<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] Annual report under Section 13 of 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended July 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from ____________ to _____________
Commission File Number 0-10061
AMERICAN VANTAGE COMPANIES
(Name of Small Business Issuer in its charter)
Nevada 04-2709807
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
6787 West Tropicana, Suite 200, Las Vegas, Nevada
89103 (Address of principal executive offices) (zip code)
(702) 227-9800
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $7,665,000.
The aggregate market value of the shares of Common Stock held by
non-affiliates of the Registrant computed by reference to the closing sale price
of $0.63 for the Company's Common Stock, as reported by NASDAQ for October 14,
1999, was $7,458,046 (assuming for purposes of such calculation that all
officers and directors of the Issuer are affiliates).
The number of shares outstanding of the Registrant's Common Stock at
October 14, 1999 was 14,659,413.
Transitional Small Business Disclosure Format (check one):
YES NO X
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PART I
Item 1. Description of Business
Development of Business
American Vantage Companies (the "Company") is a gaming consulting
company which was previously engaged in providing consulting services to Table
Mountain Casino & Bingo, a tribal gaming enterprise on a Federal Indian
Rancheria in Friant, California (the "Table Mountain Casino") until May 1999. In
May 1997, the Company acquired approximately 40 acres of undeveloped land in
North Las Vegas, Nevada which the Company had intended initially to develop as a
funeral home and cemetery. However, development has been delayed while the Clark
County, Nevada government finalizes its plan for construction of a flood control
project for the area. In the event the flood control project is built as
intended, the Company would not have to build major water control culverts on
the cemetery project. The Company is currently awaiting additional progress on
the construction of the flood control project before it begins development of
the property. The Company may also seek a waiver of the requirement to build the
major water control culverts. In February 1998, the Company acquired 20 acres of
undeveloped land in North Las Vegas, Nevada near the location of the proposed
funeral home and cemetery site which will be held for future development or
sale. In May 1999, Sitka Restaurant Group, Inc. ("Sitka"), a majority-owned
subsidiary of the Company, opened the WCW Nitro Grill, a themed restaurant, in
the Excalibur Hotel and Casino in Las Vegas, Nevada. In February 1999, Vantage
Bay Group, Inc. ("Vantage Bay"), a majority-owned subsidiary of the Company,
purchased a 49% interest in the Border Grill, a restaurant to be located in the
Mandalay Bay Hotel and Casino in Las Vegas, Nevada. The Border Grill opened in
June 1999.
The Company was incorporated in Nevada in 1979, under the name Western
Casinos, Inc. The Company changed its name to American Casino Enterprises, Inc.
in 1979, to American Enterprises, Inc. in 1985, to American Casino Enterprises,
Inc. in 1993, and then changed its name to American Vantage Companies in March
1997. The Company was originally formed to engage in the business of
recreational and leisure time activities, including casino gaming. In January
1991, the Company completed the purchase of all of the capital stock of
Millerton Games, Inc., which held a management consulting contract for the Table
Mountain Casino.
All references herein to the Company refer to the Company and its
subsidiaries unless the context otherwise requires. The Company's principal
executive offices are located at 6787 West Tropicana, Suite 200, Las Vegas,
Nevada 89103, and its telephone number is (702)227-9800.
Table Mountain Casino
On February 1, 1996, the Company entered into a termination agreement
(the "Termination Agreement") with the Table Mountain Band of Indians (the
"Table Mountain Tribe") which terminated the Company's 1993 consulting agreement
(the "1993 Agreement") and simultaneously entered into a new consulting
agreement (the "1996 Agreement"). Under the conditions of the Termination
Agreement, commencing February 1, 1996, the Table Mountain Tribe is required to
pay the Company 48 monthly installments of $350,000 in consideration for
termination of the 1993 Agreement. However, no payment is required for any month
in which the net income of the casino does not equal or exceed $1 Million. The
term of the Termination Agreement is automatically extended by one month for
each month that no payment is required thereunder, up to a maximum of 12 months.
The 1996 Agreement requires the Company to consult and provide
technical assistance, training and advice to the Table Mountain Tribe concerning
all matters relating to the operation and business activities of the casino,
including but not limited to organization and administration, planning and
development, gaming activities, internal controls and accounting procedures,
cage operations, engineering and maintenance, housekeeping, human resources,
management information services, marketing and advertising, purchasing,
surveillance, security and food and beverage operations. The 1996 Agreement was
amended in both June 1997 and October 1997. The term of the 1996 Agreement, as
amended, was extended to June 30, 2000. For its services under the 1996
Agreement, as amended, the Company is to receive minimum monthly payments of
$50,000. The Table Mountain Tribe is also required to pay the Company
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additional monies for certain increments of monthly casino net income in excess
of the first $1.5 million of net revenue from casino operations.
On May 20, 1999, the Company received formal written notice from the
legal counsel of the Table Mountain Tribe that the General Council of the Table
Mountain Tribe voted to terminate the Company's contract to provide consulting
services to the Table Mountain Casino. In June 1999, the Company brought a civil
action against the Table Mountain Tribe for breach of the Company's contract
with the Table Mountain Tribe for, among other things, payments due under the
1996 Agreement and the Termination Agreement. The Table Mountain Tribe has filed
a counterclaim against the Company.
Acquisition of North Las Vegas, Nevada Property
In May 1997, the Company bought a 40 acre parcel of land in North Las
Vegas, Nevada for approximately $3,500,000 in cash. The Company intends to
develop the property as a funeral home and cemetery. However, development has
been delayed while the Clark County, Nevada government finalizes its plan for
construction of a flood control project for the area. If the flood control
project is built as intended, the Company would not have to build major water
control culverts on the cemetery project. The Company is currently awaiting
additional progress on the construction of the flood control project before it
begins development of the property. The Company may also seek a waiver of the
requirement to build the major water culverts. In February 1998, the Company
bought a 20 acre parcel of land in North Las Vegas, Nevada for $1,375,000 in
cash which will be held for future development or sale.
WCW Nitro Grill
On November 12, 1998, Sitka entered into a license agreement (the
"License Agreement") with World Championship Wresting, Inc. ("WCW") to develop
one or more themed restaurants to be named the WCW Nitro Grill. The Company
agreed to guarantee all payments due from Sitka to WCW.
The License Agreement commenced on May 1, 1999 and will remain in
effect so long as Sitka continues to open a minimum number of restaurants or, in
the alternative, meets certain minimum royalties. The License Agreement provides
for Sitka to make certain minimum guaranteed payments upon the opening of each
restaurant and annually thereafter to WCW against royalties payable to WCW based
on gross sales of food and beverages, merchandise and fee-based attractions
and/or promotions.
On November 19, 1998, Sitka entered into a ten-year lease for
restaurant space with New Castle Corp., doing business as the Excalibur Hotel
and Casino, for the location of the first WCW Nitro Grill. On May 17, 1999, the
first WCW Nitro Grill opened in the Excalibur Hotel and Casino in Las Vegas,
Nevada. The Company expended $1,915,000 for furniture, equipment and leasehold
improvements in developing the restaurant.
Border Grill
On November 12, 1998, Vantage Bay entered into an operating agreement
(the "Operating Agreement") with TT&T, LLC ("TT&T") to develop a restaurant
named the Border Grill.
The Operating Agreement provides that Vantage Bay, in exchange for a
49% interest in the Border Grill, contribute $251,000 upon the execution of the
Operating Agreement and, thereafter, contribute further capital, up to an
aggregate of $2,750,000, to fund the development of the restaurant subject to
the terms and conditions of the Operating Agreement. Vantage Bay also agreed to
loan to TT&T up to $175,000 for development and operation of the restaurant. The
Company agreed to guarantee all payments due from Vantage Bay to TT&T. The
Border Grill opened in the Mandalay Bay Hotel and Casino in Las Vegas, Nevada on
June 17, 1999.
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Competition
The Company's activities in the restaurant industry are subject to
vigorous competition relating to restaurant location and service, as well as
quality, variety and value perception of the food products offered. The Company
is in competition with other food service operations, with locally-owned
operations, as well as national or regional chains that offer the same type of
products or services as the Company.
Government Regulation
Both of the Company's restaurants are subject to inspection and
regulation by public health authorities. Most leasehold improvements made to the
Company's restaurants are subject to local and state building code requirements.
The Company is subject to the Fair Labor Standards Act which governs such
matters as minimum age requirements, overtime and other working conditions. The
Company believes that its conduct of business is in substantial compliance with
these and other applicable government regulations. However, the Company is
unable to predict the scope or effect, if any, of any future government
regulation or legislation affecting the restaurants.
A majority of the employees of the Border Grill are paid at levels
based on the federal minimum wage level. Accordingly, changes in such minimum
wage levels affect the Border Grill's labor costs.
Some of the Border Grill employees are not covered by health insurance.
The Company is unable to predict the scope or effect, if any, of future
government regulation or legislation affecting employee health care benefits.
Employees
As of October 14, 1999, the Company employed six persons including its
three executive officers, one executive who is involved with corporate
development, including the restaurant operations and two full-time
administrative employees. One of the Company's Directors serves as a
consultant on a full-time basis.
As of October 14, 1999, the Company's subsidiaries employed 12 persons,
including five managerial employees for the retail and restaurant business and
seven retail employees. A majority of the employees of the WCW Nitro Grill are
outsourced from the Excalibur Hotel and Casino. These employees are represented
by the Culinary Workers' Union, Local 226 and the Bartenders' Union, Local 165
under a labor contract which expired in 1997, but which has been extended by a
letter of mutual agreement until May 31, 2002. The Company considers its
relationship with the Excalibur Hotel and Casino to be good. The Excalibur Hotel
and Casino considers its relationships with its employees and the Culinary
Workers' Union, Local 226 and the Bartenders' Union, Local 165 to be good.
The employees of the Border Grill are not covered by collective
bargaining agreements or represented by a union. The Company considers its
relationship with the Border Grill to be good.
Item 2. Description of Property
The Company's executive offices are located in approximately 5,116
square feet of leased office space at 6787 West Tropicana, Suite 200, Las Vegas,
Nevada 89103. The monthly rental is $8,724. The lease agreement commenced on
June 1, 1996 and expires on June 1, 2001.
The WCW Nitro Grill is located in leased restaurant space in the
Excalibur Hotel and Casino in Las Vegas, Nevada. The monthly rental is $14,583
per month, plus a percentage on gross sales of food and beverages. The lease
agreement commenced on May 1, 1999 and expires on May 1, 2009.
The Border Grill is located in leased restaurant space in the Mandalay
Bay Hotel and Casino in Las Vegas, Nevada. The monthly rental is $6,250 per
month, plus a percentage on gross sales of food and beverages. The lease
agreement expires in May 2008.
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See "Item 1. Description of Business - Acquisition of North Las Vegas,
Nevada Property" for a description of undeveloped real estate which the Company
acquired in May 1997 and February 1998.
Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party to any
material legal proceeding, nor to the knowledge of Management is any litigation
threatened against the Company or its subsidiaries, except as described
hereinafter.
In June 1999, the Company brought a civil action in the United States
District Court, Eastern District of California for breach of contract against
the Table Mountain Tribe for terminating the Company's contracts to provide
consulting services to the Table Mountain Casino. The lawsuit seeks to recover
payments totaling $3,150,000 due under the first contract and under the
consulting contract, the Company seeks an award of $790,000, which represents
only the base fees due under the consulting contract. The Company also seeks
interest, court costs and additional unspecified and "to be determined"
consulting fees that would have been due during the remainder of the consulting
term.
The Table Mountain Tribe has filed a countersuit against the Company
claiming the consulting contracts are invalid, for several reasons, and
requesting restitution for all consulting fees paid to the Company during the
period of the contracts.
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PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
The Company's Common Stock is traded in the over-the-counter market and
quoted through the Nasdaq Stock Market under the symbol "AVCS".
The following table sets forth the range of high and low closing bid
prices of the Company's Common Stock for each quarterly period indicated, as
reported by Nasdaq. The prices represent inter-dealer quotations, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions:
<TABLE>
<CAPTION>
Period High Bid Low Bid
Fiscal 1999
<S> <C> <C>
First Quarter (August 1, 1998 - October 31, 1998) $1.47 $0.81
Second Quarter (November 1, 1998 - January 31, 1999) $1.40 $0.93
Third Quarter (February 1, 1999 - April 30, 1999) $1.13 $0.94
Fourth Quarter (May 1, 1999 - July 31, 1999) $1.06 $0.81
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1998
<S> <C> <C>
First Quarter (August 1, 1997- October 31, 1997) $1.63 $1.00
Second Quarter (November 1, 1997 - January 31, 1998) $1.47 $1.03
Third Quarter (February 1, 1998 - April 30, 1998) $1.69 $1.16
Fourth Quarter (May 1, 1998 - July 31, 1998) $1.53 $1.13
</TABLE>
On October 14, 1999, the closing sale price per share for the Company's
Common Stock was $0.63.
On October 14, 1999, there were 901 holders of record of the 14,659,413
shares of the Company's Common Stock outstanding.
Dividend Policy
The Company has not paid any cash dividends on its Common Stock since
its incorporation. The Company anticipates that in the foreseeable future,
earnings, if any, will be retained for use in its business or for other
corporate purposes.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included elsewhere
in this Report.
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Statement on Forward-Looking Statements
Included in this Item 6, and in the Notes to the Consolidated Financial
Statements are certain forward-looking statements reflecting the Company's
current expectations. Although the Company believes that its expectations are
based on reasonable assumptions, there can be no assurance that the Company's
financial goals or expectations will be realized. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance, or achievements of the Company, or
industry results, to be materially different from future results, performance,
or achievements expressed or implied by such forward-looking statements.
Numerous factors may affect the Company's actual results and may cause results
to differ materially from those expressed in forward-looking statements made by
or on behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to construction activities, dependence on existing
management, gaming regulation of casinos on Indian land by Federal, State and
Tribal governments, issues related to the Year 2000, domestic and global
economic conditions and changes in Federal and State tax laws or the
administration of such laws. The Company assumes no obligation to update or
revise any such forward-looking statements or the factors listed below to
reflect events or circumstances that may arise after this report is filed, and
that may have an effect on the Company's overall performance.
Overview - Factors That May Affect Future Results
The Company, until May 1999, derived nearly all of its revenues from
providing consulting services to the Table Mountain Casino. In May 1999, the
Table Mountain Tribe voted to terminate the contracts it has with the Company
and since has not honored the consulting and termination agreements. As a
result, the Company's primary source of revenue has been eliminated for Fiscal
2000 and it will have a significant negative impact on the Company's source of
funds. If, and until, the restaurant operations begin to provide cash flows, the
Company will use existing working capital for operating purposes.
The year 2000 presents a potential problem for businesses utilizing
computers in their operations since many computer programs are date sensitive
and will only recognize the last two digits of the year, thereby recognizing the
year 2000 as the year 1900 or not at all (the "Year 2000 Issue"). The Company
has evaluated its internal operating system and is working with companies with
which it transacts business to assess their efforts to comply with the Year 2000
Issue and the Company's resulting exposure. Maintenance or modification costs of
computer programs associated with the Year 2000 Issue will be expensed as
incurred, while the costs of any new software will be capitalized and amortized
over the software's useful life. At this time, it appears the aggregate cost to
the Company relating to the Year 2000 Issue will not be material. The Company
believes that its software programs are year 2000 compliant, however, there can
be no assurances that the Year 2000 Issue will not adversely affect the Company.
Results of Operations
Year Ended July 31, 1999 Compared With The Year Ended July 31, 1998
Revenues
Casino consulting fees for the year ended July 31, 1999 ("Fiscal 1999")
decreased 22.2% to $6,660,000 from the $8,565,000 recorded for the year ended
July 31, 1998 ("Fiscal 1998"), and were derived from the consulting and
termination agreements between the Company and the Table Mountain Tribe for
providing consulting services to the Table Mountain Casino. The decrease in
revenues was caused by the premature termination of the contracts by the Table
Mountain Tribe as described below.
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In June 1997, the consulting agreement was amended to provide a revised
consulting fee schedule. The revised schedule provided for a base monthly
consulting fee of $60,000, plus additional fees of $50,000 to $100,000 for
increments of $225,000 to $500,000 or portion thereof, of monthly Table Mountain
Casino net income in excess of the first $1.5 million of net income from casino
operations. A second amendment to the consulting agreement was signed in
November 1997. The consulting fee schedule was adjusted, effective February 1,
1998, to provide for a base fee of $50,000 and additional fees of $45,000 to
$60,000 for increments of $250,000 to $500,000 or portion thereof, of monthly
casino net income in excess of $1.5 million of net income from casino
operations. The term of the agreement was extended to June 30, 2000.
Additionally, effective February 1, 1996, the Company and the Table
Mountain Tribe signed a termination agreement of a March 1993 consulting
agreement under which a monthly payment of $350,000 will be paid to the Company
through January 2000, subject to meeting certain thresholds.
In May 1999, the Table Mountain Tribe voted to terminate both contracts
with the Company and since May 1999, the Table Mountain Tribe has not honored
the consulting and termination agreements the Company has with the Table
Mountain Tribe. As a result of this action, consulting fees for Fiscal 1999 have
declined from those reported in Fiscal 1998. In June 1999, the Company filed a
lawsuit in the United States District Court, Eastern District of California
against the Table Mountain Tribe. The lawsuit seeks to recover payments totaling
$3,150,000 due under the first contract and under the consulting contract, the
Company seeks an award of $790,000, which represents only the base fees due
under the consulting contract. The Company also seeks additional unspecified and
"to be determined" consulting fees that would have been due during the remainder
of the consulting term. The Table Mountain Tribe has filed a countersuit against
the Company claiming the consulting contracts are invalid, for several reasons,
and requesting restitution for all consulting fees paid to the Company during
the period of the contracts. See Item 3 - "Legal Proceedings". Management
strongly believes the contracts are valid, enforceable and comply with all
aspects of the Indian Gaming Regulatory Act and intends to vigorously seek to
enforce their provisions. A trial date has been set for September 2000.
Restaurant revenues were derived from the Company's new WCW Nitro Grill
restaurant operation which began operations in May 1999.
Costs and Expenses
Casino consulting expenses in Fiscal 1999 increased to $1,828,000, up
6.96%, from $1,709,000 in Fiscal 1998. This increase is comprised principally of
an increase in legal expenses, political contributions and the write-off of
amounts due from the Table Mountain Tribe.
Restaurant operations expenses of $1,673,000, including startup costs,
were associated with the Company's new WCW Nitro Grill, which began operations
in May 1999.
The Company incurred $47,000 in death care operating expenses in Fiscal
1999 as compared to expenses of $61,000 in Fiscal 1998. Expenses in both years
were comprised principally of developmental payroll costs.
General and administrative expenses in Fiscal 1999 decreased by $26,000
or 2.16% from Fiscal 1998. The decrease resulted from increases in political
contributions and corporate legal costs offset by decreases in loan commitment
fees, consulting fees and charitable contributions.
Amortization and depreciation was $67,000 and $122,000 in Fiscal 1999
and Fiscal 1998, respectively. Amortization in Fiscal 1999 is comprised of
restaurant organization costs, which are being amortized over a five-year
period. In Fiscal 1998, amortization is comprised of consulting agreement
acquisition costs, which were being amortized over a 27-month period that ended
in April 1998. Depreciation expense in Fiscal 1999 increased as a result of
capital expenditures for the restaurant operation.
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The loss of unconsolidated subsidiary represents 100% of the loss from
operations, including the expense of startup costs, of the 49% owned restaurant
investment in the Border Grill. The restaurant began operations in June 1999. In
the future, if the restaurant has net income, the Company will recognize all
such income until prior losses have been offset and thereafter net income will
be split in proportion to the ownership interests.
Other Items
Interest income from time deposits with financial institutions totaled
$952,000 and $907,000 in Fiscal 1999 and Fiscal 1998, respectively. In Fiscal
1999, the Company incurred $42,000 of interest expense on a bank loan for funds,
which were loaned to the Table Mountain Tribe.
During the second quarter of Fiscal 1998, the Company charged
operations $861,000 for the write-off of its investment in the proposed Auburn,
California Indian gaming project and advances related to the Auburn Tribe.
In Fiscal 1998, the Company refunded minority investors in G & L
Acquisition Corp., a subsidiary, their original investment. In connection with
the refund, the company incurred investor reparation expenses of $550,000.
The Company recorded provisions of $115,000 and $303,000 for the State
of California income taxes currently payable for Fiscal 1999 and 1998,
respectively. Deferred state income tax benefits of $48,000 were recorded for
Fiscal 1999.
Provisions of $1,354,000 and $1,604,000 were recorded for Federal
income taxes currently payable for Fiscal 1999 and Fiscal 1998, respectively.
Deferred Federal income tax benefits of $274,000 and $2,000 were recorded for
Fiscal 1999 and 1998, respectively.
Net income was $2,026,000 ($0.13 basic and diluted earnings per share)
and $3,069,000 ($0.20 basic earnings per share and $0.19 diluted earnings per
share) for Fiscal 1999 and 1998, respectively.
Liquidity and Capital Resources
At July 31, 1999, the Company had consolidated working capital of
$14,476,000, as compared with working capital of $15,618,000 at July 31, 1998.
Investing activities
During the year ended July 31, 1999, investing activities used
$4,619,000 as compared to $1,517,000 used by investing activities in Fiscal
1998. During Fiscal 1999, the Company made a $1,500,000 mortgage loan
receivable. The mortgage is due in Fiscal 2000 and is secured by undeveloped
land. During Fiscal 1999, $1,200,000 was invested in the unconsolidated
restaurant subsidiary. The Company is obligated to invest up to $2,750,000 and
loan up to $175,000 to the unconsolidated subsidiary. Funds to satisfy the
Company's obligations will come from working capital on hand. $1,915,000 was
used in Fiscal 1999 to purchase furniture, equipment and leasehold improvements
for the WCW Nitro Grill restaurant.
Financing activities
Financing activities in the year ended July 31, 1999 resulted in a
$452,000 use of funds as compared to $108,000 being provided by financing
activities in Fiscal 1998.
In Fiscal 1999, the Company received the proceeds from the issuance of
common stock ($20,000) and cash was used to repurchase Company common stock
($472,000). A $2,203,000 bank loan was obtained during
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Fiscal 1999 and the proceeds were loaned to the Table Mountain Tribe. In Fiscal
1999, the Tribe repaid the loan and the bank loan was paid off.
The Company owns approximately 40 acres of land in North Las Vegas,
Nevada on which it plans to develop a funeral home and cemetery. The estimated
cost to build the project has not been determined. Funds required to construct
and develop the project will be provided from cash on hand, operations, and
financing arrangements or a combination of all three sources. Funds required for
the property's operations, after completion of construction, initially will be
provided by the Company's working capital or short term financing arrangements.
Ultimately, management anticipates that the property will generate sufficient
cash flow to maintain its operations independently. The development of this
property has been delayed while the Clark County, Nevada government finalizes
its plan for construction of a flood control project for the area. In the event
the flood control project is built as intended, the Company would not have to
build major water control culverts on the cemetery project. The Company is
awaiting additional progress on the construction of the flood control project
before it begins development of the property, however, it may seek a waiver of
the requirement to build the major water control culverts.
In October 1999, the Company entered into a letter of intent to
purchase a majority interest in Placement 2000.Com, Inc. ("Placement 2000"), a
privately held Internet concern specializing in online services for information
technology professionals, companies and recruiters. Under the terms of the
letter of intent, the Company will acquire the majority interest for $1,000,000
in cash with additional consideration of up to $2,000,000 to be paid and options
to purchase up to 1,000,000 shares of the Company's common stock based upon
future earnings of Placement 2000. The purchase price to be paid to Placement
2000 will be used for Placement 2000's general corporate purposes. If the
purchase is consummated, the funds for the acquisition will come from existing
working capital.
Historically, the Company has provided funds for its operations from
operating activities, financing from financial institutions and stockholders,
and issuance of common stock, and it will likely continue to use these sources
of liquidity in the future. The Table Mountain Tribe's failure to honor the
Company's consulting and termination agreements will have a significant negative
impact on the Company's source of funds. If, and until, the restaurant
operations begin to provide cash flow, the Company will use existing working
capital for operating purposes. The Company has always sought and will continue
to seek other suitable consulting contracts and/or ownership of casinos and
other gaming opportunities on and off Indian land, as well as recreational,
leisure time and entertainment ventures. The Company, as part of its
diversification strategy, will seek to acquire and develop companies which can
become market leaders on the Internet and enable the Company to realize a
significant influence over the management and policies of the companies in order
to realize a significant return to compensate for its investment of management
time and effort, as well as capital. The Company intends to allocate capital to
the acquisition of Internet companies that meet its investment criteria should
the proper opportunities arise. Additionally, the Company will continue to
pursue any business venture, including those not previously described, which
management believes afford an opportunity to increase stockholder value. In the
event any of these opportunities come to fruition, management will consider
satisfying financing requirements from working capital, through borrowing or
capital infusion through the public or private placement of common stock of the
Company or its subsidiaries.
At July 31, 1999, the Company had a $1,000,000 revolving line of credit
with a bank. The line of credit is unsecured, expires in December 1999 and bears
interest at 1% above an indexed prime. At July 31, 1999, no funds were
outstanding on the line of credit.
Item 7. Financial Statements
The consolidated financial statements of the Company are set forth in a
separate section of this Report following Part III.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Set forth below are the names of all the directors and executive
officers of the Company along with certain information relating to the business
experience of each of the listed officers and directors.
Name Position
Ronald J. Tassinari Chief Executive Officer, President and Director
Audrey K. Tassinari Executive Vice President and Director
Roy K. Keefer Chief Financial Officer, Vice President and
Secretary/Treasurer
Jeanne Hood Director
Steven G. Barringer Director
Boyad Tanner Director
Directors are elected to serve for three years, or until their
successors are elected and qualified (except that at least twenty-five percent
of all Directors must be elected each year). Officers serve at the discretion of
the Board of Directors subject to any contracts of employment. The Board of
Directors has an Audit Committee and a Compensation Committee, each comprised of
Boyad Tanner and Steven G. Barringer. The Board of Directors does not have a
nominating committee. See "Item 10. Executive Compensation."
Ronald J. Tassinari has been Chief Executive Officer, President and a
Director of the Company since its inception in August 1979.
Audrey K. Tassinari has been a Director of the Company since March 1985
and a Vice President since April 1986. Mrs. Tassinari is the wife of Ronald J.
Tassinari, the Company's President.
Roy K. Keefer has been Chief Financial Officer, Vice President and
Secretary/Treasurer of the Company since April 1992. Mr. Keefer was a Director
of the Company from December 1992 to May 1999.
Jeanne Hood has been a Director of the Company since February 1994.
Since February 1994, Ms. Hood has served as a gaming consultant to the Company.
See "Item 12. Certain Relationships and Related Transactions." From 1985 to
1993, Ms. Hood served as President and Chief Executive Officer of Elsinore
Corporation, a publicly traded gaming company, and of Four Queens, Inc., a
majority-owned subsidiary of Elsinore Corporation, which subsidiary owns and
operates the Four Queens Hotel Casino in Las Vegas, Nevada.
Steven G. Barringer has been a Director since February 1998. He is a
member of the law firm of Dickstein Shapiro Morin & Oshinsky, LLP, Washington,
D.C., practicing natural resources and environmental law. From January 1996 to
April 1999 he was a member of the law firm of Singer, Brown and Barringer,
Las Vegas, Nevada. Before forming Singer, Brown and Barringer in January 1996,
Mr. Barringer was a member of the law firm of Holland & Hart, Washington D.C.
Boyad Tanner, prior to becoming a Director in May 1999, had a varied
business background, including owning and operating Indian Trading Posts in Utah
and New Mexico. He owned and operated an automobile
-11-
<PAGE> 12
agency in Farmington, New Mexico, and was also a licensed real estate agent,
having his own agency. Mr. Tanner was the Executive Director for Urban Renewal
and Development both in Indio, California as well as in North Las Vegas, Nevada.
His most recent appointments in Las Vegas include a partnership at Harrington
Horsey Insurance Agency, serving on the Board of the Clark County Planning
Commission and serving on the Board of Directors for Cumorah Credit Union. He
was also the recipient of the Silver Beaver Award for his service with the Boy
Scouts of America. Mr. Tanner has been retired for the past five years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that, during the period from
August 1, 1998 through July 31, 1999, all filing requirements applicable to its
officers, directors, and greater than ten percent beneficial owners were
complied with.
Item 10. Executive Compensation
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by,
or paid for all services rendered to the Company during the last three fiscal
years by the Company's Chief Executive Officer and all other executive officers
whose total compensation exceeded $100,000 in those years.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
Name and Other Annual Restricted Securities
Principal Position Year Salary($) Bonus($) Compensation($) Stock Award(s)($) Underlying Options(#)
<S> <C> <C> <C> <C> <C> <C>
Ronald J. Tassinari, 1999 $461,639 $303,062 $83,069(1) -0- -0-
Chief Executive 1998 $432,635 $288,000 $86,646(1) -0- 150,000(6)
Officer and 1997 $417,988 $230,000 $70,281(1) -0- 400,000(2)(4)
President
Audrey K. Tassinari, 1999 $166,549 $130,000 $74,095(1) -0- -0-
Executive 1998 $156,785 $142,000 $78,037(1) -0- 100,000(6)
Vice President 1997 $153,621 $110,000 $55,840(1) -0- 250,000(3)(4)
Roy K. Keefer 1999 $143,931 $ 60,000 $56,464(1) -0- -0-
Chief Financial 1998 $133,481 $ 69,000 $68,288(1) -0- -
Officer 1997 $127,768 $ 25,500 $46,599(1) -0- 150,000(5)(4)
</TABLE>
(1) This amount includes, but is not limited to: directors fees;
disability, life and medical insurance premiums; automobile payments
and pension plan payments.
-12-
<PAGE> 13
(2) Represents options which were granted in October 1995 at an exercise
price of $1.75 per share, canceled and re-granted in October 1996 at
$1.375 per share.
(3) Represents options which were granted in October 1995 at an exercise
price of $1.75 per share, canceled and re-granted in October 1996 at
$1.375 per share.
(4) The Board re-granted such options at a price closer to the fair market
value of the Company's Common Stock in order to provide a better
incentive to these officers.
(5) Represents options which were granted in October 1995 at an exercise
price of $1.75 per share, canceled and regranted in October 1996 at
$1.25 per share.
(6) Represents options which were granted in December 1997 at an exercise
price of $1.16 per share.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year Table
% of Total
Shares Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
<S> <C> <C> <C> <C>
Ronald J. Tassinari -0- -0-% $-0- -
Audrey K. Tassinari -0- -0-% $-0- -
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values Table
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-The-Money
Shares Options at Options at
Acquired FY-End (#) FY-End ($)
on Exer- Value Exercisable/ Exercisable/
Name cise (#) Realized Unexercisable Unexercisable(1)
<S> <C> <C> <C> <C>
Ronald J. Tassinari -0- -0- 1,264,000/50,000 184,363/-0-
Audrey K. Tassinari -0- -0- 698,677/33,333 91,680/-0-
Roy K. Keefer -0- -0- 557,000/-0- 97,680/-0-
</TABLE>
(1) The closing price for the Company's Common Shares on July 31, 1999 was
$0.93 per share.
-13-
<PAGE> 14
Compensation of Directors
Directors receive $15,000 per annum for meetings of the Board of
Directors. They are also compensated for expenses incurred in attending the
meetings. All of the Company's directors, except for Mr. Tanner, have received
stock options from the Company. See "Item 11. - Certain Relationships and
Related Transactions."
Employment Agreements
On July 20, 1995, the Company entered into substantially similar
employment agreements with Ronald J. Tassinari, to serve as the Company's Chief
Executive Officer and President, Audrey K. Tassinari, to serve as the Company's
Executive Vice President, and Roy K. Keefer to serve as the Company's Chief
Financial Officer (collectively, the "Employees"). The employment agreements
provide for a term which concludes on March 31, 2002. The agreements provide for
annual salaries of $452,000, $170,000, and $147,000, respectively, for Mr.
Tassinari, Mrs. Tassinari and Mr. Keefer. The agreements further provide that
the Employees are entitled to receive minimum annual increases in their salaries
every December equal to the greater of (i) the annual increases provided to the
Company's other salaried executives or (ii) the increase in the Annual Average
All Items Index of the U.S. City Average Consumer Price Index. Under the
agreements, the Employees are entitled to receive incentive stock options under
the Company's stock option plans, and the Company is required to reimburse
Employees for their personal legal and financial consulting expenses, subject to
a maximum of three percent of their prior calendar year's base salary. Mr.
Tassinari is entitled to a term life insurance policy with a minimum death
benefit of $2,000,000, payable to a beneficiary of Mr. Tassinari's designation.
Mrs. Tassinari and Mr. Keefer are entitled to policies with $1,500,000 and
$1,000,000 minimum death benefits, respectively, payable to beneficiaries of
their designation. The Company has agreed to provide the Employees with an
automobile allowance or, in lieu thereof, will pay them an equal monthly cash
stipend. In the event that the Company requires the Employee to relocate from
Las Vegas, Nevada, the Company has agreed to pay their relocation expenses and
to provide second mortgages on their new permanent residences of up to $100,000.
The employment agreements also provide for indemnification of the Employees in
connection with their service to the Company.
If the employment of any of the Employees is terminated by reason of
death, the Company shall pay the balance of the monies due under the agreement
to the estate of the deceased Employee. If the employment of any of the
Employees is terminated by reason of disability, the Employee shall be entitled
to one year of severance pay at full salary and then severance pay at half
salary for the remainder of the term. If any of the Employees are terminated
without cause, or the Employees terminate their own employment following: (a) a
change in control (as defined below); (b) a significant change in the Employee's
duties under the agreements; (c) a removal of the Employee from the positions or
offices set forth in the agreements; (d) a substantial reduction in
compensation, unless all senior executives receive comparable reductions; (e) a
breach by the Company of the relocation provisions set forth in the agreements;
(f) the refusal of a successor to the Company to assume the Company's
obligations under the agreements; (g) a relocation of the Company's executive
offices without the Employee's consent; (h) a failure by the Company to increase
the Employee's salary; or (I) the Employee remains employed following a change
in control, but then resigns within two years, then the Company shall pay as
liquidated damages, or severance pay, or both to the Employee on the fifth day
following the termination date, a lump sum equal to the product of (i) an amount
equal to the sum of the annual base salary in effect as of the termination date
plus any incentive compensation most recently paid or payable to the Employees,
multiplied by (ii) two and ninety-nine one hundredths (2.99), (iii) plus any and
all accrued salary, accrued vacation pay and accrued bonus in addition to any
other consideration due under the agreements. In addition, the agreements
provide that in the event that an Employee terminates his or her employment
following a change in control, the Company shall make a cash payment on the 91st
day after such termination to the Employee in an amount equal to the excess, if
any, of (1) the number of options then held by the Employee which have not
terminated other than as a result of termination of employment multiplied by the
market price of the Company's common stock as of the date of termination, over
(2) the aggregate exercise price for all options then held by the Employee.
-14-
<PAGE> 15
For purposes of the employment agreements, a "change in control of the
Company" shall be deemed to have occurred if (i) a third person becomes the
beneficial owner (as such term is defined in Rule 13d-3 promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Act")) of the securities
of the Company having twenty percent (20%) or more of the combined voting power
of all classes of the Company's securities entitled to vote in an election of
Directors of the Company; (ii) there occurs a tender offer or exchange offer by,
a merger or other business combination with, or a sale of substantially all of
the assets of the Company to any third Person; (iii) a stockholder or
stockholders holding five percent (5%) or more of the outstanding common stock
of the Company proposes a reconstitution of additions to or deletions from the
Board and as a result, obtains a majority thereof; or (iv) during any period of
two consecutive years during the term of the agreements, individuals who at the
beginning of such period constitute the Board cease for any reason other than
death or disability to constitute at least a majority thereof.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of the date of
this Report, with respect to the beneficial ownership (as such term is defined
in Rule 13d-3 under the Securities Exchange Act of 1934) of shares of Common
Stock, the Company's sole voting securities, by each person known by the Company
to be the beneficial owner of more than 5% of its Common Stock, by each
executive officer named in the Summary Compensation Table, each director and by
all officers and directors as a group.
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership(1) of Class(2)
Ronald J. Tassinari 2,433,861 (3) 16.6%
6787 West Tropicana, Suite 200
Las Vegas, NV 89103
Audrey K. Tassinari 1,898,335 (4) 13.0%
6787 West Tropicana, Suite 200
Las Vegas, NV 89103
Roy K. Keefer 619,000 (5) 4.2%
6787 West Tropicana, Suite 200
Las Vegas, NV 89103
Jeanne Hood 150,000 (6) 1.0%
2316 Timberline Way
Las Vegas, NV 89117
Jay H. Brown 1,052,116 (7) 7.2%
520 South Fourth Street
Las Vegas, NV 89101
Steven G. Barringer 40,000 (8) * %
2101 L. Street NW
Washington, DC 20037
Boyad Tanner 0 0%
4172 Satinwood
Las Vegas, NV 89117
-15-
<PAGE> 16
All officers and directors 4,157,623 (9) 28.4%
as a group (6 persons)
* Indicates less than 1%
(1) Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the persons indicated.
(2) Based on 14,659,413 shares outstanding as of the date of October 14,
1999.
(3) Includes 11,094 shares owned of record by Mr. Tassinari as custodian
for his son, 983,573 shares owned by the Tassinari Family Trust and
1,264,000 shares issuable upon exercise of stock options. Such shares
exclude the following shares as to which Mr. Tassinari disclaims
beneficial ownership: 914,762 shares of Common Stock beneficially owned
by Audrey K. Tassinari, Mr. Tassinari's wife. If such excluded shares
were included, Mr. Tassinari would be deemed to hold 22.8% of the
Common Stock.
(4) Includes 983,573 shares owned by the Tassinari Family Trust and an
aggregate of 678,667 shares issuable upon exercise of stock options. In
addition, such shares exclude the following shares as to which Mrs.
Tassinari disclaims beneficial ownership: 1,439,194 shares of Common
Stock beneficially owned by Ronald J. Tassinari, Mrs. Tassinari's
husband. If such excluded shares were included, Mrs. Tassinari would be
deemed to hold 22.8% of the Common Stock.
(5) Includes 557,000 shares underlying incentive stock options.
(6) Includes options to acquire 100,000 shares.
(7) Includes an aggregate of 782,116 shares of Common Stock beneficially
owned in joint tenancy by Mr. Brown and Mr. Brown's wife.
(8) Represents options to acquire 40,000 shares.
(9) Includes options to purchase an aggregate of 2,659,677 shares of Common
Stock referred to in notes (3) through (8) above.
Item 12. Certain Relationships and Related Transactions
Jeanne Hood, a Director of the Company, has provided consulting
services to the Company since February 1994. She has been compensated at the
rate of $6,000 per month for such services.
On November 23, 1994, the Board of Directors granted stock options to
Robert J. Michaels, Jeanne Hood and Douglas R. Sanderson, Directors or former
Directors of the Company, to purchase 50,000, 50,000 and 12,500 shares of Common
Stock, respectively. The options were immediately exercisable at $.69 per share
in recognition of prior services rendered to the Company. All of the options
were exercised after July 31, 1997 and prior to December 31, 1997.
On October 19, 1995, the Board of Directors granted stock options to
Robert J. Michaels, Jeanne Hood and Douglas R. Sanderson, Directors or former
Directors of the Company, to purchase 50,000, 100,000 and 15,000 shares of
Common Stock, respectively. The options were immediately exercisable at $1.75
per share in recognition of prior services rendered to the Company and expire on
October 18, 2005. These options were re-granted on October 7, 1996 to Ms. Hood
and Mr. Sanderson at an exercise price of $1.25 per share.
-16-
<PAGE> 17
On October 19, 1995, the Board of Directors granted stock options to
Ronald J. Tassinari, Audrey K. Tassinari and Roy K. Keefer, each an Officer and
Director of the Company, to purchase 400,000, 250,000 and 150,000 shares of
Common Stock, respectively. The options were immediately exercisable at $1.75
per share in recognition of prior services rendered to the Company and expire on
October 18, 2005. On October 7, 1996, the foregoing options were canceled and
re-granted at an exercise price of $1.25 per share.
On December 12, 1997, the Board of Directors granted stock options to
Ronald J. Tassinari and Audrey K. Tassinari to purchase 150,000 and 100,000
shares of Common Stock, respectively. The options are exercisable at $1.16 per
share and expire on December 17, 2002.
On February 6, 1998 stock options were granted to Steven G. Barringer
to purchase 75,000 shares of Common Stock which was subsequently approved by the
Board of Directors. The options are exercisable at $1.19 per share and expire on
February 6, 2008.
See "Item 10. Executive Compensation" for the terms of certain stock
options and Employment Agreements between the Company and Ronald J. Tassinari,
Audrey K. Tassinari and Roy K. Keefer, each a Director or former Director and
officer of the Company.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation and By Laws of the Company. (1)
3.2 Certificate of Amendment to Articles of Incorporation of the
Company.(5)
3.3 Certificate of Amendment to Articles of Incorporation of the
Company.(6)
4.1 Warrant Certificate between the Company and Jay H. Brown dated July
23, 1991. (2)
10.1 American Casino Enterprises, Inc. 1991 Officers Stock Option Plan,
as amended. (3)
10.2 American Casino Enterprises, Inc. 1992 Employees Stock Option
Plan. (3)
10.3 American Casino Enterprises, Inc. 1996 Stock Option Plan. (3)
10.4 Management Consultant Contract dated March 27, 1993 between the
Company and the Table Mountain Tribe.(5)
10.5 Employment Agreement between the Company and Ronald J. Tassinari
dated July 20, 1995. (6)
10.6 Employment Agreement between the Company and Audrey K. Tassinari
dated July 20, 1995. (6)
10.7 Employment Agreement between the Company and Roy K. Keefer dated
July 20, 1995. (6)
10.8 Letter Agreement dated September 11, 1995 between the Company and
Table Mountain Rancheria. (6)
10.9 Business Loan Agreement and Promissory Note dated November 15,
1994 between the Company and First Security Bank of Nevada. (6)
-17-
<PAGE> 18
10.10 Settlement Agreement, dated February 1, 1996, between the Company
and the NIGC. (7)
10.11 Termination Agreement, dated February 1, 1996, between the
Company and the Table Mountain Tribe. Exhibit A to the Termination
Agreement is set forth as Exhibit 99.1 below, and Exhibit B to the
Termination Agreement is incorporated herein by reference from Exhibit
10.3 above.(7)
10.12 Consulting Agreement, dated February 1, 1996, between the Company
and the Tribe. (7)
10.13 Option to Purchase and Escrow Instructions dated as of October 9,
1996, among the Company, Victorson & Associates, Inc., Fred Victorson
and United Title of Nevada. (8)
10.14 Purchase Agreement and Escrow Instructions dated October 9, 1996,
among Victorson & Associates, Inc., Fred Victorson and the Company. (8)
10.15 Joint Venture Agreement between the Company and the Table
Mountain Tribe, dated as of February 1, 1996. (8)
10.16 Funding and Loan Agreement between the Auburn Tribe and the Table
Mountain/ACES Joint Venture, dated February 1, 1996. (8)
10.17 Lease for the Company's offices dated March 14, 1996, between the
Company and Tropicana Trail Limited Partnership. (8)
10.18 Agreement to terminate Funding and Loan Agreement, dated March
10, 1998, between the Company and the Auburn Tribe. (9)
10.19 Promissory Note, dated March 10, 1998, between the Company and
the Auburn Tribe. (9)
10.20 Promissory Note and Loan Agreement, dated August 24, 1998,
between the Company and the Table Mountain Tribe. (9)
10.21 Promissory Note and Loan Agreement, dated August 24, 1998,
between the Company and United Security Bank. (9)
10.22 License Agreement, dated as of November 12, 1998, by and among
Sitka, the Company and World Championship Wrestling, Inc.
10.23 Lease for Restaurant Space, dated as of November 19, 1998, by and
between New Castle Corp. and Sitka.
10.24 Operating Agreement, dated November 12, 1998, by and between TT&T
and Vantage Bay.
10.25 Lease for Restaurant Space, dated November 12, 1998, by and
between Mandalay Corp. and Border Grill Las Vegas, LLC.
21.1 Subsidiaries of the Registrant
23.1 Consent of Bradshaw, Smith & Co.
27.1 Financial Data Schedules
99.1 Order of the United States Department of the Interior, dated
February 1, 1996. (7)
-18-
<PAGE> 19
(1) Incorporated by reference to Exhibit 3(i) to the Company's Annual
Report on Form 10-K for July 31, 1981.
(2) Incorporated by reference to the Company's Annual Report on Form
10-K for July 31, 1991.
(3) Incorporated by reference to the Company's Registration Statement
on Form S-8 (File No. 333-00905) declared effective on February 13,
1996.
(4) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended July 31, 1994.
(5) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended July 31, 1995.
(6) Incorporated by reference from the Company's Current Report on Form
8-K dated February 1, 1996.
(7) Incorporated by reference from the Company's Current Report on Form
8-K dated October 9, 1996.
(8) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended July 31, 1996.
(9) Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended July 31, 1998.
(b) Reports on Form 8-K.
On December 2, 1998, the Registrant filed a Report on Form 8-K
reporting the signing of a License Agreement for the WCW Nitro Grill.
On May 20, 1999, the Registrant filed a Report on Form 8-K
reporting the termination for their consulting contract by the Table
Mountain Tribe.
-19-
<PAGE> 20
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report to be
signed on its behalf by the undersigned, thereunder duly authorized.
Dated: October 28, 1999 AMERICAN VANTAGE COMPANIES
By: /s/ Ronald J. Tassinari
-----------------------
Ronald J. Tassinari, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ Ronald J. Tassinari President and Director October 28, 1999
- ----------------------- (Principal Executive Officer)
Ronald J. Tassinari
/s/ Audrey K. Tassinari Executive Vice October 28, 1999
- ----------------------- President and Director
Audrey K. Tassinari
/s/ Roy K. Keefer Chief Financial October 28, 1999
- ----------------------- Officer, Vice President and
Roy K. Keefer Secretary/Treasurer
(Principal Financial and
Accounting Officer)
/s/ Jeanne Hood Director October 28, 1999
- -----------------------
Jeanne Hood
/s/ Steven G. Barringer Director October 28, 1999
- -----------------------
Steven G. Barringer
/s/ Boyad Tanner Director October 28, 1999
- -----------------------
Boyad Tanner
-20-
<PAGE> 21
AMERICAN VANTAGE COMPANIES
YEARS ENDED JULY 31, 1999 AND 1998
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent auditors' report F1
Financial statements:
Consolidated balance sheets F2
Consolidated statements of income F3
Consolidated statements of changes in stockholders' equity F4
Consolidated statements of cash flows F5-F6
Notes to consolidated financial statements F7-F23
</TABLE>
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
American Vantage Companies
We have audited the accompanying consolidated balance sheets
of American Vantage Companies as of July 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
American Vantage Companies as of July 31, 1999 and 1998, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ BRADSHAW, SMITH & CO., LLP
Las Vegas, Nevada
October 8, 1999
<PAGE> 23
AMERICAN VANTAGE COMPANIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $12,626,000 $15,371,000
Consulting fee and other receivables 191,000 180,000
Mortgage note receivable 1,500,000 --
Refundable income taxes 219,000 311,000
Deferred tax asset 135,000 4,000
Inventories 153,000 --
Prepaid expenses 376,000 31,000
----------- -----------
Total current assets 15,200,000 15,897,000
----------- -----------
PROPERTY AND EQUIPMENT, NET 2,029,000 180,000
LAND HELD FOR INVESTMENT OR DEVELOPMENT 5,105,000 5,101,000
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 592,000 --
DEFERRED TAX ASSET 191,000 --
OTHER ASSETS - DEPOSITS AND OTHER 89,000 9,000
----------- -----------
$23,206,000 $21,187,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 558,000 $ 126,000
Income taxes payable -- 10,000
Accrued expenses 166,000 143,000
----------- -----------
Total current liabilities 724,000 279,000
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Common stock, $.01 par; 30,000,000 shares
authorized; 14,659,413 and 15,086,463 shares 147,000 151,000
issued and outstanding
Preferred stock; $.01 par; 10,000,000 shares -- --
authorized; shares issued and outstanding - none
Capital in excess of par 2,876,000 3,324,000
Retained earnings 19,459,000 17,433,000
----------- -----------
22,482,000 20,908,000
----------- -----------
$23,206,000 $21,187,000
=========== ===========
</TABLE>
F2
See Notes to Consolidated Financial Statements.
<PAGE> 24
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Casino consulting fees $ 6,660,000 $ 8,565,000
Restaurant 1,005,000 --
------------ ------------
7,665,000 8,565,000
------------ ------------
COSTS AND EXPENSES:
Casino consulting 1,828,000 1,709,000
Restaurant operations 1,673,000 --
Death care operations 47,000 61,000
General and administrative 1,179,000 1,205,000
Amortization and depreciation 67,000 122,000
Loss of unconsolidated subsidiary 608,000 --
------------ ------------
5,402,000 3,097,000
------------ ------------
INCOME FROM OPERATIONS 2,263,000 5,468,000
OTHER INCOME (EXPENSE):
Interest 952,000 907,000
Interest expense (42,000) --
Miscellaneous -- 10,000
------------ ------------
910,000 917,000
------------ ------------
INCOME BEFORE WRITE-OFF OF PROJECT COSTS AND
ADVANCES, INVESTOR REPARATION EXPENSE AND INCOME TAXES 3,173,000 6,385,000
------------ ------------
WRITE-OFF OF PROJECT COSTS AND ADVANCES -- 861,000
INVESTOR REPARATION EXPENSE -- 550,000
------------ ------------
INCOME BEFORE INCOME TAXES 3,173,000 4,974,000
INCOME TAX EXPENSE (BENEFIT):
Current:
State 115,000 303,000
Federal 1,354,000 1,604,000
Deferred:
State (48,000) --
Federal (274,000) (2,000)
------------ ------------
1,147,000 1,905,000
------------ ------------
NET INCOME $ 2,026,000 $ 3,069,000
============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.13 $ 0.20
============ ============
Diluted $ 0.13 $ 0.19
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON SHARE EQUIVALENTS:
Basic 15,008,000 15,040,000
Stock options and warrants 740,000 1,171,000
------------ ------------
Diluted 15,748,000 16,211,000
============ ============
</TABLE>
F3
See Notes to Consolidated Financial Statements.
<PAGE> 25
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
------------------------------- IN EXCESS RETAINED
SHARES AMOUNT OF PAR EARNINGS
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, JULY 31, 1997 14,867,958 $ 149,000 $ 4,892,000 $ 14,400,000
Issuance of shares 277,905 3,000 78,000 --
Shares repurchased and retired (59,400) (1,000) (87,000) --
Retirement of minority interest in
subsidiary -- -- (1,559,000) (36,000)
Net income -- -- -- 3,069,000
---------- ------------ ------------ ------------
BALANCE, JULY 31, 1998 15,086,463 151,000 3,324,000 17,433,000
Issuance of shares 32,500 -- 20,000 --
Shares repurchased and retired (459,550) (4,000) (468,000) --
Net income -- -- -- 2,026,000
---------- ------------ ------------ ------------
BALANCE, JULY 31, 1999 14,659,413 $ 147,000 $ 2,876,000 $ 19,459,000
========== ============ ============ ============
</TABLE>
F4
See Notes to Consolidated Financial Statements.
<PAGE> 26
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,026,000 $ 3,069,000
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss of unconsolidated subsidiary 608,000 --
Amortization and depreciation 66,000 122,000
Deferred income tax benefit (322,000) (2,000)
Changes in other assets and liabilities, net (52,000) 1,003,000
------------ ------------
300,000 1,123,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,326,000 4,192,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Mortgage note receivable (1,500,000) --
Purchase of land held for investment or development
and improvements (4,000) (1,498,000)
Purchase of property and equipment, net (1,915,000) (19,000)
Repayment of note receivable from Table mountain Tribe 2,203,000 --
Note receivable from Table Mountain Tribe (2,203,000) --
Investment in unconsolidated subsidiary (1,200,000) --
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (4,619,000) (1,517,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in cash restricted as to use -- 2,684,000
Retirement of minority interest in consolidated subsidiary -- (2,569,000)
Proceeds from long-term debt 2,203,000 --
Repayment of long-term debt (2,203,000) --
Repurchase of common stock (472,000) (88,000)
Proceeds from issuance of common stock 20,000 81,000
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (452,000) 108,000
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,745,000) 2,783,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 15,371,000 12,588,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,626,000 $ 15,371,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for state and federal income taxes $ 1,410,000 $ 1,653,000
Cash paid for interest $ 42,000 $ --
</TABLE>
F5
See Notes to Consolidated Financial Statements.
<PAGE> 27
AMERICAN VANTAGE COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
DETAIL OF CHANGES IN OTHER ASSETS AND LIABILITIES:
(Increase) decrease in consulting fee and receivables $ (11,000) $ 11,000
Decrease in refundable income taxes 92,000 244,000
Increase in inventories (153,000) --
Decrease in consulting agreement acquisition costs -- 324,000
(Increase) decrease in prepaid expenses (345,000) 37,000
(Increase) decrease other assets (80,000) 265,000
Increase in accounts payable 432,000 70,000
(Decrease) increase in income taxes payable (10,000) 10,000
Increase in accrued expenses 23,000 42,000
----------- -----------
$ (52,000) $ 1,003,000
=========== ===========
</TABLE>
F6
See Notes to Consolidated Financial Statements.
<PAGE> 28
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1999 AND 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS:
The Company, until May 1999, was principally engaged in providing
consulting services to a gaming facility in central California. The
Company is involved with two restaurant operations in Southern Nevada.
The Company operates one of the restaurants and is a minority investor in
the other restaurant. The Company owns 40 acres of land in North Las
Vegas, Nevada on which it plans to develop and construct a funeral home
and cemetery. Additionally, the Company owns 20 acres of land in North
Las Vegas, Nevada near the location of the proposed funeral home and
cemetery site which will be used for future development or sale.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of American
Vantage Companies and its wholly and majority-owned subsidiaries (the
"Company"). A 49% owned subsidiary is reported in the July 31, 1999
consolidated balance sheet at the Company"s equity in net assets of the
subsidiary. The Company has reported all of the loss of the
unconsolidated subsidiary in the accompanying statement of income for the
year ended July 31, 1999. All significant intercompany accounts and
transactions have been eliminated.
CASH AND CASH EQUIVALENTS:
The Company maintains cash and cash equivalents, investments with original
maturities of three months or less, with certain financial institutions.
Due to the quality of the financial institutions involved, they present a
low level of risk to the Company. The carrying amount of cash and cash
equivalents approximates their fair value.
ALLOWANCES FOR DOUBTFUL ACCOUNTS:
Consulting fee and other receivables and mortgage note receivables are
reported at their fair value and are, in the opinion of management,
collectible and no allowances for doubtful accounts were necessary at
July 31, 1999 and 1998. Specific accounts, which in the opinion of
management, are uncollectible are written off when such determination is
made.
INVENTORIES:
Inventories, consisting principally of retail merchandise for sale, are
stated at the lower of cost or market using the first-in, first-out
method.
PROPERTY, EQUIPMENT AND DEPRECIATION:
Property and equipment is stated at cost. Depreciation is calculated using
accelerated methods over the estimated useful lives of the assets.
F7
<PAGE> 29
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):
CONSULTING AGREEMENT ACQUISITION COSTS:
All internal salary and related indirect costs of the Company's consulting
agreement acquisition efforts are expensed as incurred. Direct costs are
capitalized when the Company has a consulting contract with a federally
recognized Indian tribe which is proposing to conduct authorized gaming
activities.
Consulting agreement acquisition costs are comprised of costs associated
with the acquisition of a subsidiary which previously held the consulting
agreement with the Table Mountain Casino & Bingo (the "Table Mountain
Casino"). They were amortized over a 27-month period that ended April,
1998.
ADVERTISING COSTS:
Advertising costs of the consolidated restaurant subsidiary are expensed as
incurred. Advertising expense for the year ended July 31, 1999 totaled
$33,000.
EARNINGS PER SHARE:
The computations of basic earnings per common share are based on the
weighted average number of common shares outstanding. The computations of
diluted earnings per share are based on the weighted average number of
common shares and common share equivalents outstanding. Stock purchase
warrants and options outstanding and exercisable at or below the market
price are considered common share equivalents.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Cash and cash equivalents, mortgage note and accounts receivable, land held
for investment or development, and accounts payable are reported at
amounts that approximate their fair values.
F8
<PAGE> 30
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
2. MORTGAGE NOTE RECEIVABLE
The mortgage note receivable bears interest at 22% and is secured by a
first mortgage on undeveloped land in Henderson, Nevada with an appraised
value of $3,100,000. The note principal and accrued interest is due July
29, 2000. In the event the note is paid before maturity, the Company is
guaranteed minimum interest of $100,000 or the actual accrued interest,
whichever is greater.
3. RESTAURANT OPERATIONS
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The Company owns a 49% interest in Border Grill Las Vegas, LLC ("BGLV"),
which owns the Border Grill restaurant. The restaurant is located in the
Mandalay Bay Resort & Casino on the Las Vegas Strip in Las Vegas, Nevada.
The Company is committed to invest up to $2,750,000 in BGLV and loan up
to $175,000 to BGLV for construction of and initial working capital for
the restaurant. As of July 31, 1999, the Company had expended $1,200,000
of its commitment.
All (100%) of the loss from the operations for the restaurant for the
period from June 17, 1999, the date operations began, to July 31, 1999,
including the expense of startup costs, are reported as loss of
unconsolidated subsidiary in the consolidated statements of income for
Fiscal 1999. In the future, if the restaurant has net income, the Company
will recognize all such income until prior losses have been offset and
thereafter net income will be split proportionate to ownership interests.
The following summarizes the condensed balance sheet and condensed
statement of loss for BGLV at July 31, 1999 and for the period from June
17, 1999, the date operations commenced, to July 31, 1999.
<TABLE>
<S> <C>
Assets $ 913,000
Liabilities 320,000
----------
Members' capital $ 593,000
==========
Revenues $ 444,000
Expenses 1,052,000
----------
Loss from operations $ 608,000
==========
</TABLE>
BGLV has a management agreement with an entity owned by the majority owners
requiring payments equal to 5% of the gross sales of the restaurant.
F9
<PAGE> 31
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
3. RESTAURANT OPERATIONS (CONTINUED):
NITRO GRILL RESTAURANT
The Company owns an 88% interest in a consolidated subsidiary, which
operates the WCW Nitro Grill restaurant in the Excalibur Hotel and Casino
on the Las Vegas Strip in Las Vegas, Nevada. The restaurant began
operations on May 17, 1999. Startup costs associated with the restaurant
are included in restaurant operation expenses in the consolidated
statement of income for Fiscal 1999.
The Company has a non-exclusive worldwide licensing agreement with World
Championship Wrestling ("WCW"), a Time Warner Company, to develop
wrestling themed restaurants. Among other provisions of the licensing
agreement, the Company must designate the site for its second restaurant
by June 2000 and open the restaurant by December 2000. The licensing
agreement is renewable annually and provides for annual minimum
non-refundable licensing payments of $250,000 plus percentage royalties
on food, beverage and retail merchandise sold in the restaurant.
Percentage royalties are payable when on an annual basis they exceed the
non-refundable licensing fee. For the year ended July 31, 1999, the
Company reported licensing expense of $63,000 incurred under the terms of
the agreement.
The Company also has an agreement with another company requiring payment of
2% of gross sales of the restaurant as consideration for finders' fees
and consulting services. During the year ended July 31, 1999, the Company
reported $20,000 of expense under the terms of the agreement.
The restaurant space lease is for 10 years beginning in May 1999. The lease
provides for minimum annual lease payments of $175,000 with percentage
rents based on gross sales of the restaurant when they exceed minimum
rental payments. The lease also requires an annual payment of $65,000 for
utilities. During the year ended July 31, 1999, the Company incurred
lease expense of $44,000.
4. PROPERTY AND EQUIPMENT:
Property and equipment is comprised of:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Furniture, fixtures and office equipment $ 960,000 $ 198,000
Leasehold improvements 1,267,000 115,000
----------- -----------
2,227,000 313,000
Less accumulated depreciation (198,000) (133,000)
----------- -----------
$ 2,029,000 $ 180,000
=========== ===========
</TABLE>
F10
<PAGE> 32
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
5. INDIAN GAMING OPERATIONS:
TABLE MOUNTAIN CASINO & BINGO:
The Company has a consulting agreement with the Table Mountain Band of
Indians (the "Table Mountain Tribe") for the Table Mountain Casino in
Friant, California.
In June, 1997, the consulting agreement was amended to provide a revised
consulting fee schedule. The revised schedule provided for a base monthly
consulting fee of $60,000, plus additional fees of $50,000 to $100,000
for increments of $225,000 to $500,000 or portion thereof, of monthly
casino net income in excess of the first $1.5 million of net income from
casino operations. A second amendment to the consulting agreement was
signed in November, 1997 and the consulting fee schedule was adjusted,
effective February 1, 1998, to provide for a base fee of $50,000 and
additional fees of $45,000 to $60,000 for increments of $250,000 to
$500,000 or portion thereof, of monthly casino net income in excess of
$1.5 million of net income from casino operations. The term of the
agreement was extended to June 30, 2000.
The Company will continue to receive a monthly payment of $350,000 in
accordance with terms of the termination agreement signed in February,
1996. These payments will continue through January, 2000, subject to
meeting certain thresholds.
The Company is obligated during the period of the consulting agreement,
under certain circumstances, to loan the Table Mountain Tribe up to
$4,000,000.
The contracts were prematurely terminated by the tribe in May, 1999. See
Note 11 - Litigation with the Table Mountain Tribe.
TRIBAL-STATE GAMING COMPACT:
In September 1999, approximately 59 Native American tribes in California
signed a compact with the Governor of the State of California to permit
certain specified types of gaming in casinos on Indian owned land. Among
other things, the compacts will permit each tribe to have house banked
black jack games and operate up to 2000 video gaming machines. The
compacts can not be legally recognized until an amendment is made to the
California state constitution. The amendment will require its approval by
a majority of the voters in a statewide election, which will be held in
March 2000.
F11
<PAGE> 33
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
5. INDIAN GAMING OPERATIONS (CONTINUED):
UNITED AUBURN INDIAN COMMUNITY:
In February, 1996, the Company formed a joint venture with the Table
Mountain Tribe to provide consulting services to the United Auburn Indian
Community (the "Auburn Tribe"). The purpose of the joint venture was to
assist in the development of a casino to be built and owned by the Auburn
Tribe near Sacramento, California. The Company had an 80% interest in the
joint venture.
In March, 1998, Company management, believing the project could not be
completed in a time frame that was in the best interests of its
stockholders, withdrew with its joint venture partner, the Table Mountain
Tribe, from the arrangement. The joint venture and the Auburn Tribe in
March, 1998 signed an agreement providing that under certain
circumstances advances of $413,000 would be repaid from the future
operations of the planned Auburn casino. The Company wrote off its
investment in the project and the advances made to the Auburn Tribe
($861,000 combined) in the second quarter of Fiscal 1998. The transaction
is reported in the consolidated statements of income as write-off of
project costs and advances.
6. STOCKHOLDERS' EQUITY:
PREFERRED STOCK:
The Board of Directors has the authority to issue the preferred stock, the
terms of which (including, without limitation, dividend rates, conversion
rights, voting rights, terms of redemption and liquidation preferences)
may be fixed by the Board at its sole discretion. The holders of the
Company"s common stock will not be entitled to vote upon such matters. No
shares of preferred stock of any series are outstanding and the Board of
Directors has no present intention to issue any such shares. Shares of
preferred stock issued in the future could have conversion rights, which
may result in the issuance of additional shares of common stock, which
could dilute the interest of the holders of common stock. Such shares
could also have voting rights and liquidation preferences which are
senior to the rights and preferences of the common stock. Additionally,
such shares could have dividend, redemption or other restrictive
provisions.
WARRANTS:
In July, 1991, the Company sold shares of common stock together with
warrants to purchase additional common stock shares. On June 27, 1997,
the Board of Directors granted an extension of the exercise period of the
remaining 972,222 warrants to July, 1999 and increased the exercise price
per share to $.90. The warrants expired in July 1999.
F12
<PAGE> 34
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
6. STOCKHOLDERS' EQUITY (CONTINUED):
STOCK REPURCHASE PROGRAM:
In Fiscal 1998, the Board of Directors authorized the expenditure of up to
$2,000,000 to repurchase the Company's common stock. When the Company
repurchases shares, it is done according to applicable securities laws
and at times and in amounts as management deems appropriate. Shares may
be purchased in the open market or privately negotiated transactions,
with the timing and terms of such purchases to be determined by
management based on market conditions. There is no expiration date for
the repurchase program.
In the years ended July 31, 1999 and 1998, the Company purchased 459,550
and 59,400 shares of common stock at a cost of $472,000 and $88,000,
respectively.
STOCK OPTION PLANS:
Prior to 1997, the Company's stockholders approved the creation of an
Officers' Stock Option Plan and an Employees' Stock Option Plan. Under
the Officers' Stock Option Plan, 1,500,000 shares of the Company's common
stock are reserved for issuance to Company officers. The Employees' Stock
Option Plan provides for 2,500,000 shares of common stock which may be
issued to key employees, including officers. In 1997, the Company's
stockholders approved the creation of the 1996 Stock Option Plan which
reserves an additional 2,500,000 shares of the Company's common stock for
issuance to employees, officers and directors of the Company and others
who are involved in the continuing development and success of the Company
or its subsidiaries. The options, under all plans, are granted at not
less than 100% of the market value of the Company's common stock on the
date of grant.
The following is a summary of activity of outstanding stock options under
the Officers' Stock Option Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Balance, July 31, 1997 531,266 $0.68
Exercised (250,000) 0.53
------- -----
Balance, July 31, 1998 281,266 0.69
------- -----
Balance, July 31, 1999 281,266 $0.69
======= =====
Exercisable, July 31, 1999 281,266 $0.69
======= =====
</TABLE>
F13
<PAGE> 35
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
6. STOCKHOLDERS' EQUITY (CONTINUED):
STOCK OPTION PLANS (CONTINUED):
The following is a summary of information about the Officers' Stock Option
Plan options outstanding at July 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- --------------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.69 281,266 0.7 $ 0.69 281,266 $ 0.69
======== ======= === ====== ======= ======
</TABLE>
Activity of the Employees' Stock Option Plan is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Balance, July 31, 1997 2,188,734 $0.96
Exercised (50,000) 0.53
--------- -----
Balance, July 31, 1998 2,138,734 0.90
--------- -----
Balance, July 31, 1999 2,138,734 $0.90
========= =====
Exercisable, July 31, 1999 2,138,734 $0.90
========= =====
</TABLE>
The following is a summary of information about the Employees' Stock Option
Plan options outstanding at July 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- --------------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.69 1,338,734 1.3 $ 0.69 1,338,734 $ 0.69
1.25 800,000 2.3 1.25 800,000 1.25
----------- --------- --- -------- --------- -------
$ 0.69-1.25 2,138,734 1.7 $ 0.90 2,138,734 $ 0.90
=========== ========= === ======== ========= =======
</TABLE>
F14
<PAGE> 36
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
6. STOCKHOLDERS' EQUITY (CONTINUED):
STOCK OPTION PLANS (CONTINUED):
Activity of the 1996 Stock Option Plan is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WEIGHTED
AVERAGE
SHARES EXERCISE
PRICE
------ --------------
<S> <C> <C>
Balance, July 31, 1997 -- $ --
Granted 350,000 1.17
------- -----
Balance, July 31, 1998 350,000 1.17
------- -----
Balance, July 31, 1999 350,000 $1.17
======= =====
Exercisable, July 31, 1999 216,667 $1.17
======= =====
</TABLE>
The following is a summary of information about the 1996 Stock Option Plan
options outstanding at July 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- --------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 1.16-1.19 350,000 5.0 $ 1.17 216,667 $ 1.17
====== ==== ======= === ====== ======= ======
</TABLE>
F15
<PAGE> 37
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
6. STOCKHOLDERS' EQUITY (CONTINUED):
OTHER OPTIONS GRANTED:
Other options were granted to outside members of the Board of Directors and
to the Table Mountain Tribe. The options were granted at the market value
of the Company's common stock at the date of grant. Activity of other
options granted is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Balance, July 31, 1997 402,500 $ 0.93
Granted 75,000 1.19
Exercised (92,500) 0.58
------- -------
Balance, July 31, 1998 385,000 1.06
Canceled (50,000) 0.53
Exercised (32,500) 0.63
------- -------
Balance, July 31, 1999 302,500 $ 1.20
======= =======
Exercisable, July 31, 1999 267,500 $ 1.20
======= =======
</TABLE>
The following is a summary of information about other options outstanding
at July 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- --------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.69 62,500 0.4 $ 0.69 62,500 $ 0.69
1.19 75,000 9.0 1.19 40,000 1.19
1.25 115,000 1.0 1.25 115,000 1.25
1.75 50,000 1.0 1.75 50,000 1.75
------------ ------- --- ------ ------- -------
$ 0.69-1.75 302,500 2.9 $ 1.20 267,500 $ 1.20
============ ======= === ====== ======= =======
</TABLE>
F16
<PAGE> 38
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
6. STOCKHOLDERS' EQUITY (CONTINUED):
OTHER OPTIONS GRANTED (CONTINUED):
Statement of Financial Accounting Standards No. 123 - Accounting for
Stock-Based Compensation ("SFAS 123"), provides that companies may elect
to account for employee stock options using a fair value-based method or
continue to apply the intrinsic value-based method prescribed by
Accounting Principals Board Opinion No. 25 ("APB 25").
Under the fair value-based method prescribed by SFAS 123, all employee
stock option grants are considered compensatory. Compensation cost is
measured at the date of grant based on the estimated fair value of the
options determined using an option pricing model. The model takes into
account the stock price at the grant date, the exercise price, the
expected life of the option, the volatility of the stock, expected
dividends on the stock and the risk-free interest rate over the expected
life of the option. Under APB 25, generally only stock options that have
intrinsic value at the date of grant are considered compensatory.
Intrinsic value represents the excess, if any, of the market price of the
stock at the grant date over the exercise price of the options.
As permitted by SFAS 123, the Company accounts for these plans under APB
25, under which no compensation cost has been recognized.
The following table discloses the Company's proforma net income and net
income per share assuming compensation cost for employee stock options
and warrants had been determined using the fair value-based method
prescribed by SFAS 123.
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net income:
As reported $ 2,026,000 $ 3,069,000
Proforma 2,026,000 3,011,000
Earnings per share:
Basic:
As reported 0.13 0.20
Proforma 0.13 0.20
Diluted:
As reported 0.13 0.19
Proforma 0.13 0.19
</TABLE>
No options or warrants were issued in the year ended July 31, 1999.
F17
<PAGE> 39
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
6. STOCKHOLDERS' EQUITY (CONTINUED):
OTHER OPTIONS GRANTED (CONTINUED):
The fair value of each award under the stock option plans is estimated on
the date of grant using the Black-Scholes option pricing model. The
following assumptions were used to estimate the fair value of the options
and warrants with extension of exercise periods for the year ended July
31, 1998:
<TABLE>
<CAPTION>
EMPLOYEE STOCK
OPTION PLAN AND
OTHER OPTIONS
---------------
<S> <C>
Expected stock price volatility 75.5% and 76.1%
Expected option/warrant lives 5 and 10
Expected dividend yield --
Risk-free interest rates 5.6% and 5.8-5.9%
Weighted-average fair value of $ 0.76 and 0.99
warrants/options granted during year
</TABLE>
7. INCOME TAXES:
The income tax expense for 1999 and 1998 differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income
tax rate to pre-tax income as a result of the following differences:
<TABLE>
<CAPTION>
1999 % 1998 %
----------- -- ----------- --
<S> <C> <C> <C> <C>
Statutory federal tax rate $ 1,079,000 34 $ 1,691,000 34
State income tax, net of federal benefit 132,000 4 200,000 4
Other (64,000) (2) 14,000 --
----------- -- ----------- --
Effective tax expense $ 1,147,000 36 $ 1,905,000 38
=========== == =========== ==
</TABLE>
F18
<PAGE> 40
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
7. INCOME TAXES (CONTINUED):
The components of deferred tax benefits and assets at July 31, 1999 and
1998 and for the years then ended are comprised of:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
DEFERRED TAX BENEFITS:
Start-up costs of restaurant $ (73,000) $ --
Loss of unconsolidated subsidiary (243,000) --
Accrued vacations (6,000) (2,000)
--------- ---------
TOTAL DEFERRED TAX BENEFITS $(322,000) $ (2,000)
========= =========
DEFERRED TAX ASSETS:
Current:
Start-up costs of restaurant $ 15,000 $ --
Loss of unconsolidated subsidiary 110,000 --
Accrued vacations 10,000 4,000
--------- ---------
135,000 4,000
Long-term:
Start-up costs of restaurant 134,000 --
Loss of unconsolidated subsidiary 57,000 --
--------- ---------
191,000 --
--------- ---------
TOTAL DEFERRED TAX ASSETS $ 326,000 $ 4,000
========= =========
</TABLE>
8. SEGMENT INFORMATION:
Revenues, operating income (loss) (excluding amortization and depreciation
and minority interest), identifiable assets, capital expenditures, and
depreciation and amortization are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues:
Casino $ 6,660,000 $ 8,565,000
Restaurants 1,005,000 --
----------- -----------
$ 7,665,000 $ 8,565,000
=========== ===========
Operating income (loss):
Casino $ 4,875,000 $ 6,784,000
Restaurants (1,311,000) --
Death care (47,000) (61,000)
Corporate (1,254,000) (1,255,000)
----------- -----------
$ 2,263,000 $ 5,468,000
=========== ===========
</TABLE>
F19
<PAGE> 41
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
8. SEGMENT INFORMATION (CONTINUED):
<TABLE>
<S> <C> <C>
Identifiable assets:
Casino $ -- $15,456,000
Restaurants 3,221,000 --
Death care 3,912,000 3,750,000
Corporate 16,073,000 1,981,000
----------- -----------
$23,206,000 $21,187,000
=========== ===========
Capital expenditures:
Restaurants $ 1,899,000 $ --
Death care 4,000 148,000
Corporate 16,000 1,369,000
----------- -----------
$ 1,919,000 $ 1,517,000
=========== ===========
Depreciation and amortization:
Casino $ -- $ 72,000
Restaurants 34,000 --
Death care -- --
Corporate 33,000 50,000
----------- -----------
$ 67,000 $ 122,000
=========== ===========
</TABLE>
There were no intersegment sales during 1999 and 1998.
9. G & L ACQUISITION CORP.:
In September, 1996, the Company formed a new subsidiary, G & L Acquisition
Corp. ("G & L"). G & L sought business opportunities involving the
establishment or acquisition of a California card room, a gaming business
located on a ship which sails to international waters from home ports in
the United States or elsewhere and/or a leisure business ("Target
Business").
G & L sold additional shares of its common stock through a private
placement to "accredited investors" as such term is defined in Regulation
D under the Securities Act of 1933. The private placement resulted in the
sale of 1,992,000 shares at a price of $1.55 per share. The net proceeds
from the sale, after the costs of the offering, and the capital
contributed by the initial investors, totaled approximately $2,625,000.
The Company was not able to find, within an 18-month period as provided in
the private placement memorandum, an investment which met specific
investment criteria. As a result, in the year ended July 31, 1998,
investors were given a refund of their original investment. In connection
with the refund, the Company incurred investor reparation expenses of
$550,000. The Company also recorded a reduction of its capital in excess
of par by $1,559,000 and retained earnings by $36,000 in connection with
the refund. The transaction resulted in G & L becoming a wholly-owned
subsidiary at July 31, 1998. It was 64% owned at July 31, 1997.
F20
<PAGE> 42
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
10. COMMITMENTS AND CONTINGENCIES:
a) COMMITMENTS:
1) Operating leases:
The Company leases restaurants and office space and automobiles
under operating leases expiring in various years through 2009.
See Note 4.
Minimum future rental payments under non-cancelable operating
leases having remaining terms in excess of one year as of July
31, 1999 are:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C> <C>
2000 $ 315,000
2001 275,000
2002 187,000
2003 175,000
2004 175,000
Thereafter 831,000
-----------
$ 1,958,000
============
</TABLE>
Lease expense was $220,000 and $154,000 for the years ended July 31,
1999 and 1998, respectively.
2) Line of credit:
At July 31, 1999, the Company had a revolving, unsecured $1,000,000
line of credit which expires in December, 1999 and bears interest
at 1% above an indexed prime rate. At July 31, 1999, no funds were
outstanding on the line of credit.
b) CONCENTRATIONS OF CREDIT RISK:
The Company's cash, cash equivalents and restricted cash are on deposit
with two financial institutions which are FDIC insured on amounts up
to $100,000.
Through April 1999 virtually all the Company's revenues and related
receivables were derived from the consulting agreement with the Table
Mountain Casino. No receivables from the Table Mountain Casino are
reported in the July 31, 1999 consolidated balance sheet.
F21
<PAGE> 43
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
10. COMMITMENTS AND CONTINGENCIES (CONTINUED):
c) EMPLOYMENT AGREEMENTS:
In July, 1995, the Company entered into employment agreements with
certain key executives which expire in 2002. The employment agreements
provide for, among other things, annual base compensation,
participation in bonus plans and life insurance. The agreements also
contain severance provisions which provide for payments to the
executives in the event of their termination after a change in
control, as defined. The severance provisions provide for a
compensation payment equal to 2.99 times the annual salary paid to the
executive at the time of the change of control, as well as accelerated
payment of accrued bonuses payable to the executives under the
Company"s compensation policies and an additional payment based on the
number of stock options which the key executives have not exercised
within three months of their termination of employment. Aggregate
annual salaries guaranteed by the agreements are $769,000. At July 31,
1999, the estimated amount that would have been payable as severance
compensation under the agreements to these executives based on
compensation and stock options was $2,378,000.
11. Litigation with the Table Mountain Tribe:
In June 1999, the Company filed a lawsuit in the United States District
Court, Eastern District of California against the Table Mountain Tribe.
The Company has two contracts to provide gaming consulting services to
the casino. In May 1999, the Table Mountain Tribe voted to terminate both
contracts with the Company. The first contract, entered into in February
1996, was a buyout of an earlier contract and requires payments of
$350,000 per month for 48 months through January 2000. The second
contract, also entered into in February 1996 and subsequently amended, is
a consulting contract, which is to expire in June 2000. Since May 1999,
the Tribe has not honored the consulting and termination agreements the
Company has with the Tribe.
The lawsuit seeks to recover payments totaling $3,150,000 due under the
first contract and under the consulting contract, the Company seeks an
award of $790,000, which represents only the base fees due under the
consulting contract. The Company also seeks interest, court costs and
additional unspecified and "to be determined" consulting fees that would
have been due during the remainder of the consulting term.
The Table Mountain Tribe has filed a countersuit against the Company
claiming the consulting contracts are invalid, for several reasons, and
requesting restitution for all consulting fees paid to the Company during
the period of the contracts.
Management strongly believes the contracts are valid, enforceable and
comply with all aspects of the National Indian Gaming Act and intends to
vigorously seek to enforce their provisions.
F22
<PAGE> 44
AMERICAN VANTAGE COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1999 AND 1998
11. LITIGATION WITH THE TABLE MOUNTAIN TRIBE (CONTINUED):
A trial date has been set for September 2000.
12. RETIREMENT PLAN:
All of the Company's employees meeting certain eligibility requirements
participate in a simplified employee pension plan. Employer contributions
to the Plan are made on a discretionary basis and were $103,000 and
$104,000 for the years ended July 31, 1999 and 1998, respectively.
F23
<PAGE> 45
Exhibits Index
3.1 Articles of Incorporation and By Laws of the Company.(1)
3.2 Certificate of Amendment to Articles of Incorporation of the Company.(5)
3.3 Certificate of Amendment to Articles of Incorporation of the Company.(6)
4.1 Warrant Certificate between the Company and Jay H. Brown dated July 23,
1991.(2)
10.1 American Casino Enterprises, Inc. 1991 Officers Stock Option Plan, as
amended.(3)
10.2 American Casino Enterprises, Inc. 1992 Employees Stock Option Plan.(3)
10.3 American Casino Enterprises, Inc. 1996 Stock Option Plan.(3)
10.4 Management Consultant Contract dated March 27, 1993 between the Company
and the Table Mountain Tribe.(5)
10.5 Employment Agreement between the Company and Ronald J. Tassinari dated
July 20, 1995.(6)
10.6 Employment Agreement between the Company and Audrey K. Tassinari dated
July 20, 1995.(6)
10.7 Employment Agreement between the Company and Roy K. Keefer dated July 20,
1995.(6)
10.8 Letter Agreement dated September 11, 1995 between the Company and Table
Mountain Rancheria.(6)
10.9 Business Loan Agreement and Promissory Note dated November 15, 1994
between the Company and First Security Bank of Nevada.(6)
<PAGE> 46
10.10 Settlement Agreement, dated February 1, 1996, between the Company and
the NIGC.(7)
10.11 Termination Agreement, dated February 1, 1996, between the Company and
the Table Mountain Tribe. Exhibit A to the Termination Agreement is
set forth as Exhibit 99.1 below, and Exhibit B to the Termination
Agreement is incorporated herein by reference from Exhibit 10.3
above.(7)
10.12 Consulting Agreement, dated February 1, 1996, between the Company and
the Tribe.(7)
10.13 Option to Purchase and Escrow Instructions dated as of October 9,
1996, among the Company, Victorson & Associates, Inc., Fred Victorson
and United Title of Nevada.(8)
10.14 Purchase Agreement and Escrow Instructions dated October 9, 1996,
among Victorson & Associates, Inc., Fred Victorson and the Company.(8)
10.15 Joint Venture Agreement between the Company and the Table Mountain
Tribe, dated as of February 1, 1996.(8)
10.16 Funding and Loan Agreement between the Auburn Tribe and the Table
Mountain/ACES Joint Venture, dated February 1, 1996.(8)
10.17 Lease for the Company's offices dated March 14, 1996, between the
Company and Tropicana Trail Limited Partnership.(8)
10.18 Agreement to terminate Funding and Loan Agreement, dated March 10,
1998, between the Company and the Auburn Tribe.(9)
10.19 Promissory Note, dated March 10, 1998, between the Company and the
Auburn Tribe.(9)
10.20 Promissory Note and Loan Agreement, dated August 24, 1998, between the
Company and the Table Mountain Tribe.(9)
10.21 Promissory Note and Loan Agreement, dated August 24, 1998, between the
Company and United Security Bank.(9)
10.22 License Agreement, dated as of November 12, 1998, by and among Sitka,
the Company and World Championship Wrestling, Inc.
10.23 Lease for Restaurant Space, dated as of November 19, 1998, by and
between New Castle Corp. and Sitka.
10.24 Operating Agreement, dated November 12, 1998, by and between TT&T and
Vantage Bay.
10.25 Lease for Restaurant Space, dated November 12, 1998, by and between
Mandalay Corp. and Border Grill Las Vegas, LLC.
21.1 Subsidiaries of the Registrant
23.1 Consent of Bradshaw, Smith & Co.
27.1 Financial Data Schedules
99.1 Order of the United States Department of the Interior, dated February
1, 1996.(7)
- -----------
<PAGE> 47
<TABLE>
<S> <C>
(1) Incorporated by reference to Exhibit 3(1) to the Company's Annual Report on Form 10-K for July 31, 1981.
(2) Incorporated by reference to the Company's Annual Report on Form 10-K for July 31, 1991.
(3) Incorporated by reference to the Company's Registration Statement on Form S-8 (File No. 333-00905)
declared effective on February 13, 1996.
(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended July 31, 1994.
(5) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended July 31, 1995.
(6) Incorporated by reference to the Company's Current Report on Form 8-K dated February 1, 1996.
(7) Incorporated by reference from the Company's Current Report on Form 8-K dated October 9, 1996.
(8) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended July 31, 1996.
(9) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the year ended July 31, 1998.
</TABLE>
<PAGE> 1
Exhibit 10.22
LICENSE AGREEMENT
AGREEMENT dated as of the 12th day of November, 1998, by and between
World Championship Wrestling, Inc., One CNN Center, Atlanta, GA 30348-5366
("WCW") and Sitka Restaurant Group, Inc., 6787 West Tropicana, Suite 200, Las
Vegas, Nevada 89103, a wholly owned subsidiary of American Vantage Companies
("Licensee").
WITNESSETH:
WHEREAS, WCW is the owner of the licensed elements listed on Schedule 1
that is attached to this Agreement ("Licensed Elements"); and
WHEREAS, Licensee will, following execution of this Agreement, employ
personnel and consultants with expertise in the creation and development of
themed restaurant attractions; and
WHEREAS, Licensee desires to license from WCW the Licensed Elements for
use by Licensee in connection with the creation and development of one or more
themed restaurant attractions tentatively named the "Nitro Grill" or "WCW Nitro
Grill" all upon the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the covenants herein contained the
parties hereby agree as follows:
1 . License of Rights: (a) WCW hereby licenses to Licensee the right to create
and develop one or more themed restaurant attractions based on approved WCW
Licensed Elements in one or more themed restaurant attractions based solely on
WCW and tentatively named "Nitro Grill or WCW Nitro Grill" (Each WCW themed
restaurant attraction shall be referred to hereafter as "TR"). Each TR shall
consist of a full service restaurant which shall include one or more retail
boutiques only featuring WCW related merchandise (including any Authorized
Articles (as defined below) and merchandise produced by WCW licensed third
parties which shall hereafter be collectively referred to as "Merchandise") and
featuring one or more attractions and/or promotions based on the Licensed
Elements.
(b) The parties acknowledge and agree that the license of rights to
operate a TR using the Licensed Elements shall be non-exclusive; provided,
however, that WCW shall not license any other WCW only themed restaurants in the
Territory (as defined below in Paragraph 2) as long as Licensee is not in breach
or default of this Agreement for any of the TRs and Licensee is in compliance
with one or more of the following conditions:
(i) Licensee has opened at least one new TR by May 1, 1999; has
provided WCW with Notice (as defined below) by July 1, 2000 for a
second TR to be opened by December 31, 2000 and has by April 1, 2001
and April 1 each year thereafter committed to open a third and
subsequent TRs. Such commitment must consist of a written notice
("Notice") to WCW along with an advance payment of $25,000 The
1
<PAGE> 2
Notice must contain the location name and scheduled grand opening date.
The opening of such new TR must occur within six months of Notice;
(ii) Licensee is operating at least nine (9) TRs; or
(iii) Licensee has paid at least $2,750,000 in aggregate royalties in
respect of Gross Retail Sales (as defined in Exhibit "A") of TRs for
such preceding calendar year. Such royalties must have been actually
earned based on Gross Retail Sales and paid to WCW.
In the event that as of the end of any calendar year, Licensee is not in
compliance with at least one of the foregoing conditions, WCW's covenant not to
license any other themed restaurants solely featuring WCW in the Territory shall
terminate and WCW shall have the right to license to third parties (other than
Licensee) the right to use any or all of the Licensed Elements (including the
names Nitro Grill and WCW Nitro Grill) in connection with one or more WCW themed
restaurants, subject to the limitation set forth in Paragraph 1(c) below.
(c) If WCW is permitted during the License Term (as defined below) to
license to other third parties the right to open WCW themed restaurants as
provided in Paragraph 1(b) above, WCW shall not during the License Term permit
any third party licensee to open a TR in Nevada and/or in the same greater
metropolitan area as any TR currently in operation by Licensee, provided that
the TR then in operation by Licensee in Nevada or in such greater metropolitan
area, as the case may be, had annual Gross Retail Sales in the preceding
calendar year of at least $2,400,000.
(d) (i) In the event that Licensee desires to use the Licensed Elements
in connection with the manufacture, advertising, promotion and sale of
categories of merchandise produced by or at the direction of Licensee
("Authorized Articles"), Licensee shall so advise WCW. Licensee shall not have
the right to produce and sell any Authorized Articles unless Licensee has
obtained WCW's prior written approval. Licensee acknowledges and agrees that WCW
is engaged in a licensing program for the production of merchandise based on the
Licensed Elements and that WCW's right to approve Licensee's production and sale
of any Authorized Articles shall be exercised in the sole discretion of WCW. WCW
acknowledges that at all times during the License Term, clothing in the form of
shirts, t-shirts, hats and jackets shall be permitted Authorized Articles,
subject to WCW's approvals set out in Paragraphs A-5 and A-6.
(ii) In the event that WCW approves of Licensee's production and sale
of Authorized Articles, such Authorized Articles shall be nonexclusive and
subject to the terms and conditions set forth in Exhibit A. In addition,
Licensee may only sell such Authorized Articles at the TRs unless Licensee first
obtains WCW's written approval of the locations and countries where such
Authorized Articles are intended to be sold. In the event that WCW approves of
Licensee producing and selling Authorized Articles, WCW shall specify in its
written approval the term during which Licensee may sell such Authorized
Articles. If no term is specified by WCW when giving such written approval,
Licensee shall be deemed to have the right to sell such Authorized Articles
during the TR Term (as defined below).
2
<PAGE> 3
(e) Licensee agrees that the Excalibur TR (as defined below) shall be
open for food and retail service to the public and fully functional by no later
than May 1, 1999. Failure by Licensee to open the Excalibur TR by May 1, 1999
shall constitute a material breach of this Agreement.
2. Territory: Licensee may exercise the rights herein granted throughout the
world, subject to the following limitations. If Licensee desires to have any
partners for purposes of developing any TRs outside of the United States, such
partners are subject to WCW approval. In the event that Licensee does not open
at least one (1) TR in a country outside the United States by no later than
three (3) years from April 1, 1999 or in the event that Licensee does not open
at least five (5) TRs by no later than seven (7) years from April 1, 1999, the
Territory shall be limited to (i) the United States, its territories and
possessions and (ii) those countries (exclusive of Canada) outside the United
States in which TRs have been opened and are still in operation as of the
applicable measuring date. In such event, WCW shall have the right to open TRs
or license to third parties the right to open TRs in any country outside the
United States in which Licensee has not opened a TR as of the applicable
measuring date. Notwithstanding anything herein to the contrary, if Licensee has
opened a TR in Canada and Licensee loses its exclusivity for countries outside
the United States as provided above in this Paragraph 2, Licensee's exclusivity
in Canada shall be limited to the greater metropolitan area of any city in
Canada where Licensee has opened a TR; WCW may open or license third parties to
open a TR in any location in Canada outside of the greater metropolitan area(s)
in Canada where Licensee is operating a TR.
3. Term:
(a) The Term of this License Agreement ("License Term") shall commence
on the earlier of May 1, 1999 or the opening of the first TR and shall continue
for so long as Licensee is continuing to open new TRs, subject to prior
termination by WCW as provided in Exhibit A and to the limitations set forth in
the next sentence. The License Term of this Agreement shall terminate and
Licensee shall no longer have the right to open new TRs if Licensee (i) fails to
open one new TR by May 1, 1999 (ii) fails by July 1, 2000 to commit to open a
second TR; (iii) fails to open the second TR by December 31, 2000; (iv) fails by
April 1, 2001 and April 1 in each year thereafter to commit to open a third and
subsequent TRs; or (v) fails to satisfy the terms of any commitment it has made
to open a TR within the six (6) month timeframe set out in Paragraph 1(b)(i).
In the event, Licensee has satisfied either of the conditions specified in
Paragraphs 1(b)(ii) or 1(b)(iii) during the previous calendar year, section
3(a)(iv) shall not apply.
Upon the termination of the License Term, Licensee shall only have the right to
open new non-exclusive TRs with the prior written approval of WCW, which
approval may be granted or withheld in WCW's sole discretion. Any termination of
the License Term, however, as provided above in this Paragraph 3(a) shall not
affect Licensee's rights to continue to operate existing TRs under the terms of
the Agreement.
(b) Each TR that is opened by Licensee hereunder shall have a specific
Term for such TR ("TR Term"). The TR Term shall commence as of the date that
Licensee has opened such TR but in not event later than three months after
Licensee has signed a lease for such TR ("TR Lease") and shall conclude twelve
(12) months thereafter.
3
<PAGE> 4
Licensee shall have the right to renew the TR Term for a specific TR for
additional one (1) year periods for the remainder of the term of the TR Lease
provided that (i) Licensee delivers the written notice and makes the payment to
WCW that is required pursuant to Paragraph 4(d) below, (ii) Licensee has
complied with Paragraph 6(g) of this Agreement, and (iii) Licensee is not
otherwise in material breach of any of its duties and obligations pursuant to
this Agreement, which material breach has not been cured within the applicable
cure periods set forth herein. After the expiration of the last of the renewal
periods for each TR, Licensee's right to renew the TR Term for such TR shall be
subject to the mutual agreement of Licensee and WCW.
(c) In the event, Licensee intends not to renew a TR term or intends to
close any existing TR, Licensee shall provide WCW with one hundred and twenty
(120) days written notice prior to the closing and the expiration of the current
term. Concurrently with the notice, Licensee shall provide WCW with commercially
reasonable terms, subject to any underlying lease restrictions or landlord
buy-outs, to take control of the TR or relicense the TR to another licensee.
Subject to the terms of Paragraph A-18, WCW shall at all times have the right
of first negotiation and last refusal should Licensee seek to sell, transfer or
close a TR.
4. Compensation:
(a) Licensee shall pay WCW the sum of Twenty Five Thousand Dollars
($25,000) on execution of this License Agreement and Two Hundred and Twenty Five
Thousand Dollars ($225,000) by December 31, 1998. The Twenty Five Thousand
Dollar ($25,000) payment on signature of this License Agreement and the Two
Hundred Twenty Five Thousand Dollar ($225,000) payment by December 31, 1998
shall be a non-refundable advance of Two Hundred Fifty Thousand Dollars
($250,000) against royalties payable to WCW pursuant to Paragraph 4(c) with
respect to the first TR that Licensee is obliged to open no later than May 1,
1999 in the Excalibur Hotel in Las Vegas, Nevada ("Excalibur TR"). In the event
that Licensee does not sign the Excalibur TR Lease by December 31, 1998 or does
not open the first TR in the Excalibur Hotel in Las Vegas, Nevada by May 1,
1999, WCW shall have the right to terminate this License agreement by delivering
a written notice of termination to Licensee. In the event that WCW terminates
this License Agreement as provided in the preceding sentence, WCW shall retain
the Two Hundred and Fifty Thousand Dollar ($250,000) non-refundable advance on
royalties.
(b) Licensee further agrees to pay WCW an advance payment of Two
Hundred and Fifty Thousand Dollars ($250,000) for any additional TR in two
payments consisting of Twenty Five Thousand Dollars payable on delivery of
Notice and Two Hundred Twenty Five Thousand Dollars ($225,000) payable on the
earlier of the opening of the TR or six (6) months after the date of Notice.
Said Two Hundred and Fifty Thousand Dollars ($250,000) advance payment shall be
applicable against the royalties payable with respect to such TR pursuant to
Paragraph 4(c).
(c) Licensee shall pay WCW the following royalties in respect of Gross
Retail Sales made at each TR, as follows:
4
<PAGE> 5
(i) Food and Beverages (including complimentary tabs to the
extent the TR is compensated by a third party --
("Complimentary Tabs") sold at any TR -- a royalty of one and
a half percent (1.5%) of Gross Retail Sales;
(ii) Merchandise sold at any TR -- a royalty of eleven percent
(11%) of Gross Retail Sales;
(iii) Payments by Customers with respect to Fee-Based
Attractions and/or Promotions (including WCW pay per view
events) at any TR -- a royalty of five percent (5%) of Gross
Retail Sales;
(d) In the event that Licensee wishes to exercise its right to extend
the TR Term for an additional one (1) year period as permitted by Paragraph 3(b)
above, Licensee may do so provided Licensee is not in default or breach
hereunder by notifying WCW in writing of Licensee's intention to renew not less
than thirty (30) days prior to the expiration of the then current TR Term and by
making a non-refundable advance payment at such time to WCW of Two Hundred and
Fifty Thousand Dollars ($250,000). The foregoing non-refundable advance payment
shall be applicable against the royalties payable by Licensee to WCW for such TR
with respect to the upcoming additional year of the TR Term. If Licensee fails
to extend the TR Term for any TR in accordance with Paragraph 3(b) and this
Paragraph 4(d), the TR Term for such TR shall terminate and shall not be subject
to any further renewal rights.
5. Promotional Support:
(a) Upon Licensee's written request, WCW shall provide the Excalibur TR
with at least one (1) WCW talent (the "WCW Talent") for one (1) appearance per
week for three (3) weeks of each month during the Excalibur TR Term. WCW shall
use commercially reasonable efforts to provide an average of one (1) A, two (2)
B and one (1) C talent as classified by WCW and amended by WCW from time to time
for the Excalibur appearances. Licensee shall pay all costs of travel and
lodging for such WCW Talent visiting the Excalibur TR for promotional purposes.
Licensee shall provide the WCW Talent with the same class of airfare as the WCW
Talent is entitled to when travelling on business for WCW. The Schedule of
Appearances for WCW Talent shall be subject to WCW's approval; provided,
however, that Licensee shall not schedule any visits by WCW Talent on "Nitro",
"Thunder" or Pay-Per-View nights. Licensee agrees that Licensee shall not sell
tickets or charge admission for such times when WCW Talent are making
promotional appearances at Excalibur TR. In the event that any WCW Talent is
unavailable for a confirmed appearance, WCW will use reasonable efforts to
provide alternative WCW Talent for such appearance. If it is not possible to
provide alternative WCW Talent, the parties shall agree upon an alternative date
for another appearance by such WCW Talent.
(b) WCW shall provide to Licensee taped highlights of previous WCW
matches which Licensee may, in its discretion, exhibit in the TRs.
(c) With respect to any TRs opened by Licensee after Excalibur TR, WCW
and Licensee shall work in good faith to develop schedules for WCW Talent
appearances for
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said new TRs. Any such subsequent appearance schedules shall be subject to the
approval of WCW and to the availability of WCW Talent to make personal
appearances.
(d) Licensee shall have the right to broadcast WCW pay per view events
("PPV Events") at TRs provided that Licensee acquires the necessary consents and
makes payment of any and all fees that WCW or its licensees charge to commercial
establishments broadcasting PPV Events and Licensee otherwise complies with any
and all other terms and conditions applicable to commercial establishments
broadcasting the PPV Events.
6. Approvals: (a) Licensee acknowledges and agrees that for the purpose of
protecting the goodwill associated with the Licensed Elements, and in order to
maintain the quality assurance associated therewith, WCW shall have a right of
approval, which approval shall not be unreasonably withheld, over any elements
of the TRs which affect the guest experience including but not limited to the
following elements:
(i) the site of any TR;
(ii) the design and decor of any TR;
(iii) any and all Licensed Elements incorporated in the
design and/or decor of any TR;
(iv) any Merchandise, Fee Based Attractions and/or
Promotions offered at any TR;
(v) restaurant uniforms to the extent they use any of the
Licensed Elements;
(vi) menu items, to the extent they use any of the
Licensed Elements;
(vii) any elements of the TR and any materials or
merchandise created by or at Licensee's direction to
the extent they include any of the Licensed Elements;
and
(viii) use of all WCW logos, trademarks, service marks and
copyrights.
(b) Licensee shall submit to WCW for approval by WCW each proposed
restaurant site, any blueprints, plans, sketches, mock-ups and/or models of each
restaurant design and decor, samples, sketches, mock-ups or models of all decor
and/or Authorized Articles that incorporate any Licensed Elements, blueprints,
plans, sketches and models of all Fee Based Attractions and/or Promotions, and
samples of restaurant uniforms. WCW will evaluate all such items submitted for
approval in good faith and will use commercially reasonable efforts to notify
Licensee of WCW's approval or disapproval of any such elements within two (2)
weeks of WCW's receipt of such elements. The parties acknowledge and agree,
however, that any approval or disapproval which cannot be made solely by WCW
(e.g., approvals or disapprovals of elements involving a WCW Talent who has a
right of approval in such WCW Talent's contract with WCW) may take longer than
two (2) weeks. In the event that WCW disapproves of any items with respect to
which WCW has a right of approval, WCW undertakes to use commercially reasonable
efforts to specify in writing the reasons for such disapproval so that Licensee
may modify such items that have been disapproved. Any such modification of any
item shall again be subject to the approvals process set forth herein and in
Exhibit A.
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(c) Licensee agrees that the food, service and decor for each TR shall
be consistent with the food, service and decor standards of quality of a first
class Las Vegas restaurant. Licensee shall permit WCW or its representatives to
inspect the quality of the food and beverages sold at any TR. WCW or its
representatives shall perform such inspections no more frequently than once per
month; provided, however, that if any such inspection reveals a deficiency in
quality, WCW or its representatives may inspect such TR more frequently than
once per month. In the event that the food, service and decor at any TR is in
WCW's reasonable opinion less than the quality of a first class Las Vegas
restaurant, WCW shall provide Licensee with written notice of the same and
Licensee shall take all appropriate action within thirty (30) days to improve
the quality of such food and beverages.
(d) Licensee further agrees to perform all maintenance necessary at
each TR so that each TR shall remain a first class establishment during the TR
Term. WCW shall have the right for purposes of protecting the goodwill
associated with the Licensed Elements and in order to maintain the quality
associated therewith, to inspect each TR not more than once every six (6)
months, to make certain that the decor, restaurant interior and exterior,
furniture and fixtures, dishes and silverware, customer bathrooms, Promotions
and Fee Based Attractions (collectively the "Elements") are clean and well
maintained. In the event that WCW's reasonable inspection reveals that any of
the foregoing Elements at any TR is not clean and/or well maintained, WCW shall
notify Licensee in writing and Licensee shall within thirty (30) days of
Licensee's receipt of such written notice take appropriate steps to remedy any
deficiencies in any Elements at any TR set forth in WCW's written notice to
Licensee.
(e) In the event WCW provides written notice to Licensee of any
deficiencies under Paragraphs 6(c) and 6(d) and Licensee fails to remedy the
deficiencies within thirty (30) days of said written notice, WCW shall have the
right at anytime after the thirty (30) notice period (the "Notice Period") and
before the deficiencies are corrected to terminate the TR Term(s) of the TR(s)
with the uncorrected deficiencies. Upon termination, the terms of Exhibit "A"
shall apply and WCW shall be without liability to Licensee as to the terminated
TR. In the event Licensee has used its best efforts but is unable to correct the
deficiencies within the Notice Period, Licensee shall, before the expiration of
the Notice Period, provide WCW with written notice of its efforts to correct the
deficiency during the Notice Period, a firm timeline for completion of the
corrections and a request for a specific time extension to finish the
corrections. The Notice Period for corrections shall only be extended upon
Licensee's written request and WCW's written approval, said approval not to be
unreasonably withheld. Should Licensee fail to complete the corrections within
the specified timeline, WCW shall have the right to terminate as set out above
in this section.
(f) Licensee acknowledges and agrees that WCW's rights of approval set
forth in this Agreement and in Exhibit A are solely to preserve the integrity of
the Licensed Elements and that nothing herein is, or shall be deemed to be, (i)
Licensee engaging in the business of selling or distributing goods or services
under a marketing plan or system prescribed in substantial part by WCW; or (ii)
WCW exerting or having authority to exert to a significant degree of control
over Licensee's method of operation, business organization,
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promotional activities, management, marketing plan or business affairs. Licensee
further acknowledges that WCW is not in the restaurant business and is under no
obligation to train or assist Licensee in the methods of operation, management,
marketing, or business affairs of any TR hereunder.
(g) Licensee shall have the right to approve the initial term of each
TR Lease (including the Excalibur TR Lease) as well as all provisions in the TR
Lease relating to the renewal and/or extension of the initial term (collectively
"Lease Term Provisions") of such TR Lease. Prior to signing any TR Lease
Licensee shall submit to WCW for approval the TR Lease Term Provisions. WCW
shall have five (5) business days to approve or disapprove of the Lease Term
Provisions and if WCW approves of the Lease Term Provisions with respect to any
TR, the TR Term may be renewed for the duration of the TR Lease (including
renewals and extensions of the initial term of the TR Lease) provided that
Licensee has complied with Paragraphs 3(b) and 4(d). Licensee further agrees
that each TR Lease shall contain a provision explicitly stating that the
landlord may not sue or otherwise seek redress against WCW and/or its parent or
affiliates for any act or omission, or any liability or any obligation of
Licensee under the TR Lease.
7. Compliance with Regulations: Licensee acknowledges and agrees that it shall
be Licensee's sole responsibility to operate the TR on a day-to-day basis.
Licensee shall obtain all licenses and permits that may be necessary to operate
the TR. Licensee further agrees that Licensee shall operate the TR in accordance
with all federal, state and municipal laws, ordinances and/or regulations. In
addition to the insurance provisions set forth in Exhibit A, Licensee shall
further obtain all Worker's Compensation insurance that may be necessary in
order for Licensee to conduct the operations of each TR. Licensee agrees to
indemnify and hold harmless WCW and its affiliates and their respective
officers, directors, employees and agents from and against any and all claims,
demands, causes of action, damages and expenses (including reasonable attorneys'
fees) that may arise from Licensee's operation of any TR, including, without
limitation, any and all claims, demands, causes of action, damages and expenses
(including reasonable attorneys' fees) based on Licensee not being in compliance
with any federal, state or municipal laws, ordinances and/or regulations or
Licensee not having all necessary licenses and permits to operate any TR. The
insurance and indemnity provisions of this paragraph shall be in addition to
those set out in Exhibit "A."
8. Ownership/Guarantee: American Vantage Companies hereby unconditionally
guarantees all payments due from Licensee to WCW hereunder as well as any of
Licensee's indemnity and insurance provisions set out in paragraph 7 hereof and
paragraph A-11 of the standard terms and conditions. WCW shall at all times
have the right of approval over any investors in the TRs, including any
individual or company which has any control, ownership rights or financial stake
in the TRs. This Agreement and any of the underlying rights or participations
may not be sold, transferred or assigned without the prior written consent of
WCW.
9. Notices: Payments and statements to WCW shall be made or given to the Atlanta
address specified on the first page of this Agreement. All other notices to WCW
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shall be sent to WCW at the Atlanta address specified on the first page of this
Agreement, with a copy to the same address, Attention: Turner Sports/Legal
10. Standard Terms: The attached "Exhibit A" (Standard Terms and Conditions) are
incorporated by this reference into the terms of this License Agreement
(collectively referred to herein as "Agreement"). If any provisions set forth
above in this Agreement conflicts (or is in construed to conflict) with any
provision of the Standard Terms and Conditions, the provisions hereinabove set
forth will control.
11. Credit Terms: Execution of this Agreement by WCW is contingent upon WCW's
satisfaction with Licensee's financial ability to fulfill the financial
commitments stated herein. To this end, Licensee agrees to furnish any financial
information requested by WCW to confirm Licensee's credit status. Licensee
agrees to comply with WCW's request(s) pursuant to this Paragraph before and
during the entire term of this Agreement.
IN WITNESS WHEREOF, the parties have executed this License Agreement as
of the date first above written.
WORLD CHAMPIONSHIP WRESTLING, INC. SITKA RESTAURANT GROUP, INC.
("WCW") ("Licensee")
By: /s/illegible By: /s/ Karl Rogers
------------------------------ -----------------------------
Title: President, Turner Sports Title: President
------------------------------ -----------------------------
Agreed To and Accepted with Respect
To Paragraph 8:
AMERICAN VANTAGE COMPANIES
By: /s/ Audrey K. Tassinari
------------------------------
Title: Executive Vice-President
------------------------------
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SCHEDULE "1"
"LICENSED ELEMENTS" means only the names and static visual likenesses of the
following specific fictional characters, only as depicted in the entertainment
properties created by WCW for broadcast including WCW Nitro, WCW Saturday Night,
WCW Worldwide, Thunder and WCW pay per view programming (the "Programs")
(excluding dialogue, story lines and plot elements from the Pictures, except as
specifically agreed in writing and in advance by WCW). It is specifically
understood and agreed that the character names, likenesses and other elements
referred to above (including, if applicable, the names of actors, voice-over
artists, and/or other elements listed in this Schedule "1") are included within
the definition of "Licensed Elements" (i) only to the extent of WCW's ownership
or control thereof, and (ii) only as specifically depicted in and as part of the
Program(s). Licensee understands and acknowledges that nothing herein grants
Licensee the right to use sound bites, voices, music, or other audio effects
from the Program(s). If Licensee wishes to use any such elements, Licensee must
separately procure the necessary rights, and any rights, clearance or related
fees arising from same shall be at Licensee's sole expense. WCW reserves the
right to amend the list of Licensed Elements from time to time to keep the list
current with WCW licensing rights.
LICENSED ELEMENTS
All WCW & NWO Logos
All WCW & NWO Trademarks and Servicemarks
Nitro Grill
Adams, Brian Duncum, Jr., Bobby
Adams, Chris El Dandy
Armstrong, Brad Elizabeth, Miss
Anderson, Arn (BC) El Vampiro
Bagwell, Marcus Enos, Mike
Barbarian (Faces of Fear) Flair, Ric
Beautiful Bobby Flynn, Jerry
Benoit, Chris Fortune, Chad
Bigelow, Bam Bam Fuller, Rick
Bischoff, Eric Fullington, James
Blaze, Bobby Gambler
British Bulldog - (Davey Boy Smith) Garza, Hector
Cobra Giant
Curtis, Mark (Referee) Glacier
Ciclope Goldberg, Bill
Damien Gorgeous, George
Darsow, Barry Guerrera, Juventud
Dibiase, Ted (Announcer) Guerrero, Chao Jr.
Dillion, JJ (BC) Guerrero, Eddie
Disciple, The Hacksaw Jim Dugan
Disco Inferno Hall, Scott
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Hamilton, Jr., Joe Prince laukea
Harlem Heat - Booker T. Psychosis
Harlem Heat - Stevie Ray Putski, Scoff
Hart, Bret "The Hitman" Raven
Hart, Jimmy (Manager) Reese, Ron
Heenan, Bobby (Announcer) Renegade
Hennig, Curt Riggs, Scotty
High Voltage - Kaos Rude, Ravishing Rick (Announcer)
High Voltage - Ruckus Saturn
Hogan, Hulk Savage, Randy
Horowitz, Barry Schiavone, Tony (Announcer)
Hudson, Scott (Announcer) Silver King
Jannetty, Marty Smiley, Norman
Jericho, Chris Steiner, Rick
Kaz Steiner, Scott
Kelly, Kevin Sting
Kidman, Billy Super Calo
Konnan Swinger, Johnny
Kouragous, Evan Tenay, Mike (Announcer)
Lane,Lenny Torborg, Dale
La Parka Ultimo Dragon
Lex Luger "The Total Package" Van Hammer
Lizmark, Jr. Villano IV
Lodi Villano V
Long, Teddy - (manager) Vincent
Malenko, Dean Wallstreet, Michael
Marshall, Lee (Announcer) Watts, Eric
Meng (Faces of Fear) Windham, Barry
Miller, Ernest Windham, Kendall
Minton, Chip Wrath
Mitchell, James (manager) Wright, Alex
Morris, Hugh Zbyszko, Larry (Announcer)
Mortis
Mysterio, Rey
Nash, Kevin
Nitro Girls - Kimberly Page
Nitro Girls - Chae An
Nitro Girls - Melissa Bellin
Nitro Girls - Vanessa Bozman
Nitro Girls - Teri Byrne
Nitro Girls - Amy Crawford
Nitro Girls - Rebecca Curci
Norton, Scott
Okerlund, Mean Gene (Announcer)
Onoo, Sonny (Manager)
Page, Diamond Dallas
Patrick, Nick (Referee)
Penzer, David (Ring Announcer)
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EXHIBIT "A"
LICENSE AGREEMENT
STANDARD TERMS AND CONDITIONS
These Standard Terms and Conditions shall be deemed fully incorporated
in the License Agreement ("Underlying Agreement") to which this Exhibit "A" is
attached, and these Standard Terms and Conditions and the Underlying Agreement
shall hereinafter be collectively referred to as the "Agreement." All terms
shall, unless expressly provided to the contrary herein, have the same
respective meanings as set forth in the Underlying Agreement. Unless expressly
provided to the contrary herein, to the extent that any provision of these
Standard Terms and Conditions conflicts with any provision of the Underlying
Agreement, the Underlying Agreement shall control.
A-1 LICENSE
WCW hereby grants to Licensee, and Licensee hereby accepts, a license
to utilize the Licensed Elements in connection with the TRs, any Authorized
Articles and for the advertising and promotion of TRs and any Authorized
Articles in the Territory during the License Term, upon and subject to all of
the terms and conditions of this Agreement. Any and all rights not expressly
granted to Licensee hereunder are expressly reserved by WCW and may be exercised
and exploited freely by WCW at any time, and Licensee covenants and agrees that
it shall not exercise, or authorize or permit others to exercise, any rights
with respect to the Licensed Elements other than the limited and specific rights
licensed hereunder. It is understood that the license granted hereunder does not
grant Licensee any rights with respect to the use of the Licensed Elements in
connection with premium promotions or other giveaways unless specifically
approved in writing by WCW.
A-2 ACCOUNTINGS
(a) Gross Retail Sales. For the purposes of this Agreement, Gross
Retail Sales shall be defined as gross sales of food, beverages, merchandise,
fee based attractions and other items normally considered retail sales in a TR
by License or any of its affiliates or associated or subsidiary companies,
without any deductions whatsoever (including, without limitation, freight,
taxes, uncollectible accounts, manufacturing, distribution, advertising,
marketing, promotion, license fees, costs of goods sold and employee wages).
(b) Monthly Statements. Not later than thirty (30) days after the
initial opening of any TR and promptly on the 15th day of every month thereafter
during the TR Term, Licensee shall furnish to WCW complete and accurate
statements (certified to be accurate by Licensee) showing the Gross Retail Sales
by such TR of Food and Beverages (including Complimentary Tabs for which
Licensee is compensated), Merchandise and Fee
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Based Attractions and Promotions. All statements shall be prepared by Licensee
in a format approved by WCW. Monthly reports shall be prepared separately for
each TR.
(c) Royalty Payments. Royalty payments due hereunder shall be due in
conjunction with and shall accompany the monthly statements required by
Paragraph A-2(b). Licensee shall also include the TR location on the face of the
royalty check. If the TR Term is extended beyond the term specified in Paragraph
3(b) of the Underlying Agreement, royalty payments which exceed the total
advance shall not be credited toward any advance which is payable with respect
to the extension period. All payments shall be in U.S. funds. Licensee shall
pay, and hold WCW forever harmless from, all taxes, customs, duties, levies,
imposts or any other charges now or hereafter imposed or based upon the sale,
possession or use of the Licensed Elements (including but not limited to sales,
use, inventory, income and value added taxes on sales), which charges shall not
be deducted from WCW's royalties. All monies payable to or received by Licensee
from the exploitation of the rights granted herein shall be held by Licensee in
trust for WCW's account to the extent of WCW's entitlement to such monies as set
forth in this Agreement.
(d) Timeliness. All payments hereunder shall be made to WCW (or its
authorized representative) at the address set forth in the Underlying Agreement
within the time and in the manner specified herein, it being intended and agreed
that the time within which Licensee is required to make payment in accordance
with the terms hereof is of the essence of this Agreement and any failure so to
do on the part of Licensee shall constitute an event of default hereunder in
accordance with Paragraph A-13 below. In addition to any other rights WCW may
have in the event of such a default, Licensee agrees to pay interest to WCW on
any sums which have not been received by WCW within thirty (30) days following
the due date. Such interest shall accrue from said date and shall be payable at
the rate of two percent (2%) over the prime rate as published in the Wall Street
Journal on the date the payment is due or the maximum rate allowed by law.
A-3 BOOKS AND RECORDS
Licensee shall keep accurate books of account and records in a form
meeting the generally accepted standards of the profession of certified public
accountants covering all transactions relating to the license hereby granted,
and WCW and its authorized representatives shall have the right at all
reasonable business hours, and upon reasonable notice, to examine and audit said
books of account and records and all other documents and materials in the
possession or under the control of Licensee with respect to the subject matter
and terms of this Agreement, and shall have free and full access thereto for
said purposes and for the purpose of taking extracts therefrom. Upon demand of
WCW, but not more than twice per calendar year, Licensee shall at its own
expense furnish to WCW a detailed statement prepared by an independent certified
public accountant, or certified to be accurate by a duly authorized official of
Licensee, showing the Gross Retail Sales of each TR with respect to Food and
Beverages, Merchandise, and Fee Based Attractions and Promotions. If an audit
reveals that Licensee has misrepresented or under reported any item bearing upon
the royalties or other compensation due or payable to WCW, then, in addition to
recomputing and making immediate payment of the sums due based on the true items
together with interest thereon at the rate at which WCW is entitled to borrow
from its principal lending institution (after giving effect to compensating
balance
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requirements and any commitment fees), Licensee shall pay costs and expenses
incurred by WCW for the audit and checking and attorney's fees incurred by WCW
in connection therewith or in connection with enforcing the collection thereof
if the difference between the actual sums due hereunder is in excess of three
percent (3%) of the sums previously paid. All books of account and records shall
be kept available for at least seven (7) years in Licensee's principle place of
business.
A-4 EXCLUSIVITY
(a) (i) If, and only if, the Underlying Agreement specifies that
Licensee's license hereunder is exclusive, WCW shall not, except as otherwise
provided herein, grant any other licenses effective during the License Term or
TR Term for the use of the Licensed Elements in connection with themed
restaurants based solely on WCW or the Licensed Elements. Notwithstanding the
foregoing, nothing in this Agreement shall be construed to prevent WCW from
granting any licenses for the use of the Licensed Elements other than as
provided herein, or from utilizing the Licensed Elements in any manner
whatsoever other than as provided herein, regardless of the extent to which such
use or utilization may be competitive with the license granted hereunder.
(ii) If the Underlying Agreement specifies that Licensee's
license hereunder is non-exclusive, then WCW shall be free to utilize, or to
grant any licenses to third parties to utilize, the Licensed Elements in any
manner for any purposes whatsoever except as provided for in the terms of the
License.
(b) In all cases, WCW expressly reserves all rights whatsoever relating
to the promotion, sale and other exploitation of the Licensed Elements and any
merchandise with respect to the same at (i) the MGM Grand Hotel/Casino complex
in Las Vegas, Nevada, and (ii) concert halls, arena shows, circuses, stadiums,
theaters, theme parks and all other public performance venues at which
television programs or motion pictures containing elements included in the
Licensed Elements or derivative works (e.g., concerts, musicals and other stage
plays, motion picture sequels, audio-visual performances, etc.) based thereon
are exhibited or performed, and (iii) retail outlets or any other facilities
owned, operated or controlled by WCW (or its parent, subsidiaries or
affiliates), and (iv) catalogs, internet websites, direct response television
advertisements or similar direct mail sales methods and publications featuring
WCW products created or published by WCW (or its parent, subsidiaries, or
affiliates). The foregoing venues, retail outlets, other facilities, and
catalogs are collectively referred to herein as "WCW Venues". Licensee
acknowledges that WCW Venues are expressly excluded from the Licensed Territory
and that Licensee has not been granted any rights with respect to the
exploitation of themed restaurant rights to WCW and the Licensed Elements at the
WCW Venues. Licensee further acknowledges and agrees that WCW may itself
exercise themed restaurant rights to WCW and the Licensed Elements at the WCW
Venues and may grant others licenses to exploit themed restaurant rights to WCW
and the Licensed Elements at WCW Venues, provided, however, that during such
period that Licensee has the exclusive right to open TRs in the Territory, WCW
may only exercise or license themed restaurant rights at the WCW Venues if such
themed restaurants at the WCW Venues offer foods, beverages and merchandise in
conjunction with WCW exhibitions or other events held at such WCW Venues and are
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not otherwise operating as TRs on days when WCW exhibitions or other events are
not held.
(c) Notwithstanding anything contained herein, WCW reserves the worldwide right
to utilize the Licensed Elements and Programs in conjunction with any type of
restaurant facility, provided the restaurant is not solely based on WCW and the
Licensed Elements and further that any such facility will not use the terms
"Nitro Grill," "WCW" or "nWo" in its name within the Territory.
A-5 QUALITY OF MERCHANDISE
(a) Any Authorized Articles produced by Licensee shall be of high
standard and of such style, appearance and quality as to be adequate and suited
to their exploitation to the best advantage and to the protection and
enhancement of the Licensed Elements and the goodwill pertaining thereto. The
Authorized Articles shall be manufactured, sold, distributed, promoted and
advertised in accordance with all applicable governmental, regulatory,
professional and industry-wide codes, statutes, rules and regulations.
(b) Licensee shall submit to WCW and WCW shall have absolute approval
of the Authorized Articles, and the cartons, containers, advertising,
promotional, packaging and wrapping materials bearing any Licensed Elements
("Collateral Materials") at all stages of the development and application
thereof. Licensee may not manufacture, use, sell, advertise, promote, or
distribute any Authorized Articles or Collateral Materials until and unless
Licensee has received WCW's prior written approval. Any and all items submitted
by Licensee to WCW pursuant to this Paragraph A-5 shall be at Licensee's expense
and shall clearly indicate the TR location associated with each such submission.
After each Authorized Article or Collateral Material has been finally approved
pursuant to this Paragraph, Licensee shall not depart therefrom in any material
respect without first submitting to WCW a prototype, layout or sample of the
modified article or material and obtaining WCW's prior written consent to such
modification. Any such approval by WCW shall not constitute waiver of WCW's
rights or Licensee's duties under any provision of this Agreement.
(c) Any item submitted to WCW shall not be deemed approved unless and
until WCW has approved it in writing.
(d) At the time of first distribution of each Authorized Article,
Licensee shall submit to WCW twelve (12) free samples of each such item to WCW
and a royalty shall not be payable on such samples. Upon WCW's annual written
request thereafter, Licensee shall furnish twelve (12) free additional random
samples of each Authorized Article being distributed by Licensee hereunder,
together with any cartons, containers and packing and wrapping material used in
connection with such distribution for quality control by WCW. It being agreed
that WCW shall have the right, if quality problems are encountered as a result
of the examination of samples, to take such additional samples as frequently as
WCW in its sole discretion deems desirable in an effort to assure that proper
quality control has been established. Moreover, WCW shall have the right to have
its representatives visit the plant or plants where the Authorized Articles are
produced and where the Collateral Materials and the like are printed or produced
in order to determine
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whether or not proper quality controls are being exercised. Notwithstanding
anything herein to the contrary, in the event that any Authorized Article has a
per unit wholesale cost of $100 or more, Licensee shall not be obliged to supply
the number of free samples set forth above. Rather, Licensee shall provide three
(3) free samples of any Authorized Article having a per unit wholesale cost in
excess of $100. WCW shall also have the right to purchase from Licensee
additional Authorized Articles whose per unit wholesale cost is in excess of
$100 for their cost of manufacture. No royalty shall be payable on such samples
or such purchased additional Authorized Articles whose per unit wholesale cost
is in excess of $100. In the event that any Authorized Article has a per unit
wholesale cost of $500 or more, WCW and Licensee shall work in good faith to
approve such Authorized Article without Licensee having to deliver free samples
of such Authorized Article to WCW.
(e) In the event Licensee is not the manufacturer of the Authorized
Articles, Licensee shall, subject to WCW's prior written consent, be entitled to
engage a third party manufacturer to make and produce the Authorized Articles
exclusively for Licensee, provided that Licensee will obtain from such
manufacturer and deliver to WCW a duly executed letter in the form contained in
Exhibit "B" hereto. The use by Licensee of any such manufacturer shall not
affect Licensee's obligations hereunder and Licensee shall be responsible for
ensuring that such manufacturer complies with the provisions of this Agreement.
A-6 LABELING
(a) As a condition to WCW's authorization of the public distribution of
items bearing reproductions of the Licensed Elements, including, without
limitation, Authorized Articles sold under this license and advertising,
promotional and display material therefor, all such items shall bear copyright
and trademark notices as set forth below in Paragraph A-6(c) as well as any
other legal notices which WCW may from time to time reasonably direct.
(b) In the event that any Authorized Article is marketed in a carton,
container and/or packing or wrapping material employing the Licensed Elements,
such notice shall also appear upon the said carton, container and/or packing or
wrapping material. Each and every tag, label, imprint or other device containing
any such notice and all advertising, promotional or display material bearing the
Licensed Elements shall be submitted by Licensee to WCW for its written approval
prior to use by Licensee in accordance with Paragraph A-5 above. Any such
approval by WCW shall not constitute waiver of WCW's rights or Licensee's duties
under any provision of this Agreement.
(c) Form of Copyright and Trademark Notice: Each Authorized Article
shall bear copyright and trademark notices in the following form (or in such
other form as WCW may hereafter designate, for prospective implementation, by
notice to Licensee):
19XX (C) & (TM) WCW, Inc.
The packaging containing the Authorized Articles described in Paragraph 2 herein
shall bear the following copyright and trademark notices:
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Copyright: (C)19XX World Championship Wrestling, Inc. A Time Warner Company,
All Rights Reserved
Trademark: WCW(TM) and NWO(R) are trademarks of World Championship
Wrestling, Inc.
All characters and character names depicted, are trademarks of
or used under License to World Championship Wrestling, Inc.
A-7 TECHNICAL AND PROMOTIONAL MATERIAL
WCW reserves the right to require Licensee to pay for the cost of film
footage or other technical materials which Licensee may request for which WCW
from time to time might charge. All technical materials involving the Licensed
Elements or any reproduction thereof, notwithstanding their invention, creation
or use by Licensee, shall be and remain the property of WCW, and WCW shall be
entitled to use same and to license the use of same by others provided such use
does not conflict with the terms of this Agreement. "Technical materials" shall
mean all artwork and designs, pictures, separations, textual material, screens,
films, proofs and any and all materials used in the creation, production and/or
reproduction of the Authorized Articles.
A-8 DISTRIBUTION
(a) Commencing not later than the opening of the first TR and
thereafter during the License Term and TR Term (including any extensions
thereof), Licensee shall diligently and continuously operate the TRs and sell
and distribute Authorized Articles in the TRs. Licensee's failure (except as
otherwise provided herein) to open the Excalibur TR by the May 1, 1999 will
result in immediate damage to WCW. In such a case, in addition to all other
remedies available to it hereunder, WCW may immediately terminate this Agreement
by giving written notice to Licensee.
(b) Licensee shall sell to WCW such quantities of the Authorized
Articles as WCW shall request at as low a rate and on as favorable terms as
Licensee sells similar quantities of the Authorized Articles to the general
trade.
A-9 GOODWILL AND PUBLICITY
(a) Licensee acknowledges that particular and substantial goodwill
values are associated with the Licensed Elements and that said Licensed Elements
and names and all rights therein and goodwill pertaining thereto belong
exclusively to WCW. Licensee further acknowledges that said Licensed Elements
and names have secondary meanings in the mind of the public and that the value
thereof cannot readily be fixed in amounts or sums of money. Licensee shall not
by any act or omission jeopardize such goodwill, and any goodwill developed
hereunder shall accrue to the benefit of WCW. Licensee acknowledges the
necessity of protecting WCW's name, copyrights and trademarks generally and
specifically to conserve the goodwill and good name of WCW and the Licensed
Elements, and the right of WCW to supervise or intervene in the activities of
Licensee in connection therewith.
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(b) WCW shall have the right, but shall not be under any obligation, to
use the Licensed Elements and/or the name of Licensee so as to give the Licensed
Elements, Licensee, WCW and/or WCW's television programs and/or motion pictures
full and favorable prominence and publicity. WCW shall not be under any
obligation whatsoever to broadcast or exhibit, or to continue broadcasting or
exhibiting, any television program or motion picture or use the Licensed
Elements or any person, character, symbol, design or likeness or visual
representation thereof in any medium, nor shall WCW be restricted in any way
whatsoever from producing and distributing derivative works which contain or are
derived from the Licensed Elements or any element or component part thereof.
A-10 WARRANTIES AND REPRESENTATIONS
(a) By WCW. WCW has the right and power to enter into and perform this
Agreement, and has taken all steps necessary and appropriate to authorize the
execution and performance hereof. WCW owns or controls all rights necessary to
grant Licensee the rights granted to it hereunder.
(b) By Licensee. Licensee has the right and power to enter into and
perform this Agreement, and has taken all steps necessary and appropriate to
authorize the execution and performance hereof. Licensee will not act in any
manner that is inconsistent with the provisions hereof.
A-11 INDEMNIFICATION AND INSURANCE
(a) Subject to the full performance by Licensee of all of its
obligations hereunder, WCW hereby indemnifies Licensee and undertakes to defend
Licensee against and hold Licensee harmless from all claims, suits, liabilities,
losses, damages, penalties, costs and expenses (including reasonable attorneys
fees) which may be suffered by or obtained against Licensee arising solely out
of the use by Licensee of the Licensed Elements in strict accordance with this
Agreement.
(b) Licensee hereby indemnifies WCW and undertakes to defend WCW
against and hold WCW harmless from any and all claims, suits, liabilities,
losses, damages, penalties, costs and expenses (including reasonable attorneys
fees, which may include, without limitation, an allocation for in-house counsel)
of any nature which may be suffered by or obtained against WCW arising from (i)
any allegedly unauthorized use of any patent, design, mark, process, idea,
method or device by Licensee (none of the same being included in the Licensed
Elements) in connection with any TR or any Authorized Articles or any other
alleged action or omission by Licensee constituting a breach by Licensee of any
term or provision of, or representation, warranty, covenant or agreement made by
Licensee under, this Agreement, and (ii) any alleged defects in the Authorized
Articles produced and sold by Licensee, (iii) any alleged inadequacy or failure
to perform by Licensee of any agreement or render any service, or (iv) personal
damages or injury resulting from any use of the Authorized Articles produced and
sold by Licensee or from the operation of the TR including claims based on the
sale of food, beverages and the operation of any attractions or promotions at
the TR.
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(c) Licensee shall obtain, at its own expense, a comprehensive general
liability insurance policy (including products liability coverage) for the
entire License Term and TR Term (including any extensions thereof) including
coverage for contractual liability (applying to the terms and conditions of this
Agreement), product liability, personal injury liability and advertiser's
liability, and including a vendor's liability endorsement in favor of WCW. Said
policy shall be written by a recognized insurance company which has qualified to
do business in the State of New York and in any State where a TR is located
which has an A. M. Best Company rating of "A" or better in the latest edition of
Best's Insurance Guide and Key Ratings, and shall provide for minimum combined
single limit of liability coverage of not less than $3,000,000 for each
occurrence. As proof of such insurance, fully paid certificates of insurance
naming WCW as an insured party will be submitted by Licensee for WCW's prior
approval before any TR is opened or any Authorized Articles are distributed,
advertised or sold, and at the latest within thirty (30) days prior to the
opening of the first TR: World Championship Wrestling, Inc., One CNN Center, Box
105366, Atlanta, GA 30348-5366, Attn: Director of Risk Management. Any proposed
change in such certificates of insurance shall be submitted to WCW for its prior
approval, and Licensee shall furnish WCW with a copy of the then prevailing
certificate of insurance. For purposes of Licensee's indemnity and insurance
policy coverage under this Paragraph, "WCW" shall also include the officers,
directors, shareholders, agents and employees of WCW and its related entities,
as well as any person(s) the use of whose name or likeness may be licensed
hereunder.
A-12 PROTECTION OF WCW'S RIGHTS
(a) Licensee acknowledges that WCW owns or controls the trademarks,
service marks and copyrighted works which underlie this license including the
names "Nitro Grill and WCW Nitro Grill" and Licensee shall not during the term
hereof or thereafter attack the rights of WCW in the Licensed Elements or any
trademarks based thereon, regardless of the basis of such attack and regardless
of whether the same relates to title or validity. Licensee shall at no time use
or authorize the use of any trademark, trade name or other designation identical
with or confusingly or colorably similar to the Licensed Elements.
(b) Licensee shall cooperate fully and in good faith with WCW for the
purpose of securing and preserving the rights of WCW (or any grantor of WCW) in
and to the Licensed Elements. WCW may commence or prosecute any claims or suits
in its own name or in the name of Licensee or join Licensee as a party thereto.
Licensee shall immediately notify WCW in writing of any infringements or
imitations by others of the Licensed Elements on articles similar to those
covered by this Agreement, and WCW shall have the sole right to determine
whether or not any action shall be taken on account of any such infringements or
imitations. Licensee shall not institute any suit or take any actions on account
of any such infringements or imitations without first obtaining the written
consent of WCW to do so.
(c) Licensee shall utilize all necessary and adequate security measures
to prevent the loss, theft, destruction or unauthorized exploitation of the
technical materials and/or Licensed Elements delivered to Licensee, and Licensee
shall immediately report to WCW any such loss, theft, destruction or
unauthorized exploitation upon its gaining
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knowledge thereof. Upon the expiration of the License Period (or earlier
termination of this Agreement) Licensee shall, at WCW's election, either erase
or destroy all technical and advertising materials relating to the Authorized
Articles and provide WCW with satisfactory proof of such erasure or destruction,
or deliver such material to WCW via such method as WCW specifies, on a charges
collect basis.
(d) Licensee will be deemed to have simultaneously assigned,
transferred and conveyed to WCW any trade rights, trademark, service mark or
copyright, equities, goodwill, titles or other rights in and to the Licensed
Elements, including any copyright in an article derived from the Licensed
Elements, which may have been obtained or created by Licensee during the term
hereof pursuant to any endeavors covered hereby. Any such assignment, transfer
or conveyance shall be made without any consideration other than the mutual
covenants and considerations of this Agreement. If any materials bearing the
Licensed Elements (or any element or component part thereof) utilized by
Licensee hereunder on or in connection with the Authorized Articles were not
created or owned by WCW, it is an essential condition of this Agreement that
Licensee shall do all that is necessary to ensure that such materials achieve
copyright protection and that valid title to such copyright is, at the earliest
possible moment, transferred to WCW. To this end, Licensee shall, among other
things, enter into a contract with anyone not directly in its employ who creates
such materials bearing the Licensed Elements, or any element or component part
thereof, which states that such materials are created as works made for hire, as
such term is defined in the U.S. Copyright Act, 17 U.S.C. Section 101 et seg.,
or otherwise contractually bind such person to execute all such documents as may
be necessary to transfer valid title in the copyright in such materials to WCW
and shall arrange for the execution of such documents and their transmittal to
WCW at the earliest possible moment provided such documents are prepared at
WCW's expense. WCW agrees that in the event that any patented or proprietary
intellectual property rights of Licensee are being used in conjunction with any
Licensed Element, WCW, if so requested by Licensee, shall execute and deliver
any documents that may be reasonably necessary to confirm that Licensee is the
owner of Licensee's patented or proprietary rights not involving any of the
Licensed Elements.
(e) No later than thirty (30) days following the date of the first
interstate shipment by Licensee of any Authorized Article, Licensee shall
provide WCW, free of cost, with sufficient evidence of the date of first
shipment of the Authorized Article in interstate commerce and a description of
the use of the Licensed Elements in relation to the Authorized Article along
with identical samples of each such Authorized Article including packaging. Such
evidence and sample shall be sent to WCW at its address at World Championship
Wrestling, Inc., Attn: Legal Department, One CNN Center, Atlanta, Georgia 30303.
(f) Licensee shall fully cooperate with WCW in undertaking the
registration of any copyright, trademark, service mark or other intellectual
property registration or filing with respect to the Licensed Elements and/or
Authorized Articles as requested by WCW in writing, and all such registrations
shall be in WCW's name (or such other name as WCW designates). Such registration
shall be handled by attorneys selected or approved by WCW. In the event of any
registration relating to the Licensed Elements by Licensee in its own name or
that of any third party, such registration shall be (i) deemed to be for WCW's
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benefit and (ii) held in trust for WCW by Licensee, and (iii) Licensee shall
bear all costs, expenses, damages and loss occasioned by such unauthorized
registration and/or WCW's correction of same.
(g) Licensee shall execute and deliver to WCW, in such form as WCW
shall reasonably request, any and all documents which may be necessary or
desirable to assist WCW in recording Licensee as a registered user of the
Licensed Elements (as trademark and/or servicemark) in the Licensed Territory,
if appropriate. Upon or after the expiration or termination of this Agreement,
Licensee shall execute and deliver to WCW, in such form as WCW shall reasonably
request, any and all documents which may be necessary or desirable to cancel the
recordation of Licensee as a registered user of the Licensed Elements in the
Licensed Territory; provided, however, that if WCW elects first to complete the
recordation of Licensee as a registered user, Licensee shall also provide any
and all documents which may be necessary or desirable to achieve this purpose.
(h) Licensee shall not commingle on any Authorized Articles (or in the
advertising and promotion thereof) names, characters and/or likenesses from any
individual motion picture or television program which are included in the
Licensed Elements with those associated with any other motion picture or
television program (whether or not containing elements included in the Licensed
Elements) without WCW's prior written consent.
(i) WCW may, in its absolute discretion, withdraw any element of the
Licensed Elements, or any component part thereof, from the terms of this
Agreement if WCW determines that the exploitation thereof hereunder would or
might violate or infringe or reasonably tend to violate or infringe the
copyright, trademark or other rights of third parties, or subject WCW to any
liability, or violate any law, court order, government regulation or other
ruling of any governmental agency, or if, on account of the expiration or sooner
termination of an agreement between WCW and a third party from whom WCW has
obtained certain underlying rights relating to the exploitation of the Licensed
Elements hereunder or otherwise, WCW shall no longer have the right to act in
the capacity herein contemplated on behalf of any third party or parties, or if
WCW determines that it cannot adequately protect its rights in the Licensed
Elements under the copyright, trademark or other laws of the Licensed Territory;
provided, however, that in the event of any such withdrawal, WCW shall reimburse
Licensee its actual, out-of-pocket cost of any Authorized Articles (bearing such
withdrawn Licensed Element) which were produced, but not sold, prior to
Licensee's receipt of notice of such withdrawal. Any such withdrawal shall not
constitute grounds for termination of this Agreement unless all elements and
component parts of the Licensed Elements are simultaneously withdrawn by WCW.
(j) In the event that WCW requests that Licensee make any filings with
respect to the Licensed Elements, the Merchandise or the Authorized Articles
with the U.S. Copyright Office and/or the U.S. Patent and Trademark Office, WCW
shall pay Licensee, or reimburse Licensee for, the costs and expenses of any
such filings.
A-13 DEFAULT
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The following shall be events of default hereunder: if Licensee (i)
becomes the subject of any bankruptcy proceeding which is not discharged or
stayed within sixty (60) days after the commencement thereof, files a voluntary
petition in bankruptcy, makes an assignment for the benefit of creditors, or a
receiver, liquidator or trustee is appointed for its affairs, breaches any other
agreement with WCW, (ii) fails to make payment of royalties, advances and or any
other sums payable to WCW pursuant to this Agreement when due or fails to
perform any of its other material obligations hereunder or otherwise breaches
any representation, warranty, covenant or agreement referred to or contained in
this Agreement, and does not fully cure such failure or breach within ten (10)
business days after receipt of written notice thereof from WCW, in the case of
failure to make payments, or within fifteen (15) business days in the case of
other failure or breach, (iii) discontinues its business or loses any license or
authorization required to permit Licensee to perform fully its obligations
hereunder pursuant to an action of any duly constituted governmental, judicial
or legislative authority. Upon any default, WCW may, in addition and without
prejudice to any other rights it may have, terminate this Agreement, in which
event the entire unpaid balance of all royalties and advances accrued to WCW's
account hereunder shall immediately become due and payable. In the event this
Agreement is so terminated, Licensee, its receivers, representatives, trustees,
agents, administrators, successors, and/or assigns shall not have the right to
sell, exploit or in any way deal with or in any Licensed Elements or Authorized
Articles or any carton, container, packing or wrapping material, advertising,
promotional or display materials pertaining thereto, except with and under the
special consent and instructions of WCW in writing, which they shall be
obligated to follow.
A-14 FORCE MAJEURE
This license shall terminate in the event that any act of God, fire,
flood, public disaster, or any action, rule, regulation, requirement or order of
any governmental authority or any other cause or reason beyond the control of
the parties renders performance impossible and one party so informs the other in
writing of such causes and its desire to be so released. In such event, all
royalties on sales theretofore made shall become immediately due and payable and
neither the advance on royalties nor any portion thereof shall be repayable.
A-15 EFFECT OF TERMINATION OR EXPIRATION
(a) Upon and after the expiration or sooner termination of this
license, (i) all rights licensed to Licensee hereunder shall forthwith revert to
WCW, (ii) if the Underlying Agreement specifies that the license granted
hereunder is an exclusive license, WCW shall be free to license others to use
the Licensed Elements in connection with the themed restaurants and in the
manufacture, sale, distribution and promotion of the Authorized Articles in the
Licensed Territory (it being acknowledged that WCW has the full and complete
right so to do during the License Term and TR Term (as the same may be extended)
if the license granted hereunder is a non-exclusive license) subject to any
applicable limitations contained in the Underlying Agreement; (iii) Licensee
shall refrain from further use of the Licensed Elements or any further
reference, direct or indirect, thereto or to anything deemed by WCW to be
similar to the Licensed Elements, in connection with Licensee's business
products, except as permitted in Paragraph A-17
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below; (iv) Licensee shall immediately cease all manufacture, distribution and
promotion of the Authorized Articles; and (v) all rights in the Licensed
Elements and the goodwill connected therewith shall remain the property of WCW.
It shall not be a violation of any right of Licensee if WCW should at any time
during the License Term and TR Term (as the same may be extended) enter into
negotiations with another to license the use of the Licensed Elements in respect
of themed restaurants and in Authorized Articles within the Territory provided
that, in the event that the license granted to Licensee hereunder is an
exclusive license, it is contemplated that such prospective license shall
commence after termination of this Agreement. In the event of any termination
hereunder, no monies or other consideration which WCW may receive in respect of
any licenses of the Licensed Elements within or outside the Territory shall be
deemed in mitigation of, or be otherwise offset, credited or applied against,
any sums payable to WCW pursuant to this Agreement.
(b) Upon expiration or termination of any TR Term with respect to a TR
("Terminated TR"), Licensee shall cease advertising such Terminated TR as a WCW
themed restaurant. Licensee shall, as promptly as practicable, remove all of the
Licensed Elements and Merchandise from the Terminated TR, even if such removal
of the Licensed Elements requires the destruction of furniture and fixtures at
such Terminated TR. WCW shall have the right to inspect such Terminated TR
within thirty (30) days after the expiration or termination of the TR Term for
such Terminated TR to verify that all Licensed Elements and Merchandise have
been removed from such Terminated TR.
(c) Upon expiration or termination, Licensee shall, at WCW's election,
deliver to WCW or destroy any and all TR elements or materials created for the
TR which utilize any of the Licensed Elements, except as otherwise provided in
Paragraph A-17.
A-16 FINAL STATEMENT
Thirty (30) days before the expiration of any TR Term (as the same may
be extended) and in the event of its sooner termination, ten (10) business days
after receipt of notice of termination, a statement showing the number and
description of Authorized Articles on hand or in process shall be furnished by
Licensee to WCW as well as an accounting of the year to date Gross Retail Sales.
WCW shall have the right to take a physical inventory and perform an accounting
to ascertain or verify such inventory and statement. Refusal by Licensee to
submit to such physical inventory and accounting by WCW and/or failure by
Licensee to render the final statement and accounting as and when required by
this provision, shall result in a forfeiture by Licensee of Licensee's right to
dispose of its inventory (as provided by the next paragraph hereof), WCW
retaining all other legal and equitable rights WCW may have in the
circumstances.
A-17 DISPOSAL OF INVENTORY
(a) Licensee shall not at any time manufacture Authorized Articles in
excess of those reasonably anticipated to meet normal customer requirements.
Provided that Licensee is in compliance with the foregoing, after termination or
expiration of the TR Term, Licensee, except as otherwise provided in this
Agreement, may dispose of Authorized Articles which are on hand at the time the
notice of termination is received or upon the expiration date, whatever the case
may be. Licensee's right to dispose of
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Authorized Articles pursuant to the preceding sentence, shall be in effect for
the ninety (90) day period after termination or expiration of the applicable TR
Term ("sell-off period"). Licensee's sell-off right shall be on a non-exclusive
basis and shall be subject to the advance and royalty payments being up-to-date
for the current period and payments and statements being made and furnished for
the sell-off period in accordance with Paragraph A-2 above. Licensee shall not
be authorized to dispose of such excess inventory to the extent that it exceeds
fifteen percent (15%) of the total number of Authorized Articles sold by such TR
during the previous year of the TR Term, without WCW's prior written consent.
Any such sell-off shall be made only at other TRs operated by Licensee.
Notwithstanding anything to the contrary herein, Licensee shall not sell or
dispose of any Authorized Articles after any expiration or termination of this
license which Licensee has on stock as a result of the failure of Licensee to
affix notice of copyright, trademark or servicemark registration or any other
notice to the Authorized Articles, cartons, containers or packing or wrapping
material or advertising, promotional or display material or because of the
departure by Licensee from the quality and style approved by WCW pursuant to
Paragraph A-5 above. All applicable royalties shall be paid on Authorized
Articles sold during the sell-off period within fifteen (15) days following the
expiration of said sell-off period. Any Authorized Articles which have not been
sold as of the expiration of the sell-off period shall, at WCW's election, be
delivered to WCW or destroyed.
(b) Licensee acknowledges that its failure (except as otherwise
provided herein) to cease the sale, distribution or promotion of the Authorized
Articles or any class or category thereof after the termination or expiration of
the TR Term or its failure to remove all Licensed Elements and Merchandise from
any Terminated TR will result in immediate and irremediable damage to WCW and to
the rights of any subsequent licensee. Licensee acknowledges and admits that
there is no adequate remedy at law for such failure to cease manufacture, sale,
distribution or promotion of Authorized Articles or to cease using the Licensed
Elements in any Terminated TR, and Licensee agrees that in the event of such
failure, WCW shall be entitled to equitable relief by way of temporary and
permanent injunctions and such other and further relief as any court with
jurisdiction may deem just and proper, other provisions to the contrary
elsewhere herein notwithstanding.
A-18 ASSIGNMENT
WCW reserves the right to assign this Agreement to any third party and
to hypothecate or pledge this Agreement as collateral for any purpose. In the
event of any such assignment, Licensee shall pay the advances and royalties due
hereunder as directed by WCW. This Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of WCW. The license herein
granted is personal to Licensee and this Agreement may not be assigned,
transferred, sublicensed, pledged, mortgaged or otherwise encumbered, in whole
or in part, by Licensee either voluntarily or by operation of law or as part of
a merger, consolidation or otherwise without WCW's prior written consent.
A-19 NOTICES
All notices, statements, accountings and other documents required to be
given or delivered hereunder shall be given in writing either by personal
delivery (including Federal Express & Airborne Express), by certified mail which
delivery is evidenced by a signed
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receipt, or by facsimile transmission unless otherwise specified. Licensee's and
WCW's respective addresses for notice purposes shall be as set forth in the
Underlying Agreement unless either party notifies the other as provided herein
that notices to such party should be sent to a different address. All such
notices shall be sufficiently given when the same shall be deposited, so
addressed, postage prepaid in the mail, or when the same shall have been sent by
facsimile transmission or personally delivered to the recipient. The date of
said facsimile transmission or personal delivery, or the date which is three (3)
business days following the date of said mailing, shall be deemed to be the date
of the giving of such notice, except statements and payments to WCW hereunder
and notice of change of address, which shall be deemed effective only upon
actual receipt thereof.
A-20 FURTHER DOCUMENTS
Licensee shall execute, verify, acknowledge, deliver and file any
formal assignments, recordations and any and all other documents which WCW may
prepare and reasonably call for to give effect to any of the provisions of this
Agreement relating to copyrights, trademarks and/or other intellectual property
rights. If Licensee fails so to do within ten (10) days after WCW requests such
execution, verification, acknowledgment, delivery or filing, Licensee hereby
irrevocably appoints WCW its attorney-in-fact (which appointment shall be deemed
a power coupled with an interest), with full powers of substitution and
delegation, to execute, verify, acknowledge and deliver any such assignments,
recordations and/or such other documents relating to copyrights, trademarks
and/or other intellectual property rights.
A-21 MISCELLANEOUS PROVISIONS
In the event any provision of this Agreement shall be found to be
contrary to any law or regulation of any federal, state or municipal
administrative agency or body, the other provisions of this Agreement shall not
be affected thereby but shall notwithstanding continue in full force and effect.
If any legal action or other proceeding is brought for the enforcement of this
Agreement or as a result of a breach, default or misrepresentation in connection
with any of the provisions of this Agreement, the successful or prevailing party
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in such action or proceeding, in addition to any other relief to which such
party may be entitled. No waiver by either party hereto of any breach or default
by the other party shall be construed to be a waiver of any other breach or
default by such other party. Resort to any remedies referred to herein shall not
be construed as a waiver of any other rights and remedies to which either party
is entitled under this Agreement or otherwise, nor shall an election to
terminate be deemed an election of remedies or a waiver of any claim for damages
or otherwise. This Agreement may not be altered or modified except in writing
signed by the party to be charged with such alteration or modification. This
Agreement constitutes the entire understanding between the parties with respect
to the subject matter hereof and all prior understandings, whether oral or
written, have been merged herein. Irrespective of the place of execution or
performance, this Agreement shall be governed, construed and enforced in
accordance with the laws of the State of Georgia applicable to agreements
entered into and to be wholly performed therein, and Licensee hereby consents to
the exclusive jurisdiction of the courts of the State of Georgia and United
States courts located in the State of Georgia in connection with any suit,
action or proceeding brought by
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Licensee arising out of or related in any manner to this Agreement. Licensee
agrees that the service of process by mail shall be effective service of same
and that such service shall have the same effect as personal service within the
State of Georgia and result in jurisdiction over Licensee in the appropriate
forum in the State of Georgia. Nothing herein contained shall constitute a
partnership between, or joint venture by, the parties hereto or constitute
either party the employee or agent of the other, and Licensee shall have no
right or power to obligate or bind WCW in any manner whatsoever. This Agreement
is not for the benefit of any third party and shall not be deemed to give any
right or remedy to any third party whether referred to herein or not. Paragraph
headings as used in this Agreement are for convenience only and are not a part
hereof, and shall not be used in any manner to interpret or otherwise modify any
provision of this Agreement. As used herein, the word "person" means any
individual, firm, partnership, association, corporation or other entity.
END OF STANDARD TERMS AND CONDITIONS
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EXHIBIT "B"
Date
Attn: Licensing Manager
World Championship Wrestling, Inc.
One CNN Center, Box 105366
Atlanta, GA 30348
Re:
Dear Sirs,
This letter will serve as notice to you that pursuant to Paragraph A-5(e) of the
Licensee Agreement (the "Agreement") dated between World
Championship Wrestling, Inc. ("WCW") and the Licensee (as defined therein), we
have been engaged as the manufacturer for the manufacture of the Articles as
defined in the Agreement. We hereby acknowledge that we have received and read
copy of Exhibit "A" to that License Agreement containing the Standard Terms and
Conditions and understand the terms and conditions set forth in the said
Agreement and hereby agree to be bound by those provisions of the said Agreement
which are applicable to us as manufactures of the Articles, including but not
limited to your right, pursuant to Paragraphs A-3 and A-5 of the Agreement, to
examine our books of account and records and manufacturing facility with respect
to the manufacture of the Articles.
We further agree that we will abide by all relevant instructions from WCW and/or
Licensee with respect to the inclusion of markings and notices on the Authorized
Articles and the packaging and wrapping materials or cartons or containers
therefor.
We understand that our engagement as the manufacture for the Authorized Articles
is subject to your written approval. We request, therefore, that you sign the
space below, thereby showing your acceptance of our engagement as aforesaid.
- ---------------------------------------
For and on behalf of
Agreed and accepted:
- ---------------------------------------
World Championship Wrestling, Inc.
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<PAGE> 1
EXHIBIT 10.23
LEASE
FOR
RESTAURANT SPACE
By and Between
NEW CASTLE CORP.,
A NEVADA CORPORATION,
AS LANDLORD
And
SITKA RESTAURANT GROUP, INC.,
A NEVADA CORPORATION,
AS TENANT
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1 ....................................................................1
DEFINITIONS...........................................................1
1.1 Affiliate.........................................................1
1.2 Commencement Date.................................................1
1.3 Floor Area .......................................................1
1.4 Gross Sales ......................................................1
1.5 Lease Year .......................................................2
1.6 Person ...........................................................3
1.7 Permitted Closure Period..........................................3
1.8 Project ..........................................................3
1.9 Rent Commencement Date............................................3
1.10 Rules and Regulations............................................3
1.11 Tenant Improvements..............................................3
1.12 TI Costs ........................................................3
1.13 TI Cost Statement ...............................................3
ARTICLE 2 ....................................................................3
LEASE OF PREMISES AND CONSTRUCTION ...................................3
2.1 Lease ............................................................3
2.2 Construction of Premises..........................................4
2.3 Relocation .......................................................4
2.4 Remodeling .......................................................5
ARTICLE 3 ....................................................................5
TERM .................................................................5
3.1 Duration .........................................................5
ARTICLE 4 ....................................................................7
MINIMUM RENT .........................................................7
4.1 Minimum Rent......................................................7
ARTICLE 5 ....................................................................8
PERCENTAGE RENT ......................................................8
5.1 Percentage Rent ..................................................8
5.2 Annual Adjustment ................................................8
5.3 Tenant Reports ...................................................8
5.4 Tenant Records....................................................9
5.5 Audit.............................................................9
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ARTICLE 6 ...................................................................10
ADDITIONAL RENT .....................................................10
6.1 Additional Rent .................................................10
6.2 Payments by Landlord ............................................10
ARTICLE 7....................................................................10
USE AND OPERATION....................................................10
7.1 Designated and Exclusive Use....................................10
7.2 Insurance Requirements: Governmental Regulations................10
7.3 Restrictions on Use ............................................11
7.4 Business Operations ............................................12
7.5 Tradename ......................................................12
7.6 Employees ......................................................12
7.7 Security .......................................................14
7.8 Regulatory Authorities .........................................15
7.9 Restrictive Covenant ...........................................15
7.10 Landlord Comps .................................................16
7.11 Room Charges ...................................................17
7.12 Beverage Providers .............................................17
ARTICLE 8 ...................................................................17
INSURANCE ...........................................................17
8.1 Tenant's Insurance ..............................................17
8.2 Landlord's Insurance ............................................18
8.3 Waiver of Subrogation ...........................................18
ARTICLE 9 ...................................................................19
TAXES ...............................................................19
9.1 Additional Taxes.................................................19
9.2 Sales Tax........................................................19
9.3 CET.... .........................................................19
ARTICLE 10 ..................................................................20
SERVICES ............................................................20
10.1 Services Provided...............................................20
10.2 Service Charge..................................................21
10.3 Service Interruption............................................21
ARTICLE 11 ..................................................................21
REPAIRS AND MAINTENANCE .............................................21
11.1 Repairs and Maintenance by Landlord.............................21
11.2 Repairs and Maintenance by Tenant...............................22
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ARTICLE 12 ..................................................................22
ALTERATIONS AND IMPROVEMENTS.........................................22
12.1 Alterations and Improvements....................................22
12.2 Trade Fixtures..................................................23
12.3 Liens ..........................................................23
ARTICLE 13 ..................................................................24
ADVERTISING .........................................................24
13.1 Advertising.....................................................24
ARTICLE 14 ..................................................................24
RULES AND REGULATIONS................................................24
14.1 Rules and Regulations ..........................................24
ARTICLE 15...................................................................25
ASSIGNMENT AND SUBLETTING ...........................................25
15.1 Assignment and Subletting ......................................25
15.2 Transfer Premium ...............................................25
15.3 Landlord's Option as to Subject Space...........................26
15.4 Concessionaires ................................................26
ARTICLE 16 ..................................................................26
INDEMNITY ...........................................................26
16.1 Indemnification.................................................26
ARTICLE 17 ..................................................................27
EMINENT DOMAIN.......................................................27
17.1 Entire or Substantial Taking....................................27
17.2 Partial Taking .................................................27
17.3 Election to Terminate...........................................27
17.4 Disposition of Proceeds.........................................27
ARTICLE 18 ..................................................................27
DAMAGE OR DESTRUCTION ...............................................27
18.1 Damage or Destruction: Landlord to Rebuild .....................27
18.2 Option to Terminate ............................................28
18.3 Portions to be Rebuilt by Landlord and Tenant...................28
18.4 Non-Liability ..................................................28
18.5 Operations During Reconstruction Period.........................28
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ARTICLE 19...................................................................29
ENTRY BY LANDLORD....................................................29
19.1 Access to Premises..............................................29
19.2 Leasing Activities..............................................29
ARTICLE 20...................................................................29
ABANDONMENT..........................................................29
20.1 Abandonment.....................................................29
ARTICLE 21...................................................................30
EVENTS OF DEFAULT BY TENANT..........................................30
21.1 Event of Default................................................30
ARTICLE 22...................................................................31
REMEDIES OF LANDLORD.................................................31
22.1 Remedies........................................................31
22.2 Late Charge.....................................................32
ARTICLE 23...................................................................33
ESTOPPEL CERTIFICATES AND SUBORDINATION..............................33
23.1 Estoppel Certificates...........................................33
23.2 Subordination...................................................33
23.3 Priority Option.................................................33
23.4 Attornment......................................................33
ARTICLE 24...................................................................34
SALE OF PREMISES.....................................................34
24.1 Sale of Premises by Landlord....................................34
ARTICLE 25...................................................................34
HOLDING OVER.........................................................34
25.1 Holding Over....................................................34
ARTICLE 26...................................................................34
SURRENDER OF PREMISES................................................34
26.1 Surrender.......................................................34
26.2 Merger Upon Surrender...........................................35
ARTICLE 27...................................................................35
GENERAL PROVISIONS...................................................35
27.1 Waivers.........................................................35
27.2 No Accord and Satisfaction......................................35
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27.3 Notices..............................................................35
27.4 Relationship of the Parties..........................................36
27.5 Attorneys' Fees......................................................36
27.6 Binding Effect.......................................................36
27.7 Interest on Past Due Obligations.....................................36
27.8 Severability ........................................................36
27.9 Entire Agreement; Amendment..........................................36
27.10 Captions ...........................................................36
27.11 Construction .......................................................37
27.12 Time of Essence ....................................................37
27.13 Execution of Additional Documents...................................37
27.14 Time Periods........................................................37
27.15 Recordation.........................................................37
27.16 Brokers.............................................................37
Exhibit A - Description of Project
Exhibit B - Site Plan for Premises
Exhibit C - Work Letter Agreement
Exhibit D - Ownership of Tenant
Exhibit E - Accounting Procedures
Exhibit F - Excluded Employees
Exhibit G - Utility Rates
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FUNDAMENTAL LEASE PROVISIONS
LANDLORD: New Castle Corp., a Nevada corporation
Landlord's Address: c/o Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: General Counsel
TENANT: Sitka Restaurant Group, Inc.,
a Nevada corporation
Tenant's Address: 6787 West Tropicana Suite 200
Las Vegas, Nevada 89103
TENANT'S TRADENAME: WCW Nitro Grill
PREMISES: Approximately 15,600 approx. square feet of
Floor Area, shown by diagonal lines on
EXHIBIT B. The Premises shall not include
the exterior walls, the roof, the area above
or below the Premises, or the land upon
which the Premises are located.
COMMENCEMENT DATE: The date Landlord delivers the Premises to
Tenant. In no event shall the Commencement
Date occur prior to Landlord's receipt of a
fully executed copy of the WCW License
Agreement (defined in SECTION 3.2(a) below).
RENT COMMENCEMENT DATE: The earlier of the seventy-fifth (75th) day
following the Commencement Date or the date
Tenant opens the Premises for business to
the public
TERM: 120 full calendar months
OPTIONS TO EXTEND: None
MINIMUM RENT: $14,583/month as set forth in SECTION 4.1
below
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ANNUAL PERCENTAGE
RENTAL RATE: The amounts specified in SECTION 5.1(a) for
Gross Sales of Food and Beverage
The amounts specified in SECTION 5.1(b) for
Gross Sales of all other items
(subject to adjustment per SECTION 5.1)
USE OF PREMISES: Restaurant having WCW theme and providing
live music, live broadcasts of WCW events
and other similar WCW themed entertainment.
Tenant may also engage in the sale of WCW
retail merchandise. Tenant shall also have
the non-exclusive right to sell alcoholic
beverages.
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<PAGE> 9
LEASE
FOR
RESTAURANT SPACE
(THE "LEASE")
DATE: November 19th, 1998 (the "EXECUTION DATE")
LANDLORD: NEW CASTLE CORP., a Nevada corporation
TENANT: SITKA RESTAURANT GROUP, INC., a Nevada corporation
In consideration of the mutual covenants and agreements contained in
this Lease, Landlord and Tenant agree as follows:
ARTICLE I
DEFINITIONS
As used in this Lease, the following terms shall have the
following meanings:
1.1 AFFILIATE: In relation to any Person, any other Person
controlled, directly or indirectly, by such Person, any other Person that
controls, directly or indirectly, such Person or any Person directly or
indirectly under common control with such Person.
1.2 COMMENCEMENT DATE: The date for commencement of the Lease
Term set forth in the FUNDAMENTAL LEASE PROVISIONS.
1.3 FLOOR AREA: The respective portion of the floor area from
time to time subject to lease by Tenant pursuant to this Lease, as determined
and applied by Landlord.
1.4 GROSS SALES: The actual sales of all food, goods, wares and
merchandise sold, leased, licensed or delivered and the actual charges of all
services performed by Tenant or by any subtenant, licensee or concessionaire of
Tenant in, at, from, or arising out of the use of the Premises, whether for
wholesale, retail, cash, credit, or trade-ins or otherwise, without reserve or
deduction for inability or failure to collect. Gross Sales shall include,
without limitation, sales and services: (a) where the orders therefor originate
in, at, from, or arising out of the use of the Premises, whether delivery or
performance is made from the Premises or from some other place, (b) made or
performed by mail, telephone, telegraph, facsimile, or other electronic means,
(c) made or performed by means of mechanical or other vending devices in the
Premises, and (d) which Tenant or any subtenant, licensee, concessionaire or
other person in the normal and customary course of its business would credit or
attribute to its operations at the Premises or any
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part thereof. Any sums deposited with and forfeited to Tenant shall be included
in Gross Sales. Each installment or credit sale shall be treated as a sale for
the full price in the month during which such sale is made, regardless of
whether or when Tenant receives payment therefor. No franchise or capital stock
tax and no income or similar tax based on income or profits shall be deducted
from Gross Sales. Gross Sales shall not include, or if included there shall be
deducted (but only to the extent they have been included in Gross Sales): (i)
the net amount of any cash or credit refunds or credit allowed on services upon
any sale from the Premises where the merchandise sold, or some part thereof, is
returned by the purchaser to Tenant after the sale (not exceeding in amount the
selling price of the item in question) or upon the rejection of any services
from the Premises, provided that Tenant shall not be required to accept any
returned merchandise if a cash refund or credit allowance is issued in lieu
thereof, and provided further that any credit or refund shall reduce Gross Sales
for the accounting period such credit or refund is made but shall not affect
Gross Sales for the period in which the original sales relating to such income
were made; (ii) the amount of any city, county, state or federal sales, use,
gross receipts, transaction privilege, luxury, casino entertainment or excise
tax ("CET") on such sale which is both added to the selling price (or absorbed
in the price) and paid to the taxing authorities by Tenant (but not by any
vendor of Tenant); (iii) the amount of any discount on sales to employees; (iv)
service charges, interest and collection expenses received or receivable from
customers for sales on credit and service, credit card and other charges or fees
(exclusive, however, of any service charges payable to banks) paid by Tenant to
credit card companies and similar organizations resulting from use of credit or
debit cards by customers; (v) the value of any complimentary items or discounts
granted pursuant to SECTION 7.10 hereof, or the costs of any complimentary
issued by Landlord or any of its Affiliates for food, beverages, other goods,
services, merchandise or the like purchased or received from or at the Premises
to any hotel or casino guest of Landlord or any such Affiliate at the Project or
any other hotel/casino owned or operated by Landlord or any of its Affiliates;
(vi) income from the reimbursement pursuant to SECTION 7.11 hereof of the costs
of any room charges incurred by any hotel guest at the Project or any other
property owned or operated by Landlord or any of its Affiliates, provided that
all such items shall be considered income for purposes of calculating Gross
Sales during the accounting period when such charges are made by the guest;
(vii) income from inventory returned to suppliers in an amount not to exceed the
original amount paid by Tenant for the returned inventory; and (viii) the
redemption of gift certificates (but not the purchase of gift certificates). The
retail value of food or merchandise used or given away as samples shall not be
included in Gross Sales, but rather shall be credited against the amount of
Gross Sales made from the Premises. Where coupons, 2 for -1's or other discount
promotions are used, only the actual sales price paid to Tenant shall be
included in Gross Sales.
1.5 LEASE YEAR: The period during the Lease Term commencing on
January 1st in each year and ending at midnight on the 31st of December of that
year, except that, subject to SECTION 4.1, the first Lease Year shall commence
at the start of the Lease Term and shall end at midnight on the 31st of
December of that year, and except that the last Lease Year shall end at the
expiration of the term of this Lease or at the time of any earlier termination
of this Lease in accordance with the terms hereof.
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1.6 PERSON: Any natural person, corporation, limited liability
company, partnership, limited partnership, limited liability partnership,
association, organization or any other entity of whatsoever nature.
1.7 PERMITTED CLOSURE PERIOD: Any period when the Premises may
be temporarily closed for relocation pursuant to SECTION 2.3 or remodeling
pursuant to SECTION 2.4, untenantable by reason of fire or other casualty,
temporarily closed for repairs or maintenance under ARTICLE 11, or temporarily
closed due to failure to supply Services under ARTICLE 10, or temporarily closed
because of a permitted taking pursuant to SECTION 17.2.
1.8 PROJECT: The building and related improvements commonly
referred to as The Excalibur Hotel and Casino located on the real property more
particularly described on EXHIBIT A attached hereto.
1.9 RENT COMMENCEMENT DATE: The date for commencement of rent
payments set forth in the Fundamental Lease Provisions.
1.10 RULES AND REGULATIONS: The rules and regulations adopted
in accordance with SECTION 14.1.
1.11 TENANT IMPROVEMENTS: The improvements to the Premises to
be constructed pursuant to EXHIBIT C.
1.12 TI COSTS: The cost of the Tenant Improvements determined
in accordance with EXHIBIT C. Wherever applicable in this Lease, the TI Costs
shall be deemed to be amortized on a straight line basis over a ten (10) year
period commencing on the Rent Commencement Date.
1.13 TI COST STATEMENT: A statement setting forth the TI Costs
as set forth on EXHIBIT C.
ARTICLE 2
LEASE OF PREMISES AND CONSTRUCTION
2.1 LEASE. Landlord leases the Premises to Tenant and Tenant
leases the Premises from Landlord, for the Lease Term, at the rental, and upon
the covenants and conditions contained in this Lease, including the Fundamental
Lease Provisions and all Exhibits attached hereto. In addition to the Premises,
Tenant shall have the right to use, in common with Landlord and other tenants or
licensees of the Project, areas to be designated by Landlord for receiving,
garbage disposal, freight elevators and locker room facilities (the "COMMON
AREAS"). The Common Areas may be altered, reconfigured or relocated by Landlord
from time to time during the term of this Lease.
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<PAGE> 12
2.2 CONSTRUCTION OF PREMISES. Tenant shall construct or cause to
be constructed the Tenant Improvements in accordance with the Work Letter
Agreement attached as EXHIBIT C. Landlord shall not be obligated to provide or
pay for any improvement work or services related to the Tenant Improvements.
Tenant also acknowledges that Landlord has made no representation or warranty
regarding the condition of the Premises or the Project except as specifically
set forth in this Lease and the Work Letter Agreement.
2.3 RELOCATION.
(a) Tenant acknowledges that Landlord shall have an absolute
right from time to time to relocate the Premises within the Project, at
Landlord's cost, at any time during the Lease Term, provided that the premises
to which Tenant is relocated (i) shall be no less than eighty-five percent (85%)
of the size of the original premises, (ii) shall have the prominence of
location and visibility that is reasonably equivalent to or better than the
original premises, (iii) shall be located in an area having substantially
similar levels of pedestrian foot traffic, and (iv) shall be appropriately
configured for the restaurant use of the original premises. If Landlord
exercises its right to relocate Tenant pursuant to this Section, Landlord shall
notify Tenant in writing (the "Relocation Notice") specifying the location of
the new premises. If Tenant objects to the new premises on the basis that it
fails to meet the criteria set forth above, Tenant shall notify Landlord in
writing within ten (10) days following the Relocation Notice, specifying its
objections to the new premises. If Tenant fails to object within such 10-day
period, Tenant shall be deemed to have approved the new premises. If Tenant
objects to the new premises, Landlord and Tenant shall meet and confer in an
attempt to address Tenant's concerns, but if Landlord is unable to resolve the
same within thirty (30) days after the Relocation Notice, Landlord may terminate
this Lease upon written notice to Tenant, which termination shall be effective
sixty (60) days after such notice. If Landlord elects to terminate the Lease
under this SECTION 2.3, Landlord shall pay to Tenant the unamortized portion of
the TI Costs, provided Tenant is not in default at the time of such termination.
(b) All costs and expenses of relocating to the new premises,
including, without limitation, all reasonable costs incurred by Tenant in
relocating the new premises, shall be paid by Landlord. If Landlord exercises
its right to relocate Tenant, Landlord shall reconstruct Tenant Improvements in
the new premises in a form substantially equivalent to the Tenant Improvements
constructed pursuant to EXHIBIT C. Within ten (10) days after Landlord has
notified Tenant that it has substantially completed the Tenant Improvements (in
accordance with the standards for "Substantial Completion" as set forth in
EXHIBIT C) to be constructed by Landlord on the relocated premises, Tenant shall
surrender the Premises and the relocated premises shall be deemed the Premises
hereunder. During any portion of such 10-day period that Tenant is not
conducting business in either premises, rent and all other costs or charges
payable hereunder (other than premiums for insurance maintained by Tenant
hereunder) shall be abated and the Lease Term shall be extended for the entire
period during which Tenant is not doing business. Upon Landlord's request,
Tenant shall execute an amendment designating the relocated Premises on EXHIBIT
B.
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<PAGE> 13
Other than EXHIBIT B, all terms and conditions contained in this Lease shall
continue unmodified following such relocation.
2.4 REMODELING. Landlord may, in connection with any remodeling of all
or any portion of the Project, change, at Landlord's sole cost and expense, the
dimensions or reduce the size of the Premises to not less than eighty-five
percent (85%) of its original size; provided, however, that if, in Tenant's
reasonable judgment, as a result thereof the remaining portion of the Premises
is not suitable for the purpose for which Tenant has leased the Premises, Tenant
may terminate this Lease upon sixty (60) days written notice to Landlord, which
notice shall be given within thirty (30) days after Landlord notifies Tenant of
Landlord's intention to remodel; provided further, however, that such
termination shall not be effective if within thirty (30) days of Tenant's notice
thereof, Landlord notifies Tenant either of its election to relocate Tenant
pursuant to SECTION 2.3 hereof or to rescind Landlord's intention to remodel. If
Tenant elects to terminate the Lease under this SECTION 2.4, Landlord shall pay
to tenant the unamortized portion of the TI Costs, provided Tenant is not in
default at the time of such termination. If Tenant does not elect to terminate
this Lease pursuant to this SECTION 2.4 and as a result of Landlord's remodeling
under this SECTION 2.4 there is any reduction in the area of Premises, then
Minimum Rent shall be reduced to an amount equal to that proportion of the
Minimum Rent that the Floor Area after the remodeling bears to the Floor Area of
the Premises prior to the remodeling. In the event of any remodeling pursuant to
this SECTION 2.4, Landlord shall repair any damage to the Premises caused
thereby. In connection with any such remodeling, Landlord may require Tenant to
cease conducting business in the Premises for a period not to exceed thirty (30)
days. The rent and all other costs and charges payable or reimbursable hereunder
(other than premiums for insurance maintained by Tenant hereunder) shall be
abated during any period that Landlord requires Tenant to cease conducting
business and the Lease Term shall be extended by an amount of time equal to the
entire period during which Landlord requires Tenant to cease conducting
business. Upon Landlord's request, Tenant shall execute an amendment designating
any changes to the Premises pursuant to this Section on EXHIBIT B.
2.5 AMORTIZATION OF TENANT IMPROVEMENTS. For purposes of any payments
due to Tenant in the event of a termination under SECTION 2.3 and SECTION 2.4,
such amount shall be paid upon the effective date of termination of the Lease
and the surrender by the Tenant of the Premises. In calculating the termination
payment, the TI Costs shall be determined by reference to the TI Cost Statement
and shall be amortized as set forth in SECTION 1.12 above.
ARTICLE 3
TERM
3.1 DURATION. The term of this Lease (the "LEASE TERM") shall be for a
period specified in the FUNDAMENTAL LEASE PROVISIONS, commencing on the
Commencement Date, and unless sooner terminated in accordance with the
provisions hereof, ending on the last day of the
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<PAGE> 14
Lease Term. If the Commencement Date does not occur on the first day of a
calendar month, the fractional portion of such month shall be added to the Lease
Term. Tenant shall not be liable for any rent until the Rent Commencement Date.
Following the Rent Commencement Date, Tenant and Landlord shall, upon either
party's request, execute and deliver to Landlord an addendum to this Lease
specifying the Commencement Date, the Rent Commencement Date, and the last day
of the Lease Term.
3.2 WCW LICENSE AGREEMENT/TERMINATION RIGHTS.
(a) As a condition precedent to this Lease and prior to the
Commencement Date, Tenant shall obtain from World Championship Wrestling, Inc.
("WCW") an exclusive license to operate a WCW wrestling themed restaurant and a
non-exclusive license to operate a WCW Wrestling retail store in Clark County,
Nevada (the "WCW LICENSE AGREEMENT"). The WCW License Agreement shall be in a
form reasonably acceptable to Landlord (as evidenced by Landlord's written
approval thereof). Without limiting the foregoing, the WCW License Agreement
shall be irrevocable for the Term of this Lease and shall give Tenant the right
to seek damages in the event of a breach thereof by WCW. Tenant shall use its
best efforts to obtain the fully executed WCW License Agreement within thirty
(30) days following the Execution Date, and if it fails to do so, this Lease
shall automatically terminate and be of no further force and effect. If the WCW
License Agreement expires, terminates or is revoked for any reason prior to the
expiration of the Lease Term, Tenant shall provide Landlord with notice of such
expiration, termination or revocation within ten (10) days of such occurrence
and such event shall constitute an event of default under this Agreement,
entitling Landlord to terminate this Lease, in addition to all other rights and
remedies to which Landlord is entitled hereunder. Such written notice shall
specify the date of such termination. If this Lease is terminated in accordance
with the terms of this SECTION 3.2(a), Tenant shall not be entitled to
reimbursement for any unamortized TI Costs. Landlord agrees that notwithstanding
such WCW License Agreement, Landlord will not sue or otherwise seek redress
against WCW and/or its parent or Affiliates for any act, omission, liability or
obligation of Tenant under this Lease.
(b) Landlord shall have the right, exercisable in its sole and absolute
discretion, to elect to terminate this Lease at any time after the third (3rd)
anniversary of the Rent Commencement Date upon one hundred twenty (120) days
prior written notice to Tenant. If Landlord terminates this Lease pursuant to
this SECTION 3.2(b), Landlord shall reimburse Tenant for the unamortized portion
of any TI Costs paid by Tenant, provided Tenant is not in default at the time of
such termination.
(c) Tenant shall have the right, exercisable in its sole and absolute
discretion, to elect to terminate this Lease at any time after the first (1st)
anniversary of the Rent Commencement Date upon one hundred twenty (120) days
prior written notice to Landlord. Upon its exercise of the termination rights in
this SECTION 3.2(c), Tenant shall pay to Landlord the estimated cost to Landlord
to return the Premises to the condition existing prior to the construction of
the Tenant Improvements ("REFURBISHMENT COST"). The Refurbishment Cost and the
annual
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<PAGE> 15
incremental increase thereto to reflect increases in construction costs over
time shall be determined by mutual agreement of Landlord and Tenant at the time
of the approval of the Tenant Improvement Plans as set forth in EXHIBIT C.
Following the approval of the Tenant Improvement Plans, Tenant and Landlord
shall execute and deliver to Landlord an addendum to this Lease specifying the
Refurbishment Cost and the agreed upon annual incremental increase thereto.
(d) Upon the exercise by Landlord or Tenant of any of the termination
rights described above and the satisfaction of all of the foregoing conditions
precedent, this Lease shall be terminated and neither Landlord nor Tenant shall
have any further liability or obligation to the other, except as otherwise
provided in SECTION 3.2(a) and except with respect to liabilities, obligations
or other provisions specifically stated in this Lease to survive any termination
hereof.
ARTICLE 4
MINIMUM RENT
4.1 MINIMUM RENT. The amount set forth in the FUNDAMENTAL LEASE
PROVISIONS as Minimum Rent (the "MINIMUM Rent") shall be paid as follows:
(a) On or before the Rent Commencement Date set forth in the
FUNDAMENTAL LEASE PROVISIONS, Tenant shall pay Landlord the entire
Minimum Rent due for the first year of the Lease which amount is One
Hundred Seventy-Four Thousand Nine Hundred Ninety-Six Dollars
($174,996).
(b) Commencing on the first day of the calendar month that
occurs twelve (12) months after the Rent Commencement Date, Tenant
shall pay Landlord the Minimum Rent as set forth in the FUNDAMENTAL
LEASE PROVISIONS.
(c) Thereafter, Tenant shall pay Landlord the Minimum Rent as
set forth in the FUNDAMENTAL LEASE PROVISIONS monthly in advance on the
first day of each month during the remainder of the Lease Term.
(d) All Minimum Rent due hereunder shall be paid when due as
set forth above without any deduction or offset.
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ARTICLE 5
PERCENTAGE RENT
5.1 PERCENTAGE RENT. In addition to the Minimum Rent set forth in the
FUNDAMENTAL LEASE PROVISIONS and other sums required to be paid by Tenant under
this Lease, Tenant shall pay the following:
(a) On all food and beverage items sold by Tenant during a Lease Year:
(i) Three percent (3%) on Gross Sales of food and beverages
up to and including $7,000,000; and
(ii) Five percent (5%) on Gross Sales of food and beverages
in excess of $7,000,000; and
(b) On all items other than food and beverages sold by Tenant during a
Lease Year, eight percent (8%) on Gross Sales of non-food and beverage items
unless Gross Sales from all sources (food, beverage and other items) exceed
$8,000,000, in which event Tenant shall pay ten percent (10%) of Gross Sales on
all non-food and beverage items.
The sums described in SECTIONS 5.1(a) AND 5.1(b) above shall be collectively
referred to as "PERCENTAGE RENT". Tenant shall only pay Percentage Rent in any
Lease Year if the total Percentage Rent exceeds the Minimum Rent paid by Tenant
for the same period. Percentage Rent shall be computed each month, and within
fifteen (15) days of the date such month ends, Tenant shall pay to Landlord any
such Percentage Rent. In no event shall Landlord be obligated to refund to
Tenant any portion of the Minimum Rent for a given Lease Year if the amount
calculated by multiplying the applicable percentage rental rates by the
appropriate Gross Sales total for each item when added together produce a total
that is less than the Minimum Rent for such Lease Year.
5.2 ANNUAL ADJUSTMENT. Within ninety (90) days after the end of each
Lease Year, Tenant shall determine the amount of Tenant's total Gross Sales
during that Lease Year, as well as Gross Sales for food and beverage items and
non-food and beverage items, and the amounts payable to Landlord as Minimum Rent
and as Percentage Rent for that Lease Year. If the total amount of Percentage
Rent owing for the Lease Year is greater than the total amount of Percentage
Rent paid by Tenant during the Lease Year, Tenant shall immediately pay the
deficiency to Landlord. If the total amount of Percentage Rent paid by Tenant
during a Lease Year exceeds the total amount of Percentage Rent required to be
paid by Tenant during such Lease Year, Tenant shall receive a credit equivalent
to the excess which may be deducted by Tenant from the next accruing payment or
payments of either Minimum Rent or Percentage Rent.
5.3 TENANT REPORTS. On or before the fifteenth (15th) day following the
end of each month during the Lease Term, Tenant agrees to submit to Landlord a
written statement signed by
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Tenant and certified by Tenant to be true and correct, showing the amount of
Gross Sales (total, food and beverage, and non-food and beverage) during the
preceding month. On or before the forty-fifth (45th) day following the end of
each Lease Year, Tenant agrees to submit to Landlord a written statement signed
by Tenant and certified by Tenant to be true and correct, showing the amount of
Gross Sales (total, food and beverage, and non-food and beverage) during the
preceding Lease Year.
5.4 TENANT RECORDS. Tenant agrees to keep full, complete and proper
books, records and accounts of the daily Gross Sales from the Premises and any
concession operated at any time in the Premises; of inventories, purchases and
receipts of merchandise; of sales tax; and of all other transactions and
matters, including sales slips, cash register tape readings, sales books, bank
books, deposit slips and sales tax reports, normally examined and required to be
kept by an independent accountant and/or any Regulatory Authority (as
hereinafter defined) pursuant to accepted auditing standards in performing an
audit of Gross Sales. All such books, records and accounts shall be kept for a
period of at least one (1) year following the end of each the Lease Year. Within
one (1) year after the end of the Lease Year, Landlord, its agents and
employees, upon at least seven (7) days prior written notice, may examine and
inspect all of the books and records relating to the business conducted upon the
Premises for the purpose of investigating and verifying the accuracy of any
statement of Gross Sales during any prior Lease Year. Tenant agrees to require
any subtenants, concessionaires, and licensees to also maintain records meeting
the requirements of this SECTION 5.4.
5.5 AUDIT. At any time within one (1) year after the end of the Lease
Year, Landlord may cause an audit of Tenant's business to be made for the
purpose of verifying the accuracy of any statement of Gross Sales. The audit
shall be performed by a representative selected by Landlord, and Tenant agrees
to make all records available for the audit at the Premises or at Tenant's
corporate offices, as Tenant may elect. If the results of the audit show that
Tenant's statement of Gross Sales for any period has been understated by five
percent (5%) or more, then Tenant shall immediately pay Landlord the cost of
the audit in addition to any deficiency payment required, plus an amount equal
to twelve percent (12%) of the amount of the understatement. If Understatements
are shown for more than three periods during the Lease Term, such
understatements shall be an incurable event of default under this Lease. Any
information obtained by Landlord as a result of such an audit or otherwise
pursuant to this Lease shall be held in confidence by Landlord except in any
proceeding or action to collect the cost of the audit or deficiency, and then
only to the extent relevant thereto, or with respect to a prospective sale,
mortgage, lease or leaseback of the Premises.
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ARTICLE 6
ADDITIONAL RENT
6.1 ADDITIONAL RENT. In addition to Minimum Rent and Percentage Rent,
all other payments to be made by Tenant under this Lease, including, but not
limited to the charges for services provided under ARTICLE 10, shall be deemed
Additional Rent and shall be due and payable on demand if no other time for
payment is specified.
6.2 PAYMENTS BY LANDLORD. Upon ten (10) days prior written notice to
Tenant or such shorter period as may be necessary for Landlord to avoid a
delinquency and/or late charge, Landlord may pay any sum or do any act which
Tenant has failed to do, and Tenant agrees to pay Landlord, upon demand, all
sums so expended by Landlord, together with interest from the date of
expenditure until paid at a rate equal to the lesser of twelve percent (12%) per
annum or the maximum rate allowed by law. Such sum and interest shall also be
deemed Additional Rent.
ARTICLE 7
USE AND OPERATION
7.1 DESIGNATED AND EXCLUSIVE USE. Tenant agrees to use the Premises
solely for the purpose set forth in the FUNDAMENTAL LEASE PROVISIONS. Tenant
shall not use or permit the Premises to be used for any other purpose whatsoever
without Landlord's prior written consent. Landlord hereby covenants and agrees
that Tenant shall have the exclusive right to operate a restaurant having the
theme described in the FUNDAMENTAL LEASE PROVISIONS within the Project. On or
before the Rent Commencement Date, Tenant shall submit its menu to Landlord for
Landlord's approval, which approval shall not be unreasonably withheld or
delayed. Without limiting Landlord's approval rights, Landlord may withhold its
consent to the menu or selected menu items if, in Landlord's reasonable
judgment, the menu or such items are deceptively similar to the menu or to items
served by other food service facilities operated by Landlord or by third parties
in the Project or would breach any exclusive rights granted to third parties.
Tenant shall not substantially change the type or character of items being
offered for sale without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed.
7.2 INSURANCE REQUIREMENTS: GOVERNMENTAL REGULATIONS. Tenant shall not
do or permit anything to be done in or about the Premises, or bring or keep
anything on the Premises, which will in any way increase the rate of fire
insurance on the Project over and above the customary rates for fire insurance
for projects including restaurant(s) similar to the Premises. At Tenant's
expense, Tenant agrees to comply, in all material respects, with all fire and
public liability insurance requirements relating to the Premises. Tenant agrees
to comply promptly, in all material respects, with all governmental laws,
ordinances, orders, rules and regulations affecting the Premises, including,
without limitation, any applicable environmental law,
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regulation, ordinance or order of any governmental entity, or any other federal,
state or local laws relating to the contamination of or adverse effects on the
environment. Tenant hereby agrees to indemnify and hold Landlord harmless for,
from and against any losses, liabilities, damages, costs, expenses, and claims
of any kind whatsoever, including reasonable attorneys' fees, incurred by
Landlord and arising from or relating to the violation by Tenant of any
agreement of Tenant made in the immediately foregoing sentence. This indemnity
shall survive the expiration or earlier termination of the Lease Term for a
period of two (2) years.
7.3 RESTRICTIONS ON USE.
(a) Without limiting the provisions of this ARTICLE 7, no
auction, fire or bankruptcy sales may be conducted in the Premises without
Landlord's prior written consent. Tenant shall not, without Landlord's prior
written approval, operate or permit to be operated on the Premises any coin or
token operated vending machines or similar device for the sale or leasing to the
public of any goods, wares, merchandise, food, beverages, and/or service,
including, without limitation, pay telephones, pay lockers, pay toilets, scales
and amusement devices. Tenant shall not use or permit the use of any portion of
the Premises for sleeping apartments, lodging rooms or gaming activities. Tenant
shall not perform any acts or carry on any practices which may injure the
Premises or other parts of the Project or be a nuisance or menace to other
tenants in the Project, Landlord or the patrons and customers of either of them.
Tenant agrees to keep the Premises, the walkways adjacent to the Premises, and
any loading platform and service areas allocated or approved by Landlord for the
use by Tenant (whether or not such use is exclusive), clean and free from
rubbish and dirt at all times. Tenant agrees to store all trash and garbage
within the Premises or in other areas designated by Landlord and to arrange for
removal of such trash and garbage at Tenant's expense. Tenant shall not make any
use of the Premises which is not in compliance with the terms of this Lease or
with the Rules and Regulations.
(b) Without Landlord's prior written consent, which may be
given or withheld in Landlord's sole discretion, Tenant shall not offer for sale
of any merchandise bearing the words "Las Vegas" (other than in combination with
the words "WCW Nitro Grill"), "Excalibur," or other gaming or nationally
licensed character logos, tradenames or emblems (e.g., merchandise bearing NFL
or NBA logos, Disney characters, etc.) or any merchandise which is determined by
Landlord (in its sole discretion) to be offensive or objectionable or to compete
with the restrictive covenant contained in any other lease for space in the
Project.
(c) Tenant shall provide events at the Premises at least
weekly, which events may include, but shall not be limited to, live WCW
broadcasts and live music performances. All entertainment shall be conducted in
a first class, professional manner in keeping with and not inconsistent with or
detrimental to the operation by Landlord of the Project as an exclusive,
first-class resort casino facility, and Tenant shall be responsible for
obtaining all required licenses, permits and other approvals for any such
entertainment in the Premises. Tenant shall notify Landlord in advance and
obtain Landlord's approval of all prospective entertainment to be offered at the
Premises, which approval shall not be unreasonably withheld or delayed.
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7.4 BUSINESS OPERATIONS. From and after the Rent Commencement Date
(except during any Permitted Closure Period), Tenant agrees to continuously
occupy and use the entire Premises for the purpose or purposes specified above,
during those days, nights and hours as shall be determined by Landlord with
Tenant's approval, which shall not be less than 9 hours on Saturday and Sunday
and 5 1/2 hours Monday through Friday. In the event of a breach by Tenant of any
of the conditions of this SECTION 7.4 which is due to the actions or inaction of
Tenant, Landlord shall have, in addition to any and all remedies herein
provided, the right, at its option, to collect not only the Minimum Rent herein
provided, but additional rent at the rate of one-twentieth (1/20) of the Minimum
Rent herein provided for each and every day that Tenant is not open for business
as herein provided. Tenant shall carry at all times in the Premises sufficient
quantities of products as shall be reasonably designed to service its customers
and meet anticipated customer demand, and shall staff the Premises at all times
with sufficient personnel to serve its customers. Tenant's method of conducting
its business in the Premises shall at all times be in keeping with and not
inconsistent with or detrimental to the operation by Landlord of the Project as
an exclusive, first-class resort casino facility. Tenant shall refrain from
using or permitting the use of the Premises or any portion thereof for office,
clerical or other non-selling purposes, except space in the Premises may be used
for such purposes to such extent as is reasonably required for the conduct of
Tenant's business thereon. Tenant shall not use the Premises for storage or
warehouse purposes beyond such use as is reasonably required to keep Tenant's
restaurant adequately stocked for sales of product and merchandise in, at or
from the Premises.
7.5 TRADENAME. Tenant shall conduct business under the tradename set
forth in the FUNDAMENTAL LEASE PROVISIONS and no other without prior written
consent of Landlord. Tenant warrants that it has, and, during the entire Term of
the Lease, will have, the right to operate under the tradename set forth in the
Fundamental Lease Provisions. Landlord shall not acquire any property rights in
or to the name. "WCW Nitro Grill" or "WCW Nitro Grill of Las Vegas" by virtue of
this Lease. Tenant shall not conduct any business at any time either before or
after the termination of this Lease, either in the Premises or elsewhere, under
a name in which the word "Excalibur" appears except in reference to the location
of the Premises, without Landlord's prior written consent, and Tenant shall not
acquire any property right in or to any name which contains said word as a part
thereof. Any permitted use by Tenant of the word "Excalibur" during the Term of
this Lease shall not permit Tenant to use, and Tenant shall not use, such word
either (i) after the termination of this Lease, or (ii) at any other location
during or after the termination of this Lease.
7.6 EMPLOYEES.
(a) Tenant shall control the conduct, demeanor and appearance
of its officers, agents and employees so as to run a first class business in
strict conformity with Landlord's standards. Tenant will ensure that its
personnel act so as not to annoy, disturb or be offensive to customers, patrons
or others in the Project, and if any of Tenant's personnel act in a manner
objectionable to Landlord, Landlord will bring such objection to the attention
of Tenant's manager, who will immediately take all necessary steps to correct
the cause of such objection.
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Tenant warrants that its employees, while working in connection with this
Agreement, will comply with any and all applicable federal, state or local laws,
rules and regulations and ordinances.
(b) Tenant shall be responsible for all salaries, employee
benefits, social security taxes, federal and state unemployment insurance and
any and all similar taxes relating to its employees and for workers'
compensation coverage with respect to its employees pursuant to applicable law.
Tenant's employees shall not be entitled to participate in, or to receive, any
of Landlord's employee benefit or welfare plans, and they shall not be deemed
agents or employees of Landlord for purposes of this Lease or any other purpose.
Tenant will comply with any applicable federal, state or local law, ordinance,
rule or regulation, regarding its employees, including federal or state laws or
regulations regarding minimum compensation, overtime and equal opportunities for
employment.
(c) Tenant shall not cause or permit its employees to enter
upon those areas of the Project which are designated "Employees Only," as the
parties acknowledge that for such purposes, "Employees" refers to the employees
of Landlord and not to the employees of Tenant.
(d) Landlord requires, and Tenant will therefore develop and
implement, a drug testing program for Tenant's employees employed at the
Premises. Except. for the initial salaried, full time management/supervisory
staff (who must be tested prior to opening of the Premises) Tenant's employees
employed at the Premises shall be tested no later than when the individual
employee completes at least 520 hours of service for Tenant at the Premises.
(e) Tenant shall require standard uniforms to be worn by all
of its employees at all times while on duty in the Premises so that all
employees present a clean and well groomed appearance. Landlord may, at any
time, direct Tenant to require any of its employees not so attired to
immediately conform to the requirements of this subparagraph (e) or leave the
Premises.
(f) Landlord and Tenant agree that they are separate and
independent employers. Tenant shall independently and unilaterally adopt such
policies and procedures as it deems appropriate, which shall apply to all
employees of Tenant. Tenant's employment practices shall be lawful and
consistent with legal obligations.
(g) Tenant understands and acknowledges that Landlord is
signatory to a collective bargaining agreements ("CBA") with Local Joint
Executive Board of Las Vegas, Culinary Workers Union, Local 226, and Bartenders
Union, Local 165 ("UNION"), which imposes certain restrictions upon the
subcontracting or subleasing of the Project. The Union has agreed that Landlord
may lease a food outlet to Tenant, and that Tenant may employ the employees
listed on EXHIBIT F (the "EXCLUDED EMPLOYEES") who shall not be covered by the
CBA for the Project. Tenant agrees it shall not employ any employees for the
Project other than the Excluded Employees. Landlord and Tenant acknowledge that
managers are not covered by the CBA, and Tenant may employ such managers as it
determines to be appropriate.
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(h) Tenant understands and acknowledges that Landlord is a
signatory to a CBA with the International Alliance of Theatrical Stage
Employees, Local 720 ("IATSE") which imposes certain restrictions upon the
employment of entertainment and stage workers for the Project. Tenant agrees
that it shall not employ any entertainment and stage workers for the Project and
Landlord shall employ such entertainment and stage employees, as are determined
to be appropriate by Landlord and Tenant, who shall be assigned to work in the
Premises.
(i) Landlord shall employ such restaurant and entertainment
employees, other than the Excluded Employees, as are determined to be
appropriate by Landlord and Tenant, who shall be assigned to work in the
Premises (the "NITRO GRILL EMPLOYEES"). The Nitro Grill Employees shall be
included in the collective bargaining unit covered by the terms of the CBA with
the Union or with IATSE, as applicable. Tenant shall supervise and direct the
work of the Nitro Grill Employees assigned to work in the Premises. Tenant
acknowledges that it has received and reviewed the CBA with the Union and with
IATSE. In its supervision and direction of the Nitro Grill Employees, Tenant
agrees that it shall honor all terms and conditions of employment specified by
the CBA with the Union and with IATSE, as amended from time to time, and shall
comply with all federal, state and local laws, rules, regulations and
ordinances.
(j) Tenant shall reimburse Landlord on a bi-weekly basis
together with Minimum Rent for all salaries, wages and other amounts paid to, or
payable as a result of the employment of, the Nitro Grill Employees, including,
but not limited to, overtime, social security taxes, workers' compensation and
unemployment insurance, payroll taxes, vacation pay, pension and retirement
benefits, health care, disability insurance, and other fringe benefits, whether
statutory or otherwise, and the cost of uniforms (the "NITRO GRILL EMPLOYEE
EXPENSES"). Landlord shall provide Tenant with a monthly accounting of the Nitro
Grill Employee Expenses, which amounts shall be considered Additional Rent under
this Lease.
(k) Tenant shall indemnify, defend and hold Landlord harmless
for, from and against any loss, cost, damage or expense resulting from (i) any
failure by Tenant to observe the provisions of this SECTION 7.6, including, but
not limited to, the failure by Tenant to honor the terms and conditions of any
CBA or to comply with applicable laws, (ii) any action or failure to act by any
Nitro Grill Employee under the direction and supervision of Tenant, and (iii)
any claims by any Nitro Grill Employee arising within the course and scope of
his/her employment.
7.7 SECURITY. Tenant acknowledges that Landlord's security department
and security officers are not responsible for providing security services for
the Premises and that responsibility to provide security services for the
Premises if Tenant so elects is the obligation of Tenant. In no event shall
Landlord be liable to Tenant or any third-party for the security department's
failure to respond to a request for aid or assistance by Tenant. Notwithstanding
anything to the contrary contained herein, Tenant agrees that Tenant, its agents
and employees including all individuals providing security services, whether
employed directly by Tenant or engaged as Tenant's agent or as an independent
security contractor, shall follow any instructions or directions, written or
oral, received from Landlord's security department or personnel.
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7.8 REGULATORY AUTHORITIES. If Tenant is required to apply to either
the Nevada Gaming Commission or any other agency regulating Landlord's
activities (collectively herein, the "REGULATORY AUTHORITIES") for a finding of
suitability or other approval, Tenant shall promptly do so. If after application
and applicable hearings, Tenant is found unsuitable by any Regulatory Authority,
then Tenant shall immediately undertake corrective action to comply with any
requirement of the Regulatory Authority to be found suitable, including, without
limitation, terminating any objectionable or unsuitable employee, provided,
however, that in the event that the corrective action taken is not satisfactory
to such Regulatory Authority then this Lease shall thereupon immediately cease
and terminate and be of no further force or effect, without penalty or refund of
any key money or other sum. Unless otherwise directed by the Regulatory
Authorities and provided that Tenant is not in default under this Lease at the
time of such termination, Landlord shall reimburse Tenant for the unamortized
portion of any TI Costs paid for by Tenant. In addition Tenant acknowledges that
Landlord will hold gaming and liquor licenses in connection with its operations
at the Project. If the employment or continued employment of any person by
Tenant or continued association with Tenant could have a material adverse effect
on any gaming or liquor license, permit or approval held or sought by Landlord
or any Affiliate of Landlord (as determined by Landlord in good faith), Landlord
shall so notify Tenant and Tenant shall take all necessary action to immediately
eliminate such adverse effect. If such material adverse effect is not eliminated
within twenty (20) days after notice from Landlord, Landlord may terminate this
Lease upon ten (10) days written notice to Tenant. Unless otherwise directed by
the Regulatory Authorities and provided that Tenant is not in default under this
Lease at the time of such termination, Landlord shall reimburse Tenant for the
unamortized portion of any TI Costs paid for by Tenant.
7.9 RESTRICTIVE COVENANT. During the Term of this Lease, Tenant shall
not, directly or indirectly, alone or as a partner, joint venturer member,
consultant, franchisor, franchisee, agent or independent contractor, own or
operate any WCW wrestling themed restaurant or retail store in Clark County,
Nevada. In addition, if this Lease is terminated prior to the expiration of the
Lease Term for any reason other than a breach of the Lease by Landlord or
pursuant to ARTICLE 17 or ARTICLE 18 below, Tenant shall not, directly or
indirectly, alone or as a partner, joint venturer, member, consultant,
franchisor, franchisee, agent or independent contractor, own or operate any WCW
wrestling themed restaurant or retail store that is not open for business at the
time of such termination in Clark County, Nevada for a period of two (2) years
following such termination. Tenant acknowledges that the restrictions contained
in this Section are reasonable in scope and duration and are necessary to
protect Landlord. If any provision of this Section, as applied to any party or
to any circumstance, is adjudged by a court to be invalid or unenforceable, the
same will in no way affect any other circumstance or the validity or
enforceability of the remainder of this Lease. If any such provision, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision, and/or to delete specific words or phrases, and in its reduced
form, such provision shall then be enforceable and shall be enforced. The
parties agree and acknowledge that the breach of this Section will cause
irreparable damage to Landlord and upon breach of any provision of this
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Section, Landlord shall be entitled to injunctive relief, specific performance
or other equitable relief; provided, however, that the foregoing remedies shall
in no way limit any other remedies which Landlord may have at law or in equity.
7.10 LANDLORD COMPS. Tenant agrees that Landlord may "comp" its
guests, officers, directors or employees or those of its Affiliates at Tenant's
restaurant. Landlord shall be entitled to the following:
(a) Twenty-Seven Thousand Five Hundred Dollars ($27,500) of
complimentary items free of charge during each Lease Year (the "COMP
THRESHOLD"); provided, however, that no more than Twenty-five Hundred Dollars
($2,500) of the total Comp Threshold (the "MONTHLY COMP LIMIT") shall be used by
Landlord during any month. Notwithstanding the preceding sentence, if Landlord
exceeds the Monthly Comp Limit in any month during a Lease Year, and at the end
of such Lease Year the Comp Threshold has not been reached, Tenant shall pay to
Landlord with the annual adjustment to Percentage Rent, the amount that Landlord
paid Tenant for comps under this SECTION 7.10(a) in all months when the Monthly
Comp Limit was exceeded until the Comp Threshold is reached. The Comp Threshold
shall be reduced prorata for any Permitted Closure Period.
(b) After the Comp Threshold has been reached in a given Lease
Year or during any month in which the Monthly Comp Limit has been reached,
Tenant shall bill Landlord for food and beverage items provided on a
complimentary basis at an amount equal to eighty-two percent (82%) of the retail
price charged by Tenant for such food and/or beverage items. Payment for food
and beverages provided under this SECTION 7.10(b) shall be made in accordance
with EXHIBIT E.
Gratuities on all complimentary items shall be paid directly by the
guest, and shall not be charged to Landlord, except, however, if such gratuities
are room charges pursuant to SECTION 7.11, such gratuities shall be charged to
the guest or to Landlord, as the case may be. Landlord shall pay the applicable
taxes on all complimentary items provided under this SECTION 7.10. Taxes and
gratuities shall not be applied toward the Comp Threshold or subject to the
eighteen percent (18%) discount. Any charges to Landlord for complimentary items
under this SECTION 7.10 shall be billed by Tenant and paid by Landlord in the
manner described in EXHIBIT E.
Landlord shall either designate patrons who are to receive
complimentary food and/or beverages either by (i) giving Tenant reasonable
advance notice of the patron's visit to the Premises (which notice shall be
given by employees authorized to do so in writing by Landlord and shall set
forth any limitations on any complimentary food and beverage) or (ii) written
notice after the patron's visit, in which event Landlord and Tenant shall make
the appropriate adjustment to any room charge made by such patron or other
adjusting payments.
7.11 ROOM CHARGES. Guests of the Project and properties of one or more
of Landlord's Affiliates shall be entitled to bill charges for food and beverage
service and gratuities at Tenant's
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restaurant to their rooms and Tenant, at its expense, shall cause its register
system to network with the computer system for the Project based on
specifications provided by Landlord. Such charges shall be paid by Landlord to
Tenant in the manner described on EXHIBIT E.
7.12 BEVERAGE PROVIDERS. Tenant acknowledges that from time to time
Landlord may agree to utilize certain designated brands of beverage items on a
company-wide basis (e.g., Landlord may contract with a selected manufacturer of
carbonated beverages to utilize such manufacturer's brands). Upon receipt of a
notice specifying any such beverage brand choice, Tenant agrees to honor such
brand choice and use only the selected product.
ARTICLE 8
INSURANCE
8.1 TENANT'S INSURANCE. Tenant agrees, at Tenant's expense, to maintain
the following insurance policies during the entire Lease Term:
(a) A policy of comprehensive public liability and property
damage insurance providing coverage against liability for injury or death to
persons and for property damage occurring in or about the Premises. Such
liability insurance shall be a broad form comprehensive, general liability
policy, including but not limited to contractual liability, in an amount of not
less than Ten Million Dollars ($10,000.000.00). Landlord agrees that Tenant may
satisfy insurance coverage limits over One Million Dollars ($1,000,000.00) by
means of an excess liability policy;
(b) A policy of plate glass insurance covering all plate and
other glass in the Premises;
(c) A policy providing fire and extended coverage, vandalism,
malicious mischief, sprinkler leakage and special extended coverage insurance in
an amount adequate to cover the full cost of replacement of all personal
property, inventory, decorations, trade fixtures, furnishings, equipment and
other contents in the Premises. Such insurance shall be in an amount equal to
the current replacement value of the property required to be insured;
(d) A policy of business interruption insurance; and
(e) A policy of products liability insurance in form
satisfactory to Landlord and in the amount of not less than One Million Dollars
($1,000,000.00).
All such insurance policies shall, to the extent applicable, name Landlord as an
additional insured (as well as such other persons, firms or corporations as
Landlord may designate) or an additional loss payee, and shall be written by one
or more responsible insurance companies licensed to do business in Nevada with a
rating of AVII or better as rated in the most recent edition of Best's
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Insurance Guide (or similar rating service if such guide is no longer
published). Such policies shall also include an endorsement requiring the
company writing such policy to give Landlord at least twenty (20) days written
notice in advance of any cancellation or lapse of such policy or the effective
date of any reduction in the amount of coverage under such policy. All public
liability, property damage, and other casualty insurance policies obtained by
Tenant pursuant to this SECTION 8.1 shall be written as primary insurance and
not contributing with separate coverage which Landlord may carry. The insurance
required by this SECTION 8.1 may be covered by general policies covering all of
Tenant's locations. Prior to the Commencement Date, Tenant shall furnish
Landlord with certificates of insurance showing that insurance meeting the
requirements of this Section has been obtained and fully paid for by Tenant.
Similar certificates of insurance as to renewal policies shall be provided to
Landlord at least fifteen (15) days prior to the expiration of any policy, if
requested. The limits of the public liability insurance required to be
maintained by Tenant under this Lease shall in no way limit or diminish Tenant's
liability under ARTICLE 16 hereof and such limits shall be subject to increase
at any time and from time to time during the Lease Term if Landlord, in the
exercise of reasonable discretion, deems such an increase necessary for
Landlord's adequate protection.
8.2 LANDLORD'S INSURANCE. Landlord shall procure and maintain in full
force and effect, public liability and property damage insurance in types of
coverages and amounts as are customarily carried by operators of similar hotel
and casino facilities in Clark County, Nevada.
8.3 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives any
and all rights of recovery against the other or against the officers, employees,
agents and representatives of the other, on account of loss or damage occasioned
to such waiving party, or its property or any property of others under its
control to the extent that such loss or damage arises from any risk generally
covered by fire and extended coverage insurance, whether or not such an
insurance policy is maintained or there are insurance proceeds sufficient to
cover the loss. Landlord and Tenant shall each, upon obtaining the respective
policies of insurance required under this Lease, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is contained
in this Lease and obtain from the respective carriers an endorsement waiving any
right of subrogation in favor of the insurer.
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ARTICLE 9
TAXES
9.1 ADDITIONAL TAXES. In addition to all other amounts which Tenant is
required to pay under this Lease, Tenant shall pay before delinquency:
(a) All taxes and assessments levied against fixtures,
equipment and personal property of Tenant installed or located in the Premises;
and
(b) Any and all taxes, assessments or other charges of any
kind imposed by any federal, state, county, municipal or other governmental body
or agency and payable by Landlord or Tenant (excluding income, franchise,
inheritance or estate taxes), whether or not customary or within the
contemplation of the parties, with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises.
Tenant, at its expense, shall have the right, in Landlord's name if appropriate,
to contest or review by legal proceedings, or in such other manner as it may
deem suitable (which, if instituted, Tenant shall conduct at its own expense,
and free of any expense imposed on Landlord) any tax, assessment or other
governmental imposition or charge described in this SECTION 9.1. Tenant may
defer payment of a contested item, unless such deferment would result in the
enforcement of a lien on the Premises or the Project or the imposition of a
criminal penalty on Landlord, in which event, Tenant shall promptly pay such
contested item or items or cause them to be paid under protest if at any time
the Premises or Project or any part thereof shall be in danger of being
forfeited or otherwise lost, or if Landlord shall be subjected to criminal
liability for such non-payment. The legal proceedings herein referred to shall
include appropriate proceedings to review tax assessments and appeals from
orders therein and appeals from any judgments, decrees, or orders. If there
shall be any refund with respect to any contested item based on a payment by
Tenant, Tenant shall be entitled to the entire amount thereof. Landlord shall
promptly cooperate with Tenant, execute such documents and take such actions as
may be reasonably necessary, (but without the imposition of cost or expense on
Landlord) to enable Tenant to properly contest any matter contemplated in this
SECTION 9.1.
9.2 SALES TAX. Tenant agrees to pay to Landlord a sum equal to the
amount which Landlord is required to pay or collect by reason of any privilege
tax, sales tax, gross proceeds tax, rent tax, or like tax levied, assessed or
imposed by any federal, state, county or municipal governmental authority, or
any subdivision thereof, upon any rent or other charges required to be paid
under this Lease. Such sum shall be paid simultaneously with the rental payment
or other charge upon which such sum is based.
9.3 CET. Tenant agrees that it will collect any applicable CET
associated with the sale of food, beverage or merchandise from the Premises and
will pay the same to the taxing authority on a timely basis, or if Tenant is not
permitted to pay the same directly, shall remit the CET due
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to Landlord no later than the 10th day of the month following the month in which
the taxable sales occurred. Tenant shall make all documents containing
information relative TO the computation of the CET available for inspection upon
prior written notice by representatives of Landlord and the Nevada Tax
Commission or Nevada Gaming Commission. This obligation shall continue beyond
the Lease Term as to CET assessed during the time Tenant operated the Premises.
Tenant shall be liable for any and all CET, interest and penalties found to be
payable in connection with the sale of food, beverage or merchandise from the
Premises as a result of understated taxable revenues, insufficiency of records
or untimely payments unless Tenant is not permitted to pay the CET directly to
the taxing authority, then if Tenant has timely remitted the payment to Landlord
as required in this Section, Tenant shall not be liable for the untimely payment
of the CET to the taxing authority.
ARTICLE 10
SERVICES
10.1 SERVICES PROVIDED. Provided Tenant is not in default under this
Lease, Landlord shall provide Tenant with the following services (collectively,
the "SERVICES") DURING the Lease Term:
(a) Heating and air conditioning during the customary periods
of the year therefor during the hours of operation required hereunder when and
to the same extent as furnished to other comparable portions of the Project.
Tenant acknowledges that Tenant shall have access to the controls for heating
and air conditioning located within the Premises, but might not have access to
the controls for heating or air conditioning located outside the Premises and
shall not attempt to make any changes to such controls located outside the
Premises;
(b) Customary gas, water and sewer service;
(c) Electricity in sufficient amounts to provide ordinary
lighting and to operate the restaurant equipment to be installed in the Premises
and approved by Landlord;
(d) One (1) telephone and local telephone service. Long
distance telephone charges shall be Tenant's responsibility; and
(e) Garbage service at the receptacles designated by Landlord.
Landlord's obligation to furnish services shall be conditioned upon the
availability of adequate energy sources. Landlord shall confer with Tenant and
have the right to reduce such services as required by any mandatory or voluntary
fuel or energy conservation program. Landlord may, from time to time, prescribe
reasonable rules and regulations for implementation of this Section.
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10.2 SERVICE CHARGE. As compensation for the Services attributable to
the Premises, Tenant agrees to pay Landlord Sixty-Five Thousand Dollars
($65,000.00) per Lease Year (the "SERVICE CHARGE") payable on a monthly basis
together with Minimum Rent, prorated for any partial Lease Year. The Service
Charge is based in part on the utility rates set forth on EXHIBIT G ("UTILITY
RATES"). If after the first Lease Year the Utility Rates increase or decrease,
Landlord may reevaluate the Service Charge and shall notify Tenant in writing of
any change (together with back-up information showing the basis for the revised
Service Charge), which change shall be effective thirty (30) days after receipt
of any such notice. Except as provided in the preceding sentence, the Service
Charge shall be paid regardless of the actual cost of providing such Services.
10.3 SERVICE INTERRUPTION. Landlord shall not be liable in damages for
any failure or interruption of any utility service to the Premises, except to
the extent that any failure or interruption arises from the gross negligence or
willful misconduct of Landlord. No failure or interruption of utility service
for any reason shall entitle Tenant to terminate this Lease; provided, however,
that if the failure or interruption of any Service to be repaired or maintained
by Landlord and not the service provider continues for a period of forty-eight
(48) hours or more, Tenant shall be entitled to an equitable abatement of
Minimum Rent. Landlord shall not be obligated to provide any service or
maintenance or to make any repairs pursuant to this Lease when such service,
maintenance or repair is made necessary because of any wrongful act or misuse of
any utility service by Tenant, Tenant's agents, employees, servants,
contractors, subtenants or licensees. Landlord reserves the right to stop any
Service when Landlord deems such stoppage necessary, whether by reason of
accident or emergency, or for repairs or improvements or otherwise, provided,
that any such period of stoppage shall be only so long as is reasonably required
to effect any necessary repairs or maintenance. Landlord shall not be obligated
to inspect the Premises and shall not be obligated to make any repairs or
perform any maintenance hereunder unless first notified of the need thereof in
writing or, in an emergency, verbally, followed by a written confirmation, by
Tenant. Upon receipt of any such notice, Landlord shall commence any required
repair work of an emergency nature as soon as possible and work as expeditiously
as possible to complete such work. All other work of a non-emergency nature
shall be performed as promptly as possible. If Landlord shall fail to commence
emergency repairs or maintenance to be performed by Landlord and not the service
provider within twenty-four (24) hours after said notice, or non-emergency
repairs or maintenance within five (5) days after said notice, then Tenant shall
be entitled to an equitable abatement of Minimum Rent for so long as such
failure continues and an extension of the Lease Term for a period equal to the
period of rent abatement.
ARTICLE 11
REPAIRS AND MAINTENANCE
11.1 REPAIRS AND MAINTENANCE BY LANDLORD. Landlord agrees, at its sole
expense, to keep in good structural order, condition and repair all common area
surrounding the Premises and
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the exterior walls, floor (but not floor coverings) and roof of the Premises,
except for reasonable wear and tear and except for any damage thereto caused by
any act or negligence of Tenant or its agents, employees, servants, contractors,
subtenants or licensees. Landlord agrees to maintain the Project (other than
those portions of the Premises for which Tenant is responsible and portions of
the Project which are maintained by other tenants or third parties) as a first
class hotel and casino and keep the Project in compliance with all applicable
building codes and regulations to the extent necessary to insure Tenant's safe
and continued use of the Premises. Landlord shall make any of the foregoing
repairs as expeditiously as possible after Landlord has received written notice
from Tenant that such repairs need to be made and within thirty (30) days of
receipt of such notice unless such repairs cannot, in the exercise of reasonable
diligence, be completed in thirty (30) days and diligently pursue the same to
completion. All other items of maintenance and repair for the Premises are the
sole responsibility and expense of Tenant.
11.2 REPAIRS AND MAINTENANCE BY TENANT. Tenant agrees, at Tenant's
expense, to keep the Premises and any special equipment, fixtures or facilities
(including, but not limited to grease traps located outside the Premises) in a
clean, safe and sanitary condition. Tenant agrees to immediately replace broken
glass in exterior and interior windows and doors with glass of the same quality,
and, on Landlord's request, to remove any encroachments maintained or authorized
by Tenant on any public place without Landlord's prior written consent. Tenant
shall not overload any floor or facility, throw any foreign substances in
plumbing fixtures or use the plumbing fixtures for any purpose other than that
for which constructed. Tenant also agrees to keep the Premises (including any
exterior entrance, storefronts and the interior of exterior walls), all
partitions, doors, fixtures and equipment (including lighting, heating and
plumbing fixtures and any separate air conditioning system) in good order,
condition and repair and in compliance with all applicable laws, rules and
regulations. The cost of maintenance and repair of that part of any wall shared
with other tenants of the Project shall be borne equally by all tenants sharing
such wall; provided, however, Tenant shall be solely responsible for repairs to
such shared walls necessitated by the negligence or intentional acts or
omissions of Tenant its agents, employees or licensees. If Tenant refuses or
neglects to commence repairs within ten (10) days after receipt of written
demand from Landlord, or adequately to complete such repairs within a reasonable
time not to exceed thirty (30) days after such demand, Landlord, in addition to
any other rights and remedies contained or available to Landlord at law or in
equity, may enter the Premises and make the repairs, at Tenant's expense and
without liability to Tenant for any loss or damages which may accrue to Tenant's
stock or business by reason of such entry and repair work.
ARTICLE 12
ALTERATIONS AND IMPROVEMENTS
12.1 ALTERATIONS AND IMPROVEMENTS. Tenant may not make any alterations,
improvements, renovations, additions, or utility installations ("IMPROVEMENTS")
in, on or to the Premises, the exterior of the Premises, the exterior walls, the
roof, the storefront, or any
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structural, mechanical or electrical component without Landlord's prior written
consent. Any Improvements approved by Landlord shall be at the sole cost and
expense of Tenant, and shall be made promptly and in good and workmanlike manner
and in compliance with all applicable insurance requirements and with all
applicable permits, authorizations, building regulations, zoning laws and all
other governmental rules, regulations, ordinances, statutes and laws, now or
hereafter in effect pertaining to the Premises or Tenant's use thereof. Any
Improvements made by Tenant shall at Landlord's option become the property of
Landlord upon the expiration or sooner termination of this Lease. However, as a
condition to granting its consent to Tenant to make any Improvement, Landlord
shall have the right to require Tenant to remove such Improvements, at Tenant's
sole cost and expense, upon the termination of this Lease and to surrender the
Premises in the same condition as it was prior to the making of any or all such
Improvements, ordinary wear and tear excepted.
12.2 TRADE FIXTURES. Tenant may bring trade fixtures into the Premises
and may remove any and all restaurant equipment, trade fixtures, signs and
graphic displays (but not flooring) and other personal property of Tenant and
supplied by and brought into the Premises by Tenant, whether or not affixed to
the Premises (the "TENANT'S FIXTURES"), at any time Tenant is not in default
under this Lease, subject to any applicable grace or cure period. Tenant agrees
to repair any damage to the Premises caused by such removal. All other fixtures
which may be installed by Landlord or Tenant shall remain upon the Premises and
shall become the property of Landlord during the Lease Term and after the
earlier termination or expiration of the Lease Term, unless Landlord requests
removal of a particular item by Tenant, in which case Tenant shall remove the
item and restore the Premises to the condition they were in prior to
installation of the particular item. Upon reasonable request of Tenant, Landlord
agrees to execute and deliver any documents necessary or advisable, for
inclusion in Tenant's records or otherwise, to evidence Landlord's consent to
removal from the Premises of any personal property or fixtures leased to or to
be leased to Tenant by any third party.
12.3 LIENS. Tenant agrees to keep the Premises and the Property free
from any liens arising out of any work performed on the Premises by Tenant or
materials furnished to the Premises by Tenant and from any claim, liens, tax
lien or levy, attachment, garnishment or encumbrance arising directly or
indirectly from any obligation, action or inaction of Tenant whatsoever. Tenant
shall have twenty (20) days after notice of the filing for record of any lien or
tax lien, within which to obtain the release and discharge thereof or to bond
over the lien at Tenant's sole cost and expense. Landlord may, at any time and
in accordance with applicable law, post notices of non-responsibility on the
Premises and Tenant shall give Landlord at least ten (10) days prior written
notice of the commencement of any work on the Premises.
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ARTICLE 13
ADVERTISING
13.1 ADVERTISING.
(a) Tenant may not install, change or modify its signs at any
time without Landlord's prior written consent, which consent shall be given or
withheld in the sole discretion of Landlord. Tenant agrees to properly maintain
all approved signs. Upon expiration of the Lease, Tenant agrees promptly to
remove all signs and other advertising media placed in and around the Premises
by Tenant. Tenant shall repair all damage caused to the Project or Premises by
such removal, including proper "capping off" of electrical wiring. Tenant agrees
not to use any advertising medium, such as flashing lights, searchlights,
loudspeakers, phonographs, radios, or televisions, which can be heard or
experienced outside the Premises. Tenant agrees not to display, paint or place
any handbills, bumper stickers, or other advertising materials on any vehicle in
the parking area of the Project, or to distribute any handbills or other
advertising materials within or around the Project.
(b) Landlord shall provide in-room advertising in the hotel
directory on the same basis as such in-room advertising is provided to other
tenants, and Landlord shall permit Tenant to place signs within the hotel
provided that the location, type and content of the signs are approved in
advance by Landlord in its sole discretion. Without limiting the foregoing,
Tenant shall have the right to use all duretrans signs currently used for "Wild
Bill's" restaurant. All signs may be removed or relocated at any time at
Landlord's direction.
(c) Tenant will be responsible for the costs associated with
local, national or regional advertising of the WCW Nitro Grill/WCW Nitro Grill
Las Vegas. Tenant shall regularly advertise WCW Nitro Grill/WCW Nitro Grill Las
Vegas and any special events held at WCW Nitro Grill/WCW Nitro Grill Las Vegas,
including, but not limited to, advertising on the cable network.
13.2 CELEBRITY APPEARANCES. WCW Wrestlers shall make regular
appearances at the Premises, which appearances shall occur at least once per
week for three (3) weeks each month (and the WCW License Agreement shall provide
for such appearances).
ARTICLE 14
RULES AND REGULATIONS
14.1 RULES AND REGULATIONS. Landlord may promulgate such reasonable
rules and regulations relating to the use of the Premises and the Project as
Landlord may deem appropriate and for the best interests of the Project,
provided such rules and regulations do not expressly
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conflict with Tenant's rights under this Lease. Such rules and regulations shall
be binding upon Tenant upon delivery of a copy thereof to Tenant. The rules and
regulations may be amended by Landlord from time to time, subject to the
standards set forth above, with advance notice, and all such amendments shall be
effective upon delivery of a copy to Tenant.
ARTICLE 15
ASSIGNMENT AND SUBLETTING
15.1 ASSIGNMENT AND SUBLETTING. Tenant may assign its interest in this
Lease or sublet all or any portion of the Premises (a "TRANSFER") only with the
prior written consent of Landlord, which consent may be withheld in Landlord's
sole and absolute discretion, except as specifically provided for herein.
Further, Tenant acknowledges that Landlord's decision to lease the Premises to
Tenant is based, in part, on a review of the individuals and entities comprising
Tenant (and the individuals comprising any entities having an ownership interest
in Tenant), all of which are listed on EXHIBIT D. Therefore, if Tenant is a
corporation which is not publicly traded or a partnership, limited liability
company or other entity, the issuance of any additional stock and/or the
transfer, assignment or hypothecation of any stock or interest in such
corporation, partnership, limited liability company or other entity, directly or
indirectly, to any individual or entity other than those listed on EXHIBIT D,
shall be deemed a Transfer within the meaning of this ARTICLE 15. Any attempted
Transfer without Landlord's prior written consent in accordance with the
applicable standards set forth herein shall be void, shall confer no rights upon
any third person and at Landlord's option shall constitute a material, incurable
event of default under this Lease. Tenant shall provide Landlord with any and
all information requested by Landlord in connection with a proposed Transfer.
Each Transfer to which Landlord has consented shall be evidenced by an
instrument in writing in form satisfactory to Landlord and shall be executed by
the assignor or sublessor and by the assignee or subtenant (each, a
"TRANSFEREE"). Each Transferee that is an assignee or sublessee of Tenant's
interest as lessee under the Lease shall also agree in writing to assume, to be
bound by, and to perform the terms, covenants, and conditions of this Lease to
be done, kept, and performed by Tenant. One executed copy of such written
instrument shall be delivered to Landlord. No such Transfer shall release Tenant
from Tenant's obligations to Landlord under this Lease. Landlord's consent to a
Transfer on one occasion shall not be deemed a consent to any subsequent
Transfer.
15.2 TRANSFER PREMIUM. If Landlord consents to a Transfer in which the
Transferee is an assignee or sublessee of Tenant's interest as lessee under the
Lease, as a condition thereto which the parties hereby agree is reasonable,
Tenant shall pay to Landlord any "TRANSFER PREMIUM," as that term is defined in
this SECTION 15.2, received by Tenant from such Transferee. "TRANSFER PREMIUM"
shall mean all rent, additional rent or other consideration payable by such
Transferee in excess of the Minimum Rent, Percentage Rent and Additional Rent
payable by Tenant under this Lease on a per rentable square foot basis if less
than all of the Premises is transferred. "TRANSFER PREMIUM" shall also include,
but not be limited to, any payment in excess
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of fair market value for services rendered by Tenant to the Transferee or for
assets, fixtures, inventory, equipment, or furniture transferred by Tenant to
the Transferee in connection with such Transfer.
15.3 LANDLORD'S OPTION AS TO SUBJECT SPACE. Notwithstanding anything to
the contrary contained in this ARTICLE 15, Landlord shall have the option, by
giving written notice to Tenant within thirty (30) days after receipt of any
request for approval of a Transfer in which the Transferee is an assignee or
sublessee of Tenant's interest as lessee under the Lease, to (i) recapture the
subject space, or (ii) take an assignment or sublease of the subject space from
Tenant. Such recapture, or sublease or assignment shall cancel and terminate
this Lease, or create a sublease or assignment, as the case may be, with respect
to the subject space as of the effective date of the proposed Transfer until the
last day of the term of the proposed Transfer. In the event of a recapture by
Landlord, if this Lease shall be canceled with respect to less than the entire
Premises, the rent reserved herein shall be prorated on the basis of the number
of rentable square feet retained by Tenant in proportion to the number of
rentable square feet contained in the Premises, and this Lease as so amended
shall continue thereafter in full force and effect, and upon request of either
party, the parties shall execute written confirmation of the same.
15.4 CONCESSIONAIRES. Tenant agrees not to permit any business to be
operated in or from the Premises by any licensee or other concessionaire without
the prior written consent of Landlord, which consent may be withheld in
Landlord's sole and absolute discretion.
ARTICLE 16
INDEMNITY
16.1 INDEMNIFICATION. Landlord and its agents, employees, officers, and
directors shall not be responsible or liable for, and Tenant agrees to
indemnify, defend and hold harmless Landlord and its agents, employees,
officers, and directors for, from and against, all claims, damages, expenses
(including reasonable attorneys' fees), liabilities and judgments arising from
(i) any injury to persons, loss of life or damage to property occurring within,
on or about the Premises, (ii) the use, non-use, condition or occupation of the
Premises by Tenant or its employees, agents or invitees or (iii) the negligence
or willful misconduct of Tenant or its employees, agents or invitees; provided,
however, that with respect to the foregoing clauses (i) and (ii) Tenant shall
not be obligated to indemnify, defend or hold harmless Landlord to the extent
that any claim, damage, expense, liability or judgment arises from the gross
negligence or willful misconduct of Landlord, or Landlord's breach of this
Lease. The provisions of this Section shall survive the expiration or sooner
termination of this Lease with respect to any claims or liability occurring
prior to such expiration or termination.
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ARTICLE 17
EMINENT DOMAIN
17.1 ENTIRE OR SUBSTANTIAL TAKING - If title to all or a substantial
portion of the Premises is taken for any public or quasi-public use under any
statute or by right of eminent domain, or by purchase in lieu of condemnation,
so that a reasonable amount of reconstruction of the Premises will not result in
the Premises being reasonably suited for Tenant's continued occupancy for the
uses and purposes for which the Premises are leased, this Lease shall terminate
as of the date that possession of said Premises, or part thereof, is taken.
17.2 PARTIAL TAKING. Except as provided in SECTION 17.3, if any part of
the Premises are taken and the remaining part (after reconstruction of the then
existing Project) is suitable, as determined by Tenant in its reasonable
discretion, for Tenant's continued occupancy for the purposes and uses for which
the Premises are leased, this Lease shall terminate as to the part so taken as
of the date that possession of such part of the Premises is taken, and the
Minimum Rent shall be equitably reduced. Landlord shall make such repairs and
alterations to the Premises as may be reasonably necessary to restore the part
not taken to useful condition. A just and proportionate part of the Minimum Rent
shall be abated during such restoration if there is a material interference with
Tenant's business.
17.3 ELECTION TO TERMINATE. If more than thirty-three percent (33%)
of the Floor Area of either the Project or the Premises is taken, either
Landlord, or in the case of the Premises only, Tenant may terminate this Lease
upon sixty (60) days' notice to the other party without regard to the provisions
of SECTION 17.2.
17.4 DISPOSITION OF PROCEEDS. All compensation awarded or paid upon a
total or partial taking of the fee of the Premises shall belong to Landlord,
whether such compensation is awarded or paid as compensation for diminution in
value of the leasehold or the fee. Landlord shall not be entitled to any
separate award made to Tenant for loss of business, depreciation to, and cost of
removal of stock and fixtures so long as such award does not diminish the
compensation paid to Landlord.
ARTICLE 18
DAMAGE OR DESTRUCTION
18.1 DAMAGE OR DESTRUCTION: LANDLORD TO REBUILD. If the Premises are
partially or totally destroyed by fire or other casualty insurable under
Landlord's fire and extended coverage insurance so as to become partially or
totally untenantable, Landlord agrees to rebuild and repair the Premises as
provided in SECTION 18.3, unless Landlord elects not to rebuild as provided in
SECTION 18.2.
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18.2 OPTION TO TERMINATE. If it so happens that:
(a) Thirty-three percent (33%) or more of either the Premises
or the Project is destroyed or damaged by fire or other casualty insurable under
Landlord's fire and extended coverage;
(b) Either the Premises or the Project is destroyed to the
extent of at least thirty-three percent (33%) of the replacement cost thereof;
(c) Either the Premises or the Project is partially or totally
destroyed by a cause or casualty other than those covered by Landlord's fire and
extended coverage insurance; or
(d) Either the Premises or the Project is declared unsafe or
unfit for occupancy by any governmental authority and repairs are thereby
required;
then, in any such event, Landlord may, if Landlord elects, rebuild or put the
Premises in good condition and fit for occupancy within a reasonable time after
such destruction or damage, or Landlord may give notice in writing to Tenant not
later than thirty (30) days after any such damage or destruction terminating
this Lease. If Landlord elects to rebuild or put the Premises in good condition
and fit for occupancy, then Tenant shall be entitled to an equitable abatement
of rent for the period of time that Tenant is unable to operate in the Premises
as a result of such rebuilding, and the Lease Term shall be extended for an
amount of time equal to such period of rebuilding.
18.3 PORTIONS TO BE REBUILT BY LANDLORD AND TENANT. Landlord's
obligation to rebuild (should Landlord elect or be obligated to repair or
rebuild) shall be limited to the Premises, as originally provided to Tenant, and
Tenant, at Tenant's expense, shall replace and fully repair all of Tenant's
exterior signs, trade fixtures, equipment, display cases and other installations
originally installed by Tenant. All insurance proceeds payable under Landlord's
fire and extended coverage risk insurance shall be payable solely to Landlord,
and Tenant shall have no interest in such proceeds.
18.4 NON-LIABILITY. Tenant shall not be entitled to any compensation or
damages from Landlord for loss of the use of the whole or any part of the
Premises, the Project, Tenant's personal property or any inconvenience or
annoyance caused by such damage, repair, or reconstruction. Notwithstanding the
destruction of or injury to the Premises or any part of the Premises, whether or
not the same are rendered untenantable or unfit for occupancy, Tenant shall have
no right to quit and surrender possession and shall have no right to any
abatement of rent, except as specifically provided in SECTION 18.5.
18.5 OPERATIONS DURING RECONSTRUCTION PERIOD. During any period of
repair and reconstruction, the Minimum Rent provided in SECTION 4.1 shall be
abated proportionately with the degree to which Tenant's use of the Premises is
impaired, such abatement to commence with
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the date of damage or destruction and to continue throughout the period of
repair. Tenant agrees to continue the operation of Tenant's business on the
Premises during any such period to the extent reasonably practicable from the
standpoint of prudent business management. The obligation of Tenant to pay
Percentage Rent and Additional Rent shall remain in full force and effect under
all circumstances.
ARTICLE 19
ENTRY BY LANDLORD
19.1 ACCESS TO PREMISES. Landlord and Landlord's employees and agents
may enter the Premises at all reasonable hours without diminution or abatement
of rent and without liability to Tenant (i) to inspect the Premises; (ii) during
periods of time when Tenant is not open for business to the public (whenever
possible) to make repairs, additions or alterations to the Premises, the
Project, or any property owned or controlled by Landlord (and for such purposes
Landlord may erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, always providing the
entrance to the Premises shall not be blocked thereby); (iii) to serve or post
any notice required or permitted under the provisions of this Lease or by law;
(iv) to cure any default by Tenant or to exercise any remedy of Landlord for a
default; and (v) for any other lawful purpose. For the purpose of providing
access as required by this Section, Landlord shall have a key to unlock all
doors on the Premises. If an excavation is made or is authorized to be made upon
land adjacent to the Premises or the Project, Tenant agrees to permit all
necessary persons to enter the Premises for the purpose of doing such work as
Landlord deems necessary to preserve walls from injury or damage. Nothing
contained herein shall impose or be deemed to impose any duty on the part of
Landlord to do any work or repair, maintenance, reconstruction or restoration,
which under any provision of this Lease is required to be done by Tenant; and
the performance thereof by Landlord shall not constitute a waiver of Tenant's
default in failing to do the same.
19.2 LEASING ACTIVITIES. Landlord, and/or its authorized agents and
representatives, shall be entitled to enter the Premises at all reasonable times
for the purpose of exhibiting the same to prospective purchasers and, during the
last six (6) months of the Term of this Lease, Landlord shall be entitled to
exhibit the Premises for lease.
ARTICLE 20
ABANDONMENT
20.1 ABANDONMENT. Tenant shall not vacate or abandon the Premises at
any time during the Lease Term. If Tenant violates this prohibition or is
dispossessed of the Premises involuntarily, by operation of law or otherwise, in
addition to all other remedies available to
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Landlord pursuant to this Lease or at law or in equity, any personal property
belonging to Tenant and left on the Premises shall be deemed to be abandoned, at
Landlord's option, or Landlord may store such property in Tenant's name and at
Tenant's expense, without notice to Tenant.
ARTICLE 21
EVENTS OF DEFAULT BY TENANT
21.1 EVENT OF DEFAULT. The following shall constitute events of
default by Tenant under this Lease:
(a) If Tenant fails to pay any rent (including Percentage Rent
and Additional Rent) or any other sums payable pursuant to this Lease on the
date due, whether or not the same shall have been demanded, and such failure
continues for a period of five (5) days after Tenant has received written notice
thereof, provided that if Tenant defaults in rent payment two (2) times in any
calendar year, no five (5) day cure period shall apply to any subsequent rent
payment default in that year.
(b) Any assignment of this Lease, sublease of all or any
portion of the Premises or transfer of any interest in Tenant other than as
permitted under or in compliance with ARTICLE 15 of this Lease.
(c) If Tenant fails to observe or perform any of the other
covenants or agreements contained in this Lease to be observed or performed by
Tenant; except that if such failure is of a type that can be cured or corrected
by Tenant, then such failure shall not be a default unless such failure
continues for thirty (30) days after written notice of breach is given by
Landlord to Tenant; and further except that if such failure is of such a
character as to require more than thirty (30) days to correct, Tenant shall not
be in default if Tenant commences action to correct such failure within the
30-day period and thereafter, using reasonable diligence, cures such failure;
(d) If Tenant shall become bankrupt, go into receivership, or
make an assignment for the benefit of creditors, or take or have taken against
Tenant any proceedings of any kind under any provision of any federal or state
bankruptcy law, provided, however, that in the case of any involuntary
proceeding against Tenant, if the same is dismissed within sixty (60) days of
filing then such involuntary proceeding shall not be an event of default; or
(e) If Tenant shall abandon the Premises, with Tenant's
absence from the Premises for a period of ten (10) consecutive days to be
conclusive evidence that the Premises have been abandoned.
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ARTICLE 22
REMEDIES OF LANDLORD
22.1 REMEDIES. On any event of default, Landlord, at Landlord's
option, without notice or demand, may do any one or more of the following, in
any order, successively or concurrently, except that in every case, Landlord, in
good faith, shall take all reasonable efforts to mitigate damages:
(a) Landlord may take any action deemed necessary by Landlord,
in Landlord's sole and absolute discretion, to cure the default. Tenant shall be
liable to Landlord for all of Landlord's reasonable expenses so incurred, as
Additional Rent, payable on demand by Landlord to Tenant.
(b) Landlord may terminate this Lease by written notice to
Tenant of Landlord's election to do so. Upon Landlord's notice of termination,
Landlord may recover from Tenant:
(i) The worth at the time of award of the unpaid
Minimum Rent, Percentage Rent, and Additional Rent which had
been earned at the time of termination;
(ii) The worth at the time of award of the amount by
which the unpaid Minimum Rent, Percentage Rent, and Additional
Rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided;
(iii) The worth at the time of award of the amount by
which the unpaid Minimum Rent, Percentage Rent, and Additional
Rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves
could be reasonably avoided; and
(iv) Any other amount reasonably necessary to
compensate Landlord for all the detriment proximately caused
by Tenant's failure to perform its obligations under the
Lease.
The "worth at the time of the award" of the amounts referred in SUBSECTIONS (i)
and (ii) above shall be computed by allowing interest at the lesser of the rate
of 12% per annum or the maximum rate of interest allowed by law. The "worth at
the time of the award" of the amount referred to in SUBSECTION (iii) above shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus 1 percent.
(c) Landlord may without declaring the Lease Term ended,
reenter the Premises and occupy the same, or any portion thereof, for and on
account of Tenant as hereinafter provided, applying any moneys received first to
the payment of such expenses as Landlord may have paid,
31
<PAGE> 40
assumed or incurred in recovering possession of the Premises, including costs,
expenses, attorneys' fees, and expenditures for placing the same in good order
and condition, or preparing or altering the same for reletting, and all other
expenses, commissions and charges paid, assumed or incurred by Landlord in or in
connection with reletting the Premises and then to the fulfillment of the
covenants of Tenant. Any such reletting as provided for herein may be for the
remainder of the Lease Term or for a longer or shorter period. Such reletting
shall be for such rent and on such other terms and conditions as Landlord, in
its sole discretion, deems appropriate. Tenant shall have no right or authority
whatsoever to collect any rent from such tenants, subtenants or any licensees or
concessionaires on the Premises. In any case, and whether or not the Premises or
any part thereof be relet, Tenant, until the end of what would have been the
Lease Term in the absence of such default, shall be liable to Landlord and shall
pay to Landlord monthly an amount equal to the average amount due as rent
hereunder, less the net proceeds for said month, if any, of any reletting
effected for the account of Tenant pursuant to the provisions of this
subparagraph, after deducting all of Landlord's expenses in connection with such
reletting, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, reasonable attorneys' fees, reasonable expenses of
employees, alteration costs (except costs limited in this Section), and expenses
of preparation for such reletting (all said costs are cumulative and shall be
applied against proceeds of reletting until paid in full). Landlord reserves the
right to bring such actions for the recovery of any deficits remaining unpaid by
Tenant to Landlord hereunder as Landlord may deem advisable from time to time
without being obligated to await the end of the Lease Term for a final
determination of Tenant's account; and the commencement or maintenance of one or
more actions by Landlord in this connection shall not bar Landlord from bringing
subsequent actions for further accruals pursuant to the provisions of this
Section.
(d) Landlord may pursue all rights and remedies of Landlord,
which shall in any event be cumulative and not alternative, and shall be in
addition to any and all rights provided at law or in equity.
For the purposes of determining the Percentage Rent which would be payable to
Landlord by Tenant hereunder subsequent to Tenant's default, the Percentage Rent
for each month of the unexpired term hereof shall be deemed to be an amount
equal to the average of the Percentage Rent paid or payable by Tenant to
Landlord hereunder annually during the three (3) years immediately preceding the
date of default, or such lesser period of time as has occurred since the
Commencement Date.
22.2 LATE CHARGE. If any installment of rent or any other sum payable
by Tenant hereunder is not received by Landlord within five (5) days of the date
when due, a late charge of three percent (3%) of such overdue installment or
other payment shall be immediately and automatically payable by Tenant to
Landlord, without the necessity of delivery of any notice; provided, however,
that Landlord shall give Tenant notice of non-payment and five (5) days from
receipt of such notice to cure such non-payment twice in any twelve (12) month
period before assessing such late fee.
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ARTICLE 23
ESTOPPEL CERTIFICATES AND SUBORDINATION
23.1 ESTOPPEL CERTIFICATES. Tenant agrees at any time and from time to
time upon not less than ten (10) business days' prior request by Landlord, to
execute, acknowledge and deliver to Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the Lease is in full force and effect as modified and
stating the modifications), stating the dates to which the Minimum Rent and
other charges have been paid in advance, if any, and confirming Tenant's
acceptance of the Premises, the commencement of the Lease Term, the rent
provided under the Lease, and such other matters as Landlord may request, it
being intended that any such statement delivered pursuant to this Section may be
relied upon by any prospective purchaser, mortgagee, beneficiary under a deed of
trust, or assignee of any mortgagee of the Premises or the Project.
23.2 SUBORDINATION. Tenant agrees upon request of Landlord to
subordinate this Lease and its rights hereunder to the lien of any mortgage,
deed of trust or other encumbrance, together with any renewals, extensions or
replacements thereof, now or hereafter placed, charged or enforced against the
Premises, or any portion thereof, or any property of which the Premises is a
part, provided, however, that any such subordination instrument shall contain
reasonable non-disturbance and attornment provisions in favor of Tenant and
binding on such lender, and to execute and deliver at any time, and from time to
time, upon demand by Landlord, such documents as may be required to effectuate
such subordination.
23.3 PRIORITY OPTION. In the event that the mortgagee or beneficiary
of any such mortgage or deed of trust elects to have this Lease a prior lien to
its mortgage or deed of trust, then and in such event, upon such mortgagee's or
beneficiary's giving written notice to Tenant to that effect, this Lease shall
be deemed prior in lien to such mortgage or deed of trust, whether this Lease is
dated prior to or subsequent to the date of recordation of such mortgage or deed
of trust.
23.4 ATTORNMENT. Tenant shall, in the event any proceedings are brought
for the foreclosure of the Premises or in the event of exercise of the power of
sale under any deed of trust made by Landlord covering the Premises, attorn to
the purchaser upon any such foreclosure or sale and recognize such purchaser as
Landlord under this Lease, provided, however, that such purchaser shall also
agree to grant Tenant reasonable and customary non-disturbance and mutual
attornment rights.
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ARTICLE 24
SALE OF PREMISES
24.1 SALE OF PREMISES BY LANDLORD. Landlord may at any time assign or
transfer its interest as Landlord in and to this Lease, or any part thereof, and
may at any time sell or transfer its interest in the fee to the Premises, or its
interest in and to the whole or any portion of the Premises. In the event of any
sale or exchange of the Premises by Landlord and the assignment by Landlord of
this Lease and execution by the new owner of an acceptance and assumption
agreement agreeing to accept the assignment and assume all of Landlord's
obligations hereunder, Landlord shall be and is hereby entirely released of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease occurring after the consummation of such sale or
exchange and assignment.
ARTICLE 25
HOLDING OVER
25.1 HOLDING OVER. If Tenant should remain in possession of the
Premises after the expiration of the Lease Term with the consent of Landlord and
without executing a new lease, then such holding over shall be construed as a
tenancy from month-to-month, subject to all conditions, provisions and
obligations of this Lease, insofar as the same are applicable to a
month-to-month tenancy, except that Minimum Rent shall increase by fifty percent
(50%). Tenant shall continue in possession until such tenancy is terminated by
either Landlord or Tenant giving written notice of termination to the other
party at least thirty (30) days prior to the effective date of termination.
ARTICLE 26
SURRENDER OF PREMISES
26.1 SURRENDER. On the last day or sooner termination of the Lease
Term, Tenant agrees to quit and surrender the Premises, broom clean, in good
condition and repair (reasonable wear and tear and damage by acts of God or fire
excepted) together with all alterations, additions and improvements (unless
notified otherwise by Landlord) which may have been made in, to or on the
Premises, except trade fixtures installed at the expense of Tenant. Tenant, on
or before the end of the Lease Term, shall remove all of Tenant's property from
the Premises, and all property not removed shall be deemed abandoned by Tenant.
If the Premises are not surrendered at the end of the Lease Term, Tenant shall
indemnify Landlord against loss or liability resulting from delay by Tenant in
so surrendering the Premises, including, without limitation, any claim made
against Landlord by any succeeding tenant based on such delay.
34
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26.2 MERGER UPON SURRENDER. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation of this Lease, shall not automatically
work a merger, and Landlord may either terminate all or any existing
subtenancies or treat the surrender or cancellation as an assignment to Landlord
of any or all such subtenancies.
ARTICLE 27
GENERAL PROVISIONS
27.1 WAIVERS. One or more waivers by Landlord of any covenant or
condition contained in this Lease or of any breach or default by Tenant shall
not be construed as a waiver of a subsequent breach or default of the same or of
any other covenant or condition, and the consent or approval by Landlord to or
of any act of Tenant which requires Landlord's consent or approval shall not be
deemed to waive or render unnecessary Landlord's consent or approval to or of
any subsequent or similar act by Tenant. The subsequent acceptance by Landlord
of rent or of any other payment shall not constitute a waiver of any concurrent
or preceding breach or default by Tenant of any term, covenant or condition of
this Lease, other than the failure of Tenant to pay the particular rental or
payment so accepted, regardless of Landlord's knowledge of such preceding or
concurrent breach or default at the time of acceptance of such rent or payment.
No waiver shall be effective unless it is in writing and signed by Landlord.
27.2 NO ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord of a lesser amount than the rent provided to be paid shall be deemed to
be other than on account of the earliest rent due and payable under this Lease,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent be deemed an accord and satisfaction. Landlord may
accept any such check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy provided in this
Lease.
27.3 NOTICES. All notices, demands, and statements shall be in writing
and shall be given by personal delivery, facsimile transmission, express
delivery service or by deposit in the United States mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the addresses
appearing in the FUNDAMENTAL LEASE PROVISIONS or at such other place as either
party may designate in writing to the other party. A copy of any notice or
demand sent to Landlord shall be sent to the following address:
New Castle Corp.
c/o Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, NV 89109
Attn: General Counsel
35
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The date notice is given shall be the date on which the notice is delivered, if
notice is given by personal delivery, facsimile transmission if confirmation of
transmission is made, or express delivery service, or the date of deposit in the
mail, if the notice is sent through the United States mail. Notice is deemed to
have been received on the date on which the notice is delivered, if notice is
given by personal delivery, facsimile transmission or express delivery service,
or three (3) days after deposit in the mail, if the notice is sent through the
United States mail.
27.4 RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease shall
be deemed or construed by the parties or by any third person to create the
relationship of principal and agent, of partnership, of joint venture or of any
association between Landlord and Tenant, and neither the method of computation
of rent nor any other provision contained in this Lease nor any acts of the
parties shall be deemed to create any relationship between Landlord and Tenant
other than the relationship of landlord and tenant.
27.5 ATTORNEYS' FEES. In the event of any action or proceeding brought
by either party against the other under this Lease or any guarantee of this
Lease, the prevailing party shall be entitled to recover attorneys' fees in such
amount as the court or other fact finder may judge reasonable.
27.6 BINDING EFFECT. Subject to all limitations on assignment and
subletting set forth in this Lease, all of the terms and provisions of this
Lease shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties to this Lease.
27.7 INTEREST ON PAST DUE OBLIGATIONS. Any amount due to Landlord which
is not paid when due shall bear interest from the due date until paid at the
rate equal to the lesser of twelve percent (12%) per annum or the maximum rate
allowed by law. Payment of such interest shall not excuse or cure any default by
Tenant under this Lease.
27.8 SEVERABILITY. If any one or more of the provisions of this Lease
or the applicability of any such provision to a specific situation shall be held
invalid or unenforceable, such provision shall be modified to the minimum extent
necessary to make it or its application valid and enforceable, and the validity
and enforceability of all other provisions of this Lease and all other
applications of such provisions shall not be affected by such determination.
27.9 ENTIRE AGREEMENT; AMENDMENT. This Lease, together with the
attached Exhibits which are an integral part of this Lease, constitutes the
entire agreement between the parties pertaining to the subject matter of this
Lease. All prior and contemporaneous agreements, representations and
understandings of the parties, oral or written, are superseded and merged in
this Lease. No supplement, modification or amendment of this Lease shall be
binding unless in writing and executed by both parties.
27.10 CAPTIONS. The captions of the Sections and Articles of this
Lease are for convenience only and shall not be considered or referred
to in resolving questions of interpretation
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or construction. References in this Lease to "SECTIONS" and "ARTICLES" are to
the various Sections and Articles of this Lease, unless otherwise noted.
27.11 CONSTRUCTION. The laws of the State of Nevada shall govern the
validity, performance, and enforcement of this Lease. This Lease shall not be
construed either for or against Landlord or Tenant. This Lease shall be
interpreted in an effort to reach an equitable result. Whenever the context may
require, any pronouns used in this Lease shall include the corresponding
masculine, feminine or neuter forms and the singular form of nouns and pronouns
shall include the plural and vice versa. If there is more than one Tenant, the
obligations under this Lease shall be considered the joint and several
obligations of each. Whenever or wherever in this Lease, the consent of Landlord
or Tenant is required, such consent shall not be unreasonably withheld or
delayed, unless otherwise specifically stated herein.
27.12 TIME OF ESSENCE. Time is of the essence with respect to the
performance of each of the covenants and agreements contained in this Lease.
27.13 EXECUTION OF ADDITIONAL DOCUMENTS. Landlord and Tenant each agree
to execute such additional documents as may be necessary or appropriate to fully
carry out the provisions of this Lease.
27.14 TIME PERIODS. If the time for the performance of any obligation
or taking of action under this Lease expires on a Saturday, Sunday or legal
holiday, the time for performance or taking such action shall be extended to the
next succeeding day which is not a Saturday, Sunday or legal holiday.
27.15 RECORDATION. Tenant shall not record, or cause to be recorded,
this Lease or any memorandum of this Lease. without the prior written consent of
Landlord.
27.16 BROKERS. The parties warrant that they have had no dealings with
any broker or agent in connection with this Lease, and covenant to pay, hold
harmless and indemnify each other from and against any and all cost, expense or
liability for any compensation, commissions and charges claimed by any broker or
agent with respect to this Lease or the negotiation thereof.
27.17 QUIET ENJOYMENT. Upon Tenant paying Minimum and Additional Rent
for the Premises and performing all of the covenants, conditions and provisions
on Tenant's part to be observed and performed hereunder, Tenant shall have the
quiet possession of the Premises for the Lease Term hereof subject to all of the
provisions of this Lease.
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IN WITNESS WHEREOF, this Lease is executed as of the date first-above written.
NEW CASTLE CORP., a Nevada corporation
By: /s/ Don Givens
----------------------------------
Its: VP/GM
----------------------------------
"Landlord"
SITKA RESTAURANT GROUP, INC., A NEVADA
CORPORATION,
By: /s/ Karl Rogers
----------------------------------
Its: President
----------------------------------
"TENANT"
ACKNOWLEDGMENTS
STATE OF NEVADA )
): ss.
County of CLARK )
The foregoing instrument was acknowledged before me this 19th day of NOVEMBER,
1998, by DON GIVENS, the V.P./G.M. of New Castle Corp., a Nevada corporation,
on behalf of the corporation.
/s/ Norma G. Lucero
-------------------
NOTARY PUBLIC
My Commission Expires:
8/18/2001
- ----------------------
[NOTARY PUBLIC SEAL]
38
<PAGE> 47
STATE OF NEVADA )
):ss.
County of CLARK )
The foregoing instrument was acknowledged before me this 9th day of
November 9, 1998, by Karl Rogers , the President of SITKA RESTAURANT
GROUP, INC., a Nevada corporation, on behalf of the corporation.
/s/ Carol Caldwell
------------------
NOTARY PUBLIC
My Commission Expires:
6-20-99
- ----------------------
[NOTARY PUBLIC SEAL]
39
<PAGE> 48
File No. 93-04-2078 RMG FIRST AMENDMENT
EXHIBIT "A" (CONT)
PARCEL TWO (2):
- ---------------
That portion of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of
Section 29, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada,
being more particularly described as follows:
Commencing at the Southeast (SE) corner of the Northeast Quarter (NE 1/4) of
Section 29;
the said point also being on the centerline of Las Vegas Boulevard South;
Thence North 00 degrees 19'25" West, along the East line of the South Half
(S 1/2) of the Northeast Quarter (NE 1/4) of Section 29, being the said
centerline of Las Vegas Boulevard South, a distance of 1379.62 feet to a point
for the Southeast (SE) corner of the said North Half (N 1/2) of the Northeast
Quarter (NE 1/4) of said Section 29;
Thence South 89 degrees 37'48" West, departing the said East line and departing
the said centerline of Las Vegas Boulevard South, and along the South line of
the said North Half (N 1/2) of the Northeast Quarter (NE 1/4) of Section 29, a
distance of 150.00 feet to an angle point on the West right-of-way line of Las
Vegas Boulevard South;
Thence North 00 degrees 20'09" West, along the said West line, a distance of
21.54 feet to a point for the Southeast (SE) corner and POINT OF BEGINNING of
this parcel;
Thence South 89 degrees 37'48" West, departing the said West right-of-way line,
a distance of 650.00 feet to a point for the Southwest (SW) corner of this
parcel;
Thence North 00 degrees 20'09" West, a distance of 378.46 feet to a point for
the Northwest (NW) corner of this parcel;
Thence North 89 degrees 37'48" East, a distance of 475.00 feet to an angle
point;
Thence South 00 degrees 20'09" East, a distance of 140.00 feet to an angle
point;
Thence North 89 degrees 37'48" East, a distance of 175.00 feet to a point for
the Northeast (NE) corner of this parcel;
the said point being on the said West right-of-way line of Las Vegas Boulevard
South;
Thence South 00 degrees 20'09" East, along the said West right-of-way line, a
distance of 238.46 feet to the POINT OF BEGINNING.
EXHIBIT "A"
<PAGE> 49
File No. 93-04-2078 RMG FIRST AMENDMENT
EXHIBIT "A" (CONT)
PARCEL THREE (3):
- -----------------
That portion of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of
Section 29, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada,
being more particularly described as follows:
Commencing at the Southeast (SE) corner of the Northeast Quarter (NE 1/4) of
Section 29;
the said point also being on the centerline of Las Vegas Boulevard South;
Thence North 00 degrees 19'25" West, along the East line of the South Half (S
1/2) of the Northeast Quarter (NE 1/4) of Section 29, being the said centerline
of Las Vegas Boulevard South, a distance of 1379.62 feet to a point for the
Southeast (SE) corner of the said North Half (N 1/2) of the Northeast Quarter
(NE 1/4) of Section 29;
Thence South 89 degrees 37'48" West, departing the said East line and departing
the said centerline of Las Vegas Boulevard South, and along the South line of
the said North Half (N 1/2) of the Northeast Quarter (NE 1/4) of Section 29, a
distance of 150.00 feet to an angle point on the West right-of-way line of Las
Vegas Boulevard South;
Thence North 00 degrees 20'09" West, along the said West line, a distance of
400.00 feet to a point for the most Easterly Southeast (SE) corner and POINT OF
BEGINNING of this parcel;
Thence South 89 degrees 37'48" West, departing the said West right-of-way line,
a distance of 650.00 feet to an angle point;
Thence South 00 degrees 20'09" East, a distance of 378.46 feet to a point for
the most Southerly Southeast (SE) corner of this parcel;
Thence South 89 degrees 37'48" West, a distance of 1391.19 feet to a point on
the East right-of-way line of Interstate Highway No. 15 for the Southwest (SW)
corner of this parcel;
Thence North 00 degrees 08'58" East, along the said East right-of-way line, a
distance of 631.00 feet to an angle point;
Thence North 17 degrees 52'21" East, continuing along the said East line, a
distance of 297.56 feet to a point for the Northwest (NW) corner of this parcel;
the said point being on a curve concave Northwesterly having a radius of 424.00
feet and a radial bearing of North 01 degrees 30'50" West;
Thence Northeasterly along the said 424.00 foot radius non-tangent curve to the
left having a central angle of 32 degrees 17'50", and an arc distance of 239.01
feet to a point of tangency having a radial bearing of South 33 degrees 48'40"
East;
Exhibit "A" continued........
EXHIBIT "A"
<PAGE> 50
File No. 93-04-2078 RMG FIRST AMENDMENT
EXHIBIT "A" (CONT)
Parcel Three (3) - cont
Thence North 56 degrees 11'20" East, a distance of 85.91 feet to an angle
point;
Thence South 33 degrees 48'40" East, a distance of 41.87 feet to an angle
point;
Thence North 56 degrees 11'20" East, a distance of 154.12 feet to an angle
point;
Thence North 73 degrees 14'26" East, a distance of 142.57 feet to a point on the
South right-of-way line of Tropicana Avenue;
Thence North 88 degrees 59'03" East, continuing along the said South
right-of-way line of Tropicana Avenue, a distance of 427.65 feet to angle point;
Thence North 01 degrees 00'57" West, a distance of 27.62 feet to an angle point;
Thence North 88 degrees 59'03" East, a distance of 176.52 feet to a point of
curvature of a curve concave Southwesterly having a radius of 34.00 feet and a
radial bearing of South 01 degrees 00'57" East;
Thence Southeasterly along the arc of the said 34.00 foot radius non-tangent
curve to the right having a central angle of 47 degrees 00'55", and an arc
distance of 27.90 feet to a point having a radial bearing of North 45 degrees
59'58" East;
Thence North 88 degrees 59'03" East, a distance of 128.05 feet to a point of
curvature of a non-tangent curve concave Southeasterly having a radius of 33.50
feet and a radial bearing of South 71 degrees 31'14" East;
Thence Northeasterly along the arc of the said 33.50 foot radius non-tangent
curve to the right having a central angle of 70 degrees 30'17", and an arc
distance of 41.22 feet to a point of tangency having a radial bearing of North
01 degrees 00'57" West;
Thence North 88 degrees 59'03" East, a distance of 458.54 feet to an angle
point;
Thence South 87 degrees 23'48" East, a distance of 71.35 feet to a point of
curvature of a non-tangent curve concave Southwesterly having a radius of 66.50
feet and a radial bearing of South 06 degrees 40'36" West;
Thence Southeasterly along the arc of the said 66.50 foot radius curve to the
right having a central angle of 39 degrees 00'42", and an arc distance of 45.28
feet to a point on the said West right-of-way line of Las Vegas Boulevard South
for the Northeast (NE) corner of this parcel having a radial bearing of North
45 degrees 41'18" East;
Thence South 00 degrees 20'09" East, along the said West right-of-way line, a
distance of 772.41 feet to the POINT OF BEGINNING.
Exhibit "A" continues................
EXHIBIT "A"
<PAGE> 51
File No. 93-04-2078 RMG FIRST AMENDMENT
Exhibit "A" continued.................
Parcel Three (3) - cont
Together with that portion of land as conveyed to NEW CASTLE CORPORATION by that
Deed recorded July 22, 1992 in Book 920722 as Document No. 00568 Official
Records, being more particularly described as follows:
A portion of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of Section
29, Township 21 South, Range 61 East, M.D.M., and more fully described by metes
and bounds as follows, to wit:
PARCEL A:
- ---------
BEGINNING at a point on the right or Easterly right-of-way line of IR-15
Freeway, 544.91 feet right of and at right angles to Highway Engineer's Station
"B1" 202(divided by)19.83 P.O.T.; said POINT OF BEGINNING further described as
bearing South 67(degrees)13'20" East, a distance of 793.13 feet from the North
Quarter corner of Section 29, Township 21 South, Range 61 East, M.D.M.: thence
South 89(degrees)59'19" East, along said right-of-way line, a distance of 48.24
feet to a point; thence South 56(degrees)90'56" West, along the former right or
Easterly right-of-way line of said IR-15 Freeway, a distance of 40.07 feet to a
point; thence North 33(degrees)50'18" West, along said former right-of-way line,
a distance of 26.87 feet to the POINT OF BEGINNING; said parcel contains an area
of 538 square feet (0.01 of an acre), more or less.
PARCEL B:
- ---------
BEGINNING at a point on the right or Easterly right-of-way line of IR-15
Freeway, 687.74 feet right of and at right angles to Highway Engineer's Station
"B1" 202(divided by)82.88 P.O.T.; said POINT OF BEGINNING further described as
bearing South 74(degrees)25'54" East a distance of 907.56 feet from the North
Quarter corner of Section 29, Township 21 South, Range 61 East, M.D.M.; thence
North 47(degrees)24'51" East, along said right-of-way line, a distance of 58.37
feet to a point; thence North 88(degrees)57'13" East, along said right-of-way
line, a distance of 93.48 feet to a point; thence South 73(degrees)11'47" West,
along the former right or Easterly right-of-way line of said IR-15 Freeway, a
distance of 142.53 feet to the POINT OF BEGINNING; said parcel contains an area
of 1,809 square feet (0.04 of an acre), more or less.
Exhibit "A"
<PAGE> 52
File No. 93-04-2078 RMG FIRST AMENDMENT
EXHIBIT "A" (CONT)
PARCEL FOUR (4):
That portion of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of
Section 29, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada,
being more particularly described as follows:
Commencing at the Southeast (SE) corner of the Northeast Quarter (NE 1/4) of
Section 29;
the said point also being on the centerline of Las Vegas Boulevard South;
Thence North 00 degrees 19' 25" West, along the East line of the South Half
(S 1/2) of the Northeast Quarter (NE 1/4) of Section 29, being the said
centerline of Las Vegas Boulevard South, a distance of 1379.62 feet to a
point for the Southeast (SE) corner of the said North Half (N 1/2) of the
Northeast Quarter (Ne 1/4) of Section 29;
Thence South 89 degrees 37' 48" West, departing the said East line and departing
the said centerline of Las Vegas Boulevard South, and along the South line of
the said North Half (N 1/2) of the Northeast Quarter (NE 1/4) of Section 29, a
distance of 2191.37 feet to a point on the East right-of-way line of Interstate
Highway No. 15;
Thence North 00 degrees 08' 58" East, along the said East right-of-way line, a
distance of 652.64 feet to an angle point;
Thence North 17 degrees 52' 21" East, continuing along the said East line, a
distance of 366.17 feet to a point for the Southwest (SW) corner and POINT OF
BEGINNING of this parcel;
the said point being on a curve concave Northwesterly having a radius of 360.00
feet a radial bearing of North 5 degrees 8' 28" West;
Thence North 17 degrees 52' 21" East, continuing along the said East line, a
distance of 122.55 feet to a point for the Northwest (NW) corner of this parcel;
Thence North 86 degrees 07' 17" East, a distance of 187.48 feet to an angle
point;
Thence South 33 degrees 48' 40" East, a distance of 26.57 feet to an angle
point;
Thence South 56 degrees 11' 20" West, a distance of 85.91 feet to a point of
curvature of the said 360.00 foot radius curve concave Northwesterly; the said
point having a radial bearing of North 33 degrees 48' 40" West;
Thence Southwesterly along the arc of the said 360.00 foot radius non-tangent
curve to the right having a central angle of 28 degrees 40' 12", and an arc
distance of 180.14 feet to the POINT OF BEGINNING.
Exhibit "A" continued................
EXHIBIT "A"
<PAGE> 53
File No. 93-04-2078 RMB FIRST AMENDMENT
EXHIBIT "A" (CONT)
PARCEL FIVE (5):
Being a portion of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of
Section 29, Township 21 South, Range 61 East, M.D.M., and more fully described
by metes and bounds as follows, to wit:
BEGINNING at a point on the right or Easterly right-of-way line of IR-15 Freeway
(Project IR-015-1(81)37), 240.73 feet right of and at right angles to Highway
Engineer's Station "B1" 201+11.27 P.O.T.;
said point of beginning further described as bearing South 45 degrees 52'00"
East, a distance of 594.71 feet from the North Quarter (N 1/4) Corner of Section
29, Township 21 South, Range 61 East, M.D.M.;
Thence North 17 degrees 51'33" East, along the former right or Easterly
right-of-way line of said IR-15 Freeway, a distance of 58.52 feet to an
intersection with the Northwesterly "RB" ramp right-of-way line of said IR-15
Freeway;
Thence from a tangent which bears North 84 degrees 50'00" East curving to the
left along said Northwesterly "RB" ramp right-of-way line, with a radius of 360
feet, through an angle of 28 degrees 40'18", an arc distance of 180.15 feet to a
point;
Thence North 56 degrees 09'42" East, continuing along said right-of-way line, a
distance of 85.91 feet to an intersection with said Easterly IR-15 Freeway
right-of-way line;
Thence North 33 degrees 50'18" West, along said Easterly IR-15 Freeway
right-of-way line, a distance of 26.57 feet to a point;
Thence South 86 degrees 05'39" West, continuing along said Easterly right-of-way
line, a distance of 187.46 feet to an intersection with said former right or
Easterly right-of-way line or IR-15 Freeway;
Thence along said former right or Easterly right-of-way line, the following
Three (3) courses and distances:
1) North 17 degrees 51'33" East - 10.77 feet;
2) North 86 degrees 05'39" East - 200.25 feet;
3) North 88 degrees 57'13" East - 322.20 feet to an intersection with said
right or Easterly IR-15 Freeway right-of-way line;
Thence along said Easterly right-of-way line, the following Three (3) courses
and distances:
1) South 73 degrees 11'47" West - 142.53 feet;
2) South 56 degrees 09'56" West - 154.12 feet;
3) North 33 degrees 50'18" West - 41.87 feet to a point on the Southeasterly
"RB" ramp right-of-way line of said IR-15 Freeway;
Thence South 56 degrees 09'42" West, along Southeasterly "RB" ramp right-of-way
line, a distance of 85.91 feet to a point;
Thence from a tangent which bears the last described course, curving to the
right along said right-of-way line, with a radius of 424 feet, through an angle
of 32 degrees 18'04", an arc distance of 239.04 feet to the POINT OF BEGINNING.
Exhibit "A"
Exhibit "A" continued.........
<PAGE> 54
File No. 93-04-2078 RMG FIRST AMENDMENT
Exhibit "A" continued..........
EXHIBIT "A" (cont)
EXCEPTING THEREFROM that portion of said land as conveyed to NEW CASTLE
CORPORATION by that Deed recorded July 22, 1992 in Book 920722 as Document No.
00568 of Official Records, more particularly described as follows:
A portion of the North Half (N 1/2) of the Northeast Quarter (NE 1/4) of
Section 29, Township 21 South, Range 61 East, M.D.M., and more fully described
by metes and bounds as follows, to wit:
PARCEL A:
BEGINNING at a point on the right or Easterly right-of-way line of IR-15
Freeway, 544.91 feet right of and at right angles to Highway Engineer's Station
"B1" 202+19.83 P.O.T.; said POINT OF BEGINNING further described as bearing
South 67 degrees 13'20" East, a distance of 793.13 feet from the North Quarter
corner of Section 29, Township 21 South, Range 61 East, M.D.M.: thence South 89
degrees 59'19" East, along said right-of-way line, a distance of 48.24 feet to
a point; thence South 56 degrees 09'56" West, along the former right or Easterly
right-of-way line of said IR-15 Freeway, a distance of 40.07 feet to a point;
thence North 33 degrees 50'18" West, along said former right-of-way line, a
distance of 26.87 feet to the POINT OF BEGINNING; said parcel contains an area
of 538 square feet (0.01 of an acre), more or less.
PARCEL B:
BEGINNING at a point on the right or Easterly right-of-way line of IR-15
Freeway, 687.74 feet right of and at right angles to Highway Engineer's Station
"B1" 202+82.88 P.O.T.; said POINT OF BEGINNING further described as bearing
South 74 degrees 25'54" East a distance of 907.56 feet from the North Quarter
corner of Section 29, Township 21 South, Range 61 East, M.D.M.; thence North 47
degrees 24'51" East, along said right-of-way line, a distance of 58.37 feet to
a point; thence North 88 degrees 57'13" East, along said right-of-way line, a
distance of 93.48 feet to a point; thence South 73 degrees 11'47" West, along
the former right or Easterly right-of-way line of said IR-15 Freeway, a
distance of 142.53 feet to the POINT OF BEGINNING; said parcel contains an area
of 1,809 square feet (0.04 of an acre), more or less.
Exhibit "A"
<PAGE> 55
EXHIBIT "B"
[GRAPHIC OF FLOORPLAN]
<PAGE> 56
EXHIBIT C
WORK LETTER AGREEMENT
LANDLORD: NEW CASTLE CORP., a Nevada corporation
TENANT: SITKA RESTAURANT GROUP, INC., a Nevada corporation,
DATE: November 16th, 1998
RECITALS
A. Concurrently with the execution of this Work Letter Agreement
(the "AGREEMENT"), Landlord and Tenant have entered into a lease (the "Lease")
covering certain leased premises (the "PREMISES") more particularly described in
the Lease. Capitalized terms not defined in this Agreement shall have the
meaning set forth in the Lease.
B. To induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of the Lease apply
hereto) and in consideration of the mutual covenants hereinafter contained,
Landlord and Tenant hereby agree as follows:
AGREEMENT
1. TENANT IMPROVEMENTS.
1.1 Any reference herein to "TENANT IMPROVEMENTS" shall
include all work to be done in the Premises pursuant to the Tenant Improvement
Plans described in SECTION 2 below, including but not limited to partitioning,
interior doors, floor covering and finishes, reflective ceiling, electrical
fixtures, electrical outlets and switches, telephone outlets, plumbing fixtures,
paint and wall coverings, furniture, trade fixtures and equipment.
1.2 Tenant is leasing the Premises "as-is," "with all
faults," and "without any representations or warranties." Tenant agrees and
warrants that it has investigated and inspected the condition of the Premises
and the suitability of same for Tenant's use, and Tenant hereby waives and
disclaims any objection to, cause of action based upon, or claim that its
obligations hereunder should be reduced or limited because of the condition of
the Premises or the suitability of same for Tenant's use. Tenant acknowledges
that neither Landlord nor any agent nor any employee of Landlord has made any
representations or warranty with respect to the Premises or with respect to its
suitability for the conduct of Tenant's business and Tenant
<PAGE> 57
expressly warrants and represents that Tenant has relied solely on its own
investigation and inspection of the Premises in its decision to enter into this
Lease.
1.3 Tenant further agrees and warrants that, subject to the
provisions of this Agreement, (i) Tenant is solely responsible for the
construction of all Tenant Improvements and the completion of all work necessary
to prepare the Premises for Tenant's use; and (ii) Landlord's only
responsibility with respect to the construction of the Tenant Improvements is to
deliver the Premises to Tenant and to review and approve plans and selections
related thereto as set forth in this Agreement.
2. PREPARATION OF TENANT IMPROVEMENT PLANS.
2.1 Within fifteen (15) days after the execution of the Lease,
Tenant shall cause its architect and/or space planner to prepare a "SPACE PLAN"
for the layout of the Premises and shall submit such Space Plan to Landlord for
its approval, in its sole discretion. Landlord shall notify Tenant within
fifteen (15) business days after receipt of the Space Plan, whether Landlord
approves of the Space Plan and, if it does not fully approve of such Space Plan,
the respects in which the Space Plan is not acceptable. Within ten (10) business
days following receipt of any objection from Landlord, Tenant shall cause its
architect and/or space planner to revise the Space Plan to address Landlord's
objections and shall resubmit the same to Landlord. If Landlord objects in
writing to the resubmitted Space Plan within fifteen (15) business days
following its receipt thereof, Landlord and Tenant shall meet and confer to
resolve any dispute concerning the Space Plan.
2.2 Within fifteen (15) days following approval of the Space Plan,
Tenant shall cause its architect to prepare final working drawings and
specifications for the Tenant Improvements (the "WORKING DRAWINGS") and shall
submit the same to Landlord for approval, in its sole discretion, which approval
shall follow the same procedure set forth in SECTION 2.1 above. Once approved by
Landlord, the Space Plan and Working Drawings shall be referred to herein as the
"TENANT IMPROVEMENT PLANS."
2.3 At the same time that the Tenant Improvement Plans are
presented to Landlord for approval, Tenant shall also submit a budget to
Landlord itemizing the estimated cost to return the Premises to the condition
existing prior to the construction of the Tenant Improvements ("REFURBISHMENT
COST"). The Refurbishment Cost and the annual incremental increase thereto
necessary to reflect increases in construction costs over time shall be
determined by mutual agreement of Landlord and Tenant at the time of the
approval of the Tenant Improvement Plans.
2.4 Once the Tenant Improvement Plans have been approved, the
Tenant Improvement Plans shall not be changed without the prior approval of
Landlord.
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<PAGE> 58
3. CONSTRUCTION OF THE TENANT IMPROVEMENTS.
3.1 After approval of the Space Plan and Working Drawings by
Landlord, a contractor designated by Tenant and approved by Landlord, in its
sole discretion ("CONTRACTOR") shall construct the Tenant Improvements.
3.2 Tenant shall independently retain Contractor to construct the
Tenant Improvements in accordance with the Tenant Improvements Plans and Tenant
shall supervise the construction by Contractor.
3.3 In constructing the Tenant Improvements, all subcontractors
and laborers used by Tenant and Contractor shall be unionized laborers unless
such unionized labor is not available for such work after diligent inquiry and
investigation.
3.4 Should any "mechanic's" or other lien be filed against the
Premises or any part thereof by reason of Tenant's construction of the Tenant
Improvements or because of a claim against Tenant, Tenant shall cause the same
to be canceled and discharged of record by bond or otherwise within ten (10)
days after receipt of notice thereof and shall indemnify and defend Landlord and
hold it harmless for, from and against any claims arising out of any such claims
against Tenant. If Tenant fails to discharge any such mechanic's lien filed
against the Premises in accordance with the foregoing, Tenant will be in default
under the Lease and Landlord shall have the right, but not the obligation, to
discharge such mechanic's lien and to seek reimbursement from Tenant plus
interest thereon at a rate of twelve percent (12%) per annum until paid.
3.5 The Tenant Improvements shall comply in all respects with the
following: (i) state, federal, city or quasi-governmental laws, codes,
ordinances and regulations, as each may apply according to the rulings of the
controlling public official, agent or other person; (ii) building material
manufacturer's specifications; and (iii) the Tenant Improvement Plans. Tenant
shall obtain and pay for all necessary licenses, permits and certificates of
occupancy required by any applicable governmental agency for the Premises and
shall provide Landlord with a duplicate original of the certificate of occupancy
issued by Clark County along with unconditional lien waivers executed by
Contractor and each subcontractor.
3.6 Contractor and each subcontractor shall guarantee to Tenant
and for the benefit of Landlord that the portion of the Tenant Improvements for
which it is responsible shall be free from any defects in workmanship and
materials for a period of not less am one (1) year from the date of completion
thereof. Contractor and each subcontractor shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished
in accordance with its contract that shall become defective within one (1) year
after the later to occur of (i) completion of the work performed by such
contractor or subcontractors and (ii) the Commencement Date. The correction of
such work shall include, without additional charge, all additional expenses and
damages incurred in connection with such removal or replacement of all
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<PAGE> 59
or any part of the Tenant Improvements, and/or the Premises that may be damaged
or disturbed thereby. All such warranties or guarantees as to materials or
workmanship of or with respect to the Tenant Improvements shall be contained in
the contract or subcontract between Tenant and Contractor and each
subcontractor. The contracts between Tenant and Contractors and subcontractors
shall be written such that all guarantees and warranties and all other rights
and remedies at law, in equity or by contract with respect to the work performed
and Contractor's obligations shall inure to the benefit of both Landlord and
Tenant, as their respective interests may appear, and can be directly enforced
by either. Tenant covenants to give to Landlord any assignment or other
assurances which may be necessary to effect such rights of direct enforcement.
4. PAYMENT OF COST OF THE TENANT IMPROVEMENTS. Tenant shall be solely
responsible for the cost to construct the Tenant Improvements (the "TI COSTS").
5. COMPLETION OF TENANT IMPROVEMENTS; COMMENCEMENT DATE. Landlord shall
deliver the Premises to Tenant immediately upon execution and delivery of the
Lease. Tenant shall thereafter promptly commence the construction process in
accordance with the terms and conditions of this Agreement. If the Tenant does
not complete construction of the Tenant Improvements so that it is able to open
for business to the public on or before the Rent Commencement Date, Tenant shall
nonetheless pay the Minimum Rent provided for in the Lease plus an additional
rent at the rate of one-twentieth (1/20th) of the Minimum Rent for each and
every day from the Rent Commencement Date that Tenant is not open for business.
If Tenant has not completed construction of the Tenant Improvements so that it
is able to open for business to the public within thirty (30) days following the
Rent Commencement Date, Landlord shall have the right to terminate the Lease
upon prior written notice to Tenant at any time after thirty (30) days following
the Rent Commencement Date. Such written notice shall specify the date of such
termination. If Landlord terminates this Lease in accordance herewith, Tenant
shall not be entitled to reimbursement for any TI Costs incurred prior to the
effective date of the termination and Tenant shall be responsible for paying to
Landlord the Refurbishment Cost, as may be appropriately adjusted to reflect the
degree of construction completed prior to the termination.
6. INSURANCE. Contractor and each subcontractor shall carry worker's
compensation insurance covering all of their respective employees, and shall
also carry public liability insurance, including property damage, with all
limits, in a form and with companies as are required to be carried by Tenant as
set forth in the Lease. Tenant shall carry "Builder's All Risk" insurance in an
amount approved by Landlord covering the construction of the Tenant
Improvements, and such other insurance as Landlord may require. Such insurance
shall be in amounts and shall include such extended coverage endorsements as may
be reasonably required by Landlord. Certificates for all insurance carried by
Tenant pursuant to this SECTION 6 shall be delivered to Landlord before the
commencement of construction of the Tenant Improvements and before the
Contractor's equipment is moved onto the site. All such policies of insurance
must contain a provision that the company writing said policy will give Landlord
thirty (30) days' prior written notice of any cancellation or lapse of the
effective date or any reduction in the amounts of such insurance. In the event
that the Tenant Improvements are damaged by any cause during the
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<PAGE> 60
course of the construction thereof, Tenant shall immediately repair the same at
Tenant's sole cost and expense. All insurance, except Workers' Compensation,
maintained by Contractor and each subcontractor shall preclude subrogation
claims by the insurer against anyone insured thereunder. Such insurance shall
provide that it is primary insurance as respects the Landlord and that any other
insurance maintained by Landlord is excess and noncontributing with the
insurance required hereunder.
7. LANDLORD'S RIGHT TO INSPECT. Landlord shall have the right to
inspect the Tenant Improvements at all times, provided however, that Landlord's
failure to inspect the Tenant Improvements shall in no event constitute a waiver
of any of Landlord's rights hereunder nor shall Landlord's inspection of the
Tenant Improvements constitute Landlord's approval of the same. Should Landlord
disapprove any portion of the Tenant Improvements, Landlord shall notify tenant
in writing of such disapproval and shall specify the items disapproved. Any
defects or deviations in, and/or disapproval by Landlord of, the Tenant
Improvements shall be rectified by Tenant at no expense to Landlord, provided
however, that in the event Landlord determines that a defect or deviation exists
or disapproves of any matter in connection with any portion of the Tenant
Improvements and such defect, deviation or matter might adversely affect the
mechanical, electrical, plumbing, heating, ventilating and air-conditioning or
life-safety systems of the Project, the structure or exterior appearance of the
Project or any other tenant's use of such other tenant's premises, Landlord may
take such action as Landlord deems necessary, at Tenant's expense and without
incurring any liability on Landlord's part, to correct any such defect,
deviation and/or matter, including, without limitation, causing the cessation of
performance of the construction of the Tenant Improvements until such time as
the defect, deviation and/or matter is corrected to Landlord's satisfaction.
8. OWNERSHIP. Except as may be expressly set forth on the Tenant
Improvement Plans, the Tenant Improvements shall be owned by Landlord and shall
be surrendered by Tenant at the expiration or prior termination of the Lease.
Upon such expiration or earlier termination of the Lease, Tenant hereby assigns
to Landlord all warranties and guaranties from Contractor relating to the Tenant
Improvements, and shall execute whatever documents may be necessary to evidence
such assignment if requested by Landlord.
9. REPRESENTATIVES. Landlord and Tenant each appoint the following
individuals to act as their respective representatives in all matters covered by
this Agreement:
Tenant's Representative: KARL ROGERS
Landlord's Representative: GENE LAWSON
All inquiries, requests, instructions and authorizations and other
communications with respect to the matters covered by this Agreement will be
submitted to the Landlord's representative or Tenant's representative, as the
case may be. Each party may change its representative under this Agreement at
any time upon three (3) days prior written notice to the other party.
C-5
<PAGE> 61
10. TIME. Time is of the essence in this Agreement. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.
11. TENANT'S LEASE DEFAULT. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in the
Lease, or a default by Tenant under this Agreement, has occurred at any time on
or before the Substantial Completion of the Premises, then all other obligations
of Landlord under the terms of this Agreement shall be forgiven until such time
as such default is cured pursuant to the terms of the Lease.
12. RESPONSIBILITY FOR DESIGN. Tenant will be responsible for the
design, function and maintenance of all Tenant Improvements, whether or not
approved by Landlord. Landlord's preparation and/or approval of the Tenant
Improvement Plans or inspection of the Tenant Improvements will not constitute
any representation or warranty by Landlord as to the adequacy, efficiency,
performance or desirability of Tenant's Improvements in the Premises and shall
create no responsibility or liability on the part of Landlord for their
completeness, design sufficiency, or compliance with all laws, rules, and
regulations of governmental agencies or authorities.
13. NOTICES. Notices under this Agreement shall be given in accordance
with the notice provisions set forth in the Lease.
14. CONFLICTS. In the event of any conflict between the provisions of
this Agreement and the provisions of the Lease, the provisions of this Agreement
shall govern.
C-6
<PAGE> 62
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
SITKA RESTAURANT GROUP, INC.,
a Nevada corporation,
By: /s/ Karl Rogers
--------------------------------
Its: President
-------------------------------
"TENANT"
NEW CASTLE CORP.,
a Nevada corporation
By: /s/ Don Givens
--------------------------------
Its: VP/GM
-------------------------------
"LANDLORD"
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<PAGE> 63
EXHIBIT D
Ownership of Tenant
100% owned by Mondel, Inc., which is 100% owned by American Vantage
Companies.
<PAGE> 64
EXHIBIT E
ACCOUNTING PROCEDURES
1. ROOM CHARGES. Landlord shall pay to Tenant all room charges on the
second (2nd) business day after such room charges were incurred by restaurant
patrons. Such amounts shall be paid by direct deposit in a bank account
established by Tenant. Landlord shall provide a weekly reconciliation of
payments made under this PARAGRAPH 1, and Landlord and Tenant shall make any
necessary adjusting payments. Provided that Tenant follows all procedures
reasonably established by the Landlord for processing room charges, Landlord
shall assume the risk of non-payment by guests of Landlord or its Affiliates.
2. COMPS. By the fifteenth (15th) day of each month, Landlord shall
provide Tenant with a report (the "COMP REPORT") summarizing (i) the amount
treated as Comps under SECTION 7.10 of the Lease, (ii) the amount applied toward
the Comp Threshold and (iii) the amount by which the Monthly Comp Threshold is
exceeded in any month during the Term of this Lease. Tenant shall supply
Landlord with such information as may be necessary to calculate these amounts.
Landlord shall pay to Tenant any amount required under SECTION 7.10(b) of the
Lease on or before the fifteenth (15th) of the month following the month for
which such Comps were furnished.
3. PAYMENTS TO LANDLORD. Amounts payable by Tenant to Landlord under the
Lease, including, but not limited to, Minimum Rent, Percentage Rent, and Service
Charge, shall be paid by Tenant in the manner provided under the Lease.
4. POINT OF SALE EQUIPMENT. In addition to any point of sale equipment
required by Tenant to operate the restaurant and cafe located on the Premises,
Tenant shall, at Landlord's request, maintain at the Premises point of sale
equipment designated by Landlord (the "PROJECT POS EQUIPMENT") that will
interface with the operating system for the Project, and all room charges and
Comps will be processed using the Project POS Equipment. The point of sale
equipment initially installed at the Premises (including the Project POS
Equipment) will be installed in accordance with EXHIBIT C of the Lease. The
Project POS Equipment will be maintained, repaired and replaced by Landlord. All
point of sale equipment other than the Project POS Equipment will be maintained,
repaired and replaced by Tenant.
5. GROSS REVENUES. Tenant will provide Landlord unaudited information on
gross revenues derived from the restaurant and cafe on a daily basis, in a form
agreed to by Landlord and Tenant.
<PAGE> 65
EXHIBIT F
EXCLUDED EMPLOYEES
Owners
Room Managers
Managers
Supervisors
<PAGE> 1
Exhibit 10.24
OPERATING AGREEMENT
FOR
BORDER GRILL LAS VEGAS, LLC
A LIMITED-LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES
LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES
REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS
AND CONDITIONS WHICH ARE SET FORTH HEREIN.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS .................................................. 1
ARTICLE II ORGANIZATIONAL MATTERS ....................................... 6
ARTICLE III CAPITAL CONTRIBUTIONS AND LOANS .............................. 7
ARTICLE IV MEMBERS ...................................................... 9
ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY ........................ 13
ARTICLE VI PROFITS AND LOSSES ........................................... 17
ARTICLE VII DISTRIBUTIONS AND OTHER MEMBER PAYMENTS ...................... 20
ARTICLE VIII TRANSFER AND ASSIGNMENT OF INTERESTS ......................... 22
ARTICLE IX ACCOUNTING, RECORDS AND REPORTING ............................ 23
ARTICLE X DISSOLUTION AND WINDING UP ................................... 27
ARTICLE XI INDEMNIFICATION AND INSURANCE ................................ 29
ARTICLE XII MISCELLANEOUS ................................................ 30
</TABLE>
EXHIBITS
Exhibit A - Capital Contributions, Percentage Interests and Addresses of
Members and Managers
Exhibit B - Opening Budget
Exhibit C - Procedure for Determining Fair Market Value and Payment Terms
Exhibit D - Description of Reimbursements to Manager and Affiliates
Exhibit E - License Agreement
Exhibit F - Management Agreement
Exhibit G - Lease
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EXHIBIT 10.24
OPERATING AGREEMENT
FOR
BORDER GRILL LAS VEGAS, LLC
A NEVADA LIMITED-LIABILITY COMPANY
This Operating Agreement is made as of November 12, 1998, by and among
TT&T, LLC, a Nevada limited-liability company ("TT&T"; or the "Managing
Member") and Vantage Bay Group, Inc., a Nevada corporation (sometimes referred
to as "Vantage" or the "Non-managing Member").
A. On September 29, 1998, Articles of Organization for Border Grill Las
Vegas, LLC (the "Company"), a limited-liability company under the laws of the
State of Nevada, were filed with the Nevada Secretary of State.
B. The parties desire to adopt and approve this operating agreement for
the Company.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred
to as the "Members," or individually as a "Member") by this Agreement set forth
the operating agreement for the Company under the laws of the State of Nevada
upon the terms and subject to the conditions of this Agreement.
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" shall mean Chapter 86 of Nevada Revised Statutes, as the same
may be amended from time to time.
1.2 "Adjusted Balance" shall mean the Capital Account balance of a Member,
increased by any Company Minimum Gain or Member Minimum Gain attributable to
Member nonrecourse debt allocable to such Member under Regulations Section
1.704-2.
1.3 "Adjusted Capital Account Deficit" shall mean, with respect to any
Member, at any time, the deficit balance, if any, of a Member's Capital Account,
after giving effect to the following adjustments:
A. credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to
be obligated to restore pursuant to Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations; and
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B. debit to such Capital Account the items described in Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
1.4 "Affiliate" shall mean any individual, partnership, corporation, trust
or other entity or association, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with the
Member. The term "control," as used in the immediately preceding sentence,
means, with respect to a corporation or limited-liability company the right to
exercise, directly or indirectly, more than fifty percent (50%) of the voting
rights attributable to the controlled corporation or limited-liability company,
and, with respect to any individual, partnership, trust, other entity or
association, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity.
1.5 "Agreement" shall mean this Operating Agreement, as originally
executed and as amended in accordance with the applicable provisions hereof from
time to time.
1.6 "Articles" shall mean the Articles of Organization for the Company
originally filed with the Nevada Secretary of State and as amended in accordance
with the applicable provisions hereof from time to time.
1.7 "Assignee" shall mean the owner of an Economic Interest who has not
been admitted to the Company as a Substitute Member in accordance with Article
VII.
1.8 "Available Cash" for any Fiscal Quarter or other period shall mean the
amount of cash from all sources other than proceeds of Liquidating Transactions,
as reasonably determined by Manager, which the Manager deems available for debt
service on Member-Loans and/or for distributions to the Members after paying or
creating reserves for (i) all debts, liabilities and obligations then due
(excluding debt service on all Member Loans), (ii) working capital, and (iii)
such additional reserves as the Manager, in its reasonable discretion, deems
necessary in order to satisfy known or reasonably foreseeable or contingent
liabilities of the Company (which reserves may include a reasonable estimate of
amounts required in future periods to fund required debt service on Member Loans
and the Tax Distribution Entitlement). In determining the adequacy of the
Company's reserves, the Manager shall take into account the amount and timing of
cash receipts that are expected to be received by the Company in future periods
as a result of its normal operations. In the event the aggregate reserves
(excluding reserves for debt service on Member Loans and Tax Distribution
Entitlements) established are to exceed $250,000, the Manager shall consult with
the Non-managing Member prior to establishing such reserves.
1.9 "Bankruptcy" shall mean: (a) the filing of an application by a Member
for, or his or her or its consent to, the appointment of a trustee, receiver, or
custodian of his, her or its other assets; (b) the entry of an order for relief
with respect to a Member in proceedings under the United States Bankruptcy Code,
as amended or superseded from time to time; (c) the making by a Member of a
general assignment for the benefit of creditors; (d) the entry of an order,
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judgment, or decree by any court of competent jurisdiction appointing a trustee,
receiver, or custodian of the assets of a Member unless the proceedings and the
person appointed are dismissed within ninety (90) days; or (e) the failure by a
Member generally to pay his, her or its debts as the debts become due within the
meaning of Section 303(h)(1) of the United States Bankruptcy Code, as determined
by the Bankruptcy Court, or the admission in writing of such Member's inability
to pay such Member's debts as they become due.
1.10 "Capital Account" shall mean with respect to any Member the capital
account which the Company shall establish and maintain for such Member pursuant
to Section 3.4.
1.11 "Capital Contributions" of any Member at any time shall mean the
total value of the cash and the fair market value of property theretofore
contributed to the Company by such Member.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.13 "Company" shall mean Border Grill Las Vegas, LLC, a Nevada
limited-liability company.
1.14 "Company Minimum Gain" shall have the meaning ascribed to the term
"partnership minimum gain" in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
1.15 "Crossover" shall mean the date on which the Unrecovered Capital of
the Non-managing Member has been reduced to zero and the Non-managing Member has
received full payment of its First Priority Return.
1.16 "Dissolution Event" shall mean with respect to a Member, the
Bankruptcy or dissolution of such Member, unless the other Member consents to
continue the business of the Company pursuant to Section 10.2.
1.17 "Economic Interest" shall mean a Member's or Economic Interest
Owner's right to share in one or more of the Company's Profits, Losses, and
distributions of the Company's cash and other assets pursuant to this Agreement
and the Act, but shall not include any other rights of a Member, including,
without limitation, the right to vote or participate in the management, or any
right to information concerning the business and affairs of, the Company.
1.18 "Economic Interest Owner" shall mean the owner of an Economic
Interest who is not a Member.
1.19 "Excess Balance" shall mean at any time (i) with respect to the
Non-managing Member, the excess of the Adjusted Balance of the Non-managing
Member over the sum of (a) the Unrecovered Capital of the Non-managing Member,
and (b) the Unpaid First Priority Return of the Non-managing Member, and (ii)
with respect to the Managing Member, the excess of the Adjusted Balance of the
Managing Member over the Unrecovered Capital of the Managing Member.
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1.20 "First Priority Return" shall mean, with respect to the Non-managing
Member, for each Fiscal Quarter of the Company from inception through the end of
the Fiscal Quarter in which Crossover occurs, an amount equal to 5% per annum,
non-compounded, on the Non-managing Member's Unrecovered Capital for such Fiscal
Quarter (properly adjusted to reflect fluctuations in the amount of such
Unrecovered Capital on each day of such Fiscal Quarter). Once Crossover is
reached, the First Priority Return shall cease and to the extent permitted by
law, shall not be returnable under Section 7.4 or otherwise.
1.21 "Fiscal Year" shall mean the Company's fiscal year, which shall be
the calendar year; and "Fiscal Quarter" shall mean each calendar quarter or
partial calendar period of a Fiscal Year or partial Fiscal Year.
1.22 "Initial Member Loan" shall mean a Member Loan to be made by the
Non-managing Member of up to $175,000 as described in Section 3.7A.
1.23 "Lease" shall mean the Restaurant Lease dated November 12, 1998 to be
entered into between the Company as Tenant and Mandalay Corp. as Landlord, for
restaurant space to be built in the Mandalay Bay Hotel and Casino Project in Las
Vegas, Nevada, in the form and with the side letters attached hereto as Exhibit
G.
1.24 "License Agreement" shall mean the non-exclusive license agreement
between the Company and Dancing Pigs, Inc., a California corporation wholly
owned by Susan Feniger, and Cano, Inc., a California corporation wholly owned by
Mary Sue Milliken, a copy of which is attached hereto as Exhibit E.
1.25 "Liquidating Transactions" shall mean one or more sales or other
dispositions of the Company's assets in one or more transactions leading to or
constituting the winding up or dissolution of the Company.
1.26 "Management Agreement" shall mean the restaurant management agreement
between the Company and Mundo Management Group, LLC, a California limited
liability company, which is an Affiliate of Manager, a copy of which is attached
hereto as Exhibit F.
1.27 "Manager" shall mean one or more managers, who may but need not be a
Member. Specifically, "Manager" shall mean TT&T, or any other Person (or
Persons) that succeeds it in such capacity in accordance with the terms hereof.
1.28 "Managing Member" shall mean TT&T.
1.29 "Member" shall mean each Person who (a) is an initial signatory to
this Agreement, has been admitted to the Company as a Member in accordance with
the Articles or this Agreement or is a transferee of a Membership Interest that
becomes a substitute Member in accordance with Article VIII and (b) has not
resigned, withdrawn, or been expelled subject to and to the extent permitted by
the terms and conditions of this Agreement, or, if other than an individual,
dissolved.
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1.30 "Member Loan" shall mean any loan made to the Company by a Member as
described in Section 3.7.
1.31 "Member Minimum Gain" shall have the meaning of "partner nonrecourse
debt minimum gain" set forth in Regulations Section 1.704-2(i)(2).
1.32 "Member Nonrecourse Deductions" shall have the meaning of "partner
nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Regulations.
1.33 "Membership Interest" shall mean a Member's entire interest in the
Company including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information concerning
the business and affairs of, the Company.
1.34 "Non-managing Member" shall mean all Members other than the Managing
Member. Specifically, Vantage is initially the only Non-managing Member.
1.35 "NRS" shall mean the Nevada Revised Statutes, as amended from time to
time, and the provisions of succeeding law.
1.36 "Opening Budget" shall mean the budget for the start-up of the
Company's operations, which is attached hereto as Exhibit B and incorporated
herein.
1.37 "Percentage Interest" shall mean the percentage interest of a Member
set forth opposite the name of such Member under the column "Member's Percentage
Interest" in Exhibit A hereto, as such percentage may be adjusted pursuant to
Section 3.3.
1.38 "Person" shall mean an individual, general partnership, limited
liability partnership, limited partnership, limited-liability company,
corporation, trust, estate, real estate investment trust, association or any
other entity.
1.39 "Profits" or "Losses" shall mean, for each Fiscal Year, an amount
equal to the Company's taxable income or loss for such Fiscal Year determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
A. any income or gain of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
shall be added to such taxable income or loss;
B. any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken into account in
computing Profits or Losses, shall be subtracted from such taxable income or
loss;
C. if the Company's assets and the Members' Capital Accounts have
been revalued pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
amount of such adjustments shall be treated as an item of gain or loss and
included in the computation of Profits and Losses,
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and the Company's gains, losses, depreciation and amortization shall thereafter
be determined in accordance with the requirements of Regulations Sections
1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g); and
D. any items of income, gain, loss or deduction which are
individually allocated pursuant to Section 6.2 shall not be taken into account
in computing Profits or Losses.
1.40 "Regulations" shall mean the federal income tax regulations
promulgated by the United States Treasury Department under the Code.
1.41 "Restaurant" shall mean that certain Mexican restaurant to be known
as "Border Grill" pursuant to and subject to the terms of the License Agreement
and any applicable terms of the Lease, and developed and operated by the Company
pursuant to the Lease.
1.42 "Tax Distribution Entitlement" shall mean, for each Fiscal Quarter,
an amount equal to the sum of (a) the product of the highest applicable combined
effective federal and California tax rates for individual taxpayers and a
reasonable estimate of the net taxable income allocable to the Managing Member
pursuant to any provision of Article VI for such Fiscal Quarter (adjusted to
reflect any tax losses allocated to the Managing Member during prior Fiscal
Quarters to the extent such tax losses have not previously offset net taxable
income for purposes of calculating a Tax Distribution Entitlement for a prior
Fiscal Quarter), and (b) the cumulative amount of the Managing Member's Tax
Distribution Entitlements accrued but not previously distributed to the Managing
Member with respect to prior Fiscal Quarters.
1.43 "Tax Matters Partner" shall mean the Manager or its successor as
designated pursuant to Section 9.8.
1.44 "Unpaid First Priority Return" shall mean, at any time of
determination, the excess of (i) the cumulative First Priority Return of the
Non-managing Member for all prior Fiscal Quarters of the Company, over (ii) the
aggregate amount theretofore distributed to the Non-managing Member pursuant to
Section 7.1D.
1.45 "Unrecovered Capital" shall mean at any time, (i) with respect to the
Non-managing Member, the excess of (a) the Capital Contributions of such
Member, over (b) the aggregate amount theretofore distributed to the
Non-managing Member pursuant to Section 7.1E, and (ii) with respect to the
Managing Member, the excess of (c) the Capital Contributions of such Member,
over (d) the aggregate amount theretofore distributed to the Managing Member
pursuant to any provision of Section 7.1.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed a Nevada
limited liability company under the laws of the State of Nevada by filing the
Articles with the Nevada Secretary of State and entering into this Agreement.
The rights and liabilities of the Members shall be determined pursuant to the
Act and this Agreement. To the extent that the rights or
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obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
2.2 Name. The name of the Company shall be "Border Grill Las Vegas, LLC",
or such other name as may be approved by the Members. Subject to the provisions
of the License Agreement, the business of the Company may be conducted under
that name or, upon compliance with applicable laws and any applicable provisions
of the Lease, any other name that the Manager, with the prior consent of the
Non-managing Member, deems appropriate or advisable. The Manager shall file any
fictitious name certificates and similar filings, and any amendments thereto,
that the Manager considers appropriate or advisable.
2.3 Term. The term of the Company began on the filing of the Articles and
shall continue until September 30, 2014, unless the Company is earlier dissolved
in accordance with the provisions of this Agreement or the Act.
2.4 Office and Agent. The Company shall continuously maintain a registered
agent in the State of Nevada as required by the Act. The location of the
principal office of the Company shall be determined by the Manager and initially
shall be at the address of the Company's registered agent in Nevada set forth
below and upon completion of the Restaurant, shall be at the Lease premises at
3950 Las Vegas Boulevard South, Las Vegas, Nevada. The initial registered agent
in the State of Nevada is Paracorp Incorporated, 318 N. Carson, Suite 208,
Carson City, Nevada 89701. The Company also may have such other offices,
anywhere within and without the State of Nevada, as the Manager from time to
time may determine. The registered agent shall be as stated in the Articles or
as otherwise determined by the Manager.
2.5 Addresses of the Members and Managers. The respective addresses of the
Members and the Managers are set forth on Exhibit A and shall be maintained in
the records of the Company.
2.6 Purpose of Company. The Company's principal purpose shall be to own
and operate the Restaurant, and all general business activities related or
incidental to the foregoing stated business purpose.
2.7 Tax Treatment of Company. The Members intend that the Company will be
treated as a partnership for federal and applicable state income tax purposes
and that the information tax returns of the Company shall be filed on such
basis. The Manager is authorized, after prior notice to the Non-managing Member,
to execute and file, on behalf of the Company, any tax elections or forms that
may be necessary or helpful to establish the Company's status as a partnership
for tax purposes. The Company shall not make any elections inconsistent with
such status without the consent of the Members.
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ARTICLE III
CAPITAL CONTRIBUTIONS AND LOANS
3.1 Capital Contributions. The Non-managing Member hereby agrees to
contribute to the Company a cash Capital Contribution in the aggregate amount of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), of which the
Non-managing Member shall contribute $250,000 upon execution of this Agreement
and the balance of said capital in installments within five (5) business days of
a written request therefor from the Manager setting forth the amount of the
installment. The Managing Member has agreed to make a cash Capital Contribution
of $1,000 to the Company upon execution of this Agreement. The capital shall be
deemed contributed on the date it is deposited in the Company's bank account.
3.2 Guaranty and Default of Capital Contribution of the Non-managing
Member. American Vantage Companies, Inc., a Nevada corporation and the parent
company holding all of the issued stock of Vantage, by execution of this
Agreement, hereby guarantees the obligations of Vantage to make its full Capital
Contribution required by Section 3.1 and the Initial Member Loan described in
Section 3.7A. In the event the Non-managing Member fails to make an installment
of its required Capital Contribution or the Initial Member Loan, the
Non-managing Member shall be in material default of this Agreement and the
Manager may, upon the consent of the other Member, remove the Non-managing
Member as a Member upon written notice to the Non-managing Member.
Notwithstanding anything in this Agreement to the contrary, thereafter, Vantage
shall be an Economic Interest Owner and shall have no right to receive any
Unpaid First Priority Return, and the Company, at the remaining Member's option,
may at any time purchase Vantage's Economic Interest for an amount equal to the
amount of its Unrecovered Capital on the date it is converted to an Economic
Interest Owner, less an amount equal to the costs incurred by the Company in
removing the Non-managing Member and admitting additional Member(s) or obtaining
financing for the balance of the unpaid Capital Contributions and Initial Member
Loan, not to exceed $100,000, which purchase price shall be paid, if at all, by
the Company in installments out of Available Cash, if any, after all remaining
Members have received distributions equivalent to their aggregate Capital
Contributions, plus an amount equivalent to a ten percent (10%) per annum
return on their unreturned Capital Contributions from time to time.
3.3 No Additional Capital Contributions. No Member shall be required to
make any capital contributions except as provided in Section 3.1. If the
Manager determines that additional capital contributions are necessary or
appropriate for the conduct of the Company's business and upon the prior written
consent of all Members, the Members may make additional Capital Contributions.
In such event, the Members shall have the opportunity, but not the obligation,
to participate in such additional Capital Contributions on a pro rata basis in
accordance with their respective Percentage Interests. If, with the consent of
the Members, the Members do not contribute such additional Capital Contributions
in proportion to their respective Percentage Interests, then immediately
following any such disproportionate additional Capital Contributions, the
Percentage Interests shall be adjusted by the Manager to reflect the
disproportionate additional Capital Contributions.
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3.4 Capital Accounts. The Company shall establish an individual Capital
Account for each Member which shall be maintained strictly in accordance with
Regulations Section 1.704-(b)(2)(iv). If a Member transfers all or a part of
its Membership Interest in accordance with this Agreement, such Member's Capital
Account attributable to the transferred Membership Interest shall carry over to
the new owner of such Membership Interest pursuant to Regulations Section
1.704-1(b)(2)(iv)(1).
3.5 No Interest. Except as provided herein, no Member shall be entitled to
receive any interest on its Capital Contributions or Capital Account.
3.6 No Right to Withdraw Capital. No Member shall be entitled to make
withdrawals from, or to receive repayment of, its Capital Account except as
expressly provided herein. Each Member shall look solely to the assets of the
Company, and no Member shall look to any other Member or to the Manager for the
return of its Capital Contributions or any amount in its Capital Account.
3.7 Loans by Members. If operating funds are needed beyond the Capital
Contributions described in Section 3.1, in the reasonable determination of the
Manager with the consent of the Members, the Members may make unsecured loans
("Member Loans") on a pro rata basis in accordance with their respective
Percentage Interests for the amount of funds necessary, on commercially
reasonable terms, with an interest rate not to exceed the lesser of ten percent
(10%) or the maximum permitted by law, repayable as set forth in Section 7.1,
on terms approved by the Members. If the Non-managing Member does not consent to
making such a loan to which the Managing Member has consented, and acceptable
third party financing is not available, then the Company shall dissolve.
A. Initial Member Loan. It is anticipated that the Company may
require funds in addition to the Capital Contributions required in Section 3.1.
The Non-managing Member agrees to make a Member Loan, without a corresponding
Member Loan from the Managing Member, in an amount up to $175,000 (the "Initial
Member Loan"). The Initial Member Loan shall accrue interest at 10% per annum,
compounding annually, with principal and interest payable as set forth in
Section 7.1.
ARTICLE IV
MEMBERS
4.1 Limited Liability. Except as required under the Act or as expressly
set forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that liability or obligation
arises in contract, tort, or otherwise.
4.2 Admission of Additional Members. It is not contemplated that
additional members will be admitted to the Company. However, additional Members
may be admitted by the Manager, subject to the following:
A. The Manager determines that additional capital is needed for the
Company's business and the Non-managing Member (or American Vantage Companies,
Inc., on
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the Non-managing Member's behalf) does not contribute the Non-managing Member's
required Capital Contribution under Section 3.1 or 3.2, as applicable, or the
Initial Member Loan as required by Section 3.7A; or
B. All Members consent to the admission of additional Members.
4.3 Withdrawals, Resignations, or Removals.
A. The Managing Member may only withdraw as a Member from the
Company after Crossover, upon providing 90 days written notice to the other
Members; and thereupon, the Company shall be dissolved pursuant to Section 10.
1. Each of Susan Feniger and Mary Sue Milliken, by executing this Agreement,
hereby promises and agrees to continue being one of the controlling principals
of the Manager of the Company and of the Restaurant management company (Mundo)
or any permitted assignee or successor under the Management Agreement, and will
oversee and manage the business of the Company and the operation of the
Restaurant until Crossover, except in the case of death, disability or other
involuntary cause, provided however the maximum liability, in the aggregate, for
a breach or breaches by either or both of them of this promise shall be the
amount of any Unpaid First Priority Return and Unrecovered Capital. For purposes
of this Section 4.3A, "disability" shall mean the inability of a person to
perform substantially all of her managerial duties due to a physical or mental
health impairment that continues for a period of more than ninety (90) days and,
in the written opinion of a qualified physician, has resulted in such person's
inability to so perform such duties; and "involuntary cause" shall mean the
occurrence of an event, beyond the reasonable control of a person, that for
reasonably justifiable non-business reasons, results in the inability of such
person to perform substantially all of her managerial duties.
B. The Non-managing Member may not withdraw, resign or otherwise
cease for any reason, voluntarily or involuntarily, being a Member of the
Company without the written consent of the Manager and the remaining Members. If
the Manager and the remaining Members consent to such termination, the
Non-managing Member shall cease being a Member and may continue as an Economic
Interest Owner, provided however that the Company will be entitled, but not
required, to purchase the Membership Interest of the former Member for a
purchase price equal to the greater of (i) the fair-market value of such
interest determined in accordance with the procedures and on the terms
specified in Exhibit C hereto, and (ii) any due and Unpaid First Priority Return
and/or Unrecovered Capital.
C. In the event any Member withdraws, resigns or otherwise ceases
being a Member in breach of Section 4.3A or B, other than as provided in
Section 3.2 and 4.3D below, (i) such Member shall not be entitled to be paid for
its Membership Interest; however, the Company shall have the right to purchase
the Membership Interest at one-half its fair market value determined in
accordance with the procedures and on the terms specified in Exhibit C hereto
(the Non-managing Member shall have no right to receive any Unpaid First
Priority Return and/or Unrecovered Capital if the Non-managing Member is in
breach of this Agreement) and, beginning on the date of termination as a Member,
such former Member shall no longer be a Member and shall have only the rights of
an Economic Interest Owner and then only the right to distributions to which a
holder of an Economic Interest would be entitled under this Agreement, and (ii)
the Company shall be entitled to recover any damages incurred by it as a result
of such
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breach, including but not limited to, by offsetting such damages against any
amounts distributable to such withdrawn Member.
D. In the event the Non-managing Member is determined to be
unsuitable by any Regulatory Authority, as defined in the Lease, such that the
landlord under the Lease would have the right to terminate the Lease, the
Non-managing Member shall at the election of the Managing Member, be removed as
a Member and shall sell its Membership Interest in the Company to the landlord
under the Lease pursuant to the side letter relating to the Lease attached
hereto as Exhibit G; provided, however, that the landlord shall be entitled
upon such purchase to become only an Economic Interest Owner, and the Company
shall have a right of first refusal to purchase such Economic Interest on the
same terms as to be paid by the landlord. In the event that the landlord does
not elect to purchase the Non-managing Member's Membership Interest as set
forth therein, then the Non-managing Member may seek a bona fide offer from an
unaffiliated third party in compliance with Section 15.2 of the Lease to
purchase such Membership Interest; subject, however, to the requirement that
any such unaffiliated third party would be entitled to become only an Economic
Interest Owner after such purchase and the Company shall have a right of first
refusal to purchase such Economic Interest on the same terms. If the
Non-managing Member does not obtain such an offer within ten (10) business days
(unless any greater or lesser time is permitted or required by the Regulatory
Authority to avoid termination of the Lease), upon request of the Manager, the
Non-managing Member shall convey its Economic Interest to the Company in
consideration of the Company agreeing to pay the Non-managing Member an amount
equal to the lesser of (i) the Unpaid First Priority Return and Unrecovered
Capital, if any, or (ii) the unamortized portion of the TI Costs (as defined in
the Lease) which the landlord acknowledges it would pay pursuant to the Lease
if it terminated the Lease as a result of the Non-managing Member having been
found to be unsuitable by a Regulatory Authority, payable in installments out
of Available Cash after all Members have received distributions equivalent to
their aggregate Capital Contributions, but before the remaining Members receive
additional distributions.
4.4 Transactions With The Company. Subject to the limitations set forth
in this Agreement, including Sections 3.7, 5.7 and 5.8, and with the prior
approval of the Manager and the Members, a Member may lend money to and
transact other business with the Company. Subject to applicable law, such
Member has the same rights and obligations with respect thereto as a Person who
is not a Member.
4.5 Remuneration To Members. Except as otherwise provided for (see
Section 5.8), or authorized in, this Agreement, no Member is entitled to
remuneration for acting in the Company business, subject to the entitlement of
the Manager or Members winding up the affairs of the Company to reasonable
compensation pursuant to Section 10.4
4.6 Members Are Not Agents. Pursuant to Section 5.1 and the Articles, the
management of the Company is vested in the Manager. No Member, acting solely in
the capacity of a Member, is an agent of the Company nor can any Member in such
capacity bind or execute any instrument on behalf of the Company.
4.7 Voting Rights. Except as expressly provided in this Agreement or the
Articles or required by the Act, Members shall have no voting, approval or
consent rights. All matters to be
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submitted to the Members must be approved by the Manager (except removal of the
Manager). Members shall have the right to approve or disapprove matters as
specifically stated in this Agreement, as follows:
A. the admission of additional or substitute Members pursuant to
Section 4.2B or Section 8.4 by consent of all Members;
B. the removal of any Manager or the termination of the Management
Agreement for cause, by the Non-Managing Member;
C. the election of any Manager, by consent of all Members;
D. the amendment of this Agreement, by consent of all Members;
E. any amendment of the Articles, by consent of all Members;
F. any increase in the Restaurant management fee which is not
determined by an independent expert under and in accordance with the Management
Agreement, or any change in the reimbursement procedures set forth in Exhibit
D, by the Non-managing Member;
G. the approval of any additional fees to Manager or its Affiliates,
including without limitation fees as described in Section 5.8D, by the
Non-managing Member;
H. (i) the sale or closure (other than temporary closure for
remodeling or other valid business purpose) of the Restaurant before Crossover,
(ii) the sale, but not the closure, of the Restaurant after Crossover, if such
sale is not an independent sale negotiated at arm's length with an unaffiliated
buyer in a stand-alone transaction (provided, however such a sale shall be
considered independent even if Mary Sue Milliken and/or Susan Feniger or their
Affiliate receives a consulting fee for up to one year following the sale for
actual services to be rendered, so long as such consulting fee is not a
recharacterization of the Restaurant sales price), or (iii) any other act that
would make it impossible to carry on the ordinary business of the Company, by
consent of all Members;
I. the voluntary withdrawal of the Manager prior to Crossover, by
the Non-managing Member;
J. the withdrawal, resignation or other termination of the
Non-managing Member as a Member, with the consent of the remaining Members;
K. entering into the Lease and termination of the Lease (other than
by expiration of its term), by the Members;
L. change of the name of the Company or the Restaurant, by the
Members;
M. the contribution of additional capital or the making of a Member
Loan to the Company, by consent of all Members;
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N. the confession of a judgment against the Company, by
consent of all Members;
O. any expenditure which would cause any category of expense
in the Opening Budget to exceed 110% of the amount in the Opening Budget, unless
the total revised Opening Budget does not increase by more than 10%, by consent
of all Members;
P. any financing obtained prior to Crossover, other than
customary trade accounts and equipment leases, by consent of the Non-managing
Member; and
Q. the dissolution of the Company, by consent of all Members.
4.8 Competing Activities. The Members, the Manager, their Affiliates,
and the officers, directors, shareholders, partners, members, managers, agents,
employees of each may engage or invest in, independently or with others, any
business activity of any type or description, including, without limitation,
those that might be the same as or similar to the Company's business and that
might be in direct or indirect competition with the Company. Neither the Company
nor any other Member shall have any right in or to such other ventures or
activities or to the income or proceeds derived therefrom. The Members and the
Manager shall not be obligated to present any investment opportunity or
prospective economic advantage to the Company, even if the opportunity is of the
character that, if presented to the Company, could be taken by the Company. The
Members, the Manager and their Affiliates shall have the right to hold any
investment opportunity or prospective economic advantage for its own account or
to recommend such opportunity to Persons other than the Company. The Members
acknowledge that the Manager and its Affiliates own and/or manage other
businesses, including businesses that may compete with the Company and for the
Manager's time. The Members hereby waive any and all rights and claims which
they may have against the Manager and its Affiliates and their officers,
directors, shareholders, partners, members, managers, agents, employees, as a
result of any of such activities, unless and except for activities which
otherwise give rise to a breach of this Agreement. Notwithstanding the
foregoing, the Manager agrees that neither it nor its Affiliates will engage or
invest in any full-service Mexican or Latin American cuisine restaurant located
in the Restricted Area as defined in the Lease, prior to Crossover or in
violation of the Lease.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Manager. The business, property and
affairs of the Company shall be managed exclusively by Manager. Except for
situations in which the approval of the Members is expressly required by the
Articles or this Agreement, Manager shall have full, complete and exclusive
authority, power, and discretion to manage and control the business, property
and affairs of the Company, to make all decisions regarding those matters and to
perform any and all other acts or activities customary or incident to the
management of the Company's business, property and affairs.
5.2 Election of Managers.
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A. Number, Term, and Qualifications. The Company shall
initially have one Manager. Unless it resigns or is removed as permitted by, and
in accordance with this Agreement, the Manager shall hold office until a
successor shall have been elected and qualified.
B. Resignation. The Managing Member may not resign as Manager
prior to Crossover, unless an Affiliate of the Managing Member controlled by
Mary Sue Milliken or Susan Feniger or both of them becomes the Manager, or with
the consent of all Members. After Crossover, the Managing Member may voluntarily
resign as Manager at any time by giving written notice to the Members without
prejudice to the rights, if any, of the Company under any contract to which the
Company, the Manager or its Affiliate is a party. The permitted voluntary
resignation of any Manager shall take effect 90 days after receipt of that
notice or at such later time as shall be specified in the notice; and, the
acceptance of the voluntary resignation shall not be necessary to make it
effective. The voluntary resignation of a Manager who is also a Member shall not
affect such Person's rights as a Member and shall not constitute a withdrawal of
such Person as a Member.
C. Removal for Good Cause Only. A Manager may be removed as
Manager of the Company only for "good cause" and by the vote of the Non-managing
Member. Such removal of a Manager who is also a Member shall not affect such
Person's rights as a Member and shall not constitute a withdrawal of such Person
as a Member. The term "good cause" shall mean either (i) a willful breach by a
Manager of this Agreement or (ii) a willful breach by a Manager of its fiduciary
duties to the Company as set forth in this Agreement, including but not limited
to misappropriation of Company assets, fraud, manifest dishonesty, bad faith
exercise of management authority or a willful failure to perform the duties of
Manager pursuant to this Agreement; provided, however, that with respect to a
breach which is curable, such breach has not been cured by a Manager within ten
(10) business days after receipt of written notice specifying such breach or, if
such breach cannot be cured within such 10 business day period, failure of the
Manager to take good faith reasonable efforts within such period to commence a
cure of such breach and to thereafter diligently prosecute its complete cure. In
the event a Manager disputes any attempted removal pursuant to the provisions of
this Section 5.2C, such dispute shall be submitted to binding arbitration in
accordance with the provisions of Section 12.8 of this Agreement.
D. Vacancies. Any vacancy occurring for any reason in the
Manager shall be filled by the written consent of all Members. If the Members
cannot agree on a replacement Manager within 30 days after the vacancy in
accordance with the terms and conditions of this Agreement, the Company shall be
dissolved pursuant to Section 10.1 hereof.
5.3 Powers of Manager.
A. Powers of Manager. Without limiting the generality of
Section 5.1, but subject to Section 5.3B and to the express limitations set
forth elsewhere in this Agreement, the Manager shall have all necessary powers
to manage and carry out the purposes, business, property, and affairs of the
Company, including, without limitation, the power to exercise on behalf and in
the name of the Company all of the powers described in NRS Section 86.281.
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B. Limitations on Power of Manager. Notwithstanding any other
provisions of this Agreement, the Manager shall not have authority hereunder to
cause the Company to engage in the matters set forth in Section 4.7 without
first obtaining the requisite affirmative vote or written consent of the
Members, as may be required under the respective provisions of Section 4.7.
5.4 Members Have No Managerial Authority. The Members shall have no
power to participate in the management of the Company except as expressly
authorized by this Agreement or the Articles and except as expressly required by
the Act. Unless expressly and duly authorized in writing to do so by the
Manager, no Member shall have any power or authority to bind or act on behalf of
the Company in any way, to pledge its credit, or to render it liable for any
purpose.
5.5 Fiduciary Duty; Performance of Duties; Liability of Manager. The
Manager owes a duty of loyalty to account to the Company and hold as trustee for
the Company all property and profit of the Company, or derived from winding up
the Company's business or the use of Company property, and to refrain from
dealing with the Company as a party having an adverse interest to the Company,
other than as permitted by this Agreement or consented to by the Non-managing
Member. A Manager shall not be liable to the Company or to any Member for any
loss or damage sustained by the Company or any Member, unless and to the extent
the loss or damage shall have been the result of fraud, manifest dishonesty,
gross negligence, reckless or intentional misconduct, or a knowing violation of
law by the Manager.
5.6 Devotion of Time. The Manager shall not be obligated to devote all
of its time or business efforts to the affairs of the Company. The Manager,
directly or through its Affiliates, shall devote such time, effort, and skill as
is customary for the operation of the Company and its business so that the
Restaurant is operated in compliance with the Lease.
5.7 Transactions between the Company and the Manager. Notwithstanding
that it may constitute a conflict of interest, the Manager may, and may cause
its Affiliates to, engage in any transaction (including, without limitation, the
purchase, sale, lease, or exchange of any Restaurant equipment, fixtures or
furnishings, or the rendering of any service, or the establishment of any
salary, other compensation, or other terms of employment) with the Company so
long as (i) the transaction is disclosed to the Non-managing Member; and if the
transaction provides for a payment of $25,000 or more to the Manager or its
Affiliate, the prior approval of the Non-managing Member is obtained, (ii) such
transaction is not expressly prohibited by this Agreement and, if applicable, is
in compliance with this Agreement, and (iii) so long as the terms and
conditions of such transaction, on an overall basis, are fair and reasonable to
the Company and are at least as favorable to the Company as those that are
generally available from Persons capable of similarly performing them and in
similar transactions between parties operating at arm's length. Notwithstanding
the foregoing, the reimbursements to Manager and its Affiliates and procedures
set forth in Exhibit D are hereby approved by the Manager and the Non-managing
Member. Any material change shall require the approval of the Non-managing
Member, not to be unreasonably withheld.
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5.8 Payments to Manager or Affiliates. Any payments to Manager or its
Affiliates pursuant to Sections 5.8A, 5.8C and 5.8D below shall be subject to
compliance with the requirements of Section 5.7 above.
A. Restaurant Management Fees; Expenses and Costs. It is
contemplated that the Restaurant will be managed by Mundo Management Group, LLC
("Mundo"), an Affiliate of the Manager, pursuant to the Management Agreement
attached hereto as Exhibit E, which is hereby approved by the Non-managing
Member. The Restaurant management fees provided under the Management Agreement
may be increased as provided therein. Otherwise, the management fee will not be
increased without the approval of the Non-managing Member. Under the Management
Agreement, in addition to the management fee to be paid by the Company, the
restaurant manager will receive reimbursement for certain expenses related to
the lease, ownership, maintenance, operation and promotion of the Restaurant as
specified in accordance with Exhibit D, which is Exhibit A to the Management
Agreement, including but not limited to salaries (other than for Susan Feniger
and Mary Sue Milliken, who may receive only the benefits set forth in such
Exhibit, unless approved by the Non-managing Member), benefits and related
overhead expenses, as specifically provided in said Exhibit.
B. License Fee. It is contemplated that the Company will enter
into a nonexclusive license agreement with an Affiliate of Manager on terms set
forth in the License Agreement attached hereto as Exhibit , which is hereby
approved by the Non-managing Member. The Non-managing Member acknowledges that
the licensor under the License Agreement makes no representation or warranty to
the Company regarding the licensor's ownership of or rights to use the tradename
Border Grill, except as provided in the License Agreement.
C. Services Performed by Manager or Affiliates; Reimbursement.
Subject to Section 5.7, the Manager may employ Affiliates, including but not
limited to Mundo, to handle the day-to-day operations of the Company. The
Manager and any Affiliate who performs services for the Company shall be
entitled to reimbursement for reasonable costs and expenses incurred in
connection with providing such services as described in Exhibit D.
D. Extraordinary Services. The Manager shall be entitled, with
the approval of the Non-managing Member, to reasonable fees for performing
extraordinary services for the Company including services rendered in connection
with the remodeling or relocation of the restaurant.
E. Guaranteed Payments. Any fees paid to the Managing Member
pursuant to this Agreement or any management agreement or license agreement
entered into between the Managing Member and the Company shall be treated as
guaranteed payments subject to Section 707(c) of the Code and not as a
distribution of Available Cash.
5.9 Acts of Manager as Conclusive Evidence of Authority. Any lease,
note, mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any amendment, assignment or
endorsement thereof, executed or entered into between the Company and any other
Person, when signed by the Manager, is not invalidated as to the Company by any
lack of authority of the Manager in the absence of actual
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knowledge on the part of the other Person that the Manager had no authority to
execute the same. For purposes of all actions taken by the Managing Member as
Manager, the signature of either Susan Feniger or Mary Sue Milliken on behalf of
the Managing Member on behalf of the Company shall be evidence of the authority
of the Managing Member on behalf of the Company.
5.10 Officers. The Manager may, but shall not be required to, appoint
officers at any time. The officers of the Company, if deemed necessary by the
Manager, may include a chairperson, president, vice president, secretary, and
chief financial officer. The officers shall serve at the pleasure of the
Manager, subject to all rights, if any, of an officer under any contract of
employment. Any individual may hold any number of offices. If a Manager is not
an individual, such Manager's officers may serve as officers of the Company if
elected by the Members. The officers shall exercise such powers and perform such
duties as specified in this Agreement and as shall be determined from time to
time by the Manager. Notwithstanding any other provision of this Agreement to
the contrary, in no event shall any chairmanship, presidency or other similar
executive position of the Company be held by any person or persons other than
either or both of Mary Sue Milliken or Susan Feniger.
5.11 Limited Liability. No person who is a Member, Manager or officer
of the Company shall be personally liable under any judgment of a court, or in
any other manner, for any debt, obligation, or liability of the Company,
whether that liability or obligation arises in contract, tort, or otherwise,
solely by reason of being a Member, Manager or officer of the Company.
ARTICLE VI
PROFITS AND LOSSES
6.1 Allocation of Profits and Losses.
A. Allocation of Profits from Operations. Subject to Sections
6.2 and 10.5, Profits of the Company for any Fiscal Year or other period (other
than Profits realized from a Liquidating Transaction) shall be allocated to the
Members as follows and in the following order of priority:
(1) Profits shall first be allocated to the Members
in proportion to, and to the extent of the excess, for each Member, of (a) the
aggregate Losses previously allocated to such Member pursuant to Sections 6.1C,
over (b) the amount of Profits previously allocated to such Member pursuant
to this Section 6.1A(1);
(2) Profits shall next be allocated to the
Non-managing Member in an amount equal to the excess of (a) the First Priority
Return of the Non-managing Member for such Fiscal Year or other period and all
prior Fiscal Years or other periods, over (b) the aggregate amount of Profits
previously allocated to the Non-managing Member pursuant to this Section
6.1A(2); and
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(3) Any remaining Profits shall be allocated to the
Members in accordance with their respective Percentage Interests.
B. Allocation of Profits from Liquidating Transactions. After
adjusting the Members' Capital Accounts to reflect all distributions of
Available Cash and all allocations pursuant to Sections. 6.1A and 6.1C of
Profits and Losses other than from Liquidating Transactions for all prior Fiscal
Years or other periods of the Company, any Profits realized by the Company from
Liquidating Transactions shall, subject to and after applying Section 6.2, be
allocated to the Members in the following order of priority:
(1) Profits shall first be allocated to the Members
having deficit Adjusted Balances in proportion to, and to the extent of, such
deficit Adjusted Balances;
(2) Next, if the Adjusted Balance of the Non-managing
Member is less than the sum of (i) its Unrecovered Capital, and (ii) its Unpaid
First Priority Return, Profits shall be allocated to the Non-managing Member
until the Adjusted Balance of the Non-managing Member is equal to such sum;
(3) Next, if the Adjusted Balance of the Managing
Member is less than the amount of its Unrecovered Capital, Profits shall be
allocated to the Managing Member until its Adjusted Balance is equal to the
amount of its Unrecovered Capital;
(4) Next, Profits shall be allocated to all of the
Members in the proportions required so that the Excess Balances of the Members
shall stand as nearly as possible in proportion to their respective Percentage
Interests; and
(5) Next, any remaining Profits shall be allocated to
the Members in accordance with their respective Percentage Interests.
C. Allocation of Losses from Operations. After adjusting the
Members' Capital Accounts to reflect all distributions of Available Cash made
during such Fiscal Year, Losses shall, subject to Section 6.2, be allocated to
the Members in accordance with the priorities set forth in Subsections 6.ID(1),
(2), (3) and (4). If, pursuant to this Section 6.1C, a Member would receive an
allocation of Losses that would cause or increase an Adjusted Capital Account
Deficit for such Member, the portion of such allocation that would cause or
increase such Adjusted Capital Account Deficit shall be reallocated to the other
Members in proportion to their respective percentage Interests (unless such
reallocation would cause or increase an Adjusted Capital Account Deficit for
another Member).
D. Allocation of Losses from Liquidating Transactions. After
adjusting the Members' Capital Accounts to reflect all distributions of
Available Cash and all allocations pursuant to Sections 6.1A and 6.1C of
Profits and Losses other than from Liquidating Transactions for all Fiscal Years
or other periods of the Company, any Losses realized by the Company as a result
of Liquidating Transactions shall, subject to Section 6.2, be allocated to the
Members in the following order of priority:
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(1) Losses shall first be allocated to all of the
Members in the proportions required so that the Excess Balances of the Members
shall stand as nearly possible in proportion to their respective Percentage
Interest.
(2) Losses shall next be allocated to the Members in
proportion to their respective Excess Balances until such Excess Balances are
reduced to zero;
(3) Losses shall next be allocated to the Members in
proportion to, and to the extent of, their remaining positive Adjusted Balances;
and
(4) Any remaining Losses shall be allocated to the
Members in accordance with their respective Percentage Interests.
6.2 Regulatory Allocations.
A. Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement, to the extent required by Section 1.704-2(f) of the
Regulations, if there is a net decrease in Company Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, in subsequent Fiscal Years) in
an amount equal to such Member's share of the net decrease in Company Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g)(2). This
Section 6.2A is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(f) and shall be interpreted and applied
consistently therewith.
B. Chargeback of Minimum Gain Attributable to Member
Nonrecourse Debt. Notwithstanding any other provision of this Agreement (other
than Section 6.2A), to the extent required by Section 1.704-2(i)(4) of the
Regulations, if during any Fiscal Year there is a net decrease in Member Minimum
Gain, each Member who has a share of such Member Minimum Gain (determined in
accordance with Regulations Section 1.704-2(i)(5)), shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary, in
subsequent Fiscal Years) in an amount equal to such Member's share of the net
decrease in Member Minimum Gain (which share of such net decrease shall be
determined in accordance with Regulations Section 1.704-2(i)(4)). This Section
6.2B is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(i)(4) and shall be interpreted and
applied consistently therewith.
C. Nonrecourse Deductions. Notwithstanding Section 6.1, any
nonrecourse deductions (as defined in Regulations Section 1.704-2(b)(1)) for any
Fiscal Year or other period shall be allocated to the Members in proportion to
their respective Percentage Interests.
D. Member Nonrecourse Deductions. Notwithstanding Section 6.1,
Member Nonrecourse Deductions for any Fiscal Year or other period shall be
specially allocated to the Member that bears the economic risk of loss with
respect to the member nonrecourse debt to which such items are attributable in
accordance with Regulations Section 1.704-2(i).
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E. Loss Limitation and Qualified Income Offset. If a Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any other event
creates an Adjusted Capital Account Deficit for such Member, items of Company
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly
as possible. The preceding sentence is intended to constitute a "qualified
income offset" within the meaning of Regulations Section 1.704-1(b)(a)(ii)(d)
and shall be interpreted and applied consistently therewith.
F. Curative Allocations. In the event that Manager determines
that any item allocated pursuant to this Section 6.2 causes the relative Capital
Account balances of the Members to diverge from the balances targeted pursuant
to Section 6.1, subsequent allocations of income, gain, loss and deduction as
computed for book purposes shall be made, to the extent permissible by
Regulations Sections 1.704-1(b) and 1.704-2, so that the Capital Account balance
of each Member shall, to the extent possible, be as targeted pursuant to Section
6.1, so that distributions to a Member in accordance with its positive Capital
Account balance as provided in Section 10.6 would be equal to the distributions
such Member would receive if liquidation proceeds were instead distributed as
provided in Section 7.1.
6.3 Code Section 704(c) Allocations. Notwithstanding any other
provision in this Article VI, in accordance with Code Section 704(c) and the
Regulations promulgated thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its fair market value on the date of contribution in
accordance with any permissible method under the Regulations which the Manager
shall select in its sole discretion. In the event the Company's assets are
revalued pursuant to Regulation Section 1.704-1(b)(2)(iv)(f), the partners'
distributive shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes with respect to such assets shall be determined so
as to take account of the variation between the adjusted tax basis and book
value of such property in accordance with the principles of Code Section 704(c)
and Regulations Section 1.704-1 (b)(2)(iv)(f). Allocations pursuant to this
Section 6.3 are solely for purposes of federal, state and local taxes and shall
not affect or in any way be taken into account in computing a Member's Capital
Account or share of Profits, Losses, or distributions pursuant to this
Agreement.
6.4 Allocation of Net Profits and Losses in Respect of a Transferred
Interest. If any Membership Interest is transferred, or is increased or
decreased by reason of the admission of a new Member or otherwise, during any
Fiscal Year of the Company, each item of income, gain, loss, deduction, or
credit of the Company for such Fiscal Year shall be allocated between transferor
and transferee by the Manager in accordance with any method permitted under the
Code.
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ARTICLE VII
DISTRIBUTIONS AND OTHER MEMBER PAYMENTS
7.1 Distributions and Payments. Subject to applicable law,
periodically, but no less frequently than 30 days following the end of each
Fiscal Quarter, the Manager shall determine the amount of the Company's
Available Cash and distribute or pay such Available Cash in accordance with the
following priorities:
A. First, to the Managing Member, in the amount of its Tax
Distribution Entitlement; provided, however, that distributions shall be made
pursuant to this Section 7.1A only for a Fiscal Quarter in which distributions
or payments are made pursuant to Sections 7.1B through F;
B. Next, to the Members in proportion to the relative amounts
of any accrued but unpaid interest on Member Loans;
C. Next, to the Members in proportion to the relative amounts
of the then-outstanding principal balances of Member Loans;
D. Next, to the Non-managing Member in the amount of its
Unpaid First Priority Return; provided, however, that no distributions shall be
made pursuant to this Section 7.1D for any period following the end of the
Fiscal Quarter in which Crossover occurs;
E. Next, to the Non-managing Member in the amount of its
Unrecovered Capital;
F. Next, to the Non-managing Member until the Non-managing
Member has received aggregate distributions pursuant to this Section 7.1F equal
to 49% of an amount determined by dividing the aggregate amount of distributions
made to the Managing Member pursuant to Section 7.1A by.51. [For example, if
the aggregate distributions to the Managing Member pursuant to Section 7.1A
were $800,000, then the aggregate distributions to the Non-managing Member under
this Section 7.1F would be $768,627 ($800,000/.51 = $1,568,627 x 49% =
$768,627).];
G. Thereafter, to the Members in accordance with their
respective Percentage Interests.
7.2 Form of Distribution. A Member, regardless of the nature of the
Member's Capital Contribution, shall have no right to demand or receive any
distribution from the Company in any form other than money. No Member may be
compelled to accept from the Company a distribution of any asset in kind in lieu
of a proportionate distribution of money being made to other Members.
7.3 Restriction on Distributions.
A. No distribution shall be made if, after giving effect to
the distribution:
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(i) The Company would not be able to pay its debts as
they become due in the usual course of business.
(ii) The Company's total assets would be less than
the sum of its total liabilities.
B. The Manager may base a determination that a distribution is
not prohibited on any of the following:
(i) Financial statements prepared by an independent
accountant for the Company on the basis of accounting practices that are
reasonable in the circumstances.
(ii) A fair valuation performed by an independent
certified public accountant.
Except as provided in NRS 86.343, the effect of a distribution is
measured as of the date the distribution is authorized if the payment occurs
within 120 days after the date of authorization, or the date payment is made if
it occurs more than 120 days of the date of authorization.
7.4 Return of Distributions. Except for distributions made in violation
of the Act or this Agreement, no Member or Economic Interest Owner shall be
obligated to return any distribution to the Company or pay the amount of any
distribution for the account of the Company or to any creditor of the Company.
The amount of any distribution returned to the Company by a Member or Economic
Interest Owner or paid by a Member or Economic Interest Owner for the account of
the Company or to a creditor of the Company shall be added to the account or
accounts from which it was subtracted when it was distributed to the Member or
Economic Interest Owner.
ARTICLE VIII
TRANSFER AND ASSIGNMENT OF INTERESTS
8.1 Transfer and Assignment of Interests. Other than as permitted in
Section 8.3, a Member shall be entitled to transfer, assign, convey, or sell all
or any part of its Membership Interest only with the prior consent of Manager,
which consent may be given or withheld, conditioned or delayed at the Manager's
sole discretion. after the consummation of any permitted transfer of a
Membership Interest (or part thereof), the membership interest (or part thereof)
so transferred shall continue to be subject to the terms and provisions of this
Agreement, and any further transfers shall be subject to the restrictions in
this Article VIII. For purposes of this Agreement, a transfer, voluntary or
involuntary, of more than 20% of the ownership interests in any Member or a
change in control of any Member shall be deemed a transfer of a Membership
Interest and shall be governed by this Article VIII. Notwithstanding anything
herein to the contrary, prior to Crossover, without the prior consent of the
Non-managing Member, the Managing Member may not transfer its Membership
Interest in the Company or be deemed to transfer its Membership Interest as a
result of a change in the ownership interest of the
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Managing Member or a change in control of the Managing Member, if as a result of
such transfer, neither Mary Sue Milliken nor Susan Feniger shall control the
Managing Member.
8.2 Further Restrictions on Transfer of Interests. In addition to other
restrictions found in this Agreement, no Member shall transfer, assign, convey,
sell, encumber or in any way alienate all or any part of its Membership
Interest: (i) without complying with all applicable federal and state securities
laws; (ii) if the Membership Interest to be transferred, when added to the total
of all other Membership Interests transferred in the preceding twelve (12)
consecutive months prior thereto, would cause the termination of the Company
under Section 708 of the Code unless the Company determines, based on the
opinion of legal counsel to the Company, that any such termination would not
have a material adverse effect on the Company or any Member; (iii) if such
transfer would jeopardize the Company's classification as a partnership for
federal or applicable state income tax purposes, or (iv) if such transfer would
cause a breach of the Lease.
8.3 Permitted Transfers. The Economic Interest of any Member may be
transferred subject to compliance with Section 8.2, and without the prior
written consent of Manager as required by Section 8.1, but with notice to
Manager, (i) by inter vivos gift or by testamentary transfer to any spouse,
domestic partner, parent, sibling, in-law, child or grandchild of the Member, or
to a trust for the benefit of the Member or such spouse, domestic partner,
parent, sibling, in-law, child or grandchild of the Member, or (ii) to any
Affiliate of the Member; provided in the case of the Managing Member, that the
Managing Member is still controlled by Mary Sue Milliken and/or Susan Feniger.
8.4 Substitution of Members.
A. Substitute Members. An Assignee of a Membership Interest
shall have the right to be admitted to the Company as a substitute Member only
if (i) the Manager provides prior written consent to such admission, which
consent may be withheld in the Manager's sole discretion; (ii) the Members
consent as provided in Section 4.7; (iii) such Assignee executes an instrument
satisfactory to the Company accepting and adopting the terms and provisions of
this Agreement; and (iv) such Assignee pays any reasonable expenses in
connection with his or her admission as a substitute Member. The admission of an
Assignee as a substitute Member shall not in and of itself result in the release
of the Member who assigned the Membership Interest from any liability that such
Member may have to the Company. An Assignee, including a successor upon death,
who has not been admitted to the Company as a substitute Member shall have only
the rights of an owner of an Economic Interest.
B. Effective Date of Permitted Transfers. Any permitted
transfer of all or any portion of a Membership Interest or an Economic Interest
shall be effective as of the date upon which the applicable requirements of
Sections 8.1, 8.2 and 8.4A have been met (or upon such later date as may be
agreed to by Manager). Any permitted transferee of a Membership Interest shall
take subject to the restrictions on transfer imposed by this Agreement.
8.5 Rights of Legal Representatives. If a Member who is an individual
dies or is adjudged by a court of competent jurisdiction to be incompetent to
manage the Member's person or property, the Member's executor, administrator,
guardian, conservator, or other legal
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representative may exercise all of the Member's rights for the purpose of
settling the Member's estate or administering the Member's property, including
any power the Member has under the Articles or this Agreement to give an
Assignee the right to become a Member. If a Member is a corporation, trust or
other entity and is dissolved or terminated, the powers of that Member may be
exercised by its legal representative or successor. However, the legal
representative shall have no right to participate in the management or affairs
of the Company, nor to vote.
8.6 No Effect to Transfers in Violation of Agreement. Any purported
transfer of all or any part of a Membership Interest or Economic Interest in
contravention of this Agreement shall be null and void ab initio and of no force
or effect.
ARTICLE IX
ACCOUNTING, RECORDS AND REPORTING
9.1 Books and Records. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded, in
accordance with the accounting methods followed for federal income tax purposes.
The books and records of the Company shall reflect all the Company's
transactions and shall be appropriate and adequate for the Company's business
and not contain any material inaccuracies or fail to reflect any items that
would result in any material inaccuracy. The Company shall maintain at its
principal office, which may be outside of Nevada, all of the following:
A. A current list of the full name and last known business or
residence address of each Member and Economic Interest Owner set forth in
alphabetical order;
B. A current list of the full name and business or residence
address of each Manager;
C. A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed;
D. Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the three most recent
taxable years;
E. A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
F. The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past two Fiscal
Years; and
G. A true and correct copy of the Lease, Management Agreement,
License Agreement, and any and all amendments, written side agreements or other
modifications to any of them.
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9.2 Delivery to Members and Inspection.
A. Upon the request of any Member or Economic Interest Owner
for purposes reasonably related to the interest of that Person as a Member or
Economic Interest Owner, the Manager shall deliver to the requesting Member or
Economic Interest Owner, a copy of the information required to be maintained by
Sections 9.1A, B, C, D, E and G.
B. On reasonable notice to the Company, each Member, Manager
and Economic Interest Owner, at such party's own expense, shall have the right,
upon reasonable request for purposes reasonably related to the interest of the
Person as Member, Manager or Economic Interest Owner, to:
(i) inspect and copy, during normal business hours
and without causing unreasonable disruption in the operation of the Company,
any of the Company records described in Sections 9.1A through G, and
(ii) obtain from the Manager, promptly after their
becoming available, a copy of the Company's federal, state, and local income tax
or information returns for each Fiscal Year.
C. Any request, inspection or copying by a Member or Economic
Interest Owner under this Section 9.2 may be made by that Person or that
Person's authorized agent or attorney.
D. The Manager shall within three (3) business days after
receipt thereof, furnish to the Members copies of any written notices, demands,
correspondence or other documentation delivered to or given by the Company in
connection with an alleged default under the Lease or any material modification,
waiver, consent, amendment or side agreement relating to the Lease.
9.3 Budgets ad Statements.
A. The Manager shall promptly provide the Members with a copy
of each budget provided to the Company pursuant to the Management Agreement.
B. The Manager shall cause monthly financial statements,
consisting of a balance sheet, income statement and statement of changes in
financial position, to be sent, along with copy of the general ledger, to each
Member not later than 21 days after the end of each calendar month during the
term hereof. Such statements shall reflect in reasonable detail all
reimbursements to and employee benefits and burdens allocated by Manager and its
Affiliates in accordance with Exhibit D hereto.
C. The Manager shall cause an annual report to be sent to each
of the Members not later than 90 days after the close of each Fiscal Year. The
report shall contain a balance sheet as of the end of the Fiscal Year and an
income statement and statement of changes in financial position for the Fiscal
Year. Such statements shall reflect in reasonable detail all
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reimbursements to and employee benefits and burdens allocated by Manager and its
Affiliates in accordance with Exhibit D hereto. Such financial statements shall
be accompanied by the report thereon, if any, of the independent accountants
engaged by the Company or, if there is no report, the certificate of a Manager
that the financial statements were prepared without audit from the books and
records of the Company; provided however, that as long as Vantage is a Member
and Vantage or its parent company, American Vantage Companies, Inc., is a public
reporting company, (i) such financial statements shall be audited by, and
accompanied by a report of, an independent certified public accountant engaged
by the Company, and (ii) the Company shall reimburse Vantage for its accounting
costs incurred in reviewing the Company's audited financial statements for the
purpose of including such information in Vantage's or American Vantage
Companies' financial statements, not to exceed $5,000 per year for the initial
term of the Lease.
D. The Manager shall cause to be prepared at least annually,
at Company expense, information necessary for the preparation of the Members'
and Economic Interest Owners' federal and state income tax returns. The Manager
shall send or cause to be sent to each Member or Economic Interest Owner within
90 days after the end of each taxable year such information as is necessary to
complete federal and state income tax or information returns, and a copy of the
Company's federal, state, and local income tax or information returns for that
year.
E. The Manager shall cause to be timely filed with the Nevada
Secretary of State all statements and amendments thereto required under NRS
86.263.
9.4 Financial and Other Information. The Manager shall provide such
financial and other information relating to the Company or any other Person in
which the Company owns, directly or indirectly, an equity interest, as a Member
may reasonably request. The Manager shall distribute to the Members, promptly
after the preparation or receipt thereof by the Manager, any financial or other
information relating to any Person in which the Company owns, directly or
indirectly, an equity interest, including any filings by such Person under the
Securities Exchange Act of 1934, as amended, that is received by the Company
with respect to any equity interest of the Company in such Person. The Company
shall retain the financial records of the Company until the expiration of the
applicable statute of limitations for tax matters, or six years, whichever is
greater. Following dissolution of the Company, the financial records may be
destroyed any time after such holding period has expired, unless either Member
requests such financial records, in which case they may be kept by the Manager
or provided to such Member, at the Manager's election.
9.5 Filings. The Manager, at Company expense, shall cause the income
tax returns for the Company to be prepared and timely filed with the appropriate
authorities. Prior to filing, the Manager shall give the Non-managing Member an
opportunity to review and consult, at its expense, with Manager on the tax
treatment of any substantial item. The Manager, at Company expense, shall also
cause to be prepared and timely filed, with appropriate federal and state
regulatory and administrative bodies, amendments to, or restatements of, the
Articles and all reports required to be filed by the Company with those entities
under the Act or other then current applicable laws, rules, and regulations,
subject to the right of the Members as provided herein to consent to such
matters.
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9.6 Bank Accounts. The Manager shall maintain the funds of the Company
in one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other Person.
9.7 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Manager. The Non-managing Member may advise the Manager of any tax
or accounting matters concerning the Non-managing Member and the Manager shall
consult with the Non-Managing Member in administering such matters in the best
interests of the Company. The Manager may rely upon the advice of the Company's
accountants in administering this Agreement.
9.8 Tax Matters for the Company Handled by Manager and Tax Matters
Partner. The Manager shall from time to time cause the Company to make such tax
elections as it deems in its sole discretion to be in the best interests of the
Company and the Members. The Tax Matters Partner, as defined in Section 6231 of
the Code, shall represent the Company (at the Company's expense) in connection
with all examinations of the Company's affairs by tax authorities, including any
resulting judicial and administrative proceedings, and shall be authorized to
expend the Company's funds for necessary professional services and reasonable
costs associated therewith. If for any reason the initial Tax Matters Partner or
any successor Tax Matters Partner ceases to be the Manager, the new Manager
elected pursuant to Section 4.7 shall serve as the Tax Matters Partner;
provided, however that if such successor Manager is not a Member, the Tax
Matters Partner shall be such Member as may be designated by the predecessor Tax
Matters Partner, or, if no Member is so designated or such designation does not
satisfy the requirements of the Code, a new Tax Matters Partner shall be
selected by the Members in accordance with the requirements of the Code. The
Non-managing Member may advise the Manager of any tax or accounting matters
concerning the Non-managing Member and the Manager shall consult with the
Non-Managing Member in administering such matters in the best interests of the
Company.
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
A. Upon the consent of the Manager and all of the Members;
B. The occurrence of a Dissolution Event and the failure of a
majority interest of the percentage interests of the Remaining Members (as
defined in Section 10.2) to consent in accordance with Section 10.2 to continue
the business of the Company within ninety (90) days after the occurrence of such
event;
C. The sale or other liquidation of all or substantially all
of the assets of the Company or the cessation of its primary business;
D. Expiration of the term as described in Section 2.3;
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E. Withdrawal of the Managing Member from the Company pursuant
to Section 4.3A;
F. Termination of the Lease; or
G. The failure of the Non-managing Member to make a Member
Loan which the Managing Member has agreed to make.
10.2 Continuation of Company. Upon the occurrence of a Dissolution
Event, the Company shall not be dissolved and its affairs shall not be wound up
if the remaining Members ("Remaining Members") holding a majority of the
remaining Membership Interests vote or consent to continue the business of the
Company within 90 days of the happening of the Dissolution Event.
10.3 Articles of Dissolution. As soon as possible following the
occurrence of any of the events specified in Section 10. 1, the Manager who has
not wrongfully dissolved the Company or, if none, the Members, shall execute
Articles of Dissolution in such form as shall be prescribed by the Nevada
Secretary of State and file the Articles as required by the Act.
10.4 Winding Up. Upon the occurrence of any event specified in Section
10. 1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Manager shall be responsible for overseeing the winding up
and liquidation of the Company (unless the Manager has wrongfully dissolved the
Company in which case the Members other than the Manager shall be responsible
for overseeing such liquidation and winding up). The Persons winding up the
affairs of the Company shall give written notice of the commencement of winding
up by mail to all known creditors and claimants whose addresses appear on the
records of the Company. The Manager or Members winding up the affairs of the
Company shall be entitled to reasonable compensation for such services. The
persons winding up the affairs of the Company shall take full account of the
assets and liabilities of the Company, and shall cause its assets to be sold and
liquidated into cash. No Member shall be required to take any distribution of
property in kind, without the consent of such Member.
10.5 Adjustment of Capital Accounts and Allocation of Profits and
Losses. Prior to making any liquidating distributions of the company's assets,
the Members' Capital Accounts shall be adjusted to reflect all prior
distributions to the Members and the allocation of all Profits, Losses and
income, gain, deduction or loss attributable to the Company's operations and its
Liquidating Transactions, and any unrealized gain or loss inherent on any assets
or properties to be distributed to the Members in kind (if any). Profits, Losses
and any other items of income, gain, deduction or loss resulting from
Liquidating Transactions, and any unrealized gain or loss inherent on any assets
or properties to be distributed to the Members in kind (if any), shall be
allocated to the Members as provided in Section 6.1B or 6.1D, as applicable.
If, in any year in which a Liquidating Transaction occurs, the Manager
determines, in its reasonable discretion, that the amount of Profits from
Liquidating Transactions (including both Profits already realized and estimated
Profits yet to be realized) subject to allocation under Section 6.1B is, or is
likely to be, insufficient to permit the Capital Accounts of the Members (as
adjusted to reflect allocations to the Members of such Profits from Liquidating
Transactions) to reflect the economic
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agreement of the Members (as set forth in Section 7.1), then the Manager is
authorized to specially allocate Profits (or, if necessary, gross income) for
such year (other than Profits from Liquidating Transactions) according to the
priorities set forth in Section 6.1B, rather than according to the priorities
set forth in Section 6.1 A, so that the Capital Accounts of Members shall, to
the extent possible, reflect the economic agreement of the Members (as set forth
in Section 7.1).
10.6 Order of Payments Upon Dissolution. After determining that all
known debts and liabilities of the Company, including, without limitation, debts
and liabilities to Members who are creditors of the Company, have been paid or
adequately provided for, the remaining assets of the Company shall be liquidated
into cash and all cash shall be distributed to the Members in accordance with
their respective positive Capital Account balances, as adjusted pursuant to
Section 10.5.
10.7 No Obligation to Restore Deficit. No Member shall be required to
restore to the Company, to any other Member, or to the creditors of the Company
any deficit balance in such Member's Capital Account following the liquidation
and dissolution of the Company.
10.8 Providing for Debts. The payment of a debt or liability, whether
the whereabouts of the creditor is known or unknown, has been adequately
provided for if the payment thereof has been assumed or guaranteed in good faith
by one or more financially responsible persons or by the United States
government or any agency thereof, and the provision, including the financial
responsibility of the Person, was determined in good faith and with reasonable
care by the Members to be adequate at the time of any distribution of the assets
pursuant to this Section. This Section 10.8 shall not prescribe the exclusive
means of making adequate provision for debts and liabilities.
10.9 Certificate of Cancellation. The Manager or Members who filed
the Articles of Dissolution shall obtain from the Nevada Secretary of State a
certificate of dissolution upon the completion of the winding up of the affairs
of the Company.
10.10 No Action for Dissolution. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be done
to the goodwill and reputation of the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is
not required by Section 10.1 or provided for under this Agreement. This
Agreement has been drawn carefully to provide fair treatment of all parties and
equitable payment in liquidation of the Economic Interests. Accordingly, except
where the Members have failed to liquidate the Company as required by this
Article X, each Member hereby waives and renounces his or her right to initiate
legal action to seek the appointment of a receiver or trustee to liquidate the
Company or to seek a decree of judicial dissolution of the Company on the ground
that (a) it is not reasonably practicable to carry on the business of the
Company in conformity with the Articles or this Agreement, or (b) dissolution is
reasonably necessary for the protection of the rights or interests of the
complaining Member. Damages for breach of this Section 10.10 shall be monetary
damages only (and not specific performance), and the damages may be offset
against distributions by the Company to which such Member would otherwise be
entitled.
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ARTICLE XI
INDEMNIFICATION AND INSURANCE
11.1 Indemnification of Agents. The Company shall indemnify any Person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he or
she is or was a Member, Manager, officer, employee or other agent of the Company
or of the Manager or that, being or having been such a Member, Manager, officer,
employee or agent, he or she is or was serving at the request of the Company as
a manager, director, officer, employee or other agent of another
limited-liability company, corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to hereinafter as an "agent"),
to the fullest extent permitted by applicable law in effect on the date hereof
and to such greater extent as applicable law may hereafter from time to time
permit. The Manager shall be authorized, on behalf of the Company, to enter into
indemnity agreements from time to time with any Person entitled to be
indemnified by the Company hereunder, upon such terms and conditions as the
Manager deems appropriate in his business judgment.
11.2 Liability Insurance. The Company shall have the power to purchase
and maintain insurance on behalf of any Person who is or was an agent of the
Company against any liability asserted against such Person and incurred by such
Person in any such capacity, or arising out of such Person's status as an agent,
whether or not the Company would have the power to indemnify such Person against
such liability under the provisions of Section 11.1 or under applicable law. To
the extent reasonable, any Member, at its request, will be named as an
additional insured on liability insurance maintained by or for the Company.
11.3 Key Person Insurance. Prior to Crossover, the Company shall for
its benefit purchase and maintain insurance on the life (and insuring against
the long-term disability) of Susan Feniger and Mary Sue Milliken, if insurable,
in an amount equal to the Non-managing Member's Unrecovered Capital from time to
time. Thereafter, the Company may, with the consent of the Members, maintain
such insurance. The Company shall, in the event of its receipt of any proceeds
as beneficiary of such insurance, pay an amount of such proceeds to the
Non-managing Member up to the amount of the Non-managing Member's Unrecovered
Capital; and any excess proceeds shall, in the discretion of the Manager, be
retained by the Company as working capital or distributed to the Members in
accordance with their Percentage Interests.
ARTICLE XII
MISCELLANEOUS
12.1 Investment Representations. The Members and Economic Interest
Owners, if any, understand (1) that the Membership Interests and Economic
Interests evidenced by this Agreement have not been registered under any Federal
or State securities laws (the "Securities Acts") because the Company is issuing
and intends to issue, all Membership Interests and Economic Interests in
reliance upon the exemptions from the registration requirements of the
Securities Acts providing for issuance of securities not involving a public
offering, (2) that the
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Company has relied upon the fact that the Membership Interests and Economic
Interests are to be held by each Member or Economic Interest Owner for
investment, and (3) that exemption from registration under the Securities Acts
may not be available if the Membership Interests and Economic Interests were
acquired by a Member or Economic Interest Owner with a view to distribution.
Accordingly, each Member and Economic Interest Owner hereby confirms to
the Company that such Member and Economic Interest Owner is acquiring the
Membership Interests and Economic Interests for such own Member's and Economic
Interest Owner's account, for investment and not with a view to the resale or
distribution thereof. Each Member and Economic Interest Owner agrees not to
transfer, sell or offer for sale any of portion of the Membership Interests or
Economic Interests unless there is an effective registration or other
qualification relating thereto under any applicable Securities Acts or unless
the holder of Membership Interests or Economic Interests delivers to the Manager
an opinion of counsel, satisfactory to the Company, that such registration or
other qualification under such Act and applicable state securities laws is not
required in connection with such transfer, offer or sale. Each Member and
Economic Interest Owner understands that the Company is under no obligation to
register the Membership Interests or Economic Interests or to assist such Member
or Economic Interest Owner in complying with any exemption from registration
under the Securities Acts if such Member or Economic Interest Owner should at a
later date, wish to dispose of the Membership Interest or Economic Interest.
Furthermore, each Member realizes that the Membership Interests and Economic
Interests are unlikely to qualify for disposition under Rule 144 of the
Securities and Exchange Commission unless such Member or Economic Interest Owner
is not an "affiliate" of the Company and the Membership Interest or Economic
Interest has been beneficially owned and fully paid for by such Member or
Economic Interest Owner for at least two years.
SF KF MM RT
-------- --------
Initials Initials
For T,T.&T For Vantage
12.2 Counsel to the Company. Counsel to the Company is also counsel to
the Managing Member, Mundo Management Group, LLC, Mary Sue Milliken, Susan
Feniger, and their Affiliates. The Members, by subscribing to this Agreement,
hereby confirm their consent to the representation of the Company under these
circumstances. The Company has selected the Law Offices of Wendy G. Glenn, a
Professional Corporation ("Company Counsel") as legal counsel to the Company.
Each Member acknowledges that Company Counsel does not represent the Member in
the formation or operation of the Company. Company Counsel shall owe no duties
directly to a Member, but only to the Company. Notwithstanding any adversity
that may develop, in the event any dispute or controversy arises between any
Members and the Company, or between any Members or the Company, on the one hand,
and another Member (or Affiliate of a Member) that Company Counsel represents,
on the other hand, then each Member agrees that Company Counsel may represent
either the Company or such Member (or his or her Affiliate), or both, in any
such dispute or controversy to the extent permitted by the California Rules of
Professional Conduct or similar rules in any other jurisdiction, and each Member
hereby consents to such representation. Each Member further acknowledges that
Company Counsel has not represented the interests of the
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Members individually in connection with the formation of the Company and the
preparation and negotiation of this Agreement and each Member has been advised
to seek independent counsel. The Non-managing Member represents that it has been
represented by Jay H. Brown, Esquire and Patricia J. Curtis, Esquire, of Hale
Lane Peek Dennison Howard and Anderson, in connection with its investment in the
Company, and in the event of any adversarial proceeding or other dispute of any
nature, by, between or among the Non-managing Member and the Company, the
Managing Member or any of their respective Affiliates, the Non-managing Member
may be represented by Jay H. Brown or Patricia J. Curtis or any member of any
law firm of which she is a member, and each other Member and the Manager consent
to such representation.
SF KF MM RT
-------- --------
Initials Initials
For TT&T For Vantage
12.3 Intentionally omitted.
12.4 Complete Agreement. This Agreement and the Articles constitute the
complete and exclusive statement of agreement among the Members and Manager with
respect to the subject matter herein and therein and replace and supersede all
prior written and oral agreements or statements by and among the Members and
Manager or any of them, including but not limited to that certain letter dated
July 29, 1998 from the Company's counsel to Jay H. Brown, Esq., and executed by
American Vantage Companies. No representation, statement, condition or warranty
not contained in this Agreement or the Articles will be binding on the Members
or Manager or have any force or effect whatsoever. To the extent that any
provision of the Articles conflict with any provision of this Agreement, the
Articles shall control.
12.5 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.
12.6 Parties in Interest. Except as expressly provided in the Act,
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Members and Manager and their
respective successors and permitted assigns nor shall anything in this Agreement
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
12.7 Headings. All headings herein are inserted only for convenience
and ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
12.8 Disputed Matters. Except as otherwise provided in this Agreement,
any controversy or dispute arising out of this Agreement, the interpretation of
any of the provisions hereof, or the action or inaction of any Member or Manager
hereunder shall be submitted to arbitration in Las Vegas, Nevada or Los Angeles,
California, at the election of the Managing Member, before one arbitrator or a
panel of arbitrators, as the parties shall determine, under the
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then current commercial arbitration rules of the American Arbitration
Association, JAMS/Endispute or other mutually agreeable arbitrator. Any award or
decision obtained from any such arbitration proceeding shall be final and
binding on the parties, and judgment upon any award thus obtained may be entered
in any court having jurisdiction thereof. No action at law or in equity based
upon any claim arising out of or related to this Agreement shall be instituted
in any court by any Member except (a) an action to compel arbitration pursuant
to this Section 12.8, (b) an action to enforce an award obtained in an
arbitration proceeding in accordance with this Section 12.8, or (c) an action
for a temporary restraining order and preliminary injunction (but not for
permanent injunction) pending arbitration of a dispute.
12.9 Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
persons or circumstances other than those to which it is held invalid shall not
be affected thereby.
12.10 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions and conditions of this Agreement and the transactions
contemplated hereby.
12.11 Notices. Any notice to be given or to be served upon the Company,
any Member, the Manager or any Person in connection with this Agreement must be
in writing (which may include facsimile) and will be deemed to have been given
and received when delivered to the address specified by the party to receive the
notice. Such notices will be given to a Member or Manager at the address
specified in Exhibit A hereto. Any Member may, at any time by giving five (5)
days' prior written notice to the Company, designate any other address in
substitution of the foregoing address to which such notice will be given. In
addition to the foregoing, notice may be given by facsimile transmission to the
facsimile number included in Exhibit A, which notice shall be deemed given when
received during customary business hours prior to 5:00 PM local time of the
recipient, provided that a duplicate copy of such notice has been deposited in
the United States Mail, postage prepaid, on or prior to the date of
transmission.
12.12 Amendments. All amendments to this Agreement will be in writing
and signed by all of the Members.
12.13 Reliance on Authority of Person Signing Agreement. If a Member is
not a natural person, neither the Company nor any Member will (a) be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual or
(b) be responsible for the application or distribution of proceeds paid or
credited to individuals signing this Agreement on behalf of such entity.
12.14 Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
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12.15 Attorney Fees. In the event that any dispute between the Company
and the Members or among the Members should result in litigation or arbitration,
the prevailing party in such dispute shall be entitled to recover from the other
party all 00\- reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including, without limitation, reasonable attorneys' fees and
expenses.
12.16 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
12.17 No Waiver. The failure of a Member to seek redress for violation
of, or to insist upon the strict performance of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have originally
constituted a violation, from having the effect of an original violation.
IN WITNESS WHEREOF, all of the Members of Border Grill Las Vegas, LLC,
a Nevada limited-liability company, have executed this Agreement, effective as
of the date written above.
MANAGING MEMBER
TT&T, LLC,
a Nevada limited-liability company
By: /s/ Mary Sue Milliken
-----------------------------
Mary Sue Milliken,
Manager Member
By: /s/ Susan Feniger
-----------------------------
Susan Feniger,
Manager Member
By: /s/ R. Kevin Finch
-----------------------------
R. Kevin Finch,
Manager Member
(Signatures continued on next page.)
34
<PAGE> 37
NON-MANAGING MEMBER
Vantage Bay Group, Inc.,
a Nevada corporation
By: /s/ Ronald Tassinari
-----------------------------
Ronald Tassinari, President
35
<PAGE> 38
By executing below, the undersigned hereby guarantees the obligations
of the Non-managing Member to make its Capital Contribution as required in
Section 3.1, which guarantee is given as set forth in Section 3.2 of this
Agreement.
American Vantage Companies, Inc.,
a Nevada corporation
By: /s/ Ronald Tassinari
-----------------------------
Ronald Tassinari, President
36
<PAGE> 39
By executing below, the undersigned each hereby agrees to be bound by
her promise set forth in and subject to the provisions of Section 4.3A.
/s/ Mary Sue Milliken
-----------------------------
Mary Sue Milliken
/s/ Susan Feniger
-----------------------------
Susan Feniger
37
<PAGE> 40
EXHIBIT A
CAPITAL CONTRIBUTIONS, PERCENTAGE INTERESTS AND ADDRESSES OF
MEMBERS AND MANAGERS
<TABLE>
<CAPTION>
Initial
Capital
Member; Manager and Address Contributions Percentage Interest
- -------------------------------------------------------------------------------
<S> <C> <C>
Managing Member:
Manager
TT&T, LLC $ 1,000 51%
1445 4th Street
Santa Monica, CA 90401
Non-managing Member:
Vantage Bay Group, Inc. $250,000 49%
c/o American Vantage Companies
6787 West Tropicana Avenue
Suite 200
Las Vegas, NV 89103
Total $251,000 100%
</TABLE>
<PAGE> 41
EXHIBIT B
OPENING BUDGET
<PAGE> 42
EXHIBIT B
NEW RESTAURANT MANDALAY BAY
OPENING COSTS-RESTAURANT
based on 6,388 sf downstairs/3,522 sf upstairs/3,000 sf patio
<TABLE>
<CAPTION>
Total per
Category
<S> <C> <C>
ACQUISITION
Legal 30,000
Accounting 2,000
Liquor license 10,000 42,000
CONSTRUCTION
Architect & Design Fees 96,300
Downstairs (6388 af @ 180/sf) 1,149,940
Upstairs (3522 sf @ 180/sf) 633,960
Patio (3000 sf @ 5O/sf) 150,000
Kitchen & Bar Equipment 375,000
Murals 60,000
Contingency 80,250 2,545,350
FURNITURE, FIXTURES & EQUIPMENT
Dining Room Tables (40 @ $250 ea) 10,000
Dining Room Chairs (170 @ $250 ea) 42,500
Mesa Grande Table (1 @ $750 ea) 750
Bar Tables (8 @ $150) 1,200
Bar Seats (44 @ $200 ea) 8,800
Patio Tables (37 @ $150 ea) 5,550
Patio Chairs (148 @ $150 ea) 22,200
Misc Furniture & Fixtures 10,000
Signage 20,000
Kitchen Equipment 25,000
POS 45,000
Music 25,000
Contingency 10,000 226,000
OPENING INVENTORY & SUPPLIES
Smallwares 20,000
China/Glass/Silver 30,000
Liquor Beer & wine 30,000
Food Inventory 11,000
Menus, matches & misc. supplies 15,000
Office Equipment, supplies & paper products 30,000
Uniforms 8,000
Contingency 10,000 154,000
PRE-OPENING EXPENSES
1st Month Rent 6,250
Staff training-dining room 15,000
Staff training-kitchen 15,000
Management salaries (chef,sous,gm,asst) 155,000
Management relocation & Training lodging 45,000
Travel, Meals & Lodging 45,000
Cost of goods-training 15,000
Pre-opening charity events 25,000
Insurance, utilities 15,000
Sales Tax Deposit (3 x Monthly Tax Liability) 105,000
Graphics, printing, advertising 20,000
Opening Management Fee 60,000
Contingency 15,000 536,250
LICENSES AND DEVELOPMENT COSTS
Permits & business license 15,000
Concept Licensing Fee 15,000 30,000
OFFERING EXPENSES
Legal 30,000
Accounting 5,000
Other 3,000 38,000
CONTINGENCY/RESERVE 29,400 50,000
TOTAL BUDGET 3,601,000 3,621,600
LESS LANDLORD FUNDED IMPROVEMENTS (675,000)
---------
2,926,000
INVESTOR CAPITAL 2,750,000
INVESTOR LOAN 175,000
---------
2,925,000
</TABLE>
(Estimates only--For internal use-Numbers subject to change)
<PAGE> 43
EXHIBIT C
PROCEDURE FOR DETERMINING FAIR MARKET VALUE AND PAYMENT TERMS
For purposes of Sections 4.3B and 4.3C, the fair market value of the Company
shall be determined as follows:
A. During the first year of operation of the Restaurant, 75% of
annualized net income before depreciation for the period from
the opening of the Restaurant through the end of the month
immediately preceding the "Calculation Date", shall be
multiplied by a factor of two (2), with the product increased
by any cash reserves and liquid tangible assets (i.e.,
collectible accounts receivables) and decreased by any
outstanding debt (i.e., accounts payable, accrued expenses,
contracts payable and notes payable) of the Company, to
establish the stipulated fair market value of the Company.
B. In the second year of operation, 85% of the net income before
depreciation of the Restaurant for the most recent 12 months
prior to the Calculation Date, multiplied by a factor of two
(2), with the product increased by any cash reserves and
liquid tangible assets (i.e., collectible accounts
receivables) and decreased by any outstanding debt (i.e.,
accounts payable, accrued expenses, contracts payable and
notes payable) of the Company, to establish the stipulated
fair market value of the Company.
C. In the third year of operation and thereafter, 100% of the net
income before depreciation of the Restaurant for the most
recent 12 months prior to the Calculation Date, multiplied by
a factor of two (2), with the product increased by any cash
reserves and liquid tangible assets (i.e., collectible
accounts receivables) and decreased by any outstanding debt
(i.e., accounts payable, accrued expenses, contracts payable
and notes payable) of the Company, to establish the stipulated
fair market value of the Company.
The Company may purchase some or all of the Non-managing Member's former
Membership Interest for an amount equal to the respective Percentage Interest
(i.e., up to 49% multiplied by the applicable stipulated fair market value of
the Company. The Company may pay the amount in full or elect, at its option, to
deliver a note to the Non-managing Member reflecting installment payments fully
amortizing over five (5) years at an interest rate equal to the prime rate of
interest announced by Wells Fargo Bank.
For purposes of the foregoing provisions, the "Calculation Date" shall mean (i)
the date the Manager gives its consent to the withdrawal of the Non-managing
Member under Section 4.3B or (ii) the date the Company elects to acquire the
Membership Interest in the event of a breach as provided in Section 4.3C.
<PAGE> 44
EXHIBIT D
DESCRIPTION OF REIMBURSEMENTS TO MANAGER AND AFFILIATES
Mundo will be the restaurant manager and as such, certain expenses described in
this Exhibit D and incurred in managing the Restaurant will be passed through to
the Restaurant, other than salaries for Mary Sue Milliken and Susan Feniger (the
"Owners"). Mundo will also perform "entity" management functions for the Manager
of the Company, such as overseeing and assisting in preparation of tax returns,
investor communications, financial statements and other obligations of the
Company as provided in the Operating Agreement.
Expenses that are incurred solely for the benefit of the Restaurant will be paid
by the Restaurant and all direct employees of the Restaurant will be paid by the
Restaurant. Mundo will maintain a principal business office, initially in Santa
Monica, California, which will include certain principal business office staff,
expenses, etc. Reasonable business expenses and salaries (other than for Mary
Sue Milliken and Susan Feniger) may be paid by Mundo but then reimbursed to
Mundo by the Restaurant to the extent described below. These reimbursements are
in addition to any management fee paid to Mundo by the Restaurant.
Mundo shall bear its own entity expenses, such as tax return preparation,
corporate or entity maintenance expenses, legal and accounting fees solely for
the benefit of Mundo, and any Mundo indebtedness.
The following categories of expenses would be allocated as follows.
1. Employee Salaries (including any bonuses) for Director of
Operations, Corporate Chef, Accounting personnel, Marketing
Manager, Catering Manager, MIS, administrative assistant(s)
for the Owners, and after Crossover, any additional principal
business office staff, i.e., risk manager, employee relations,
supporting clerical staff, etc., will be split equally among
the restaurants, unless an unusual amount of time is spent on
one restaurant over another; except Director of Operations and
Accounting Manager salaries will be split based on actual time
spent on each restaurant. The Director of Operations and
Accounting Manager will complete a memo periodically and
submit them to an Owner for approval of the allocation of
time and salaries. When salaries for other employees are
allocated unequally, a written memo will be approved by an
Owner or the Director of Operations or Accounting Manager,
setting forth the reason for such unequal allocation.
2. Employee benefits and burdens and all employee-related
expenses for the employees described in the foregoing
paragraph shall be allocated in the same manner as salaries.
Such benefits and burdens shall be limited to the following:
a. Health insurance.
1
EXHIBIT D
<PAGE> 45
b. Long-term disability insurance for executive-level
employees.
c. Reasonable and actual business-related expenses.
d. Life insurance for executive-level employees.
e. Payroll tax costs (taxes, social
security, SDI, unemployment insurance, etc.).
f. Worker's compensation insurance.
g. Employer pension plan contribution, if any.
3. Promotional and Charity Events - to be determined on a
case-by-case basis. (For example: donation of food for
promotional event will be split evenly among all restaurants
if it will benefit all restaurants.)
4. Advertising - to be determined by Director of Operations or
Accounting Manager invoice by invoice, as to which restaurants
will directly benefit.
5. Direct Mail Marketing, Website Expense, Data Processing Fees,
Dues and Publications, Media Consultant - split evenly by all
restaurants.
6. Overhead expenses (e.g., office rent, telephone, utilities,
etc.) of principal business office staff and Owners - split
evenly by all restaurants, unless directly attributable to one
or more, but less than all, restaurants. Manager estimates
that not more than $900/month would be allocated to the
Restaurant in the first year.
7. Travel expenses of principal business office staff and Owners
will be allocated to the restaurant(s) receiving the benefit.
8. Research and development costs and R&D outside meals will be
allocated based on location being researched. Research for new
restaurant locations will be at the cost of Mundo or the
Owners, and not of the Restaurant.
9. Owners' benefits and burdens listed under item 2 above, will
be allocated among all restaurants equally. In addition,
Owners will have an expense allowance to cover dining,
entertainment, research and development, promotion, etc.,
which need not be directly related to any restaurant. The
amount of such expense allocated to the Restaurant shall not
exceed $15,000 in the first year, which maximum may increase
by CPI annually. And, the Owners and principal business office
staff may have a cellular phone allowance. The amount of such
allowance which is allocated to the Restaurant shall not
exceed $3,500 in the first year, with that maximum increasing
by CPI annually.
10. Any blanket property or liability insurance shall be allocated
equally among the restaurants benefited, unless the
independent insurance broker advises that another method is
more equitable, in which case the more equitable method shall
be used.
2
EXHIBIT D
<PAGE> 46
EXHIBIT E
LICENSE AGREEMENT
<PAGE> 47
BORDER GRILL LAS VEGAS
LICENSE AGREEMENT
THIS AGREEMENT is entered into February , 1999, effective as of
November 12, 1998, by and between Dancing Pigs, Inc., a California corporation
wholly owned by Susan Feniger, and Cano, Inc., a California corporation wholly
owned by Mary Sue Milliken (collectively, "Licensor") and Border Grill
Las Vegas, LLC, a Nevada limited-liability company ("Licensee").
RECITALS
A. Licensor is the successor in interest to the ownership of the
trademark BORDER GRILL and all logos, designs, trade dress, copyrights, menus,
styles, recipes, and all other rights associated with and used in connection
with the operation of certain Mexican cuisine restaurants (the "Trademark").
B. The Trademark has previously been, and as of the effective date of
this Agreement continues to be, used with Licensor's permission on a
non-exclusive basis, by one or more other restaurants of which Licensor, or its
principals, are controlling members.
C. The Trademark is expected to be used with Licensor's prior
permission, on a non-exclusive basis by other restaurant operations of which
Licensor, or its principals, are controlling members.
D. Licensee desires to obtain the non-exclusive use of the Trademark
from Licensor for use in the operation of a restaurant ("Restaurant") to be
located in the Mandalay Bay Hotel and Casino project, at 3950 Las Vegas
Boulevard South, Las Vegas, Nevada ("location"), pursuant to that certain
Restaurant Lease between Licensee and Mandalay Bay Corp. dated November 12, 1998
("Lease"), on the terms and conditions and with the rights and obligations set
forth herein.
NOW, THEREFORE, in consideration of the covenants and promises
contained herein, it is hereby agreed as follows:
1. LICENSE.
1.1 Grant of License. Licensor hereby grants to Licensee, and
Licensee hereby accepts from Licensor, the non-exclusive (except for the radius
limitation, as provided below) right, privilege, and license ("License") to use
the Trademark in its operation of the Restaurant at the location only, subject
to the terms and conditions herein. The Trademark shall be used and displayed
in, on and at the Restaurant only in such manner as Licensor in its sole
discretion shall specify, and no other. Licensee acknowledges that the Trademark
has acquired and will acquire valuable secondary meaning and goodwill with the
public and that the restaurants using the Trademark have acquired a reputation
for high quality and style, excellent food, and professional and courteous
service. The Restaurant shall be operated by Licensee exclusively as a Mexican
cuisine restaurant and for no other purpose whatsoever without Licensor's
written consent.
1
<PAGE> 48
Licensee's use of the Trademark shall be solely in connection with the
Restaurant in accordance with the guidelines and directions furnished to
Licensee by Licensor, if any, and the quality of the Restaurant shall be
satisfactory to the Licensor, in its sole discretion. Provided that this
Agreement is in full force and effect and provided that Licensee has not
achieved "Crossover" as that term is defined in Licensee's Operating Agreement,
Licensor shall not license any third party to operate a full-service Mexican
cuisine restaurant under the Trademark within the Restricted Area as defined in
the Lease.
1.2 Term of License. Subject to earlier termination as provided in
Paragraph 9 hereof, the License shall be for a term of approximately ten (10)
years and ten (10) months commencing as of the date hereof and expiring at the
end of the Term of the Lease, and may be renewed by Licensee with 6 months prior
notice for one five (5) year renewal term if the Lease is extended, on the terms
set forth herein.
1.3 Reservation of Rights. All rights in and to the Trademark other
than those specifically granted herein are reserved to Licensor for its own use
and benefit, including but not limited to all rights in merchandising and other
goods. Licensee acknowledges that it shall not acquire any rights of any nature
whatsoever in the Trademark as a result of Licensee's use thereof, and that all
use of the Trademark, including but not limited to improvements in design by
Licensee, shall inure to the benefit of Licensor. Licensee agrees that it shall
not, directly or indirectly, during the term of this Agreement or thereafter,
attack the ownership by Licensor of the Trademark or the validity thereof or
attack the validity of the License herein granted to it. Licensee acknowledges
that Licensor will permit Licensee to distribute merchandise and other goods
using the Trademark, but that Licensor has and at all times shall retain
complete control over such merchandise and other goods, and the Trademark's use
in connection with such merchandise and other goods, notwithstanding that
Licensor may, in connection with any such distribution rights, require Licensee
to pay for some or all of the costs incurred for the design and manufacture of
such merchandise and other goods.
1.4 Assignments of License. The License herein granted is personal
to Licensee and may not be assigned, transferred, sub-licensed, pledged,
mortgaged or otherwise encumbered by Licensee in whole or in part without
Licensor's prior written consent. Licensor, in its sole and absolute discretion,
shall be entitled to assign the Trademark so long as such assignment is subject
to the terms and conditions of this Agreement.
2. PAYMENTS. In consideration for the grant of the License hereunder,
Licensee shall pay to Licensor the following:
2.1 an initial fee of $15,000;
2.2 One Hundred Dollars ($100) each year or partial year of the term
on January 1 of each year; and
2.3 $7,500 upon the giving of notice of the renewal of the License,
for the renewal term.
3. OBLIGATIONS OF LICENSOR. During the term of this Agreement and so
long as no
2
<PAGE> 49
event of default shall have occurred hereunder, Licensor shall provide to
Licensee all information in Licensor's possession or control relating to the
design and marketing of the Trademark or utilization and exploitation of the
Trademark, and shall assist Licensee and its officers, employees, agents,
managers, contractors, and other representatives to become familiar therewith.
4. OBLIGATIONS OF LICENSEE. During the term of this Agreement and so
long as no default shall have occurred hereunder, Licensee shall:
4.1 adhere to such reasonable standards regarding operations of the
Restaurant as Licensor, upon notice to Licensee, may set forth. Licensor may,
from time to time, change, revise, amend or expand such standards and
guidelines, upon notice to Licensee;
4.2 conduct its operations at the Restaurant in a first-class manner
so as to reflect credibly on Licensor and so as not to injure, damage or render
less valuable the Trademark and the goodwill connected therewith and use its
best efforts to enhance the reputation and popularity of BORDER GRILL
restaurants and to increase the BORDER GRILL clientele.
4.3 at all times maintain the interior and exterior of the
Restaurant and surrounding premises used in connection therewith in safe, good,
clean and attractive conditions, equal to the standard of first-class
restaurants and in compliance with Licensor's design requirements, and do such
lighting, painting, decorating, embellishing, repairing and restoring as may
from time to time be required to maintain such high standards and requirements.
Licensee shall comply with all of Licensor's reasonable requests in regard to
the maintenance of the physical plant of the Restaurant and improvements
thereto.
4.4 at all times serve such food and beverages prepared to the
highest quality standards customary of first-class restaurants, and cause the
food and beverages to be presented in an attractive manner.
4.5 employ a sufficient number of qualified personnel at the
Restaurant and require that all personnel perform their duties in a professional
and courteous manner.
4.6 use the Trademark in strict compliance with any and all
trademark laws;
4.7 display the Trademark only in such form and manner as shall be
specifically approved by Licensor and cause to appear on all material on or in
connection with which the Trademark is used, such legends, markings and notices
as Licensor may request in order to give appropriate notice of any trademark,
trade name or other rights therein or pertaining thereto; and
4.8 comply with all applicable laws, regulations, ordinances and
zoning codes.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Licensor's Representations and Warranties. Licensor hereby
represents and warrants that:
(a) Licensor has the full right, power and authority to enter
into and
3
<PAGE> 50
perform its obligations under this Agreement and to consummate the transactions
contemplated herein, subject to the fact that Licensor has not registered the
Trademark, with no obligation to do so. This agreement constitutes a legal,
valid and binding agreement of licensor, enforceable in accordance with its
terms (except as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable).
(b) To the best of Licensor's knowledge, Licensor is the sole
and exclusive owner of the rights granted to Licensee hereunder and controls,
free of liens or other encumbrances, all rights granted to Licensee hereunder,
subject to the fact that the Trademark has not been registered. Licensor has no
obligation to register the Trademark. Licensor has not granted any right,
option, license, or other interest in or to the Trademark for use at the
Restaurant to any other person or in violation of the geographic limitation
contained in Paragraph 1.1 hereof.
(c) There is not now pending and, to the best of Licensor's
knowledge, there is not threatened, nor is there any basis for, any litigation,
action, suit or proceeding to which Licensor is or will be a party in, before or
by any court or governmental or regulatory agency or body, having, or which
insofar as can be foreseen in the future, may have, any adverse affect on
Licensor's ability to carry out its obligations hereunder. There is no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitration outstanding against Licensor
having, or which insofar as can be foreseen in the future, may have, any adverse
affect on Licensor's ability to carry out its obligations hereunder.
(d) The execution, delivery and performance of this Agreement
will not result in any lien or encumbrance upon any asset of Licensor or in a
violation or breach of, or any conflict with, the terms or provisions of, or any
default under: (i) any statute, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign, to
which Licensor or any of his properties or assets is subject; or (ii) any
provision of any agreement, indenture, deed of trust, mortgage, loan agreement,
lease or other instrument to which Licensor is a party or by which it or any of
its assets is bound.
(e) Licensor has filed an application to register the
Trademark with the U.S. Patent Office and the application is pending. Licensor
makes no representation or warranty to Licensee that (i) such registration will
be granted, (ii) Licensor may not withdraw such registration if in its
reasonable judgment it determines to do so because a third party asserts or
threatens to assert a claim with respect to Licensor's or Licensee's use of the
Tradename, (iii) that no third party has a paramount right to the Trademark, nor
(iv) that Licensor may not determine in its reasonable judgment to terminate
this License as a result of a third party asserting or threatening to assert a
claim with respect to Licensor's or Licensee's use of the Tradename, as provided
in Section 9.2(g).
5.2 Licensee's Representations and Warranties. Licensee hereby
represents and warrants that:
4
<PAGE> 51
(a) Licensee is a limited-liability company duly organized,
validly existing and in good standing under the laws of the State of Nevada.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by the Managing Member and approved by the Non-managing Member of
Licensee. This Agreement constitutes a legal, valid and binding agreement of
Licensee, enforceable in accordance with its terms (except as the enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable). Licensee has the full power and authority to perform its
obligations under this Agreement and the transactions contemplated herein.
(c) There is not now pending and, to the best of Licensee's
knowledge, there is not threatened, nor is there any basis for, any litigation,
action, suit or proceeding to which Licensee is or will be a party in, before or
by any court or governmental or regulatory agency or body, having, or which
insofar as can be foreseen in the future, may have, any adverse affect on
Licensee's ability to carry out its obligations hereunder. There is no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitration outstanding against Licensee
having, or which insofar as can be foreseen in the future, may have, any adverse
affect on Licensee's ability to carry out its obligations hereunder.
(d) The execution, delivery and performance of this Agreement
will not result in any lien or encumbrance upon any asset of Licensee or in a
violation or breach of, or any conflict with, the terms or provisions of, or any
default under: (i) any statute, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign, to
which Licensee or any of its properties or assets is subject; or (ii) any
provision of any agreement, indenture, deed of trust, mortgage, loan agreement,
lease or other instrument to which Licensee is a party or by which it or any of
its assets is bound.
6. INDEMNITY.
6.1 Licensor. Licensor hereby agrees at all times to defend,
indemnify and hold harmless Licensee, its partners, members, officers,
directors, agents, employees, and contractors from and against any and all
claims, damages, liabilities, costs and expenses (including without limitation
reasonable attorneys' fees and costs) arising out of any breach by Licensor of
any material representation, warranty, covenant, condition or agreement made or
to be performed by Licensor under the terms of this Agreement. Any such
indemnitee shall have the right, at its sole option and at its own expense, to
retain independent counsel and to participate in the defense of any such claims.
Licensor shall have the sole right on behalf of all indemnitees to accept or
reject proposed settlement terms, so long as no indemnitee is, as a part of such
settlement, required to make any payments or perform any other act.
6.2 Licensee. Licensee hereby agrees at all times to defend,
indemnify and hold harmless Licensor, its partners, members, officers,
directors, agents, employees, and contractors from and against any and all
claims, damages, liabilities, costs and expenses (including
5
<PAGE> 52
without limitation reasonable attorneys' fees and costs) arising out of: (a) any
breach by Licensee of any material representation, warranty, covenant, condition
or agreement made or to be performed by Licensee under the terms of this
Agreement; (b) Licensee's display or use of the Trademark, in violation of this
Agreement; (c) Licensee's operation of the Restaurant; and (d) any other act or
failure to act by Licensee under or in violation of this Agreement. Any such
indemnitee shall have the right, at its sole option and at its own expense, to
retain independent counsel and to participate in the defense of any such claims.
Licensee shall have the sole right on behalf of all indemnitees to accept or
reject proposed settlement terms, so long as no indemnitee is, as a part of such
settlement, required to make any payments or perform any other act.
7. INSURANCE. Licensee agrees to obtain and maintain during the term of
this Agreement, at its own expense, commercial general liability insurance
providing protection (at a minimum, in the amount of $1,000,000 per
occurrence/$2,000,000 annual aggregate) applicable to any claims, liabilities,
damages, costs, or expenses arising out of Licensee's operation of the
Restaurant. Such insurance shall include coverage of Licensor, its partners,
shareholders, members, directors, officers, agents, employees, assignees, and
successors. Upon request of Licensor, Licensee shall cause the insurance company
issuing such policy to issue a certificate to Licensor confirming that such
policy has been issued and is in full force and effect and provides coverage of
Licensor, and also confirming that before any cancellation, modification, or
reduction in coverage of such policy, the insurance company shall give Licensor
thirty (30) days prior written notice of such proposed cancellation,
modification, or reduction.
8. CONFIDENTIALITY. Licensee acknowledges that it has gained and/or may
gain knowledge through Licensee's association with Licensor of certain
information that is confidential and proprietary to Licensor ("Proprietary
Information"). The Proprietary Information includes, without limitation: (i) the
Trademark; (ii) any and all marketing, competitive, contractual, financial or
other information available only to Licensor; and (iii) various trade secrets
that are or may in the future be owned by Licensor. Licensee agrees that it
shall not during the term of this Agreement or at any time thereafter use
(except as required by law or with the express prior written approval of
Licensor) any of the Proprietary Information either directly or indirectly. The
foregoing provision shall not be construed to prevent Licensee from making use
of or disclosing information that is in the public domain through no fault of
the Licensee; however, specific information shall not be deemed to be in the
public domain merely because it is encompassed by some general information that
is published or in the public domain or in Licensee's prior possession.
9. TERMINATION.
9.1 Causes of Termination. This Agreement shall terminate upon the
occurrence of any of the following events:
(a) The termination of this Agreement as set forth in
Paragraph 1.2 above; or
(b) Licensee becomes insolvent or is a subject of a petition
under state or federal bankruptcy or insolvency laws, or makes an assignment,
composition or disposition for the benefit of its creditors, or if a receiver,
trustee or other similar officer is appointed to take
6
<PAGE> 53
charge of Licensee's affairs, or Licensee admits in writing of its inability to
pay its debts as they become due or fails to pay its debts as they become due,
or Licensee takes any action in furtherance of the foregoing.
9.2 Licensor's Option to Terminate. Licensor shall have the right, in
its sole discretion, to terminate this Agreement upon the occurrence of any of
the following:
(a) Licensee transfers or agrees to transfer a substantial portion
of its assets or agrees to a merger, consolidation or other restructuring of
Licensee; or
(b) Licensee fails to comply with quality standards prescribed by
Licensor and fails to cure such noncompliance within fifteen (15) days of
Licensor's written demand therefor; or
(c) Licensee fails to pay the payments set forth in Paragraph 2
hereof and fails to cure such failure within fifteen (15) days of Licensor's
written demand therefor; or
(d) Licensee fails to use its best efforts to display, use, and
otherwise exploit the Trademark;
(e) After Crossover, neither Mary Sue Milliken nor Susan Feniger is
the executive chef of the Restaurant or, directly or indirectly, the principals
of the managing member of Licensee;
(f) Licensee fails to comply with any material term or provision of
this Agreement and fails to cure such default within fifteen (15) days of
Licensor's written demand therefor; or
(g) Licensor determines in its reasonable judgment to terminate this
License because a third party asserts or threatens to assert a claim with
respect to Licensor's or Licensee's use of the Tradename.
9.3 Effect of Termination.
(a) Upon any termination of this Agreement, any and all rights
granted to Licensee hereunder shall immediately cease and without further act or
instrument be assigned to and revert to Licensor, and Licensee shall immediately
terminate all further use of the Trademark and shall remove from the Restaurant
any and all signs, displays, menus and other items bearing the Trademark.
Licensee shall execute any instruments requested by Licensor which Licensor, in
his sole and absolute discretion, deems necessary, proper or appropriate to
accomplish or confirm the foregoing. Any such assignment, transfer or conveyance
shall be without consideration other than the mutual agreement contained herein.
(b) In the event of a termination pursuant to Section 9.2(g),
Licensor and Licensee agree to seek the approval of the Landlord under Section
7.5 of the Lease for the use of a new tradename and trademark owned by Licensor
or an Affiliate of Licensor. If the Landlord consents to such new trademark,
then Licensor or any such Affiliate of Licensor and
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Licensee shall enter into a license agreement substantially in the same form and
on the same terms as set forth in this License Agreement for a new license to
Licensee of the new trademark. If the new trademark is owned by an Affiliate of
Licensor, Licensor shall, so long as to do so does not breach any agreement, or
violate any law or paramount right of another party, cause such Affiliate of
Licensor to enter into such new license agreement as described in this Section
9.3(b).
10. MISCELLANEOUS.
(a) Agreement to Cooperate and Perform Necessary Acts. Each party
agrees, without further consideration, to cooperate and diligently perform any
further acts, deeds and things and to execute and deliver any documents that may
from time to time be reasonably required to consummate, evidence, confirm and/or
carry out the intent and provisions of this Agreement, all without undue delay
or expense.
(b) Attorneys' Fees and Costs or Suit. Should any party institute or
should the parties otherwise become a party to any action or proceeding in
arbitration pursuant to Subparagraph (d) hereof, or otherwise to enforce or
interpret this Agreement or any provision hereof, or for damages by reason of
any alleged breach of this Agreement or any provision hereof or for a
declaration of rights in connection herewith, or for any other relief, including
equitable relief, in connection herewith, the prevailing party in any such
action or proceeding shall be entitled to receive from the non-prevailing party
as a cost of suit, and not as damages, all costs and expenses of prosecuting or
defending the action or proceeding, whichever the case may be, including,
without limitation, reasonable actual attorneys' and other professional fees
such as accounting fees incurred by the prevailing party in connection with such
action or proceeding.
(c) California Law/Los Angeles County Venue. This Agreement and the
rights of each party under this Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
California. This Agreement shall be construed as if made, and as if its
obligations are to be performed, wholly within the State of California, without
regard to principles of conflict of laws. Should litigation between the parties
be instituted, such litigation shall, subject to Subparagraph (d) pertaining to
arbitration, be filed in and heard solely before the state courts of California,
with venue exclusively in Los Angeles County. Each party waives such party's
right to assert the doctrine of "forum non conveniens" as it applies to venue
in said County, or to otherwise object to venue within said County.
(d) Mandatory and Binding Arbitration.
(i) The parties hereby agree that they will submit any and all
controversies, claims and matters of difference to binding arbitration in Los
Angeles County, California, according to the rules and practices of
JAMS-Endispute or other mutually acceptable private arbitration service, except
to the extent that such rules and practices are inconsistent with the provisions
of this Subparagraph (d). This submission and agreement to arbitrate shall be
specifically enforceable. Without limiting the generality of the foregoing, the
following shall be considered controversies for this purpose: (A) all questions
relating to the breach of any obligation, warranty, right or condition
hereunder; (B) the failure of any party to deny or reject a claim or demand of
any other party; and (C) any question as to whether the right to arbitrate a
certain dispute exists. Arbitration may proceed in the absence of any party if
reasonable written
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notice of the proceedings has been given to such party. The parties agree to
abide by all awards rendered in such proceedings, which shall be final and
binding on all parties. All awards may be filed with the clerk of the district
court in the county in which the prevailing party has his or its principal
office and/or in the county in which the residence or principal office of a
non-prevailing party is located, as a basis of judgment, and of the issuance of
execution for its collection and, at the election of the party making such
filing, with the clerk of one or more other courts, state or federal, having
jurisdiction over the party against whom such an award is rendered or such
party's property.
(ii) The parties shall mutually agree upon one (1) arbitrator
who shall be selected pursuant to the rules of the American Arbitration
Association.
(iii) The parties to any dispute hereunder shall have the
right to engage in any and all discovery pertaining to civil litigation as they
would be entitled to pursuant to the California Code of Civil Procedure
including, without limitation, all pre-hearing discovery as would be permitted
in civil litigation. Said discovery shall proceed pursuant to the provisions of
the California Code of Civil Procedure governing discovery in civil litigation
and all conditions and objections allowed under the rules of said California
Code of Civil Procedure shall be allowed with respect to such discovery. The
arbitrator shall rule upon motions to compel or limit discovery and shall have
the authority to impose sanctions, including attorneys' fees and costs, to the
same extent as a court of law or equity should the arbitrator determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification.
(iv) The arbitrator shall apply California law, or Federal law
if applicable, as though the arbitrator was bound by applicable statutes and
precedents in case law, and shall endeavor to decide the controversy as though
the arbitrator was a judge in a California court of law. The arbitrator shall
have the power to issue any award, judgment, decree or order of relief that a
court of law or equity could issue under California law including but not
limited to, money damages, specific performance, or injunctive relief; and for
such purposes it is hereby expressly acknowledged and agreed that damages at law
will be an inadequate remedy for a breach or threatened breach of any provision
of this Agreement, it being the intention of this sentence to make clear the
agreement of the parties hereto that the respective rights and obligations of
the parties hereto hereunder shall be enforceable in any arbitration proceedings
in accordance with principles of equity as well as of law. The arbitrator shall
prepare a written decision that will be supported by written findings of fact
and conclusions which adequately set forth the basis of the arbitrator's
decision and which cite the statutes and precedents applied and relied upon in
reaching said decision. The award, judgment, decree or order, and the findings
of the arbitrator, shall be final, conclusive and binding upon the parties
hereto, and the judgment upon the award and enforcement of any other judgment,
decree or order of relief granted by the arbitrator may be entered or obtained
in any court of competent jurisdiction upon the application of any party to the
dispute. This agreement to arbitrate shall be self-executing without the
necessity of filing any action in any court and shall be specifically
enforceable under the prevailing arbitration law.
(v) The parties acknowledge that, in the event of any dispute,
the parties are required to submit the dispute to arbitration under the
provisions of this Subparagraph
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(d), on award rendered by an arbitrator in accordance with these provisions is
absolutely binding on both parties, neither party shall be entitled to petition
any court for an order overturning any such award, and neither party is entitled
to submit any dispute to a judicial or administrative proceeding in violation of
the provisions herein.
(e) Entire Agreement/No Collateral Representations. The
parties expressly acknowledge and agree that this Agreement: (i) is the final,
complete and exclusive statement of the parties' agreement with respect to the
subject matter hereof, (ii) supersedes any prior or contemporaneous promises,
assurances, guarantees, representations, understandings, conduct, proposals,
conditions, commitments, acts, course of dealing, warranties, interpretations or
terms of any kind, oral or written (hereinafter collectively called the "Prior
Agreements"), and that any such Prior Agreements are of no force or effect
except as expressly set forth herein, and (iii) may not be varied, supplemented
or contradicted by evidence of such Prior Agreements, parol or extrinsic
evidence of any nature, or by evidence of subsequent oral agreements. Any
agreement hereafter made shall be ineffective to modify, supplement or discharge
the terms of this Agreement, in whole or in part, unless such agreement is in
writing and signed by the party against whom enforcement of the modification,
supplement or is sought.
(f) Waiver. No breach of any agreement or provision herein
contained, or of any obligation under this Agreement, may be waived, nor shall
any extension of time for performance of any obligations or acts be deemed an
extension of time for performance of any other obligations or acts contained
herein, except by written instrument signed by the party to be charged or by
such party's agent duly authorized in writing or as otherwise expressly
authorized herein. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or a waiver or relinquishment of any other agreement or provision or
right or power herein contained.
(g) Remedies Cumulative. The remedies of each party under this
Agreement are cumulative and shall not exclude any other remedies to which such
party may be lawfully entitled.
(h) Severability. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be determined to be invalid, illegal or unenforceable, then the performance of
the offending term or provision (but only to the extent its application is
invalid, illegal or unenforceable) shall be excused as if it had never been
incorporated into this Agreement, and the remaining part of this Agreement
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby and shall continue in full force
and effect to the fullest extent provided by law.
(i) Effect Upon Successors and Assigns. Any attempt by
Licensee to sell, assign, transfer, or otherwise convey Licensee's rights or
duties under this Agreement, in whole or in part, without the prior written
consent of Licensor, as required by this Agreement, shall be null and void and
shall vest no rights or interests in the purported assignee. Subject to the
foregoing, all of the representations, warranties, covenants, conditions and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of each party and such party's respective heirs, executors,
administrators, legal representatives, successors and/or assigns,
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whichever the case may be.
(j) No Third Party Beneficiary. Notwithstanding anything else
herein to the contrary, the parties specifically disavow any desire or intention
to create a "third party" beneficiary contract, and specifically declare that no
person or entity, save and except for the parties or their permitted successors,
shall have any rights hereunder nor any right of enforcement hereof.
(k) Construction. The headings used in this Agreement are for
convenience purposes only, and shall not be used in construing or interpreting
the scope or intent of this Agreement or any provision hereof. References to
this Agreement shall include all amendments or renewals thereof. All
cross-references in this Agreement, unless specifically directed to another
agreement or document, shall be construed only to refer to provisions within
this Agreement, and shall not be construed to be referenced to the overall
transaction or to any other agreement or document. As used in this Agreement,
each gender shall be deemed to include each other gender, including neutral
genders or genders appropriate for entities, if applicable, and the singular
shall be deemed to include the plural, and vice versa, as the context requires.
(l) Notices. All notices, demands, requests, consents,
approvals or other communications (for the purposes of this Paragraph
hereinafter collectively called "Notices"), required or permitted to be given
hereunder, or which are given with respect to this Agreement, shall be in
writing, and shall be given by personal delivery, facsimile or by a nationally
recognized overnight delivery service (which forms of Notice shall be deemed to
have been given upon delivery), or by mailing in the United States mail by
registered or certified mail, return receipt requested, postage prepaid (which
forms of Notice shall be deemed to have been given upon the third (3rd) business
day following the date mailed). Notices shall be addressed to the appropriate
party(s) as set forth on the signature page of this Agreement, or to such other
address as the receiving party shall have specified most recently by like
Notice, with a copy to the other parties hereto. Any Notice given to the estate
of a party shall be sufficient if addressed to the party as provided in this
Paragraph. A copy of any Notice given by Licensor or Licensee under this
Agreement shall be provided to the Non-Managing Member, c/o American Vantage
Company, c/o Jay Brown, Esq., Singer, Brown & Barringer, 520 South Fourth
Street, Second Floor, Las Vegas, Nevada 89101.
(Signatures on following page.)
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IN WITNESS WHEREOF, this Agreement is effective as of the date written above.
LICENSOR
Dancing Pigs, Inc., a California corporation
By _________________________________________
Susan Feniger, President
Cano, Inc., a California corporation
By _________________________________________
Mary Sue Milliken, President
LICENSEE
Border Grill Las Vegas, LLC,
a Nevada limited-liability company
By TT&T, LLC,
Its Manager
By _________________________________
Susan Feniger, Member Manager
By _________________________________
Mary Sue Milliken, Member Manager
By _________________________________
R. Kevin Finch, Member Manager
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<PAGE> 59
EXHIBIT F
MANAGEMENT AGREEMENT
<PAGE> 60
BORDER GRILL LAS VEGAS
MANAGEMENT AGREEMENT
This Agreement is entered into February , 1999, effective as of November 12,
1998, by and between BORDER GRILL LAS VEGAS, LLC, a Nevada limited-liability
company (the "Company") and MUNDO MANAGEMENT GROUP, LLC, a California limited
liability company ("Manager").
RECITALS
A. The Company has been formed to acquire a leasehold interest in
restaurant premises to be located at 3950 Las Vegas Boulevard South, in the
Mandalay Bay Hotel and Casino project, Las Vegas, Nevada, and further to
develop, construct, own, and operate in such premises a full service restaurant
serving Mexican cuisine under the concept and name "Border Grill", developed by
Susan Feniger and Mary Sue Milliken, or such other name as may be chosen by the
Company (the "Restaurant"). A copy of the operating agreement of the Company
(the "Operating Agreement") has been delivered to Manager and all terms used
herein shall, unless otherwise indicated, be defined as defined in the Operating
Agreement. A copy of the Lease also has been delivered to Manager.
B. The Company desires to retain Manager because of the expertise of
Manager's principals and its affiliates in planning, developing, managing and
operating restaurants and to obtain the services of Susan Feniger and Mary Sue
Milliken as the executive chefs of the Restaurant, at least until Crossover.
C. Manager desires to provide such services to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. Term. Subject to Section 5 hereof, the Company hereby engages
Manager and Manager agrees to serve the Company for a term of five (5) years
(the "Term") commencing as of the date hereof. If Crossover has not been
achieved at the end of the Term, the Term shall be extended in one (1) year
increments on the same terms until Crossover is reached. Manager agrees to
provide the services of Susan Feniger and/or Mary Sue Milliken, as long as they
are alive and able, as executive chefs of the Restaurant at least until
Crossover.
2. Scope. Manager shall prepare budgets which shall be submitted
to the Company (and the Company shall provide them to the Members) for the
services described below. The pre-opening budget has been approved by the
Company and is attached as Exhibit B to the Operating Agreement. A budget for
the initial operation of the Restaurant shall be prepared and submitted fifteen
(15) days prior to opening the Restaurant for business. Annual and semi-annual
budgets shall be prepared and delivered fifteen (15) days prior to January 1 and
July 1, respectively, of each year of operation of
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the Restaurant. Each budget shall reflect in reasonable detail the expenses
anticipated to be incurred by and reimbursed to the Manager or its Affiliates as
described in Sections 3 and 4 below,
A. Prior to Opening, on behalf of and at the expense of the
Company, Manager shall:
(i) obtain all permits, licenses, and other authority
necessary to construct the tenant improvements in and occupy and
operate the Restaurant;
(ii) secure final plans and drawings and a graphics program
for realization of the Restaurant concept;
(iii) purchase and install all furniture, fixtures and
equipment needed to operate the Restaurant;
(iv) plan and promote the opening of the Restaurant;
(v) interview, hire and train all kitchen, dining room, office
and maintenance personnel required, including, without limitation,
chefs, sous-chefs, general managers (one of whom may but need not be
Kevin Finch), assistant managers and dining room/floor managers,
waiters, bussers, receptionists, hosts, bookkeepers, and assistants, as
Manager reasonably determines are necessary or desirable for full
operation of the Restaurant; and
(vi) create the menu and beverage/wine list.
B. After Opening, on behalf of and at the expense of the Company,
Manager shall:
(i) supervise all management, kitchen and food preparation,
dining room, maintenance, and office personnel at the Restaurant;
(ii) monitor, analyze and modify the menu and beverage/wine
list for the Restaurant;
(iii) purchase and stock food and dry goods inventories for
the Restaurant;
(iv) purchase and stock wine and beverage inventories for the
Restaurant;
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(v) manage all of the Restaurant's accounts payable and
receivable, cash, and payroll and tax functions;
(vi) prepare and transmit all financial reports, tax and lease
payments and other documents and materials required by and in
accordance with the applicable terms and conditions of the Lease and
the Operating Agreement, by the operation of the Restaurant and
applicable law, which financial reports to the Company shall reflect in
reasonable detail the expenses incurred by and reimbursed to the
Manager and its Affiliates as described in Sections 3 and 4 below; and
(vii) maintain a public relations effort for the Restaurant.
C. Insurance. Obtain in the Company's name, with its Members and
Manager insured as additional insureds (or in the Manager's name with
the Company and its Members as additional insureds), all liability,
property and other insurance coverage and in amounts determined by
Manager to be reasonable and appropriate to insure against losses
arising from the Company's business and the operation of the
Restaurant. In addition, until Crossover has occurred, "key person"
insurance coverage shall be maintained for the benefit of the Company
at the expense of the Company, on Mary Sue Milliken and Susan Feniger,
if insurable, in an amount equivalent to the Unrecovered Capital from
time to time.
3. Personnel. With the exception of Mary Sue Milliken and Susan
Feniger, Members of Manager who shall not be employees of the Restaurant or the
Company, all personnel, including but not limited to R. Kevin Finch, a member of
Manager, outside consultants, lawyers, architects, and contractors, general
managers, assistant managers, dining room/floor managers, chefs and waiters,
bussers, receptionists, hosts, bookkeepers and assistants, shall be employed on
behalf of the Company, either by Manager on behalf of the Company or as direct
employees of the Company itself, and the costs thereof shall be considered
Restaurant Expenses (as defined below). If Manager determines that it is in the
best interest of the Company, Manager may contract with a third party, including
an Affiliate, for the performance of the "back-office" financial management,
accounting, personnel and public relations services and to provide equipment
required by the Restaurant. The cost of such services (including accounting
set-up fees) shall be fair and reasonable in light of the services provided and
the equipment and personnel costs saved for the Restaurant, and shall not exceed
the cost for comparable services or for the use of comparable equipment which
would be customarily charged in an arm's-length transaction. Attached as Exhibit
A is a description of the procedures to be used by Manager in allocating and
reimbursing expenses incurred by Manager or an Affiliate, including the expenses
described in Sections 4C and D below. Any change in such allocation procedures
must be approved by the Company and its Members.
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4. Compensation. The following compensation shall be paid by the
Company to Manager. Attached as Exhibit A is a description of the procedures to
be used by Manager in allocating and reimbursing expenses incurred by Manager or
an Affiliate, including the expenses described in Sections 4C and D below. Any
change in such allocation procedures must be approved by the Company and its
Members.
A. Opening Fee. The Company shall pay to Manager a fee of $60,000,
in consideration for Manager's or its Affiliate's services in connection with
opening the Restaurant, including planning the Restaurant and the kitchen,
supervising the construction, fixturization and decoration of the Restaurant,
and other activities relating to the establishment of the Restaurant, including
the services described in Section 2A above (the "Opening Fee"). The Opening Fee
shall be in addition to any reimbursement due Manager for out-of-pocket expenses
for consultants, professionals, etc., incurred in connection with these or other
services.
B. Management Fee. Commencing on the date the Restaurant opens for
business, the Company shall pay Manager for the services set forth in Section 2B
above, an annual fee (the "Management Fee") equal to five percent (5%) of the
"Gross Revenues" from operations of the Company during each such year. The
Management Fee shall be paid on a monthly basis in arrears. For purposes of
calculating the Management Fee, "Gross Revenues" shall mean the actual receipts,
including room charges, of the Company, less all refunds or credits for returns
or rejection of food or services; provided, however, after Crossover, "Gross
Revenues" shall include the amount of the full retail price of all complimentary
or discounted meals or services, less all discounts on sales to employees and
complimentary meals served to employees or management personnel. Upon renewal
and after the fifth, tenth, fifteenth, etc., anniversary of this Agreement, if
Crossover has been achieved (and if not, at such time as Crossover is achieved),
during the term of this Agreement, the Management Fee may be increased as
provided in Section 6.
C. Restaurant Expenses: Fringe Benefits. The rent, Lease expenses,
taxes, payroll, food and liquor expenses, expenses for utilities, contract
payments, legal and accounting expenses and other charges attributable to the
operation of the Restaurant, together with all charges, expenses and costs of
operating the Company as described in the Operating Agreement shall be
"Restaurant Expenses" and shall be payable by the Company separate and apart
from the Opening Fee, and the Management Fee provided for in this Section. In
addition, subject to the provisions in Section 4 above, Manager shall be
reimbursed by the Company for fringe benefits (including fringe benefits for
Mary Sue Milliken and Susan Feniger), which still also constitute "Restaurant
Expenses" as such benefits are specifically described in Exhibit A.
D. Expenses. Subject to the provisions in Section 4 above, the
Company shall pay or reimburse Manager for all the reasonable and necessary
out-of-pocket business expenses incurred on behalf of the Restaurant (both
before and after opening) and for reasonable restaurant and travel expenses
related to the promotion of the
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Restaurant, as specifically described in Exhibit A, upon presentation of expense
statements or vouchers and such other supporting information as the Company may
from time to time reasonably request.
E. Company Distributions. No distributions by the Company to the
Managing Member of the Company in its capacity as a member of the Company shall
in any way reduce the compensation or reimbursements to which Manager is
entitled under this Agreement in its capacity as Manager of the Restaurant.
5. Termination.
A. Without Cause. The Company may not terminate this Agreement
without cause. Manager may not terminate this Agreement prior to Crossover.
B. With Cause.
(i) Reason. This Agreement may be terminated by the Company at
any time after Crossover for "Cause", which for purposes of this Agreement shall
mean only the following: (a) Manager's willful breach of or habitual neglect of,
or willful misconduct in the performance of Manager's material duties and
obligations as set forth in this Agreement, but only if such willful breach,
habitual neglect or willful misconduct continues, uncured, for a period of ten
(10) business days after receipt of notice thereof from the Company to Manager
or, (b) Manager's defrauding of the Company.
(ii) Effective Date. If Manager is terminated for Cause as
set forth above, such termination shall be effective thirty (30) days after
written notice thereof from the Company pursuant to Section 11 hereof.
(iii) Arbitration. If Manager is terminated by the Company for
Cause upon the consent of the Non-managing Member of the Company, then Manager
shall have the right, but not the obligation, to elect to have the propriety of
such termination determined by binding arbitration by delivering written notice
of such election to the Company in accordance with Section 11 hereof. Upon
receipt of notice of such election, the Company and Manager shall appoint an
arbitrator that is mutually acceptable. If the Company and Manager are unable to
agree upon an arbitrator within thirty (30) days, either party may request such
appointment by the American Arbitration Association or JAMS-Endispute. The
hearing of any such controversy or claim by the arbitrator shall be held within
a period of thirty (30) days (or such longer period as may be reasonable in
light of the circumstances) after the appointment of the arbitrator. If an
arbitrator shall die, become disqualified or incapacitated, or shall fail or
refuse to act, before such matter shall have been determined, then, in place of
such arbitrator, an arbitrator shall promptly be appointed in the same manner as
set forth herein. All arbitrations shall be determined in the Los Angeles or Las
Vegas area, at the option of the Company as determined by its Managing Member,
and shall be governed (except for the method of the selection of the
arbitrators) in accordance with the Rules of the American
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Arbitration Association or JAMS-Endispute (or any successor thereto) and the
judgment or the award rendered therein may be entered in any court having
jurisdiction. If the arbitrator determines that Cause was not present, the
Company shall bear the entire cost of the arbitration and the arbitration award
shall provide for the immediate reinstatement of Manager and payment to Manager
of all amounts due to Manager under this Agreement up to the date of Manager's
reinstatement, plus interest thereon from the date due until the date paid, at
the rate of 10%.
(iv) In the event Manager is terminated for Cause or Manager
terminates this Agreement prior to Crossover in breach of its obligation not to
terminate prior to Crossover, neither Manager nor any Affiliate of Manager nor
Susan Feniger or Mary Sue Milliken nor an Affiliate of either of theirs shall
conduct any business in Mandalay Bay Hotel and Casino for a period of one (1)
year or until Crossover is achieved, whichever occurs first.
6. Renewal. Upon expiration of the Term, this Agreement shall be
automatically renewed for successive one-year terms, on the same terms and
conditions, except that after Crossover, either party may terminate the
Agreement upon four (4) months prior notice. On the fifth, tenth, fifteenth,
etc., anniversaries of this Agreement if Crossover has been achieved (and if
not, at such time as Crossover is achieved), during the term of this Agreement,
the Management Fee may be increased to reflect the success of the Restaurant and
the value of Manager's services, reputation and contribution to the Restaurant,
to a fee which cannot exceed the lesser of (a) the then-customary restaurant
management fee in the restaurant industry as determined by an independent
restaurant expert ("Expert"), or (b) an increase by an additional one percent
(1%) of Gross Revenues (i.e., the first increase could not be more than an
increase from 5% to 6% of Gross Revenues) or as approved by the consent of the
Non-managing Member of the Company. The Expert (a) must be acceptable to the
Company with the approval of the Non-managing Member, (b) have experience in
appraising management fees paid for restaurants located in casinos of similar
status as Mandalay Bay, and (c) have no prior course of dealing with either the
Manager or the Non-managing Member or their Affiliates. The Company will bear
all costs and expenses of any determination by an Expert under this Section.
7. Assignment; Transfer. Manager shall not assign, delegate or
otherwise transfer in whole or in part its rights or obligations under this
Agreement, other than to an Affiliate controlled by Mary Sue Milliken or Susan
Feniger or both of them, prior to Crossover. After occurrence of Crossover,
Manager shall be permitted to assign or otherwise transfer its rights hereunder
to a qualified manager or management company experienced in the management of
similar quality restaurant facilities and qualified to direct and manage the
Restaurant.
8. Binding Agreement. This Agreement shall extend to and be binding
upon Manager and the Company and their respective successors and assigns, except
as provided herein. The Company and Manager shall cooperate in good faith with
each other to maximize the success, gross sales and profitability of the
Restaurant.
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9. Indemnification. The Company shall defend, indemnify and hold
Manager harmless from and against any and all losses, liabilities, damages,
expenses (including reasonable attorney's fees and costs), actions, causes of
actions or proceedings arising directly or indirectly from Manager's performance
of this Agreement, except to the extent any loss, liability, damage and/or
expense arises from the gross negligence or willful misconduct of Manager.
Manager may retain its own counsel to defend it in such actions at the sole cost
and expense of the Company, provided that the Manager shall reimburse the
Company for such defense cost and expense, to the extent the Manager is finally
determined in such action(s) to have been grossly negligent or found to have
committed willful misconduct. The Company shall add Manager and the Company's
Members as an additional insured on all property, liability and risk policies of
insurance which the Company obtains in connection with its operation or
operation of the Restaurant. This indemnification shall be in addition to any
right of exculpation or indemnification to which Manager or its affiliate may be
entitled under the Operating Agreement in its capacity as Managing Member of the
Company and shall survive the expiration or termination of the Term of this
Agreement.
10. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements, in addition to any other relief to which he may be entitled.
11. Notices. Any notice required to be given hereunder shall be deemed
sufficiently given when personally delivered or sent by registered or certified
mail:
(a) To the Company:
Border Grill Las Vegas, LLC
1445 4th Street
Santa Monica, CA 90401
With a copy to its Non-managing Member:
c/o American Vantage Companies, Inc.
c/o Jay H. Brown, Esq.
Singer, Brown & Barringer
520 South Fourth Street, Second Floor
Las Vegas, NV 89101
(b) To Manager:
Mundo Management Group, LLC
1445 4th Street
Santa Monica, California 90401
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<PAGE> 67
or at such other address as either party may designate in writing to the other.
12. Amendments; Interpretation. This Agreement contains the entire
agreement and, except as expressly referred to herein, the parties hereto have
made no agreements, representations or warranties relating to the subject matter
of this Agreement. No modification of this Agreement shall be valid unless made
in writing and signed by the parties hereto, and any material Amendment,
modification or revision shall not be effective, unless approved by the
Non-managing Member. The waiver or breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition. This Agreement shall be construed in
accordance with and governed by the laws of the State of California.
13. Definitions. All terms not otherwise defined herein shall have the
same meaning as set forth in the Operating Agreement.
(Signatures on following page.)
-8-
<PAGE> 68
IN WITNESS WHEREOF, the Company and Manager have each caused this
Agreement to be executed by its duly authorized representative, as of the date
written above.
"Manager" "Company"
Mundo Management Group, LLC, Border Grill Las Vegas, LLC,
a California limited liability company a Nevada limited-liability company
By TT&T, LLC,
a Nevada limited-liability company,
By: __________________________________ Its Managing Member
Mary Sue Milliken, Member
By: _________________________________
By: __________________________________ Mary Sue Milliken, Member Manager
Susan Feniger, Member
By: _________________________________
By: __________________________________ Susan Feniger, Member Manager
R. Kevin Finch, Member
By: _________________________________
R. Kevin Finch, Member Manager
-9-
<PAGE> 69
EXHIBIT A
DESCRIPTION OF REIMBURSEMENTS TO MANAGER AND AFFILIATES
Manager will be the restaurant manager and as such, certain expenses described
in this Exhibit A and incurred in managing the Restaurant will be passed through
to the Restaurant, other than salaries for Mary Sue Milliken and Susan Feniger
(the "Owners"). Manager will also perform "entity" management functions for the
Manager of the Company, such as overseeing and assisting in preparation of tax
returns, investor communications, financial statements and other obligations of
the Company as provided in the Operating Agreement.
Expenses that are incurred solely for the benefit of the Restaurant will be paid
by the Restaurant and all direct employees of the Restaurant will be paid by the
Restaurant. Manager will maintain a principal business office, initially in
Santa Monica, California, which will include certain principal business office
staff, expenses, etc. Reasonable business expenses and salaries (other than for
Mary Sue Milliken and Susan Feniger) may be paid by Manager but then reimbursed
to Manager by the Restaurant to the extent described below. These reimbursements
are in addition to any management fee paid to Manager by the Restaurant.
Manager shall bear its own entity expenses, such as tax return preparation,
corporate or entity maintenance expenses, legal and accounting fees solely for
the benefit of Manager, and any Manager indebtedness.
The following categories of expenses would be allocated as follows.
1. Employee Salaries (including any bonuses) for Director of
Operations, Corporate Chef, Accounting personnel, Marketing
Manager, Catering Manager, MIS, administrative assistant(s)
for the Owners, and after Crossover, any additional principal
business office staff, i.e., risk manager, employee relations,
supporting clerical staff, etc., will be split equally among
the restaurants, unless an unusual amount of time is spent on
one restaurant over another; except Director of Operations and
Accounting Manager salaries will be split based on actual time
spent on each restaurant. The Director of Operations and
Accounting Manager will complete a memo periodically and
submit them to an Owner for approval of the allocation of time
and salaries. When salaries for other employees are allocated
unequally, a written memo will be approved by an Owner or the
Director of Operations or Accounting Manager, setting forth
the reason for such unequal allocation.
2. Employee benefits and burdens and all employee-related
expenses for the employees described in the foregoing
paragraph shall be allocated in the same manner as salaries.
Such benefits and burdens shall be limited to the following:
a. Health insurance.
b. Long-term disability insurance for executive-level
employees.
-10-
<PAGE> 70
c. Reasonable and actual business-related expenses.
d. Life insurance for executive-level employees. e.
Payroll tax costs (taxes, social security, SDI,
unemployment insurance, etc.).
f. Worker's compensation insurance.
g. Employer pension plan contribution, if any.
3. Promotional and Charity Events - to be determined on a
case-by-case basis. (For example: donation of food for
promotional event will be split evenly among all restaurants
if it will benefit all restaurants.)
4. Advertising - to be determined by Director of Operations or
Accounting Manager invoice by invoice, as to which restaurants
will directly benefit.
5. Direct Mail Marketing, Website Expense, Data Processing Fees,
Dues and Publications, Media Consultant-split evenly by all
restaurants.
6. Overhead expenses (e.g., office rent, telephone, utilities,
etc.) of principal business office staff and Owners - split
evenly by all restaurants, unless directly attributable to one
or more, but less than all, restaurants. Manager estimates
that not more than $900/month would be allocated to the
Restaurant in the first year.
7. Travel expenses of principal business office staff and Owners
will be allocated to the restaurant(s) receiving the benefit.
8. Research and development costs and R&D outside meals will be
allocated based on location being researched. Research for new
restaurant locations will be at the cost of Manager or the
Owners, and not of the Restaurant.
9. Owners' benefits and burdens listed under item 2 above, will
be allocated among all restaurants equally. In addition,
Owners will have an expense allowance to cover dining,
entertainment, research and development, promotion, etc.,
which need not be directly related to any restaurant. The
amount of such expense allocated to the Restaurant shall not
exceed $15,000 in the first year, which maximum may increase
by CPI annually. And, the Owners and principal business office
staff may have a cellular phone allowance. The amount of such
allowance which is allocated to the Restaurant shall not
exceed $3,500 in the first year, with that maximum increasing
by CPI annually.
10. Any blanket property or liability insurance shall be allocated
equally among the restaurants benefited, unless the
independent insurance broker advises that another method is
more equitable, in which case the more equitable method shall
be used.
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<PAGE> 71
EXHIBIT G
LEASE
<PAGE> 1
Exhibit 10.25
LEASE
FOR
RESTAURANT SPACE
By and Between
MANDALAY CORP.,
AS LANDLORD
And
BORDER GRILL LAS VEGAS, LLC, A NEVADA LIMITED LIABILITY COMPANY
AS TENANT
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1 .................................................................. 1
DEFINITIONS ............................................................ 1
1.1 Affiliate ......................................................... 1
1.2 Commencement Date ................................................. 1
1.3 Floor Area ........................................................ 1
1.4 Gross Sales ....................................................... 1
1.5 Lease Year ........................................................ 2
1.6 Permitted Closure Period .......................................... 3
1.7 Person ............................................................ 3
1.8 Project ........................................................... 3
1.9 Rent Commencement Date ............................................ 3
1.10 Rules and Regulations ............................................. 3
1.11 Tenant Improvements ............................................... 3
1.12 TI Costs .......................................................... 3
1.13 TI Cost Statement ................................................. 3
ARTICLE 2 .................................................................. 4
LEASE OF PREMISES AND CONSTRUCTION ..................................... 4
2.1 Lease .............................................................. 4
2.2 Construction of Premises ........................................... 4
2.3 Relocation ......................................................... 4
2.4 Remodeling ......................................................... 5
2.5 Amortization of Tenant Improvements ................................ 6
ARTICLE 3 .................................................................. 7
TERM ................................................................... 7
3.1 Duration ........................................................... 7
3.2 Options to Extend Term ............................................. 7
3.3 Landlord's Right to Terminate ...................................... 7
ARTICLE 4 .................................................................. 8
MINIMUM RENT ........................................................... 8
4.1 Minimum Rent ....................................................... 8
ARTICLE 5 .................................................................. 9
PERCENTAGE RENT ........................................................ 9
5.1 Percentage Rent .................................................... 9
5.2 Adjustment to Annual Percentage Rental Rate ........................ 9
5.3 Annual Adjustment .................................................. 9
(i)
<PAGE> 3
5.4 Tenant Reports ..................................................... 9
5.5 Tenant Records ..................................................... 10
5.6 Audit .............................................................. 10
ARTICLE 6 .................................................................. 11
ADDITIONAL RENT ........................................................ 11
6.1 Additional Rent .................................................... 11
6.2 Payments by Landlord ............................................... 11
ARTICLE 7 .................................................................. 11
USE AND OPERATION ...................................................... 11
7.1 Designated Use .................................................... 11
7.2 Insurance Requirements: Governmental Regulations .................. 11
7.3 Restrictions on Use ............................................... 12
7.4 Business Operations ............................................... 12
7.5 Tradename ......................................................... 13
7.6 Employees ......................................................... 14
7.7 Security .......................................................... 15
7.8 Regulatory Authorities ............................................ 15
7.9 Restrictive Covenant .............................................. 15
7.10 Landlord Comps .................................................... 16
7.11 Room Charges ...................................................... 17
7.12 Beverage Providers ................................................ 17
7.13 Complimentary Rooms ............................................... 17
ARTICLE 8 .................................................................. 17
INSURANCE .............................................................. 17
8.1 Tenant's Insurance ................................................. 17
8.2 Landlord's Insurance ............................................... 19
8.3 Waiver of Subrogation .............................................. 19
ARTICLE 9 .................................................................. 19
TAXES .................................................................. 19
9.1 Additional Taxes ................................................... 19
9.2 Sales Tax .......................................................... 20
9.3 CET ................................................................ 20
ARTICLE 10 ................................................................. 20
SERVICES ............................................................... 20
10.1 Services Provided ................................................. 20
10.2 Service Charges ................................................... 21
10.3 Service Interruption .............................................. 21
(ii)
<PAGE> 4
ARTICLE 11 ................................................................. 22
REPAIRS AND MAINTENANCE ................................................ 22
11.1 Repairs and Maintenance by Landlord ............................... 22
11.2 Repairs and Maintenance by Tenant ................................. 22
ARTICLE 12 ................................................................. 23
ALTERATIONS AND IMPROVEMENTS ........................................... 23
12.1 Alterations and Improvements ...................................... 23
12.2 Trade Fixtures .................................................... 23
12.3 Liens ............................................................. 24
ARTICLE 13 ................................................................. 24
ADVERTISING ............................................................ 24
13.1 Advertising ....................................................... 24
ARTICLE 14 ................................................................. 25
RULES AND REGULATIONS .................................................. 25
14.1 Rules and Regulations ............................................. 25
ARTICLE 15 ................................................................. 25
ASSIGNMENT AND SUBLETTING .............................................. 25
15.1 Assignment and Subletting ......................................... 25
15.2 Certain Excluded Transactions ..................................... 26
15.3 Transfers Not Requiring the Consent of Lessor ..................... 26
15.4 Landlord's Option as to Subject Space ............................. 26
15.5 Concessionaires ................................................... 27
15.6 Assignment in Bankruptcy .......................................... 27
ARTICLE 16 ................................................................. 27
INDEMNITY .............................................................. 27
16.1 Indemnification ................................................... 27
ARTICLE 17 ................................................................. 28
EMINENT DOMAIN ......................................................... 28
17.1 Entire or Substantial Taking ...................................... 28
17.2 Partial Taking .................................................... 28
17.3 Election to Terminate ............................................. 28
17.4 Disposition of Proceeds ........................................... 28
ARTICLE 18 ................................................................. 29
DAMAGE OR DESTRUCTION .................................................. 29
18.1 Damage or Destruction: Landlord to Rebuild ........................ 29
18.2 Option to Terminate ............................................... 29
(iii)
<PAGE> 5
18.3 Portions to be Rebuilt by Landlord and Tenant ..................... 29
18.4 Non-Liability ..................................................... 30
18.5 Operations During Reconstruction Period ........................... 30
ARTICLE 19 ................................................................. 30
ENTRY BY LANDLORD ...................................................... 30
19.1 Access to Premises ................................................ 30
19.2 Leasing Activities ................................................ 31
ARTICLE 20 ................................................................. 31
ABANDONMENT ............................................................ 31
20.1 Abandonment ....................................................... 31
ARTICLE 21 ................................................................. 31
EVENTS OF DEFAULT BY TENANT ............................................ 31
21.1 Event of Default .................................................. 31
ARTICLE 22 ................................................................. 32
REMEDIES OF LANDLORD ................................................... 32
22.1 Remedies .......................................................... 32
22.2 Late Charge ....................................................... 34
ARTICLE 23 ................................................................. 34
ESTOPPEL CERTIFICATES AND SUBORDINATION ................................ 34
23.1 Estoppel Certificates ............................................. 34
23.2 Subordination ..................................................... 35
23.3 Priority Option ................................................... 35
23.4 Attornment ........................................................ 35
ARTICLE 24 ................................................................. 35
SALE OF PREMISES ....................................................... 35
24.1 Sale of Premises by Landlord ...................................... 35
ARTICLE 25 ................................................................. 36
HOLDING OVER ........................................................... 36
25.1 Holding Over ...................................................... 36
ARTICLE 26 ................................................................. 36
SURRENDER OF PREMISES .................................................. 36
26.1 Surrender ......................................................... 36
26.2 Merger Upon Surrender ............................................. 36
(iv)
<PAGE> 6
ARTICLE 27 ................................................................. 36
GENERAL PROVISIONS ..................................................... 36
27.1 Waivers ........................................................... 36
27.2 No Accord and Satisfaction ........................................ 37
27.3 Notices ........................................................... 37
27.4 Relationship of the Parties ....................................... 37
27.5 Attorneys' Fees ................................................... 37
27.6 Binding Effect .................................................... 37
27.7 Interest on Past Due Obligations .................................. 38
27.8 Severability ...................................................... 38
27.9 Entire Agreement; Amendment ....................................... 38
27.10 Captions ......................................................... 38
27.11 Construction ..................................................... 38
27.12 Time of Essence .................................................. 38
27.13 Execution of Additional Documents ................................ 38
27.14 Time Periods ..................................................... 38
27.15 Recordation ...................................................... 39
27.16 Brokers .......................................................... 39
27.17 Quiet Enjoyment .................................................. 39
27.18 Force Majeure .................................................... 39
(v)
<PAGE> 7
EXHIBITS
A - Description of Project
B - Site Plan for Premises
C - Work Letter Agreement
D - Sample Menu
D-1 - Prohibited Menu Items
E - Ownership of Tenant
F - Accounting Procedures
G - Restricted Area
(vi)
<PAGE> 8
FUNDAMENTAL LEASE PROVISIONS
LANDLORD: Mandalay Corp., a Nevada corporation
Landlord's Address: c/o Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
With a copy to: Circus Circus Enterprises, Inc.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attn: General Counsel
TENANT: Border Grill Las Vegas, LLC,
a Nevada limited liability company
Tenant's Address: 1445 4th Street
Santa Monica, California 90401
and
After opening to the Premises address
With a copy to Tenant's attorney: Wendy G. Glenn, Esq.
1900 Avenue of the Stars
Suite 2600
Los Angeles, California 90067-4507
and another copy to: Jay Brown, Esq.
Singer, Brown & Barringer
520 S. Fourth Street, 2nd Floor
Las Vegas, Nevada 89101
TENANT'S TRADENAME: BORDER GRILL
PREMISES: The Floor Area located on two floors
and shown by diagonal lines on
EXHIBIT B together with the
exclusive use of that portion of the
patio area also shown by diagonal
lines on EXHIBIT B. The Premises is
comprised of approximately 9,666
square feet of Floor Area in the
interior of the Premises
(approximately 6,140 square feet on
the
1
<PAGE> 9
first floor and approximately 3,526
square feet of floor area on the
second floor) and approximately
3,670 square feet of adjacent patio
area as shown on Exhibit B. The
Premises shall not include the
exterior walls, the roof, the area
above or below the Premises, or the
land upon which the Premises are
located.
ESTIMATED LATEST
DELIVERY DATE: May 15, 1998
ESTIMATED RENT
COMMENCEMENT DATE: June 15, 1998
TERM: A period commencing on the
Commencement Date and expiring on
the last day of the month in which
the tenth (10th) anniversary of the
Rent Commencement Date occurs.
OPTIONS TO EXTEND: One 60-month option to extend
MINIMUM RENT: $6,250/month
SECURITY DEPOSIT: None
ANNUAL PERCENTAGE 5% of Gross Sales (as defined
RENTAL RATE: herein) (subject to adjustment per
SECTION 5.2 below)
USE OF PREMISES: Mexican restaurant. Tenant shall
also have the non-exclusive right to
sell alcoholic beverages from the
Premises. Tenant may allow its
patrons to purchase food and
beverages at the Premises for
consumption outside the Premises,
but Tenant shall not offer delivery
service outside the Premises,
including, but not limited to, the
patio areas not included within the
Premises. Copies of sample menus for
the Restaurant are attached as
EXHIBIT D ("SAMPLE MENU") for purpose
of defining the character of the
Restaurant to be operated on the
Premises. The attachment of the
Sample Menu shall not limit the
items that Tenant may serve in the
Premises, but Tenant may not, by
adding or deleting menu items,
2
<PAGE> 10
change the character of the
Restaurant without Landlord's prior
written consent, which consent shall
not be unreasonably withheld. Copies
of menu items not permitted to be
served at the Restaurant are
attached as EXHIBIT D-1.
GUARANTOR(S): None
3
<PAGE> 11
LEASE
FOR
RESTAURANT SPACE
(the "Lease")
DATE: November 12, 1998
LANDLORD: MANDALAY CORP., a Nevada corporation
TENANT: BORDER GRILL, LAS VEGAS, LLC, a
Nevada limited liability company
In consideration of the mutual covenants and agreements contained in
this Lease, Landlord and Tenant, acting through its manager TT&T, LLC, agree as
follows:
ARTICLE 1
DEFINITIONS
As used in this Lease, the following terms shall have the following
meanings:
1.1 Affiliate: In relation to any Person, any other Person controlled,
directly or indirectly, by such Person, any other Person that controls, directly
or indirectly, such Person or any Person directly or indirectly under common
control with such Person.
1.2 Commencement Date: The date of Substantial Completion (as defined
in the Work Letter Agreement attached as Exhibit C).
1.3 Floor Area: The respective portion of the floor area of the
Premises from time to time subject to lease by Tenant pursuant to this Lease, as
determined and applied by Landlord.
1.4 Gross Sales: The actual receipts of sales or rentals of all food,
goods, wares and merchandise sold, leased or delivered and the actual charges of
all services performed by Tenant or by any subtenant, licensee or concessionaire
of Tenant in, at, from, or arising out of the use of the Premises, whether for
wholesale, retail, cash, credit, or trade-ins or otherwise, without reserve or
deduction for inability or failure to collect. Gross Sales shall include,
without limitation, sales and services: (a) where the orders therefor originate
in, at, from, or arising out of the use of the Premises, whether delivery or
performance is made from the Premises or from some other place, (b) made or
performed by mail, telephone, telegraph, facsimile, or other electronic means,
(c) made or performed by means of mechanical or other vending devices in the
1
<PAGE> 12
Premises, and (d) which Tenant or any subtenant, licensee, concessionaire or
other person in the normal and customary course of its business would credit or
attribute to its operations at the Premises or any part thereof. Any sum
deposited with and forfeited to Tenant shall be included in Gross Sales. Each
installment or credit sale shall be treated as a sale for the full price in the
month during which such sale is made, regardless of whether or when Tenant
receives payment therefor. No franchise or capital stock tax and no income or
similar tax based on income or profits shall be deducted from Gross Sales. Gross
Sales shall not include, or if included there shall be deducted (but only to the
extent they have been included in Gross Sales): (i) the net amount of any cash
or credit refunds or credit allowed on services upon any sale or rental from the
Premises where the merchandise sold or rented, or some part thereof, is returned
by the purchaser to Tenant after the sale or rental (not exceeding in amount the
selling or rental price of the item in question) or upon the rejection of any
food or beverage from the Premises, provided that Tenant shall not be required
to accept any returned merchandise if a cash refund or credit allowance is
issued in lieu thereof, and provided further that any credit or refund shall
reduce Gross Sales for the accounting period such credit or refund is made but
shall not affect Gross Sales for the period in which the original sales or
rental relating to such income were made; (ii) the amount of any city, county,
state or federal sales, use, gross receipts, transaction privilege, luxury,
casino entertainment or excise tax ("CET") on such sale which is both added to
the selling price (or absorbed in the price) and paid to the taxing authorities
by Tenant (but not by any vendor of Tenant); (iii) the amount of any discount on
sales to employees; (iv) service charges. interest and collection expenses
received or receivable from customers for sales on credit and service, credit
card and other charges or fees paid by Tenant to credit card companies, banks
and similar organizations resulting from use of credit or debit cards by
customers; (v) income from or the value of any complimentary items or discounts
granted pursuant to SECTION 7.10 hereof, of the costs of any complimentary
issued by Landlord or any of its Affiliates for food, beverages, other goods,
services, merchandise or the like purchased or received from or at the Premises
to any hotel or casino guest of Landlord or any such Affiliate at the Project or
any other hotel/casino owned or operated by Landlord or any of its Affiliates,
(vi) income from the reimbursement pursuant to SECTION 7.11 hereof of the costs
of any room charges incurred by any hotel guest at the Project or any other
property owned or operated by Landlord or any of its Affiliates, provided that
all such items shall be considered income for purposes of calculating Gross
Sales during the accounting period when such charges are made by the guest;
(vii) income from inventory returned to suppliers in an amount not to exceed the
original amount paid by Tenant for the returned inventory, and (viii) the
redemption of gift certificates (but not the purchase of gift certificates). The
retail value of food or merchandise used or given away as samples shall not be
included in Gross Sales, but rather shall be credited against the amount of
Gross Sales made from the Premises. Where coupons, 2 for -1's or other discount
promotions are used, only the actual sales price paid to Tenant shall be
included in Gross Sales.
1.5 Lease Year: The period during the Lease Term commencing an January
1st in each year and ending at midnight on the 31st of December of that year,
except that the first Lease Year
2
<PAGE> 13
shall commence at the start of the Lease Term and shall end at midnight on the
31st of December of that year, and except that the last Lease Year shall end at
the expiration of the term of this Lease or at the time of any earlier
termination of this Lease in accordance with the terms hereof.
1.6 Permitted Closure Period: Any period when the Premises may be
temporarily closed for relocation pursuant to SECTION 2.3 or remodeling pursuant
to SECTION 2.4, closed if permitted under SECTION 7.4, untenantable by reason of
any force majeure event described in SECTION 27.18, temporarily closed for
repairs or maintenance under ARTICLE 11, or temporarily closed due to failure to
supply Services under ARTICLE 10, or temporarily closed because of a partial
taking pursuant to SECTION 17.2.
1.7 Person: Any natural person, corporation, limited liability company,
partnership, limited partnership, limited liability partnership, association,
organization or any other entity of whatsoever nature.
1.8 Project: The building and related improvements commonly referred to
as Mandalay Bay Resort & Casino located at 3950 Las Vegas Boulevard South, Las
Vegas, Nevada, and more generally depicted on EXHIBIT A attached hereto.
1.9 Rent Commencement Date: The earlier of (i) thirty (30) days after
Substantial Completion (as defined in the Work Letter) or (ii) the date Tenant
opens for business in the Premises, provided, however, that the Commencement
Date shall not occur any earlier than the Estimated Rent Commencement Date
unless Tenant agrees to open for business prior to such date. Tenant agrees that
it will use reasonable efforts to open prior to the Estimated Rent Commencement
Date if it receives possession of the Premises on or before the Estimated Latest
Delivery Date, but it will not be in default under this Lease if it fails to do
so.
1.10 Rules and Regulations: The rules and regulations adopted in
accordance with SECTION 14.1.
1.11 Tenant Improvements: The improvements to the Premises to be
constructed pursuant to EXHIBIT C.
1.12 TI Costs: The cost of the Tenant Improvements determined in
accordance with EXHIBIT C. Wherever applicable in this Lease, the TI Costs shall
be deemed to be amortized over the initial ten (10) year term of this Lease.
1.13 TI Cost Statement: A statement setting forth the TI Costs as set
forth on EXHIBIT C.
3
<PAGE> 14
ARTICLE 2
LEASE OF PREMISES AND CONSTRUCTION
2.1 Lease. Landlord leases the Premises to Tenant and Tenant leases the
Premises from Landlord, for the Lease Term, at the rental, and upon the
covenants and conditions contained in this Lease, including the Fundamental
Lease Provisions and all Exhibits attached hereto. In addition to the Premises,
Tenant shall have the right to use, in common with Landlord and other tenants or
licensees of the Project, areas to be designated by Landlord for receiving,
garbage disposal, freight elevators, locker room facilities and employee and
customer parking areas (the "COMMON AREAS"). The Common Areas may be altered,
reconfigured or relocated by Landlord from time to time during the Lease Term.
2.2 Construction of Premises. Landlord shall construct or cause to be
constructed the Tenant Improvements in accordance with the Work Letter Agreement
attached as EXHIBIT C. Landlord shall be obligated to spend up to Six Hundred
Seventy-Five Thousand and No/100 Dollars ($675,000.00), as a tenant improvement
allowance to be used in accordance with the terms of the Work Letter Agreement.
Except as specifically set forth in this Lease and in the Work Letter Agreement
attached hereto as EXHIBIT C, Landlord shall not be obligated to provide or pay
for any improvement work or services related to the improvement of the Premises.
Tenant also acknowledges that Landlord has made no representation or warranty
regarding the condition of the Premises or the Project except as specifically
set forth in this Lease and the Work Letter Agreement.
2.3 Relocation.
(a) Tenant acknowledges that Landlord shall have an absolute
right at anytime after the third anniversary of the Lease and from time
to time thereafter to relocate the Premises within the Project, at
Landlord's cost, provided that the premises to which Tenant is
relocated (i) shall be no less than ninety percent (90%) of the size of
the original premises, (ii) shall be located in an area having
substantially similar levels of pedestrian foot traffic, (iii) shall
have similar visibility, quality and, adjacent view, (iv) shall have
access to a substantially comparable patio area and two-story layout as
exists for the original premises, and (v) shall be appropriately
configured for Tenant's restaurant use. If Landlord exercises its right
to relocate Tenant pursuant to this Section, Landlord shall notify
Tenant in writing (the "Relocation Notice") specifying the location of
the new premises. If Tenant objects to the new premises, Tenant shall
notify Landlord in writing within ten (10) business days following the
Relocation Notice, specifying its objections to the new premises. If
Tenant fails to object within such 10-business day period, Tenant shall
be deemed to have approved the new premises. If Tenant objects to the
new premises, Landlord and Tenant shall meet and confer in an attempt
to address Tenant's concerns, but if Landlord is unable to resolve the
same
4
<PAGE> 15
within thirty (30) days after the Relocation Notice, Landlord may
terminate this Lease upon written notice to Tenant. Provided that
Tenant is not in default at the time of any such termination, Landlord
shall reimburse Tenant for the unamortized portion of any TI Costs paid
for by Tenant. If this Lease is not terminated pursuant to this SECTION
2.3 and as a result of a relocation under this SECTION 2.3 there is any
reduction in the Floor Area of the Premises, then Minimum Rent and the
Threshold Amount shall be reduced to an amount equal to that proportion
that the Floor Area after the relocation bears to the Floor Area of the
Premises prior to the relocation.
(b) All costs and expenses of relocating to the new premises,
including, without limitation, all reasonable costs incurred by Tenant
in relocating to the new premises, shall be paid by Landlord. If
Landlord exercises its right to relocate Tenant, Landlord shall
reconstruct the Tenant Improvements in a form substantially equivalent
to the improvements constructed pursuant to EXHIBIT C and shall install
at Landlord's expense all furnishings, equipment, furniture and
finishes necessary to make the relocated premises substantially the
same as the original premises (the "FINISH WORK"). Within ten (10) days
after Landlord has notified Tenant that it has substantially completed
the improvements (in accordance with the standards for "SUBSTANTIAL
COMPLETION" as set forth in the Work Letter Agreement) to be
constructed by Landlord on the relocated premises and has completed the
Finish Work for the relocated premises, Tenant shall surrender the
original premises and the relocated premises shall be deemed the
Premises hereunder. During any portion of such 10-day period that
Tenant is not conducting business in either premises, rent and all
other costs or charges payable hereunder (other than premiums for
insurance maintained by Tenant hereunder) shall be abated and the Lease
Term shall be extended for the entire period during which Tenant is not
doing business. Following any relocation. Landlord and Tenant shall
execute an amendment designating the relocated premises on EXHIBIT B
setting forth the revised expiration date of the Term and the revised
Minimum Rent and Threshold Amount, if applicable. Other than EXHIBIT B,
the Lease Term extension and any adjustment to Minimum Rent and the
Threshold Amount, all terms and conditions contained in this Lease
shall continue unmodified following such relocation.
2.4 Remodeling. Landlord may, in connection with any remodeling of all
or any portion of the Project, change, at Landlord's sole cost and expense, the
dimensions or reduce the size of the Premises to not less than ninety percent
(90%) of its original size so long as the remodeled Premises and improvements
are substantially similar to the original Premises and improvements; provided,
however, that if, in Tenant's reasonable judgment, as a result thereof the
remaining portion of the Premises is not suitable for the purpose for which
Tenant has leased the Premises, Tenant may terminate this Lease by written
notice to Landlord given within thirty (30) days after Landlord notifies Tenant
of Landlord's intention to remodel; provided further, however, that such
termination shall not be effective if within thirty (30) days of Tenant's notice
thereof, Landlord notifies Tenant either of its election to relocate Tenant
pursuant to SECTION 2.3
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hereof or to rescind Landlord's intention to remodel. If Tenant terminates this
Lease pursuant to this SECTION 2.4, Landlord shall reimburse Tenant the
unamortized portion of any TI Costs paid for by Tenant, provided Tenant is not
in default at the time of any such termination. If Tenant does not elect to
terminate this Lease pursuant to this SECTION 2.4 and as a result of Landlord's
remodeling under this SECTION 2.4 there is any reduction in the area of
Premises, then Minimum Rent and the Threshold Amount shall be reduced to an
amount equal to that proportion that the Floor Area after the remodeling bears
to the Floor Area of the Premises prior to the remodeling. In the event of any
remodeling pursuant to this SECTION 2.4, Landlord shall repair any damage to the
Premises and repair or replace any improvements, furniture, fixtures, equipment
and other property damaged or removed thereby. Without limiting the foregoing,
if the kitchen area is reduced as the result of any remodeling, Landlord shall
be responsible for restoring the kitchen area in such a manner so that the size
and layout of the kitchen area remain relatively the same as existed in the
original Premises so as to adequately serve the remodeled service and seating
area, and the kitchen remains sufficient to meet the needs of Tenant in its
reasonable judgment. In connection with any such remodeling, Landlord may
require Tenant to cease conducting business in the Premises for a period not to
exceed thirty (30) days. The rent and all other costs and charges payable or
reimbursable hereunder (other than premiums for insurance maintained by Tenant
hereunder) shall be abated during any period that Landlord requires Tenant to
cease conducting business under this SECTION 2.4 and Landlord will reimburse
Tenant for its actual, out-of-pocket costs directly incurred during any period
Tenant is required to cease conducting business in the Premises and which cannot
reasonably be avoided; provided that, in no event, shall the amount of such
reimbursement per day exceed an amount equal to the average daily cost of
salaries and other employee related expenses and other non-avoidable expense
over the immediately preceding six (6) month period. The Lease Term shall be
extended by an amount of time equal to the entire period during which Landlord
requires Tenant to cease conducting business under this Section. Following such
remodeling, Landlord and Tenant shall execute an amendment designating any
changes to the Premises pursuant to this Section on EXHIBIT B, the revised
expiration date of the Term and the revised Minimum Rent and Threshold Amount,
if applicable.
2.5 Amortization of Tenant Improvements. For purposes of any payments
due to Tenant in the event of a termination under SECTION 2.3 and SECTION 2.4,
such amount shall be paid upon the effective date of termination of the Lease
and the surrender by the Tenant of the Premises. In calculating the termination
payment, the TI Costs shall be determined by reference to the TI Cost Statement
and shall be amortized over the initial Lease Term, and no such payment shall be
due in the event any such termination occurs during an Option Term.
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ARTICLE 3
TERM
3.1 Duration. The term of this Lease (the "LEASE TERM") shall be for
the period specified in the FUNDAMENTAL LEASE PROVISIONS, unless sooner
terminated in accordance with the provisions hereof. Following the commencement
of the Lease Term, Tenant and Landlord shall, upon either party's request,
execute and deliver to Landlord an addendum to this Lease specifying the
Commencement Date, the Rent Commencement Date and the last day of the Lease
Term. Tenant agrees that if for any reason whatsoever Landlord is unable to
deliver possession of the Premises to Tenant by the Estimated Latest Delivery
Date specified in the FUNDAMENTAL LEASE PROVISIONS, this Lease shall not be void
or voidable, nor shall the Landlord be liable to Tenant for any loss or damage
resulting therefrom.
3.2 Options to Extend Term. Provided (i) Tenant is not in default of
any provision of the Lease at the time of exercise or at any time thereafter
prior to the commencement of the Option Term (defined below) or (ii) there have
not been more than five (5) monetary defaults or seven (7) total defaults during
the Lease Term, Tenant may extend the Lease Term for an additional five (5) year
period ("OPTION TERM") by giving Landlord written notice not more than eighteen
(18) months nor less than twelve (12) months before the expiration of the Lease
Term. Time is of the essence in the exercise of the options. All of the terms
and conditions of the Lease shall apply to the Option Term so far as applicable,
and reference in the Lease to the "LEASE TERM" shall be deemed to include the
Option Term to the extent exercised, except that (i) the right to extend the
Lease Term for the Option Term shall not apply and (ii) the Minimum Rent,
Threshold Amount and the Comp Threshold shall each be increased by ten percent
(10%) from the amounts applicable to the Lease Term.
3.3 Landlord's Right to Terminate.
(a) Tenant acknowledges that Landlord is relying on Tenant's
ability to generate a threshold level of traffic in the Premises which
will benefit the Project. Therefore, if in the period commencing the
first day of the month following the first anniversary of the Rent
Commencement Date and ending on the twelfth (12th) month thereafter or
during any succeeding (but not overlapping) twelve (12) month period
(each referred to as the "MEASUREMENT PERIOD"), Tenant does not have
Gross Sales greater or equal to the "THRESHOLD AMOUNT" (defined below),
then Landlord may terminate this Lease by written notice to Tenant
given within sixty (60) days from the date when Landlord receives the
Monthly Statement for the twelve (12) calendar month of the Measurement
Period indicating that the Gross Sales for any such Measurement Period
were not the Threshold Amount. For purposes of this Section, the
Threshold Amount shall be $2,500,000 until the third anniversary of the
Rent Commencement Date and $3,000,000 commencing on the third
anniversary of the Rent Commencement Date and continuing until the end
of
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the Lease Term. The Threshold Amount shall be reduced prorata for any
Permitted Closure Period and as provided in SECTIONS 2.3 and 2.4. Upon
the exercise by Landlord of the termination right described in this
SECTION 3.3(a), this Lease shall be terminated and neither Landlord nor
Tenant shall have any further liability or obligation to the other,
except with respect to liabilities, obligations or other provisions
specifically stated in this Lease to survive any termination hereof and
with respect to SECTION 3.3(b).
(b) If Landlord exercises the termination right set forth in
SECTION 3.3(a) above, Landlord shall pay to Tenant a termination
payment equal to (i) the portion of the TI Costs paid for by Tenant
(calculated by deducting the TI Allowance from the total TI Costs, as
such terms are defined in the Work Letter Agreement), less (ii)
Tenant's Net Profit derived from the Premises since the Commencement
Date. For purposes of this Lease "NET PROFIT" shall be calculated on an
after tax basis and mean the Gross Sales (subject to modification as
provided below) derived from the Premises less all amounts used to pay
or establish reasonable reserves for all expenses relating to the
operation of the Premises, including, but not limited to, the cost of
food and beverages, wages and benefits, supplies, advertising and
promotion, administrative expenses, a management fee not to exceed 5%
of gross receipts, capital improvements, repair and replacements of
FF&E, and any other proper cash expenditure as reasonably determined by
the Landlord. If the Net Profit received from the Premises since the
Commencement Date exceeds the portion of the TI Costs paid by Tenant,
there shall be no termination payment due to Tenant if Landlord
exercises its rights under SECTION 3.3(a) of this Lease.
ARTICLE 4
MINIMUM RENT
4.1 Minimum Rent. Commencing on the Rent Commencement Date, Tenant
shall pay Landlord for each month during the Lease Term from and after the Rent
Commencement Date, rent each month in the amount set forth in the Fundamental
Lease Provisions (the "Minimum Rent"). Minimum Rent shall be paid monthly in
advance on the first day of each month of the Lease Term from and after the Rent
Commencement Date, without any deduction or offset other than any rent abatement
specifically provided for under the terms of this Lease. If the Rent
Commencement Date occurs on a day other than the first day of a calendar month,
then upon the Rent Commencement Date, Tenant shall pay to Landlord, as Minimum
Rent for the partial month, a pro rata portion of the Minimum Rent payable for a
full month.
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ARTICLE 5
PERCENTAGE RENT
5.1 Percentage Rent. In addition to the Minimum Rent and other sums
required to be paid by Tenant under this Lease, and subject to the provisions of
SECTION 5.2 below, Tenant shall pay as "PERCENTAGE RENT" a sum equal to the
Annual Percentage Rental Rate times the amount of Gross Sales of Tenant made
from or upon the Premises during each Lease Year, less the amount of Minimum
Rent paid by Tenant during such Lease Year. Percentage Rent shall be computed
each month, and within fifteen (15) days of the date such month ends, Tenant
shall pay to Landlord the amount by which the sum computed as the Annual
Percentage Rental Rate of Tenant's Gross Sales during that period exceeds the
Minimum Rent paid by Tenant for the same period. In no event shall Landlord be
obligated to refund to Tenant any portion of the Minimum Rent for a given Lease
Year if the amount calculated by multiplying the Annual Percentage Rental Rate
by the Gross Sales is less than the Minimum Rent for such Lease Year.
5.2 Adjustment to Annual Percentage Rental Rate. The Annual Percentage
Rental Rate shall be seven percent (7%) of Gross Sales for that portion of
annual Gross Sales of Tenant made from or upon the Premises in excess of Four
Million Five Hundred Thousand Dollars ($4,500,000) in any Lease Year. Such
adjustment will be reflected in the annual payment referenced in Section 5.3
below.
5.3 Annual Adjustment. Within ninety (90) days after the end of each
Lease Year, Tenant shall determine the amount of Tenant's Gross Sales during
that Lease Year and the amounts payable to Landlord as Minimum Rent and as
Percentage Rent for that Lease Year. If the total amount of Minimum Rent and
Percentage Rent owing for the Lease Year is greater than the total amount of
Minimum Rent and Percentage Rent paid by Tenant during the Lease Year, Tenant
shall immediately pay the deficiency to Landlord. If the total amount of Minimum
Rent and Percentage Rent paid by Tenant during a Lease Year exceeds the total
amount of Minimum Rent and Percentage Rent required to be paid by Tenant during
such Lease Year, Tenant shall receive a credit equivalent to the excess which
may be deducted by Tenant from the next accruing payment or payments of either
Minimum Rent or Percentage Rent or, if the Lease has expired, Landlord shall pay
such amount to Tenant within thirty (30) days after such amount has been
determined.
5.4 Tenant Reports. On or before the fifteenth (15th) day following the
end of each month during the Lease Term, Tenant agrees to submit to Landlord a
written statement signed by Tenant and certified by Tenant to be true and
correct, showing the amount of Gross Sales during the preceding month ("MONTHLY
STATEMENT"). On or before the sixtieth (60th) day following the end of each
Lease Year, Tenant agrees to submit to Landlord a written statement signed by
Tenant and certified by Tenant to be true and correct, showing the amount of
Gross Sales during the preceding Lease Year.
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5.5 Tenant Records. Tenant agrees to keep full, complete and proper books,
records and accounts of the daily Gross Sales from the Premises and any
concession operated at any time in the Premises; of inventories, purchases and
receipts of merchandise; of sales tax; and of all other transactions and
matters, including sales slips, cash register tape readings, sales books, bank
books, deposit slips and sales tax reports, normally examined and required to be
kept by an independent accountant and/or any Regulatory Authority (as
hereinafter defined) pursuant to accepted auditing standards in performing an
audit of Gross Sales. All such books, records and accounts shall be kept for a
period of at least one (1) year following the end of each Lease Year. Within one
(1) year after the end of the Lease Year, Landlord, its agents and employees,
upon at least seven (7) days prior written notice, may examine and inspect all
of the books and records relating to the business conducted upon the Premises
for the purpose of investigating and verifying the accuracy of any statement of
Gross Sales and Net Profit during the prior Lease Year. Tenant agrees to require
any subtenants, concessionaires, and licensees to also maintain records meeting
the requirements of this SECTION 5.5.
5.6 Audit. At any time within one (1) year after the end of the Lease
Year, Landlord may cause an audit of Tenant's business to be made for the
purpose of verifying the accuracy of any statement of Gross Sales and Net Profit
during the prior Lease Year. The audit shall be performed by a representative
selected by Landlord, and Tenant agrees to make all records available for the
audit at the Premises or at Tenant's corporate offices, as Tenant may elect. If
the results of the audit show that Tenant's statement of Gross Sales for any
period has been understated by four percent (4%) or more, then Tenant shall
immediately pay Landlord the cost of the audit in addition to any deficiency
payment required, plus an amount equal to twelve percent (12%) of the amount of
the understatement. If understatements are shown for more than five (5) monthly
periods or three (3) annual periods during the Lease Term, such understatements
shall be an incurable event of default under this Lease unless such
understatements are the result of wrongful acts of Tenant's employees outside
the scope of employment (i.e., embezzlement by an employee); provided that if
any understatement is based on a single error that results in a consistent under
reporting of Gross Sales, such error shall constitute a single understatement
for purpose of this Section unless Tenant fails to correct such error on
subsequent statements prepared after the error is discovered. Any information
obtained by Landlord as a result of receiving statements of Gross Sales or
auditing the same or otherwise pursuant to this Lease shall be held in strict
confidence by Landlord except (i) in any proceeding or action to collect the
cost of the audit or deficiency, and then only to the extent relevant thereto,
(ii) to the extent required to be disclosed by law or by regulatory authorities,
or (iii) with respect to a prospective sale, mortgage, lease or leaseback of the
Project or a portion thereof including the Premises, and then only to
prospective lenders, purchasers, lessees under a ground lease or sale leaseback
or their consultants.
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ARTICLE 6
ADDITIONAL RENT
6.1 Additional Rent. In addition to Minimum Rent and Percentage Rent, all
other payments to be made by Tenant under this Lease, including, but not limited
to the Service Charge payable under Article 10, shall be deemed Additional Rent
and shall be due and payable within five (5) days of written demand if no other
time for payment is specified.
6.2 Payments by Landlord. Upon ten (10) days prior written notice to
Tenant or such shorter period as may be necessary for Landlord to avoid a
delinquency and/or late charge, Landlord may pay any sum or do any act which
Tenant has failed to do, and Tenant agrees to pay Landlord, upon demand, all
sums so expended by Landlord, together with interest from the date of
expenditure until paid at a rate equal to the lesser of twelve percent (12%)
per annum or the maximum rate allowed by law. Such sum and interest shall also
be deemed Additional Rent.
ARTICLE 7
USE AND OPERATION
7.1 Designated Use. Tenant agrees to use the Premises solely for the
purpose set forth in the FUNDAMENTAL LEASE PROVISIONS. Tenant shall not use or
permit the Premises to be used for any other purpose whatsoever without
Landlord's prior written consent. Landlord hereby covenants and agrees that, so
long as Tenant is not in default hereunder, Tenant shall have the exclusive
right to operate a Mexican and Latin American style restaurant within the
Project. Notwithstanding anything to the contrary in this Section or elsewhere
in this Lease, Tenant acknowledges and agrees that such exclusive right shall
not limit or restrict the following: (i) Mexican and/or Latin American items
available for catered functions or through room service, (ii) selected items of
Mexican and/or Latin cuisine offered in other restaurants so long as not more
than twenty-five percent (25%) of the items offered in such other restaurants
are characterized as Mexican and/or Latin cuisine, or (iii) coffee shops and
buffets or similar food service operations in the Project. On or before the
Commencement Date, Tenant shall submit its menu to Landlord if it is different
from the Sample Menu attached as EXHIBIT D. Tenant may change selected menu
items, but shall not substantially change the overall character of items being
offered for sale without Landlord's prior written consent, which consent will
not be unreasonably withheld. Without limiting the foregoing, Tenant shall not
sell or offer for sale the types of cuisine listed on Exhibit D-1 in excess of
the percentages listed thereon.
7.2 Insurance Requirements: Governmental Regulations. Tenant shall not do
or permit anything to be done in or about the Premises, or bring or keep
anything on the Premises, which will in any way increase the rate of fire
insurance on the Project over and above the customary rates for fire insurance
for projects including fine-dining restaurant(s) similar to the Premises. At
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Tenant's expense, Tenant agrees to comply, in all material respects, with all
fire and public liability insurance requirements relating to the Premises.
Tenant agrees to comply promptly, in all material respects, with all
governmental laws, ordinances, orders, rules and regulations affecting the
Premises, including, without limitation, any applicable environmental law,
regulation, ordinance or order of any governmental entity, or any other federal,
state or local laws relating to the contamination of or adverse effects on the
environment. Tenant hereby agrees to indemnify and hold Landlord harmless for,
from and against any losses, liabilities, damages, costs, expenses, and claims
of any kind whatsoever, including reasonable attorneys' fees, incurred by
Landlord and arising from or relating to the violation by Tenant of any
agreement of Tenant made in the immediately foregoing sentence. This indemnity
shall survive the expiration or earlier termination of the Lease Term.
7.3 Restrictions on Use. Without limiting the provisions of this Article
7, no auction, fire or bankruptcy sales may be conducted in the Premises without
Landlord's prior written consent. Tenant shall not, without Landlord's prior
written approval, operate or permit to be operated on the Premises any coin or
token operated vending machines or similar device for the sale or leasing to the
public of any goods, wares, merchandise, food, beverages, and/or service,
including, without limitation, pay telephones, pay lockers, pay toilets, scales
and amusement devices. Tenant shall not use or permit the use of any portion of
the Premises for sleeping apartments, lodging rooms or gaming activities. Tenant
shall not perform any acts or carry on any practices which may injure the
Premises or other parts of the Project or be a nuisance or menace to other
tenants in the Project, Landlord or the patrons and customers of either of them.
Tenant agrees to keep the Premises, the walkways adjacent to the Premises, and
any loading platform and service areas allocated or approved by Landlord for the
use by Tenant (whether or not such use is exclusive), clean and free from
Tenant's rubbish and dirt at all times. Tenant agrees to store all trash and
garbage within the Premises or in other area designated by Landlord and to
arrange for removal of such trash and garbage at Tenant's expense. Tenant shall
not make any use of the Premises which is not in compliance with the terms of
this Lease or with the Rules and Regulations.
7.4 Business Operations. Commencing on the Rent Commencement Date and
throughout the remainder of the Lease Term (except (i) during Permitted Closure
Periods, (ii) on Christmas and (iii) during a Tenant Remodel Period (defined
below)), Tenant agrees to continuously occupy and use the entire Premises for
the purpose or purposes specified above, during those days, nights and hours as
shall be determined by Tenant with Landlord's approval, which shall not be less
than nine (9) hours per day, seven days a week. In the event Tenant needs to
close the Premises during the Lease Term during any period other than a
Permitted Closure Period, Christmas or Tenant Remodel Period, Tenant shall
obtain Landlord's prior written consent, which consent may be given or withheld
in Landlord's sole discretion, and if Landlord gives such consent such closure
shall not constitute a breach of this SECTION 7.4. Tenant shall have the right
to close its business to the public for not more than three (3) days every third
Lease Year for remodeling (a "Tenant Remodel Period") provided that (i) Tenant
notifies Landlord in writing at least thirty (30) days prior to any such planned
closing, (ii) all such closings occur on days other
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than Fridays, Saturdays and Sundays, and (iii) all such closings are scheduled
so that they do not conflict with any major activities in the Project or
otherwise unreasonably disrupt Project operations. In the event of a breach by
Tenant of any of the conditions of this SECTION 7.4 which is due to the actions
or inaction of Tenant, Landlord shall have, in addition to any and all remedies
herein provided, the right, at its option, to collect not only the Minimum Rent
herein provided, but additional rent at the rate of one-twentieth (1/20) of the
Minimum Rent herein provided for each and every day that Tenant is not open for
business as herein provided. Tenant shall carry at all times in the Premises
sufficient quantities and qualities of products as shall be reasonably designed
to service its customers and meet anticipated customer demand, and shall staff
the Premises at all times with sufficient personnel to serve its customers.
Tenant's method of conducting its business in the Premises shall at all times be
in keeping with and not inconsistent with or detrimental to the operation by
Landlord of the Project as an exclusive, first-class resort casino facility.
Tenant shall refrain from using or permitting the use of the Premises or any
portion thereof for office, clerical or other non-selling purposes, except space
in the Premises may be used for such purposes to such extent as is reasonably
required for the conduct of Tenant's business thereon. Tenant shall not use the
Premises for storage or warehouse purposes beyond such use as is reasonably
required to keep Tenant's restaurant adequately stocked for sales of product and
merchandise in, at or from the Premises.
7.5 Tradename. Subject to the provisions of this SECTION 7.7, Tenant
shall conduct business under the tradename set forth in the FUNDAMENTAL LEASE
PROVISIONS and no other without prior written consent of Landlord. The rights to
use the name "Border Grill" or any other tradename under which Tenant is
permitted to operate pursuant to this Lease shall be owned by or licensed to
Tenant for the entire Term of this Lease including all extensions thereof.
Tenant represents that the licensor has filed an application to federally
register Border Grill. If a third party claim is threatened or asserted with
respect to Tenant's use of the tradename and Tenant determines, in its
reasonable judgment, to cease using such tradename as a result of such claim
Tenant may change its tradename, provided that Landlord consents to the new
tradename, which consent shall not be unreasonably withheld or delayed. Tenant
also shall have the right to change the tradename under which it is operating in
the Premises in conjunction with any corporate-wide change of tradename or any
permitted assignment or sublease hereunder. Landlord shall not acquire any
property rights in or to the name "Border Grill" by virtue of this Lease. Tenant
shall not conduct any business at any time either before or after the
termination of this Lease, either in the Premises or elsewhere, under a name in
which the words "Mandalay Bay" appears except in reference to the location of
the Premises, without Landlord's prior written consent, and Tenant shall not
acquire any property right in or to any name which contains said word
combinations as a part thereof. Any permitted use by Tenant of the words
"Mandalay Bay" during the term of this Lease shall not permit Tenant to use, and
Tenant shall not use, such words either after the termination of this Lease or
at any other location.
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7.6 Employees.
(a) Tenant shall control the conduct, demeanor and appearance of
its officers, agents and employees so as to run a first class business in
strict conformity with any standards reasonably adopted by Landlord,
provided such standards do not unreasonably interfere with Tenant's
operation of the Premises. Tenant will ensure that its personnel act so
as not to annoy, disturb or be offensive to customers, patrons or others
in the Project, and if any of Tenant's personnel act in a manner
objectionable to Landlord, Landlord will bring such objection to the
attention of Tenant's manager, who will immediately take all necessary
steps to correct the cause of such objection. Tenant warrants that its
employees, while working in connection with this Agreement, will comply
with any and all applicable federal, state or local laws, rules and
regulations and ordinances.
(b) Tenant shall be responsible for all salaries, employee
benefits, social security taxes, federal and state unemployment insurance
and any and all similar taxes relating to its employees and for workers'
compensation coverage with respect to its employees pursuant to
applicable law. Tenant's employees shall not be entitled to participate
in, or to receive, any of Landlord's employee benefit or welfare plans,
and they shall not be deemed agents or employees of Landlord for purposes
of this Lease or any other purpose. Tenant will comply with any
applicable federal, state or local law, ordinance, rule or regulation,
regarding its employees, including federal or state laws or regulations
regarding minimum compensation, overtime and equal opportunities for
employment.
(c) Tenant shall not cause or permit its employees to enter upon
those areas of the Project which are designated "EMPLOYEES ONLY," as the
parties acknowledge that for such purposes, "EMPLOYEES" refers to the
employees of Landlord and not to the employees of Tenant.
(d) Landlord requires, and Tenant will therefore develop and
implement, a drug testing program for Tenant's employees employed at the
Premises. Except for the initial salaried, full time
management/supervisory staff (who must be tested prior to opening of the
Premises) Tenant's employees employed at the Premises shall be tested no
later than when the individual employee completes at least 520 hours of
service for Tenant at the Premises.
(e) Tenant shall require standard uniforms to be worn by all of
its employees at all times while on duty in the Premises so that all
employees present a clean and well groomed appearance. Landlord may, at
any time, direct Tenant to require any of its employees not so attired
while on duty to immediately conform to the requirements of this
subparagraph (e) or leave the Premises.
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7.7 Security. Tenant acknowledges that Landlord's security department and
security officers are not responsible for providing security services for the
Premises (including the portion of the adjoining patio included in the Premises,
but excluding any other portion of the Patio), and that responsibility to
provide security services for the Premises if Tenant so elects is the obligation
of Tenant. In no event shall Landlord be liable to Tenant or any third-party for
the security department's failure to respond to a request for aid or assistance
by Tenant.
7.8 Regulatory Authorities. If Tenant is required to apply to either the
Nevada Gaming Commission or any other agency regulating Landlord's activities
(collectively herein, the "REGULATORY AUTHORITIES") for a finding of suitability
or other approval, Tenant shall promptly do so. If after application and
applicable hearings, Tenant is found unsuitable by any Regulatory Authority,
then Tenant shall immediately undertake corrective action to comply with any
requirement of the Regulatory Authority to be found suitable, including, without
limitation, terminating any objectionable or unsuitable employee, provided,
however, that in the event that the corrective action taken is not satisfactory
to such Regulatory Authority, then this Lease shall thereupon immediately cease
and terminate and be of no further force or effect. Unless otherwise directed by
the Regulatory Authorities and provided that Tenant is not in default under this
Lease at the time of such termination, Landlord shall reimburse Tenant for the
unamortized portion of any TI Costs paid for by Tenant. In addition, Tenant
acknowledges that Landlord will hold gaming and liquor licenses in connection
with its operations at the Project. If the employment or continued employment of
any person by Tenant or continued association with Tenant could have a material
adverse effect on any gaming or liquor license, permit or approval held or
sought by Landlord or any Affiliate of Landlord (as determined by Landlord in
good faith), Landlord shall so notify Tenant and Tenant shall take all necessary
action to immediately eliminate such adverse effect. If such material adverse
effect is not eliminated within twenty (20) days after notice from Landlord,
Landlord may terminate this Lease upon ten (10) days written notice to Tenant.
Unless otherwise directed by the Regulatory Authorities and provided that Tenant
is not in default under this Lease at the time of such termination, Landlord
shall reimburse Tenant for the unamortized portion of any TI Costs paid for by
Tenant.
7.9 Restrictive Covenant. During the first seven (7) years of the Lease
Term, Tenant shall not, directly or indirectly, alone or as a partner, joint
venturer member, consultant, franchisor, franchisee, agent or independent
contractor, own or operate any Border Grill or any other Mexican restaurant with
a substantially similar name and/or a deceptively similar concept in the
Restricted Area described on EXHIBIT G (excluding, however, any restaurant in or
for any project owned or controlled by Landlord or any of its Affiliates within
such radius). In addition, if this Lease is terminated prior to the expiration
of the Lease Term for any reason other than a breach of the Lease by Landlord or
pursuant to SECTION 2.3. SECTION 2.4, SECTION 3.3, ARTICLE 17 or ARTICLE 18
below, Tenant shall not, directly or indirectly, alone or as a partner, joint
venturer, member, consultant, franchisor, franchisee, agent or independent
contractor, own or operate any Border Grill restaurant that is not open for
business at the time of such termination in the Restricted Area for a period of
one (1) year. Tenant acknowledges that the restrictions contained in this
Section are reasonable in scope and duration and are necessary to protect
Landlord. If any
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provision of this Section, as applied to any party or to any circumstance, is
adjudged by a court to be invalid or unenforceable, the same will in no way
affect any other circumstance or the validity or enforceability of the remainder
of this Lease. If any such provision, or any part thereof, is held to be
unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination shall have
the power to reduce the duration and/or area of such provision, and/or to delete
specific words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced. The parties agree and acknowledge that the
breach of this Section will cause irreparable damage to Landlord and upon breach
of any provision of this Section, Landlord shall be entitled to injunctive
relief, specific performance or other equitable relief; provided, however, that
the foregoing remedies shall in no way limit any other remedies which Landlord
may have at law or in equity.
7.10 Landlord Comps. Tenant agrees that Landlord may "comp" its guests,
officers, directors or employees or those of its Affiliates at Tenant's
restaurant. Landlord shall be entitled to the following:
(a) $50,000 of complimentary item free of charge during each Lease
Year (the "COMP THRESHOLD"); provided, however, that no more than $4,175
of the total Comp Threshold (the "MONTHLY COMP LIMIT") shall be used by
Landlord during any month. Notwithstanding the preceding sentence, if
Landlord exceeds the Monthly Comp Limit any month during a Lease Year, and
at the end of such Lease Year the Comp Threshold has not been reached
("UNUSED COMP THRESHOLD"), Tenant shall pay to Landlord with the annual
adjustment to Percentage Rent, an amount equal to ninety percent (90%) of
the Unused Comp Threshold but not exceeding the aggregate amount that
Landlord paid Tenant for comps under this SECTION 7.10(a) in all months
when the Monthly Comp Limit was exceeded during such Lease Year. The Comp
Threshold shall be reduced prorata for any Permitted Closure Period.
(b) After the Comp Threshold has been reached in a given LEASE YEAR
or during any month in which the Monthly Comp Limit has been reached,
Tenant shall bill Landlord for food and beverage items provided on a
complimentary basis at an amount equal to ninety percent (90%) of the
retail price charged by Tenant for such food and/or beverage items.
Payment for food and beverages provided under this SECTION 7.10(b) shall
be made in accordance with EXHIBIT F.
Gratuities on all complimentary items shall be paid directly by the guest,
and shall not be charged to Landlord, except, however, pursuant to SECTION 7.11
if such gratuities are room charges. Landlord shall pay the applicable taxes on
all complimentary items provided under this SECTION 7.10. Taxes and gratuities
shall not be applied toward the Comp Threshold or subject to the ten percent
(10%) discount. Any charges to Landlord for complimentary items under this
SECTION 7.10 shall be billed by Tenant and paid by Landlord in the manner
described in EXHIBIT F.
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Landlord shall designate patrons who are to receive complimentary food
and/or beverages either by (i) giving Tenant reasonable advance notice of the
patron's visit to the Restaurant (which notice shall be given by employees
authorized to do so in writing by Landlord and shall set forth any limitations
on any complimentary food and beverage) or (ii) written notice after the
patron's visit, in which event Landlord and Tenant shall make the appropriate
adjustment to any room charge made by such patron or other adjusting payments.
7.11 Room Charges. Guests of the Project and Landlord's Affiliates shall
be entitled to bill charges for services and food and beverage service and
gratuities at Tenant's restaurant to their rooms only if Tenant's point of sale
system is compatible with and capable of interfacing with Landlord's point of
sale system for the Project, in Landlord's sole judgment. Any connection to
Landlord's point of sale system shall be at Tenant's expense and subject to any
restrictions and procedures established by Landlord. Any room charges shall be
paid by Landlord to Tenant in accordance with accounting procedures reasonably
established by Landlord. Information obtained by Landlord as a result of any
room charges shall be held in strict confidence as provided in SECTION 5.6
above.
7.12 Beverage Providers. Tenant acknowledges that from time to time
Landlord may agree to utilize certain designated brands of the beverage items
listed on EXHIBIT H on a company-wide basis (e.g., Landlord may contract with a
selected manufacturer of carbonated beverages to utilize such manufacturer's
brands). Upon receipt of a notice specifying any such beverage brand choice,
Tenant agrees to honor such brand choice and use only the selected product,
provided that Tenant shall be permitted to serve its own specialty beverages
including its own make of any mix.
7.13 Complimentary Rooms. During the Lease Term, Landlord shall provide to
members, managers and employees of Tenant and/or its designated Affiliate who
travel to Las Vegas, Nevada for business related to the Premises, complimentary
rooms in, at Landlord's discretion, the Project or one of the other hotels owned
by Landlord or its Affiliates, provided that there is space available in such
hotels on the night of the visit, and provided further that following the Rent
Commencement Date the number of complimentary room nights provided to Tenant in
each Lease Year (prorated for any partial Lease Year) shall not exceed one
hundred eighty (180). Tenant shall be liable for all taxes on any complimentary
rooms provided pursuant to this SECTION 7.13 and all incidental charges, which
amounts shall be paid within ten (10) days after receipt of an invoice therefor.
ARTICLE 8
INSURANCE
8.1 Tenant's Insurance. Tenant agrees, at Tenant's expense, to maintain
the following insurance policies during the entire Lease Term:
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(a) A policy of comprehensive public liability and property damage
insurance providing coverage against liability for injury or death to
persons and for property damage occurring in or about the Premises. Such
liability insurance shall be a broad form comprehensive, general liability
policy, including but not limited to contractual liability, in an amount
of not less than Ten Million Dollars ($10,000,000.00). Landlord agrees
that Tenant may satisfy insurance coverage limits over $1,000,000.00 by
means of an excess liability policy;
(b) A policy of plate glass insurance covering all plate and other
glass in the Premises;
(c) A policy providing fire and extended coverage, vandalism,
malicious mischief, sprinkler leakage and special extended coverage
insurance in an amount adequate to cover the full cost of replacement of
all personal property, inventory, decorations, trade fixtures,
furnishings, equipment and other contents in the Premises. Such insurance
shall be in an amount equal to the current replacement value of the
property required to be insured;
(d) A policy of business interruption insurance; and
(e) A policy of products liability insurance in form satisfactory to
Landlord and in the amount of not less than One Million Dollars
($1,000,000.00).
All such insurance policies shall, to the extent applicable, name Landlord as an
additional insured (as well as such other persons, firms or corporations as
Landlord may designate) or an additional loss payee, and shall be written by one
or more responsible insurance companies licensed to do business in Nevada with a
rating of AVII or better as rated in the most recent edition of Best's Insurance
Guide (or similar rating service if such guide is no longer published). Such
policies shall also include an endorsement requiring the company writing such
policy to give Landlord at least twenty (20) days writing in advance of any
cancellation or lapse of such policy or the effective date of any reduction in
the amount of coverage under such policy. All public liability, property damage,
and other casualty insurance policies obtained by Tenant pursuant to this
SECTION 8.1 shall be written as primary insurance and not contributing with
separate coverage which Landlord may carry. The insurance required by this
SECTION 8.1 may be covered by general policies covering all of Tenant's
locations. Prior to the Commencement Date, Tenant shall furnish Landlord with
certificates of insurance showing that insurance meeting the requirements of
this Section has been obtained and fully paid for by Tenant. Similar
certificates of insurance as to renewal policies shall be provided to Landlord
at least fifteen (15) days prior to the expiration of any policy, if requested.
The limits of the public liability insurance required to be maintained by Tenant
under this Lease shall in no way limit or diminish Tenant's liability under
Article 16 hereof and such limits shall be subject to increase at any time and
from time to time during the Lease Term if Landlord, in the exercise of
reasonable discretion, deems such an increase necessary for Landlord's adequate
protection.
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8.2 Landlord's Insurance. Landlord shall procure and maintain at its
expense in full force and effect, public liability and property damage insurance
in types of coverages and amounts as are customarily carried by operators of
similar casino facilities on and about the Las Vegas strip.
8.3 Waiver of Subrogation. Landlord and Tenant each hereby waives any and
all rights of recovery against the other or against the officers, employees,
agents and representatives of the other, on account of loss or damage occasioned
to such waiving party, or its property or any property of others under its
control to the extent that such loss or damage arises from any risk generally
covered by fire and extended coverage insurance, whether or not such an
insurance policy is maintained or there are insurance proceeds sufficient to
cover the loss. Landlord and Tenant shall each, upon obtaining the respective
policies of insurance required under this Lease, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is contained
in this Lease and obtain from the respective carriers an endorsement waiving any
right of subrogation in favor of the insurer.
ARTICLE 9
TAXES
9.1 Additional Taxes. In addition to all other amounts which Tenant is
required to pay under this Lease, Tenant shall pay before delinquency:
(a) All taxes and assessments levied against fixtures, equipment and
personal property of Tenant installed or located in the Premises; and
(b) Any and all taxes, assessments or other charges of any kind
imposed by any federal, state, county, municipal or other governmental
body or agency and payable by Landlord or Tenant (excluding income,
franchise, inheritance or estate taxes), whether or not customary or
within the contemplation of the parties, with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises.
Tenant, at its expense, shall have the right, in Landlord's name if
appropriate, to contest or review by legal proceedings, or in such other manner
as it may deem suitable (which, if instituted, Tenant shall conduct at its own
expense, and free of any expense imposed on Landlord) any tax, assessment or
other governmental imposition or charge described in this SECTION 9.1. Tenant
may defer payment of a contested item, unless such deferment would result in the
enforcement of a lien on the Premises or the Project or the imposition of a
criminal penalty on Landlord, in which event, Tenant shall promptly pay such
contested item or items or cause them to be paid under protest if at any time
the Premises or Project or any part thereof shall be in danger of being
forfeited or otherwise lost, or if Landlord shall be subjected to criminal
liability
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for such non-payment. The legal proceedings herein referred to shall include
appropriate proceedings to review tax assessments and appeals from orders
therein and appeals from any judgments, decrees, or orders. If there shall be
any refund with respect to any contested item based on a payment by Tenant,
Tenant shall be entitled to the entire amount thereof. Landlord shall promptly
cooperate with Tenant, execute such documents and take such actions as may be
reasonably necessary, (but without the imposition of cost or expense on
Landlord) to enable Tenant to properly contest any matter contemplated in this
Section 9.1.
9.2 Sales Tax. Tenant agrees to pay to Landlord a sum equal to the amount
which Landlord is required to pay or collect by reason of any privilege tax,
sales tax, gross proceeds tax, rent tax, or like tax levied, assessed or imposed
by any federal, state, county or municipal governmental authority, or any
subdivision thereof, upon any rent or other charges required to be paid under
this Lease. Such sum shall be paid simultaneously with the rental payment or
other charge upon which such sum is based.
9.3 CET. Tenant agrees that it will collect any applicable CET associated
with the sale of food, beverage or merchandise from the Premises and will pay
the same to the taxing authority on a timely basis, or if Tenant is not
permitted to pay the same directly, shall remit the CET due to Landlord no later
than the 10th day of the month following the month in which the taxable sales
occurred. Tenant shall make all documents containing information relative to the
computation of the CET available for inspection upon prior written notice by
representatives of Landlord and the Nevada Tax Commission or Nevada Gaming
Commission. This obligation shall continue beyond the Lease Term as to CET
assessed during the time Tenant operated the Premises. Tenant shall be liable
for any and all CET, interest and penalties found to be payable in connection
with the sale of food, beverage or merchandise from the Premises as a result of
understated taxable revenues, insufficiency of records or untimely payments
unless Tenant is not permitted to pay the CET directly to the taxing authority,
then if Tenant has timely remitted the payment to Landlord as required in this
Section, Tenant shall not be liable for the untimely payment of the CET to the
taxing authority.
ARTICLE 10
SERVICES
10.1 Services Provided. Provided Tenant is not in default under this
Lease, Landlord shall provide Tenant with the following services (collectively,
the "SERVICES") from the date on which Tenant opens for business and during the
Lease Term:
(a) Heating and air conditioning during the customary periods of the
year therefor during the hours of operation required hereunder when and to
the same extent as furnished to other comparable portions of the Project.
Tenant acknowledges that Tenant shall have access to the controls for
heating and air
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conditioning located within the Premises, but might not have access to the
controls for heating or air conditioning located outside the Premises and
shall not attempt to make any changes to such controls located outside the
Premises;
(b) Customary gas, water and sewer service;
(c) Electricity in sufficient amounts to provide ordinary lighting
and to operate the restaurant equipment to be installed in the Premises
and approved by Landlord;
(d) One (1) telephone and local telephone service. Long distance
telephone charges shall be Tenant's responsibility;
(e) Garbage service at the receptacles designated by Landlord; and
(f) Pay telephone within the Premises (the revenue from which shall
belong to Landlord).
Landlord's obligation to furnish Services shall be conditioned upon the
availability of adequate energy sources. Landlord shall confer with Tenant and
have the right to reduce such Services as required by any mandatory or voluntary
fuel or energy conservation program. Landlord may, from time to time, prescribe
reasonable rules and regulations for implementation of this Section.
10.2 Service Charges. As compensation for the Services, Tenant agrees to
pay Landlord an amount equal to one percent (1%) of annual Gross Sales for each
Lease Year (the "SERVICE CHARGE") payable on a monthly basis together with
Minimum Rent, prorated for any partial Lease Year. The Service Charge shall be
paid regardless of the actual cost of providing such Services.
10.3 Service Interruption. Landlord shall not be liable in damages for any
failure or interruption of any utility service to the Premises, except to the
extent that any failure or interruption arises from the gross negligence or
willful misconduct of Landlord. No failure or interruption of utility service
for any reason other than as set forth in SECTION 10.1 shall entitle Tenant to
terminate this Lease. Landlord shall not be obligated to provide any service or
maintenance or to make any repairs pursuant to this Lease when such service,
maintenance or repair is made necessary because of any wrongful act or misuse of
any utility service by Tenant, Tenant's agents, employees, servants,
contractors, subtenants or licensees. Landlord reserves the right to stop any
Service when Landlord deems such stoppage necessary, whether by reason of
accident or emergency, or for repairs or improvements or otherwise, provided,
that any such period of stoppage shall be only so long as is reasonably required
to effect any necessary repairs or maintenance. Landlord shall not be obligated
to inspect the Premises and shall not be obligated to make any repairs or
perform any maintenance hereunder unless first notified of the need thereof in
writing or, in an emergency, verbally, followed by a written confirmation, by
Tenant. Upon receipt of any such notice, Landlord shall commence any required
repair work of an emergency
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nature as soon as possible and work as expeditiously as possible to complete
such work. All other work of a non-emergency nature shall be performed as
promptly as possible. If Landlord shall fail to commence repairs or maintenance
to be performed by Landlord and not the service provider promptly after said
notice, then Tenant shall be entitled to an equitable abatement of Minimum Rent
for so long as such failure continues and the Lease Term shall be extended for a
period equal to the period of rent abatement.
ARTICLE 11
REPAIRS AND MAINTENANCE
11.1 Repairs and Maintenance by Landlord. Landlord agrees, at its sole
expense, to keep in good structural and cosmetic order, condition and repair all
common areas surrounding the Premises and the exterior walls, floor (but not
floor coverings) and roof of the Premises except for reasonable wear and tear
and except for any damage thereto caused by any act or negligence of Tenant or
its agents, employees, servants, contractors, subtenants or licensees. Landlord
agrees to maintain the Project (other than those portions of the Premises for
which Tenant is responsible and portions of the Project which are maintained by
other tenants or third parties) as a first class hotel and casino and to keep
the Project in compliance with all applicable building codes and regulations to
the extent necessary to insure Tenant's safe and continued use of the Premises.
Landlord shall make any of the foregoing repairs as expeditiously as possible
after Landlord has received written notice from Tenant that such repairs need to
be made and within thirty (30) days of receipt of such notice unless such
repairs cannot, in the exercise of reasonable diligence, be completed in thirty
(30) days, in which event Landlord shall commence such repairs within thirty
(30) days and diligently pursue the same to completion. All other items of
maintenance and repair for the Premises are the sole responsibility and expense
of Tenant.
11.2 Repairs and Maintenance by Tenant. Tenant agrees, at Tenant's
expense, to keep the Premises and any special equipment, fixtures or facilities
(including, but not limited to grease traps located outside the Premises) in a
clean, safe and sanitary condition. Tenant agrees to immediately replace broken
glass in exterior and interior windows and doors with glass of the same quality,
and, on Landlord's request, to remove any encroachments maintained or authorized
by Tenant on any public place without Landlord's prior written consent. Tenant
shall not overload any floor or facility, throw any foreign substances in
plumbing fixtures or use the plumbing fixtures for any purpose other than that
for which constructed. Tenant also agrees to keep the Premises (including
exterior entrances, store fronts and the interior of exterior walls), all
partitions, doors, fixtures and equipment (including lighting, heating and
plumbing fixtures and any separate air conditioning system) in good order,
condition and repair and in compliance with all applicable laws, rules and
regulations. The cost of maintenance and repair of that part of any wall shared
with other tenants of the Project shall be borne equally by all tenants sharing
such wall; provided, however, Tenant shall be solely responsible for repairs to
such shared walls necessitated by the negligence or intentional acts or
omissions of Tenant its agents, employees or licensees. If Tenant refuses or
neglects to commence repairs within ten (10) days after receipt of
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written demand from Landlord, or adequately to complete such repairs within a
reasonable time not to exceed thirty (30) days after such demand, Landlord, in
addition to any other rights and remedies contained or available to Landlord at
law or in equity, may enter the Premises and make the repairs, at Tenant's
expense and without liability to Tenant for any loss or damages which may accrue
to Tenant's stock or business by reason of such entry and repair work. Landlord,
at its cost, may enter into repair or maintenance contracts covering the
heating, air conditioning and ventilation systems located on the Premises and
other parts of the Project.
ARTICLE 12
ALTERATIONS AND IMPROVEMENTS
12.1 Alterations and Improvements. Except for (i) non-structural
alterations not altering the exterior appearance of the Premises and not
exceeding $25,000 for any individual item and $100,000 in the aggregate during
any Lease Year and (ii) additions to or renovations of kitchen equipment, Tenant
may not make any alterations, improvements, renovations, additions, or utility
installations ("IMPROVEMENTS") in, on or to the Premises, the exterior of the
Premises, the exterior walls, the roof, the storefront, or any structural,
mechanical or electrical component without Landlord's prior written consent. Any
Improvements (other than removable trade fixtures, equipment, furnishings, signs
and graphic displays) approved by Landlord shall be at the sole cost and expense
of Tenant, and shall be made promptly and in good and workmanlike manner and in
compliance with all applicable insurance requirements and with all applicable
permits, authorizations, building regulations, zoning laws and all other
governmental rules, regulations, ordinances, statutes and laws, now or hereafter
in effect pertaining to the Premises or Tenant's use thereof. Any Improvements
(other than removable trade fixtures, equipment, furnishings, signs and graphic
displays) made by Tenant shall at Landlord's option become the property of
Landlord upon the expiration or sooner termination of this Lease. However, as a
condition to granting its consent to Tenant to make any Improvement, Landlord
shall have the right to require Tenant to remove such Improvements, at Tenant's
sole cost and expense, upon the termination of this Lease and to surrender the
Premises in the same condition as it was prior to the making of any or all such
Improvements (ordinary wear and tear excepted) if Landlord in the exercise of
its reasonable judgment believes that such Improvements are specific to Tenant's
use and/or would materially limit Landlord's use of reletting of the Premises.
12.2 Trade Fixtures. Tenant may bring trade fixtures into the Premises and
may remove any and all removable, trade fixtures, equipment, furnishings, signs
and graphic displays (but not flooring) and other personal property of Tenant
whether or not affixed to the Premises, at any time Tenant is not in default
under this Lease, subject to any applicable grace or cure period. Tenant agrees
to repair any damage to the Premises caused by such removal. All fixtures other
than those described above which may be made or installed by either Landlord or
Tenant shall remain upon the Premises and shall become the property of Landlord
upon termination of this Lease for any reason, unless Landlord requests removal
of a particular item by Tenant as provided in SECTION
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12.1 above, in which case Tenant shall remove the item and restore the Premises
to the condition they were in prior to installation of the particular item. Upon
reasonable request of Tenant, Landlord agrees to execute and deliver any
documents necessary or advisable, for inclusion in Tenant's records or
otherwise, to evidence Landlord's consent to removal from the Premises of any
personal property or fixtures leased to or be leased to Tenant by any third
party.
12.3 Liens. Tenant agrees to keep the Premises and the Property free from
any liens arising out of any work performed on the Premises or materials
furnished to the Premises and from any claim, liens, tax lien or levy,
attachment, garnishment or encumbrance arising directly or indirectly from any
obligation, action or inaction of Tenant whatsoever. Tenant shall have twenty
(20) days after notice of the filing for record of any lien or tax lien, within
which to obtain the release and discharge thereof or to bond over the lien at
Tenant's sole cost and expense. Landlord may, at any time and in accordance with
applicable law, post notices of non-responsibility on the Premises and Tenant
shall give Landlord at least ten (10) days prior written notice of the
commencement of any work on the Premises.
ARTICLE 13
ADVERTISING
13.1 Advertising.
(a) Tenant may not install, change or modify its signs at any time without
Landlord's prior written consent, which shall not be unreasonably withheld or
delayed. Tenant agrees to properly maintain all approved signs. Upon expiration
of the Lease, Tenant agrees promptly to remove all signs and other advertising
media placed in and around the Premises by Tenant. Tenant shall repair all
damage caused to the Project or Premises by such removal, including proper
"capping off" of electrical wiring. Tenant agrees not to use any advertising
medium. such as flashing lights, searchlights, loudspeakers, phonographs,
radios, or televisions, which can be heard or experienced outside the Premises.
Tenant agrees not to display, paint or place any handbills, bumper stickers, or
other advertising materials on any vehicle in the parking area of the Project,
or to distribute any handbills or other advertising materials within or around
the Project.
(b) Landlord agrees that it will afford within the Project like
advertising for the Premises as is afforded by Landlord to other similar
restaurants (whether owned by Landlord or leased to tenants) within the Project.
Landlord also agrees that it will promote the Premises to its guests in a like
manner as it promotes other similar restaurants in the Project in promotional
and check-in materials, room books and other internal marketing materials. For
purposes of this SECTION 13.1(b), the House of Blues shall not be considered a
similar restaurant.
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ARTICLE 14
RULES AND REGULATIONS
14.1 Rules and Regulations. Landlord may promulgate such reasonable rules
and regulations relating to the use of the Premises and the Project as Landlord
may deem appropriate and for the best interests of the Project, provided such
rules and regulations do not expressly conflict with Tenant's rights under this
Lease. Such rules and regulations shall be binding upon Tenant upon delivery of
a copy thereof to Tenant. The rules and regulations may be amended by Landlord
from time to time, subject to the standards set forth above, with advance
notice, and all such amendments shall be effective upon delivery of a copy to
Tenant.
ARTICLE 15
ASSIGNMENT AND SUBLETTNG
15.1 Assignment and Subletting. Tenant may assign its interest in this
Lease or sublet all or any portion of the Premises (a "TRANSFER") only with the
prior written consent of Landlord, which consent may be withheld in Landlord's
sole and absolute discretion, unless another standard is specifically provided
for herein. Further, Tenant acknowledges that Landlord's decision to lease the
Premises to Tenant is based, in part, on a review of the individuals and
entities comprising Tenant (and the individuals comprising any entities having
an ownership interest in Tenant), all of which are listed on EXHIBIT E.
Therefore, except as provided in SECTION 15.2 below, if Tenant is a corporation
which is not publicly traded or a partnership, limited liability company or
other entity, the issuance of any additional stock and/or the transfer,
assignment or hypothecation of any stock or interest in such corporation,
partnership, limited liability company or other entity, directly or indirectly,
to any individual or entity other than those listed on EXHIBIT E, shall be
deemed a Transfer within the meaning of this ARTICLE 15; provided, however, that
in the event any of the foregoing events is proposed with respect to any Person
that is a passive investor member of Tenant or any Person owning a direct or
indirect controlling interest in such passive investor member, then Landlord
agrees that it shall not unreasonably delay or withhold its consent to any such
Transfer. Any attempted Transfer without Landlord's prior written consent in
accordance with the applicable standard set forth herein shall be void, shall
confer no rights upon any third person and at Landlord's option shall constitute
a material, incurable event of default under this Lease. Tenant shall provide
Landlord with any and all information requested by Landlord in connection with a
proposed Transfer. Each Transfer to which Landlord has consented shall be
evidenced by an instrument in writing in form reasonably satisfactory to
Landlord and shall be executed by the assignor or sublessor and by the assignee
or subtenant (each, a "TRANSFEREE"). Each Transferee that is an assignee or
sublessee of Tenant's interest as lessee under the Lease shall also agree in
writing to assume, to be bound by, and to perform the terms, covenants, and
conditions of this Lease to be done, kept, and performed by Tenant. One executed
copy of such written instrument shall be delivered to Landlord. No such Transfer
shall
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release Tenant from Tenant's obligations to Landlord under this Lease.
Landlord's consent to a Transfer on one occasion shall not be deemed a consent
to any subsequent Transfer.
15.2 Certain Excluded Transactions. Notwithstanding the definition of
Transfer or any prohibitions or limitations on assignments or transfers set
forth in this Lease, the following shall not be deemed to be an assignment or
transfer:
(a) any transfer of Tenant's stock or ownership interest by Vantage
Bay Group, Inc., provided that the assignee does not own or operate any
project (or own any interest, directly or indirectly, in any entity which
owns a project) that competes with the Project; or
(b) any transfer of Tenant's stock or ownership interests between
Susan Feniger ("FENIGER") Mary Sue Milliken ("MILLIKEN") and Kevin Finch
("FINCH") or their spouses, domestic partners, affiliated entities, heirs,
or beneficiaries of trusts controlled by Feniger and/or Milliken and/or
Finch, provided that together Feniger and Milliken, and their spouses,
domestic partners, affiliated entities, heirs and/or beneficiaries of
trusts controlled by Feniger and/or Milliken (but not Finch) own, directly
or indirectly, and control at least a fifty-one percent (51%) interest in
Tenant, and, provided further that Feniger and/or Milliken remain active
in the management and operation of Tenant.
15.3 Transfers Not Requiring the Consent of Lessor. Tenant shall have the
right, upon prior notice to Landlord, but without Landlord's prior written
consent to assign this Lease or sublet the Premises to any direct or indirect
wholly-owned subsidiary, company or entity of Tenant or an affiliate controlled
by Tenant and/or Feniger and/or Milliken, subject, however to the following
express conditions:
(a) No such assignment shall be deemed to release Tenant from
continuing liability hereunder unless at the time of such assignment
Landlord shall agree in writing to release Tenant, which agreement may be
given or withheld in Landlord's sole and absolute discretion;
(b) Any assignee must assume in writing for the benefit of Landlord
all of the obligations of Tenant under this Lease; and
(c) The operation of the Premises by any such assignee shall be the
same type of restaurant as may then be operated by Tenant.
15.4 Landlord's Option as to Subject Space. Notwithstanding anything to
the contrary contained in this ARTICLE 15, Landlord shall have the option, by
giving written notice to Tenant within thirty (30) days after receipt of any
request for approval of a Transfer in which the Transferee is an assignee or
sublessee of Tenant's interest as lessee under the Lease (other than a Transfer
permitted by SECTION 15.3), to (i) recapture the subject space, or (ii) take an
assignment
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or sublease of the subject space from Tenant. Such recapture, or sublease or
assignment shall cancel and terminate this Lease, or create a sublease or
assignment, as the case may be, with respect to the subject space as of the
effective date of the proposed Transfer until the last day of the term of the
proposed Transfer, and Tenant shall be relieved of all liability under this
Lease arising thereafter for the subject space. In the event of a recapture by
Landlord, if this Lease shall be canceled with respect to less than the entire
Premises, the rent reserved herein shall be prorated on the basis of the number
of rentable square feet retained by Tenant in proportion to the number of
rentable square feet contained in the Premises, and this Lease as so amended
shall continue thereafter in full force and effect, and upon request of either
party, the parties shall execute written confirmation of the same.
15.5 Concessionaires. Tenant agrees not to permit any business to be
operated in or from the Premises by any unaffiliated licensee or other
unaffiliated concessionaire without the prior written consent of Landlord, which
consent may be withheld in Landlord's sole and absolute discretion.
15.6 Assignment in Bankruptcy. In the event that in any bankruptcy
proceeding, whether voluntary or involuntary, Tenant, as debtor in possession,
or a trustee for Tenant desires to assign this Lease or any interest of Tenant
herein, then such assignment shall require the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed.
ARTICLE 16
INDEMNITY
16.1 Indemnification. Landlord and its agents, employees, officers, and
directors shall not be responsible or liable for, and Tenant agrees to
indemnify, defend and hold harmless Landlord and its agents, employees,
officers, and directors for, from and against, all claims, damages, expenses
(including reasonable attorneys' fees), liabilities and judgments arising from
(i) any injury to persons, loss of life or damage to property occurring within,
on or about the Premises, (ii) the use, non-use, condition or occupation of the
Premises by Tenant or its employees, agents or invitees or (iii) the negligence
or willful misconduct of Tenant or its employees, agents or invitees; provided,
however, that with respect to the foregoing clauses (i) and (ii) Tenant shall
not be obligated to indemnify, defend or hold harmless Landlord to the extent
that any claim, damage, expense, liability or judgment arises from the gross
negligence or willful misconduct of Landlord or any employee or agent of
Landlord, or Landlord's breach of this Lease. The provisions of this Section
shall survive the expiration or sooner termination of this Lease with respect to
any claims or liability occurring prior to such expiration or termination.
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ARTICLE 17
EMINENT DOMAIN
17.1 Entire or Substantial Taking. If title to all or a substantial
portion of the Premises is taken for any public or quasi-public use under any
statute or by right of eminent domain, or by purchase in lieu of condemnation,
so that a reasonable amount of reconstruction of the Premises will not result in
the Premises being reasonably suited for Tenant's continued occupancy for the
uses and purposes for which the Premises are leased, this Lease shall terminate
as of the date that possession of said Premises, or part thereof, is taken.
17.2 Partial Taking. Except as provided in SECTION 17.3, if any part of
the Premises are taken and the remaining part (after reconstruction of the then
existing Project) is suitable, as determined by Tenant in its reasonable
discretion, for Tenant's continued occupancy for the purposes and uses for which
the Premises are leased, this Lease shall terminate as to the part so taken as
of the date that possession of such part of the Premises is taken, and the
Minimum Rent shall be equitably reduced. Landlord shall make such repairs and
alterations to the Premises as may be reasonably necessary to restore the part
not taken to useful condition. A just and proportionate part of the Minimum Rent
shall be abated during such restoration if there is a material interference with
Tenant's business.
17.3 Election to Terminate. If more than thirty-three percent (33%) of
the Floor Area of either the Project or the Premises is taken, either Landlord,
or in the case of the Premises only Tenant, may terminate this Lease upon sixty
(60) days' notice to the other party without regard to the provisions of SECTION
17.2.
17.4 Disposition of Proceeds. All compensation awarded or paid upon a
total or partial taking of the fee of the Premises shall belong to Landlord,
whether such compensation is awarded or paid as compensation for diminution in
value of the leasehold or the fee. Landlord shall not be entitled to any
separate award made to Tenant for loss of business, depreciation to, and cost of
removal of stock and fixtures so long as such award does not diminish the
compensation paid to Landlord.
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ARTICLE 18
DAMAGE OR DESTRUCTION
18.1 Damage or Destruction: Landlord to Rebuild. If the Premises are
partially or totally destroyed by fire or other casualty insurable under
Landlord's fire and extended coverage insurance so as to become partially or
totally untenantable, Landlord agrees to rebuild and repair the Premises as
provided in SECTION 18.3, unless Landlord elects not to rebuild as provided in
SECTION 18.2.
18.2 Option to Terminate. If it so happens that:
(a) Thirty-three percent (33%) or more of either the Premises
or the Project is destroyed or damaged by fire or other casualty
insurable under Landlord's fire and extended coverage;
(b) Either the Premises or the Project is destroyed to the
extent of at least thirty-three percent (33%) of the replacement cost
thereof;
(c) Either the Premises or the Project is partially or totally
destroyed by a cause or casualty other than those covered by Landlord's
fire and extended coverage insurance; or
(d) Either the Premises or the Project or any portion thereof
is declared unsafe or unfit for occupancy by any governmental authority
and repairs are thereby required;
then, in any such event, Landlord may, if Landlord elects, rebuild or put the
Premises in good condition and fit for occupancy within a reasonable time after
such destruction or damage, or Landlord may give notice in writing to Tenant not
later than thirty (30) days after any such damage or destruction terminating
this Lease. If Landlord elects to rebuild or put the Premises in good condition
and fit for occupancy, then Tenant shall be entitled to an equitable abatement
of rent for the period of time that Tenant is unable to operate in the Premises
as a result of such rebuilding, and the Lease Term shall be extended for an
amount of time equal to such period of rebuilding.
18.3 Portions to be Rebuilt by Landlord and Tenant. Landlord's
obligation to rebuild (should Landlord elect or be obligated to repair or
rebuild) shall be limited to the Premises, as originally provided to Tenant, and
Tenant, at Tenant's expense, shall replace and fully repair all of Tenant's
exterior signs, trade fixtures, equipment, display cases and other installations
originally installed by Tenant. All insurance proceeds payable under Landlord's
fire and extended coverage risk insurance shall be payable solely to Landlord,
and Tenant shall have no interest in such proceeds.
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18.4 Non-Liability. Tenant shall not be entitled to any compensation or
damages from Landlord for loss of the use of the whole or any part of the
Premises, the Project, Tenant's personal property or any inconvenience or
annoyance caused by such damage, repair, or reconstruction. Notwithstanding the
destruction of or injury to the Premises or any part of the Premises, whether or
not the same are rendered untenantable or unfit for occupancy, Tenant shall have
no right to quit and surrender possession and shall have no right to any
abatement of rent, except as specifically provided in SECTION 18.5.
18.5 Operations During Reconstruction Period. During any period of
repair and reconstruction, the Minimum Rent provided in SECTION 4.1 shall be
abated proportionately with the degree to which Tenant's use of the Premises is
impaired, such abatement to commence with the date of damage or destruction and
to continue throughout the period of repair. Tenant agrees to continue the
operation of Tenant's business on the Premises during any such period to the
extent reasonably practicable from the standpoint of prudent business
management. The obligation of Tenant to pay Percentage Rent and Additional Rent
shall remain in full force and effect under all circumstances.
ARTICLE 19
ENTRY BY LANDLORD
19.1 Access to Premises. Landlord and Landlord's employees and agents
may enter the Premises at all times during the period when Tenant is open for
business and at all other times on 24 hour advance notice except in the event of
an emergency without diminution or abatement of rent and without liability to
Tenant (i) to inspect the Premises; (ii) during periods of time when Tenant is
not open for business to the public (whenever possible) to make repairs,
additions or alterations to the Premises, the Project, or any property owned or
controlled by Landlord (and for such purposes Landlord may erect scaffolding and
other necessary structures where reasonably required by the character of the
work to be performed, always providing the entrance to the Premises shall not be
blocked thereby); (iii) to save or post any notice required or permitted under
the provisions of this Lease or by law; (iv) to cure any default by Tenant or to
exercise any remedy of Landlord for a default; and (v) for any other lawful
purpose. For the purpose of providing access as required by this Section,
Landlord shall have a key to unlock all doors on the Premises. If an excavation
is made or is authorized to be made upon land adjacent to the Premises or the
Project, Tenant agrees to permit all necessary persons to enter the premises for
the Purpose of doing such work as Landlord deems necessary to preserve the walls
of the Project from injury or damage. Nothing contained herein shall impose or
be deemed to impose any duty on the part of Landlord to do any work or repair,
maintenance, reconstruction or restoration, which under any provision of this
Lease is required to be done by Tenant; and the performance thereof by Landlord
shall not constitute a waiver of Tenant's default in failing to do the same.
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19.2 Leasing Activities. Landlord, and/or its authorized agents and
representatives, shall be entitled to enter the Premises at all times during the
period when Tenant is open for business and at all other times on 24 hours
advance notice for the purpose of exhibiting the same to prospective purchasers
and, during the last six (6) months of the Term of this Lease, Landlord shall be
entitled to exhibit the Premises for lease.
ARTICLE 20
ABANDONMENT
20.1 Abandonment. Tenant shall not vacate or abandon the Premises at
any time during the Lease Term. If Tenant violates this prohibition or is
dispossessed of the Premises involuntarily, by operation of law or otherwise, in
addition to all other remedies available to Landlord pursuant to this Lease or
at law or in equity, any personal property belonging to Tenant and left on the
Premises shall be deemed to be abandoned, at Landlord's option, or Landlord may
store such property in Tenant's name and at Tenant's expense, without notice to
Tenant.
ARTICLE 21
EVENTS OF DEFAULT BY TENANT
21.1 Event of Default. The following shall constitute events of default
by Tenant under this Lease:
(a) If Tenant fails to pay any rent (including Percentage Rent
and Additional Rent) or any other sums payable pursuant to this Lease
on the date due, whether or not the same shall have been demanded, and
such failure continues for a period of five (5) days after Tenant has
received written notice thereof; provided that if Tenant defaults in
rent payment two (2) times in any calendar year and Landlord has given
Tenant two (2) contemporaneous default notices with respect thereto, no
five (5) day cure period shall apply to any subsequent rent payment
default in that year.
(b) Any assignment of this Lease, sublease of all or any
portion of the premises or transfer of any interest in Tenant other
than as permitted under or in compliance with ARTICLE 15 of this Lease.
(c) if Tenant fails to observe or perform any of the other
covenants or agreements contained in this Lease to be observed or
performed by Tenant; except that if such failure is of a type that can
be cured or corrected by Tenant, then such failure shall not be a
default unless such failure continues for thirty (30) days after
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written notice of breach is given by Landlord to Tenant; and further
except that if such failure is of such a character as to require more
than thirty (30) days to correct, Tenant shall not be in default if
Tenant commences action to correct such failure within the 30-day
period and thereafter, using reasonable diligence, cures such failure;
(d) If Tenant or any guarantor of this Lease shall become
bankrupt, go into receivership, or make an assignment for the benefit
of creditors, or take or have taken against Tenant or any guarantor of
this Lease any proceedings of any kind under any provision of any
federal or state bankruptcy law provided, however, that in the case of
any involuntary proceeding against Tenant, if the same is dismissed
within sixty (60) days of filing then such involuntary proceeding shall
not be an event of default; or
(e) If Tenant shall abandon the Premises, with Tenant's
absence from the Premises for a period of ten (10) consecutive days
(other than during a Permitted Closure Period) to be conclusive
evidence that the Premises have been abandoned.
ARTICLE 22
REMEDIES OF LANDLORD
22.1 Remedies. On any event of default, Landlord, at Landlord's option,
without notice or demand, may do any one or more of the following, in any order,
successively or concurrently, except that in every case, Landlord, in good
faith, shall take all reasonable efforts to mitigate damages:
(a) Landlord may take any action deemed necessary by Landlord,
in Landlord's sole and absolute discretion, to cure the default. Tenant
shall be liable to Landlord for all of Landlord's reasonable expenses
so incurred, as Additional Rent, payable on demand by Landlord to
Tenant.
(b) Landlord may terminate this Lease by written notice to
Tenant of Landlord's election to do so. Upon Landlord's notice of
termination, Landlord may recover from Tenant:
(i) The worth at the time of award of the unpaid
Minimum Rent, Percentage Rent, and Additional Rent which had
been earned at the time of termination;
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(ii) The worth at the time of award of the amount by
which the unpaid Minimum Rent, which would have been earned
after termination until the time of award exceeds the amount
of such rental loss that Tenant proves could be reasonably
avoided;
(iii) The worth at the time of award of the amount by
which the unpaid Minimum Rent for the balance of the term
after the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; and
(iv) Any other amount reasonably necessary to
compensate Landlord for all the detriment proximately caused
by Tenant's failure to perform its obligations under the
Lease, including, but not limited to, the unamortized portion
of any TI Costs paid by Landlord.
The "worth at the time of the award" of the amounts referred in SUBSECTIONS (i)
and (ii) above shall be computed by allowing interest at the lesser of the rate
of 12% per annum or the maximum rate of interest allowed by law. The "worth at
the time of the award" of the amount referred to in SUBSECTION (iii) above shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus 1 percent.
(c) Landlord may without declaring the Lease Term ended,
reenter the Premises and occupy the same, or any portion thereof, for
and on account of Tenant as hereinafter provided, applying any moneys
received first to the payment of such expenses as Landlord may have
paid, assumed or incurred in recovering possession of the Premises,
including costs, expenses, reasonable attorneys' fees, and expenditures
for placing the same in good order and condition, or preparing or
altering the same for reletting, and all other expenses, commissions
and charges paid, assumed or incurred by Landlord in or in connection
with reletting the Premises and then to the fulfillment of the
covenants of Tenant. Any such reletting as provided for herein may be
for the remainder of the Lease Term or for a longer or shorter period.
Such reletting shall be for such rent and on such other terms and
conditions as Landlord, in its sole discretion, deems appropriate.
Tenant shall have no right or authority whatsoever to collect any rent
from such tenants, subtenants or any licensees or concessionaires on
the Premises. In any case, and whether or not the Premises or any part
thereof be relet, Tenant, until the end of what would have been the
Lease Term in the absence of such default, shall be liable to Landlord
and shall pay to Landlord monthly an amount equal to the average amount
due as rent hereunder, less the net proceeds for said month, if any, of
any reletting effected for the account of Tenant pursuant to the
provisions of this subparagraph, after deducting all of Landlord's
expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal
expenses, reasonable attorneys' fees, reasonable expenses of employees,
alteration costs (except costs limited in this Section), and expenses
of
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preparation for such reletting (all said costs are cumulative and shall
be applied against proceeds of reletting until paid in full). Landlord
reserves the right to bring such actions for the recovery of any
deficits remaining unpaid by Tenant to Landlord hereunder as Landlord
may deem advisable from time to time without being obligated to await
the end of the Lease Term for a final determination of Tenant's
account; and the commencement or maintenance of one or more actions by
Landlord in this connection shall not bar Landlord from bringing
subsequent actions for further accruals pursuant to the provisions of
this Section.
(d) Landlord may pursue all rights and remedies of Landlord,
which shall in any event be cumulative and not alternative, and shall
be in addition to any and all rights provided at law or in equity.
For the purposes of determining the Percentage Rent which would be payable to
Landlord by Tenant hereunder subsequent to Tenant's default, the Percentage Rent
for each month of the unexpired term hereof shall be deemed to be an amount
equal to the average of the Percentage Rent paid or payable by Tenant to
Landlord hereunder annually during the three (3) years immediately preceding the
date of default, or such lesser period of time as has occurred since the
Commencement Date.
22.2 Late Charge. If any installment of rent or any other sum payable
by Tenant hereunder is not received by Landlord within five (5) days of the date
when due, a late charge of five percent (5%) of such overdue installment or
other payment shall be immediately and automatically payable by Tenant to
Landlord, without the necessity of delivery of any notice; provided, however,
that Landlord shall give Tenant notice of non-payment and five (5) days from
receipt of such notice to cure such non-payment twice in any twelve (12) month
period before assessing such late fee.
ARTICLE 23
ESTOPPEL CERTIFICATES AND SUBORDINATION
23.1 Estoppel Certificates. Tenant agrees at any time and from time to
time upon not less than ten (10) business days' prior request by Landlord, to
execute, acknowledge and deliver to Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the Lease is in full force and effect as modified and
stating the modifications), stating the dates to which the Minimum Rent and
other charges have been paid in advance, if any, add confirming Tenant's
acceptance of the Premises, the commencement of the Lease Term, the rent
provided under the Lease, and such other matters as Landlord may request, it
being intended that any such statement delivered pursuant to this Section may be
relied upon by any prospective purchaser, mortgagee, beneficiary under a deed of
trust, or assignee of any mortgagee of the Premises or the Project. Landlord
shall not request Tenant
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provide more than two (2) estoppel certificates in any Lease Year unless such
additional estoppels are required in connection with any sale or financing of
the Project.
23.2 Subordination. Tenant agrees upon request of Landlord to
subordinate this Lease and its rights hereunder to the lien of any mortgage,
deed of trust or other encumbrance, together with any renewals, extensions or
replacements thereof, now or hereafter placed, charged or enforced against the
Premises, or any portion thereof, or any property of which the Premises is a
part, provided, however, that any such subordination instrument shall contain
reasonable non-disturbance and attornment provisions in favor of Tenant and
binding on such lender, and to execute and deliver at any time, and from time to
time, upon demand by Landlord, such documents as may be required to effectuate
such subordination.
23.3 Priority Option. In the event that the mortgagee or beneficiary of
any such mortgage or deed of trust elects to have this Lease a prior lien to its
mortgage or deed of trust, then and in such event, upon such mortgagee's or
beneficiary's giving written notice to Tenant to that effect, this Lease shall
be deemed prior in lien to such mortgage or deed of trust, whether this Lease is
dated prior to or subsequent to the date of recordation of such mortgage or deed
of trust.
23.4 Attornment. Tenant shall, in the event any proceedings are
brought for the foreclosure of the Premises or in the event of exercise of the
power of sale under any deed of trust made by Landlord covering the Premises,
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as Landlord under this Lease, provided, however, that such purchaser
shall also agree to grant Tenant reasonable and customary non-disturbance and
mutual attornment rights.
ARTICLE 24
SALE OF PREMISES
24.1 Sale of Premises by Landlord. Landlord may at any time assign or
transfer its interest as Landlord in and to this Lease, or any part thereof, and
may at any time sell or transfer its interest in the fee to the Premises, or its
interest in and to the whole or any portion of the Premises. In the event of any
sale or exchange of the Premises by Landlord and the assignment by Landlord of
this Lease and execution by the new owner of an acceptance and assumption
agreement agreeing to accept the assignment and assume all of Landlord's
obligations hereunder, Landlord shall be and is hereby entirely released of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease occurring after the consummation of such sale or
exchange and assignment.
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ARTICLE 25
HOLDING OVER
25.1 Holding Over. If Tenant should remain in possession of the
Premises after the expiration of the Lease Term with the consent of Landlord and
without executing a new lease, then such holding over shall be construed as a
tenancy from month-to-month, subject to all conditions, provisions and
obligations of this Lease, insofar as the same are applicable to a
month-to-month tenancy, except that Minimum Rent shall increase by fifty percent
(50%). Tenant shall continue in possession until such tenancy is terminated by
either Landlord or Tenant giving written notice of termination to the other
party at least thirty (30) days prior to the effective date of termination.
ARTICLE 26
SURRENDER OF PREMISES
26.1 Surrender. On the last day or sooner termination of the Lease
Term, Tenant agrees to quit and surrender the Premises, broom clean, in good
condition and repair (reasonable wear and tear and damage by acts of God or
other casualties excepted) together with all alterations, additions and
improvements (unless notified otherwise by Landlord) which may have been made
in, to or on the Premises, except trade fixtures installed at the expense of
Tenant. Tenant, on or before the end of the Lease Term, shall remove all of
Tenant's property from the Premises, and all property not removed shall be
deemed abandoned by Tenant. If the Premises are not surrendered at the end of
the Lease Term, Tenant shall indemnify Landlord against loss or liability
resulting from delay by Tenant in so surrendering the Premises including,
without limitation, any claim made against Landlord by any succeeding tenant
based on such delay.
26.2 Merger Upon Surrender. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation of this Lease, shall not automatically
work a merger, and Landlord may either terminate all or any existing
subtenancies or treat the surrender or cancellation as an assignment to Landlord
of any or all such subtenancies.
ARTICLE 27
GENERAL PROVISIONS
27.1 Waivers. One or more waivers by Landlord of any covenant or
condition contained in this Lease or of any breach or default by Tenant shall
not be consumed as a waiver of a subsequent breach or default of the same or of
any other covenant or condition, and the consent or approval by Landlord to or
of any act of Tenant which requires Landlord's consent or approval shall not be
deemed to waive or render unnecessary Landlord's consent or approval to or of
any
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subsequent or similar act by Tenant. The subsequent acceptance by Landlord of
rent or of any other payment shall not constitute a waiver of any concurrent or
preceding breach or default by Tenant of any term, covenant or condition of this
Lease, other than the failure of Tenant to pay the particular rental or payment
so accepted, regardless of Landlord's knowledge of such preceding or concurrent
breach or default at the time of acceptance of such rent or payment. No waiver
shall be effective unless it is in writing and signed by Landlord.
27.2 No Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the rent provided to be paid shall be deemed to
be other than on account of the earliest rent due and payable under this Lease,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent be deemed an accord and satisfaction. Landlord may
accept any such check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy provided in this
Lease.
27.3 Notices. All notices, demands, and statements shall be in writing
and shall be given by personal delivery, facsimile transmission, express
delivery service or by deposit in the United States mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the addresses
appearing in the FUNDAMENTAL LEASE PROVISIONS or at such other place as either
party may designate in writing to the other party. The date notice is given
shall be the date on which the notice is delivered, if notice is given by
personal delivery, facsimile transmission if confirmation of transmission is
made, or express delivery service, or the date of deposit in the mail, if the
notice is sent through the United States mail. Notice is deemed to have been
received on the date on which the notice is delivered, if notice is given by
personal delivery, facsimile transmission or express delivery service, or three
(3) days after deposit in the mail, if the notice is sent through the United
States mail.
27.4 Relationship of the Parties. Nothing contained in this Lease shall
be deemed or construed by the parties or by any third person to create the
relationship of principal and agent, of partnership, of joint venture or of any
association between Landlord and Tenant, and neither the method of computation
of rent nor any other provision contained in this Lease nor any acts of the
parties shall be deemed to create any relationship between Landlord and Tenant
other than the relationship of landlord and tenant.
27.5 Attorneys' Fees. In the event of any action or proceeding brought
by either party against the other under this Lease or any guarantee of this
Lease, the prevailing party shall be entitled to recover attorneys' fees in such
amount as the court or other fact finder may judge reasonable.
27.6 Binding Effect. Subject to all limitations on assignment and
subletting set forth in this Lease, all of the terms and provisions of this
Lease shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties to this Lease.
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27.7 Interest on Past Due Obligations. Any amount due to Landlord
which is not paid when due shall bear interest from the due date until paid at
the rate equal to the lesser of twelve percent (12%) per annum or the maximum
rate allowed by law. Payment of such interest shall not excuse or cure any
default by Tenant under this Lease.
27.8 Severability. If any one or more of the provisions of this Lease
or the applicability of any such provision to a specific situation shall be held
invalid or unenforceable, such provision shall be modified to the minimum extent
necessary to make it or its application valid and enforceable, and the validity
and enforceability of all other provisions of this Lease and all other
applications of such provisions shall not be affected by such determination.
27.9 Entire Agreement: Amendment. This Lease, together with the
attached Exhibits which are an integral part of this Lease, constitutes the
entire agreement between the parties pertaining to the subject matter of this
Lease. All prior and contemporaneous agreements, representations and
understandings of the parties, oral or written, are superseded and merged in
this Lease. No supplement, modification or amendment of this Lease shall be
binding unless in writing and executed by both parties.
27.10 Captions. The captions of the Sections and Articles of this
Lease are for convenience only and shall not be considered or referred to in
resolving questions of interpretation or construction. References in this Lease
to "SECTIONS" and "ARTICLES" are to the various Sections and Articles of this
Lease, unless otherwise noted.
27.11 Construction. The laws of the State of Nevada shall govern the
validity, performance, and enforcement of this Lease. This Lease shall not be
construed either for or against Landlord or Tenant. This Lease shall be
interpreted in an effort to reach an equitable result. Whenever the context may
require, any pronouns used in this Lease shall include the corresponding
masculine, feminine or neuter forms and the singular form of nouns and pronouns
shall include the plural and vice versa. If there is more than one Tenant, the
obligations under this Lease shall be considered the joint and several
obligations of each. Whenever or wherever in this Lease, the consent of Landlord
or Tenant is required, such consent shall not be unreasonably withheld or
delayed, unless otherwise specifically stated herein.
27.12 Time of Essence. Time is of the essence with respect to the
performance of each of the covenants and agreements contained in this Lease.
27.13 Execution of Additional Documents. Landlord and Tenant each agree
to execute such additional documents as may be necessary or appropriate to fully
carry out the provisions of this Lease.
927.14 Time Periods. If the time for the performance of any obligation
or taking of action under this Lease expires on a Saturday, Sunday or legal
holiday, the time for performance or
38
<PAGE> 49
taking such action shall be extended to the next succeeding day which is not a
Saturday, Sunday or legal holiday.
27.15 Recordation. Tenant shall not record, or cause to be recorded,
this Lease or any memorandum of this Lease, without the prior written consent of
Landlord.
27.16 Brokers. The parties warrant that they have had no dealings with
any broker or agent in connection with this Lease, and covenant to pay, hold
harmless and indemnify each other from and against any and all cost, expense or
liability for any compensation, commissions and charges claimed by any broker or
agent with respect to this Lease or the negotiation thereof.
27.17 Quiet Enjoyment. Upon Tenant paying the Minimum Rent and
Additional Rent, and performing all of the covenants, conditions and provisions
on Tenant's part to be observed and performed hereunder, Tenant shall have the
quiet possession of the Premises for the entire Lease Term, subject to all of
the provisions of this Lease.
27.18 Force Majeure. The parties to this Agreement shall be excused
from the performance of any obligation under this Agreement, excluding in the
case of Tenant, the obligation to pay Rent or other sums payable hereunder, in
the event such performance is prevented by reason of a strike, boycott, lockout
or other labor trouble; any storm, fire, earthquake or Act of God; any riot,
civil disturbance, or any act of war or of the public enemy; the shortage,
unavailability or disruption in the supply of labor, materials, fuels or the
disruption of electrical, or other required utility service; any present or
future governmental law, ordinance, order, rule or regulation; or any other
cause or contingency beyond the respective parties' control; but only during
such time as such party is unable due to a specified reason herein to perform
its obligations hereunder.
39
<PAGE> 50
IN WITNESS WHEREOF, this Lease is executed as of the date first-above written.
MANDALAY CORP., a Nevada corporation
By: /s/ illegible
------------------------------------
Its: President
-----------------------------------
"Landlord"
BORDER GRILL LAS VEGAS, LLC,
a Nevada limited liability company
By: TT&T, LLC, a Nevada limited liability
company, Its: Managing Member
By:
-------------------------------------
Susan Feniger, Managing Member
By:
-------------------------------------
Mary Sue Milliken, Managing Member
"Tenant"
ACKNOWLEDGMENTS
STATE OF )
) ss.
County of )
The foregoing instrument was acknowledged before me this
day of , 1998, by , the of Mandalay Corp.,
a Nevada corporation, on behalf of the corporation.
-------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ----------------------
40
<PAGE> 51
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On , before me, , a Notary Public
for the State of California, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand official seal.
-------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ----------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On , before me, , a Notary Public
for the State of California, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand official seal.
-------------------------------------
NOTARY PUBLIC
My Commission Expires:
- ----------------------
41
<PAGE> 52
EXHIBIT A
Description of Project
<PAGE> 53
EXHIBIT A
[Composite First Floor Plan]
This is a conceptual site plan, and Landlord reserves the right to change,
amend, alter or revise this site plan and the Project in its sole discretion.
<PAGE> 54
EXHIBIT B
Site Plan for Premises
<PAGE> 55
EXHIBIT B
[GRAPHIC - Floorplan Upper Level]
<PAGE> 56
[GRAPHIC - Floorplan Pool Level]
<PAGE> 57
EXHIBIT C
WORK LETTER AGREEMENT
LANDLORD: MANDALAY CORP.
TENANT: BORDER GRILL LAS VEGAS, LLC
DATE: November 12, 1998
RECITALS
A. Concurrently with the execution of this Work Letter Agreement (the
"AGREEMENT"), Landlord and Tenant have entered into a lease (the "LEASE")
covering certain leased premises (the "PREMISES") more particularly described in
the Lease. Capitalized terms not defined in this Agreement shall have the
meaning set forth in the Lease.
B. To induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of the Lease apply
hereto) and in consideration of the mutual covenants hereinafter contained,
Landlord has agreed to make certain improvements to the Premises in accordance
with this Agreement. The cost of such improvements shall be paid for by the
parties as set forth below.
AGREEMENT
1. Tenant Improvements. Any reference herein to "TENANT IMPROVEMENTS"
shall include all work to be done in the Premises pursuant to the Tenant
Improvement Plans described in SECTION 2 below, including but not limited to
partitioning, interior doors, floor covering and finishes, millwork reflective
ceiling, electrical fixtures, electrical outlets and switches, telephone
outlets, plumbing fixtures, paint and wall coverings, furniture, trade fixtures
and equipment. Tenant Improvements shall not include (a) the building shell, the
core area (including necessary mechanical, electrical [600-800 amp service]
(including electrical subpanels), plumbing, life safety, exhaust, heating, air
conditioning and ventilation systems included within the building shell),
unpainted exterior drywall or lath and plaster covering the exposed side of all
core walls, core and perimeter columns, sprinklers and other fire-related safety
devices (the "BASE BUILDING IMPROVEMENTS"), all of which shall be provided by
Landlord, at Landlord's expense, as base building improvements or (b) the
furniture, fixtures, equipment and other finish items not included in the Tenant
Improvement Plans (defined below), all of which shall be provided by Tenant, at
Tenant's expense.
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2. Preparation of Tenant Improvement Plans.
2.1 On or before October 30, 1998, Tenant shall cause its
architect or space planner ("TENANT'S ARCHITECT") to prepare a "SCHEMATIC DESIGN
PLAN" which will include the high wall and reflective ceilings and structural
components of the Premises (the "SHELL IMPROVEMENTS") and shall present such
Schematic Design Plan to Landlord for its review at a meeting to occur on or
about October 30, 1998 between Tenant's Architect, Landlord and Landlord's
Architect (the "SCHEMATIC DESIGN MEETING"). At the Schematic Design Meeting,
Landlord and Tenant will agree on any changes to the Schematic Design Plan, and
within ten (10) business days following the Schematic Design Meeting, Tenant
shall cause the Architect to revise the Schematic Design Plan to address such
changes and shall resubmit the same to Landlord. If Landlord objects in writing
to the resubmitted Schematic Design Plan within ten (10) days following its
receipt thereof, Tenant's Architect and Landlord and Landlord's Architect shall
meet and confer to resolve any dispute concerning the Schematic Design Plan.
2.2 On or before November 15, 1998, Landlord shall cause its
architect ("LANDLORD'S ARCHITECT") to prepare "SHELL DRAWINGS" for the Shell
Improvements and shall submit such Shell Drawings to Tenant's Architect. On or
before November 30, 1998, Tenant's Architect shall provide Landlord and
Landlord's Architect with comments and/or proposed changes to the Shell
Drawings, and Landlord, Landlord's Architect and Tenant's Architect shall meet
and confer to address any comments and/or proposed changes to the Shell Drawings
raised by Tenant's Architect.
2.3 On or before the later of forty-five (45) days after
Landlord and Tenant agree on the Schematic Design Plan or fifteen (15) days
after Landlord and Tenant agree on the Shell Drawings, Tenant shall cause its
Architect to prepare the "INTERIOR DESIGN PACKAGE SUBMITTAL" for the interior
design and finish of the Premises (the "FINISH WORK") and shall present the
same to Landlord for its approval, which approval shall generally follow the
same procedure set forth in SECTION 2.1 above.
2.4 The Schematic Design Plan and the Interior Design Package
Submittal shall each be referred to as a "SPACE PLAN" and shall collectively be
referred to as the "SPACE PLANS." The Shell Improvements and the Finish Work
shall collectively comprise the Tenant Improvements. Once approved by Landlord
and Tenant, the Space Plans and Shell Drawings shall be referred to herein as
the *TENANT IMPROVEMENT PLANS."
2.5 Once the Tenant Improvement Plans have been approved, the
Tenant Improvement Plans shall not be changed without the prior approval of
Landlord and Tenant, except as may be required by any governmental authority as
a condition to issuance of a building permit (provided that Tenant shall be
consulted on the manner that any changes required by governmental authority are
implemented and shall have reasonable approval thereof).
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3. Construction of the Tenant Improvements.
3.1 Circus Circus Development Inc. or another contractor
designated by Landlord ("CONTRACTOR") shall construct the Tenant Improvements.
3.2 Landlord shall independently retain Contractor to
construct the Tenant Improvements in accordance with the Tenant Improvements
Plans. Landlord shall have the right to assign to Tenant all warranties and
guaranties from Contractor relating to the Tenant Improvements, and upon such
assignment Tenant hereby waives all claims against Landlord relating to, or
arising out of the construction of, the Tenant Improvements.
3.3 Provided that Tenant and its agents do not interfere with
Contractor's work in the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the Premises for the purpose of
Tenant installing equipment or fixtures not included in the Tenant Improvements.
Prior to Tenant's entry into the Premises as permitted by the terms of this
Section, Tenant shall submit a schedule to Landlord and Contractor, for their
approval, which schedule shall detail the timing and purpose of Tenant's entry.
All provisions of the Lease shall apply to any entry by Tenant under this
Section, other than provisions relating to the payment of Minimum Rent,
Additional Rent and Percentage Rent and provisions relating to the operation of
a restaurant on the Premises.
4. Payment of Cost of the Tenant Improvements.
4.1 Promptly following execution of the Lease, Tenant shall
provide Landlord with adequate financial assurances that it has sufficient funds
to pay all TI Costs (defined below) less the Tenant Allowance.
4.2 Promptly after the Shell Drawings for the Shell
Improvements are complete, Landlord shall provide Tenant with a cost proposal,
which cost proposal shall include, as nearly as possible, the cost of all items
in connection with the design and construction of the Tenant Improvements (the
"PRELIMINARY COST"). Tenant shall have the right to approve or disapprove the
Preliminary Cost Proposal within five (5) business days of the receipt of the
same. Upon such approval, Landlord shall be released by Tenant to purchase the
items set forth in the Preliminary Cost Proposal and to commence the
construction relating to such items. If Tenant timely disapproves the
Preliminary Cost Proposal, Tenant and Landlord shall meet and confer to resolve
any disputes concerning the Preliminary Cost Proposal.
4.3 Within fourteen (14) days after the Interior Design
Package Submittal has been approved by Landlord, Landlord shall provide Tenant
with a cost proposal, which cost proposal shall include, as nearly as possible,
the cost of all items in connection with the Tenant Improvements, including the
Shell Improvements and the Finish Work (the "FINAL COST PROPOSAL"). Tenant shall
have the right to approve or disapprove the Final Proposal within five (5)
business days of the receipt of the same (provided that Tenant shall not object
to any amount
C-3
<PAGE> 60
approved as part of the Preliminary Cost Proposal). Upon such approval,
Landlord shall be released by Tenant to purchase the items set forth in the
Final Cost Proposal that were not included in the Preliminary Cost Proposal and
to commence the construction relating to such items. If Tenant timely
disapproves the Final Cost Proposal, Tenant and Landlord shall meet and confer
to resolve any disputes concerning the Final Cost Proposal.
4.4 The Preliminary Cost Proposal and the Final Cost Proposal
shall each be referred to as a "COST PROPOSAL" and shall collectively be
referred to as the "COST PROPOSALS."
4.5 Landlord hereby grants to Tenant a one-time "TENANT
ALLOWANCE" of $675,000. Such Tenant Allowance shall be used by Landlord to pay a
portion of the TI Costs for the items in the following categories:
(i) The payment of permit and license fees.
(ii) Construction of the Tenant Improvements,
including without limitation the furnishing and installation of the
following:
(1) All partitioning doors, floor coverings,
finishes, reflective ceilings, wall coverings and painting,
millwork and similar items;
(2) All electrical power, wiring, electrical outlets
and switches, tube outlets and other wiring to be installed
within the Premises;
(3) All heating, ventilation and air conditioning
duct work, diffusers and accessories required for the
completion of the air conditioning system within the Premises;
(4) Any additional Tenant requirements including, but
not limited to, odor control, special lighting, heating,
ventilation and air conditioning, noise or vibration control
or other special systems; and
(5) Fire walls and doors, partitions and/or
modifications to the sprinkler or fire and life safety systems
and other items which may be necessary to meet applicable
building code requirements for Tenant's occupancy of the
Premises.
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4.6 The amount by which the TI Costs exceed the Tenant
Allowance, shall be paid by Tenant to Landlord as provided in this SECTION 4.
Without limiting the foregoing, if Tenant requests any changes or substitutions
to any portion of the Tenant Improvements after the Tenant Improvement Plans
have been prepared and the Final Cost Proposal has been approved, any additional
costs as a result thereof that cause the TI Costs to exceed the Tenant Allowance
shall be paid by Tenant as provided in this SECTION 4. If the TI Costs are less
than the Tenant Allowance, the difference shall revert to Landlord, and Tenant
shall not be entitled to any rent credit or deduction.
4.7 In no event shall Landlord be obligated to make
disbursements pursuant to this Agreement in a total amount which exceeds the
Tenant Allowance. If Tenant is required to pay any costs in excess of the Tenant
Allowance pursuant to this SECTION 4, the estimated excess costs shall be paid
by Tenant to Landlord prior to the commencement of construction and any
additional amounts in excess of such estimated payment shall be due within five
(5) days after Tenant receives the TI Cost Statement.
4.8 Within thirty (30) days following Substantial Completion
of the Tenant Improvements Landlord shall deliver to Tenant an itemized written
statement (the "TI COST STATEMENT"), setting forth the total cost to construct
the Tenant Improvements (the "TI COSTS"), taking into account any change orders
that result in the increase or decrease to the Final Cost Proposal. The cost of
the Tenant Improvements shall not exceed the Final Cost Proposal approved by
Tenant unless Tenant approves a change order that increases such cost.
5. Completion of the Tenant Improvements: Commencement Date.
5.1 Subject to SECTION 5.2 below, the Term of the Lease shall
commence upon Substantial Completion of the Premises. For purposes of
determining the Commencement Date, "SUBSTANTIAL COMPLETION" of the Premises
shall occur upon substantial completion of construction of the Tenant
Improvements in the Premises pursuant to the Tenant Improvement Plans, with the
exception of any minor punch list items, which will not have a material adverse
impact on the operation of Tenant's restaurant, and any tenant fixtures or
equipment to be installed by Tenant.
5.2 If there shall be a delay or there are delays in the
Substantial Completion of the Premises, as a direct, indirect, partial, or total
result of:
5.2.1 Tenant's failure to comply with the time deadlines
specified in this Agreement and such failure continues for five (5) days after
the expiration of such deadline;
5.2.2 Tenant's failure to timely approve or disapprove any
matter requiring Tenant's approval and such failure continues for five (5) days
after notice of such failure;
C-5
<PAGE> 62
5.2.3 A material, uncured breach by Tenant of the terms of
this Agreement or the Lease if such breach continues for five (5) days after
written notice thereof (or such longer period as may be provided for under the
Lease);
5.2.4 Changes in any of the Tenant Improvement Plans after
disapproval of the same by Landlord or because the same do not comply with Code
or other applicable laws;
5.2.5 Tenant's written request for changes in the Tenant
Improvement Plans which relate to the design of the Premises and which are not
required by or resulting from governmental authorities or are not necessary for
the operation of the Premises or to correct an error or omission in the Tenant
Improvement Plans;
5.2.6 Tenant's requirement for materials, components, finishes
or improvements which are not available in a commercially reasonable time given
the anticipated date of Substantial Completion of the Premises as set forth in
the Lease; or
5.2.7 Any other acts or omissions of Tenant, or its agents, or
employees which Tenant fails to cure within five (5) business days after receipt
of written notice thereof; then, notwithstanding anything to the contrary set
forth in the Lease or this Agreement and regardless of the actual date of the
Substantial Completion of the Premises, the Commencement Date shall be deemed
to be the date the Commencement Date would have occurred if no Tenant delay or
delays, as set forth above, had occurred, and in addition to the Minimum Rent
Landlord shall, until Tenant opens for business, collect in lieu of Percentage
Rent one-twentieth (1/20th) of the Minimum Rent per day.
5.3 Landlord shall notify Tenant upon Substantial Completion
of the Tenant Improvements, and prior to delivery of the Premises to Tenant,
Landlord and Tenant shall conduct a "walk through" inspection of the Premises
and prepare a punch list of known or apparent deficiencies or incomplete work
required to be corrected or completed by Landlord pursuant to the Tenant
Improvement Plans. Landlord shall cause all punch list items to be repaired or
completed within a reasonable time following the walk through inspection.
Landlord shall use reasonable efforts to cause such items to be completed within
forty-five (45) days after the Commencement Date, provided that if in the
exercise of reasonable diligence such item cannot be completed within such
45-day period, Landlord shall cause such repairs to be commenced within such
45-day period and shall diligently pursue the same to completion.
6. Ownership. Except as may be expressly set forth on the Tenant
Improvement Plans, the Tenant, Improvements (other than furniture, removable
trade fixtures and equipment) shall be owned by Landlord and shall be
surrendered by Tenant at the expiration or prior termination of the Lease in
good condition and repair, ordinary wear and tear, damage due to casualty, and
obsolescence excepted.
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7. Representatives. Landlord and Tenant each appoint the following
individuals to act as their respective representatives in all matters covered by
this Agreement:
Tenant's Representative: Josh Schweitzer
Landlord's Representative: John Kristich
All inquiries, requests, instructions and authorizations and other
communications with respect to the matters covered by this Agreement will be
submitted to the Landlord's representative or Tenant's representative, as the
case may be. Each party may change its representative under this Agreement at
any time upon three (3) days prior written notice to the other party.
8. Time. Time is of the essence in this Agreement. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. If Tenant fails to approve any proposed changes to the Tenant
Improvement Plans or specify in writing its objections thereof within five (5)
days after written notice as required by the Lease, then at Landlord's sole
option, at the end of such period the change order shall automatically be deemed
approved.
9. Tenant's Lease Default. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in the
Lease, or a default by Tenant under this Agreement, continues beyond the
expiration of any applicable notice and grace period at any time on or before
the Substantial Completion of the Premises, then (i) in addition to all other
rights and remedies granted to Landlord pursuant to the Lease. Landlord shall
have the right to withhold payment of all or any portion of the Tenant Allowance
and/or Landlord may cause Contractor to cease the construction of the Premises
(in which case, Tenant shall be responsible for any delay in the Substantial
Completion of the Premises caused by such work stoppage as set forth in SECTION
5.2 of this Agreement), and (ii) all other obligations of Landlord under the
terms of this Agreement shall be forgiven until such time as such default is
cured pursuant to the terms of the Lease.
10. Responsibility for Design. Except as otherwise provided in the
Lease, Tenant will be responsible for the design, function and maintenance of
all Tenant Improvements, whether or not approved or installed by Landlord at
Tenant's request. Landlord's preparation and/or approval of the Tenant
Improvement Plans will not constitute any representation or warranty by Landlord
as to the adequacy, efficiency, performance or desirability of Tenant's
Improvements in the Premises and shall create no responsibility or liability on
the part of Landlord for their completeness, design sufficiency, or compliance
with all laws, rules, and regulations of governmental agencies or authorities.
11. Notices. Notices under this Agreement shall be given in accordance
with the notice provisions set forth in the Lease.
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<PAGE> 64
12. Conflicts. In the event of any conflict between the provisions of
this Agreement and the provisions of the Lease, the provisions of this Agreement
shall govern.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
BORDER GRILL LAS VEGAS, LLC, a Nevada
limited liability company
BY: TT&T, LLC, a Nevada limited
liability company,
Its: Managing Member
By:
----------------------------------
Susan Feniger, Managing Member
By:
----------------------------------
Mary Sue Milliken, Managing Member
"Tenant"
MANDALAY CORP., a Nevada corporation
By: /s/ [illegible]
---------------------------------
its:
----------------------------
"Landlord"
C-8
<PAGE> 65
EXHIBIT D
Sample Menu
D-1
<PAGE> 66
EXHIBIT D
LUNCH
ENTRADAS
Soup of the Day - selection changes daily 4.75
Guacamole - with cilantro, red onion and lime 5.75
Green Corn Tamales - with sour cream and salsa fresca
(3 per order) 5.75
Plantain Empanadas - stuffed with black beans, Poblano chilis and
anejo cheese (4 per order) 5.50
Panuchos - small handmade corn tortillas stuffed with black beans
and topped with chicken, avocado and pickled onions 5.75
Quesadilla - with cheeses and poblano chile: 5.00
with guacamole 6.50
with chicken 6.75
Ceviches - selection changes daily market price
Caesar Salad - with Romano cheese and garlic croutons
small 5.50 large 7.50
Grilled Cactus Salad - with Cotija cheese, tomato, red onions and
cilantro 5.75
Watercress and Jicama Salad - with lime and olive oil 5.75
BORDER GRIDDLED TACOS
Two soft tacos served with rice and black beans
Chicken 6.75 Bean and Cheese 5.75
Carnitas 6.75 Potato and Rajas 6.25
Carne Asada 7.50 Roasted Lamb 7.25
Grilled Fish 7.75
Sides
Rice: red, green and white 3.50 Moros: white rice and black beans 3.50
Rice and black beans 3.50 Rice and Fried Plantains 4.75
Rajas: sauteed sweet peppers, poblanos & onions, cheese and cream 5.00
Hand made corn (3) or flour (1) tortillas .75
(We do not use lard in our rice, beans or tortillas)
1 of 3
<PAGE> 67
LUNCH
Especiales de la Casa
Chicken Pozole - chicken stewed with hominy, cabbage and garlic
in mild tomato chile broth; topped with panella cheese 8.75
Mulitas de Hongos - Portobello mushrooms layered with guacamole,
cheese, black beans and poblano chiles; served with roasted
garlic tomato sauce and seared red chard. A combination of
unique textures and hot and cold flavors 12.75
Grilled Fish - selection changes daily market price
Morita Chicken Salad - breast of chicken sauteed with Morita
chiles, tossed with avocado, field greens and watercress in
a chipotle vinaigrette 9.25
Grilled Skirt Steak - marinated with garlic, cilantro and cracked
pepper; served with moros and flour tortilla 12.75
Mexican Chopped Salad - with tomato, corn, avocado, peppers, pine
nuts, tortilla chips and red onion; cumin vinaigrette 8.75
Spicy Chipotle Chicken - served and baked with smoky, fiery chipotle
chiles; served with rice and beans 10.75
Turkey Tostada Salad - crispy corn tortillas, grilled turkey, black
beans, cheese, crema, avocado, lettuce, cabbage and tomatoes,
tossed with a red wine vinaigrette 9.25
Chile Relleno - with three cheeses and two salsas, rice and beans 8.75
Torta de Pavo - Traditional Mexican sandwich on home made "bolillo"
bread with thin sliced grilled turkey, black beans, tomato,
pickled onions and guacamole; cracked pepper vinaigrette 7.75
Vegetarian Torta - with black beans, guacamole, cheese, roasted
peppers, poblano mashed potatoes, cucumber and watercress 7.50
Torta de Carnitas - braised pork with guacamole, cilantro, pickled
cucumbers, roasted tomato chipotle salsa and tamarind apple
sauce 7.75
18% gratuity added to parties of eight or more
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<PAGE> 68
DINNER
Appetizers
Soup of the Day - selection changes daily 4.75
Panuchos - black bean stuffed tortilla topped with chicken,
pickled onions & avocado 5.75
Guacamole - mashed to order 6.00
Ceviches - selection changes daily
Quesadilla - homemade flour tortilla with cheeses & poblano chile 5.50
with guacamole 6.50 with chicken 6.50
Green Corn Tamales - with sour cream & salsa fresca (3 per order) 5.75
Guatemalan Tamale - stuffed with marinated chicken & achiote sauce 6.50
Plantain Empanadas - stuffed with black beans & cheese (4 per order) 5.50
Eulalia's Chips - with black beans, creme fraiche & chipotle salsa 4.25
Border Griddled Tacos
Homemade corn tortillas with the classic fillings
(Three tacos per order)
Chicken 6.75 Potato & Rajas 6.25
Carnitas 6.75 Beans and Cheese 5.75
Carne Asada 7.50 Roasted Lamb 7.25
Grilled Fish 7.75
Salads
Caesar Salad - made to order small 6.00 large 9.00
Tostada Salad - crispy corn tortillas, black beans, cheese, 8.50
avocado, lettuce, cabbage, and tomatoes tossed with
red wine vinaigrette
with grilled turkey 9.75
Mexican Chopped Salad - with tomato, corn, peppers, pine nuts, 6.25
diced green apples and red onion; tossed with a cumin
lemon vinaigrette
Watercress & Jicama Salad - with lime and olive oil 5.75
Grilled Cactus Salad - with Cotija cheese, tomato & red onion 5.75
18% gratuity added to parties of eight or more
3 of 3
<PAGE> 69
EXHIBIT D-I
Prohibited Menu Items
1. Primarily(1) Pacific Rim Nouvelle Cuisine
2. Primarily(2) Progressive American Cuisine
3. Primarily(2) Italian Cuisine
- -------------------------
(1) Landlord shall have the right to add additional cuisine categories
from time to time so long as such additions do not have the cumulative effect of
limiting Tenant's ability to operate the Premises as a restaurant serving
principally Mexican cuisine nor shall such items limit Tenant's right to serve
the items on EXHIBIT D or similar items.
(2) For purposes of items 1, 2, and 3 of this Exhibit, the term
"primarily" means not more than thirty percent (30%) of the items offered.
D-1-1
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EXHIBIT E
Ownership of Tenant
<TABLE>
<CAPTION>
Percentage
Interest
----------
<S> <C>
1. TT&T,LLC(3) 51%
2. Vantage Bay Group, Inc. 49%
</TABLE>
- -------------------------
(3) The sole members of TT&T, LLC are Susan Feniger (42.5%), Mary Sue
Milliken (42.5%) and Kevin Finch (15%).
E-1
<PAGE> 71
EXHIBIT F
Accounting Procedures
1. ROOM CHARGES. Landlord shall pay to Tenant all room charges, if any,
weekly on a day of the week to be agreed upon by Landlord and Tenant. Such
amounts shall be paid by direct deposit in a bank account established by Tenant.
Landlord shall provide a reconciliation of payments made under this PARAGRAPH 1,
and Landlord and Tenant shall make any necessary adjusting payments. Provided
that Tenant follows all procedures reasonably established by the Landlord for
processing room charges, Landlord shall assume the risk of non-payment by guests
of Landlord or its Affiliates except to the extent a guest specifically disputes
a charge for services provided by Tenant, which shall be resolved between Tenant
and the guest.
2. COMPS. By the tenth (10th) day of each month, Landlord shall provide
Tenant with a report (the "COMP REPORT") summarizing for the prior month (i) the
total amount treated as Comps under SECTION 7.10 of the Lease, (ii) the portion
of such amount applied toward the Comp Threshold and (iii) the portion of such
amount by which the Monthly Comp Threshold is exceeded in any month during the
Term of this Lease. Tenant shall supply Landlord with such information as may be
necessary to calculate these amounts. Landlord shall pay to Tenant any amount
required under SECTION 7.10(b) of the Lease on or before the fifteenth (15th) of
the month following the month for which such Comps were furnished.
3. PAYMENTS TO LANDLORD. Amounts payable by Tenant to Landlord under
the Lease, including, but not limited to, Minimum Rent, Percentage Rent, and the
Additional Rent shall be paid by Tenant in the manner provided under the Lease.
4. GROSS SALES. Tenant will provide Landlord unaudited information on
Gross Sales derived from the Restaurant on a weekly basis, in a form generally
used by Tenant and its Affiliates.
F-1
<PAGE> 72
EXHIBIT G
Restricted Area
The area in Clark County, Nevada, bounded (i) on the south by Warm Springs Road,
(ii) on the west by Interstate 15, (iii) on the north by Sahara Avenue, and (iv)
on the east by Maryland Parkway, as such roads existed on July 1, 1998.
G-1
<PAGE> 73
EXHIBIT H
Carbonated beverages
Bottled or bag in a box juices/mixers
Iced tea (other than specialty iced tea)
Bottled iced coffee
Isotonic
Allied/Local Brands (e.g., Quinine, Tom Collins, Club Soda, Ginger Ale, Sweet &
Sour)
H-1
<PAGE> 74
MANDALAY BAY
3950 Las Vegas Boulevard South
Las Vegas, Nevada 89109
November 12, 1998
Ms. Susan Feniger
BORDER GRILL LAS VEGAS, LLC
1445 4th Street
Santa Monica, CA 90401
Re: Border Grill Lease
Dear Ms. Feniger:
Pursuant to that certain Lease for Restaurant Space ("Lease") executed
contemporaneously with this letter, Mandalay Corp. ("Landlord") has leased space
in the Mandalay Bay Resort & Casino to Border Grill Las Vegas, LLC ("Tenant").
Under Section 7.12 of the Lease, Landlord hereby notifies Tenant that it has
entered into an exclusive agreement with Pepsi-Cola Company ("Pepsi") and Tenant
shall be required to use the various brand choices designed by Pepsi, as more
specifically described on an attachment to this letter. However, Landlord and
Tenant acknowledge that the Iced Tea brand choice (Lipton) does not specifically
meet the standards required by Tenant for such product, and that Landlord has
advised Tenant that it shall not be a breach of the Lease for Tenant to
substitute a different brand choice for this particular product.
Very truly yours,
MANDALAY CORP.
By: /s/ [illegible]
-------------------------------------
Its: PRESIDENT
--------------------------------
<PAGE> 75
*(Tropicana juices which are the same as the Citrus Hill juices listed herein
(whether in bag in a box or concentrate) will be included in this Agreement if
PepsiCo. completes its acquisition of that brand.)
FOUNTAIN BRANDS
Carbonated Soft Drinks - 5 Gallon BIB
Pepsi-Cola
Caffeine Free Pepsi
Mountain Dew
Diet Pepsi
Lemon Lime Slice
Orange Slice
Mug Root Beer
Lipton Iced Teas - 5 Gallon BIB
Plain
Peach
Raspberry
All Sport - 5 Gallon BIB
Lemon Lime
Hawaiian Punch
Fruit Punch
"Punchy" Grape
"Punchy" Pink Lemonade
Frozen Carbonated Beverages
Allied/Local Brands - 5 Gallon BIB
Quinine
Tom Collins
Ginger Ale
Sweet & Sour
*Citrus Hill Juice / Mixers - 5 Gallon BIB
Apple Juice
100% Orange Juice
50% Orange Juice
Grapefruit Juice
Cranberry Juice
Margarita Mix
<PAGE> 76
Mandalay Corp.
2880 Las Vegas Boulevard South
Las Vegas, Nevada 89109
November 25, 1998
Susan Feniger
TT&T, LLC
1445 4th Street
Santa Monica, California 90401
Jay Brown, Esq.
Vantage Bay Group, Inc.
520 S. Fourth Street
2nd Floor
Las Vegas, Nevada 89101
Re: Mandalay Bay Resort & Casino -- Border Grill Lease
Dear Susan and Jay:
The purpose of this letter is to confirm our understanding regarding
Section 7.8 of that certain Lease for Restaurant Space dated November 12, 1998
(the "Border Grill Lease") between Mandalay Corp., as "Landlord," and Border
Grill, Las Vegas, LLC, as "Tenant."
Under Section 7.8 of the Border Grill Lease, if Tenant is found unsuitable
by a Regulatory Authority or if the continued association with Tenant could have
a material adverse effect on any gaming or liquor license, permit or approval
held or sought by Landlord or any Affiliate of Landlord, the Border Grill Lease
is subject to termination in accordance with the terms thereof and Landlord is
obligated under said Section 7.8 to reimburse Tenant for the unamortized portion
of any TI Costs paid for by Tenant subject to the conditions stated therein (the
"Reimbursement Obligation"). TT&T, LLC ("TT&T") and Vantage Bay Group, Inc.
("Vantage Bay"), as the sole members of Tenant, have agreed that if the Border
Grill Lease would otherwise terminate under Section 7.8 because of the continued
involvement of Vantage Bay as a member in Tenant, Landlord will have an option
(but not an obligation) to purchase from Vantage Bay (or cause one of its
Affiliates to purchase) Vantage Bay's economic interest in the Tenant for a
purchase price equal to the unamortized portion of any TI Costs paid by Tenant
in which case the Border Grill Lease would not terminate. If Landlord exercises
the foregoing option, such purchase shall be in lieu of the Reimbursement
Obligation, and Landlord shall have no liability under the Lease to pay to
Tenant the Reimbursement Obligation. If Landlord does not exercise such option,
then Landlord acknowledges that the Reimbursement Obligation as set forth in
said Section 7.8 will remain in full
<PAGE> 77
Susan Feniger
Jay Brown, Esq.
November 25, 1998
Page 2
force and effect. Within three (3) days after (i) a finding of unsuitability
resulting from Vantage Bay's involvement in Tenant or (ii) a notice from
Landlord that because of Vantage Bay's involvement the continued association
with Tenant could have a material adverse effect on any gaming or liquor
license or permit or approval for the Project, Vantage Bay and TT&T shall
deliver to Landlord the Operating Agreement, Articles of Organization, and all
amendments, modifications and other documents relating to the agreement between
Vantage Bay and TT&T with respect to the Tenant and shall provide such
additional information regarding the Tenant and the operation of the Project
reasonably requested by Landlord. Within ten (10) days following receipt of
such information, Landlord shall notify Vantage Bay and TT&T in writing if
Landlord or any Affiliate of Landlord wishes to purchase Vantage Bay's economic
interest in the Tenant. If Landlord elects to purchase Vantage Bay's economic
interest in the Tenant, Landlord (or its Affiliate) and Vantage Bay shall
execute an agreement setting forth the purchase price (calculated as set forth
above) and such additional terms and conditions as shall be negotiated by
Vantage Bay and the Landlord or its Affiliate in good faith, and Vantage Bay
and the Landlord or its Affiliate shall consummate the sale of Vantage Bay's
economic interest in the Tenant as soon as reasonably possible. Landlord (or
its Affiliate) shall not be admitted as a member of Tenant, but shall have the
rights of an economic interest owner in profits, losses and distributions of
Tenant.
Except as set forth in this letter, capitalized terms shall have the
meaning set forth in the Border Grill Lease. If this letter correctly sets
forth your understanding of our agreement, please execute and return the
enclosed copy of this letter to me.
Very truly yours,
Mandalay Corp.
By:
------------------------------------
Its:
--------------------------------
<PAGE> 78
Susan Feniger
Jay Brown, Esq.
November 25, 1998
Page 3
ACCEPTED AND AGREED:
VANTAGE BAY GROUP, INC.
By:
--------------------------------------
Its:
----------------------------------
TT&T, LLC, a Nevada limited liability
company
By:
--------------------------------------
Susan Feniger, Managing Member
By:
--------------------------------------
Mary Sue Milliken, Managing Member
BORDER GRILL LAS VEGAS, LLC,
a Nevada limited liability company
By: TT&T, LLC, a Nevada limited liability
company, Its: Managing Member
By:
---------------------------------
Susan Feniger, Managing Member
By:
---------------------------------
Mary Sue Milliken, Managing Member
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
AMERICAN CASINO ENTERPRISES, INC.
AMERICAN CARE GROUP, INC.
DIVERSY ENTERPRISES, INC.
F.A.S.T., INC.
FOWLER CARD CLUB, INC.
G & L ACQUISITION CORP.
HERITAGE COURT FUNERAL HOME
& MEMORIAL GARDENS
LAS VEGAS AD-VENTURES
NEVADA PUBLISHING, INC.
MILLERTON GAMES, INC.
MONDEL, INC.
MOTEL DEVELOPMENT, INC.
RESERVATION CONNECTION, INC.
ROYAL RESERVATIONS, INC.
SITKA RESTAURANT GROUP, INC.
TRINIDAD MANAGEMENT, INC.
VANTAGE BAY GROUP, INC.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
American Vantage Companies
We consent to incorporation by reference in registration statement No 333-00905
on Form S-8 of American Vantage Companies of our report dated October 8, 1999,
relating to the consolidated balance sheets of American Vantage Companies as of
July 31, 1999 and 1998, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for the years then ended, which
report appears in the July 31, 1999 annual report on Form 10-KSB of American
Vantage Companies.
/s/ BRADSHAW, SMITH & CO., LLP
Las Vegas, Nevada
October 27, 1999
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<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1
<CASH> 12,626,000
<SECURITIES> 0
<RECEIVABLES> 1,691,000
<ALLOWANCES> 0
<INVENTORY> 153,000
<CURRENT-ASSETS> 15,200,000
<PP&E> 2,029,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,206,000
<CURRENT-LIABILITIES> 724,000
<BONDS> 0
0
0
<COMMON> 147,000
<OTHER-SE> 22,335,000
<TOTAL-LIABILITY-AND-EQUITY> 23,206,000
<SALES> 7,665,000
<TOTAL-REVENUES> 7,665,000
<CGS> 0
<TOTAL-COSTS> 5,402,000
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 42,000
<INCOME-PRETAX> 3,173,000
<INCOME-TAX> 1,147,000
<INCOME-CONTINUING> 2,026,000
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