.  Such costs shall be charged on the basis of a percentage assessment on the amount
of salaries and wages chargeable under Section 3.02.01 above or on an actual cost basis.

 

	
3.02.03  
	
The costs of plans incurred by or on behalf of the Manager for workers' compensation, employers' group life insurance, hospitalization, disability, pension, retirement, savings and other benefit plans, that are applicable to salaries and wages chargeable under Section 3.02.01 above.  Such costs shall be charged on the basis of a percentage assessment
on the amount of salaries and wages chargeable under Section 3.02.01 above, or on an actual cost basis.

 

	
3.03  
	
Programming and Information Processing.  All costs incurred relating to programming and information processing actually and reasonably incurred or allocated on behalf of Pipeline
in compliance with, and in furtherance of, the terms of this Management Services Agreement.

 

	
3.04  
	
Reimbursable Expenses of Employees.   Reasonable personal expenses of employees whose salaries and wages are chargeable under Section 3.02.01 above.  As used
herein, the term "personal expenses" shall mean out-of-pocket expenditures incurred by employees in the performance of their duties and for which such employees are reimbursed.  The Manager shall maintain documentation for such expenses in accordance with the standards of the Internal Revenue Service.

 

 

 

48

 

 

	
3.05  
	
Transportation.  Transportation of employees, equipment and material and supplies necessary for management of the Pipeline.

 

	
3.06  
	
Services. The cost of contract services and utilities procured from outside sources.

 

	
3.07  
	
Legal Expenses and Claims.  All costs and expenses of handling, investigating and settling litigation or claims arising by reason of the management of Pipeline or necessary
to protect or recover any assets or property, including, but not limited to, attorneys' fees, court costs, costs of investigation or procuring evidence and any judgments paid or amounts paid in settlement or satisfaction of any such litigation or claims.  All judgments received or amounts received in settlement of litigation with respect to any claim asserted on behalf of Pipeline shall be for the benefit of and shall be remitted to Pipeline.

 

	
3.08  
	
Taxes.  All taxes (except those measured by income) of every kind and nature assessed or levied upon or incurred in connection with the management of Pipeline or on Pipeline's
facilities or other property of Pipeline and which taxes have been paid by the Manager for the benefit of Pipeline, including charges for late payment arising from extensions of the time for filing that are caused by Pipeline, or that result from the Manager's good faith efforts to contest the amount of application of any tax.

 

	
3.09  
	
Insurance.  Net of any returns, refunds or dividends, all premiums, deductibles and retentions paid and expenses incurred for insurance required to be carried under the Management
Services Agreement.  In the event that the Manager self-insures any of the insurance required or permitted under this Management Services Agreement, the Manager shall be reimbursed only for the amount equivalent to the standard premium(s) which would have been paid had such insurance been acquired, and the Manager shall not be reimbursed for the costs associated with any claims paid by the Manager as an insurer under such self-insurance.

 

	
3.10  
	
Permits, Licenses and Bond.  Cost of permits, licenses and bond premiums necessary in the performance of the Manager's duties on behalf of Pipeline as herein contemplated.

 

	
3.12
	
Administrative and General and Overhead Costs. Administrative and general and overhead costs, including salaries and wages, bonuses and expenses of personnel of the Manager and/or the Manager's affiliates (excluding the personnel referred to in Section
3.02 of this Article III) who render services for the benefit of the Manager (in the performance of its obligations hereunder) or Pipeline, office supplies and expenses, office rentals and other space costs, less the value of such costs made available to Manager by Pipeline

 

	
3.11  
	
Changes in Cost Determination and Allocation.  The Manager may request a change in the cost components or the determination of the cost components set forth in this Exhibit
A.  Any requested change in a cost component or in the determination of a cost component must be reviewed and approved by Pipeline prior to the implementation of such change by the Manager.

 

 

End of Exhibit A

 

 

49

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