UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_________ TO ________
Commission File No. 1-12030
Stratosphere Corporation
(Exact name of registrant as specified in its charter)
Delaware 88-0292318
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2000 Las Vegas Boulevard South
Las Vegas, Nevada 89104
(Address of principal executive offices) (Zip Code)
(702) 382-4446
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
Indicate the number of shares outstanding for each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at May 10, 1996
- - ------------------------------------ ------------------------------
Common Stock, $.01 par value 58,393,105
STRATOSPHERE CORPORATION
FORM 10-Q
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Part I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Condensed Consolidated Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets at March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statement of Operations for the three months
ended March 31, 1996 and 1995 and for the period from January 1,
1989 (inception) to March 31, 1996 4
Condensed Consolidated Statements of Stockholders' Equity for the period from
January 1, 1989 (inception) to March 31, 1996 5
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 and for the period from January 1,
1989
(inception) to March 31, 1996 6-7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations 9-12
Part II. OTHER INFORMATION 13
</TABLE>
<TABLE>
<CAPTION>
STRATOSPHERE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31,1995
1996 1995
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 49,418,037 $ 92,595,770
Accounts receivable 9,527,848 5,417,030
Other current assets 3,828,872 1,125,548
------------- -------------
Total current assets 62,774,757 99,138,348
------------- -------------
PROPERTY AND EQUIPMENT:
Land and improvements 43,659,012 24,336,018
Buildings 26,062,670 26,062,670
Furniture and equipment 6,636,332 3,324,251
Construction in progress 243,707,205 141,185,298
------------- -------------
320,065,219 194,908,237
------------- -------------
OTHER ASSETS:
Restricted investments 60,756,063 120,554,385
Deferred debt issuance costs, net 12,922,818 13,431,279
Deferred pre-opening costs 12,159,881 5,796,862
Deferred licensing costs 76,420 76,420
------------- -------------
85,915,182 139,858,946
------------- -------------
$ 468,755,158 $ 433,905,531
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - construction $ 39,097,011 $ 33,523,612
Accounts payable - trade 1,092,186 338,745
Affiliate payable 1,242,442 803,865
Accrued expenses 12,015,471 3,949,545
------------- -------------
Total current liabilities 53,447,110 38,615,767
------------- -------------
LONG TERM DEBT 203,000,000 203,000,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value. Authorized
10,000,000 shares; issued and outstanding none -- --
Common stock, $.01 par value
Authorized 100,000,000 shares; issued and
outstanding 58,255,676 and 56,361,117 shares, respectively 582,557 563,611
Additional paid-in-capital and other 217,781,248 199,697,889
Accumulated deficit during development stage (6,055,757) (7,971,736)
------------- -------------
Total stockholders' equity 212,308,048 192,289,764
------------- -------------
$ 468,755,158 $ 433,905,531
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
STRATOSPHERE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31 January 1, 1989
------------------------ (inception) to
1996 1995 March 31, 1996
---------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Rents $ -- $ 10,000 $ 121,500
Interest 2,367,642 667,673 11,393,269
Other 8,877 8,166 54,373
---------- ----------- ------------
Total revenues 2,376,519 685,839 11,569,142
---------- ----------- ------------
Costs and expenses:
Payroll and related expenses -- 1,165 1,178,128
Professional fees -- 44,177 1,415,456
Property taxes -- 135,198 200,875
Interest, net 344,047 1,283,419 12,627,546
Licenses and fees 37,500 51,698 398,823
General and administrative 186 168,159 1,558,449
---------- ----------- ------------
Total costs and expenses 381,733 1,683,816 17,379,277
---------- ----------- ------------
Other income/expenses:
Loss on asset sales -- -- 166,815
---------- ----------- ------------
Net income before taxes 1,994,786 (997,977) (5,976,950)
---------- ----------- ------------
Tax provision 78,807 -- 78,807
---------- ----------- ------------
Net income (loss) $1,915,979 $ (997,977) $ (6,055,757)
========== =========== ============
Earnings (loss) per share of
common stock $ 0.03 $ (0.03)
========== ===========
</TABLE>
<TABLE>
<CAPTION>
STRATOSPHERE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Additional Total
Common Preferred Paid-in Accumulated Stockholders'
Stock Stock Capital Deficit Equity
------------- ---- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1989
(inception) $ -- $ -- $ -- $ -- $ --
Net loss -- -- -- (370,678) (370,678)
Contributions of capital (Note 1) -- -- 1,910,201 -- 1,910,201
------------- ---- ------------- ------------- -------------
Balances at December 31, 1989 -- -- 1,910,201 (370,678) 1,539,523
Net loss -- -- -- (340,709) (340,709)
Contributions of capital (Note 1) -- -- 1,475,206 -- 1,475,206
------------- ---- ------------- ------------- -------------
Balances at December 31, 1990 -- -- 3,385,407 (711,387) 2,674,020
Net loss -- -- -- (403,359) (403,359)
Contributions of capital (Note 1) -- -- 2,195,153 -- 2,195,153
------------- ---- ------------- ------------- -------------
Balances at December 31, 1991 -- -- 5,580,560 (1,114,746) 4,465,814
Net loss -- -- -- (634,442) (634,442)
Contributions of capital (Note 1) -- -- 4,196,179 -- 4,196,179
------------- ---- ------------- ------------- -------------
Balances at December 31, 1992 -- -- 9,776,739 (1,749,188) 8,027,551
Net loss -- -- -- (1,281,332) (1,281,332)
Contributions of capital (Note 1) -- -- 289,811 -- 289,811
Issuance of common stock 10 -- -- -- 10
------------- ---- ------------- ------------- -------------
Balances at December 31, 1993 10 -- 10,066,550 (3,030,520) 7,036,040
Net loss -- -- -- (278,166) (278,166)
Contributions of capital (Note 1) -- -- 69,337 -- 69,337
Proceeds from initial public offering 299,990 -- 53,613,185 -- 53,913,175
Cost of initial public offering -- -- (2,519,156) -- (2,519,156)
Sale of common stock purchase
warrants -- -- 675 -- 675
Preferential distribution to stockholder -- -- (20,209,840) -- (20,209,840)
------------- ---- ------------- ------------- -------------
Balances at December 31, 1994 300,000 -- 41,020,751 (3,308,686) 38,012,065
Net loss -- -- -- (4,663,050) (4,663,050)
Sale of preferred stock to parent -- 82 33,524,778 -- 33,524,860
Issuance of common stock in payment
of underwriting fees 8,000 -- 3,992,000 -- 4,000,000
Convert preferred to common stock 82,500 (82) (82,418) -- --
Cost of initial public offering -- -- (23,570) -- (23,570)
Adjustment to preferred distribution for
cash received in lieu of Vegas World equipment -- -- 736,116 -- 736,116
Adjustment to preferential distribution for the
net book value of the gaming equipment -- -- -- -- --
received in excess of purchase price -- -- 490,725 -- 490,725
Exercise of 26,500 stock options 265 -- 112,360 -- 112,625
Exercise of 5,874,617 common stock
purchase warrants 58,746 -- 34,132,741 -- 34,191,487
Proceeds from secondary stock offering 112,600 -- 89,199,400 -- 89,312,000
Cost of secondary stock offering -- -- (4,841,904) -- (4,841,904)
Purchase of land for common stock 1,500 -- 1,292,250 -- 1,293,750
Unrealized holding gain on investment -- -- 144,660 -- 144,660
------------- ---- ------------- ------------- -------------
Balances at December 31, 1995 563,611 -- 199,697,889 (7,971,736) 192,289,764
Net income -- -- -- 1,915,979 1,915,979
Exercise of 79,000 stock options 790 -- 334,960 -- 335,750
Cost of secondary stock offering -- -- (242,243) -- (242,243)
Purchase of land for common stock 18,156 -- 18,186,604 -- 18,204,759
Unrealized holding loss on investment -- -- (195,962) -- (195,962)
------------- ---- ------------- ------------- -------------
Balances at March 31, 1996 $ 582,557 $ -- $ 217,781,248 $ (6,055,757) $ 212,308,048
============= ==== ============= ============= =============
</TABLE>
See accompanying notes to condensed financial statements.
<TABLE>
<CAPTION>
STRATOSPHERE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
------------------------------ January 31, 1989
(inception) to
1996 1995 March 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,994,786 $ (997,977) $ (5,976,950)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Amortization of debt issue costs 238,403 130,296 1,956,612
Loss on sale of property and equipment -- -- 166,815
Increase in accounts receivable (4,110,818) -- (9,251,972)
Increase in other current assets (2,703,324) (876,322) (4,104,749)
Increase (decrease) in accounts payable 1,192,018 (287,508) 2,334,628
Increase in accrued expenses 7,987,119 1,812,862 11,936,664
------------- ------------- -------------
Net cash used in provided by operating activities 4,598,184 (218,649) (2,938,952)
------------- ------------- -------------
Cash flows from investing activities:
Purchase of U.S. Treasury Bills -- -- (39,625,167)
Redemption of U.S. Treasury Bills -- -- 39,625,167
Purchase of certificates of deposit -- -- (3,258,648)
Redemption of certificates of deposit -- -- 3,258,648
Advances to stockholder -- (4,411,798) (46,808,484)
Decrease (increase) in restricted investments 59,602,359 (185,582,070) (60,807,366)
Capital expenditures (101,090,015) (12,113,187) (230,804,362)
Increase in other assets (6,363,018) (685,805) (12,287,216)
------------- ------------- -------------
Net cash used in investing activities (47,850,674) (202,792,860) (350,707,428)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from notes payable -- 13,461,000 42,289,969
Principal payments on notes payable -- (3,737,763) (12,383,754)
Proceeds from loans from Bob Stupak
Enterprises, Inc. -- -- 7,688,347
Payments of loans from Bob Stupak
Enterprises, Inc. -- -- (7,688,347)
Capital contributions -- -- 10,135,896
Cash proceeds from sale of property and equipment -- -- 928,134
Proceeds from initial public offering -- -- 53,913,175
Sale of common stock purchase warrants -- -- 675
Increase in prepaid offering costs -- -- (2,519,155)
Proceeds from issuance of First Mortgage Notes -- 203,000,000 203,000,000
Proceeds from exercise of stock options/common
stock purchase warrants 335,750 -- 34,639,862
Proceeds (costs) from secondary stock offering (242,243) -- 84,227,854
Increase in deferred debt issue costs (18,750) (9,932,249) (11,168,239)
------------- ------------- -------------
Net cash provided by financing activities 74,757 202,790,988 403,064,417
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents (43,177,733) (220,521) 49,418,037
Cash and cash equivalents at beginning of period 92,595,770 516,479 --
------------- ------------- -------------
-------------
Cash and cash equivalents at end of period $ 49,418,037 $ 295,958 $ 49,418,037
============= ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
STRATOSPHERE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended March 31, Period from
-------------------------- January 1, 1989
(inception) to
1996 1995 March 31, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid for interest (net of amount
capitalized) $ -- $ -- $ 313,321
Cash paid for income taxes -- -- 275,877
------------ ------------ ------------
$ -- $ -- $ 589,198
============ ============ ============
Noncash investing and financing activities:
Purchase of land, buildings, furniture
and equipment from stockholder (principally
Vegas World assets) as follows:
Purchase price -- -- 52,225,000
Cash paid -- -- (5,496,516)
------------ ------------ ------------
Note payable to stockholder -- -- 46,728,484
Preferential distribution to --
stockholder -- -- (18,982,999)
------------ ------------ ------------
Predecessor cost of assets
acquired for non-cash
consideration $ -- $ -- $ 27,745,485
============ ============ ============
Increase (decrease) in land and improvements and construction in progress
included in long-term debt and accounts payable -
construction $ 5,573,399 $ (121,409) $ 42,743,002
============ ============ ============
Increase in furniture and equipment from
reduction in notes receivable from stockholder $ -- $ 80,000 $ 80,000
============ ============ ============
Offering costs recognized as a reduction
in additional paid-in capital in
connection with initial public
offering of common stock $ -- $ -- $ 2,542,726
============ ============ ============
Issuance of common stock in payment
of underwriting fees in connection with
First Mortgage Notes -- $ 4,000,000 $ 4,000,000
============ ============ ============
Issuance of common stock in purchase
of land $ 18,204,760 $ 1,293,750 $ 19,498,510
============ ============ ============
Issuance of preferred stock to parent
in payment of notes payable $ -- $ 33,519,750 $ 33,524,860
============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
STRATOSPHERE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
THE COMPANY
The accompanying condensed consolidated financial statements present
the financial position, results of operations and cash flows of Stratosphere
Corporation and its wholly-owned subsidiaries, Stratosphere Gaming Corporation,
Stratosphere Land Corporation and Stratosphere Advertising Agency (collectively
the "Company"). In the opinion of management, the accompanying financial
statements include all adjustments (of a normal recurring nature) which are
necessary for a fair presentation of the results for the interim periods
presented. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations of the Securities and Exchange Commission. Although the Company
believes that the disclosures are adequate to make the information presented not
misleading, it is suggested that these financials be read in conjunction with
the consolidated financial statements and the related notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.
The Company was incorporated in the State of Delaware on January 15,
1993 under the name of Stratosphere Tower Corporation and on February 8, 1993, a
Certificate of Amendment was filed which changed the name of the Company to
Stratosphere Corporation. The Company is owned 42.6% by Grand Casinos Resorts,
Inc. ("Grand") which is in turn a wholly-owned subsidiary of Grand Casinos, Inc.
On June 24, 1994, Stratosphere Gaming Corp. was incorporated in the State of
Nevada. Stratosphere Gaming Corp. has no operations or assets of its own.
The Company was organized for the purpose of completing the development
and construction of, and thereafter owning and operating, the Stratosphere
Tower, a 1,149 foot, free-standing observation tower with integrated casino,
hotel and entertainment facilities in Las Vegas, Nevada (the "Stratosphere
Tower"). Subsequently, the property opened April 29, 1996.
(2) ACCOUNTS RECEIVABLE
Accounts receivable consists of the following as of March 31, 1996:
The Gordon Company and affiliates $8,403,742
Interest receivable 848,229
Income tax refund receivable 275,877
----------
Total $9,527,848
==========
The Company entered into a Development and Lease Agreement on March 26,
1996 with the Gordon Company ("Gordon") pursuant to which Gordon will develop
retail space at the property with a minimum investment of $9.9 million. As of
March 31, 1996, the Company has classified $8,403,742 of expenditures made
related to the build-out of the retail space as accounts receivable in
anticipation of Gordon reimbursing the Company for such amounts.
(3) LONG TERM DEBT
On March 9, 1995, the Company closed on its offering of $203,000,000
14 1/4% First Mortgage Notes due 2002 with Contingent Interest; Contingent
Interest is equal to 10.8% of the Company's consolidated cash flow, up to a
limit of $100 million during any two consecutive semiannual periods (as defined
in the Indenture) ending March 31, once operational. The indenture relating to
the First Mortgage Notes (the "Indenture") contains covenants that include a
requirement that the Company maintain certain financial ratios. The proceeds of
the offering are being used to develop and construct Phase I, an integrated
casino/hotel and entertainment complex.
COMPLETION GUARANTEE AND STANDBY EQUITY COMMITMENT
The Company, Grand Casinos, Inc. and Grand entered into a Memorandum of
Agreement effective as of February 16, 1995. Pursuant to the Memorandum of
Agreement, Grand Casinos, Inc., concurrent with the closing of the First
Mortgage Notes, entered into the Completion Guarantee whereby Grand Casinos,
Inc. agreed to complete the Stratosphere Tower Project, and guarantee the
payment of all project costs owing to such completion subject to a number of
qualifications and exceptions. Grand Casinos, Inc.'s obligations under the
Completion Guarantee are limited to $50.0 million in the aggregate. Funds made
available by Grand Casinos, Inc. pursuant to the Completion Guarantee will
constitute loans to the Company and will (i) be evidenced by one or more
promissory notes bearing interest (but no Contingent Interest) at the same rate
as the First Mortgage Notes; and (ii) mature no earlier than one year after the
maturity of the First Mortgages Notes; and (iii) be subordinated to the full
repayment of all principal, interest, premium (if any) and other payments under
the First Mortgage Notes.
Further, pursuant to the Memorandum of Agreement, Grand Casinos, Inc.
also entered into a Standby Equity Commitment with the Company pursuant to which
Grand Casinos, Inc., may contribute to the Company up to $20 million in new
equity through the purchase of Capital Stock (other than Disqualified Stock), on
non-cumulative bases, in each of the first three years following the time that
the Stratosphere Tower Project is operating. Such funds would be contributed to
the Company, up to $20.0 million of additional equity during each of the first
three years Stratosphere is Operating as long as the Company's Consolidated Cash
Flow does not reach $50.0 million, subject to certain terms and conditions to
cover, on a dollar for dollar basis, any shortfall in the Company's consolidated
cash flow. The maximum commitment for the three years would be $60 million.
Funds for the Standby Equity Commitment would be made available, to the extent
necessary, through a rights offering of common stock, at a discount of
approximately 50% from the then-current market price, to all stockholders of the
Company; provided, however, that Grand Casinos, Inc. would be obligated to
purchase any such shares of common stock, in addition to its pro rata share as a
stockholder of the Company, not so purchased by the other public stockholders.
The Company will retain the right to obtain the equity funds which would
otherwise be provided by the Standby Equity Commitment through other means
deemed appropriate.
(4) STOCKHOLDERS' EQUITY
On January 11, 1996 the Company purchased approximately 3.5 acres
across the street from its property. This property will be the location for the
new 500-car parking lot. The Company issued 1,050,000 shares of common stock to
purchase this land. Of the 1,050,000 shares issued, 500,000 shares went directly
to the owner of the land, 500,000 shares were sold to an unrelated third party.
The proceeds from this sale were then paid to the land owner and the remaining
50,000 shares were paid as a fee to the broker of the deal.
The Company has also purchased on March 20, 1996 additional property
totaling approximately six (6) acres located contiguous to other property owned
by the Company. The aggregate purchase price for this property was approximately
$8,166,000. Funds for this purchase were generated by a sale of 765,559
registered shares of the Common Stock to an unrelated third party.
(5) CONTINGENCIES
On April 3, 1994, a complaint was filed in the United States District
Court for the District of Nevada (Harvey J. Cohen, et al. v. Stratosphere
Corporation, et al.) against the Company, Mr. Stupak, Lyle Berman, Grand and
others. By Order filed April 10, 1995, the district court dismissed the federal
securities law claims with prejudice and dismissed the common law claims without
prejudice. On May 3, 1995, the plaintiffs filed a notice of appeal of the
district court's Order with the United States Court of Appeals for the Ninth
Circuit. The complaint purported to seek relief in connection with the IPO, each
consisting of one share of Common Stock and one warrant, on behalf of two
classes of plaintiffs for unspecified monetary damages. The complaint alleged
that the defendants made misrepresentations, breached a contract and engaged in
other wrongdoing in connection with the IPO, so that the defendants and their
affiliates, associates and friends could, while avoiding all economic risk,
purchase IPO Units in the IPO rather than one plaintiff class, and that this
alleged conduct caused a second dealer class to lose out on other profits it
allegedly deserved. The Company believes that the claims made in the complaint
are without merit and will ask the Court of Appeals to affirm the district
court's Order.
On or about August 29, 1995, a complaint was filed in the District
Court, Clark County, Nevada (Harvey J. Cohen, et al. vs. Stratosphere
Corporation, et al.) against the Company, Mr. Stupak, Lyle Berman, Grand and
others. The complaint purports to represent a class of plaintiffs and seeks
relief for misrepresentation, breach of contract and tortious interference with
contract regarding the IPO. The Company believes that the claims made in the
complaint are without merit and plans to vigorously defend against such claims.
On or about December 20, 1995, a complaint was filed in the District
Court, Clark County, Nevada (Vegas Market Place, Inc. vs. Bob Stupak,
Individually dba Vegas World Hotel and Casinos, et al) against the Company, Mr.
Stupak and others. The complaint seeks damages arising out of a lease executed
between Bob Stupak, dba Vegas World Hotel and Casino and Vegas Market Place,
Inc. Among the causes of action brought in the complaint are quiet title, breach
of contract, specific performance, constructive eviction, declaratory judgment,
breach of implied covenant of good faith and dealing, intentional interference
with perspective economic advantage, intentional interference with contractual
relationships, preliminary injunction and permanent injunction. The Company has
filed a motion to dismiss several of the claims for relief brought in this
complaint. The Company believes that the claims made in the Complaint are
without merit and plans to vigorously defend against such claims.
Management believes that the final disposition of the cases noted above
will not have a material adverse impact on ongoing operations.
(6) OTHER INFORMATION
On May 10, 1996, the Company determined to change its fiscal year from
December 31 of each year to a 52-53 week year ending on the Sunday closest to
December 31 of each year. The change in fiscal year will not require the filing
of a transition report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DEVELOPMENT ACTIVITIES
The Tower concept was conceived in early 1989. Formal ground breaking
occurred in November 1991 and construction commenced in February 1992. The
Company was formed in January 1993 to continue the development and construction
of the Tower. In June 1994, the Company acquired the Vegas World Option (as
defined herein) and the scope of Stratosphere was expanded to include a casino,
hotel and entertainment complex. In November 1994, the Company purchased the
Vegas World Assets (as defined herein). The Company is developing and will own
and operate Stratosphere, an integrated casino/hotel and entertainment complex,
Phase I of which commenced operations on April 29, 1996.
RESULTS OF OPERATIONS
The Company is in the development stage and does not have any
historical operating income. The Company's operating expenses primarily have
consisted of interest and amortization costs and expenses relating to the First
Mortgage Notes issued in March 1995. Accordingly, historical results will not be
indicative of future operating results. Future operating results are subject to
significant business, economic, regulatory and competitive uncertainties and
contingencies, many of which are beyond the Company's control. While the Company
believes that Stratosphere will be able to attract a sufficient number of
patrons and achieve the level of activity necessary to permit the Company to
meet its payment obligations in connection with the First Mortgage Notes and
other indebtedness, there can be no assurance with respect thereto.
The Company recorded net income of $1,915,979 for the three months
ended March 31, 1996 versus a loss of $997,977 for the same period ending March
31, 1995. This positive change was due to an increase in interest income and
capitalized interest.
LIQUIDITY AND CAPITAL RESOURCES
Prior to February 23, 1994, the Company met its capital requirements
through capital contributions and borrowings from Bob Stupak Enterprises, Inc.,
a corporation wholly owned by Robert E. Stupak ("BSE") or its affiliates, from
Grand and through mortgage financing. On February 23, 1994, the Company
consummated the IPO and received net proceeds of $51.4 million therefrom, of
which the Company used $12.5 million to repay amounts borrowed from BSE and
Grand.
In connection with the Company's acquisition of the Vegas World Assets
from Mr. Stupak, the Company was obligated to pay Mr. Stupak, the Chairman of
the Board and a significant stockholder of the Company, $50.8 million, which has
been paid. Concurrent with the closing of the Note Offering on March 9, 1995,
Grand invested approximately $33.5 million in the Company by purchasing 8,250
unregistered shares of the Company's Series A Convertible Non-Voting Preferred
Stock (the "Series A Preferred Stock") for $4,063 per share (the "Grand Casinos
Equity Contribution"). These shares of Series A Preferred Stock have been
converted into an aggregate of 8,250,000 shares of the Common Stock. The shares
of Common Stock issued upon conversion of the Series A Preferred Stock are not
transferable until March 9, 2000.
On September 7, 1995, the Company called for redemption on or by
October 10, 1995 of all the outstanding Warrants at a price of $0.01 per
Warrant, for a total redemption price of $117,000. Each Warrant entitled the
registered holder thereof to purchase one share of Common Stock at $5.83 per
share. The Company received approximately $34.2 million in net proceeds from the
issuance of the Common Stock upon exercise of the Warrants.
The $358.9 million anticipated to be necessary to fund Phase I is
expected to be derived from a combination of equity contributions totaling $92.9
million, gross proceeds of $203.0 million from the Note Offering, estimated
borrowing of $37.5 under capital leases and $25.5 million of the $34.2 million
net proceeds from the exercise of the Warrants. In connection with the Note
Offering, Grand executed the Completion Guarantee pursuant to which it
committed, subject to certain qualifications, to complete Stratosphere so that
it becomes Operating and pay project costs owing prior to completion, with a
maximum obligation of $50.0 million. Grand is also providing the Standby Equity
Commitment pursuant to which it agreed to purchase up to $20.0 million of
additional equity of the Company during each of the first three years
Stratosphere is Operating as long as the Company's Consolidated Cash Flow does
not reach $50.0 million, subject to certain terms and conditions. Management
believes the funds provided by these sources will be sufficient to develop and
commence operations of Phase I of Stratosphere, assuming no delays or
construction cost overruns not covered by the Completion Guarantee. On April 26,
1996, the Company consummated the $37.5 million of additional borrowings by
entering into the capital lease obligation.
The Company's development of Phase II, which management anticipates
will be completed by the end of 1996, will require an estimated $98.0 million of
capital, not including an additional 3.5 acres of land acquired with 1.1 million
shares of common stock on January 11, 1996 that will be used to facilitate
additional parking. Although management believes that the net proceeds of $84.7
million from the Equity Offerings completed December 29, 1995, together with the
$8.7 million of remaining proceeds from the exercise of the Warrants will be
sufficient to fund development of Phase II, no assurances can be given that such
proceeds will be sufficient.
The Company has also purchased on March 20, 1996 additional property
totaling approximately six (6) acres located contiguous to other property owned
by the Company. The aggregate purchase price for this property was approximately
$8,166,000. Funds for this purchase were generated by a sale of 765,559
registered shares of the Common Stock to an unrelated third party.
As a result of the $203 million in aggregate principal amount of the
First Mortgage Notes, the Company has substantial annual fixed debt service
along with other operating expenses. Prior to the opening of Phase I, on April
29, 1996, the Company will have had no operations. The first interest payment on
the First Mortgage Notes was paid from the proceeds of the Note Offering and the
accrual of future interest payments through the opening of Stratosphere have
been provided for in the construction budget for Stratosphere. After the opening
of Stratosphere, the ability of the Company to meet its debt service obligation,
including making future interest payments on the First Mortgage Notes, will
depend on the Company's ability to generate sufficient cash flow from
operations. There can be no assurance that operations will commence by the
scheduled opening date or at all. While the Company believes that after
commencement of operations it will be able to generate sufficient cash flow to
meet its expenses, including such debt service requirements, any forecast of its
operating results is inherently subject to a myriad of factors, many of which
are beyond the control of the Company. There can be no assurance that the
Company will be able to realize currently anticipated earnings or even generate
earnings before interest, taxes and depreciation and amortization sufficient to
meet its debt service requirements and other expenses.
Following the commencement of operations of Stratosphere, the Company
expects to fund its operating and capital needs, as currently contemplated, from
operating cash flows. The Company intends to establish initial working capital
reserves to provide for reasonably anticipated short-term liquidity needs. To
the extent operating cash flows are insufficient to meet anticipated liquidity
needs, the Company may seek additional financing through bank borrowings, debt
or equity financings. There can be no assurance that additional financing, if
needed, will be available to the Company, or that, if available, the financing
will be on terms favorable to the Company. There is no assurance that the
Company's estimate of its reasonably anticipated liquidity needs is accurate or
that new business developments or other unforeseen events will not occur,
resulting in the need to raise additional funds.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See item 3 to the Company's Form 10-K for the fiscal year ended
December 31, 1995.
Item 5. Other Information
On May 10, 1996, the Registrant determined to change its fiscal year
from December 31 of each year to a 52-53 week year ending on the Sunday closest
to December 31 of each year. The change in fiscal year will not require the
filing of a transition report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhbit number 10.39 -- Gordon lease
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal quarter
ended March 31, 1996.
STRATOSPHERE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has dult caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: May 11, 1996 By:
Name: David Wirshing
Title: President
Date: May 11, 1996 By:
Name: Thomas A. Lettero
Title: Chief Financial Officer
Execution Draft: 3/5/96
DEVELOPMENT
AND
LEASE AGREEMENT
LANDLORD:
STRATOSPHERE CORPORATION,
A DELAWARE CORPORATION
TENANT:
STRATO-RETAIL, LLC, A NEVADA
LIMITED LIABILITY COMPANY
PREMISES
IN
THE STRATOSPHERE
LAS VEGAS, NEVADA
TABLE OF CONTENTS
ARTICLE 1.00 BASIC DATA AND DEFINITIONS..............................1
1.01 Basic Data...........................................1
1.02 Definitions..........................................2
ARTICLE 2.00 GRANT OF LEASE..........................................6
2.01 Grant of Lease.......................................6
2.02 Quiet Enjoyment......................................7
2.03 Grant of Non-exclusive Easements.....................7
ARTICLE 3.00 TERM AND POSSESSION.....................................7
3.01 Initial Term.........................................7
3.02 Extended Term........................................7
3.03 Exercise of Option...................................7
3.04 Acceptance of Premises...............................8
ARTICLE 4.00 GAMING .................................................9
ARTICLE 5.00 RENT AND OPERATING COSTS...............................10
5.01 Annual Minimum Rent.................................10
5.02 Shared Rent.........................................10
5.03 Maintenance and Inspection of Records...............10
5.04 Extended Term.......................................11
5.05 Operating Costs.....................................11
5.06 Other Charges.......................................11
5.07 Payment of Rent - General...........................12
5.08 Profit from Sale of Bricks..........................12
ARTICLE 6.00 USE OF PREMISES........................................12
6.01 Use.................................................12
6.02 Hours of Business...................................12
6.03 Restrictions........................................13
6.04 Promotions..........................................13
6.05 Name, Advertising and Signage.......................13
6.06 Vending Machines....................................14
6.07 Gaming..............................................14
6.08 Interference with Customers.........................15
6.09 Compliance with Laws and Permitted Encumbrances.....15
6.10 Hazardous Materials.................................15
ARTICLE 7.00 EXPANSION SPACE........................................16
7.01 Expansion Space.....................................16
ARTICLE 8.00 DEVELOPMENT AND FINANCING OF THE PREMISES.............16
8.01 Tenant's Development Obligations ...................16
8.02 Financing...........................................16
8.03 Leasehold Mortgages.................................17
8.04 Construction Matters................................24
ARTICLE 9.00 DESIGNATED SPACES.....................................29
9.01 Existing Lease......................................29
9.02 Third Party Designated Spaces.......................29
9.03 Landlord Designated Spaces..........................30
9.04 Exclusive and Leasing Restriction...................31
ARTICLE 10.00 TENANT'S MANAGEMENT AND LEASING OBLIGATIONS...........31
10.01 Tenant To Manage....................................31
10.02 Leases..............................................31
10.03 Inventory, Staff and Fixtures.......................32
ARTICLE 11.00 MAINTENANCE, REPAIR AND ALTERATIONS BY LANDLORD.......32
11.01 Maintenance, Repair and Replacement.................32
11.02 Alterations by Landlord.............................32
11.03 Access by Landlord..................................32
ARTICLE 12.00 UTILITIES, SERVICES, MAINTENANCE, REPAIRS
AND ALTERATIONS BY TENANT...................................33
12.01 Cleaning............................................33
12.02 Heat, Ventilation, Air Conditioning.................33
12.03 Common Utilities and Other Services.................33
12.04 Condition of Premises...............................33
12.05 Failure to Maintain Premises........................34
12.06 Alterations by Tenant...............................34
12.07 Trade Fixtures and Personal Property................34
ARTICLE 13.00 TAXES.................................................35
13.01 Landlord's Taxes....................................35
13.02 Tenant's Taxes......................................35
13.03 Right to Contest....................................35
ARTICLE 14.00 INSURANCE............................................36
14.01 Landlord's Insurance................................36
14.02 Tenant's Insurance..................................36
14.03 Waiver of Subrogation...............................37
ARTICLE 15.00 PARKING AND PARKING FACILITY..........................37
15.01 ....................................................37
15.02 ....................................................38
15.03 ....................................................38
ARTICLE 16.00 LANDLORD'S SPONSOR....................................38
16.01 Product Sponsors....................................38
ARTICLE 17.00 INDEMNITY.............................................38
17.01 Indemnity by Tenant.................................38
17.02 Indemnity by Landlord...............................39
17.03 Survival............................................40
ARTICLE 18.00 ASSIGNMENT; RIGHT OF FIRST REFUSAL...................40
18.01 Assignment; Subleasing..............................40
18.02 Subsequent Assignments..............................40
18.03 Right of First Refusal..............................40
18.04 Transfers to Affiliates.............................41
ARTICLE 19.00 SURRENDER.............................................42
19.01 Possession..........................................42
19.02 Trade Fixtures, Personal Property and Improvements..42
19.03 Merger..............................................42
19.04 Payments After Termination..........................42
ARTICLE 20.00 HOLDING OVER..........................................42
20.01 Month-to-Month Tenancy..............................42
20.02 Tenancy at Sufferance...............................42
20.03 General.............................................43
ARTICLE 21.00 RULES AND REGULATIONS.................................43
21.01 Purpose.............................................43
21.02 Observance..........................................43
21.03 Modification........................................43
21.04 Non-Compliance......................................43
ARTICLE 22.00 EMINENT DOMAIN........................................43
22.01 Total Taking........................................43
22.02 Partial Taking of Premises..........................43
22.03 Partial Taking of Stratosphere......................44
22.04 Notice..............................................44
22.05 Distribution of Awards..............................44
22.06 Restoration.........................................45
22.07 Surrender...........................................45
ARTICLE 23.00 DAMAGE BY FIRE OR OTHER CASUALTY......................45
23.01 Damage to Premises..................................45
23.02 Damage to Stratosphere..............................45
23.03 Restoration; Abatement..............................46
23.04 Limitation on Landlord's Liability..................46
23.05 Restoration Plans...................................46
23.06 Restoration Contracts...............................46
ARTICLE 24.00 TRANSFERS BY LANDLORD; NON-DISTURBANCE, SUBORDINATION.47
24.01 Sale, Conveyance and Assignment.....................47
24.02 Effect of Sale, Conveyance, or Assignment...........47
24.03 Subordination.......................................47
24.04 Attornment..........................................47
24.05 Nondisturbance......................................48
24.06 Effect of Attornment................................48
24.07 Execution of Instruments............................48
24.08 Attornment of Subtenants............................48
ARTICLE 25.00 NOTICES, ACKNOWLEDGMENTS, AUTHORITIES FOR ACTION......49
25.01 Notices.............................................49
25.02 Acknowledgments.....................................49
25.03 Authorities for Action..............................50
ARTICLE 26.00 DEFAULT AND REMEDIES..................................50
26.01 Tenant's Default....................................50
26.02 Remedies............................................54
26.03 Interest and Costs..................................54
26.04 Performance of Covenants............................54
26.05 Payments............................................54
26.06 Termination for Failure to Commence Construction....55
26.07 Remedies Cumulative.................................55
26.08 Waiver of Redemption................................55
26.09 Tenant's Right to Cure Landlord Default.............55
ARTICLE 27.00 APPRAISAL ............................................56
27.01 Appraisal ..........................................56
27.02 Payment and Adjustment .............................57
ARTICLE 28.00 MISCELLANEOUS.........................................57
28.01 Consent Not Unreasonably Withheld ..................57
28.02 Applicable Law and Construction ....................57
28.03 Entire Agreement ...................................57
28.04 Amendment or Modification ..........................57
28.05 Construed Covenants and Severability ...............57
28.06 No Implied Surrender or Waiver .....................57
28.07 Counterparts........................................58
28.08 Successors Bound ...................................58
28.09 Unavoidable Delay ..................................58
3/5/96
DEVELOPMENT AND LEASE AGREEMENT
BETWEEN: Stratosphere Corporation, a Delaware corporation ("Landlord")
AND: Strato-Retail, LLC , a Nevada limited liability company ("Tenant")
PROJECT: THE STRATOSPHERE
Las Vegas, Nevada
DATE: March 11, 1996.
LANDLORD AND TENANT, in consideration of the covenants herein contained, hereby
agree as follows:
ARTICLE 1.00 BASIC DATA AND DEFINITIONS
1.01 BASIC DATA. The following basic data forms a part of this Lease and each
reference to the following defined terms shall include the data set
forth below:
(a) ANNUAL MINIMUM RENT. The fixed minimum rent for the Premises at
the annual rate as determined from time to time in accordance
with this Lease. Annual Minimum Rent for the Premises during the
Initial Term shall be $1,000,000 per Lease Year. Annual Minimum
Rent for any Extended Term shall be at the rate set forth in
Article 5.04.
(b) BUILDING SHELL CONSTRUCTION. That portion of Tenant's
Development Obligations being assumed by Landlord pursuant to
the Agreement in which Landlord has agreed to construct the
shell of the second floor of the Base Building to house both
Phase I and Phase II of the Premises ("Building Shell") in
accordance with the criteria attached hereto as Exhibit E.
(c) DEVELOPMENT PERIOD. The construction period necessary to
complete construction of the Tenant Development Obligations with
respect to Phase I which shall commence on the Delivery Date for
Phase I and be substantially completed on the later to occur of
(i) one hundred twenty (120) days after the Delivery Date for
Phase I, or (ii) Landlord's Opening Date, subject to Unavoidable
Delays and delays caused by Landlord's failure to timely
complete the Building Shell Construction, as well as the
construction period necessary to complete construction of the
Tenant Development Obligations with respect to Phase II which
shall commence on the Delivery Date for Phase II and be
substantially completed one hundred twenty (120) days after the
Delivery Date for Phase II, subject to Unavoidable Delays.
(d) DELIVERY DATE. The applicable date on which the Base Building
and all Landlord improvements thereto with respect to each of
Phase I and Phase II (including, without limitation, the
Building Shell Construction for Phase I and Phase II) are ready
for Tenant to commence the balance of Tenant's Development
Obligations. Landlord and Tenant acknowledge that there shall be
separate Delivery Dates for Phase I and Phase II.
(e) EXHIBITS. The consecutively lettered Exhibits A through H, each
of which is attached hereto and made a part of this Lease.
(f) LANDLORD'S NOTICE ADDRESS.
STRATOSPHERE CORPORATION
2000 Las Vegas Boulevard South
Las Vegas, Nevada 89104
(g) TENANT'S NOTICE ADDRESS.
c/o THE GORDON COMPANY
1310 Montana Avenue, Suite "A"
Santa Monica, California 90403
Attn: Randy Brant
c/o SIMON PROPERTY GROUP, L.P.
National City Center
115 W. Washington Street
Indianapolis, Indiana 46204
Attention: President
(h) INITIAL TERM. The term of this Lease, which shall commence on
the Delivery Date for Phase I and end fifty-five (55) full
calendar years thereafter, plus the partial calendar year
between the Delivery Date for Phase I and the next succeeding
December 31, unless extended or sooner terminated in accordance
with the provisions of this Lease.
(i) TRADE NAME. The Tower Shops at Stratosphere The Trade Name may
not be changed without the prior written consent of Landlord.
1.02 DEFINITIONS. The following terms shall have the meanings set forth in
this Article 1.02:
(a) AGREEMENT. That certain side letter agreement of even date
herewith in which Landlord has agreed to construct, on Tenant's
behalf, that portion of Tenant's Development Obligations which
constitute the Building Shell Construction for Phase I and Phase
II and certain other improvements approved by Tenant. A copy of
the Agreement is attached hereto as Exhibit G.
(b) APPRAISAL. Appraisal in accordance with Article 27.00.
(c) BASE BUILDING. The two story low rise building which will
contain, among other things, both Phase I and Phase II of the
Premises and be connected to the Tower and Hotel and constructed
in accordance with the criteria set forth on Exhibit A attached
hereto.
(d) BREAKPOINT. During the Initial Term of the Lease, the Breakpoint
shall be equal to $6,000,000, such figure to be increased as
follows:
(i) Commencing on the date on which Phase II is
substantially completed and at least fifty percent (50%)
of the gross leasable area available for occupancy by
Subtenants therein initially opens to the public for
business, then the Breakpoint shall be increased
to$10,500,000.00. Tenant shall provide Landlord with
written evidence setting forth in reasonable detail a
computation showing the date on which fifty percent
(50%) of the gross leasable area available for occupancy
in Phase II initially opened to the public for business.
(e) COMPLETION DATE. The date on which (i) the Stratosphere has been
substantially completed and is open to the public for business,
and (ii) construction of the Premises Common Areas for Phase I
has been substantially completed, and (iii) all of Tenant's
Development Obligations necessary to ready Subtenant premises
for occupancy in Phase I has been substantially completed, all
of which shall be required to be completed no earlier than the
last day of the Development Period or such later date as may be
agreed upon in writing by Landlord and Tenant.
(f) COMMON AREAS. As depicted in Exhibit B attached hereto.
(g) (i) STRATOSPHERE COMMON AREAS. The sidewalks, parking areas,
stairway service corridors, truck loading areas and
docking facilities, malls, aisleways, elevators,
escalators, stairways and other portions of the
Stratosphere (excluding the Premises) located on
Landlord's Parcel and made available from time to time
in accordance with Article 2.03 for the general and
non-exclusive use, convenience and benefit of Landlord,
Tenant, Subtenants, and their respective customers,
guests and invitees.
(ii) PREMISES COMMON AREAS. The malls, aisleways and other
portions of the Premises made available from time to
time for the general and non-exclusive use, convenience
and benefit of Landlord, Tenant, Subtenants and their
respective customers, guests and invitees.
(h) DEVELOPMENT COSTS. "Development Costs" shall mean one hundred
five percent (105%) times all third party architectural,
engineering and consulting fees, and all construction costs
(including construction costs associated with individual
Subtenant spaces therein which are funded by Tenant in the form
of allowances or otherwise). Development Costs shall
specifically exclude all costs associated with Tenant's
Financing including, but not limited to, survey, title and
environmental expenses and all costs of obtaining a separate tax
parcel designation for the Premises.
(i) EXISTING LEASE. Lease entered into by and between Stratosphere
Corporation as Landlord and McDonalds Corporation as Tenant,
dated February 14, 1996, which Lease will be partially assumed
by Tenant as provided in Article 9.01.
(j) EXPANSION SPACE. All space designated for retail use and
connected to the proposed 900 room hotel expansion and
containing approximately 5,000 square feet of gross building
area all as depicted on Exhibit B attached hereto.
(k) EXTENDED TERM. Tenant's right to extend the term of the Lease
for an additional twenty (20) years upon and subject to the
terms and conditions set forth in Article 3.00 below.
(l) FIRST LEASE YEAR. The first lease year shall commence on the
Delivery Date for Phase I and end on the following December 31.
(m) GAAP. Generally accepted accounting principles as the same may
from time to time be amended or supplemented.
(n) GROSS RENTS. The gross receipts of Tenant received from
Subtenants during each Lease Year denominated as annual minimum
rent and percentage rent (whether in addition to or in lieu of
annual minimum rent). Gross Rents shall specifically exclude all
reimbursements to Tenant from Subtenants for common area
maintenance, insurance, utilities, real estate taxes and other
ancillary charges under any Sublease.
(o) LANDLORD DESIGNATED SPACES. Retail space in the Premises
reserved for Sublease by Tenant to Landlord, or Landlord's
assignee, for:
(i) Photo booth in Phase I designated as Space B-14 and
containing approximately 1,134 square feet; and
(ii) Landlord retail in Phase I designated as Spaces D-4 and
E-15 and containing approximately 2,559 square feet and
2,251 square feet respectively;
All as more particularly set forth in Article 9.03 and as shown
on Exhibit C attached hereto.
(p) LANDLORD'S OPENING DATE. April 30, 1996 or such later date as
Landlord shall open the Stratosphere to the public for business.
(q) LANDLORD PARCEL. The real estate owned by Landlord and legally
described in Exhibit D attached hereto.
(r) LANDLORD'S DEVELOPMENT OBLIGATIONS. The obligations of Landlord
to construct the first floor of the Base Building of the
Premises.
(s) LEASE YEAR. Each Lease Year shall commence on January 1st of
each year of the Initial Term or Extended Term, except the First
Lease Year, and end on December 31st of the same year unless
sooner terminated as herein provided.
(t) LEASE. This Development and Lease Agreement, including the
Exhibits.
(u) MEZZANINE FLOOR. The retail or storage space located on the
mezzanine level of the second floor of the Base Building.
(v) NET REVENUE. Gross Rents, key money paid by Subtenants to
Tenant, and Sponsorship income of Tenant, less the following:
(i) the Breakpoint;
(ii) Any sums collected and paid out by Tenant for any sales
or excise or value added tax imposed by and accounted
for by Tenant to any duly constituted governmental
authority; and
(iii) Any amounts paid by Tenant to McDonalds Corporation
pursuant to Paragraph 3C of the Existing Lease.
Without limiting the generality of the foregoing, no expenditure
related to Tenant's Financing whether principal, interest, fees,
expenses or otherwise, shall be deducted in computing Net
Revenue.
(w) OPERATING COSTS. As defined in Article 5.05.
(x) PERMITTED USE. The Premises shall be used for a
retail/entertainment complex under the Trade Name and only the
Trade Name.
(y) PHASE I. That portion of the Premises comprised of both Retail
Floor and Mezzanine Floor of the Stratosphere consisting of
approximately 69,000 square feet of gross floor area on the
Retail Floor and an undetermined number of square feet of floor
area to be located on the Mezzanine Floor, all of which is
located upon the Landlord Parcel and which will connect the
retail portion of the Stratosphere to the vertical access of the
Tower as depicted on Exhibit B attached hereto.
(z) PHASE II. That portion of the Premises comprised of both Retail
Floor and Mezzanine Floor of the Stratosphere consisting of
approximately 52,000 square feet of gross floor area on the
Retail Floor and an undetermined number of square feet of floor
area to be located on the Mezzanine Floor, all of which shall be
located upon the Landlord Parcel and which shall connect to
Phase I as depicted on Exhibit B attached hereto.
(aa) PREMISES. Phase I and Phase II, as the same may be expanded from
time to time to include all or any portion of the Expansion
Space, and measured to the center line of all exterior walls,
floors and ceilings.
(bb) RENT. The aggregate of all amounts payable by Tenant to Landlord
in accordance with Article 5.00 and otherwise pursuant to the
terms and conditions of this Lease.
(cc) RETAIL FLOOR. The retail space located on the second floor of
the Base Building including areas designated for public walkways
and Premises Common Areas.
(dd) SHARED RENT. The rent payable to Landlord as provided in Article
5.02 below.
(ee) STRATOSPHERE. The hotel containing not less than 900 rooms
("Hotel), a casino of not less than 50,000 square feet
("Casino"), a tower containing one or more restaurants, meeting
rooms, a lounge, an observation deck ("Tower"), the Premises,
and the Parking Facility all currently under refurbishment and
development in the configuration shown on the plot plan attached
hereto as Exhibit B and which is located on the Landlord Parcel
at the intersection of Las Vegas Boulevard and Baltimore Road.
(ff) SUBLEASE(S). The lease agreements between Tenant and each
Subtenant, and all amendments, modifications and supplements
thereto.
(gg) SUBTENANT(S). Those individuals or entities who Sublease space
from Tenant within the Premises and any Expansion Space
including, without limitation, the Landlord Designated Spaces
and the Third Party Designated Spaces.
(hh) TENANT'S DEVELOPMENT OBLIGATIONS. The obligations of Tenant to
develop and construct the Premises into a retail/entertainment
complex as more particularly set forth in Article 8.01.
(ii) THIRD PARTY DESIGNATED SPACES. Retail space reserved for
Sublease in Phase II by Tenant to:
(i) Rainforest Cafe designated as Space I-1 and containing
approximately 18,136 square feet;
(ii) Kids Quest designated as Space G-5 and containing
approximately 955 square feet; and
(iii) Aquarium gift shop designated as Space I-2 and
containing approximately 3,953 square feet.
All as more particularly set forth in Article 9.02.
ARTICLE 2.00 GRANT OF LEASE
2.01 GRANT OF LEASE. Tenant acknowledges that Landlord is entering into this
Lease in order that there be an attractive retail/entertainment complex
on the Premises which will be developed, operated, managed, and
maintained with a level of aesthetic appearance and attractiveness
consistent with that found in the balance of the Stratosphere, upon and
subject to the terms and conditions of this Lease.
Landlord, for and in consideration of the rents hereinafter reserved and
the covenants and agreements on the part of Tenant to be paid and
performed, hereby demises and leases the Premises to Tenant, and Tenant
hereby leases and accepts the Premises from Landlord, to have and to
hold during the term, subject to the terms and conditions of this Lease.
Landlord hereby warrants and represents to Tenant that it has full
authority to lease the Premises to Tenant as provided herein subject
only to those encumbrances set forth on Exhibit F attached hereto which
Tenant hereby acknowledges as permitted encumbrances ("Permitted
Encumbrances").
Landlord hereby reserves unto itself, its agents, successors, assigns,
employees, guests and invitees a non-exclusive easement for ingress and
egress over, under and across those portions of the Premises Common
Areas. Further, Landlord, its agents and employees shall have a
non-exclusive easement for ingress and egress over all other portions of
the Premises as may be necessary to permit Landlord to repair and
maintain the Stratosphere or to otherwise exercise its rights and
obligations under this Lease; provided, however, except in an emergency,
Landlord shall give Tenant prior notice of the intention of Landlord,
its agents or employees to enter upon any portion of the Premises for
such purposes and in the exercise of such rights shall use reasonable
efforts to minimize any disruption to Tenant's operation of the Premises
or the operation of any Subtenant therein. Landlord shall repair and
restore any portion of the Premises damaged or disturbed by Landlord,
its agents or employees as a result of such entry upon the Premises.
2.02 QUIET ENJOYMENT. Landlord covenants that Tenant, upon paying all Rent
and performing all covenants and agreements on its part to be performed,
shall have quiet enjoyment and possession of the Premises during the
Initial Term and Extended Term, subject to the terms and conditions of
this Lease and to any Permitted Encumbrances to which this Lease is
subordinate.
2.03 GRANT OF NON-EXCLUSIVE EASEMENTS. Landlord hereby grants to Tenant,
Subtenants and their respective customers, guests and invitees, a
non-exclusive easement, throughout the term of this Lease, over, upon,
and across the Stratosphere Common Areas (such as, without limitation,
the public areas of the first floor of the Base Building, escalators,
parking areas (including the Parking Facility as defined in Article
15.01), sidewalks, elevators and walkways, and specially designated
truck loading and docking facilities and related roadways) for, among
other things, ingress and egress to and from the Landlord Parcel and
roadways adjacent to the Stratosphere, the passage and parking of motor
vehicles and trucks and other delivery and service vehicles to and from
the Landlord Parcel and the Premises and ingress and egress to and from
the Premises and to and from other portions of the Stratosphere and for
all other necessary uses by the foregoing parties in connection with
their respective rights in and to the Premises, including access to
provide services to the Premises not otherwise provided by Landlord,
provided that Landlord may at any time appropriate portions of the
Stratosphere Common Areas for Landlord's exclusive use, except that
Landlord shall in no event change or appropriate in any way (i) the
escalators shown on Exhibit B attached hereto which are the primary
access to the Premises and the Tower, and (ii) any access areas between
the Premises and the Tower, without in each instance obtaining Tenant's
prior written approval, nor shall Landlord appropriate other portions of
the Stratosphere Common Areas without in each instance substituting
adequate alternative areas sufficient to provide continuous vehicular
and pedestrian ingress, egress and a Parking Facility for the
non-exclusive use of Tenant, Subtenants and their respective customers,
guests and invitees as provided above. Prior to any such appropriation
or change in the Stratosphere Common Areas by Landlord, Tenant shall be
given thirty (30) days prior written notice describing the same.
Tenant's use of the Stratosphere Common Areas shall be subject to
reasonable, non-discriminatory rules and regulations established by
Landlord from time to time pursuant to Article 21.00.
ARTICLE 3.00 TERM AND POSSESSION
3.01 INITIAL TERM. The Initial Term of this Lease shall commence on the
Delivery Date for Phase I.
Landlord and Tenant will execute a recordable memorandum of this Lease
in form and content approved by both parties setting forth the actual
Delivery Date and Completion Date and other pertinent terms hereof as
reasonably designated by either party.
3.02 EXTENDED TERM. Provided that at the time of exercise of and, unless
waived by Landlord as a condition to effectiveness of such exercise
(without waiving the Event of Default for any other purpose), at the
time the Extended Term is to commence, no Event of Default shall exist
and be continuing, Tenant is hereby granted the option ("Option"), which
Option is integral with this Lease and may not be separately assigned
(that is, the Option may be exercised, if at all, only in whole as to
the entire Premises and not in part and only by the holder from time to
time of the Tenant's interest under this Lease), to extend the term of
this Lease an additional twenty (20) years ("Extended Term"), such
period to commence at the expiration of the Initial Term.
3.03 EXERCISE OF OPTION. Tenant shall exercise, if at all, the Option to
extend the Initial Term of this Lease, as follows: At any time on or
before the date which is six (6) months prior to the expiration of the
Initial Term, Tenant may give written notice to Landlord that Tenant
elects to exercise the Option and, if Tenant fails to give such notice
within the time required, Tenant shall have waived its right to extend
the Initial Term. If Landlord and Tenant do not agree on the Annual
Minimum Rent and Shared Rent for the Extended Term within sixty (60)
days after Tenant exercises the Option, then the Rent shall be
determined by Appraisal in accordance with Article 27.0. If the Annual
Minimum Rent and Shared Rent for the Option is determined by Appraisal
and Tenant is not satisfied with the Appraisal, then Tenant may elect to
terminate this Lease in its entirety by giving written notice thereof to
Landlord within thirty (30) days after its receipt of the Appraisal,
which termination shall be effective as of the scheduled expiration of
the Initial Term, or if Landlord elects by Landlord giving written
notice thereof to Tenant within twenty (20) days after receipt of such
termination notice from Tenant, such termination shall be effective as
of twelve (12) months after such termination notice is given by Tenant,
in which case, the Initial Term shall be automatically extended to the
last day of such twelve (12) month period and the Rent payable during
such twelve (12) month period shall be the same as that payable during
the Initial Term.
Any such Extended Term as above provided shall operate as an extension
of the Initial Term hereof, so that this Lease and each and every
covenant, agreement and provision thereof shall be and remain in full
force and effect during the Initial Term hereof as extended and with the
same force and effect as if the Initial Term of this Lease were
originally for such Extended Term, except (a) the Annual Minimum Rent
and Shared Rent during the Extended Term for the Premises shall be as
set forth in this Article 3.03 , (b) Tenant shall have no option to
extend the Initial Term of this Lease beyond the expiration of the
Extended Term , and (c) Landlord shall not be obligated to provide any
new or additional leasehold improvements or allowances to Tenant.
3.04 ACCEPTANCE OF PREMISES. Tenant shall have thirty (30) days after
Landlord's Development Obligations for each of Phase I and Phase II of
the Building Shell Construction are substantially complete ("Inspection
Period") within which to inspect the Building Shell Construction and to
notify Landlord in writing of any defects or faults in Landlords
workmanship or materials or Landlord's failure to conform to plans and
specifications approved by Tenant ("Tenant's Construction Objections").
If Tenant fails to so notify Landlord of Tenant's Construction
Objections within the Inspection Period, then Tenant shall be deemed to
be satisfied with the condition of the Premises except for latent
defects and any other defects which are not readily discoverable by an
inspection. If Tenant notifies Landlord of Tenant's Construction
Objections during the Inspection Period, Landlord shall, within thirty
(30) days thereafter ("Remedy Period") remedy Tenant's Construction
Objections to Tenant's reasonable satisfaction. If Tenant is not
satisfied with Landlord's remedy to Tenant's Construction Objections,
Tenant shall notify Landlord further of Tenant's Construction Objections
in writing within five (5) days after the Remedy Period ("Notice
Period") at which time Landlord and Tenant shall, no later than thirty
(30) days after the Notice Period, settle Tenant's Construction
Objections by arbitration. The arbitration shall be conducted pursuant
to the Construction Rules of American Arbitration Association ("AAA") by
three (3) arbitrators appointed according to those rules. All
proceedings shall be conducted in English and the Federal Rules of Civil
Procedure shall prevail. The arbitration proceedings shall take place in
the State of Nevada and Landlord and Tenant irrevocably submit to the
jurisdiction of said State for purposes of the aforementioned
arbitration proceedings. The expenses of arbitration shall be borne
equally by the parties hereto or as the arbitrator shall otherwise
equitably determine.
Landlord shall guaranty Landlord's Development Obligations with respect
to Phase I and Phase II of the Building Shell Construction for a period
of one (1) year from the Delivery Date for each of Phase I and Phase II
against faulty and/or defective materials and workmanship. Landlord
shall assign or otherwise cooperate to make available to Tenant
Landlord's rights in and to any third party warranties and guarantees
with respect to the Premises to Tenant.
ARTICLE 4.00 GAMING
If at any time (a) Tenant or any person associated in any way with
Tenant is denied a gaming license, found unsuitable, or is denied or
otherwise unable to obtain any other approval with respect to the
Premises by the Nevada Gaming Commission, any other agency or
subdivision of the State of Nevada or any other agency or subdivision
thereof or of any other government regulating gaming (collectively
"Gaming Authorities"), is required by any Gaming Authority to apply for
an approval and does not apply within any required time limit, as the
same may be extended by such Gaming Authority, withdraws any application
for approval other than upon a determination by the applicable Gaming
Authority that such approval is not required, and if the result of the
foregoing has or may have an adverse effect on Landlord or any affiliate
of Landlord or does or may materially delay obtaining any approval; or
(b) any Gaming Authority commences or threatens to commence any suit or
proceeding against Landlord or any affiliate of Landlord or to terminate
or deny any approval of Landlord or any affiliate of Landlord as a
result of Tenant or any person associated with Tenant (all of the
foregoing events described in (a) and (b) above are collectively
referred to as a "Denial"), Landlord may terminate this Lease by written
notice to Tenant; provided, however, if Landlord exercises its right to
terminate this Lease pursuant to this Article 4.00 solely as the result
of an association of Tenant or any person associated with Tenant which
is the subject of a Denial, this Lease shall not terminate if Tenant
ends such association within thirty (30) days of Landlord's notice of
termination or within such longer period of time, if any, as the Gaming
Authority gives for terminating such association. Tenant and all such
persons associated with Tenant shall promptly, and in all events within
any time limit established by law, regulation or such Gaming Authority,
furnish each Gaming Authority any information requested by such Gaming
Authority and shall otherwise fully cooperate with all Gaming
Authorities. A person shall be deemed associated with Tenant if that
person directly or indirectly owns any equity interest in Tenant, any
equity interest in such person is directly or indirectly owned by
Tenant, any equity interest in such person is directly or indirectly
owned by a person directly or indirectly having any equity interest in
Tenant (all of the foregoing are hereinafter referred to as "Tenant
Affiliates"), such person is employed by Tenant or a Tenant Affiliate,
is an officer, director or agent of Tenant or a Tenant Affiliate, has
any contractual relationship with Tenant or a Tenant Affiliate,
furnishes services or property to Tenant or a Tenant Affiliate, or has
the power to exercise a significant influence over Tenant or a Tenant
Affiliate. Without limiting the generality of the foregoing, all
Leasehold Mortgagees holding a Leasehold Mortgage on all or any of
Tenant's interest in this Lease and/or the Premises and all Subtenants
shall be deemed associated with Tenant.
Tenant represents to Landlord that neither Tenant, nor any partner in
Tenant, nor, to the best of Tenant's knowledge, any person associated
with Tenant is unwilling to file all necessary applications to obtain
whatever approvals may be required of such persons in connection with
the transactions provided for herein. To the best of Tenant's knowledge,
neither Tenant nor any partner in Tenant, nor any person associated with
Tenant has ever engaged in any conduct or practices which any of the
foregoing persons should reasonably believe would cause such person or
entity to be denied any approval. Except as disclosed in writing to
Landlord on or before the execution hereof, neither Tenant, any partner
in Tenant, nor any officer, director or shareholder of any thereof has
ever (i) been arrested, detained, charged, indicted or summoned to
answer for any criminal offense or violation for any reason whatsoever,
regardless of disposition of the event, except for minor traffic
citations, (ii) had a criminal indictment, information or complaint
returned against him for which he was not arrested or in which he was
named as an unindicted co-party, (iii) been questioned by a city, state,
federal or law enforcement agency, commission or committee, (iv) been
subpoenaed to appear to testify before a federal, state or county grand
jury, board or commission, (v) had a civil or criminal record expunged
or sealed by a court order, (vi) received a pardon for any criminal
offense, (vii) had any member of his family or spouse's family who has
ever been convicted of a felony, (viii) held a privileged or
professional license in any state, (ix) had any disciplinary action
taken against him with respect to any such license, or (x) been refused
a gaming license or related finding of suitability or a license for
selling alcoholic beverages or been a participant in any group which has
been denied any such license or finding based upon a finding of
unsuitability.
ARTICLE 5.00 RENT AND OPERATING COSTS
5.01 ANNUAL MINIMUM RENT. Commencing on the Completion Date, Tenant shall pay
to Landlord as and for Tenant's Annual Minimum Rent for the Premises the
sum of $1,000,000 payable in equal monthly installments of $83,333.33 in
advance on the first day of each calendar month included in the Initial
Term and at that prorated rate payable in advance for any partial
calendar month should the Completion Date not fall on the first day of a
calendar month.
5.02 SHARED RENT. Commencing with the First Lease Year, in addition to the
payment of the Annual Minimum Rent as described in Article 5.01 above,
Tenant shall pay to Landlord, for each full or partial Lease Year of the
Initial Term, an amount equal to fifty percent (50%) of Tenant's Net
Revenue for such period ("Shared Rent").
Shared Rent shall be payable quarterly, within thirty (30) days
following the end of each calendar quarter of each Lease Year, and shall
be accompanied by a written statement from Tenant setting forth in
reasonable detail the computation of Shared Rent for such quarter and
certified by the treasurer or chief financial officer of a member of
Tenant. The Breakpoint shall be pro rated for each such quarterly
computation. If and to the extent Tenant shall overpay or underpay
Shared Rent for any Lease Year, such sums shall be adjusted annually,
within sixty (60) days following the end of each Lease Year, with any
underpayment being made by Tenant to Landlord on such sixtieth (60th)
day, and any overpayment being credited to the next installment of
Annual Minimum Rent or Shared Rent thereafter becoming due hereunder.
5.03 MAINTENANCE AND INSPECTION OF RECORDS. Tenant shall maintain in its main
office in Indianapolis, Indiana, complete and accurate books of accounts
and records with respect to Net Revenue and Shared Rent and the
computation thereof. Copies of summaries of such records shall be made
available to Landlord at its office in Las Vegas, Nevada upon Landlord's
written request. Such books of accounts and records shall at all times
be retained and preserved by Tenant for at least the six (6) immediately
preceding Lease Years. Landlord shall be entitled at all times during
business hours, upon reasonable notice, through Landlord's duly
authorized agents, or accountants, to inspect and make copies of any
records and books of Tenant with respect to the computation of Net
Revenue and Shared Rent. At any time within two (2) years after receipt
of any Net Revenue calculation furnished to it by Tenant pertaining to
Shared Rent, Landlord may cause a special audit to be made of Tenant's
records relating to Shared Rent for the period covered by such Net
Revenue calculation. The cost of such audit shall be paid by Landlord
unless it shall be determined as a result of such audit that the Shared
Rent properly payable to Landlord was understated in any Net Revenue
calculation furnished by Tenant to Landlord by more than two percent
(2%) in any Lease Year, including the First Lease Year, in which case
Tenant shall pay the cost of the audit. Any understated amount of Shared
Rent discovered by such an audit shall be immediately due and payable to
Landlord.
Should Tenant cause or permit an audit to be conducted with respect to
the Net Revenue calculation or Shared Rent, promptly upon receipt of any
accountant's or other report with respect thereto, Tenant shall deliver
a copy thereof to Landlord.
Landlord shall not disclose any confidential information obtained
pursuant to this Article 5.00 except (a) as required by law, (b) in
litigation, (c) to actual or prospective lenders and/or purchasers or
(d) to Landlord's advisors and consultants as required in connection
with their services provided that Landlord will make reasonable efforts
to obtain from such advisors and consultants, other than attorneys and
accountants, an agreement not to disclose such confidential information
other than as permitted in this paragraph. Confidential information
shall not include, and Landlord shall have no obligation to refrain from
using or disclosing, information which meets any of the following
criteria:
(i) The information is lawfully known by Landlord, its agents,
employees or advisors at the time of the audit or inspection;
(ii) The information is or becomes known to the general public
through no fault of Landlord, its agents, employees and
advisors;
(iii) The information is independently developed by Landlord without
use of confidential information; or
(iv) The information is lawfully received by Landlord from a third
party.
Upon any permitted assignment in accordance with the provisions of this
Lease , Tenant shall deliver to the assignee copies of all books of
accounts and records required to be maintained and retained as provided
in this Article 5.03.
5.04 EXTENDED TERM. Rent for the Premises for the Extended Term, if any,
shall be determined as provided for in Article 3.03 and shall be payable
on the commencement of the Extended Term.
5.05 OPERATING COSTS. Tenant shall pay or cause to be paid when due all costs
incurred by it in connection with the development, operation, management
and ownership of the Premises as permitted hereunder including, but not
limited to, Tenant's allocable share of the costs incurred by Landlord
pursuant to Article 15.02, real estate taxes assessed solely against the
Premises, insurance with respect to the Premises only and required to be
carried by Tenant hereunder, utility services serving the Premises, if
possible, special assessments levied or charged against the Premises,
maintenance and repair of all non-structural components of the Premises,
repair and/or replacement of all internal finishings such as ceilings,
floors, walls, decorations, doors, window frames, and janitorial
services, but excluding any items included within Landlord's Development
Obligations. If Tenant fails to pay such costs when due, and such
failure may result in Landlord being liable for such costs or an adverse
effect upon Landlord's ability to operate or maintain all or any portion
of the Stratosphere (other than the Premises), Landlord shall have the
right, but not the obligation, to pay any portion or all of such costs
and charge such amount to Tenant as Rent payable within ten (10) days of
Landlord's notice to Tenant plus a penalty of five percent (5%) of such
costs not so paid within such period.
5.06 OTHER CHARGES. Tenant shall pay to Landlord, at the times and in the
manner provided in this Lease or, if not so provided, within thirty (30)
days after notice from Landlord, all amounts (other than those payable
under Articles 5.01, 5.02, 5.04 and 5.05) which are payable by Tenant to
Landlord under this Lease.
5.07 PAYMENT OF RENT - GENERAL. All amounts payable by Tenant to Landlord or
by Tenant to any other third party as provided for in this Article 5.00,
shall be deemed to be Rent and shall be payable and recoverable as Rent
in the manner herein provided, and Landlord shall have all rights
against Tenant for default in any such payment as in the case of arrears
of Rent. Rent shall be paid to Landlord, without deduction or set-off
(except that Tenant shall have the right of set-off against Rent as
further provided for in Articles 6.01 and 26.09) in legal tender of the
jurisdiction in which the Premises are located, at Landlord's Notice
Address, or to such other person or at such other address as Landlord
may from time to time designate in writing. Tenant's obligation to pay
Rent shall survive the expiration or earlier termination of this Lease.
Subject to the terms and conditions of this Lease, Landlord and Tenant
acknowledge and agree that this Lease shall be deemed and construed as a
net, net lease.
5.08 PROFIT FROM SALE OF BRICKS. At Tenant's election, Landlord and Tenant
shall form a joint venture to sell the right to customers to place their
name on the bricks that will form the floor of the walkway on the
Premises Common Areas ("Brick Site"). Landlord and Tenant shall
cooperate with each other during construction of the Brick Site as it
relates to the sale of bricks. The gross receipts from the sale of
bricks less the cost of marketing the sale of bricks and the cost to
engrave the names of the customers on the bricks shall be deemed "Brick
Profits". Landlord and Tenant shall equally share in the Brick Profits.
The gross receipts from the sale of bricks shall not be used in the
calculation of Shared Rent. Management of this joint venture shall be
upon terms and conditions mutually agreed upon by Landlord and Tenant.
ARTICLE 6.00 USE OF PREMISES
6.01 USE. For so long as the Stratosphere shall be open to the public for
business, the Premises shall be used and occupied only for the Permitted
Use and for no other use or purpose whatsoever and, except for gaming
activities that are conducted by Landlord, Tenant shall not conduct
and/or permit any gaming activity to occur on the Premises. For purposes
of this Article 6.01, gaming activity shall not include the operation of
an arcade which is intended for use primarily by minors.
After Landlord's Opening Date, if the Stratosphere shall not be open to
the public for business (other than temporary closings for remodeling or
as a result of damage by fire or other casualty as provided in Article
23.00) for a period in excess of six (6) consecutive months, then the
Premises may be used and occupied for any lawful use and Tenant shall
have no obligation to make any payments of Annual Minimum Rent. In
addition, Tenant shall have the right to make all changes to the
Stratosphere Common Areas necessary to provide parking for and ingress
and egress to the Premises and to provide utilities and all other
services to the Premises necessary for the use and operation of the
Premises. Tenant may offset against any Rent due to Landlord the cost
incurred in providing any services which Landlord has failed to provide.
6.02 HOURS OF BUSINESS. So long as the Stratosphere is operating and open to
the public for business during the days and hours described below,
Tenant will open for business and remain open and conduct its business,
and shall require not less than seventy five percent (75%) of the
Subtenants to also open for business and remain open and conduct
business in the Premises under its Trade Name and for the Permitted Use
(or, with respect to the Subtenants, under their respective trade names
and permitted uses) throughout the term on each day, 365 days per year,
and during the hours of 10:00 a.m. to 11:00 p.m. Sunday through Thursday
and 10:00 a.m. to 12:00 p.m. Friday and Saturday. Tenant agrees that, in
addition to the hours of business set forth herein, the Premises Common
Areas leading to and from the Tower elevators will remain open to the
public during the same business hours as the Tower business hours.
6.03 RESTRICTIONS. Tenant (or anyone acting through, for, or in place of
Tenant) shall not:
(a) conduct, permit or advertise on or from or pertaining to the
Premises any fire, sale, bankruptcy (unless a receiver in
bankruptcy is appointed and requires such a sale on the
Premises) or auction, whether real or fictitious, or wholesale
business;
(b) use, or permit to be used, the malls or sidewalks adjacent to
the Premises, or any other Premises Common Areas (except for
kiosks which do not unreasonably interfere with normal traffic
flow in any direction) for the sale or display of any
merchandise or for any other business, occupation, or
undertaking;
(c) use, or permit to be used, any sound broadcasting system or
amplifying device which can be heard outside of the Premises;
(d) use or permit the use of any portion of the Premises as regular
living quarters, sleeping apartments, lodging rooms, or for any
unlawful purpose;
(e) grant any concession, license, or permission to any ticket
broker or reservationist to sell or take orders for merchandise
or services in the Premises; or
(f) place any gaming merchandise, vending, game machines, game
tables or any other gaming devices on the Premises except as
provided for in Article 6.07.
6.04 PROMOTIONS. At reasonable times and in reasonable numbers, personnel of
Landlord and/or its affiliates shall be entitled to enter upon the
Premises and distribute promotional materials to all persons therein in
a manner which does not unreasonably interfere with the use or operation
of the Premises by Tenant or any of the Subtenants. The improvements to
be constructed by Tenant in accordance with Article 8.00 shall include
an information booth/kiosk constructed to the reasonable satisfaction of
Landlord containing not more than one hundred (100) square feet and
located as shown on Exhibit B attached hereto, at which information
booth/kiosk the promotional materials of Landlord and Landlord's
affiliates may be displayed and/or distributed and tickets may be sold
to Stratosphere events. In addition, the information booth/kiosk may be
staffed by Landlord's personnel or Landlord's affiliates personnel. No
promotion by or on behalf of any competitor of Landlord or its
affiliates in the gaming and/or hotel business shall be permitted on the
Premises.
6.05 NAME, ADVERTISING AND SIGNAGE. Neither Tenant nor any Subtenant may use
the Trade Name, picture or a representation of the Stratosphere Tower,
Hotel and/or Casino in Tenant's and/or any Subtenant's name, signage,
advertising, or otherwise without the prior written approval of Landlord
which approval may be withheld in Landlord's sole and absolute
discretion.
Landlord agrees that during the Initial Term and Extended Term, Tenant
or any Subtenant may use the Trade Name to identify its location and as
a part of its address. The rights granted herein to the Trade Name do
not include the right to use any of the Stratosphere trademarks and/or
service marks including, but not limited to, Stratosphere, nor shall
Tenant or any Subtenant be permitted to use the Trade Name in any manner
other than as the name and address of the Premises. In particular, but
not by way of limitation, neither Tenant nor any Subtenant shall have
the right to use the Trade Name to market or make any product that has
the Trade Name on the products. All signage and literature of or on
behalf of Tenant or any Subtenant using the Trade Name shall be
submitted to Landlord for its prior written approval.
Landlord makes no representation of any kind and gives no warranty of
any kind, express or implied, as to the right of Tenant or any Subtenant
to use the Trade Name or any portion thereof. It is expressly agreed and
understood by the parties hereto that any claim by any third party
regarding the Trade Name and its use by Tenant or any Subtenant shall be
the sole and complete responsibility of Tenant or such Subtenant and
Landlord shall have no obligation of any kind including, but not limited
to, any obligation to defend Tenant or such Subtenant or to assist
Tenant or such Subtenant in its defense of any action with said third
party. Further, neither Tenant nor any Subtenant shall have any rights
to register the Trade Name or take any action against third parties
regarding an alleged infringement of the Trade Name or any part thereof.
The rights granted pursuant to this Article 6.05 to Tenant or any
Subtenant shall terminate upon termination of this Lease or, if earlier,
upon Tenant's or any Subtenant's cessation of use of the Trade Name. It
is specifically agreed that the rights granted herein shall expire in
the event that Tenant or any Subtenant fails to maintain the Premises in
the quality and condition required herein after notice and opportunity
to cure the same as more particularly set forth in Article 26.01 hereof.
The rights herein granted shall not be assigned or sublicensed by Tenant
or any Subtenant to any third party. Should Landlord reasonably
determine that any advertising by Tenant or any Subtenant adversely
affects the image, reputation or operations of the Stratosphere, or
promotes any competitor of Landlord or its affiliates in the gaming
and/or hotel business, Tenant or such Subtenant, as the case may be,
shall immediately cease such advertising promptly upon receipt of
written notice from Landlord. Tenant agrees that all interior signage
for the Premises which is not in compliance with the signage criteria
previously approved by Landlord is subject to Landlord's prior written
approval which approval shall not be unreasonably withheld or delayed.
Tenant shall have the right, during the term hereof, to install and
maintain at least one (1) building facia sign on the exterior of the
Premises, the content, design and location of which shall be subject to
Landlord's prior written approval which approval shall not be
unreasonably withheld or delayed.
Tenant shall include in all Subleases the prohibitions contained herein
against any Subtenant using the Trade Name or any existing name, any
Stratosphere trademark or service marks and against advertising or
promoting a gaming or hotel competitor of Landlord. The Subleases shall
specifically state that such prohibitions are for the benefit of and
directly enforceable by Landlord.
6.06 VENDING MACHINES. Tenant may not lease, license or otherwise permit
vending machines or other similar devices in any portion of the
Premises, without Landlord's written approval.
6.07 GAMING. Except as provided in Article 6.01 and this Article 6.07, no
gaming or gaming devices shall be permitted in the Premises. Landlord
reserves on behalf of itself and its affiliates, but without obligation
to do so, the right to place, operate, maintain and/or remove, without
charge, slot and other gaming machines in a location within the Premises
reasonably acceptable to Tenant. The area on which such gaming machines
are operated shall be the subject of a Sublease between Landlord and
Tenant including mutually agreeable rent and other terms and conditions.
The rent shall be based on the rent charged for retail space in the
Premises and not rent charged for gaming space. All costs associated
with such gaming areas including, without limitation, costs of providing
electricity and security thereto, shall be borne by Landlord. The
placement of gaming devices will be such as to not interfere, in any
direction, with normal traffic flow in the Premises Common Areas and
such devices shall be placed, operated, maintained and removed by
Landlord in accordance with all applicable laws, codes and ordinances.
6.08 INTERFERENCE WITH CUSTOMERS. Landlord and Tenant shall not do, permit or
suffer anything to be done, or kept upon the Premises, nor shall
Landlord and Tenant conduct any activity hereunder which will obstruct
or interfere with the rights of the other party, its affiliates, its and
their other tenants or the patrons and customers of any of them, or
which will annoy any of them or their patrons or customers by reason of
unreasonable noise, odor, vibration, or otherwise, nor will Landlord or
Tenant commit or permit any nuisance on the Premises or commit or suffer
any immoral or illegal act to be committed thereon. Notwithstanding
anything contained in this Article 6.08, Landlord will not make any
changes to the Stratosphere Common Areas that would materially cut off
Tenant's access from the Casino to the Premises.
6.09 COMPLIANCE WITH LAWS AND PERMITTED ENCUMBRANCES. Tenant, at Tenant's
expense, shall comply with (i) all laws, rules, orders, ordinances,
directions, regulations and requirements of federal, state, county and
municipal authorities pertaining to Tenant's use, development and
management of the Premises, (ii) the Permitted Encumbrances including,
without limitation, all applicable federal, state and local laws,
regulations or ordinances pertaining to air and water quality, toxic or
hazardous materials and substances, waste disposal, air emissions and
other environmental matters, (iii) all zoning and other land use
matters, and utility availability, and (iv) any direction of any public
officer or officers, pursuant to law, which shall impose any duty upon
Landlord or Tenant with respect to the use or occupation of the
Premises. Tenant may elect to contest by appropriate proceeding, the
application of any law, code, regulation or ordinance affecting the
Premises provided such contest does not in any way jeopardize Landlord's
title to the Premises or subject Landlord to the risk of any penalty,
fine or criminal proceeding. If and to the extent due solely to Tenant's
use of the Premises for the uses provided herein, improvements to the
Premises or the Base Building are necessary to comply with any of the
foregoing or with the requirements of insurance carriers, Tenant shall
pay the entire cost thereof.
6.10 HAZARDOUS MATERIALS. Without the prior written consent of Landlord,
which consent may be withheld in its sole and absolute discretion,
Tenant shall not cause or permit to be brought upon or kept or used in,
on or about the Premises by Tenant, its employees, agents, contractors,
Subtenants or invitees any toxic or hazardous material, substance or
waste. Without limiting the indemnification obligations of Tenant under
Article 17.01, if the presence of any such material, substance or waste
caused or permitted by Tenant, its employees, agents, contractors,
Subtenants or invitees results in any contamination of the Premises,
then Tenant shall promptly take all actions at its sole expense as are
necessary to return the Premises to the condition existing prior to the
introduction of any such material, substance or waste, provided that
Landlord's written approval of such actions shall first be obtained. The
prohibition contained in this Article 6.10 shall not apply to the use of
office supplies and cleaning solvents used by Tenant and the Subtenants
in reasonable quantities and in accordance with applicable laws and
regulations.
ARTICLE 7.00 EXPANSION SPACE.
7.01 EXPANSION SPACE. Landlord may, but shall not be obligated to, expand the
Stratosphere to include an additional 900 room hotel, which expansion
may contain additional retail space adjacent to the Premises. In the
event Landlord so expands Stratosphere to include such new hotel, the
additional retail space therein, if any, (" Expansion Space") shall be
added to and constitute a part of the Premises subject to the provisions
of this Article 7.01.
In the event Landlord elects to expand the Stratosphere, including the
Expansion Space, Landlord shall construct a building shell for the
Expansion Space at its sole cost and expense in accordance with plans
and specifications approved in advance by Tenant, it being agreed,
however, that the specifications for such construction shall at least
equal the standard of specifications listed in the Building Shell
Criteria set forth in Exhibit E attached hereto. Landlord's construction
work in the Expansion Space shall be subject to an Inspection Period and
Remedy Period and the warranty provisions of Section 3.04 above. Tenant
shall thereafter, at Tenant's sole cost and expense, complete the
Expansion Space and ready any Subtenant space for occupancy. The parties
acknowledge that there shall be no adjustment to the Breakpoint as a
result of the addition of the Expansion Space to the Premises.
ARTICLE 8.00 DEVELOPMENT AND FINANCING OF THE PREMISES
8.01 TENANT'S DEVELOPMENT OBLIGATIONS. Tenant hereby agrees to construct and
develop the Premises into a retail/entertainment complex, at Tenant's
sole cost and expense and in accordance with all applicable laws, plans
and specifications which have been approved by Landlord as hereinafter
provided and the provisions of this Article 8.00, on or before the
Completion Date. Landlord will construct, on behalf of Tenant, that
portion of Tenant's Development Obligations for Phase I and Phase II
respectively which constitute the Building Shell Construction and Tenant
shall reimburse Landlord thereafter upon and subject to the terms and
conditions of the Agreement. Tenant's costs associated with the
completion of Tenant's Development Obligations for Phase I, exclusive of
leasing and development fees, legal fees and Financing costs, but
inclusive of sums paid by Tenant to Landlord with respect to the
Building Shell Construction for Phase I, shall be not less than Twenty
Million and 00/100 Dollars ($20,000,000). Tenant acknowledges that
Tenant has additional development obligations relating to Phase II all
as more particularly set forth in Article 8.04.2.
8.02 FINANCING. Tenant intends to obtain financing in an amount, and upon
terms and conditions acceptable to Tenant, which, when added to other
capital sources available to Tenant, is sufficient to pay the cost to
complete Tenant's Development Obligations for the Premises
("Financing"). In the event that Tenant is unable to obtain Financing
acceptable to Tenant, or otherwise provide Landlord with evidence that
Tenant has available to it the necessary funds to meet Tenant's
Development Obligations, within seven (7) days after execution of this
Lease, then either party may terminate this Lease upon ten (10) days
written notice to the other party, in which event, neither party shall
have any further liability hereunder except as otherwise set forth in
Article 26.06 hereof and the Existing Lease shall be assigned by Tenant
to Landlord.
In connection with the Financing or any amendment, consolidation,
substitution, increase, renewal, replacement or refinancing thereof,
Tenant shall have the absolute right, exercisable at any time and from
time to time, without the necessity of securing Landlord's permission or
consent, to mortgage, hypothecate or pledge its interest in this Lease
and the leasehold estate created hereby and Tenant's right, title and
interest in the Premises and/or the improvements therein, to assign
Tenant's interest in this Lease including, without limitation, the right
to receive rents, issues and profits as collateral security for and in
connection with any leasehold mortgage(s) ("Leasehold Mortgage"), to any
bank, savings and loan, pension fund, insurance company or other
institutional investor or lender ("Leasehold Mortgagee") and to enter
into any and all extensions, modifications, amendments, consolidations,
substitutions, renewals, replacements and refinancings of any Leasehold
Mortgage, as Tenant may desire, upon the condition that all rights
acquired under any Leasehold Mortgage(s) shall be subject to the terms
and conditions of this Lease and subordinated to the rights of Landlord
hereunder, except for Landlord's right to receive Annual Minimum Rent
which shall be subject and subordinate to any Leasehold Mortgage as
hereinafter provided, and provided further that in no event shall the
total aggregate debt secured by any Leasehold Mortgage(s) then
outstanding exceed eighty percent (80%) of the appraised value of the
Premises, as determined by the applicable Leasehold Mortgagee at the
time any such Leasehold Mortgages shall be executed. No holder of a
Leasehold Mortgage shall have the rights or benefits granted under
Articles 8.02 and 8.03 until a copy of an executed counterpart of such
Leasehold Mortgage, and of each extension, modification, amendment,
replacement or refinancing thereof is delivered to Landlord.
In the event the Leasehold Mortgagee (or its nominee, or designee or any
purchaser of the leasehold estate created hereunder and their successors
and assigns other than Tenant or any affiliated entity of Tenant) shall
succeed to Tenant's interest under this Lease and in the Premises by
foreclosure, or transfer in lieu of foreclosure, Leasehold Mortgagee (or
its nominee, or designee or any purchaser of the leasehold estate
created hereunder and their successors and assigns other than Tenant or
any affiliated entity of Tenant) shall not be required to pay to
Landlord any installments of Annual Minimum Rent, as required by Article
5.01, that accrue during the period of time the Leasehold Mortgagee (or
its nominee, or designee or any purchaser of the leasehold estate
created hereunder and their successors and assigns) shall hold any such
interest. In addition, the Breakpoint, as calculated in accordance with
Article 1.02(d), shall be decreased to seven million and 00/100 dollars
($7,000,000.00) ("Revised Breakpoint") and, notwithstanding the
provisions of Article 5.02, Landlord shall be entitled to receive one
hundred percent (100%) of Tenant's Net Revenue, calculated using the
Revised Breakpoint, up to a maximum payment to Landlord of one million
and 00/100 dollars ($1,000,000.00) and fifty percent (50%) of Tenant's
Net Revenue, calculated using the Breakpoint, thereafter.
8.03 LEASEHOLD MORTGAGES.
(a) Protection of Leasehold Mortgagees. Subject to the Leasehold
Mortgagee's compliance with the terms and provisions set forth
herein including, without limitation, the terms of Article
8.03(d), Landlord shall be obligated to recognize any right,
title and interest of a Leasehold Mortgagee in this Lease,
whether arising by way of foreclosure or otherwise; provided,
however, in no event shall any such Leasehold Mortgage encumber
or otherwise affect Landlord's reversionary interest in and to
the Premises.
(b) Leasehold Mortgagee's Rights to Cure. Landlord and Tenant agree
that so long as any such Leasehold Mortgage exists:
(i) Landlord will simultaneously deliver to the Leasehold
Mortgagee a copy of all notices (including, without limitation,
any notice of an Event of Default) given by Landlord to Tenant
pursuant to the terms of the Lease provided that Tenant and/or
Leasehold Mortgagee has given Landlord written notice of the
applicable Leasehold Mortgagee's notice address.
(ii) Upon the occurrence of any Event of Default by Tenant
(except an Event of Default creating an emergency at the
Premises which threatens the safety of persons or jeopardizes in
any material way Landlord's use or operation of the
Stratosphere) the Leasehold Mortgagee shall have the same
concurrent period (if any) given Tenant for remedying any such
Event of Default or causing the same to be remedied. In the case
of an Event of Default under Article 26.01(a) and (c) hereof,
the Leasehold Mortgagee shall have an additional period of
twenty (20) business days and in the case of any other Event of
Default an additional period of thirty (30) business days to
remedy such Event of Default. In the event of an emergency as
described above, the Leasehold Mortgagee shall have only such
shorter period of time to cure such an Event of Default which
may be reasonable under the circumstances; provided, however,
Landlord shall still retain its right to exercise any right or
remedy as Landlord may reasonably determine is necessary to
preserve or protect Landlord's interest in the Stratosphere.
(iii) In the event of performance by or on behalf of the
Leasehold Mortgagee within the period provided for above,
Landlord shall accept such performance by or on behalf of the
Leasehold Mortgagee as though the same had been done or
performed by Tenant within the period allowed Tenant by the
terms of this Lease.
(iv) For the purposes of the succeeding provisions of this
Article 8.03(b), Landlord and Tenant acknowledge that the Events
of Default described in Article 26.01 are of two (2) types: (i)
"Curable Defaults" and (ii) "Non-curable Defaults". The
Non-curable Defaults are the defaults or other events or
occurrences hereunder which by their nature are not reasonably
susceptible of being cured by a third person such as the
Leasehold Mortgagee including, without limitation, those which
by their nature cannot be cured without first obtaining
possession of the Premises and shall specifically include a
default under Article 4.00 which is not caused by Leasehold
Mortgagee and a failure to provide timely reports of Net Revenue
and Shared Rent as required by Article 5.02 and Article 5.03;
the Curable Defaults are all other defaults or events which by
their nature are reasonably susceptible of being cured by a
third person such as the Leasehold Mortgagee.
(v) Notwithstanding the provisions of Article 8.03(b)(ii) and
(iii), if any Curable Defaults occur which are not reasonably
susceptible of being cured within the applicable grace period
given to the Leasehold Mortgagee as provided for in Article
8.03(b)(ii), then, if prior to the expiration of the applicable
grace period, the Leasehold Mortgagee shall give to Landlord
written notice that it intends to undertake a curing of all
Curable Defaults (and if such Curable Default consists of or
includes a default in the payment of any Rent or other amounts
payable by Tenant under this Lease (other than Annual Minimum
Rent the payment of which is not required as provided in Article
8.02), the Leasehold Mortgagee accompanies such notice with
payment of the arrears in such Rent and any other amounts then
due and owing by Tenant and thereafter continues to timely cure
any further payment defaults (other than those with respect to
Annual Minimum Rent as referenced above) and if within such
applicable grace period the Leasehold Mortgagee commences to
cure the relevant Curable Defaults and thereafter pursues the
curing of all Curable Defaults diligently and in good faith,
then Landlord will not following the cure of such Curable
Defaults or while the Leasehold Mortgagee is diligently and in
good faith pursuing such cure, take action to effect a
termination or cancellation of this Lease or otherwise exercise
any right or remedy of Landlord hereunder as a consequence of
such Curable Defaults; provided, however, nothing in this
Article 8 shall prevent or prohibit Landlord from taking action
(other than a termination or cancellation of this Lease or
taking possession of the Premises) as a result of Tenant's
default which Landlord reasonably determines is necessary or
appropriate to protect or preserve Landlord's interest in the
Stratosphere.
Notwithstanding the foregoing, if:
(A) A Curable Default (other than a default which may be
cured by the payment of Rent or other sums due Landlord
hereunder) is of such a nature that the curing thereof
cannot reasonably be commenced, prosecuted or effected
by the Leasehold Mortgagee until it shall have obtained
possession of the Premises; and
(B) Prior to the expiration of the applicable grace period
given to the Leasehold Mortgagee as provided for in
Article 8.03(b)(ii), the Leasehold Mortgagee shall give
to Landlord written notice (which notice shall be
accompanied by payment of all arrears in such Rent and
any other amounts than due and owing by Tenant (other
than Annual Minimum Rent the payment of which is not
required as provided in Article 8.02) and provided
further that at all times thereafter, the Leasehold
Mortgagee shall immediately pay to Landlord any such
Rent and any other amounts which shall accrue under the
terms of the Lease) that it intends to institute
foreclosure or other legal proceedings or to exercise
any of its remedies under the Leasehold Mortgage
concerned in order to gain possession of the Premises
either directly or indirectly or through a trustee or
receiver and if after the giving of such notice by the
Leasehold Mortgagee and prior to the expiration of the
applicable grace period, the Leasehold Mortgagee
institutes such foreclosure or other legal proceedings
or commences to exercise any such remedies;
then Landlord will not take any action to effect a termination
or cancellation of this Lease or to or take possession of the
Premises or otherwise exercise any other right or remedy as a
consequence of such Curable Default (except as Landlord may
reasonably determine is necessary to preserve or protect
Landlord's interest in the Stratosphere) so long as the
Leasehold Mortgagee shall diligently and in good faith prosecute
such foreclosure or other legal proceedings or its remedies
under the Leasehold Mortgage and diligently and in good faith
pursue the cure of all other Curable Defaults (if any) which may
occur from time to time and which are susceptible of being cured
by the Leasehold Mortgagee without obtaining possession of the
Premises (after notice to the Leasehold Mortgagee and within the
grace and cure periods available to the Leasehold Mortgagee
pursuant to the provisions of Article 8.03 hereof and otherwise
in accordance with the terms and provisions of this Article
8.03).
(vi) In the event of the occurrence of a Non-curable Default,
and if the Leasehold Mortgagee (y) cures or commences to cure
and diligently pursues the cure of all existing Curable
Defaults, if any, in accordance with Article 8.03(b)(ii) and
(v), and (z) intends to institute and prosecute a proceeding to
foreclose the Leasehold Mortgage, and gives Landlord notice
thereof and commences such proceeding as described in Article
8.03(b)(v)(B) above (together with the payment of the arrears in
such Rent and any other amounts then due and owing by Tenant
(other than the Annual Minimum Rent the payment of which is not
required as provided in Article 8.02) and during the pendency of
any foreclosure proceedings the Leasehold Mortgagee cures, or
diligently and in good faith pursues the cure of all subsequent
Curable Defaults which are susceptible of being cured by the
Leasehold Mortgagee without obtaining possession of the Premises
(after notice to the Leasehold Mortgagee and within the grace
and cure periods available to the Leasehold Mortgagee pursuant
to the provisions of Article 8.03 hereof and otherwise in
accordance with the terms and provisions of this Article 8.03)
then Landlord will not take action to effect a termination or
cancellation of this Lease or take possession of the Premises
(except as Landlord may reasonably determine is necessary to
preserve or protect Landlord's interest in the Stratosphere), or
otherwise exercise any right or remedy as a consequence of such
Non-curable Default and all such Non-curable Defaults shall be
deemed to be waived by Landlord with respect to the Leasehold
Mortgagee provided that Landlord may nevertheless proceed to
invoke any or all of its remedies including such termination:
(a) if the Leasehold Mortgagee fails to give such notice of
its intention to foreclose within the time period above,
or after having given such notice, fails to diligently
and in good faith prosecute its remedies under the
Leasehold Mortgage; or
(b) if the Leasehold Mortgagee fails to cure or diligently
and in good faith pursue the cure of all Curable
Defaults which are susceptible of being cured by the
Leasehold Mortgagee without obtaining possession of the
Premises after notice to the Leasehold Mortgagee and
within the grace and cure periods available to the
Leasehold Mortgagee pursuant to the provisions set forth
in Article 8.03 hereof.
At any time after the delivery of any of the aforementioned
notices, the Leasehold Mortgagee may notify Landlord, in
writing, that it has decided to abandon any undertaking set
forth in any such notice, or that it has relinquished possession
of the Premises or that it will not institute foreclosure
proceedings or, if such proceedings have been commenced, that it
has discontinued them, and in such event, the Leasehold
Mortgagee shall have no further liability under or with respect
to this Lease, whether in respect of curing any Curable Defaults
or otherwise, from and after the date it delivers such notice to
Landlord and, thereupon, Landlord shall have the unrestricted
right to terminate this Lease and to take any other action it
deems appropriate by reason of any Event of Default, and upon
such termination the provisions of this Article 8.03 shall not
apply. Notwithstanding anything herein contained to the
contrary, provided the Leasehold Mortgagee shall have otherwise
complied with the provisions of this Article 8.03, the Leasehold
Mortgagee shall have no obligation to cure any Non-curable
Defaults.
No Leasehold Mortgagee (or its nominee or designee or any
purchaser of the leasehold estate created hereunder and their
successors and assigns) shall become liable under the provisions
of this Lease unless and until such time as it becomes, and for
only so long as it remains, the owner of the leasehold estate
created hereby. At the time Leasehold Mortgagee (or its nominee
or designee or any purchaser of the leasehold estate created
hereunder and their successors and assigns) becomes the owner of
the leasehold estate, it shall be prospectively bound by the
terms of this Lease as though it were originally named the
"Tenant" hereunder, including the applicable grace and cure
periods, but only so long as it is the owner of the leasehold
estate created hereby. The Leasehold Mortgagee shall not be
bound by any modification or amendment of this Lease unless the
Leasehold Mortgagee shall have consented in writing to such
modification or amendment which consent shall not be
unreasonably withheld or delayed.
In the event Landlord shall have collected any rents from
Subtenants, the same shall be credited against installments of
Rent due hereunder.
(vii) In the event the Leasehold Mortgagee (or its nominee or
designee or any purchaser of the leasehold estate created hereby
and their successors and assigns) has acquired the leasehold
estate pursuant to the exercise of any right or remedy under the
Leasehold Mortgage, or by a voluntary assignment or transfer of
this Lease and the leasehold estate and the improvements in or
upon the Premises in lieu of foreclosing or otherwise, the
Leasehold Mortgagee (or its nominee, designee or any purchaser
and their successors and assigns) shall be deemed an assignee of
all the rights of Tenant named under this Lease and all of the
rights of Tenant in such improvements shall expire and cease
effective upon the Leasehold Mortgagee's (or its nominee's,
designee's or any such purchaser's and their successors and
assigns) execution and delivery of an assumption agreement, in
recordable form, of Tenant's obligations under this Lease
(except the obligation to pay Annual Minimum Rent to the extent
subordinate as provided in Article 8.02 above). In the event the
Leasehold Mortgagee (or its nominee, designee or any purchaser
and their successors and assigns) shall retain a third party
management company to oversee the management of the Premises,
such management company shall be subject to the prior written
consent of Landlord, which consent shall not be unreasonably
withheld or delayed, in the event such management company shall
not have at least five (5) years experience in the management of
retail developments comparable to the Premises.
(viii) If the rights of Tenant under this Lease are at any time
pledged, hypothecated or otherwise subject to any Leasehold
Mortgage, Landlord agrees, for the benefit of the Leasehold
Mortgagee, that the right of election arising under Section
365(h)(1) of the Bankruptcy Code, 11 U.S.C. 365(h)(1), shall be
exercised by the Leasehold Mortgagee and not by Tenant. Any
exercise or attempted exercise by Tenant of such right of
election in violation of the preceding sentence shall be void.
If this Lease shall be rejected or disaffirmed in any bankruptcy
case of Tenant pursuant to any bankruptcy law or other law
affecting creditors' rights, the Leasehold Mortgagee shall have
sixty (60) days from the date of such rejection or disaffirmance
to elect to enter into a new lease of the Premises with
Landlord. Landlord shall, upon the written request of the
Leasehold Mortgagee within such sixty (60) day period, and
provided such written request is accompanied by the payment to
Landlord of the arrears in such Rent and any other amounts then
due and owing by Tenant (other than Annual Minimum Rent the
payment of which is not required as provided in Article 8.02),
enter into a new lease of the Premises with the Leasehold
Mortgagee, (its nominee, designee or any purchaser) which new
lease shall contain all the terms and provisions contained in
this Lease, provided that the Leasehold Mortgagee, (its nominee,
designee or any purchaser) cures (and diligently and in good
faith pursues such cure) within the notice and grace periods set
forth in this Article 8.03 all Curable Defaults under this Lease
which are susceptible of being cured without taking possession
of the Premises or as to such Curable Defaults which are
susceptible of being cured upon taking possession, then within
such similar grace periods which shall commence upon receipt of
possession and, prior to the execution of such new lease, pays
to the Landlord all Rent, (other than Annual Minimum Rent the
payment of which is not required as provided in Article 8.02),
and other amounts which would, at the time of such execution and
delivery, be due and payable by Tenant under this Lease, without
regard to rejection or disaffirmance. The new lease described
above shall be for the remainder of the term (including the
Extended Term if the time for Tenant's exercise of Tenant's
Option has not yet expired without such Option having been
exercised) at the Rent (other than the Annual Minimum Rent the
payment of which is not required as provided in Article 8.02)
and the Revised Breakpoint and all other terms, provisions,
covenants and agreements as herein contained and shall in all
events be considered a "New Lease" as that term is described in
Article 8.03(c) below. Notwithstanding anything to the contrary
contained in this Lease, in the event that Landlord and the
Leasehold Mortgagee, (its nominee, designee or any purchaser)
enter into a New Lease pursuant to this paragraph or Article
8.03, all improvements constructed by or on behalf of Tenant at
its expense, all trade fixtures and personal property of Tenant
located on or to be located on the Premises, together with all
rights, title and interest of Tenant in all Subleases shall not
revert to Landlord but shall be and become the property of the
Leasehold Mortgagee, (its nominee, designee or any purchaser) if
and to the extent permitted by law. Landlord covenants and
agrees that upon request by the Leasehold Mortgagee, (its
nominee, designee or any purchaser) it will promptly deliver,
with respect to trade fixtures and other personal property, a
quitclaim bill of sale on an as-is, where-is basis in a form
reasonably acceptable to Landlord and the Leasehold Mortgagee,
(its nominee, designee or any purchaser), and will execute such
reasonable instruments of assignment, transfer and conveyance of
such trade fixtures and other personal property and any
Subleases as may be reasonably requested by the Leasehold
Mortgagee, (its nominee, designee or any purchaser) and
acceptable to Landlord and the Leasehold Mortgagee, (its
nominee, designee or any purchaser) to further effectuate the
provisions of this Article 8.03(b)(viii), or to confirm by way
of further assurance the provisions hereof and the title of the
Leasehold Mortgagee, (its nominee, designee or any purchaser) to
the trade fixtures, personal property and Subleases. The
provisions of this Article 8.03(b)(viii) shall survive the
rejection or disaffirmance of this Lease under Section 365(h)(i)
of the Bankruptcy Code and shall continue in full force and
effect thereafter to the same extent as if this Article
8.03(b)(viii) were a separate and independent contract made by
Landlord, Tenant and the Leasehold Mortgagee and, from the
effective date of such rejection or disaffirmance of this Lease
to the date of execution and delivery of such New Lease, the
Leasehold Mortgage, (its nominee, designee or any purchaser) may
use and enjoy the leasehold estate created by this Lease, and
may use and enjoy the Premises, trade fixtures and personal
property and Subleases without hindrance by Landlord, subject,
however, to the terms and provisions of this Lease.
(ix) If a Leasehold Mortgage is in effect, (i) Landlord will not
accept a voluntary surrender or agree to a termination or
cancellation of this Lease and (ii) this Lease shall not be
modified in any material respect as described in Article
8.03(b)(vi) above without, in each instance, the prior written
consent of the Leasehold Mortgagee which consent shall not be
unreasonably withheld or delayed. If a Leasehold Mortgage is in
effect, no surrender, termination, cancellation or material
modification in violation of Article 8.03(b)(vi) above, shall be
effective as against the Leasehold Mortgagee, its nominee or
designee, or against any successor or assign of the Leasehold
Mortgagee. The provisions of this Article are for the benefit of
the Leasehold Mortgagee and may be relied upon and shall be
enforceable by the Leasehold Mortgagee. The Leasehold Mortgagee
shall not be liable upon the covenants, agreements or
obligations of Tenant contained in this Lease except as
expressly provided herein.
(c) Leasehold Mortgagee's Right to New Lease. In addition to the
rights for a New Lease granted to the Leasehold Mortgagee in
Article 8.03(b)(viii) above, the Leasehold Mortgagee shall have
the rights granted in this Article 8.03(c). In the event
Landlord intends to terminate this Lease, or any "New Lease" (as
hereinafter defined), or if this Lease or any New Lease shall
terminate for any reason other than (a) a termination made with
the prior written consent of the Leasehold Mortgagee, or (b) the
natural expiration of the term hereof and not as a result of an
Event of Default, Landlord shall give the Leasehold Mortgagee
written notice of such termination. The Leasehold Mortgagee, as
a leasehold mortgagee and not as Tenant hereunder, shall have
thirty (30) days from the date of giving of such notice by
Landlord to elect to enter into a new lease of the Premises with
Landlord. Landlord shall upon the written request of the
Leasehold Mortgagee within such thirty (30) day period, deliver
a quitclaim bill of sale with respect to the trade fixtures and
other personal property of Tenant located on or to be located on
the Premises on an as-is, where is basis in a form reasonably
acceptable to Landlord and the Leasehold Mortgagee, (its
nominee, designee or any purchaser) and enter into a new lease
of the Premises with the Leasehold Mortgagee (its nominee,
designee or any purchaser), for the remainder of the term
(including the Extended Term, if the time for exercise of
Tenant's Option has not yet expired without such Option having
been exercised), effective as of the date of such termination,
at the Rent (other than the Annual Minimum Rent the payment of
which is not required as provided in Article 8.02), and the
Revised Breakpoint and all other terms, provisions, covenants
and agreements as herein contained (the "New Lease") except for
the Extended Term with respect to which the Option has
theretofore been exercised. The New Lease shall be subject only
to the same Permitted Encumbrances to title to which this Lease
is subject on the Completion Date and to any other encumbrances
created pursuant to or permitted under the terms hereof, and the
rights to all personal property, trade fixtures and Subleases
shall be and become the property of the Leasehold Mortgagee (its
nominee, designee or any purchaser) as provided in Article
8.03(b)(viii) above. However, a grant of the New Lease shall be
subject to the following conditions:
(i) The Leasehold Mortgagee (its nominee, designee or any
purchaser) shall have served written request upon Landlord for
such New Lease within the aforesaid thirty (30) day period and,
upon execution of such New Lease, the Leasehold Mortgagee (its
nominee, designee or any purchaser), shall pay to Landlord the
arrears in such Rent and any other amounts then due and owing by
Tenant (other than Annual Minimum Rent the payment of which is
not required as provided in Article 8.02), and all expenses
including, without limitation, reasonable attorneys' fees, court
costs and disbursements incurred by Landlord in connection with
such default and termination, recovery of possession of the
Premises and upon the execution of the New Lease, payment of all
costs and expenses arising from the preparation, execution and
delivery of the New Lease, following which the rights and
obligations of the parties shall be governed by the New Lease;
and
(ii) If more than one (1) Leasehold Mortgagee has requested a
New Lease, then the New Lease shall be entered into with the
requesting Leasehold Mortgagee of highest priority and the
rights of all other Leasehold Mortgagees to a New Lease shall
terminate.
(d) Landlord's Right to Cure. In the event of any Event of Default
by Tenant hereunder, or any default under a Leasehold Mortgage,
and the Leasehold Mortgagee notifies Landlord as provided in
Article 8.03(b)(v)(B) of the Leasehold Mortgagee's intent to
institute foreclosure or other legal proceedings or exercise any
of its remedies under the applicable Leasehold Mortgage, then
Landlord shall have the right, but not the obligation,
exercisable within thirty (30) days following the receipt of a
written notice by the Leasehold Mortgagee pursuant to Article
8.03(b)(v)(B) to pay to the Leasehold Mortgagee an amount
sufficient to discharge such Leasehold Mortgage. Upon receipt of
such payment, Landlord may elect to either (i) cause the
Leasehold Mortgagee to discharge such Leasehold Mortgage of
record, or (ii) have the Leasehold Mortgage and any note or
notes secured thereby assigned to Landlord, without warranty or
recourse and, at Landlord's request, without merger, in which
event Landlord shall succeed to the interest of the Leasehold
Mortgagee thereunder and shall have the right to exercise all
remedies available to the Leasehold Mortgagee as a result of
such Event of Default or default under the Leasehold Mortgage.
8.04 CONSTRUCTION MATTERS.
8.04.1 CONDITIONS PRECEDENT TO COMMENCEMENT OF CONSTRUCTION. The
Premises (excluding the Expansion Space, if constructed) shall be
constructed as a retail/entertainment complex with approximately 122,000
square feet of gross area on the second floor of the Base Building and
that portion of the second floor depicted in Exhibit B which will be
constructed to accommodate a mezzanine level for the second floor of the
Base Building. The Premises shall have exterior pedestrian access
primarily through Landlord's Casino. For purposes of Tenant's
Development Obligations, the Premises shall include those items set
forth in this Article 8.00 and as depicted on the plans and
specifications approved for such work as hereinafter provided. Before
any work or construction is commenced with respect to Phase I, Tenant
shall comply with all of the following conditions or procure Landlord's
specific written waiver thereof:
(a) BUILDING SHELL CONSTRUCTION AND DRAWINGS. Landlord, pursuant to
the Agreement attached hereto as Exhibit G, has agreed to
perform Tenant's Development Obligations with respect to the
Building Shell Construction portion of Phase I of the Premises
in accordance with plans and specifications (and any
modifications thereto) approved by Tenant.
(b) DESIGN DRAWINGS. Tenant shall deliver to Landlord three (3) sets
of design drawings for Tenant's Development Obligations
(excluding the Building Shell Construction and any Subtenant
work). Such design drawings shall show the location, appearance,
structural systems, fire protection and other safety features,
quality of appearance and materials, pedestrian traffic flow,
interior layout, connections with the Stratosphere, and all
items in sufficient detail to enable Landlord to evaluate the
construction and aesthetic quality of the Premises and to
evaluate whether or not the Premises would comply with the terms
and provisions of this Lease. Tenant shall proceed with due
diligence to enter into contracts with its architect, general
contractor or construction manager, and, if applicable, designer
and to complete the design drawings, and, in any event, except
for Unavoidable Delays, the design drawings for Tenant's
Development Obligations (excluding Building Shell Construction
and any Subtenant work) with respect to location, items
affecting appearance perceptible by a layman, interior layout,
and connections with the Stratosphere shall be submitted to
Landlord on or before December 15, 1995, and all design drawings
shall be submitted to Landlord on or before January 15, 1996.
This condition, to the extent completed by Landlord prior to
delivery of the Building Shell, shall be deemed waived.
(c) APPROVAL/DISAPPROVAL BY LANDLORD. Landlord shall, within ten
(10) days after its receipt of design drawings, approve or
disapprove the design drawings including any furniture, fixtures
and equipment to be installed therein by Tenant which are
included therein, as Landlord determines in its sole and
absolute discretion. Tenant has submitted, and Landlord has
approved, schematic drawings of the Premises. Landlord may not
object to any lawful matter in the design drawings which was
specifically set forth in approved schematic drawings.
Landlord's approval of any variance from such approved schematic
drawings required by law shall not be unreasonably withheld.
Approval or disapproval shall be communicated in the manner
provided herein for notices, and disapproval shall be
accompanied by specification of the grounds for disapproval;
provided that Landlord's failure to disapprove within twenty
(20) days after delivery to Landlord shall be conclusively
considered to be approval. Within thirty (30) days following
Landlord's first or any subsequent disapproval, Tenant shall
submit new documents in place of those disapproved by Landlord
correcting the matters disapproved by Landlord.
Landlord shall be reasonably diligent in reviewing plans
submitted for approval pursuant to this Article 8.04. Without
limiting the generality of the foregoing, if Landlord is able to
review plans within twenty (20) days after their receipt such
review shall be deemed reasonably diligent. Provided that Tenant
has kept Landlord fully apprised of the development of such
plans and otherwise used reasonable efforts to provide Landlord
the opportunity for interim review of such plans, should
Landlord fail to review such plans with reasonable diligence and
as a result of such failure Tenant is unable to perform by the
dates set forth in Articles 1.01(c) or 1.02(e), hereof, the
applicable date shall be extended by the number of days in
excess of twenty (20) days that Tenant has been delayed as a
result of Landlord's failure to reasonably diligently review
plans. Tenant shall immediately notify Landlord of any such
delay and the length thereof. Should a zone change be required
to implement any drawings approved by Landlord pursuant to this
Article 8.04, Landlord shall, at Tenant's sole cost and expense,
co-operate with Tenant in order to obtain such zone change.
(d) FINAL PLANS. Tenant shall prepare with due diligence working
drawings and specifications conforming to the design drawings
(as described in Article 8.04.1(b)) previously approved by
Landlord and a construction schedule ("Schedule") for Landlord's
approval, which shall not be unreasonably withheld. Such working
drawings and specifications shall be prepared by an architect or
engineer licensed to practice in Nevada. The procedures for
disapproval and resubmission in Article 8.04.1(c) shall also
apply to this Article 8.04.1(d). Landlord may not object to any
matter in the working drawings and specifications which was
specifically set forth in approved design drawings nor may
Landlord object to the substitution for a specific material
approved by Landlord of another material equal to or better than
the approved material unless such matter or material violates an
applicable law, rule or regulation or has a substantially
different look or appearance from those items previously
approved. Landlord's approval of any variance from such approved
design drawings required by law shall not be unreasonably
withheld and the approval or disapproval of any such variance
shall be communicated within five (5) days after receipt of any
such request from Tenant. Landlord's failure to respond within
said five (5) day period shall be deemed approval. Upon receipt
of Landlord's approval Tenant shall submit such working drawings
and specifications to the appropriate governmental agencies for
approval, and deliver to Landlord one (1) complete set of the
same as approved by the governmental agencies. This condition to
the extent completed by Landlord, shall be deemed waived.
8.04.2 PHASE II CONSTRUCTION. Landlord shall construct Phase II to
contain additional space to the South and West of Phase I. An area
immediately adjacent to Phase II as shown on Exhibit B attached hereto
shall contain an aquarium or other significant attraction containing not
less than 30,000 square feet of area (the "Attraction"), the access to
and from which is through the Premises. Phase II shall be added to and
shall constitute a part of the Premises, subject to the provisions of
this Article 8.00. If Landlord does not open, or cause to be opened, the
Attraction within twenty-four (24) months following Tenant's completion
of its construction work in Phase II and the opening thereof to the
public, then the Annual Minimum Rent shall thereafter be reduced, until
the Attraction opens to the public, to an amount (not less than zero
dollars) sufficient to allow Tenant to achieve net income (determined in
accordance with GAAP) from its operation of the Premises which results
in not less than a fifteen percent (15%) return on all of Tenant's
Development Costs for the Premises described in Article 1.02(h)
(including the Expansion Space).
Landlord shall construct the Base Building containing Phase II in
accordance with plans and specifications approved by Tenant and Tenant
shall reimburse Landlord for the cost incurred by Landlord in
constructing said portion of the Base Building in accordance with the
Agreement. Tenant agrees it shall complete the construction of any
further improvements in Phase II (other than construction of any
Subtenant space) at its sole cost and expense in accordance with plans
and specifications which are approved by Landlord.
8.04.3 CONDITIONS APPLYING TO CONSTRUCTION GENERALLY. The following
provisions shall govern the construction of the Premises (including
Phase I and Phase II) and the Expansion Space, if applicable:
(a) LENDER'S APPROVAL. Tenant shall deliver to Landlord the written
approval of the working drawings and specifications by Tenant's
Leasehold Mortgagee, which will advance the Financing.
(b) NOTICE OF NONRESPONSIBILITY. Landlord shall have the right to
post and maintain on the Premises any notices of
nonresponsibility provided for under applicable law and such
notices shall not be disturbed by Tenant, its agents, employees
or contractors.
(c) COMPLETION BOND. Tenant may elect, but shall not be obligated,
to obtain a payment and/or performance bond to cover all or a
portion of Tenant's Development Obligations (excluding Building
Shell Construction) and the construction of any Subtenant space.
If Tenant so elects, Landlord and its lender shall be named as
co-obligees thereunder . The Leasehold Mortgagee shall also be
named as a co-obligee thereunder and in the event of a default
by Tenant in constructing and/or completing the Premises as
herein provided, as between Landlord, Landlord's lender and the
Leasehold Mortgagee, the Leasehold Mortgagee may, but shall not
be obligated to, enforce any such payment and/or performance
bond and complete or cause completion of construction of the
Premises. Should the Leasehold Mortgagee refuse or fail to
enforce such payment and/or performance bond or otherwise fail
to complete or cause completion of construction of the Premises
within the time periods allowed under this Lease, Landlord's
lender may, but shall not be obligated to, enforce such payment
and/or performance bond and complete or cause completion of
construction of the Premises. Should Landlord's lender refuse or
fail to enforce such payment and/or performance bond or
otherwise fail to complete or cause completion of construction
of the Premises within the time periods allowed under this
Lease, Landlord shall enforce such payment and/or performance
bond and complete or cause completion of construction of the
Premises.
(d) CONSTRUCTION PERMITS. Tenant shall obtain any and all permits,
licenses and approvals necessary to complete Tenant's
Development Obligations (other than those for Building Shell
Construction which shall be obtained by Landlord).
(e) BUILDER'S RISK AND OTHER INSURANCE. Tenant shall deliver to
Landlord (a) certificates of insurance evidencing coverage for
"builder's risk," (b) evidence of workers' compensation
insurance covering all persons employed in connection with
Tenant's Development Obligations (exclusive of any Subtenant
work and the Building Shell Construction performed by Landlord)
and with respect to whom death or bodily injury claims could be
asserted against Landlord or the Premises; and (c) evidence that
Tenant has paid or caused to be paid all initial premiums for
such coverage.
8.04.4 COMPLETION OF CONSTRUCTION. Once any construction work is begun
or assumed by Tenant, Tenant shall with due diligence and in good faith
prosecute to completion all construction of improvements, additions, or
alterations. Without limiting the generality of the foregoing, Tenant
shall comply with the Schedule for Phase I, Phase II and the Expansion
Space, if any, prepared by Tenant, except for Unavoidable Delays in each
instance. All work shall be performed in a good and workmanlike manner,
shall (except as approved in writing by Landlord in its reasonable
discretion) materially and substantially comply with the elevations,
drawings, plans and specifications submitted to and approved by Landlord
as provided in Article 8.04.1 and shall comply with all applicable
governmental permits, laws, ordinances, and regulations and with all
applicable rules, orders and regulations of (i) the insurance
underwriting board or insurance inspection bureau having or claiming
jurisdiction and (ii) all insurance companies insuring all or any part
of the Premises. Without limiting any other provision hereof, Landlord
and Tenant shall, and shall cause their contractors and subcontractors
to, cooperate fully with the other party and its affiliates and their
contractors and subcontractors to coordinate the work being conducted by
Tenant and Landlord and/or their affiliates hereunder and to avoid
reasonably avoidable negative impacts on the Stratosphere or the
Premises or on any construction work that Landlord or Tenant and/or
their respective affiliates may be performing.
8.04.5. DELAY IN COMPLETION. In the event that Tenant has not completed
construction of the Premises including, but not limited to, sprinklering
of the Premises and completion of the Premises Common Areas so that the
Premises are open for use by Subtenants and the public on or before the
Completion Date for reasons other than Landlord's delay in completing
the Stratosphere, Building Shell Construction or Unavoidable Delays,
Tenant shall commence the payment of Annual Minimum Rent to Landlord on
the Completion Date as more particularly provided for in Article 5.01
herein. Landlord, its guests, customers, invitees and employees shall
not be restricted from safe and unrestricted access to the Premises
including, but not limited to, the elevators to the Tower through the
Premises Common Areas, because of Tenants delay. Further, if the Tower
initially opens for business to the public on or after Landlord's
Opening Date but prior to the last day of the Development Period, Tenant
shall nevertheless have completed sufficient portions of the Premises
Common Areas to allow access to the Tower by Landlord's customers and
invitees and otherwise permit Landlord to obtain a temporary certificate
of occupancy for the Stratosphere, the failure of which shall constitute
an Event of Default hereunder unless such delay is caused by the default
of Landlord under the Agreement or Unavoidable Delays.
8.04.6 LANDLORD'S APPROVAL. Landlord's approval of the plans,
specifications or any other matter pursuant hereto shall not constitute
the assumption by Landlord of any responsibility for the accuracy or
sufficiency of the plans, specifications or other matter and Tenant
shall be solely responsible therefor.
8.04.7 RULES AND REGULATIONS. Tenant's construction work shall be
subject to such reasonable rules and regulations as Landlord may impose
to minimize disruption of Landlord's customers, to avoid negative
impacts on the Stratosphere and/or for the safety and appearance of the
Stratosphere. For example, but not by way of limitation, should Tenant
desire to conduct construction activities during other than normal
business hours, Tenant shall, reasonably in advance of conducting such
activities, consult with Landlord and undertake in good faith to
coordinate such activities so as to minimize disruption to Landlord's
business. Provided that Tenant has notified Landlord at least ten (10)
days in advance of the date on which Tenant shall commence construction
of the Premises, Landlord shall at all times after commencement of such
construction provide Tenant with the names of one or more persons at the
Stratosphere who will be available to consult with Tenant regarding such
construction. Landlord may add or delete names in its sole and absolute
discretion. In any instance, Tenant shall not be required to consult
with more than one of such persons who is then available.
8.04.8 UNION LABOR. If Landlord in its sole and absolute discretion
determines that the Stratosphere or business conducted thereon would
otherwise be adversely affected, any or all construction work in the
Premises performed by Tenant (but excluding any Subtenant work), shall
be done by recognized union labor.
8.04.9 MECHANIC'S LIENS. Tenant shall keep the title to the Premises and
every part thereof free and clear of any lien or encumbrance in respect
of such construction work, and shall indemnify, hold harmless and defend
Landlord against any claim, loss, cost, demand and legal or other
expense, including attorneys fees, whether in respect of any lien or
otherwise, arising out of the supply of material, services or labor for
such construction work other than any lien or claim resulting from
Landlord's construction of the Base Building, the Building Shell
Construction or Landlord's construction activities in the Expansion
Space or any other portion of the Stratosphere. Tenant shall immediately
notify Landlord of any such lien, claim of lien or other action of which
it has or reasonably should have knowledge and which affects the title
to the Premises or any part thereof, and shall, within twenty (20) days
thereafter cause the same to be removed or bonded against by a bond with
surety, in amount and in form and substance reasonably satisfactory to
Landlord, failing which Landlord may take such action as Landlord deems
necessary to remove the same and the entire cost thereof shall be
immediately due and payable by Tenant to Landlord.
8.04.10 STAGING AREA, CONSTRUCTION PARKING, TEMPORARY UTILITIES AND
HOISTING APPARATUS. During the original construction of all or any
portion of the Premises, Tenant shall have the right, at Tenant's sole
risk and expense, to utilize a staging area on Landlord's Parcel, the
location of which is reasonably accessible to the Premises, for the
storage of equipment and material and for the parking of construction
personnel. Further, in the event Tenant shall require such a staging
area in the future for the purposes of constructing the Expansion Space
or reconstructing the Premises, then Landlord shall designate a staging
area on a site reasonably accessible to the Premises which does not
materially interfere with Landlord's operation of the Stratosphere and
which Tenant may use for the staging of materials and the parking of
construction personnel, at Tenant's sole risk and expense. In addition,
Landlord shall provide or assist Tenant in making arrangements to
provide for the furnishing of temporary utilities to the Premises in
connection with the completion of Tenant's Development Obligations, the
consumption of which shall be at Tenant's sole cost and expense.
Further, Landlord shall make available to Tenant a hoisting apparatus,
in a location mutually agreed to by Landlord and Tenant, in order to
assist Tenant, Subtenants and their respective contractors in moving
labor and materials in and out of the Premises during the course of
Tenant's Development Obligations for the initial construction of the
Premises and the Expansion Space. Tenant shall have an easement over and
across the Landlord Parcel for ingress and egress between any current or
future staging area and the Premises.
ARTICLE 9.00 DESIGNATED SPACES.
9.01 EXISTING LEASE. Subject to the limitations described below, Landlord
hereby assigns to Tenant, and Tenant hereby agrees to assume all of
Landlord's right, title, obligations, interest in and to that certain
lease between Stratosphere Corporation, as landlord, and McDonald's
Corporation ("McDonald's") as tenant dated February 14, 1996 covering
Space D-12 in the Premises, a true, correct and complete copy of which
has been furnished to Tenant, together with an estoppel certificate from
McDonald's approved by Tenant. Pursuant to the Existing Lease, the
landlord thereunder is liable to McDonald's for the following monetary
obligations:
(a) Tenant allowance to cover the cost of McDonald's build-out in an
amount not to exceed $750,000;
(b) A guarantee of net income for a ten (10) year term beginning on
the date McDonald's opens for business in the Premises;
(c) Compensation to McDonald's for lost income from the date the
McDonald's restaurant closes at 2100 Las Vegas Blvd. until it
opens its restaurant in the Premises;
(d) Reimbursement for remaining net book value of McDonald's
existing improvements in an amount equal to $347,000; and
(e) Additional consideration for the transfer of the McDonald's
property to Landlord in the amount of $300,000.
In connection with Tenant's assumption of the Existing Lease, Tenant
shall indemnify, hold harmless and defend Landlord from the obligations
described in (a) and (b) above. Tenant shall not assume, and Landlord
hereby agrees to indemnify, hold harmless and defend Tenant, from and
against, all of the payment obligations to McDonald's described in (c),
(d) and (e) above. Tenant agrees that to the extent its obligation for
the tenant allowance under (a) above is less than $750,000, the
difference between $750,000 and Tenant's actual obligation shall be paid
over to Landlord to reimburse Landlord for a portion of its obligations
under (c), (d) and (e) above.
9.02 THIRD PARTY DESIGNATED SPACES. Landlord acknowledges that Tenant is
negotiating with the following Subtenants to sublet a portion of Phase
II (collectively referred to herein as "Third Party Designated Spaces"):
(a) Rainforest Cafe to Sublease approximately 18,136 square feet in
Phase II designated as Space I-1 at a minimum rent of $35 per
square foot of retail space on the Retail Floor versus twelve
percent (12%) of such Subtenant's gross receipts above ten
million and 00/100 dollars ($10,000,000). Tenant shall pay to
the Subtenant of the Rainforest Cafe a $750,000 buildout
allowance upon the lien free completion of its space and its
initial opening for business. Landlord acknowledges and agrees
that the execution of a Sublease with Rainforest Cafe is a
material inducement to Tenant's agreement to include Phase II
within the Premises and accordingly, Landlord shall cooperate
with and otherwise assist Tenant to insure that the Sublease
with Rainforest Cafe is fully executed no later than the date
hereof;
(b) Kids Quest to Sublease approximately 955 square feet on the
Retail Floor and approximately 9,000 square feet on the
Mezzanine Floor in Phase II designated as Space G-5 at a minimum
rent of $60.00 per square foot of retail space on the Retail
Floor versus six percent (6%) of such Subtenant's gross receipts
after deduction for its minimum rent and no rent for the square
footage on the Mezzanine Floor; and
(c) Aquarium gift shop to Sublease approximately 3,953 square feet
in Phase II designated as Space I-2 at a minimum rent of $75 per
square foot of retail space on the Retail Floor versus seven
percent (7%) of such Subtenant's gross receipts after deduction
for its minimum rent.
9.03 LANDLORD DESIGNATED SPACES. Tenant hereby agrees to sublet the following
spaces to Landlord, or its assignee, and Landlord hereby agrees to
sublease such spaces from Tenant (or cause the same to be subleased by
Landlord's assignee), which spaces shall collectively be referred to as
"Landlord Designated Spaces:"
(a) Tenant shall sublet to Landlord, or its assignee, two (2)
separate spaces in Phase I, one designated as Space D-4
containing approximately 2,559 square feet and the other
designated as Space E-15 containing approximately 2,251 square
feet for Landlord's retail purposes (each a "Stratosphere
Space"). Rent for each Stratosphere Space shall be $75 per
square foot of retail space on the Retail Floor versus six
percent (6%) of Landlord's gross receipts from retail operations
after deduction for minimum rent. Landlord shall not be
obligated to pay any administrative charge as part of its common
area maintenance contribution under any Sublease for the
Stratosphere Space in an amount greater than that paid by any
other Subtenant;
(b) Tenant shall sublet to Landlord, or its assignee, one space in
Phase I designated as Space B-14 and containing approximately
1,134 square feet for use as a photo booth operation ("Photo
Booth Space"). Rent for the Photo Booth Space shall be $100 per
square foot of retail space on the Retail Floor versus ten
percent (10%) of the gross receipts from the Photo Booth Space
after deduction for minimum rent.
In the event an assignee of Landlord shall be the Subtenant for any or
all of the Landlord Designated Spaces, Landlord shall execute and
deliver simultaneous with, and as a condition to execution of any
Sublease for any such Landlord Designated Space, a guaranty of payment.
Landlord and its affiliates shall not own or otherwise permit to be
operated any more than 31,000 square feet of retail space within the
Stratosphere, excluding the Premises. In no event shall any restaurant
operated within the Stratosphere be considered retail for purposes of
the foregoing restriction on Landlord. In the event that the Expansion
Space becomes a part of the Premises, Landlord's restriction on the
amount of retail space it may own or otherwise permit shall increase in
direct proportion to the square footage added to the Premises as a
result of the Expansion Space.
In addition to the Landlord Designated Spaces set forth above, Tenant
agrees that, from and after the date which is one (1) year after both
Phase I and Phase II of the Premises are initially open to the public
for business, Landlord shall have the right, but not the obligation,
subject to the terms and conditions set forth below, to sublease one (1)
additional space of up to 2,400 square feet of contiguous Retail Floor.
Landlord shall provide Tenant with written notice of Landlord's desire
to Sublease such space and at any time that the same shall thereafter be
available such retail space shall be offered to Landlord with rent at
the then current market rate for such space. Tenant's notice to Landlord
of the availability of any such retail space shall specify the rent and
ancillary charges applicable to such space and the location and
dimensions thereof. Landlord shall, within ten (10) business days after
receipt of any such offer, notify Tenant of its election to accept or
reject the offer to sublease the retail space. Upon the acceptance of
any such offer, the parties shall proceed to consummate the sublease of
such space upon the terms and conditions contained in the offer. If
Landlord shall fail to respond to Tenant's offer within the foregoing
ten (10) day period, then Landlord shall be deemed to have rejected the
offer to sublease such retail space and Tenant shall thereafter be
entitled to offer the same for sublease upon comparable terms and
conditions to any other party. If Landlord rejects any such offer,
Tenant shall have no obligation to thereafter offer to sublease any such
contiguous space to Landlord until Landlord thereafter gives notice to
Tenant of its desire to sublease a contiguous space as provided above.
Tenant shall be required to first offer to Landlord the right to
sublease up to 2,400 square feet of contiguous space only after receipt
of Landlord's notice and at any time the same thereafter becomes
available until such time as Landlord accepts any such offer to
sublease. Thereafter, Tenant shall have no further obligation to offer
any such retail space to Landlord.
9.04 EXCLUSIVE AND LEASING RESTRICTION. Tenant agrees that during the Initial
Term and any Extended Term hereof, and so long as Landlord is operating
a sundries store within the Stratosphere, Tenant shall not Sublease or
permit to be occupied within the Premises any sundries store which has
the right to sell film, newspapers and magazines, racing forms,
cigarettes and cigars, standard candy items, drugstore sundries,
sunglasses, package alcohol, Stratosphere logo items, marital aids,
women's nylons and gaming guidebooks, or any combination of any of the
foregoing items nor shall Tenant Sublease or permit to be occupied
within the Premises any store which sells film for cameras and
camcorders or any similar photographic devices; provided, however, this
restriction shall in no event prevent or preclude Tenant from Subleasing
or permitting any portion of the Premises to be occupied by a store
which specializes in the sale of any one of the items described above
(other than cameras or film). Further, Tenant may not Sublease any
portion of the Premises or any Expansion Space for a T-shirt shop
similar in design, operation and appearance to the so-called "Las Vegas
T-shirt" operations currently being operated on Las Vegas Boulevard.
Tenant also agrees that during the Initial Term and any Extended Term
hereof, Tenant shall only Sublease or permit to be operated within Space
C-8 of the Premises, a sit-down, steakhouse restaurant except as
otherwise approved by Landlord, which approval shall not be unreasonably
withheld or delayed.
ARTICLE 10.00 TENANT'S MANAGEMENT AND LEASING OBLIGATIONS.
10.01 TENANT TO MANAGE. Tenant hereby agrees and undertakes to manage the
Premises in a manner consistent with similar retail/entertainment
complexes in the Las Vegas, Nevada area including, but not limited to,
upkeep of the Premises Common Areas, maintenance of books and records of
Tenant's management and operation and janitorial services.
10.02 LEASES. Tenant shall immediately begin to market the Premises to attract
prospective retail/entertainment Subtenants that are consistent with the
overall scheme of the Stratosphere. Tenant shall use its reasonable and
diligent efforts to Sublease all available space in the Premises to such
retail/entertainment Subtenants. Before executing any Sublease, Tenant
will submit to Landlord for its approval the name of the prospective
Subtenant, the retail use of the space, information on the principals,
partners or owners of the proposed Subtenant, the space to be occupied
by the proposed Subtenant and the location of any existing leases
between the proposed Subtenant and any affiliate of Tenant. Landlord may
not disapprove of any of the prospective Subtenants listed on Exhibit H
hereto. If the proposed Subtenant is an affiliate of Tenant then Tenant
shall also submit to Landlord for its approval the rent and other
economic terms and conditions of the Sublease with such proposed
Subtenant. Landlord shall have five (5) business days following its
receipt of such information from Tenant to approve or disapprove any
proposed Subtenant. Landlord shall give Tenant its reasons for
disapproving any proposed Subtenant. If Landlord fails to respond within
such five (5) business day period, the proposed Subtenant shall be
deemed approved.
Tenant shall not artificially inflate common area maintenance charges,
real estate tax reimbursements or other ancillary charges under any
Sublease in order to reduce the amount of annual minimum rent or
percentage rent payable thereunder.
10.03 INVENTORY, STAFF AND FIXTURES. Tenant shall employ and maintain
personnel sufficient at all times to afford management of the Premises
as required hereunder and to service Subtenants of the Premises. Unless
otherwise agreed by Landlord, Tenant shall only use those portions of
the Premises for office and storage purposes as are reasonably required
to support Tenant's development and management operations of the
Premises.
ARTICLE 11.00 MAINTENANCE, REPAIR AND ALTERATIONS BY LANDLORD
11.01 MAINTENANCE, REPAIR AND REPLACEMENT. Landlord shall at all times during
the term hereof operate, maintain, repair and replace in good order and
condition the heating, ventilating and air conditioning systems
(including that portion of the heating, ventilating and air conditioning
components which service the Building Shell of the Premises) and
structural and other components of the Base Building included within
Landlord's Development Obligations including, without limitation, the
roof, stairwells, elevators, escalators and electrical switchgear, all
systems, facilities and equipment necessary for the operation of the
Common Areas, except the Premises Common Areas, and shall maintain and
repair the foundation and weight-bearing walls and all other exterior
walls of the Base Building and shall use reasonable diligence in doing
so. Landlord shall at all times during the term hereof maintain and keep
the Base Building in good order, condition and repair.
11.02 ALTERATIONS BY LANDLORD. Subject to the limitations set forth in Article
2.03, and the express obligations of Landlord set forth elsewhere in
this Lease, Landlord may from time to time as it deems appropriate in
its absolute discretion make repairs, replacements, changes or additions
to the structure, structural components, HVAC systems, facilities and
equipment in the Base Building where necessary to serve the Premises or
other parts of the Base Building or where otherwise appropriate; make
changes in or additions to any part of the Base Building not in or
forming part of the Premises including, without limitation, adding
additional levels; increase, decrease, eliminate, create or otherwise
change the areas, location and arrangement of any or all Common Areas;
enter into, modify and terminate easements and other agreements
pertaining to the use and maintenance of the Common Areas; construct
improvements on the Common Areas; and close temporarily or permanently
any or all portions of the Common Areas, none of which shall have a
material adverse effect upon Tenant's use or operation of the Premises
or the Common Areas. In making such alterations, Landlord shall not cut
off or otherwise cause a discontinuance of any utility or heating,
ventilating and air conditioning facility serving the Premises and shall
otherwise use reasonable efforts not to disturb or interfere with
Tenant's or any Subtenant's use of the Premises and operation of its
business any more than is reasonably necessary in the circumstances.
11.03 ACCESS BY LANDLORD. Landlord shall have the right to enter the Premises
during normal business hours, as Landlord may elect, to examine,
inspect, and show the Premises to persons wishing to lease, purchase,
finance, manage or otherwise deal with the Base Building, to provide
services or make repairs, replacements, changes or alterations as
permitted by this Lease, and to take such steps as Landlord may
reasonably deem necessary for the safety or preservation of the Base
Building.
ARTICLE 12.00 UTILITIES, SERVICES, MAINTENANCE,
REPAIRS AND ALTERATIONS BY TENANT
12.01 CLEANING. During the Initial Term and Extended Term, Tenant shall, at
its sole cost and expense, keep the Premises in a clean condition and
good state of repair in a manner consistent with similar
retail/entertainment complexes in the Las Vegas, Nevada area, and shall
provide janitor services, removal of debris and garbage, and cleaning of
all interior and exterior windows, window frames, doors and storefronts.
12.02 HEAT, VENTILATION, AIR CONDITIONING. During the Initial Term and
Extended Term, Landlord shall provide a system of chilled water to a
point at the Premises which shall be sufficient to provide heating and
cooling to all portions of the Premises, including spaces occupied by
Subtenants and the Premises Common Areas, and otherwise in accordance
with specifications which have been approved by Tenant. Tenant shall
reimburse Landlord for the cost of providing such heating, ventilating
and air conditioning services to the Premises at the rate of $.0125/1000
of the actual number of B.T.U's consumed by the Premises (as determined
by readings taken from a BTU meter approved by Tenant and installed by
Landlord at its expense, which shall enable Landlord to recoup from
Tenant, Landlord's actual cost (without profit or markup) of providing
such service to the Premises).
12.03 COMMON UTILITIES AND OTHER SERVICES. During the Initial Term and
Extended Term, Tenant shall at its expense provide heat, ventilation,
air conditioning, water, electricity and other utility services from the
Building Shell through the Premises as required by Subtenants. Where
possible, all of such utility services shall be metered directly to the
Premises and Tenant shall be responsible for paying the applicable
utility company for the cost of such services in accordance with the
usage measured by such meter and the applicable tariffs in effect from
time to time for such service. If any utility service cannot be directly
metered to the Premises, then Landlord shall be responsible for
providing such service to a point within the Building Shell determined
by Landlord and approved by Tenant, and Tenant shall reimburse Landlord
for the cost of such service based upon the readings from a "check" or
"test" meter installed by Tenant (which installation shall be approved
by Landlord) based upon readings from such "check" or "test" meter and
the applicable tariff to which Tenant would have been subject had any
such utility been metered directly to the Premises.
12.04 CONDITION OF PREMISES. Except to the extent that Landlord is
specifically responsible therefor under this Lease, Tenant shall
maintain or cause to be maintained, the Premises including all portions
of the interior walls and floor and all improvements therein in good
order and condition, including without limitation:
(a) repainting the Premises and cleaning carpets at reasonable
intervals;
(b) making repairs and replacements as needed to glass, plate glass,
store windows and storefronts, signs, moldings, doors, hardware,
partitions, walls, floors, fixtures, lighting and plumbing
fixtures, HVAC systems within the Premises, wiring, piping,
ceiling, floors and thresholds in the Premises which serve the
Premises;
(c) making all other repairs and replacements in or to the Premises
as needed, whether ordinary or extraordinary, foreseen or
unforeseen, except only for repairs and replacements to the
Premises for which Landlord is specifically responsible under
this Lease; and
(d) keeping the Premises in such condition as to comply with the
requirements of any governmental or quasi-governmental authority
having jurisdiction.
In the event Tenant desires to replace any improvement in or otherwise
visible from the Premises Common Areas with material which is not
identical to, or substantially the same as, the material being replaced,
and the cost of such replacement exceeds fifty thousand and 00/100
Dollars ($50,000) in the aggregate, Tenant shall notify Landlord of its
plans therefor and submit to Landlord a materials board specifying the
materials and finishes to be used. Landlord reserves the absolute right
to reject any materials and finishes which, in Landlord's sole
discretion, are not consistent with the overall scheme of Stratosphere.
All work under this Article 12.04 shall be performed in accordance with
Article 12.06. Notwithstanding, anything contained in this Article
12.04, any improvements made by Tenant must maintain the same quality of
the original design of the improvement.
12.05 FAILURE TO MAINTAIN PREMISES. If Tenant fails to perform any obligation
under this Article 12.00, then on not less than twenty (20) days notice
to Tenant (or such additional time as may be reasonably necessary),
except in case of an emergency adversely affecting the Base Building or
another portion of the Stratosphere where no notice is necessary,
Landlord may enter the Premises and perform such obligation without
liability to Tenant for any loss or damage Tenant thereby incurs. Tenant
shall pay Landlord as additional Rent, for the actual cost of such
performance by Landlord, within twenty (20) days of receipt of
Landlord's invoice therefor.
12.06 ALTERATIONS BY TENANT. Tenant may make changes and improvements in the
Premises with respect to Subtenant spaces (except the Premises Common
Areas which are governed by Article 12.04 above) without the written
approval of Landlord provided that such changes and/or improvements do
not interfere with Landlord's access to the Tower elevators.
In reviewing and determining whether to approve any plans proposed by
Tenant pursuant to this Article 12.00, Landlord shall be entitled to
exercise reasonable aesthetic judgment, considering the effect which the
design proposed by Tenant will have on the Base Building, Stratosphere
and its elements and the architectural harmony and continuity thereof.
12.07 TRADE FIXTURES AND PERSONAL PROPERTY. Tenant and its Subtenants may
install in the Premises normal trade fixtures and personal property,
provided that no such installation shall interfere with or damage the
mechanical or electrical systems or the structure of the Base Building.
If Tenant is not then in default hereunder, trade fixtures and personal
property installed in the Premises by Tenant or its Subtenants may be
removed from the Premises:
(a) from time to time in the ordinary course of Tenant's or its
Subtenant's business or in the course of reconstruction,
renovation, or alteration of the Premises by Tenant or its
Subtenants; and
(b) during the thirty (30) day period prior to the expiration of the
Initial Term or Extended Term.
ARTICLE 13.00 TAXES
13.01 LANDLORD'S TAXES. Landlord shall pay before delinquency all taxes levied
against the Base Building, except amounts payable by Tenant under
Article 13.02. In the event Landlord is unable to split the tax parcel
for the Base Building occupied by Landlord and the Premises occupied by
Tenant into separate tax parcels (Landlord and Tenant agreeing to use
reasonable, good faith efforts to obtain such split, with each bearing
an equal share of the costs and expenses associated therewith), then
Landlord and Tenant shall cooperate with each other to obtain a
certificate or other evidence from the assessor of Clark County, Nevada
setting forth a separate statement of value and the tax rate applicable
to the Premises. Tenant shall reimburse Landlord for its share of the
taxes and any assessment paid by Landlord on behalf of Tenant in
accordance with the assessor's determination of value no later than ten
(10) days prior to the due date of any installment of such taxes.
Tenants obligation to reimburse Landlord under this Article 13.01 shall
be deemed Rent.
13.02 TENANT'S TAXES. Tenant shall pay before any fine, penalty or interest
accrues and in any event before delinquency every tax, assessment,
license fee, excise and other charge, however described, which is
imposed on or levied, assessed or charged against the Premises by any
governmental or quasi-governmental authority having jurisdiction
including, without limitation, upon or on account of:
(a) operations at, occupancy of, or conduct of business in or from
the Premises by or with the permission of Tenant;
(b) trade fixtures or personal property in the Premises which do not
belong to Landlord; and
(c) the Rent paid or payable by Tenant to Landlord for the Premises
or for the use and occupancy of all or any part thereof.
Tenant shall promptly provide Landlord with copies of receipts
evidencing Tenant's payment of taxes under this Article 13.00 to the
extent the same are not reimbursed to Landlord. Should Tenant be
required to reimburse Landlord for any portion of such taxes, Landlord
shall promptly provide Tenant with receipts evidencing Landlord's
payment to the applicable taxing authority.
13.03 RIGHT TO CONTEST. Landlord and Tenant, at their own cost and expense,
shall each have the right to contest in good faith the validity or
amount of any tax, assessment, license fee, excise fee and other charge
which it is responsible to pay under this Article 13.00, provided that
no contest by Tenant may involve the possibility of forfeiture, sale or
disturbance of Landlord's and/or its lender's interest in the Premises
which would or could interfere with the operation of Tenant's business
at the Premises, and Tenant shall provide to Landlord or the applicable
taxing authority adequate security for the taxes contested by Tenant in
the reasonable discretion of Landlord. Upon the final determination of
any contest, Landlord and Tenant shall immediately pay and satisfy the
amount found to be due by them, together with any applicable costs,
penalties and interest.
The parties shall cooperate with each other, if necessary, to effectuate
a successful tax contest.
ARTICLE 14.00 INSURANCE
14.01 LANDLORD'S INSURANCE. During the Initial Term and Extended Term,
Landlord shall maintain at its sole expense:
(a) property insurance with special cause of loss coverage,
vandalism, malicious mischief, boiler and machinery, and
replacement endorsements covering debris removal, demolition
costs and contingent liability from operation of building laws
and all improvements and fixtures located upon the Landlord
Parcel (exclusive of the Premises but including the Base
Building), and water damage insurance in an amount sufficient to
fully cover Landlord's improvements, fixtures and property in
the Stratosphere (exclusive of the Premises but including the
Base Building), for one hundred percent (100%) of their actual
replacement costs without deduction for depreciation but subject
to such reasonable deductibles as may be maintained from time to
time by Landlord. Landlord agrees to use reasonable efforts to
obtain a joint loss adjust clause for its property insurance
carried hereunder;
(b) commercial general public liability insurance, with Tenant and
Tenant's Leasehold Mortgagee named as additional insureds
thereunder, against claims for bodily injury, including death,
personal injury and property damage in or about the Stratosphere
(exclusive of the Premises), in amounts not less than
$10,000,000.00 for death, illness or injury to one or more
persons, and $1,000,000.00 for property damage, or a combined
single limit of not less than $10,000,000.00, all of which shall
be written on an occurrence policy form;
(c) Workmen's Compensation and Occupational Disease Insurance in
accordance with the laws of the State of Nevada, including
Employer's Liability Insurance or its equivalent to the limit of
$500,000.00; and
(d) policies for such insurance shall be with an insurer qualified
to do business in the State of Nevada and require at least
thirty (30) days prior written notice to Tenant of termination
or material alteration. The insurance required to be carried by
Landlord under this Article 14.01 shall be primary with respect
to Tenant and its agents and not participating with any other
available insurance. Landlord shall deliver on the Delivery Date
and on each anniversary thereof to Tenant, certified copies or
other evidence of such policies, and evidence satisfactory to
Tenant that premiums thereon have been paid at least one (1)
year in advance and that the policies are in full force and
effect.
14.02 TENANT'S INSURANCE. During the Initial Term and Extended Term, Tenant
shall maintain at its sole expense:
(a) property insurance with special cause of loss coverage,
vandalism, malicious mischief, boiler and machinery, and
replacement endorsements covering debris removal, demolition
costs and contingent liability from operation of building laws
on all improvements and fixtures located on the Premises, and
water damage insurance in an amount sufficient to fully cover
Tenant's improvements, fixtures and property in the Premises,
and any other improvements which Tenant is obligated to repair
under Article 12.00, for one hundred percent (100%) of their
actual replacement costs without deduction for depreciation but
subject to such reasonable deductions as may be maintained from
time to time by Tenant but in no event in excess of $250,000.00.
Tenant agrees to use reasonable efforts to obtain a joint loss
adjust clause for its property insurance carried hereunder;
(b) commercial general public liability insurance, with Landlord and
Landlord's lender(s) named as additional insureds thereunder,
against claims for bodily injury, including death, personal
injury and property damage in or about the Premises, in amounts
not less than $10,000,000.00 for death, illness or injury to one
or more persons, and $1,000,000.00 for property damage, or a
combined single limit of not less than $10,000,000.00, all of
which shall be written on an occurrence policy form;
(c) Workmen's Compensation and Occupational Disease Insurance in
accordance with the laws of the State of Nevada, including
Employer's Liability Insurance or its equivalent to the limit of
$500,000.00;
(d) business income including extra expense and loss of rent
insurance insuring that the Rent will be paid to Landlord for a
period of up to two (2) years if the improvements in the
Premises are destroyed or rendered inaccessible by a risk
insured against by the policy of property and extended coverage
insurance required by Article 14.02 (a) above. Except as
otherwise provided herein, the maintenance of such insurance
shall not entitle Tenant to any offset, abatement or reduction
in Rent except to the extent that Landlord actually receives
insurance payments in satisfaction of such Rent; and
(e) Policies for such insurance shall be with an insurer qualified
to do business in the State of Nevada and in a form otherwise
acceptable to Landlord and shall require at least thirty (30)
days prior written notice to Landlord and Landlord's lender(s)
of termination or material alteration. The insurance required to
be carried by Tenant under this Article 14.02 shall be primary
with respect to Landlord and its agents and not participating
with any other available insurance. Tenant shall deliver on the
Delivery Date and on each anniversary thereof to Landlord
certified copies or other evidence of such policies, and
evidence satisfactory to Landlord that premiums thereon have
been paid at least one (1) year in advance and that the policies
are in full force and effect.
14.03 WAIVER OF SUBROGATION. Notwithstanding anything else contained in this
Lease to the contrary, Landlord and Tenant hereby release each other and
the other's agents and employees from any liability for loss or damage
by fire or other casualty coverable by the insurance required in
Articles 14.01(a), as to Landlord, and 14.02(a), as to Tenant, whether
or not the loss or damage resulted from the negligence of the other, its
agents or employees (except to the extent of any loss to the Premises
causally related to Landlord's ownership, operation or maintenance of
the Hotel swimming pool above the Premises).
ARTICLE 15.00 PARKING AND PARKING FACILITY.
15.01 Landlord shall at all times during the term hereof maintain structured
or surface parking areas for the non-exclusive use of Tenant and its
Subtenants, customers, guests, agents and invitees in the areas shown on
Exhibit B attached hereto ("Parking Facility"). The Parking Facility
shall at all times maintain a sufficient number of parking spaces on a
non-exclusive basis to enable the Premises and the Stratosphere to
comply with applicable law, code and ordinance, subject to any
applicable variance.
Tenant shall render Landlord its full and complete cooperation in
determining the parking space location and requirements for the
Premises. Without limiting the generality of the foregoing, Tenant
shall, at its sole cost and expense and as soon as practicable,
determine and inform Landlord of the total number of parking spaces
legally required for the Premises.
15.02 Tenant shall pay to Landlord, in equal monthly installments along with
its Annual Minimum Rent payment as provided for in Article 5.01, a flat
rate of ninety eight and 00/100 dollars ($98.00) per parking space
required for the Premises as required above, but in no event shall any
parking spaces allocated to any square footage on the Mezzanine Floor of
any Landlord Designated Spaces or Third Party Designated Spaces be
included in any calculation to determine Tenant's share of the costs to
maintain the Parking Facility. Tenant's obligation to pay its share of
the costs to maintain the Parking Facility shall commence on the
Completion Date and the flat rate due hereunder shall be increased at
the end of each Lease Year thereafter by an amount equal to the increase
in the Consumer Price Index for Urban Wage Earners and Clerical Workers
published by the Bureau of Labor Statistics of the United States
Department of Labor for the Las Vegas, Nevada metropolitan area, All
Items, (1982-1984 = 100), and if not so published, by a comparable index
reasonably acceptable to Landlord and Tenant.
15.03 Landlord will at all times provide six hundred fifty (650) designated
parking spaces in the Parking Facility for Tenant, Subtenants and their
respective employees ("Employee Parking").
ARTICLE 16.00 LANDLORD'S SPONSOR
16.01 PRODUCT SPONSORS. In the event Landlord enters into agreement(s) with
product sponsors ("Sponsors") (such as Pepsi, Coca-Cola, Kodak), Tenant
agrees to comply with the use of such products and further to require
its Subtenants (excluding McDonald's) to comply where possible. Tenant
and/or its Subtenants may elect to use generic products rather than the
Sponsor's product. Tenant may also elect to enter into agreements with
product sponsors with respect to the Premises which are not inconsistent
with any then existing agreements with Landlord's Sponsors and otherwise
approved by Landlord which approval shall not be unreasonably withheld
or delayed. Any sponsorship income received by Tenant shall be included
in the computation of Net Revenue for purposes of computing Shared Rent.
ARTICLE 17.00 INDEMNITY
17.01 INDEMNITY BY TENANT. Tenant shall indemnify and hold harmless Landlord
and Landlord's directors, officers, employees and agents (and if
Landlord requests, defend Landlord with counsel reasonably acceptable to
Landlord) from and against all liabilities, obligations, losses,
damages, fines, penalties, demands, claims, causes of action, judgments,
costs and expenses including, without limitation, attorney fees, which
may be imposed on or incurred, suffered or paid by or asserted against
Landlord or the Premises directly or indirectly arising from or by
reason of or in connection with:
(a) the use, non-use, possession, occupation, condition, operation,
maintenance or management of the Premises;
(b) any negligent or tortious act on the part of Tenant or any of
its agents, Subtenants, contractors, servants, employees,
licensees or invitees, but only to the extent of their negligent
or tortious liability;
(c) any accident, injury, death or damage to any person or property
occurring in, on or about the Premises;
(d) any loss or damage, however caused, to books, records, data or
information (computer generated or otherwise), files, money,
securities, negotiable instruments or papers in or about the
Premises;
(e) any loss or damage resulting from interference with or
obstruction of deliveries to or from the Premises;
(f) any pollutant, toxic or hazardous material, substance or waste,
or any other material which may adversely affect the
environment, whether or not now recognized to have such adverse
effect, which Tenant, its employees, agents, Subtenants,
contractors or invitees bring upon, keep, use or locate in, on
or about the Premises, or any release or disposal of any such
material, substance or waste in, on, about or from the Premises
by any of the foregoing;
(g) any failure on the part of Tenant to perform or comply with any
of the covenants, agreements, terms, provisions, conditions or
limitations contained in this Lease on its part to be performed
or complied with; and
(h) any mechanics or materialmen's lien arising out of the supply of
material, services or labor for the performance of Tenant's
Development Obligations hereunder or for other construction and
reconstruction activities at the Premises undertaken by or for
the benefit of Tenant.
Nothing contained in this Article 17.01 shall be deemed to require
Tenant to indemnify Landlord to any extent prohibited by law or for any
matter caused by the gross negligence or wilful misconduct of Landlord,
its agents, employees, tenants or contractors.
17.02 INDEMNITY BY LANDLORD. Landlord shall indemnify and hold harmless Tenant
and its directors, officers, employees and agents (and if Tenant
requests, defend Tenant with counsel reasonably acceptable to Tenant)
from and against all liabilities, obligations, losses, damages, fines,
penalties, demands, claims, causes of action, judgments, costs and
expenses including, without limitation, attorney fees, which may be
imposed on or incurred, suffered or paid by or asserted against Tenant
or the Premises directly or indirectly arising from or by reason of or
in connection with:
(a) the use, non-use, possession, occupation, condition, operation,
maintenance or management of the Stratosphere;
(b) any negligent or tortious act on the part of Landlord or any of
its agents, tenants (other than Tenant and its Subtenants),
contractors, servants, employees, licensees or invitees, but
only to the extent of their negligent or tortious liability;
(c) any accident, injury, death or damage to any person or property
occurring in, on or about the Stratosphere;
(d) any loss or damage, however caused, to books, records, data or
information (computer generated or otherwise), files, money,
securities, negotiable instruments or papers in or about the
Stratosphere;
(e) any loss or damage resulting from interference with or
obstruction of deliveries to or from the Stratosphere;
(f) any pollutant, toxic or hazardous material, substance or waste,
or any other material which may adversely affect the
environment, whether or not now recognized to have such adverse
effect, which Landlord, its employees, agents, tenants (other
than Tenant and its Subtenants), contractors or invitees bring
upon, keep, use or locate in, on or about the Stratosphere, or
any release or disposal of any such material, substance or waste
in, on, about or from the Stratosphere by any of the foregoing;
(g) any failure on the part of Landlord to perform or comply with
any of the covenants, agreements, terms, provisions, conditions
or limitations contained in this Lease on its part to be
performed or complied with; and
(h) any mechanics or materialmen's lien arising out of the supply of
material, services or labor for the performance of Landlord's
Development Obligations hereunder or for other construction or
reconstruction activities at the Stratosphere undertaken by or
for the benefit of Landlord.
Nothing contained in this Article 17.02 shall be deemed to require
Landlord to indemnify Tenant to any extent prohibited by law or for any
matter caused by the gross negligence or wilful misconduct of Tenant,
its agents, employees, Subtenants or contractors.
17.03 SURVIVAL. The provisions of Article 17.00 shall survive the expiration
or sooner termination of this Lease.
ARTICLE 18.00 ASSIGNMENT; RIGHT OF FIRST REFUSAL
18.01 ASSIGNMENT; SUBLEASING. Tenant may assign this Lease without Landlord's
prior written consent but only following Tenant's compliance with the
right of first refusal provision set forth in Article 18.03 below.
Further, subject to Landlord's right to consent as described in Article
10.02 above, Tenant may Sublease all or any portion of the Premises to
Subtenants at any time and from time to time during the term hereof.
18.02 SUBSEQUENT ASSIGNMENTS. Landlord's consent to an assignment shall not be
deemed to be a consent to any subsequent assignment of this Lease.
18.03 RIGHT OF FIRST REFUSAL. Tenant shall not transfer, sell, assign,
transfer at death to heirs, legatees or devisees, transfer or change any
beneficial interest (if Tenant is a trust) or transfer at any time any
general partner's or joint venturers' or co-tenant's interest in Tenant
(if Tenant is a partnership, joint venture or co-tenancy) or any or all
of its interest in this Lease, without first offering Landlord the right
to acquire such interest. In the event Tenant desires to transfer, sell,
assign or otherwise convey all of its interest in this Lease (other than
through a Sublease to a Subtenant permitted under Article 18.01 above,
and other than as provided in Article 18.04 below), Tenant shall first
give written notice thereof to Landlord ("Offer Notice") specifying in
reasonable detail the identity of the proposed transferee (who shall
have a minimum of five (5) years experience in the management and
operation of retail developments comparable to the Premises and not
otherwise be owned or controlled by any party or entity that would be
objectionable to the Gaming Authorities), and the economic and other
material terms of any proposed assignment, sale or transfer. Within
twenty (20) days after its receipt of the Offer Notice, Landlord shall
have the right to elect to purchase all of Tenant's right, title and
interest in and to this Lease upon and subject to the price and other
material terms and conditions set forth in the Offer Notice. If Landlord
elects to purchase Tenant's interest in the Lease, closing on such
purchase shall occur no later than sixty (60) days after Landlord's
election or such other time as is set forth in the Offer Notice,
whichever is later, at a time and place mutually agreed to by Landlord
and Tenant, each party agreeing to work diligently and in good faith to
complete such closing, following which Tenant shall have no further
obligations under this Lease. If Landlord elects not to purchase such
interest, or does not otherwise respond to such Offer Notice within the
twenty (20) day period, then Tenant shall thereafter be free, for the
ensuing one hundred eighty (180) day period, to consummate an assignment
or other transfer of its interest in this Lease to the party identified
in the Offer Notice and upon the same material terms set forth in the
Offer Notice without the necessity of obtaining Landlord's prior written
consent thereto. In the event of any such assignment, sale or other
transfer, the assignee/transferee shall agree, in writing, to assume and
be bound by the terms and provisions of this Lease. The provisions of
this Section 18.03 shall not apply to the exercise of any rights by a
Leasehold Mortgagee as provided in Section 8.03.
18.04 TRANSFERS TO AFFILIATES. Notwithstanding any other term or provision of
this Lease to the contrary, Tenant shall have the right, without first
having to comply with the right of first refusal provision of Article
18.03 above or having to obtain Landlord's consent, to transfer, sell,
assign, or otherwise convey its interest in this Lease, or to transfer
or change any beneficial interest, partnership interest or member
interest in and to Tenant to any "Permitted Transferee". For purposes of
this Lease, Permitted Transferee shall be any one or more of the
following:
(a) Any direct partner or member in Tenant (collectively, a "Tenant
Member");
(b) Melvin Simon;
(c) Herbert Simon;
(d) David Simon;
(e) Sheldon Gordon;
(f) Randy Brant;
(g) Any lineal descendent or spouse of any of the foregoing
individuals;
(h) Any trust for the benefit of any immediate family member of any
of the foregoing individuals;
(i) Any affiliate of Tenant or any Tenant Member that is owned or
under the control of any Tenant Member or any of the foregoing
individuals; or
(j) Any entity in which a majority interest is owned or controlled
by any one or more of the foregoing persons or entities.
ARTICLE 19.00 SURRENDER
19.01 POSSESSION. Upon the expiration or other termination of the Initial Term
or Extended Term, Tenant shall immediately quit and surrender possession
of the Premises in substantially the condition in which Tenant is
required to maintain the Premises excepting only reasonable wear and
tear and damage by fire or casualty. Upon such expiration or other
termination all right, title and interest of Tenant in the Premises
shall immediately terminate.
19.02 TRADE FIXTURES, PERSONAL PROPERTY AND IMPROVEMENTS. Subject to Tenant's
rights under Article 12.07, after the expiration or other termination of
the Initial Term or Extended Term all of Tenant's trade fixtures,
personal property and improvements remaining in the Premises shall be
deemed conclusively to have been abandoned by Tenant and may be
appropriated, sold, destroyed or otherwise disposed of by Landlord
without notice or obligation to compensate Tenant or to account
therefor, and Tenant shall pay to Landlord on written demand all costs
incurred by Landlord in connection therewith.
19.03 MERGER. The surrender of this Lease by Tenant and acceptance thereof by
Landlord (which may only be effected in a writing executed by Landlord)
or the cancellation of this Lease by mutual agreement of Tenant and
Landlord shall not work a merger and shall, at Landlord's option,
operate as an assignment to Landlord of all or any Subleases or
subtenancies. Landlord's option hereunder shall be exercised by written
notice to Tenant and, if Landlord fails to give such notice within
thirty (30) days after such surrender or cancellation becomes effective,
all such Subleases and subtenancies shall be deemed assigned to
Landlord.
19.04 PAYMENTS AFTER TERMINATION. No payments of money by Tenant to Landlord
after the expiration or other termination of the Initial Term or
Extended Term or after the giving of any notice (other than a demand for
payment of money which is paid in full within the time specified in such
demand, or if not so specified then within the time permitted by this
Lease) by Landlord to Tenant, shall reinstate, continue or extend the
Initial Term or Extended Term or make ineffective any notice given to
Tenant prior to the payment of such money. After the service of notice
or the commencement of a suit, or after final judgment granting Landlord
possession of the Premises, Landlord may receive and collect any sums of
Rent due under this Lease, and the payment thereof shall not make
ineffective any notice, or in any manner affect any pending suit or any
judgment theretofore obtained.
ARTICLE 20.00 HOLDING OVER
20.01 MONTH-TO-MONTH TENANCY. If with Landlord's prior written consent and in
Landlord's absolute discretion Tenant remains in possession of the
Premises after the expiration or other termination of the Initial Term
or Extended Term, Tenant shall be deemed to be occupying the Premises on
a month-to-month tenancy only, at a monthly rental equal to the Annual
Minimum Rent in effect as of the end of the Initial Term or Extended
Term, an estimate of Shared Rent based on the last full Lease Year
prorated to a monthly sum, plus all other Rent as determined in
accordance with Article 5.00 or such other rental as is stated in such
written consent, and such month-to-month tenancy may be terminated by
Landlord or Tenant on the last day of any calendar month by delivery of
at least thirty (30) days advance notice of termination to the other.
20.02 TENANCY AT SUFFERANCE. If without Landlord's prior written consent
Tenant remains in possession of the Premises after the expiration or
other termination of the Initial Term or Extended Term, Tenant shall be
deemed to be occupying the Premises upon a tenancy at sufferance only,
at a monthly rate equal to three (3) times the Rent determined in
accordance with Article 5.00. Such tenancy at sufferance may be
terminated by Landlord at any time by notice of termination to Tenant,
and by Tenant on the last day of any calendar month by at least thirty
(30) days advance notice of termination to Landlord. Notwithstanding the
foregoing, Landlord shall be entitled to such other remedies and damages
provided under this Lease or at law or in equity.
20.03 GENERAL. Any month-to-month tenancy or tenancy at sufferance hereunder
shall be subject to all other terms and conditions of this Lease
(excluding the right to exercise an Option with respect to the Extended
Term) and nothing contained in this Article 20.00 shall be construed to
limit or impair any of Landlord's rights of re-entry or eviction or
constitute a waiver thereof.
ARTICLE 21.00 RULES AND REGULATIONS
21.01 PURPOSE. Reasonable non-discriminatory rules and regulations will be
adopted by Landlord for the proper operation of the Base Building
including the Premises.
21.02 OBSERVANCE. Tenant shall at all times comply with and shall endeavor to
cause its employees' Subtenants, agents, licensees, guests, customers
and invitees to comply with the rules and regulations.
21.03 MODIFICATION. Landlord may, from time to time, amend, delete from, or
add to the rules and regulations, provided that any such modification:
(a) shall not be contrary to any other provision of this Lease and
shall not impose upon Tenant any greater obligations than those
expressly set forth herein;
(b) shall be reasonable and have general application to all tenants
in the Base Building; and
(c) shall be effective only upon delivery of a copy thereof to
Tenant at the Premises.
21.04 NON-COMPLIANCE. Landlord shall not be responsible to Tenant for failure
of any person, Subtenant, employee, customer, guest, invitee or agent to
comply with the rules and regulations.
ARTICLE 22.00 EMINENT DOMAIN
22.01 TOTAL TAKING. If during the Initial Term or any Extended Term all of the
Premises or all of the Base Building, Hotel, Casino, Tower or Parking
Facility are permanently taken by any public or quasi-public authority,
or private entity or individual having the power of condemnation, under
any statute or by right of eminent domain or purchased under threat or
in lieu of such taking, this Lease shall automatically terminate as of
the date any such condemnor or purchaser shall have the right to
possession of the property being condemned and both parties hereto shall
be relieved of any further obligations accruing under this Lease as of
the effective date of such termination with all Rent being apportioned
as of such date.
22.02 PARTIAL TAKING OF PREMISES. If at any time after the expiration of the
twentieth (20th) Lease Year of the Initial Term or at any time during
the Extended Term any portion which is more than forty five percent
(45%) of the gross floor area of the Premises is permanently taken by
any public or quasi-public authority, or private entity or individual
having the power of condemnation, under any statute or by right of
eminent domain or purchased under threat or in lieu of such taking,
Tenant shall have the right, upon thirty (30) days prior written notice
to Landlord, to terminate this Lease in which event both parties hereto
shall be relieved of any further obligations accruing under this Lease
as of the effective date of such termination with all Rent being
apportioned as of such date.
If Tenant does not so terminate this Lease then on the date any such
condemnor or purchaser shall have the right to possession of the
property being condemned, the Annual Minimum Rent and all other Rent
payable by Tenant hereunder which is expressed as a prorata share or a
dollar amount per square foot in the Premises shall be reduced by an
amount that is in the same ratio to Annual Minimum Rent or such other
Rent, as the case may be, as the square feet of the gross floor area of
the portion of the Premises taken bears to the square feet of the gross
floor area of the Premises immediately prior to the date of taking.
22.03 PARTIAL TAKING OF STRATOSPHERE. If at any time after the expiration of
the twentieth (20th) Lease Year of the Initial Term or at any time
during the Extended Term any portion which is more than forty five
percent (45%) of the gross floor area of either the Base Building,
Hotel, Casino, Tower or Parking Facility which comprise the Stratosphere
is permanently taken by any public or quasi-public authority, or private
entity or individual having the power of condemnation, under any statute
or by right of eminent domain or purchased under threat or in lieu of
such taking, Landlord or Tenant shall have the right, upon thirty (30)
days prior written notice to the other party, to terminate this Lease in
which event both parties hereto shall be relieved of any further
obligations accruing under this Lease as of the effective date of such
termination with all Rent being apportioned as of such date.
22.04 NOTICE. Promptly upon its receipt of such notice or process, each party
shall notify the other of the receipt, contents and date of any notice
of intended taking of all or any portion of the Premises or the
Stratosphere, service of any legal process relating to condemnation of
the Premises or the Stratosphere, notice in connection with any
proceeding or negotiations with respect to such condemnation or notice
of intent or willingness to make or negotiate a private purchase, sale,
or transfer in lieu of condemnation.
Landlord, Tenant, and all persons and entities holding under Tenant,
including the Leasehold Mortgagee, shall each have the right to
represent its respective interest in each proceeding or negotiation with
respect to a taking or intended taking and to make full proof of its
claims. No agreement, settlement, sale, or transfer to or with the
condemning authority shall be made without the consent of Landlord and
Tenant, and, if applicable, the Leasehold Mortgagee. Landlord and Tenant
each agree to execute and deliver to the other any instruments that may
be required to effectuate or facilitate the provisions of this Lease
relating to condemnation.
22.05 DISTRIBUTION OF AWARDS. As used in this Article 22, the term "Award"
shall be defined to mean all compensation, sums, or anything of value
awarded, paid or received on a total or partial condemnation or
voluntary sale in lieu thereof. Any Award for or on account of
Landlord's interest in the Premises, Base Building, Hotel, Casino, Tower
or Parking Facility shall be payable to and the sole property of
Landlord. Any award for or on account of Tenant's interest in the
Premises including, but not limited to, good will, chattels or trade
fixtures, and relocation expenses, shall be payable to and the sole
property of Tenant. If any such Award made or compensation paid to
either party includes an award or amount for the other, the party
receiving the same shall promptly account therefor to the other.
22.06 RESTORATION. If there is a partial taking of the Premises or any portion
of the Stratosphere and this Lease is not terminated in accordance with
the terms hereof, Landlord or Tenant, as the case may be, shall repair,
restore and rebuild those improvements so affected to as nearly as
possible to the condition existing prior to such taking which
improvements shall be equal in value, aesthetic appeal and quality to
the condition of the improvements before the event giving rise to such
work. Each party shall be responsible for that portion of the
restoration work that such party was obligated to perform in connection
with the initial development thereof.
22.07 SURRENDER. On any such date of termination under this Article 22, Tenant
shall immediately surrender to Landlord the Premises and all interests
therein under this Lease. Landlord may re-enter and take possession of
the Premises and remove Tenant therefrom, and the Rent shall no longer
accrue from the date of termination, except that if the date of such
taking differs from the date of termination, Rent shall no longer accrue
from the former date in respect of the portion taken. After such
termination, and within thirty (30) days after written notice from
Landlord, Tenant shall provide Landlord with a written statement signed
and certified by an officer or general partner of Tenant setting forth
the Rent calculations set forth in Article 5.00 and 15.00 herein. Tenant
shall immediately pay the Rent as calculated in Articles 5.00 and 15.00
prorated to the date of taking.
ARTICLE 23.00 DAMAGE BY FIRE OR OTHER CASUALTY
23.01 DAMAGE TO PREMISES. If at any time after the expiration of the twentieth
(20th) Lease Year of the Initial Term or at any time during the Extended
Term any portion which is more than forty five percent (45%) of the
gross floor area of the Premises shall be rendered untenantable by
damage from fire or other casualty, Tenant shall have the right, upon
thirty (30) days prior written notice to Landlord, to terminate this
Lease in which event both parties hereto shall be relieved of any
further obligations accruing under this Lease as of the effective date
of such termination with all Rent being apportioned as of such date. For
purposes of this Section 23.01 only, in the event of damage to the
Premises to the extent that Tenant may elect to terminate this Lease as
provided herein above, Tenant shall be deemed to have elected to
terminate the Lease, such election being made as of the date hereof so
that Landlord may obtain supplemental property insurance coverage, at
its sole cost and expense, for the Premises. Tenant expressly reserves
the right to rescind the foregoing election to terminate the Lease at
such time as any actual damage shall be sustained to the Premises and to
rebuild the same in accordance with this Article 23.00 with proceeds
from Tenant's insurance. In no event shall any supplemental property
insurance obtained by Landlord on the Premises in any way contravene
Tenant's primary property insurance coverage on the Premises or diminish
any proceeds otherwise properly payable to Tenant thereunder.
23.02 DAMAGE TO STRATOSPHERE. If at any time after the expiration of the
twentieth (20th) Lease Year of the Initial Term or at any time during
the Extended Term any portion which is more than forty five percent
(45%) of the Base Building, Hotel, Casino, Tower or Parking Facility
which comprise the Stratosphere shall be rendered untenantable by damage
from fire or other casualty, Landlord or Tenant shall have the right,
upon thirty (30) days prior written notice to the other party, to
terminate this Lease in which event both parties hereto shall be
relieved of any further obligations accruing under this Lease as of the
effective date of such termination with all Rent being apportioned as of
such date. Notwithstanding anything contained in this Article 23 to the
contrary, in the event that any portion of the Stratosphere is rendered
untenantable by damage from fire or other casualty and the net insurance
proceeds from any such claim are in excess of seventy five million and
00/100 dollars ($75,000,000.00) and Landlord is required, pursuant to
Section 4.11 of that certain indenture dated March 9, 1995 in favor of
American Bank National Association, as Trustee, to offer to pay off all
outstanding bonds and Landlord does so such that there remains
insufficient funds to rebuild any such affected areas of the
Stratosphere, then Landlord or Tenant shall have the right, upon thirty
(30) days prior written notice to the other party, to terminate this
Lease in which event both parties hereto shall be relieved of any
further obligations accruing under this Lease as of the effective date
of such termination with all Rent being apportioned as of such date.
23.03 RESTORATION; ABATEMENT. If there is a total or partial destruction of
the Premises or any portion of the Stratosphere and this Lease is not
terminated in accordance with the terms hereof, Landlord or Tenant, as
the case may be, shall repair, restore and rebuild those improvements so
effected to as nearly as possible to the condition existing prior to
such destruction which improvements shall be equal in value, aesthetic
appeal and quality to the condition of the improvements before the event
giving rise to such work. Each party shall be responsible for that
portion of the restoration work that such party was obligated to perform
in connection with the initial development thereof. From the date of any
such casualty until the improvements affected thereby are so repaired
and restored, the Annual Minimum Rent and all other Rent payable by
Tenant hereunder (other than taxes as provided in Article 13.02) which
is expressed as a prorata share or a dollar amount per square foot shall
abate in such proportion as the square footage of that part of the
Premises or Stratosphere damaged or rendered untenantable or unusable by
Tenant, its Subtenants, employees and invitees bears to the total square
footage of the Premises or Stratosphere.
23.04 LIMITATION ON LANDLORD'S LIABILITY. Except as specifically provided in
this Article 23, there shall be no reduction of Rent as a result of any
damage by fire or other casualty. Landlord shall have no liability to
Tenant by reason of any injury to or interference with Tenant's business
or property arising from fire or other casualty, howsoever caused, or
from the making of any repairs resulting therefrom in or to any portion
of the Base Building or the Premises unless the same shall be caused by
the negligent act or omission Landlord, its agents, subtenants,
employees or any other person entering under the express or implied
invitation of Landlord. Notwithstanding anything contained herein, Rent
payable by Tenant hereunder shall not be abated if damage is caused by
the negligent act or omission of Tenant, its agents, subtenants,
employees or other person entering the Premises under the express or
implied invitation of Tenant.
23.05 RESTORATION PLANS. Tenant shall submit to Landlord, within sixty (60)
days after such casualty, complete plans and specifications, which shall
be designed to restore the Premises and improvements to as close to the
original plan and elevation thereof as is practical and reasonable or to
such modified plan conforming to laws and regulations then in effect as
shall be first approved in writing by Landlord as provided in Article
8.04. It is understood that if any Sublease shall be terminated pursuant
to its terms because of such casualty, Tenant may at its election
rebuild such modified or substitute building or part thereof as Tenant
shall deem suitable for the then current use of the Premises, subject to
approval by Landlord of the plans therefor as provided herein. Within
twenty (20) days after submission of the plans and/or specifications
pursuant to this Article 23.05, Landlord shall either approve the same
or serve written notice upon Tenant of disapproval thereof and its
objections thereto. In the event of any disapproval or failure to
respond by Landlord, the provisions of Article 8.04 shall apply.
23.06 RESTORATION CONTRACTS. Tenant shall furnish to Landlord a copy of any
contract or contracts which Tenant shall enter into for the making of
such restoration or, if the restoration is to be done by Tenant, a copy
of all subcontracts made by Tenant in connection with such restoration
and an estimate of the cost thereof, both in stages and upon completion,
which shall be certified by the architect of Tenant as being reasonably
accurate.
ARTICLE 24.00 TRANSFERS BY LANDLORD; NON-DISTURBANCE, SUBORDINATION.
24.01 SALE, CONVEYANCE AND ASSIGNMENT. Nothing in this Lease shall restrict
the right of Landlord to sell, convey, assign, mortgage or otherwise
deal with Stratosphere or the Base Building, but any such sale,
conveyance, assignment or mortgage shall be made upon and subject to the
terms and conditions of this Lease.
24.02 EFFECT OF SALE, CONVEYANCE, OR ASSIGNMENT. A sale, conveyance or
assignment of the Stratosphere or the Base Building shall operate to
release Landlord from liability from and after the effective date
thereof upon all of the covenants, terms and conditions of this Lease,
express or implied, except as such may relate to the period prior to
such effective date, and Tenant shall thereafter look solely to
Landlord's successor in interest in and to this Lease with respect to
liability accruing on and after such effective date. Any such successor
shall, as a condition to the release of Landlord from liability
hereunder, assume and agree, in writing, to be bound by the terms,
covenants, conditions and obligations applicable to Landlord hereunder,
and a copy of such instrument shall be delivered to Tenant. This Lease
shall not be affected by any such sale, conveyance or assignment and
Tenant shall attorn to Landlord's successor in interest thereunder.
24.03 SUBORDINATION. This Lease is and shall be subject and subordinate in all
respects to that certain Indenture dated March 9, 1995 in favor of
American Bank National Association as Trustee now encumbering the Base
Building or all or any portion of Stratosphere and to all renewals,
modifications, supplements, consolidations and replacements thereof and
any new financing or further financing by Landlord; provided, however,
that on or before the Delivery Date with respect to the current mortgage
and for each replacement or renewal thereof, Landlord shall deliver to
Tenant a separate instrument in form and content satisfactory to Tenant
and signed by the holder of any mortgage or deed of trust to which this
Lease is subordinate, providing that Tenant's possession of the Premises
(and the Subtenants' possession of any portion of the Premises) shall
not be disturbed upon any foreclosure of such mortgage or deed of trust
so long as Tenant is not in default beyond any applicable grace period
under this Lease. The non-disturbance agreement shall expressly provide
for Landlord's application of casualty and condemnation proceeds as
required by this Lease. The holder of any mortgage or deed of trust
encumbering the Base Building or all or any portion of the Stratosphere
may elect to subordinate, in whole or in part, by an instrument in form
and substance satisfactory to the holder, the mortgage or deed of trust
to this Lease.
In the event that the Leasehold Mortgagee requires Landlord to
subordinate Landlord's interest in this Lease to the lien of a Leasehold
Mortgage, Landlord hereby agrees to so subordinate provided that the
Leasehold Mortgagee provides Landlord with notice of Tenant's default
under the Leasehold Mortgage and the right of Landlord to cure such
default as provided in Article 8.03(d).
24.04 ATTORNMENT. Subject to Article 24.05, if the interest of Landlord is
transferred to any third party person or entity by reason of foreclosure
or other proceedings for enforcement of a mortgage or deed of trust, or
by delivery of a deed in lieu of such foreclosure or other proceedings
(herein called "Purchaser"), Tenant shall immediately and automatically
attorn to Purchaser.
24.05 NONDISTURBANCE. No attornment under Article 24.04 shall be effective
unless and until Purchaser delivers to Tenant a written undertaking, in
a form reasonably satisfactory to Tenant, binding upon Purchaser and
enforceable by and for the benefit of Tenant under applicable law, that
this Lease and Tenant's rights hereunder, and the rights of Subtenants
under Subleases for any portion of the Premises, shall continue
undisturbed while Tenant is not in default beyond any applicable grace
period under this Lease despite such enforcement proceedings and
transfer.
24.06 EFFECT OF ATTORNMENT. Upon attornment under Article 24.04, this Lease
shall continue in full force and effect as a direct lease between
Purchaser and Tenant, upon all of the same terms, conditions and
covenants as are set forth in this Lease except that, after such
attornment, Purchaser shall not be:
(a) bound by any prepayment by Tenant of more than one (1) month's
installment of Rent, or by any previous modification of this
Lease, unless such prepayment or modification shall have been
approved in writing by any mortgagee of Landlord's interest in
Landlord's Parcel or the Base Building, by Purchaser or by any
predecessor in interest except Landlord; or
(b) subject to the obligations of Landlord hereunder except during
the period of Purchaser's ownership of the Base Building or
Landlord's Parcel.
24.07 EXECUTION OF INSTRUMENTS. The subordination, non-disturbance and
attornment provisions of this Article 24.00 shall be self-operating and
(except as specifically required in Articles 24.03 and 24.05) no further
instrument shall be necessary. Nevertheless, Tenant, on request by and
without cost to Landlord or any successor in interest, shall execute and
deliver any and all instruments further evidencing such subordination
and (where applicable hereunder) attornment upon the terms and
conditions set forth herein.
24.08 ATTORNMENT OF SUBTENANTS. In the event of a termination of this Lease
prior to the expiration of the Initial Term or the Extended Term (other
than a termination by reason of condemnation or casualty), Landlord and
Landlord's lender shall agree to recognize the attornment of each
Subtenant who is not in default beyond any applicable grace period under
its Sublease and thereby allow the continuation of such Subtenants'
Sublease in effect on the same terms and conditions as set forth in such
Sublease but as a direct lease with Landlord subject to the payment of
all rentals due thereunder and Subtenant continues to perform each and
every other term and condition of its Sublease. Landlord shall not be
liable, or subject to offset, for any matter accruing prior to the
termination of this Lease, nor shall Landlord be required to recognize
any prepaid rent, security deposits or other items except to the extent
actually received by Landlord.
Tenant agrees that all Subleases shall contain a provision requiring the
Subtenants to subordinate their subleasehold interest in the Premises to
Landlord (or any successor of Landlord) and Landlord's lender (including
any future lenders of Landlord) and attorn to Landlord or Landlord's
lenders provided that Landlord (or any successor of Landlord) and
Landlord's lender (including any future lenders of Landlord) agree to
recognize the rights of the Subtenant in the Premises pursuant to its
Sublease and the same shall not be disturbed provided the Subtenant is
not in default beyond any applicable grace period under its Sublease.
ARTICLE 25.00 NOTICES, ACKNOWLEDGMENTS, AUTHORITIES FOR ACTION
25.01 NOTICES. Any notice from one party to the other hereunder shall be in
writing and shall be deemed duly served if mailed by registered or
certified mail or recognized national overnight courier service
addressed to Tenant at Tenant's Notice Address or to Landlord at
Landlord's Notice Address. Any notice shall be deemed to have been given
at the time of actual receipt or, if mailed, on the date of actual
receipt as shown by the addressee's registry or certification receipt or
at the expiration of the third business day after the date of mailing,
whichever occurs first. Either party shall have the right to designate
by written notice, in the manner above set forth, a different address to
which notices are to be mailed.
25.02 ACKNOWLEDGMENTS. Tenant shall at any time and from time to time upon not
less than ten (10) days prior notice from Landlord execute, acknowledge
and deliver a written statement ratifying this Lease and certifying:
(a) the Completion Date and, if different, the date Tenant opened
for business at the Premises;
(b) that Tenant has accepted possession of the Premises and is
presently open and conducting business with the public in the
Premises;
(c) the amount of Rent and the date that it was first payable;
(d) the amount of Shared Rent payable for the three (3) prior Lease
Years;
(e) that the Lease is in full force and effect and has not been
assigned, modified, supplemented or amended in any way, except
as set forth in the statement, and if true, that neither party
is in default thereunder;
(f) that the Lease, a copy of which shall be attached by Tenant to
such written statement, represents the entire agreement between
the parties as to this leasing;
(g) the date upon which the Initial Term of the Lease expires;
(h) that to Tenant's knowledge on the date of the statement, if
true, there are no existing defenses or offsets which Tenant has
against the enforcement of the Lease by Landlord;
(i) that no Rent has been paid in advance and no security has been
deposited with Landlord except as noted in the statement;
(j) stating the most recent date through which Rent has been paid;
and
(k) written statement listing all Subleases then in effect at the
Premises.
Any such statement may be relied upon by any prospective transferee or
encumbrancer of all or any portion of the Base Building and any assignee
of any such persons.
Landlord shall at any time and from time to time upon not less than ten
(10) days prior notice from Tenant execute, acknowledge and deliver a
written statement ratifying this Lease and certifying:
(a) the Completion Date and the date upon which the Initial Term of
the Lease expires;
(b) that the Lease is in full force and effect and has not been
assigned, modified, supplemented or amended in any way, except
as set forth in the statement, and if true, that neither party
is in default thereunder; and
(c) that the Lease, a copy of which shall be attached by Landlord to
such written statement, represents the entire agreement between
the parties as to this leasing.
Any such statement may be relied upon by any prospective transferee or
prospective Leasehold Mortgagee and any assignee of any such persons.
25.03 AUTHORITIES FOR ACTION. Landlord may act in any matter provided for
herein by its property manager and any other person who shall from time
to time be designated by Landlord by notice to Tenant. Tenant shall
designate in writing one or more persons to act on its behalf in any
matter provided for herein and may from time to time change, by notice
to Landlord, such designation. In the absence of any such designation,
the person or persons executing this Lease for Tenant shall be deemed to
be authorized to act on behalf of Tenant in any matter provided for
herein.
ARTICLE 26.00 DEFAULT AND REMEDIES
26.01 TENANT'S DEFAULT. The occurrence of any of the following shall
constitute an Event of Default by Tenant:
(a) Failure to pay Rent or any other payment required to be made by
Tenant hereunder which failure continues for ten (10) days after
notice from Landlord to Tenant;
(b) Landlord's acquisition or discharge of any Leasehold Mortgage as
provided in Article 8.03(d) and Tenant's failure to timely cure
any default giving rise to such acquisition or discharge;
(c) Failure to obtain or maintain any insurance as required in this
Lease which failure continues for ten (10) days after notice
from Landlord to Tenant;
(d) Abandonment or surrender of the Premises or the leasehold estate
by Tenant which continues for fifteen (15) days after notice
from Landlord to Tenant. If, after commencement of construction,
Tenant leaves the Premises vacant for fifteen (15) consecutive
days, unless caused by Unavoidable Delays, Tenant shall be
presumed to have abandoned the Premises;
(e) The making of a purported assignment by Tenant which is not
permitted herein, unless such purported assignment is rescinded
by Tenant and the purported assignee is removed from the
Premises within twenty (20) days after notice from Landlord to
Tenant;
(f) If, after commencement of construction of the Premises, such
work shall substantially abate for a period of thirty (30) days
after written notice from Landlord to Tenant unless such
abatement is caused by Unavoidable Delays;
(g) If, unless caused by Unavoidable Delays, the Premises has not
been fully enclosed and/or the Premises Common Areas are not
substantially completed and open for use by the public as
provided herein on or before the Completion Date;
(h) Failure to perform any other express or implied covenants or
provisions of this Lease or any warranty contained herein or
therein, if the failure to perform is not cured within thirty
(30) days after written notice from Landlord to Tenant. If the
default cannot reasonably be cured within thirty (30) days, then
an Event of Default shall not exist if Tenant commences to cure
the default within the thirty (30) day period and thereafter
diligently and in good faith prosecutes the same to completion;
(i) Failure to provide Landlord with receipts evidencing Tenants
payment of taxes in accordance with Article 13.02 which failure
continues for ten (10) days after notice from Landlord to
Tenant;
(j) The subjection of any right or interest to attachment,
execution, order, levy, or to seizure under legal process, if
not released within ninety (90) days, except that foreclosure by
any Leasehold Mortgagee entitled to receive notice under the
provisions of Article 8 shall not be construed as an Event of
Default within the meaning of this Article. Should Tenant not
commence a contest of any such attachment, execution, order,
levy or seizure within twenty (20) days or should Tenant
thereafter fail to diligently and in good faith prosecute such
contest of any such attachment, execution, order, levy or
seizure, such failure shall immediately constitute an Event of
Default without regard to the ninety (90) day cure period.
(k) a) In the event a petition is filed by or against Tenant
under the Bankruptcy Code, Tenant, as debtor and debtor
in possession, and any trustee who may be appointed,
agree to adequately protect Landlord as follows:
(i) to pay monthly in advance on the first day of
each month as reasonable compensation for use
and occupancy of the Premises an amount equal to
all Rent due pursuant to this Lease; and
(ii) to perform each and every obligation of Tenant
under this Lease and each Sublease until such
time as this Lease is either rejected or assumed
by order of a court of competent jurisdiction;
and
(iii) to determine within sixty (60) days after the
filing of such petition whether to assume or
reject this Lease; and
(iv) to give Landlord at least thirty (30) days prior
written notice, unless a shorter notice period
is agreed to in writing by the parties, of any
proceeding relating to any assumption of this
Lease; and
(v) to give at least thirty (30) days prior written
notice of any vacation or abandonment of the
Premises, any such vacation or abandonment to be
deemed a rejection of this Lease; and
(vi) to do all other things of benefit to Landlord
otherwise required under the Bankruptcy Code.
Tenant shall be deemed to have rejected this Lease in the event
of the failure to comply with any of the above.
b) If Tenant or a trustee elects to assume this Lease
subsequent to the filing of a petition under the
Bankruptcy Code, Tenant, as debtor and as debtor in
possession, and any trustee who may be appointed agree
as follows:
(i) to cure each and every existing breach by Tenant
within not more than ninety (90) days of
assumption of this Lease; and
(ii) to compensate Landlord for any actual pecuniary
loss resulting from any existing breach
including, without limitation, Landlord's
reasonable costs, expenses and attorney's fees
incurred as a result of the breach, as
determined by a court of competent jurisdiction,
within ninety (90) days of assumption of this
Lease; and
(iii) in the event of an existing breach, to provide
adequate assurance of Tenant's future
performance as may be required under any
applicable provision of the Bankruptcy Code
including, without limitation:
(A) the deposit of an additional sum equal
to three (3) months Rent to be held
(without any allowance of interest
thereon) to secure Tenant's obligations
under the Lease; and
(B) the delivery to Landlord of written
documentation establishing that Tenant
has sufficient present and anticipated
financial ability to perform each and
every obligation of Tenant under this
Lease and each Sublease; and
(C) assurances, in form acceptable to
Landlord, as may be required under any
applicable provision of the Bankruptcy
Code.
(iv) the assumption will not breach any provision of
this Lease; and
(v) the assumption will be subject to all of the
provisions of this Lease unless the prior
written consent of Landlord, which may be
granted or denied in Landlord's absolute
discretion, is obtained; and
(vi) the prior written consent to the assumption of
any Leasehold Mortgagee to which this Lease has
been assigned as collateral security is
obtained.
c) If Tenant assumes this Lease and proposes to assign the
same pursuant to the provisions of the Bankruptcy Code
to any person or entity who shall have made a bona fide
offer to accept any assignment of this Lease on terms
acceptable to Tenant, then Tenant shall send Landlord
written notice of such proposed assignment setting
forth:
(i) the name and address of such person;
(ii) all the terms and conditions of such offer; and
(iii) the adequate assurance to be provided Landlord
to assure such person's future performance under
the Lease including, without limitation, the
assurances referred to in any applicable
provision of the Bankruptcy Code, shall be given
to Landlord by Tenant no later than twenty (20)
days after receipt of such offer by Tenant, but
in any event no later than ten (10) days prior
to the date that Tenant shall make application
to a court of competent jurisdiction for
authority and approval to enter into such
assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be
exercised by notice to Tenant given at any time
prior to the effective date of such proposed
assignment, to accept an assignment of this
Lease upon the same terms and conditions and for
the same consideration, if any, as the bona fide
offer made by such person, less any brokerage
commissions which may be payable out of the
consideration to be paid by such person for the
assignment of this Lease. The adequate assurance
to be provided Landlord to assure the assignee's
future performance under the Lease shall
include, without limitation:
(A) the deposit of a sum equal to three (3)
month's Rent to be held (without any
allowance for interest thereon) as
security for performance hereunder; and
(B) a written demonstration that the
assignee meets all reasonable financial
and other criteria of Landlord as did
Tenant and its business at the time of
execution of this Lease, including the
production of the most recent audited
financial statement of the assignee
prepared by a certified public
accountant; and
(C) the assignee's use of the Premises will
be in compliance with the terms of
Article 6.00 of this Lease; and
(D) assurances, in form acceptable to
Landlord, as to all matters identified
in any applicable provision of the
Bankruptcy Code.
(l) The appointment of a receiver, unless, in the case of an
involuntary proceeding, Tenant commences a contest thereof
within twenty (20) days, Tenant diligently and in good faith
prosecutes such contest and such receivership is terminated
within ninety (90) days after the appointment of the receiver,
to take possession of Tenant's interest in the Premises or of
Tenant's interest in the leasehold estate or of Tenant's
operations on the Premises for any reason including, but not
limited to, assignment for benefit of creditors or voluntary or
involuntary bankruptcy proceedings, but not including
receivership (a) pursuant to administration of the estate of any
deceased or incompetent Tenant or of any deceased or incompetent
individual member or partner of Tenant or (b) pursuant to any
Leasehold Mortgage to a Leasehold Mortgagee on Tenant's estate
in the Premises, or (c) instituted by Landlord, the Event of
Default being not the appointment of a receiver at Landlord's
instance but the event justifying the receivership.
The provisions of this Article 26.01 shall be subject to the
rights of any Leasehold Mortgagee as provided in Article 8.03. A
duplicate copy of any notice required to be given by Landlord to
Tenant hereunder shall be sent simultaneously to the Leasehold
Mortgagee.
In the event that Tenant defaults under this Lease prior to
opening the Premises for business, Tenant shall deliver the
rights to and copies of all plans, specifications, letters of
intent, correspondence, contracts, contacts for potential
Subtenants and all other information of Tenant relating to the
Premises to Landlord.
26.02 REMEDIES. If any one or more Events of Default occur, Landlord may,
subject to the rights of any Leasehold Mortgagee as provided in Article
8.03, immediately or at any time thereafter exercise any of the
following remedies or any other remedy conferred upon Landlord by law or
this Lease:
(a) Landlord shall have the immediate right to re-enter the Premises
and dispossess Tenant and remove and dispose of all property
therein without Landlord being guilty of trespass or becoming
liable for loss or damage of said property. No such re-entry of
the Premises shall be construed as an election on its part to
terminate this Lease;
(b) If an Event of Default shall have occurred and be continuing,
Landlord shall have the right, at its option, to terminate this
Lease by giving Tenant thirty (30) days written notice of
termination and upon expiration of said thirty (30) days, this
Lease and the term thereof shall end and expire, unless Landlord
shall have elected to re-enter the Premises, Landlord shall have
the immediate right of re-entry and thereupon Tenant shall quit
and surrender the Premises to Landlord but Tenant shall remain
liable to Landlord as further provided in this Article 26.00; or
(c) Landlord shall have the right, but not the obligation, to re-let
the Premises for such terms and for such uses as Landlord may
determine in its reasonable discretion. Any Rent received shall
be applied against Tenant's obligations hereunder (whether or
not this Lease has been terminated).
26.03 INTEREST AND COSTS. If Tenant does not pay any Rent required to be paid
under this Lease within ten (10) days following its due date, Tenant
shall pay monthly to Landlord interest at the Prime Rate on such Rent
from the due date for payment thereof until the same is fully paid and
satisfied. Tenant shall indemnify Landlord against all costs and charges
(including attorney fees) incurred in enforcing payment thereof, and in
obtaining possession of the Premises after default of Tenant or upon
expiration or other termination of the term of this Lease, or in
enforcing any covenant, provision or agreement of Tenant herein
contained.
26.04 PERFORMANCE OF COVENANTS. All covenants and agreements to be performed
by Tenant under any of the terms of this Lease shall be performed by
Tenant, at Tenant's sole cost and expense, and without any abatement of
Rent other than as expressly provided herein. If Tenant shall fail to
perform any act on its part to be performed hereunder, and such failure
constitutes an Event of Default, Landlord may (but shall not be
obligated to) perform such act without waiving or releasing Tenant from
any of its obligations relative thereto. All sums paid or costs incurred
by Landlord in so performing such acts, together with interest at the
Prime Rate from the date of such payment was made or each such cost was
incurred by Landlord, shall be payable by Tenant to Landlord on demand.
26.05 PAYMENTS. In the event of re-entry as provided for in Article 26.02(a),
or termination as provided for in Article 26.02(b) or otherwise and
except as provided in Article 26.06 below, Tenant shall pay to Landlord
on demand:
(a) Rent up to the time of re-entry or termination, whichever shall
be the later, plus accelerated rent as provided in Article
26.05(c) below;
(b) all expenses incurred by Landlord in performing any of Tenant's
obligations under this Lease, re-entering or terminating and
re-letting, collecting sums due or payable by Tenant, realizing
upon assets seized (including brokerage, legal fees and
disbursements), and the expense of keeping the Premises in good
order, repairing the same and preparing them for re-letting; and
(c) as damages for the loss of income of Landlord expected to be
derived from the Premises, the amounts (if any) by which the
Rent which would have been payable under this Lease exceeds the
payments (if any) received by Landlord from Subtenants and other
tenants in the Premises, payable on the first day of each month
during the period which would have constituted the unexpired
portion of the term had it not been terminated, or if elected by
Landlord by notice to Tenant at or after re-entry or
termination, a lump sum amount equal to the Rent which would
have been payable under this Lease from the date of such
election during the period which would have constituted the
unexpired portion of the term had it not been terminated,
reduced by the rental value of the Premises for the same period
(which shall include payments anticipated to be received from
Subtenants), established by reference to the terms and
conditions upon which Landlord re-lets them if such re-letting
is accomplished within a reasonable period after termination,
and otherwise established by reference to all market and other
relevant circumstances; Rent and rental value being reduced to
present worth at an assumed interest rate equal to the discount
rate of Citibank, N.A. ("Prime Rate") plus two percent (2%) on
the basis of Landlord's estimates.
26.06 TERMINATION FOR FAILURE TO COMMENCE CONSTRUCTION. Landlord shall have
the right to terminate this Lease for Tenant's failure to commence
construction of Tenant's Development Obligations when required
hereunder, and in the event of such termination, neither party shall
have any further liability hereunder except that Tenant shall comply
with the provisions of Article 26.01 with respect to the delivery to
Landlord of the rights to and copies of all plans, specifications,
letters of intent, correspondence, contracts, contacts and other
information.
26.07 REMEDIES CUMULATIVE. No reference to nor exercise of any specific remedy
by Landlord shall prejudice or preclude Landlord from exercising or
invoking any other remedy in respect thereof, whether allowed at law or
in equity or expressly provided for herein. No such remedy shall be
exclusive or dependent upon any other such remedy, but Landlord may from
time to time exercise any one or more of such remedies independently or
in combination.
26.08 WAIVER OF REDEMPTION. Tenant hereby waives any and all rights of
redemption granted by or under any present or future laws in the event
of Tenant being evicted or dispossessed for any cause, or in the event
of Landlord obtaining possession of the Premises by reason of the
violation by Tenant of any of the terms or conditions of this Lease or
otherwise.
26.09 TENANT'S RIGHT TO CURE LANDLORD DEFAULT. In the event Landlord fails to
conform or comply with any term, covenant or condition contained in this
Lease to be performed or complied with by Landlord, Tenant shall, prior
to exercising any remedies hereunder, give to Landlord and to any
mortgagee of Landlord of which Tenant has notice, written notice of
Landlord's default which shall provide that Landlord shall cure such
default within twenty (20) days from the date of such notice; provided,
however, that in the event of an emergency, Tenant shall give such time
to cure the default as is reasonable under the circumstances, but in no
event less than two (2) days. With respect to any such default, if
Landlord shall commence its cure within the period specified in Tenant's
notice, Landlord shall be entitled to such additional cure period as may
be reasonably required in the exercise of due diligence and endeavoring
to cure such default. Any mortgagee of Landlord shall have the right and
period of time in which to cure or commence to cure any Landlord default
as set forth herein. If Landlord fails to cure any default hereunder
beyond any applicable grace period Tenant may, but shall not be required
to, make such payment or do such act as may be necessary to cure such
default, in which event any costs, fees or expenses incurred by Tenant
in connection with such cure shall be immediately due and payable by
Landlord to Tenant and if not paid by Landlord to Tenant within twenty
(20) days after notice to Tenant, such sum, together with interest
thereon at the Prime Rate plus one percent (1%) may be deducted by
Tenant from the next installment of Annual Minimum Rent or Shared Rent
payable to Landlord hereunder. No reference to nor exercise of any
specific remedy by Tenant shall prejudice or preclude Tenant from
exercising or invoking any other remedy in respect thereof, whether
allowed at law or in equity or expressed or provided for herein.
ARTICLE 27.00 APPRAISAL
27.01 APPRAISAL. Where the terms of this Lease provide for a determination of
Rent by appraisal and the parties hereto are unable to agree upon such
Rent, then, and in any such event, at the request of either party such
Rent shall be determined by Appraisal by three (3) reputable real estate
appraisers, each of whom shall be a Member of the American Institute of
Real Estate Appraisers with the designation of "MAI" and shall have no
"disqualifying interest" (as hereinafter defined). One (1) appraiser
shall be appointed by Tenant or its representative and the second
appraiser shall be appointed by Landlord or its representative. The
third appraiser shall be appointed by the first two (2) appraisers. If
the first two (2) appraisers are unable to agree on a third appraiser
within thirty (30) days after the appointment of the second appraiser,
or if either party refuses or neglects to appoint an appraiser as herein
provided within twenty (20) days after the appointment of the first
appraiser, then such third appraiser or such second appraiser whose
appointment was not made as aforesaid shall be appointed by the then
President of the Nevada chapter of the American Institute of Real Estate
Appraisers or such successor body hereafter constituted exercising
similar functions, unless such President shall have a direct or indirect
financial or other business interest in or in common with any of the
parties hereto (herein referred to as a "disqualifying interest"), in
which case the third appraiser or such second appraiser whose
appointment was not made as aforesaid shall be appointed by the then
next highest ranking officer of the Nevada chapter of the American
Institute of Real Estate Appraisers or such successor body who shall not
have a disqualifying interest. If the determinations of at least two (2)
of the appraisers shall be identical in amount, said amount shall be
deemed to be the Rent. If the determinations of at least two (2) of the
appraisers shall not be identical in amount, the Rent shall be
determined as follows (a) if neither the highest nor the lowest
determination of Rent differs from the middle determination of Rent by
more than ten percent (10%) of such middle determination of Rent, then
the Rent shall be the average of all three (3) determinations of Rent,
and (b) if clause (a) does not apply, the Rent shall be the average of
the middle determination of Rent and the determination of Rent closest
in amount to said middle determination of Rent. The foregoing
determination of Rent shall in all cases be final, binding and
conclusive upon the parties. Each party shall pay the fees and expenses
of the one of the two (2) original appraisers appointed by such party,
or in whose stead as above provided such appraiser was appointed, and
the fees and expenses of the third appraiser shall be borne equally by
both parties. Except as otherwise provided in this Lease, the Appraisal
shall be conducted in accordance with the Commercial Arbitration Rules
then obtaining of the American Arbitration Association (including for
appointment of appraisers if the foregoing procedures for any reason
fail), and judgment upon any Appraisal decision rendered may be entered
by any court having jurisdiction thereof.
27.02 PAYMENT AND ADJUSTMENT. Pending determination of the Rent by Appraisal
as provided above, payment shall be in accordance with the provisions of
this Lease in effect as of the last day of the Initial Term, and if the
Appraisal determination indicates that a greater or lesser amount should
have been paid than that which actually was paid, a proper adjustment,
including interest on such adjustment at the Prime Rate from time to
time during the period from and after the date of Tenant's payment to
the date of adjustment based upon the determination of Rent shall be
made between the parties hereto within twenty (20) days after such
determination is made.
ARTICLE 28.00 MISCELLANEOUS
28.01 CONSENT NOT UNREASONABLY WITHHELD. Except as otherwise specifically
provided whenever consent or approval of Landlord or Tenant is required
under the terms of this Lease, such consent or approval shall not be
unreasonably withheld or delayed.
28.02 APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and
construed under the laws of the jurisdiction of the State of Nevada, and
its provisions shall be construed as a whole according to their common
meaning and not strictly for or against Landlord or Tenant. The words
"Landlord" and "Tenant" shall include the plural as well as the
singular. If this Lease is executed by more than one tenant, Tenant's
obligations hereunder shall be joint and several obligations of such
executing tenants. Time is of the essence of this Lease and each of its
provisions. The captions of the Articles are included for convenience
only, and shall have no effect upon the construction or interpretation
of this Lease.
28.03 ENTIRE AGREEMENT. This Lease contains the entire agreement between the
parties hereto with respect to the subject matter of this Lease. Tenant
acknowledges and agrees that it has not relied upon any statement,
representation, agreement or warranty except such as are set out in this
Lease.
28.04 AMENDMENT OR MODIFICATION. Unless otherwise specifically provided in
this Lease, no amendment, modification, or supplement to this Lease
shall be valid or binding unless set out in writing and executed by the
parties hereto in the same manner as the execution of this Lease.
28.05 CONSTRUED COVENANTS AND SEVERABILITY. All of the provisions of this
Lease are to be construed as covenants and agreements as though the
words importing such covenants and agreements were used in each separate
Article hereof. Should any provision of this Lease be or become invalid,
void, illegal or not enforceable it shall be considered separate and
severable from the Lease and the remaining provisions shall remain in
force and be binding upon the parties hereto as though such provision
had not been included.
28.06 NO IMPLIED SURRENDER OR WAIVER. No provisions of this Lease shall be
deemed to have been waived by Landlord unless such waiver is in writing
signed by Landlord. Landlord's waiver of a breach of any term or
condition of this Lease shall not prevent a subsequent act, which would
have originally constituted a breach, from having all the force and
effect of any original breach. Landlord's receipt of Rent with knowledge
of a breach by Tenant of any term or condition of this Lease shall not
be deemed a waiver of such breach. Landlord's failure to enforce against
Tenant or any other tenant in the Base Building any of the rules and
regulations made under Article 21.00 shall not be deemed a waiver of
such rules and regulations. No act or thing done by Landlord, its agents
or employees during the term shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept a surrender of the
Premises shall be valid, unless in writing signed by Landlord. The
delivery of keys to any of Landlord's agents or employees shall not
operate as a termination of this Lease or a surrender of the Premises.
No payment by Tenant, or receipt by Landlord, of a lesser amount than
the Rent due hereunder shall be deemed to be other than on account of
the earliest stipulated Rent, 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, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of
such Rent or pursue any other remedy available to Landlord.
28.07 COUNTERPARTS. This Lease may be executed in two or more counterparts,
each of which shall be an original but one of which shall constitute one
and the same instrument.
28.08 SUCCESSORS BOUND. Except as otherwise specifically provided, the
covenants, terms and conditions contained in this Lease shall apply to
and bind the heirs, successors, executors, administrators and assigns of
the parties hereto.
28.09 UNAVOIDABLE DELAY. As used in this Lease, "Unavoidable Delay" means
fire, explosion and other casualties; war, invasion, insurrection, riot,
sabotage, and malicious mischief; strikes, work stoppages or slowdowns
and lockouts; condemnation; rules, regulations or orders of civil or
military or naval authorities adopted after the date hereof;
impossibility of or delay in obtaining materials or reasonable
substitutes from suppliers for reasons other than unavailability of
funds; or any other cause, the occurrence of which, or the extent and
duration of the occurrence of which, is not within the reasonable
control of the party in question. The party claiming the benefit of any
Unavoidable Delay must give the other party written notice thereof not
more than five (5) business days after the occurrence of the event
creating the Unavoidable Delay. Further, an Unavoidable Delay shall
exist only for the period in which it is not within the reasonable
control of the party in question to prevent, control or correct such
event. Except as otherwise provided in this Lease, (a) if Landlord or
Tenant shall, due to Unavoidable Delay, fail punctually to perform any
obligation on its part to be performed under this Lease, then such
failure shall be excused and not be a breach of this Lease by the party
in question, but only to the extent caused by Unavoidable Delay; or (b)
if any right or option of either party to take any action under or with
respect to this Lease is conditioned upon the same being exercised
within any prescribed period of time or some specified date, then such
prescribed period of time and such specified date shall be deemed to be
extended or delayed, as the case may be, for a period equal to the
period of Unavoidable Delay. Notwithstanding the foregoing, Unavoidable
Delay shall not be applicable to determining the date of commencement
of, or the continuance of, Tenant's obligation to pay Rent or its
obligations to pay any other sums, moneys, costs, charges or expenses
required to be paid by Tenant hereunder (except where Tenant's
Development Obligations are thereby delayed beyond the Development
Period in which case, such Unavoidable Delay shall be applicable in
determining Tenant's obligation to commence paying Rent) or to the date
by which Tenant must exercise any right or option under this Lease
including, without limitation, to terminate this Lease or to extend the
term.
IN WITNESS OF THIS LEASE, Landlord and Tenant have properly executed it
as of the date set out on page one.
LANDLORD: STRATOSPHERE CORPORATION, a Delaware
corporation
By:_________________________________________
Title:___________________________________
TENANT: STRATO-RETAIL, LLC, a Nevada limited
liability company
By: SIMON PROPERTY GROUP, L.P., a
Delaware limited partnership d/b/a Simon
Real Estate Limited Partnership, a
Member
By: SIMON PROPERTY GROUP, INC., a
Maryland corporation, its general
partner
By: _______________________________
Its:___________________________
By: GB SCHMECK, LLC, a Nevada limited
liability company, a Member
By: _______________________________
Its:___________________________
Actual date of Tenant's execution:
March_____, 1996.
EXHIBITS
A Base Building Criteria
B Plot Plan depicting Stratosphere, Premises (Phase I and Phase II),
Common Areas, Expansion Space, Attraction and Parking Facility
C Lease Plan depicting Premises, Landlord's Designated Spaces, and Third
Party Designated Spaces
D Legal Description of Landlord Parcel
E Building Shell Criteria
F Permitted Encumbrances
G Tenant's Development Obligation Agreement
H List of Preapproved Subtenants
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-31-1996
<CASH> 49,418
<SECURITIES> 0
<RECEIVABLES> 9,528
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 62,775
<PP&E> 320,065
<DEPRECIATION> 0
<TOTAL-ASSETS> 468,755
<CURRENT-LIABILITIES> 53,447
<BONDS> 203,000
0
0
<COMMON> 583
<OTHER-SE> 211,725
<TOTAL-LIABILITY-AND-EQUITY> 468,755
<SALES> 0
<TOTAL-REVENUES> 2,377
<CGS> 0
<TOTAL-COSTS> 382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 344
<INCOME-PRETAX> 1,995
<INCOME-TAX> 79
<INCOME-CONTINUING> 1,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,916
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
