<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended August 31, 1999
Commission file number 333-53211
Hard Rock Hotel, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 88-0306263
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4455 Paradise Road, Las Vegas NV 89109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 693-5000
Common Stock outstanding by class as of August 31, 1999
Common Stock shares
- -------------------------------------------------------------------------------
Class A Common Stock 12,000
Class B Common Stock 64,023
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
<PAGE>
HARD ROCK HOTEL, INC.
INDEX
Part I: Financial Information
Item 1: Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C>
Balance Sheets as of November 30, 1998 and August 31, 1999 (unaudited) . . . . 1
Unaudited Statements of Operations for the three-months and nine-months ended
August 31, 1998 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Unaudited Statements of Cash Flows for the nine-months ended August 31,
1998 and 1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Condensed Financial Statements. . . . . . . . . . . . . . . . . . . . 4
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3: Quantitative and Qualitative Disclosures about Market Risks - Not Applicable
Part II: Other Information
Item 1: Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Item 6: Exhibits and Reports on Form 8-k . . . . . . . . . . . . . . . . . . . . . . .10
(a) Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
(b) Reports on Form 8-k
None
</TABLE>
<PAGE>
HARD ROCK HOTEL, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
HARD ROCK HOTEL, INC.
BALANCE SHEETS
---------------------------------------
November 30, 1998 August 31, 1999
---------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,567,535 $ 4,424,507
Accounts receivable, net of allowance for doubtful accounts of
$200,000 at November 30, 1998 and $295,000 at August 31, 1999 3,274,644 3,288,879
Income tax refund receivable 194,237 -
Inventories 1,208,126 1,303,404
Prepaid and other current assets 1,480,469 1,621,319
Deferred income taxes 764,740 764,740
---------------------------------------
Total Current Assets 11,489,751 11,402,849
Property and equipment, net, at cost 123,884,994 185,038,117
Other assets, including pre-opening costs of $843,000 at
November 30, 1998 7,018,798 6,112,331
Deferred income taxes 2,728,603 2,728,603
---------------------------------------
Total Assets $ 145,122,146 $ 205,281,900
=======================================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable 2,738,194 3,793,838
Construction related payables 13,000,218 9,354,095
Accrued expenses 4,473,594 5,757,197
Interest payable 1,984,543 5,329,524
Current obligations under capital leases 105,861 103,311
Long-term debt due within one year - 7,425,000
---------------------------------------
Total current liabilities $ 22,302,410 $ 31,762,965
Deferred income taxes 3,493,343 3,493,343
Obligations under capital leases 93,452 12,493
Long-term debt due after one year 130,500,000 187,075,000
Commitments and contingencies - -
Redeemable common stock, no par value 325,000 300,000
Shareholders' deficit:
Common stock, Class A voting, no par value:
Authorized shares -- 40,000
Issued and outstanding shares -- 12,000 - -
Common stock, Class B non-voting, no par value:
Authorized shares -- 160,000
Issued and outstanding shares -- 64,023 - -
Preferred Stock, 9 1/4% Series A Cummulative, no par value:
Authorized shares -- 40,000
Issued and outstanding shares -- 2,500 - -
Paid-in capital 7,508,250 10,008,250
Accumulated deficit (19,100,309) (27,370,151)
---------------------------------------
Total shareholders' deficit (11,592,059) (17,361,901)
---------------------------------------
Total liabilities and shareholders' deficit $ 145,122,146 $ 205,281,900
=======================================
</TABLE>
See accompanying notes
1
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended August 31, Nine months ended August 31,
-------------------------------------------------------------------------
1998 1999 1998 1999
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Casino $ 7,697,599 $ 8,846,485 $ 27,479,244 $ 26,578,417
Lodging 3,095,411 5,620,310 9,675,769 12,737,349
Food and beverage 5,163,461 7,169,227 14,434,837 16,604,298
Retail 2,626,360 2,686,148 9,033,669 8,624,356
Other income 512,210 2,011,550 1,682,652 3,205,270
-------------------------------------------------------------------------
19,095,041 26,333,720 62,306,171 67,749,690
Less complimentaries (1,451,104) (2,380,658) (4,659,356) (5,607,045)
-------------------------------------------------------------------------
Net Revenues 17,643,937 23,953,062 57,646,815 62,142,645
Costs and expenses:
Casino 4,323,946 5,953,320 14,071,531 15,563,816
Lodging 1,050,652 1,571,964 3,019,129 3,672,555
Food and beverage 3,157,237 4,752,697 8,569,324 10,788,660
Retail 1,238,987 1,238,893 4,258,811 3,959,974
Other 291,259 823,268 727,408 1,384,632
Marketing 1,015,547 1,476,169 3,661,668 2,599,833
General and administrative, including
$1.5 million in non-recurring legal fees
in the three and nine months ended
August 31, 1998 4,752,117 4,255,582 11,178,434 10,972,604
Depreciation and amortization 1,452,298 3,359,623 4,257,708 6,524,064
Pre-opening - 525,246 - 5,038,095
-------------------------------------------------------------------------
Total costs and expenses 17,282,043 23,956,762 49,744,013 60,504,233
-------------------------------------------------------------------------
Income (loss) from operations 361,894 (3,700) 7,902,802 1,638,412
Interest and other:
Interest expense, net (2,825,662) (4,632,827) (8,042,500) (9,880,700)
Other expenses, net - (5,659) - (27,554)
-------------------------------------------------------------------------
(2,825,662) (4,638,486) (8,042,500) (9,908,254)
-------------------------------------------------------------------------
Loss before extraordinary loss and
provision for income taxes (2,463,768) (4,642,186) (139,698) (8,269,842)
Income tax (provision) benefit 823,000 - (13,000) -
-------------------------------------------------------------------------
Loss before extraordinary loss (1,640,768) (4,642,186) (152,698) (8,269,842)
Extraordinary loss-early extinguishment
of debt - net of taxes - - (2,210,777) -
-------------------------------------------------------------------------
Net loss $ (1,640,768) $ (4,642,186) $ (2,363,475) $ (8,269,842)
=========================================================================
Net loss per share $ (21.58) $ (61.06) $ (31.09) $ (108.78)
=========================================================================
Shares used in per share calculation 76,023 76,023 76,023 76,023
=========================================================================
</TABLE>
See accompanying notes
2
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended August 31,
-------------------------------
1998 1999
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,363,475) $ (8,269,842)
Adjustmets to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 4,257,708 6,524,064
Amortization of loan fees 478,048 596,467
Issuance of common stock as compensation 225,000 (25,000)
Early extinguishment of debt 3,495,777 -
Changes in operating assets and liabilities:
Accounts receivable (179,136) (14,235)
Income tax refund receivable (1,272,000) 194,237
Inventories 12,204 (95,278)
Prepaid and other current assets (532,893) (140,850)
Accounts payable 825,895 1,055,644
Interest payable 4,917,833 3,344,981
Accrued expenses (1,026,340) 1,283,603
-------------------------------
Net cash provided by operating activities 8,838,621 4,453,791
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (15,629,917) (67,519,676)
Construction related payables, net - (3,646,123)
Change in advances due to related parties (470,234) -
Decrease in other assets 13,624 152,489
-------------------------------
Net cash used in investing activities (16,086,527) (71,013,310)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 120,000,000 64,000,000
Incurrence of loan fees on Prior Credit Facility (5,424,185) -
Principal payments on long-term debt (105,700,000) -
Payments on capital lease obligations (85,626) (83,509)
Issuance of Preferred Stock - 2,500,000
-------------------------------
Net cash provided by financing activities 8,790,189 66,416,491
-------------------------------
Net increase in cash and cash equivalents 1,542,283 (143,028)
Cash and cash equivalents at beginning of period 4,214,081 4,567,535
-------------------------------
Cash and cash equivalents at end of period $ 5,756,364 $ 4,424,507
===============================
</TABLE>
See accompanying notes
3
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
AUGUST 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Hard Rock Hotel,
Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and
with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all information and footnotes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three-month
and nine-month periods ended August 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending
November 30, 1999. The unaudited interim financial statements contained
herein should be read in conjunction with the audited financial
statements and footnotes for the year ended November 30, 1998.
2. THE EXPANDED FACILITY
In connection with the expansion of the Company's facilities, the
Company incurred approximately $100.0 million of capital expenditures
through August 31, 1999. The Company completed the expansion, and the
expanded facilities opened in May 1999. Capitalized interest of
approximately $3.1 million is included in this amount.
3. LONG TERM DEBT
At August 31, 1999, the Company had $120.0 million outstanding in
Senior Subordinated Notes and $74.5 million outstanding on a $77.0
million revolving credit line, which line was increased from $67.0
million at February 28, 1999. Borrowings against the line of credit may
require repayments beginning in February 2000.
4. PRE-OPENING EXPENSES
The Company incurred $5 million in pre-opening expenses associated with
the Expansion. The Company wrote off $4.5 million and $0.5 million
during the quarters ended May 31, 1999 and August 31, 1999,
respectively.
5. SALE OF PREFERRED STOCK
The Company has sold $2.5 million aggregate liquidation preference
of its 9 1/4% Series A Cumulative Preferred Stock to Peter A.
Morton, as of August 31, 1999. Additionally, the Company has sold
Mr. Morton $5.5 million aggregate liquidation preference of the
preferred stock since September 1, 1999, and expects to sell an
additional $20 million of preferred stock before the end of the
year. The terms of the additional preferred stock have not yet been
determined.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the company's financial statements, including the notes
thereto, and the other financial information appearing elsewhere herein and by
the audited financial statements and footnotes for the year ended November 30,
1998, which may be obtained upon request from the company.
OVERVIEW
Hard Rock Hotel, Inc.'s (the "Company") sole business is the operation of the
Hard Rock Hotel and Casino in Las Vegas, Nevada, which commenced operations on
March 9, 1995.
During the month of May 1999, the Company completed construction of its
expansion of the resort (the "Expansion"). The Expansion included 318 additional
rooms, 4 new restaurants, 6,000 square feet of ballroom/banquet facilities, new
retail space, an 8,000 square foot spa/salon/fitness center and a significantly
enlarged swimming pool area featuring, among other things, swim-up blackjack.
YEAR 2000 ISSUES
The "Year 2000 Issue" is the result of computer programs being designed using
two digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that are date sensitive may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including among
other things a temporary inability to process transactions.
STATE OF READINESS
As part of the buyout of Harveys' Casino Resorts 40% share of the Company, in
October 1997, the Company was required to or did replace most of its hardware
and software including the three most critical systems:
- the property management system which is used in the hotel to
check guests in and out,
- the casino system which is used to control and account for
table games, slots and the casino cage, and
- the back office systems which are used for accounting, payroll
and inventory control.
During this process, management verified that all the purchased hardware and
software related to these systems will not suffer Year 2000 Issue related
malfunctions.
The Company has verified that its remaining information technology systems and
other relevant systems will function properly during and after the year 2000 by:
- identifying all systems or equipment potentially impacted by
the Year 2000 Issue,
- testing/certifying those systems' ability to operate in a
post-1999 environment and
- re-programming or replacing systems or equipment that might
have malfunctioned due to the Year 2000 Issue.
The Company inventoried substantially all of its information technology systems
and other relevant systems. The results of this process indicate that the Year
2000 Issue should not materially affect the Company's information technology
systems and other relevant systems. The remaining steps in the Company's plan
for the year 2000 include continued testing of selected systems/equipment to
minimize all Year 2000 Issue related problems. Management believes that the cost
of its Year 2000 Issue identification, testing and remediation will not have a
material impact on the Company's financial statements.
5
<PAGE>
The Company has contacted its significant vendors and service providers to
determine the extent to which the Year 2000 Issue will affect their ability to
continue to supply the Company with goods and services. Based on the goods
(primarily food, beverage and retail items) purchased by the Company, the
Company does not expect the Year 2000 Issue to have a material impact on its
vendors or its service providers.
RISK AND CONTINGENCY PLAN
Management of the Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. The most likely worst case
scenarios would include failure of a computer system or equipment resulting in
termination of or diminished service to customers. If the Company's vendors or
suppliers of the Company's necessary power, gas, water, and telecommunications
services fail, the Company would be unable to provide certain services to its
customers. In addition, disruptions in the economy resulting from the Year 2000
Issue could materially affect the Company.
The Company maintains contingency plans in its normal course of business
designed to be deployed in the event of various potential business
interruptions. These generally include manual workarounds and adjusting
staffing. The Company will continue to evaluate the status of its program for
addressing the Year 2000 Issue and adjust its contingency plans if necessary.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements herein constitute "forward-looking statements." Such
forward-looking statements include the discussions of the business strategies of
the Company and expectations concerning future operations, margins,
profitability, liquidity, capital expenditures and capital resources. Although
management believes that the expectations in such forward-looking statements are
reasonable, it can give no assurance that any forward looking statements will
prove to be correct. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, competition in
Las Vegas, government regulation related to the gaming industry, uncertainty of
casino customer spending and vacationing in casino resorts in Las Vegas,
occupancy rates and average room rates in Las Vegas, the popularity of Las Vegas
as a convention and trade show destination, the completion of infrastructure
improvements in Las Vegas, the ability of the Company to issue an additional $20
million aggregate liquidation preference of preferred stock on favorable terms,
or at all, and general economic and business conditions that may affect levels
of disposable income and pricing of hotel rooms. For more information regarding
risks inherent in an investment in the Company, see the section "Business - Risk
Factors" in our annual Report on Form 10-K filed on February 26, 1999.
MANAGEMENT CHANGES
During the month of August 1999, Jonathan Swain was appointed to the position of
Senior Vice President and General Manager of the Company. Mr. Swain was
previously employed by Aztar Corporation from 1995 to 1999, most recently as
President of the Tropicana Hotel and Casino in Las Vegas. From 1993 to 1995, Mr.
Swain served as Vice President of Marketing for Trump Taj Mahal in New Jersey.
During the month of May 1999, Rick Richards was appointed to the position of
Vice President - Casino Operations. Mr. Richards was a Branch Manager for Hilton
National Marketing from 1997 to 1999, and Vice President and Assistant General
Manager of Players Island in Lake Charles, Louisiana from 1996 to 1997. From
1981 to 1997, Mr. Richards served in various casino management positions for
Station Casinos, Inc., Bally's Las Vegas, Caesars Palace, and Boyd Gaming.
During the month of July 1999, Tjeerd R. Brink was appointed to the position of
Vice President and Chief Financial Officer of the Company. Mr. Brink held the
same position for The Fremont Street Experience, LLC from 1997 to 1999. Prior to
1997, he worked for five years for Bennett Industries, LLC (the private holding
company for
6
<PAGE>
William G. Bennett, former majority owner of Circus Circus Enterprises Inc.,
now called Mandalay Resort Group), three years for Caesars Palace and two
years for Arthur Andersen, LLP.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1999 AND 1998
NET REVENUES AND OPERATING INCOME. Net revenues increased 35.8% for the
three months ended August 31, 1999 to $24.0 million compared to $17.6 million
for the corresponding period of the prior year. The increase in revenues is
attributable to increased hotel revenue of $2.5 million, or 81.6%, food and
beverage revenue of $2.0 million, or 38.8%, casino revenue of $1.1 million,
or 14.9%, and other income of $1.5 million, or 293%. Operating income
decreased 101.0% for the three months ended August 31, 1999 to an approximate
break even point compared to an operating profit of $0.4 million for the
corresponding period of the prior year, primarily as a result of increased
depreciation of $1.9 million and the write off of $0.5 million in pre-opening
expenses.
CASINO. Casino revenues increased 14.9% for the three months ended August
31, 1999 to $8.8 million compared to $7.7 million for the corresponding
period of the prior year. The increase is primarily due to an increase in
table games revenue of $0.9 million to $5.3 million compared to $4.3 million
for the corresponding period of the prior year, and an increase in slot
revenue of $0.2 million to $3.5 million compared to $3.3 million for the
corresponding period of the prior year. Table games drop increased 49.7% to
$45.7 million, compared to $30.5 million for the corresponding period of the
prior year primarily due to the increased number of table games. Table games
hold percentage decreased 2.7% to 11.5% compared to 14.2% in the
corresponding period of the prior year. Table games revenue increased 21.6%,
as a result of the increase in the number of table games offset by the
decrease in the hold percentage. Slot coin in increased 14.0% to $77.6
million compared to $68.1 million for the corresponding period of the prior
year. Casino departmental income decreased 14.2% for the three months ended
August 31, 1999 to $2.9 million from $3.4 million, primarily as a result of
the decreased hold percentage. Casino departmental income as a percentage of
casino revenues decreased to 32.7% in 1999 from 43.8% in 1998, primarily as a
result of the decreased hold percentage.
LODGING. Lodging revenues increased 81.6% for the three months ended August
31, 1999 to $5.6 million from $3.1 million for the corresponding period of
the prior year. The increase is primarily attributed to revenue generated
from the additional 318 hotel rooms in service as a result of the Expansion.
The average daily room rate ("ADR") for the three months ended August 31,
1999 was $89.28, down 2.6% from $91.58 for the corresponding period of the
prior year. Hotel occupancy was 96.9%, down from 100%. Lodging departmental
income increased 98.0% for the three months ended August 31, 1999 to $4.0
million from $2.0 million, primarily as a result of the increased number of
rooms. Lodging departmental income as a percentage of lodging revenues
increased to 72.0% in 1999 from 66.1% in 1998.
FOOD AND BEVERAGE. Food and Beverage revenues increased 38.8% for the three
months ended August 31, 1999 to $7.2 million from $5.2 million for the
corresponding period of the prior year. The increase was primarily due to
revenues from the new restaurants opened in conjunction with the Expansion.
Food and Beverage departmental income increased 20.5% for the three months
ended August 31, 1999 to $2.4 million from $2.0 million. Food and Beverage
departmental income as a percentage of revenues dropped to 33.7% in 1999 from
38.9% in 1998, primarily as a result of higher operating costs.
RETAIL. Retail revenues increased 2.3% for the three months ended August 31,
1999 to $2.7 million from $2.6 million for the corresponding period of the
prior year. Retail departmental income increased 4.3% for the three months
ended August 31, 1999 to $1.4 million. Retail departmental income as a
percentage of Retail revenues increased slightly to 53.9% in 1999 from 52.8%
in 1998.
OTHER INCOME. Other income increased 292.7%, for the three months ended
August 31, 1999 to $2.0 million from $0.5 million for the corresponding
period of the prior year. The increase is partially due to the opening of the
new facilities, including the Athletic Club and the Cigar Shop, which had
combined revenues for the three months ended August 31, 1999 of $0.4 million.
Revenues for the Sundry Store increased to 0.5 million from $0.3 million
7
<PAGE>
for the corresponding period of the prior year. Additionally, the Company
recorded $0.7 million revenue for chip float, representing commemorative
chips in public circulation management believes will never be redeemed.
MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, General and Administrative
expenses decreased 0.6% for the three months ended August 31, 1999 to $5.7
million from $5.8 million for the corresponding period of the prior year. The
prior year period included the incurrence of $1.5 million in legal fees
associated with the Rank lawsuit. Other marketing, general and administrative
expenses increased $1.5 million compared to the prior year, and management
attributes the increase to costs associated with maintaining a larger facility.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization expense
increased to $3.4 million for the three months ended August 31, 1999 from
$1.5 million for the corresponding period of the prior year, primarily due to
the increased capital expenditures associated with the Expansion.
PRE-OPENING EXPENSE. The Company recorded a pre-opening expense of $0.5
million for the three months ended August 31, 1999 associated with the
opening of the Expansion during the second quarter of 1999.
NET INTEREST EXPENSE. Net Interest Expense increased to $4.6 million for the
three months ended August 31, 1999 from $2.8 million for the corresponding
period of the prior year. The increase is attributed to the increase in
borrowings associated with the Expansion.
INCOME TAXES. No income tax benefit was recorded in the quarter ended August
31, 1999, because a valuation allowance has been established as a result of
the Company's accumulated losses.
NET INCOME. As a result of the factors described above, the Company recorded
a net loss for the three months ended August 31, 1999 of $4.6 million
compared to a net loss of $1.6 million for the corresponding period of the
prior year.
NINE MONTHS ENDED AUGUST 31, 1999 AND 1998
NET REVENUES AND OPERATING INCOME. Net revenues increased 7.8% for the nine
months ended August 31, 1999 to $62.1 million compared to $57.6 million for
the corresponding period of the prior year. The increase in revenues is
primarily attributable to increased hotel revenue of $3.1 million, or 31.6%,
and increased food and beverage revenue of $2.2 million, or 15.0%. Operating
income decreased 79.3% for the nine months ended August 31, 1999 to $1.6
million compared to $7.9 million for the corresponding period of the prior
year, primarily as a result of the write off of $5.0 million in pre-opening
expenses and increased depreciation of $2.3 million.
CASINO. Casino revenues decreased 3.3% for the nine months ended August 31,
1999 to $26.6 million compared to $27.5 million for the corresponding period
of the prior year. The decrease is primarily due to decreased slot revenue of
$9.9 million compared to $11.0 million for the corresponding period of the
prior year. Slot coin in decreased 2.8% to $205.2 compared to $211.0 million
for the corresponding period in the prior year. Table games revenue increased
1.0% to $16.3 million from $16.1 million. Table games drop increased 26.0% to
$125.1 million compared to $99.2 million for the corresponding period in the
prior year, primarily due to the increase in the number of table games. Table
games revenue did not increase proportionately to table games drop primarily
as a result of lower hold percentage of 13.0% compared to 16.3% in the
corresponding period of the prior year. Management believes slot revenues
decreased as a result of the opening of new casinos in Las Vegas coupled with
the construction disruption associated with the Expansion during the first
half of the year and lack of amenities (primarily restaurants) prior to the
Expansion. After the expanded facilities opened, slot revenue and coin in
improved compared to the corresponding period in the prior year. Casino
departmental income decreased 17.8% for the nine months ended August 31, 1999
to $11.0 million from $13.4 million, primarily as a result of the decreased
hold percentage. Casino departmental income as a percentage of casino
revenues decreased to 41.4% in 1999 from 48.8% in 1998, primarily as a result
of the decreased hold percentage.
LODGING. Lodging revenues increased 31.6% for the nine months ended August
31, 1999 to $12.7 million from $9.7 million for the corresponding period of
the prior year. The increase is primarily attributed to revenue
8
<PAGE>
generated from the additional 318 hotel rooms placed in service in May 1999 .
The ADR for the nine months ended August 31, 1999 was $95.04, down 1.5% from
$96.53 for the corresponding period of the prior year. Hotel occupancy was
96.2%, down from 100%. Lodging departmental income increased 36.2% for the
nine months ended August 31, 1999 to $9.1 million from $6.7 million primarily
as a result of the Expansion. Lodging departmental income as a percentage of
Lodging revenues increased to 71.2% in 1999 from 68.8% in 1998.
FOOD AND BEVERAGE. Food and Beverage revenues increased 15.0% for the nine
months ended August 31, 1999 to $16.6 million from $14.4 million for the
corresponding period of the prior year. The increase was related to revenues
from the new restaurants, which opened during May 1999. Food and Beverage
departmental income decreased 0.9% for the nine months ended August 31, 1999
to $5.8 million from $5.9 million, as a result of increased costs associated
with operating the new restaurants. Food and Beverage departmental income as
a percentage of revenues dropped to 35.0% in 1999 from 40.6% in 1998,
primarily as a result of the increased operating costs.
RETAIL. Retail revenues decreased 4.5% for the nine months ended August 31,
1999 to $8.6 million from $9.0 million for the corresponding period of the
prior year. Management believes the decrease is primarily attributable to a
diluted retail market from increased retail competition coupled with
construction disruption associated with the Expansion during the first half
of the year. Retail departmental income decreased 2.3% for the nine months
ended August 31, 1999 to $4.7 million from $4.8 million, as a result of the
decreased revenues. Retail departmental income as a percentage of Retail
revenues increased slightly to 54.1% in 1999 from 52.9% in 1998.
OTHER INCOME. Other income increased 90.5%, for the nine months ended August
31, 1999 to $3.2 million from $1.7 million for the corresponding period of
the prior year. The increase is partially due to the opening of the new
facilities, including the Athletic Club and the Cigar Shop, which had
combined revenues for the nine months ended August 31, 1999 of $0.7 million.
Revenues for the Sundry Store increased to 1.2 million from $0.8 million for
the corresponding period of the prior year. Additionally, the Company
recorded $0.7 million revenue for chip float compared to $0.4 million for the
corresponding period of the prior year, representing commemorative chips in
public circulation management believes will never be redeemed.
MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, General and Administrative
expenses decreased 8.5% for the nine months ended August 31, 1999 to $13.6
million from $14.8 million for the corresponding period of the prior year.
The decrease is primarily attributable to the costs associated with hosting
The Rolling Stones event of approximately $1.1 million during the first
quarter of 1998 and the cost incurred in the prior year of $1.5 million
associated with the Rank lawsuit, offset by increased costs in the current
year associated with maintaining a larger facility.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization expense
increased to $6.5 million for the nine months ended August 31, 1999 from $4.3
million for the corresponding period of the prior year, primarily due to the
increased capital expenditures associated with Expansion.
PRE-OPENING EXPENSE. The Company recorded a pre-opening expense of $5.0
million during the nine months ended August 31, 1999, associated with the
opening of the Expansion during the quarter ended May 31, 1999.
NET INTEREST EXPENSE. Net Interest Expense increased to $9.9 million for the
nine months ended August 31, 1999 compared to $8.0 million for the
corresponding period of the prior year. The increase is due to the increase
in borrowings associated with the Expansion.
INCOME TAXES. No income tax benefit was recorded in the nine months ended
August 31, 1999, because a valuation allowance has been established due to
the Company's accumulated losses.
EXTRAORDINARY LOSS. In connection with securing expansion financing on March
23, 1998, the Company wrote off $3.5 million in unamortized loan fee costs
and recognized an extraordinary loss of $2.2 million associated with the
retirement of the Prior Credit Facility for the quarter ended May 31, 1998.
NET INCOME. As a result of the factors described above, the Company recorded
a net loss for the nine months ended August 31, 1999 of $8.3 million compared
to net loss of $2.4 million for the corresponding period of the prior year.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended August 31, 1999, the Company's principal
source of funds was net financing activities of approximately $66.4 million.
The primary use of funds was the payment of expansion and maintenance capital
expenditures of $71.0 million. Cash provided by operating activities for the
nine months ended August 31, 1999 decreased to $4.5 million from $8.8 million
for the corresponding period of the prior year as a result of a net loss of
$8.3 million offset by depreciation and amortization of $6.5 million and
other various changes in operating asset and liability accounts. As of August
31, 1999 the Company had cash and cash equivalents of $4.4 million. The
Company believes that its current cash balances, funds available ($2.5
million) under the $77.0 million New Credit Facility, cash proceeds from the
issuance of additional shares of preferred stock, cash flow from operations,
and other sources of cash will be sufficient to provide operating liquidity.
However, no assurances can be given with respect to the availability or
sufficiency of such amounts.
The Company sold $8.0 million aggregate liquidation preference of
its 9 1/4% Series A Cumulative Preferred Stock (the "Series A Preferred") (of
which $2.5 million was sold by August 31, 1999) to Peter A. Morton, its
President and majority shareholder, and in connection therewith is
negotiating with the lenders under the New Credit Facility to obtain certain
waivers thereunder to among other things, permit the Company to use the
proceeds from such sale to make certain payments in connection with the
Expansion. The Series A Preferred pays dividends cumulatively from the date
of issue out of funds legally available for that purpose in cash in arrears
on November 30 and May 31 of each year commencing on November 30, 1999. Any
amounts not paid in cash cumulate and are compounded semi-annually at a rate
of 9 1/4% per year until paid. The Series A Preferred matures 91 days
following the earlier of either April 1, 2005, or the repayment of the
Company's outstanding 9 1/4% Senior Subordinated Notes. Subject to certain
conditions, the Company may not redeem the Series A Preferred. The Company
expects to issue an additional $20 million aggregate liquidation preference
of preferred stock by the end of the year, the proceeds from which would be
used to reduce amounts outstanding under the New Credit Facility and for
general corporate purposes. The terms of any future issuance have not been
finalized.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 5, 1998, Hard Rock Cafe International (USA) Inc. (f/k/a
Rank Licensing, Inc.), a subsidiary of Rank International plc, (the
"Plaintiff"), filed an amended complaint in the United States District Court
for the Southern District of New York against Peter A. Morton and the
Company. The Plaintiff contends that the reservation and use by Mr. Morton
and the Company of the internet domain names "hardrock.com" and
"hardrockhotel.com" (the "Domain Names"), and the use of certain marks and
logos (the "Logos") in, and in connection with merchandise offered on,
internet websites operated under the Domain Names, violate terms of certain
agreements with Mr. Morton and Federal and state trademark and unfair
competition law. The Plaintiff seeks an injunction against the use of the
Domain Names and the Logos by Mr. Morton and the Company, an order requiring
Mr. Morton and the Company to assign the Domain Names to the Plaintiff, and
over $100 million in damages. During the course of litigation, Mr. Morton and
the Company transferred the domain name "hardrock.com" to the Plaintiff. On
June 1, 1999, the court issued a ruling that the Company owes no money
damages, the Company can continue to use the domain name "hardrockhotel.com,"
and the Company can use the Logos in connection with merchandising within
designated territories. The Company is still seeking to have the territorial
limitation removed for certain product sales over the Internet. Through
August 31, 1999, the Company has incurred $1.5 million in legal fees in
defense of this suit, which was charged to general and administrative
expenses on the Statement of Operations during fiscal year 1998.
On August 27, 1999, Hard Rock Hotel Inc. and Lily Pond Investments,
Inc. filed a Complaint for Declaratory Judgment against Gary Selesner in the
Eighth Judicial District of Clark County, Nevada, Case No. A407499, based on
the termination of Gary Selesner's employment. On September 16, 1999, Gary
Selesner filed an Answer and Counterclaim seeking damages alleging breach of
contract and breach of implied covenant of good faith and fair dealing.
Discovery in this matter is proceeding.
Additionally, the Company is a defendant in various lawsuits
relating to routine matters incidental to its business. Management does not
believe that the outcome of any such litigation, in the aggregate, will have
a material adverse effect on the Company.
ITEM 6. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3. CERTIFICATE OF INCORPORATION AND BY-LAWS
3.1 Second Amended and Restated Articles of Incorporation of the Company. (1)
3.2 Certificate of Amendment of Second Amended and Restated Articles of Incorporation.
3.3 Certificate of Designation of 9 1/4% Series A Cumulative Preferred Stock, no par value per share.
3.4 Second Amended and Restated By-Laws of the Company. (1)
10. MATERIAL CONTRACTS.
10.1 Subscription Agreement for 2,500 shares of 9 1/4% Series A Cumulative Preferred Stock of Hard Rock Hotel,
Inc., dated August 31, 1999, between Peter Morton and the Company.
11
<PAGE>
10.2 Subscription Agreement for 5,500 shares of 9 1/4% Series A Cumulative Preferred Stock of Hard Rock Hotel,
Inc., dated October 1, 1999, between Peter Morton and the Company.
10.3 Employment Agreement, dated August 17, 1999, between the Company and Jonathan Swain.
10.4 Employment Agreement, dated August 17, 1999, between the Company and Rick Richards.
27. FINANCIAL DATA SCHEDULE.
27.1 Financial Data Schedule for the three months and nine months ended August 31, 1998 and 1999.
</TABLE>
(1) Incorporated by reference to designated exhibit to the Company's
Registration Statement on Form S-4, filed with the Securities and Exchange
Commission on May 21, 1998 (File No. 333-53211).
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document includes various "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Sections 21E of the Securities Exchange Act of 1934, as amended, which
represent the Company's expectations or beliefs concerning future events.
Statements containing expressions such as "believes," "anticipates" or
"expects" used in the Company's press releases and periodic reports on Forms
10-K and 10-Q filed with the Securities and Exchange Commission are intended
to identify forward-looking statements. All forward-looking statements
involve risks and uncertainties. Although the Company believes its
expectations are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurances.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HARD ROCK HOTEL, INC.
Date: October 14, 1999 By: /s/ JONATHAN SWAIN
-------------------------------------
Jonathan Swain
DULY AUTHORIZED OFFICER
/s/ TJEERD BRINK
-------------------------------------
Tjeerd Brink
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HARD ROCK HOTEL, INC.
THIS IS TO CERTIFY that on the 28th day of August, 1999, pursuant to the
unanimous written consent of the Board of Directors of Hard Rock Hotel, Inc.
(the "Corporation"), the following resolution was adopted in accordance with
Nevada Revised Statutes 78.385 and 78.390:
RESOLVED, that Article FOURTH of the Corporation's Second Amended
and Restated Articles of Incorporation be amended to so that it reads
in its entirety as follows:
"FOURTH: (a) AUTHORIZED SHARES. The total number of shares of
stock which the Corporation shall have authority to issue is 240,000
shares, consisting of two classes designated, respectively, "Common
Stock" and "Preferred Stock," with all of such shares having no par
value. The total number of shares of Common Stock which the Corporation
shall have authority to issue is 200,000 shares, consisting of two
classes, described as follows: (i) 40,000 shares of Class A Voting
Common Stock and (ii) 160,000 shares of Class B Non-Voting Common Stock.
The total number of shares of Preferred Stock which the Corporation
shall have authority to issue is 40,000 shares. The Preferred Stock may
be issued in one or more classes or series, each such class or series to
be appropriately designated by a distinguishing letter or title, prior
to the issue of any shares thereof. The voting powers, designations,
preferences, limitations, restrictions, and relative, participating,
optional and other rights, and the qualifications, limitations, or
restrictions thereof, of the Preferred Stock shall hereinafter be
prescribed by resolution of the Board of Directors pursuant to Section
(c) of this Article FOURTH.
(b) COMMON STOCK.
(i) DIVIDEND RATE. Subject to the rights of
holders of any Preferred Stock having preference as to dividends, the
holders of Common Stock shall be entitled to receive dividends when,
as and if declared by the Board of Directors out of assets legally
available therefor.
(ii) VOTING RIGHTS. The holders of the issued and
outstanding shares of Class A Voting Common Stock shall be entitled to
one vote for each share of such Calss A Voting Common Stock held by
them. The holders of the issued and outstanding shares of Class B
Non-Voting
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<PAGE>
Common Stock shall have no voting rights other than those required by
law.
(iii) LIQUIDATION RIGHTS. In the event of
liquidation, dissolution, or winding up of the affairs of the
Corporation, whether voluntary or involuntary, subject to the prior
rights of holders of Preferred Stock to share ratably in the
Corporation's assets, the Common Stock and any shares of Preferred
Stock which are not entitled to any preference in liquidation shall
share equally and ratably in the Corporation's assets available for
distribution after giving effect to any liquidation preference of any
shares of Preferred Stock.
(iv) NO CUMULATIVE VOTING, CONVERSION OR
REDEMPTION RIGHTS. The holders of Common Stock shall not have any
cumulative voting, conversion or redemption rights.
(v) CONSIDERATION FOR SHARES. The Common Stock
authorized by this Article shall be issued for such consideration as
shall be fixed, from time to time, by the Board of Directors.
(c) PREFERRED STOCK.
(i) CONSIDERATION. The Board of Directors is
hereby vested with the authority from time to time to provide by
resolution for the issuance of shares of Preferred Stock in one or
more classes or series not exceeding the aggregate number of shares of
Preferred Stock authorized by the Corporation's Second Amended and
Restated Articles of Incorporation, as amended from time to time
(hereinafter, the "Articles"), and to determine with respect to each
such class or series the voting powers, if any (which voting powers if
granted may be full or limited), designations, preferences, and
relative, participating, optional, or other special rights, and the
qualifications, limitations, or restrictions relating thereto,
including without limiting the generality of the foregoing, the voting
rights relating to shares of Preferred Stock of any class or series
(which may vary over time and which may be applicable generally only
upon the happening and continuance of stated facts or events or
ascertained outside the Articles), the rate of dividend to which
holders of Preferred Stock of any class or series may be entitled
(which may be cumulative or noncumulative), the rights of holders of
Preferred Stock of any class or series in the event of liquidation,
dissolution, or winding up of the affairs of the Corporation, the
rights, if any, of holders of Preferred Stock of any class or series
to convert or exchange such shares of Preferred Stock of such class or
series for shares of any other class or series of capital stock or for
any other securities, property, or assets of the Corporation or any
subsidiary (including the determination of the price or prices or the
rate or rates applicable to such rights to convert or exchange and the
adjustment thereof, the time or times during which the right to
2
<PAGE>
convert or exchange shall be applicable, and the time
or times during which a particular price or rate shall be applicable).
(ii) CERTIFICATE. Before the Corporation shall
issue any shares of Preferred Stock of any class or series, a
certificate setting forth a copy of the resolution or resolutions of
the Board of Directors, fixing the voting powers, designations,
preferences, the relative, participating, optional, or other rights,
if any, and the qualifications, limitations, and restrictions, if any,
relating to the shares of Preferred Stock of such class or series, and
the number of shares of Preferred Stock of such class or series
authorized by the Board of Directors to be issued shall be made and
signed by, acknowledged and filed in the manner prescribed by the
Nevada Revised Statutes. The Board of Directors is further authorized
to increase or decrease (but not below the number of such shares of
such class or series then outstanding) the number of shares of any
class or series subsequent to the issuance of shares of that class or
series.
We further hereby certify that the written consent of more than a majority
of the stockholders of the Corporation entitled to vote has been secured
approving the amendment of the Articles as provided in the foregoing
resolution.
DATED as of the 31st day of August, 1999.
/s/ PETER A. MORTON
----------------------------------------
President and Secretary
State of CA.)
----
) ss.
County of L.A.)
----
This instrument was acknowledged before me on August 31st, 1999, by
Peter A. Morton as President of Hard Rock Hotel, Inc.
/s/ ILLEGIBLE
----------------------------------------
(Signature of notarial officer)
3
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF DESIGNATION
OF THE
9 1/4% SERIES A CUMULATIVE
PREFERRED STOCK
(NO PAR VALUE PER SHARE)
OF
HARD ROCK HOTEL, INC.
-----------------------------------
Pursuant to Section 78.1955 of the
Nevada Revised Statutes
-----------------------------------
The undersigned, being the president and the secretary of Hard Rock
Hotel, Inc., a Nevada corporation (the "CORPORATION"), hereby certifies that
the Board of Directors of the Corporation adopted the following resolution by
unanimous written consent, with the same force and effect as if it were
approved and adopted at a duly constituted meeting of the Board of Directors,
pursuant to the authority of Section 78.315(2) of the Nevada Revised Statutes
and Section 2.17 of the Second Amended and Restated Bylaws (the "Bylaws") of
the Corporation, as of August 30, 1999:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the Articles of
Incorporation of the Corporation, as amended (the "ARTICLES OF
INCORPORATION"), the Board of Directors hereby authorizes the creation of one
or more series of preferred stock, no par value per share, of the
Corporation, consisting of 28,000 shares of 9 1/4% Cumulative Preferred Stock
upon the terms and conditions set forth in this Certificate of Designation
(this "CERTIFICATE"), and hereby fixes the designation and number of shares
thereof and fixes the powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof (in addition to those set forth in the Articles of
Incorporation that may be applicable to the Preferred Stock) as follows:
1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this paragraph 1 shall have, for all purposes of this
resolution, the meanings herein specified.
"COMMON STOCK" shall mean all shares now or hereafter authorized of any
class of Common Stock of the Corporation and any other stock of the
Corporation, howsoever designated, authorized after the Issue Date, which has
the right (subject always to prior rights of any
<PAGE>
class or series of preferred stock) to participate in the distribution of the
assets and earnings of the Corporation without limit as to per share amount.
"DIVIDEND PAYMENT DATE" shall have the meaning set forth in subparagraph
2(a) below.
"DIVIDEND PERIOD" means (i) the period between the Issue Date and the
first Dividend Payment Date and (ii) each semi-annual period between
consecutive Dividend Payment Dates.
"GAMING AUTHORITY" shall mean any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States of America or foreign government, any state, province or
any city or other political subdivision, whether now or hereafter existing,
or any officer or official thereof, including without limitation, the Nevada
Gaming Commission, the Nevada State Gaming Control Board, the City of Las
Vegas, the Clark County Liquor and Gaming Licensing Board and any other
agency with authority to regulate any gaming operation (or proposed gaming
operation) owned, managed or operated by the Corporation or any of its
Subsidiaries.
"ISSUE DATE" shall mean the date that shares of Preferred Stock are
first issued by the Corporation.
"JUNIOR STOCK" shall mean, for purposes of paragraphs 2 and 8 below, the
Common Stock and any other class or series of stock of the Corporation issued
after the Issue Date not entitled to receive any dividends in any Dividend
Period unless all dividends required to have been paid or declared and set
apart for payment on the Preferred Stock shall have been so paid or declared
and set apart for payment and, for purposes of paragraphs 3 and 8 below, any
class or series of stock of the Corporation issued after the Issue Date not
entitled to receive any assets upon the liquidation, dissolution or winding
up of the affairs of the Corporation until the Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
"NOTES" shall mean any series of the Corporation's 91/4% Senior
Subordinated Notes Due April 1, 2005.
"PARITY STOCK" shall mean, for purposes of paragraphs 2 and 8 below, any
other class or series of stock of the Corporation issued after the Issue Date
entitled to receive payment of dividends on a parity with the Preferred Stock
and, for purposes of paragraphs 3 and 8 below, any other class or series of
stock of the Corporation issued after the Issue Date entitled to receive
assets upon the liquidation, dissolution or winding up of the affairs of the
Corporation on a parity with the Preferred Stock.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
2
<PAGE>
"RECORD DATE" shall mean, with respect to the dividend payable on
November 30 and May 31, respectively, of each year, the preceding November 15
and May 15, or such other record date designated by the Board of Directors of
the Corporation with respect to the dividend payable on such respective
Dividend Payment Date.
"SENIOR STOCK" shall mean, for purposes of paragraphs 2 and 8 below, any
class or series of stock of the Corporation issued after the Issue Date
ranking senior to the Preferred Stock in respect of the right to receive
dividends, and, for purposes of paragraphs 3 and 8 below, any class or series
of stock of the Corporation issued after the Issue Date ranking senior to the
Preferred Stock in respect of the right to receive assets upon the
liquidation, dissolution or winding up of the affairs of the Corporation.
"SUBSCRIPTION PRICE" shall mean $1,000 per share.
"SUBSIDIARY" shall mean any corporation of which shares of stock
possessing at least a majority of the general voting power in electing the
board of directors are, at the time as of which any determination is being
made, owned by the Corporation, whether directly or indirectly through one or
more Subsidiaries.
2. DIVIDENDS.
(a) Subject to the prior preferences and other rights of any
Senior Stock, the holders of Preferred Stock shall be entitled to receive,
out of funds legally available for that purpose, cash dividends at the rate
of 91/4% per annum, and no more. Such dividends shall be cumulative from the
Issue Date and shall be payable in arrears, when and as declared by the Board
of Directors, on November 30 and May 31 of each year (each such date being
herein referred to as a "Dividend Payment Date"), commencing on November 30,
1999. Each such dividend shall be paid to the holders of record of the
Preferred Stock as their names appear on the share register of the
Corporation on the corresponding Record Date. Dividends on account of
arrears for any past Dividend Periods may be declared and paid at any time,
without reference to any Dividend Payment Date, to holders of record on such
date, not exceeding 50 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(b) In the event that full cash dividends are not paid or made
available to the holders of all outstanding shares of Preferred Stock and of
any Parity Stock, and funds available shall be insufficient to permit payment
in full in cash to all such holders of the preferential amounts to which they
are then entitled, the entire amount available for payment of cash dividends
shall be distributed among the holders of the Preferred Stock and of any
Parity Stock ratably in proportion to the full amount to which they would
otherwise be respectively entitled, and any remainder not paid in cash to the
holders of the Preferred Stock shall cumulate as provided in subparagraph
2(c) below.
3
<PAGE>
(c) Dividends on the Preferred Stock shall cumulate whether or not
the Corporation has earnings or profits, whether or not there are funds
legally available for the payment of such dividends and whether or not
dividends are declared. To the extent not declared and paid in cash,
dividends in respect of any Dividend Payment Date shall cumulate and be
compounded semi-annually at the rate of 9 1/4% per annum until paid. The
aggregate dividend payable to a holder of Preferred Stock shall be based on
the aggregate number of shares of Preferred Stock held by such holder at the
close of business on the applicable Record Date and rounded to the nearest
whole cent (with one-half cent rounded upward). Dividends payable on the
Preferred Stock shall be computed on the basis of a 360-day year consisting
of twelve 30-day months.
(d) So long as any shares of Preferred Stock shall be outstanding,
the Corporation shall not declare or pay on any Junior Stock any dividend
whatsoever, whether in cash, property or otherwise (other than dividends
payable in shares of the class or series upon which such dividends are
declared or paid, or payable in shares of Common Stock with respect to Junior
Stock other than Common Stock, together with cash in lieu of fractional
shares), nor shall the Corporation make any distribution on any Junior Stock,
nor shall any Junior Stock be purchased or redeemed by the Corporation or any
Subsidiary, nor shall any monies be paid or made available for a sinking fund
for the purchase or redemption of any Junior Stock, unless all dividends to
which the holders of Preferred Stock shall have been entitled for all
previous Dividend Periods shall have been paid or declared and a sum of money
sufficient for the payment thereof set apart.
3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any voluntary or involuntary liquidation, dissolution or other
winding up of the affairs of the Corporation, subject to the prior
preferences and other rights of any Senior Stock, but before any distribution
or payment shall be made to the holders of Junior Stock, the holders of the
Preferred Stock shall be entitled to be paid the Subscription Price of all
outstanding shares of Preferred Stock as of the date of such liquidation or
dissolution or such other winding up, plus any accrued and unpaid dividends
thereon to such date, and no more, in cash or in property taken at its fair
value as determined by the Board of Directors, or both, at the election of
the Board of Directors. If such payment shall have been made in full to the
holders of the Preferred Stock, and if payment shall have been made in full
to the holders of any Senior Stock and Parity Stock of all amounts to which
such holders shall be entitled, the remaining assets and funds of the
Corporation shall be distributed among the holders of Junior Stock, according
to their respective shares and priorities. If, upon any such liquidation,
dissolution or other winding up of the affairs of the Corporation, the net
assets of the Corporation distributable among the holders of all outstanding
shares of the Preferred Stock and of any Parity Stock shall be insufficient
to permit the payment in full to such holders of the preferential amounts to
which they are entitled, then the entire net assets of the Corporation
remaining after the distributions to holders of any Senior Stock of the full
amounts to which they may be entitled shall be distributed among the holders
of the Preferred Stock and of any Parity Stock ratably in proportion to the
full amounts to which they would otherwise be respectively entitled. Neither
the consolidation or merger of the Corporation
4
<PAGE>
into or with another corporation or corporations, nor the sale of all or
substantially all of the assets of the Corporation to another corporation or
corporations shall be deemed a liquidation, dissolution or winding up of the
affairs of the Corporation within the meaning of this paragraph 3.
4. MATURITY.
(a) MATURITY. The Corporation shall repurchase all shares of
Preferred Stock 91 days following the earlier of (i) April 1, 2005 or (ii)
the repayment of the Notes, at an amount per share equal to the Subscription
Price, together with any accrued but unpaid dividends thereon to and
including the date of repurchase.
5. REGULATORY REDEMPTION
(a) MANDATORY DISPOSITION PURSUANT TO GAMING LAWS. Each holder of
Preferred Stock, by accepting the Preferred Stock, shall be deemed to have
agreed (to the extent permitted by applicable law) that if the Gaming
Authorities require that a Person who is a holder or a beneficial owner of
any of the Preferred Stock must be licensed or found suitable under
applicable gaming laws, such holder shall apply for a license or a finding of
suitability within the required time period. If such Person fails to apply
or become licensed or is found unsuitable, the Corporation shall have the
right, at its option,
(1) to require such Person to dispose of its Preferred Stock or
beneficial interest therein within 30 days of receipt of
notice of the Corporation's election or such earlier date as
may be ordered by the Gaming Authorities, or
(2) to redeem such Preferred Stock (a "REGULATORY REDEMPTION")
at a price equal to the lesser of (a) the holder's cost
thereof and (b) 100% of the Subscription Price thereof, in
either case plus accrued and unpaid dividends, if any, to
the date of redemption.
In the event the Corporation opts to redeem Preferred Stock, it shall
provide notice of the redemption to the holder, or, if applicable, a transfer
agent, as soon as practicable. The holder or beneficial owner applying for a
license or finding of suitability must pay all costs of the licensure or
investigation for such finding.
(b) PROCEDURES FOR REDEMPTIONS. On and after a redemption date,
unless the Corporation defaults in the payment of the applicable redemption
price, including, to the extent required, all accrued and unpaid dividends
thereon, dividends shall cease to accrue on shares of Preferred Stock called
for redemption and all rights of holders of such shares shall terminate
except for the right to receive the redemption price, together with all
accrued and unpaid dividends thereon, if any, without interest. Shares of
Preferred Stock issued and reacquired shall,
5
<PAGE>
upon compliance with the applicable requirements of Nevada law, have the
status of authorized but unissued shares of preferred stock of the
Corporation undesignated as to series and, together with any and all other
authorized but unissued shares of preferred stock of the Corporation, may be
designated or redesignated and issued or reissued, as the case may be, as
part of any series of preferred stock of the Corporation, except that any
issuance or reissuance of shares of Preferred Stock must be in compliance
with this Certificate of Designation.
5. VOTING RIGHTS.
(a) The holders of the issued and outstanding shares of Preferred
Stock shall have no voting rights except as set forth herein and as required
by law.
(b) Without the consent of the holders of at least two-thirds of
the shares of Preferred Stock then outstanding, voting as a class, given in
writing or by vote at a meeting of stockholders called for such purpose, the
Corporation will not
(i) increase the authorized amount of Preferred Stock;
(ii) create any class of Senior Stock or increase the
authorized amount of any such class;
(iii) reclassify any class or series of Junior Stock into
Senior Stock or reclassify any series of Parity Stock into Senior Stock;
(iv) amend, alter or repeal any provision of the
Articles of Incorporation or this Certificate so as to alter or change any
preference or any relative or other right of the Preferred Stock; or
(c) In connection with any matter on which holders of the
Preferred Stock are entitled to vote as provided in subparagraph (b) above,
or any matter on which the holders of the Preferred Stock are entitled to
vote as one class or otherwise pursuant to law or the provisions of the
Articles of Incorporation or Bylaws, each holder of Preferred Stock shall be
entitled to one vote for each share of Preferred Stock held by such holder.
6. CAPITAL.
On any redemption of Preferred Stock, the Corporation's capital
shall be reduced by an amount equal to the Subscription Price multiplied by
the number of shares of certificates representing Preferred Stock whether or
not all such certificates have been surrendered to the Corporation.
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7. EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Preferred
Stock shall not have any preferences or relative, participating, optional or
other special rights, other than those specifically set forth in this
resolution (as such resolution may be amended from time to time) and in the
Corporation's Articles of Incorporation, as amended. The shares of Preferred
Stock shall have no preemptive or subscription rights.
8. HEADINGS OF SUBDIVISIONS.
The headings of the various subdivisions hereof are for convenience
of reference only and shall not affect the interpretation of any of the
provisions hereof.
9. SEVERABILITY OF PROVISIONS.
Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the
remaining provisions hereof.
10. STATUS OF REACQUIRED SHARES.
Shares of Preferred Stock which have been issued and reacquired in
any manner shall (upon compliance with any applicable provisions of the laws
of the State of Nevada have the status of authorized and unissued shares of
Preferred Stock issuable in series undesignated as to series and may be
redesignated and reissued.
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<PAGE>
IN WITNESS WHEREOF, Hard Rock Hotel, Inc. has caused this
certificate to be signed on its behalf by Peter Morton, its President and
Secretary, this 31st day of August, 1999.
HARD ROCK HOTEL, INC.
By: /s/ Peter Morton
-------------------------
President and Secretary
State of California )
)ss.
County of Los Angeles )
This instrument was acknowledged before me on August 31, 1999 by Peter
Morton as President of Hard Rock Hotel, Inc., a Nevada corporation.
/s/ Manoucher Paydar
-------------------------
Notary
<PAGE>
EXHIBIT 10.1
SUBSCRIPTION AGREEMENT FOR SHARES
OF 91/4% SERIES A CUMULATIVE
PREFERRED STOCK OF HARD ROCK HOTEL, INC.
This Subscription Agreement is made by and between Hard Rock Hotel,
Inc., a Nevada corporation (the "Company") and Peter Morton, an individual
("Mr. Morton"), who is subscribing hereby for shares of the Company's 91/4%
Series A Cumulative Preferred Stock (the "Shares").
In consideration of the Company's agreement to sell the Shares to Mr.
Morton upon the terms and conditions set forth herein, Mr. Morton agrees and
represents as follows:
A. SUBSCRIPTION
1. Mr. Morton hereby subscribes to purchase 2,500 Shares at $1,000 per
Share. Simultaneously with the execution of this Subscription Agreement, Mr.
Morton is paying and delivering to the Company $2,500,000 in the form of a
check or wire transfer (the "Payment") payable to Hard Rock Hotel, Inc.
2. The closing of the purchase and sale of the Shares (the "Closing")
shall occur on August 31, 1999.
3. At the Closing, against delivery of the Payment by Mr. Morton, the
Company shall deliver to Mr. Morton a certificate representing the Shares
registered in such name as Mr. Morton may request.
B. REPRESENTATIONS AND WARRANTIES
Mr. Morton hereby represents and warrants to, and agrees with the
Company as follows:
(a) The Shares are being purchased for Mr. Morton's own account, for
investment purposes only, and not for the account of any other person or
entity, and not with a view to distribution, assignment, or resale to
others or to fractionalization in whole or in part and that the offering
and sale of the Shares is intended to be exempt from registration under the
Securities Act of 1933 (the "Act") by virtue of Section 4(2) of the Act.
<PAGE>
(b) The person executing this Subscription Agreement on behalf
of Mr. Morton has been duly authorized and is duly qualified (A) to execute
and deliver this Subscription Agreement and all other instruments executed
and delivered on behalf of Mr. Morton in connection with the purchase of
the Shares and (B) to purchase and hold Shares.
C. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and agrees with Mr. Morton
as follows:
1. CORPORATE FORM. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada
and has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now conducted.
2. CORPORATE AUTHORITY. The Company has all requisite corporate power
and authority to enter into and perform all of its obligations under this
Agreement and to issue the Shares and to carry out the transactions
contemplated hereby.
3. ACTION AUTHORIZED. The Company has taken all actions necessary to
authorize it to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with
its terms. The Shares, when issued and delivered in accordance with the terms
hereof, will be duly and validly issued, fully paid and nonassessable.
4. REQUIRED FILINGS AND APPROVALS. Neither the nature of the Company
or of its business or properties, nor any circumstance in connection with the
offer, issuance, sale or delivery of the Shares as contemplated hereby, is
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of
the Company as a condition to the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Shares at the Closing, other
than the filings, registrations or qualifications under (i) Regulation D
under the Act and (ii) the state securities laws or "blue sky" laws of any
state of the United States of America that may be required to be made or
obtained, all of which the Company will comply with prior to the date of the
Closing.
5. NO CONFLICTS. None of the execution, delivery or performance of
this Agreement by the Company will conflict with the Second Amended and
Restated Articles of Incorporation, as amended or the Second Amended and
Restated By-laws of the Company or result in any
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<PAGE>
breach of, or constitute a default under any material contract, agreement or
instrument to which the Company is a party or by which it or any of its
assets is bound.
D. MISCELLANEOUS
1. All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, singular, or plural as the identity of
the person or persons may require.
2. Neither this Subscription Agreement nor any provisions hereof shall
be waived, modified, changed, discharged, terminated, revoked, or cancelled
except by an instrument in writing signed by the party against whom any
change, discharge, or termination is sought.
3. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed to:
the Company at 4455 Paradise Road, Las Vegas, NV 89109 or Mr. Morton at 510
North Robertson Boulevard, Los Angeles, CA 90048.
4. Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and Mr.
Morton, or otherwise, or delay by the Company in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Company will
be effective unless and until it is in writing and signed by the Company.
5. This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of Nevada,
as such laws are applied by Nevada courts to agreements entered into and to
be performed in Nevada and shall be binding upon Mr. Morton, Mr. Morton's
legal representatives, successors and assigns and shall inure to the benefit
of the Company and its successors and assigns.
6. In the event that any provision of this Subscription Agreement is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision hereof.
7. This Subscription Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and supersede
any and all prior or contemporaneous representations, warranties, agreements
and understandings in connection therewith. Except as otherwise provided in
this Article D, this agreement may be amended only by a writing executed by
all parties hereto.
3
<PAGE>
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
4
<PAGE>
IN WITNESS WHEREOF, the Company and Peter Morton have executed this Agreement
as of the date first above written.
HARD ROCK HOTEL, INC.
By: /s/ Peter Morton
---------------------------------
Peter Morton
Title: Chairman of the Board,
Chief Executive Officer,
President and Secretary
Number of shares of the PETER MORTON, AN INDIVIDUAL
Preferred Stock of the Company
subscribed for by Peter Morton:
By: /s/ Peter Morton
---------------------------------
Peter Morton
2,500
- ------------------------------
Shares
Method of Payment for
the Stock by Purchaser:
$2,500,000 by wire transfer of funds or certified or bank cashier's check.
5
<PAGE>
SUBSCRIPTION AGREEMENT FOR SHARES
OF 9 1/4% SERIES A CUMULATIVE
PREFERRED STOCK OF HARD ROCK HOTEL, INC.
This Subscription Agreement is made by and between Hard Rock Hotel, Inc., a
Nevada corporation (the "Company") and Peter Morton, an individual ("Mr.
Morton"), who is subscribing hereby for shares of the Company's 9 1/4% Series A
Cumulative Preferred Stock (the "Shares").
In consideration of the Company's agreement to sell the Shares to Mr.
Morton upon the terms and conditions set forth herein, Mr. Morton agrees and
represents as follows:
A. SUBSCRIPTION
1. Mr. Morton hereby subscribes to purchase 5,500 Shares at $1,000 per
Share. Simultaneously with the execution of this Subscription Agreement, Mr.
Morton is paying and delivering to the Company $5,500,000, in the form of a
check or wire transfer (the "Payment") payable to Hard Rock Hotel, Inc.
2. The closing of the purchase and sale of the Shares (the "Closing")
shall occur on October 1, 1999.
3. At the Closing, against delivery of the Payment by Mr. Morton, the
Company shall deliver to Mr. Morton a certificate representing the Shares
registered in such name as Mr. Morton may request.
B. REPRESENTATIONS AND WARRANTIES
Mr. Morton hereby represents and warrants to, and agrees with the
Company as follows:
(a) The Shares are being purchased for Mr. Morton's own account, for
investment purposes only, and not for the account of any other person or
entity, and not with a view to distribution, assignment, or resale to
others or to fractionalization in whole or in part and that the offering
and sale of the Shares is intended to be exempt from registration under the
Securities Act of 1933 (the "Act") by virtue of Section 4(2) of the Act.
<PAGE>
(b) The person executing this Subscription Agreement on behalf of Mr.
Morton has been duly authorized and is duly qualified (A) to execute and
deliver this Subscription Agreement and all other instruments executed and
delivered on behalf of Mr. Morton in connection with the purchase of the
Shares and (B) to purchase and hold Shares.
C. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and agrees with Mr. Morton as
follows:
1. CORPORATE FORM. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted.
2. CORPORATE AUTHORITY. The Company has all requisite corporate power
and authority to enter into and perform all of its obligations under this
Agreement and to issue the Shares and to carry out the transactions contemplated
hereby.
3. ACTION AUTHORIZED. The Company has taken all actions necessary to
authorize it to enter into and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms.
The Shares, when issued and delivered in accordance with the terms hereof, will
be duly and validly issued, fully paid and nonassessable.
4. REQUIRED FILINGS AND APPROVALS. Neither the nature of the Company or
of its business or properties, nor any circumstance in connection with the
offer, issuance, sale or delivery of the Shares as contemplated hereby, is such
as to require a consent, approval or authorization of, or filing, registration
or qualification with, any governmental authority on the part of the Company as
a condition to the execution and delivery of this Agreement or the offer,
issuance, sale or delivery of the Shares at the Closing, other than the filings,
registrations or qualifications under (i) Regulation D under the Act and (ii)
the state securities laws or "blue sky" laws of any state of the United States
of America that may be required to be made or obtained, all of which the Company
will comply with prior to the date of the Closing.
5. NO CONFLICTS. None of the execution, delivery or performance of this
Agreement by the Company will conflict with the Second Amended and Restated
Articles of Incorporation, as amended or the Second Amended and Restated By-laws
of the Company or result in any
2
<PAGE>
breach of, or constitute a default under any material contract, agreement or
instrument to which the Company is a party or by which it or any of its
assets is bound.
D. MISCELLANEOUS
1. All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, singular, or plural as the identity of the
person or persons may require.
2. Neither this Subscription Agreement nor any provisions hereof shall be
waived, modified, changed, discharged, terminated, revoked, or cancelled except
by an instrument in writing signed by the party against whom any change,
discharge, or termination is sought.
3. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed to: the Company
at 4455 Paradise Road, Las Vegas, NV 89109 or Mr. Morton at 510 North Robertson
Boulevard, Los Angeles, CA 90048.
4. Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and Mr.
Morton, or otherwise, or delay by the Company in exercising such right or
remedy, will not operate as a waiver thereof. No waiver by the Company will be
effective unless and until it is in writing and signed by the Company.
5. This Subscription Agreement shall be enforced, governed and construed
in all respects in accordance with the laws of the State of Nevada, as such laws
are applied by Nevada courts to agreements entered into and to be performed in
Nevada and shall be binding upon Mr. Morton, Mr. Morton's legal representatives,
successors and assigns and shall inure to the benefit of the Company and its
successors and assigns.
6. In the event that any provision of this Subscription Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other provision
hereof.
7. This Subscription Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede any and
all prior or contemporaneous representations, warranties, agreements and
understandings in connection therewith. Except as otherwise provided in this
Article D, this agreement may be amended only by a writing executed by all
parties hereto.
3
<PAGE>
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION THEREFROM IS
AVAILABLE.
4
<PAGE>
IN WITNESS WHEREOF, the Company and Peter Morton have executed this Agreement as
of the date first above written.
HARD ROCK HOTEL, INC.
By: /s/ Peter Morton
-------------------------
Peter Morton
Title: Chairman of the Board,
Chief Executive Officer,
President and Secretary
Number of shares of the PETER MORTON, AN INDIVIDUAL
Preferred Stock of the Company
subscribed for by Peter Morton:
By: /s/ Peter Morton
-------------------------
Peter Morton
5,500
- -----------------------------
Shares
Method of Payment for
the Stock by Purchaser:
$5,500,000 by wire transfer of funds or certified or bank cashier's check.
5
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
August 17, 1999, between Hard Rock Hotel, Inc., a Nevada corporation (the
"Company"), and Jonathan Swain, an individual ("Executive").
PRELIMINARY STATEMENTS
A. The Company currently operates that certain hotel/casino resort
known as the "Hard Rock Hotel" located at 4455 Paradise Road, Las Vegas, Nevada.
B. The Company desires to employ Executive, and Executive desires to
be so employed, on the terms and conditions herein contained.
AGREEMENT
NOW, THEREFORE, in consideration of the various covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Executive and
Executive accepts such employment commencing on the date of this Agreement (the
"Commencement Date") and terminating on the third anniversary of the
Commencement Date, unless sooner terminated as hereinafter provided; PROVIDED,
HOWEVER, that this Agreement may be extended for successive one (1) year terms
upon the mutual agreement of the parties hereto.
2. SERVICES TO BE RENDERED.
2.1. DUTIES OF EXECUTIVE. Executive shall be employed to serve
in the capacity of Vice President and General Manager of the Company. Executive
shall be responsible for the overall supervision, direction, and control of the
operations of the Hard Rock Hotel facility and shall direct the operating
departments with a view to the successful implementation of the business
policies and plans for the Hard Rock. Executive shall provide support in the
conceptual, strategic, and policy formulation functions of the Company and shall
direct and coordinate the activities of the Hard Rock to attempt to obtain
optimum efficiency and economy of operations in order to maximize profits.
Executive shall devote his full business time, attention and ability to the
affairs of the Company during the term of this Agreement; PROVIDED, HOWEVER,
that Employee shall not be precluded from involvement in charitable or civic
activities or his personal financial investments provided that the same do not
interfere with his time and attention to the affairs of the Company. Executive
will report directly to the Chairman of the Board of Directors ("Chairman") or
such other person designated by the Chairman or Board of Directors of the
Company (the "Board").
3. COMPENSATION AND BENEFITS. The Company shall pay the following
compensation and benefits to Executive during the term hereof; and Executive
shall accept the same as payment in full for all services rendered by Executive
to or for the benefit of the Company:
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<PAGE>
3.1. BASE SALARY. Commencing on the Commencement Date, a base
salary (the "Base Salary") of $260,000 per annum. The Base Salary shall accrue
in equal bi-weekly installments in arrears and shall be payable in accordance
with the payroll practices of the Company in effect from time to time.
3.2. ANNUAL BONUS. Executive shall be eligible to receive an
annual bonus (the "Annual Bonus") to be determined by the Chairman based upon
the achievement of the financial performance and other objectives of the Company
and Executive's contribution to such performance.
3.3. STOCK. Executive shall be entitled to participate in any
stock option or phantom equity plans that the Company provides to its comparable
senior executive officers to the extent such plans are established by the
Company.
3.4. EXPENSES. The Company shall reimburse Executive for
reasonable out-of-pocket expenses incurred in connection with the performance of
his duties hereunder, subject to (i) such policies as the Board may from time to
time establish and (ii) Executive furnishing the Company with evidence in the
form of receipts satisfactory to the Company substantiating the claimed
expenditures.
3.5. VACATION. Executive shall be entitled to the number of
paid vacation days in each calendar year determined by the Company from time to
time for its comparable senior executive officers. Executive shall also be
entitled to all paid holidays given to the Company's comparable senior executive
officers.
3.6. BENEFITS. Executive shall be entitled to participate in
the Company's group insurance, hospitalization, and group health and benefit
plans and all other benefits and plans as the Company provides to its comparable
senior executive officers to the extent such plans are established by the
Company and to the extent that Executive is eligible to participate in such
plans.
3.7. WITHHOLDING AND OTHER DEDUCTIONS. All compensation payable
to Executive hereunder shall be subject to such deductions as the Company is
from time to time required to make pursuant to law, governmental regulation or
order.
4. FACILITIES. Executive shall be furnished with an office, supplies
and personnel which are necessary or appropriate for the adequate performance by
Executive of his duties as set forth in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive represents
and warrants to the Company that (i) Executive is under no contractual or other
restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder and (ii) Executive is under no physical or mental disability
that would hinder the performance of his duties under this Agreement.
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<PAGE>
6. NON-DISCLOSURE; NON-SOLICITATION. During the term of this
Agreement and thereafter, Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or its affiliates, and their respective businesses,
which shall not be public knowledge (other than information which becomes public
as a result of acts of Executive or his representatives in violation of this
Agreement), including, without limitation, customer/ client lists, matters
subject to litigation, and technology or financial information of the Company or
its subsidiaries, without the prior written consent of the Company. In
addition, during the term of this Agreement and for a two (2) year period
thereafter, Executive shall not, directly or indirectly, solicit or contact any
employee of the Company or any affiliate of the Company, with a view to inducing
or encouraging such employee to leave the employ of the Company or its
affiliates, for the purpose of being employed by Executive, an employer
affiliated with Executive or any competitor of the Company or any affiliate
thereof. Executive acknowledges that the provisions of this Article 6 are
reasonable and necessary for the protection of the Company and that the Company
will be irrevocably damaged if such provisions are not specifically enforced.
Accordingly, Executive agrees that, in addition to any other relief to which the
Company may be entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction (without posting a bond therefor) for the purpose of restraining
Executive from any actual or threatened breach of such provisions.
7. TERMINATION.
7.1. DEATH OR TOTAL DISABILITY OF EXECUTIVE. If Executive dies
or becomes totally disabled during the term of this Agreement, Executive's
employment hereunder shall automatically terminate. For these purposes Executive
shall be deemed totally disabled if Executive shall become physically or
mentally incapacitated or disabled or otherwise unable fully to discharge
Executive's essential duties hereunder for a period of ninety (90) consecutive
calendar days or for one hundred twenty (120) calendar days in any one hundred
eighty (180) calendar-day period.
7.2. TERMINATION FOR GOOD CAUSE. Executive's employment
hereunder may be terminated by the Company for "good cause." The term "good
cause is defined as any one or more of the following occurrences:
(a) Executive's breach of any of the covenants contained
in Article 6 of this Agreement;
(b) Executive's conviction by, or entry of a plea of
guilty or nolo contendere in, a court of competent and final jurisdiction for
any crime involving moral turpitude or punishable by imprisonment in the
jurisdiction involved;
(c) Executive's commission of an act of criminal fraud
that affects the Company, whether prior to or subsequent to the date hereof upon
the Company;
3
<PAGE>
(d) Executive's continuing repeated willful failure or
refusal to perform Executive's duties as required by this Agreement (including,
without limitation, Executive's inability to perform Executive's duties
hereunder as a result of drug or alcohol related misconduct and/or as a result
of any failure to comply with any laws, rules or regulations of any governmental
entity with respect to Executive's employment by the Company);
(e) Executive's gross negligence, misappropriation of
Company assets, or any other material misconduct on the part of Executive;
(f) the failure of Executive to obtain any requisite
license, permit or approval based on suitability from any state, county, or
other governmental authority having jurisdiction over the gaming operations of
the Company (the "Gaming Authorities") which would preclude Executive from
carrying out his duties as set forth in this Agreement;
(g) if, after the initial receipt by Executive of any
requisite license, permit or approval from the Gaming Authorities, the execution
of Executive's duties as set forth in this Agreement will, as evidenced by
communications from any senior official of any of the Gaming Authorities,
materially preclude or unduly delay the issuance of, or result in the imposition
of unduly burdensome terms and conditions on, or revocation of, any liquor,
gaming or other license, permit or approval, necessary or appropriate to the
proposed, contemplated or actual operations of the Company; PROVIDED, HOWEVER,
that this Section 7.2(h) shall not be applicable if Executive shall, within a
reasonable period of time after receipt of written notice from the Board
specifying the nature of the issues involved hereunder, remedy the situation to
the satisfaction of the applicable Gaming Authorities; or
(h) Executive's breach of any other provision of this
Agreement, provided that termination of Executive's employment pursuant to this
subsection (i) shall not constitute valid termination for good cause unless
Executive shall have first received written notice from the Board stating with
specificity the nature of such breach and affording Executive at least fifteen
(15) days to correct the breach alleged.
7.3. RESIGNATION OF EXECUTIVE. The Company shall have the right
to terminate this Agreement and Executive's employment hereunder due to the
voluntary resignation of Executive, provided that Executive shall deliver no
less than sixty (60) days prior written notice of such resignation to the Board,
which notice may be waived by the Company in its sole discretion.
7.4. SEVERANCE COMPENSATION. Notwithstanding anything contained
in this Agreement, upon a termination of this Agreement and Executive's
employment hereunder due to the occurrence of any of the events referred to in
Section 7.1, 7.2 or 7.3 of this Agreement, Executive (or Executive's heirs or
representatives) shall be entitled to receive only such portion (if any) of the
Base Salary as may theretofore have accrued but be unpaid on the date on which
the termination shall take effect.
7.5. TERMINATION FOR NO CAUSE. In addition to the right to
terminate this Agreement pursuant to Sections 7.1, 7.2 and 7.3 of this
Agreement, the Company shall have the right to
4
<PAGE>
terminate this Agreement and Executive's employment hereunder for any other
reason or for no reason prior to the expiration of the term of this
Agreement. In the event that the Company terminates this Agreement and
Executive's employment hereunder pursuant to this Section 7.5, the Company
shall give ten (10) days prior written notice to Executive and pay a
termination fee to Executive in an amount equal to (i) one hundred percent
(100%) if such termination occurs within twelve months of the Commencement
Date of this Agreement or (ii) fifty percent (50%) if such termination occurs
thereafter, of the remainder of the Base Salary which would otherwise be due
Executive pursuant to this Agreement but for such termination, to be paid in
the manner and at the rate Executive had received immediately prior to such
termination pursuant to Section 3.1 of this Agreement and the Company shall
have no further obligation to Executive under this Agreement.
7.6. TERMINATION OBLIGATIONS OF EXECUTIVE. In the event that
this Agreement and Executive's employment hereunder is terminated, Executive, or
his legal representative in case of termination by death or Executive's physical
or mental incapacity to serve, shall:
(a) by the close of the effective date of termination,
resign from all corporate positions held in the Company and any of its
subsidiary and affiliated companies;
(b) promptly return to a representative designated by
the Company all property, including but not limited to, keys, identification
cards and credit cards of the Company or any of its subsidiaries or affiliated
companies; and
(c) incur no further expenses or obligations on behalf
of the Company, or any of its subsidiaries and affiliated companies.
8. CHANGE OF CONTROL. In the event of a "Change of Control" (as
defined below) which results in the material change in the Executive's duties as
described in Article 2.1 of the Agreement, Executive shall have a period of ten
(10) days after such material change to notify the Company of his resignation.
Such resignation shall conform to Article 7.3 of the Agreement but the Executive
will be due severance compensation as if Executive was terminated for no cause.
For purposes of this Article 8 "Change of Control" shall mean that Peter Morton
and/or his affiliates no longer, directly or indirectly, beneficially own(s) in
the aggregate shares of capital stock of the Company having twenty-five percent
(25%) or more of the aggregate voting power of all shares of capital stock of
the Company at the time outstanding. The term "affiliate" as used in this
Article 8 shall have the same meaning as ascribed to such term in Section 12b-2
of the Securities Exchange Act of 1934, as amended.
9. ARBITRATION. Any claim or controversy arising out of or relating
to this Agreement shall be settled by arbitration in Las Vegas. Nevada, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction. There shall be three arbitrators, one
to be chosen directly by each party at will, and the third arbitrator to be
selected by the two arbitrators so chosen. Each party shall pay the fees of the
arbitrator it
5
<PAGE>
selects and of its own attorneys, the expenses of its witnesses
and all other expenses connected with presenting its case. Other costs of the
arbitration, including the cost of any record or transcripts of the arbitration,
administrative fees, the fee of the third arbitrator, and all other fees and
costs, shall be borne equally by the parties hereto.
10. GENERAL RELATIONSHIP. Executive shall be considered an employee of
the Company within the meaning of all federal, state and local laws and
regulations including, but not limited to, laws and regulations governing
unemployment insurance, workers' compensation, industrial accident, labor and
taxes.
11. GENERAL PROVISIONS.
11.1. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns and
Executive, his assignees, and his estate. Neither Executive, his designees, nor
his estate shall commute, pledge, encumber, sell or otherwise dispose of the
rights to receive the payments provided in this Agreement, which payments and
the rights thereto are expressly declared to be nontransferable and
nonassignable (except by death or otherwise by operation of law).
11.2. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Nevada from time to time in effect.
11.3. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same Agreement.
11.4. NO WAIVER. Except as otherwise expressly set forth herein,
no failure on the part of either party hereto to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver hereof
nor shall any single or partial exercise of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
11.5. HEADINGS. The headings of the Articles and Sections of
this Agreement have been inserted for convenience of reference only and shall in
no way restrict any of the terms or provisions hereof.
11.6. NOTICES. Any notice under this Agreement shall be given in
writing and delivered in person or mailed by certified or registered mail,
addressed to the respective party at the address as set out below, or at such
other address as either party may elect to provide in advance in writing, to the
other party:
EXECUTIVE:
Jonathan Swain
8104 Moonstone Circle
Las Vegas, Nevada 89128
6
<PAGE>
COMPANY:
Hard Rock Hotel, Inc.
510 North Robertson Boulevard
Los Angeles, California 90048
Attn: Peter Morton
WITH A COPY TO:
Schreck Morris
1200 Bank of America Plaza
300 S Fourth Street
Las Vegas, Nevada 89101
Attn: Frank Schreck
11.7. SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be invalid, illegal, or unenforceable by
reason of any rule of law or public policy, all other provisions of this
Agreement shall nevertheless remain in effect. No provision of this Agreement
shall be deemed dependent on any other provision unless so expressed herein.
11.8. COMPLIANCE WITH LAWS; GAMING AUTHORITIES APPROVAL. Nothing
contained in this Agreement shall be construed to require the commencement of
any act contrary to law, and when there is any conflict between any provision of
this Agreement and any statute, law, ordinance, or regulation, contrary to which
the parties have no legal right to contract, then the latter shall prevail; but
in such an event, the provisions of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring it within the legal
requirements. Notwithstanding anything contained in this Agreement to the
contrary, this Agreement and the terms and conditions contained herein shall be
contingent upon receipt of all requisite approvals of the applicable Gaming
Authorities.
11.9. NO WAIVER. The several rights and remedies provided for in
this Agreement shall be construed as being cumulative, and no one of them shall
be deemed to be exclusive of the others or of any right or remedy allowed by
law. No waiver by the Company or Executive any failure of Executive or the
Company, respectively, to keep or perform any provision of this Agreement shall
be deemed to be a waiver of any preceding or succeeding breach of the same or
other provision.
11.10. MERGER. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Executive by the Company.
11.11. NO REPRESENTATIONS. Each party to this Agreement
acknowledges that no representations, inducements, promises or other agreements,
oral or otherwise, have been made by any party, anyone acting on behalf of any
party, which are not embodied herein
7
<PAGE>
and that no other agreement, statement or promise not contained in this
Agreement shall be valid or binding. Any addendum to or modification of this
Agreement shall be effective only if it is in writing and signed by the
parties to be charged.
11.12. DRAFTING AMBIGUITIES. Each party to this Agreement has
been afforded an opportunity to have this Agreement reviewed by his or its
respective counsel. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or of any amendments or exhibits to this
Agreement.
11.13. SURVIVAL. The terms and conditions of Article 6 and
Section 10.6 of this Agreement shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date hereinabove set forth.
COMPANY: EXECUTIVE:
Hard Rock Hotel, Inc., a Nevada corporation
By:
Peter A. Morton, President Jonathan Swain
8
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
August 17, 1999, between Hard Rock Hotel, Inc., a Nevada corporation (the
"Company"), and Rick Richards, an individual ("Executive").
PRELIMINARY STATEMENTS
A. The Company currently operates that certain hotel/casino resort
known as the "Hard Rock Hotel" located at 4455 Paradise Road, Las Vegas,
Nevada.
B. The Company desires to employ Executive, and Executive desires to
be so employed, on the terms and conditions herein contained.
AGREEMENT
NOW, THEREFORE, in consideration of the various covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Executive and
Executive accepts such employment commencing on the date of this Agreement
(the "Commencement Date") and terminating on the second anniversary of the
Commencement Date, unless sooner terminated as hereinafter provided;
PROVIDED, HOWEVER, that this Agreement may be extended for successive one (1)
year terms upon the mutual agreement of the parties hereto.
2. SERVICES TO BE RENDERED.
2.1. DUTIES OF EXECUTIVE. Executive shall be employed to serve
in the capacity of Vice President of Gaming Operations of the Company.
Executive shall be responsible for the overall supervision, direction, and
control of the casino operations of the Hard Rock Hotel facility, including
table games, slots, race and sports books, casino marketing, player
development, data base and direct mail marketing, and special events.
Executive shall direct those operating departments with a view toward revenue
growth, profitability and high standards of customer service. Executive
shall devote his full business time, attention and ability to the affairs of
the Company during the term of this Agreement; PROVIDED, HOWEVER, that
Employee shall not be precluded from involvement in charitable or civic
activities or his personal financial investments provided that the same do
not interfere with his time and attention to the affairs of the Company.
Executive will report directly to the Senior Vice President and General
Manager or such other person designated by the Board of Directors of the
Company (the "Board").
3. COMPENSATION AND BENEFITS. The Company shall pay the following
compensation and benefits to Executive during the term hereof; and Executive
shall accept the same as payment in full for all services rendered by
Executive to or for the benefit of the Company:
3.1. BASE SALARY. Commencing on the Commencement Date, a base
salary (the "Base Salary") of $125,000 per annum. The Base
Salary shall accrue in equal bi-weekly installments in
1
<PAGE>
arrears and shall be payable in accordance with the
payroll practices of the Company in effect from time to
time.
3.2. ANNUAL BONUS. Executive shall be eligible to receive an
annual bonus (the "Annual Bonus") to be determined by the
Board based upon the achievement of the financial
performance and other objectives of the Company and
Executive's contribution to such performance.
3.3. STOCK. Executive shall be entitled to participate in
stock option plans that the Company provides to its
comparable senior executive officers to the extent such
plans are established by the Company.
3.4. EXPENSES. The Company shall reimburse Executive for
reasonable out-of-pocket expenses incurred in connection
with the performance of his duties hereunder, subject to
(i) such policies as the Board may from time to time
establish and (ii) Executive furnishing the Company with
evidence in the form of receipts satisfactory to the
Company substantiating the claimed expenditures.
3.5. VACATION. Executive shall be entitled to the number of
paid vacation days in each calendar year determined by the
Company from time to time for its comparable senior
executive officers. Executive shall also be entitled to
all paid holidays given to the Company's comparable senior
executive officers.
3.6. BENEFITS. Executive shall be entitled to participate in
the Company's group insurance, hospitalization, and group
health and benefit plans and all other benefits and plans
as the Company provides to its comparable senior executive
officers to the extent such plans are established by the
Company and to the extent that Executive is eligible to
participate in such plans.
3.7. WITHHOLDING AND OTHER DEDUCTIONS. All compensation
payable to Executive hereunder shall be subject to such
deductions as the Company is from time to time required to
make pursuant to law, governmental regulation or order.
4. FACILITIES. Executive shall be furnished with an office,
supplies and personnel which are necessary or appropriate for the adequate
performance by Executive of his duties as set forth in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive
represents and warrants to the Company that (i) Executive is under no
contractual or other restriction or obligation which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder, or the
other rights of the Company hereunder and (ii) Executive is under no physical
or mental disability that would hinder the performance of his duties under
this Agreement.
6. NON-DISCLOSURE; NON-SOLICITATION. During the term of this
Agreement and thereafter, Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential
2
<PAGE>
information, knowledge or data relating to the Company or its affiliates, and
their respective businesses, which shall not be public knowledge (other than
information which becomes public as a result of acts of Executive or his
representatives in violation of this Agreement), including, without
limitation, customer/ client lists, matters subject to litigation, and
technology or financial information of the Company or its subsidiaries,
without the prior written consent of the Company. In addition, during the
term of this Agreement and for a two (2) year period thereafter, Executive
shall not, directly or indirectly, solicit or contact any employee of the
Company or any affiliate of the Company, with a view to inducing or
encouraging such employee to leave the employ of the Company or its
affiliates, for the purpose of being employed by Executive, an employer
affiliated with Executive or any competitor of the Company or any affiliate
thereof. Executive acknowledges that the provisions of this Article 6 are
reasonable and necessary for the protection of the Company and that the
Company will be irrevocably damaged if such provisions are not specifically
enforced. Accordingly, Executive agrees that, in addition to any other relief
to which the Company may be entitled in the form of actual or punitive
damages, the Company shall be entitled to seek and obtain injunctive relief
from a court of competent jurisdiction (without posting a bond therefor) for
the purpose of restraining Executive from any actual or threatened breach of
such provisions.
7. TERMINATION.
7.1. DEATH OR TOTAL DISABILITY OF EXECUTIVE. If Executive
dies or becomes totally disabled during the term of this Agreement,
Executive's employment hereunder shall automatically terminate. For these
purposes Executive shall be deemed totally disabled if Executive shall become
physically or mentally incapacitated or disabled or otherwise unable fully to
discharge Executive's essential duties hereunder for a period of ninety (90)
consecutive calendar days or for one hundred twenty (120) calendar days in
any one hundred eighty (180) calendar-day period.
7.2. TERMINATION FOR GOOD CAUSE. Executive's employment
hereunder may be terminated by the Company for "good cause." The term "good
cause is defined as any one or more of the following occurrences:
(a) Executive's breach of any of the covenants
contained in Article 6 of this Agreement;
(b) Executive's conviction by, or entry of a plea of
guilty or nolo contendere in, a court of competent and final jurisdiction for
any crime involving moral turpitude or punishable by imprisonment in the
jurisdiction involved;
(c) Executive's commission of an act of fraud,
whether prior to or subsequent to the date hereof upon the Company;
(d) Executive's continuing repeated willful failure
or refusal to perform Executive's duties as required by this Agreement
(including, without limitation, Executive's inability to perform Executive's
duties hereunder as a result of drug or alcohol related misconduct
3
<PAGE>
and/or as a result of any failure to comply with any laws, rules or
regulations of any governmental entity with respect to Executive's employment
by the Company);
(e) Executive's gross negligence, insubordination or
material violation of any duty of loyalty to the Company or any other
material misconduct on the part of Executive;
(f) Executive's commission of any act which is
detrimental to the Company's business or goodwill;
(g) the failure of Executive to obtain any requisite
license, permit or approval based on suitability from any state, county, or
other governmental authority having jurisdiction over the gaming operations
of the Company (the "Gaming Authorities") which would preclude Executive from
carrying out his duties as set forth in this Agreement;
(h) if, after the initial receipt by Executive of any
requisite license, permit or approval from the Gaming Authorities, the
execution of Executive's duties as set forth in this Agreement will, as
evidenced by communications from any senior official of any of the Gaming
Authorities, materially preclude or unduly delay the issuance of, or result
in the imposition of unduly burdensome terms and conditions on, or revocation
of, any liquor, gaming or other license, permit or approval, necessary or
appropriate to the proposed, contemplated or actual operations of the
Company; PROVIDED, HOWEVER, that this Section 7.2(h) shall not be applicable
if Executive shall, within a reasonable period of time after receipt of
written notice from the Board specifying the nature of the issues involved
hereunder, remedy the situation to the satisfaction of the applicable Gaming
Authorities; or
(i) Executive's breach of any other provision of this
Agreement, provided that termination of Executive's employment pursuant to
this subsection (i) shall not constitute valid termination for good cause
unless Executive shall have first received written notice from the Board
stating with specificity the nature of such breach and affording Executive at
least fifteen (15) days to correct the breach alleged.
7.3. RESIGNATION OF EXECUTIVE. The Company shall have the
right to terminate this Agreement and Executive's employment hereunder due to
the voluntary resignation of Executive, provided that Executive shall deliver
no less than sixty (60) days prior written notice of such resignation to the
Board, which notice may be waived by the Company in its sole discretion.
7.4. SEVERANCE COMPENSATION. Notwithstanding anything
contained in this Agreement, upon a termination of this Agreement and
Executive's employment hereunder due to the occurrence of any of the events
referred to in Section 7.1, 7.2 or 7.3 of this Agreement, Executive (or
Executive's heirs or representatives) shall be entitled to receive only such
portion (if any) of the Base Salary as may theretofore have accrued but be
unpaid on the date on which the termination shall take effect.
7.5. TERMINATION FOR NO CAUSE. In addition to the right to
terminate this Agreement pursuant to Sections 7.1, 7.2 and 7.3 of this
Agreement, the Company shall have the right to terminate this Agreement and
Executive's employment hereunder for any other reason or for no
4
<PAGE>
reason prior to the expiration of the term of this Agreement. In the event
that the Company terminates this Agreement and Executive's employment
hereunder pursuant to this Section 7.5, the Company shall give ten (10) days
prior written notice to Executive and pay a termination fee to Executive in
an amount equal to the lesser of (i) Sixty-two Thousand Five Hundred Dollars
($62,500) or (ii) the remainder of the Base Salary which would otherwise be
due Executive pursuant to this Agreement but for such termination, to be paid
in the manner and at the rate Executive had received immediately prior to
such termination pursuant to Section 3.1 of this Agreement and the Company
shall have no further obligation to Executive under this Agreement.
7.6. TERMINATION OBLIGATIONS OF EXECUTIVE. In the event that
this Agreement and Executive's employment hereunder is terminated, Executive,
or his legal representative in case of termination by death or Executive's
physical or mental incapacity to serve, shall:
(a) by the close of the effective date of
termination, resign from all corporate positions held in the Company and any
of its subsidiary and affiliated companies;
(b) promptly return to a representative designated by
the Company all property, including but not limited to, keys, identification
cards and credit cards of the Company or any of its subsidiaries or
affiliated companies; and
(c) incur no further expenses or obligations on
behalf of the Company, or any of its subsidiaries and affiliated companies.
8. ARBITRATION. Any claim or controversy arising out of or
relating to this Agreement shall be settled by arbitration in Las Vegas.
Nevada, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction. There shall be
three arbitrators, one to be chosen directly by each party at will, and the
third arbitrator to be selected by the two arbitrators so chosen. Each party
shall pay the fees of the arbitrator it selects and of its own attorneys, the
expenses of its witnesses and all other expenses connected with presenting
its case. Other costs of the arbitration, including the cost of any record or
transcripts of the arbitration, administrative fees, the fee of the third
arbitrator, and all other fees and costs, shall be borne equally by the
parties hereto.
9. GENERAL RELATIONSHIP. Executive shall be considered an employee
of the Company within the meaning of all federal, state and local laws and
regulations including, but not limited to, laws and regulations governing
unemployment insurance, workers' compensation, industrial accident, labor and
taxes.
10. GENERAL PROVISIONS.
10.1. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and its successors and assigns and
Executive, his assignees, and his estate. Neither Executive, his designees,
nor his estate shall commute, pledge, encumber, sell or otherwise
5
<PAGE>
dispose of the rights to receive the payments provided in this Agreement,
which payments and the rights thereto are expressly declared to be
nontransferable and nonassignable (except by death or otherwise by operation
of law).
10.2. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Nevada from time to time in effect.
10.3. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same Agreement.
10.4. NO WAIVER. Except as otherwise expressly set forth
herein, no failure on the part of either party hereto to exercise and no
delay in exercising any right, power or remedy hereunder shall operate as a
waiver hereof nor shall any single or partial exercise of any right, power or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
10.5. HEADINGS. The headings of the Articles and Sections of
this Agreement have been inserted for convenience of reference only and shall
in no way restrict any of the terms or provisions hereof.
10.6. NOTICES. Any notice under this Agreement shall be given
in writing and delivered in person or mailed by certified or registered mail,
addressed to the respective party at the address as set out below, or at such
other address as either party may elect to provide in advance in writing, to
the other party:
EXECUTIVE:
Rick Richards
9116 Teal Lake Court
Las Vegas, Nevada 89129
COMPANY:
Hard Rock Hotel, Inc.
510 North Robertson Boulevard
Los Angeles, California 90048
Attn: Peter Morton
WITH A COPY TO:
Schreck Morris
1200 Bank of America Plaza
300 S Fourth Street
Las Vegas, Nevada 89101
Attn: Frank Schreck
6
<PAGE>
10.7. SEVERABILITY. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable by reason of any rule of law or public policy, all other
provisions of this Agreement shall nevertheless remain in effect. No
provision of this Agreement shall be deemed dependent on any other provision
unless so expressed herein.
10.8. COMPLIANCE WITH LAWS; GAMING AUTHORITIES APPROVAL.
Nothing contained in this Agreement shall be construed to require the
commencement of any act contrary to law, and when there is any conflict
between any provision of this Agreement and any statute, law, ordinance, or
regulation, contrary to which the parties have no legal right to contract,
then the latter shall prevail; but in such an event, the provisions of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements. Notwithstanding
anything contained in this Agreement to the contrary, this Agreement and the
terms and conditions contained herein shall be contingent upon receipt of all
requisite approvals of the applicable Gaming Authorities.
10.9. NO WAIVER. The several rights and remedies provided for
in this Agreement shall be construed as being cumulative, and no one of them
shall be deemed to be exclusive of the others or of any right or remedy
allowed by law. No waiver by the Company or Executive any failure of
Executive or the Company, respectively, to keep or perform any provision of
this Agreement shall be deemed to be a waiver of any preceding or succeeding
breach of the same or other provision.
10.10. MERGER. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of Executive by the Company.
10.11. NO REPRESENTATIONS. Each party to this Agreement
acknowledges that no representations, inducements, promises or other
agreements, oral or otherwise, have been made by any party, anyone acting on
behalf of any party, which are not embodied herein and that no other
agreement, statement or promise not contained in this Agreement shall be
valid or binding. Any addendum to or modification of this Agreement shall be
effective only if it is in writing and signed by the parties to be charged.
10.12. DRAFTING AMBIGUITIES. Each party to this Agreement has
been afforded an opportunity to have this Agreement reviewed by his or its
respective counsel. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or of any amendments or exhibits to this
Agreement.
10.13. SURVIVAL. The terms and conditions of Article 6 and
Section 10.6 of this Agreement shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date hereinabove set forth.
7
<PAGE>
COMPANY: EXECUTIVE:
Hard Rock Hotel, Inc., a Nevada corporation
By:
Peter A. Morton, President Rick Richards
8
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