Exhibit 10.1
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into effective as of
the ________ day of _________________________, 2000, by and between WMF
INVESTMENTS, INC., a Texas corporation, (the "Landlord") whose address is 16815
Royal Crest Drive, Suite 260, Houston, Texas 77058, and RCI ENTERTAINMENT
(HOUSTON), INC., a Texas corporation (the "Tenant" or "RCI"), whose address is
505 North Belt Drive, Suite 630 Houston, Texas 77060.
Subject to all of the terms and conditions of this Lease, and in
consideration of the mutual covenants, obligations and agreements contained in
this Lease, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:
ARTICLE I LEASED PREMISES
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Landlord does hereby lease, demise and let to Tenant and Tenant does hereby
lease and take from Landlord those certain premises situated within the County
of Harris, State of Texas, and being more particularly described as Lot ________
Block ____ of ________, a subdivision in ____ County, Texas more commonly known
as 15301 Gulf Freeway, Houston, Harris County, Texas 77034, together with all
rights, privileges, easements, appurtenances, and immunities belonging to or in
any way pertaining to said premises and together with the improvements erected
upon said premises (collectively, the "Leased Premises").
ARTICLE II TERM
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The initial term of this Lease ("Term") shall be for a period of ten (10)
years, commencing on the completion of ALL of the following events (the
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"Commencement Date"):
(i) The execution, delivery and performance of that certain
Definitive Asset Purchase Agreement between RCI, and
Landlord whereby RCI will purchase the business of Landlord;
(ii) The execution, delivery and performance of that certain
additional agreement whereby Rick's Cabaret International,
Inc. ("Rick's") and Landlord will enter into a Registration
Rights Agreement pursuant to which Rick's will grant
Landlord "piggyback" registration rights for 160,000 shares
of Rick's;
(iii) The execution, delivery and performance of that certain
Lock-Up Agreement pursuant to which Landlord will agree that
subsequent to the effective date of any Registration
Statement, which may be filed pursuant to the "piggyback"
registration rights, that Landlord will not sell more than
20,000 shares of Rick's common stock during any calendar
month;
(iv) The execution, delivery and performance of that certain
Management Agreement whereby RCI will enter into a
Management Agreement to manage the Chesapeake Bay
Gentlemen's Club during the period of time from the
execution of the Definitive Asset Purchase Agreement until
RCI has been issued the required liquor license by the Texas
Alcoholic Beverage Commission ("TABC");
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(v) RCI shall have obtained or been transferred from Landlord
all necessary permits and other authorizations which may be
needed to conduct topless entertainment at the Chesapeake
Bay Gentlemen's Club;
(vi) RCI shall have obtained a liquor license duly issued and
approved by the TABC which will allow for the sale of liquor
by the Purchaser;
(vii) Landlord shall have assigned its rights under the
existing lawsuit with the City of Houston and RCI shall have
been substituted in as a party to such litigation;
(viii) The execution, delivery and performance of this Lease;
(ix) Approval of all of the aforesaid transactions by the
Board of Directors of each of the respective parties hereto;
and shall continue in full force and effect until ten years after the
Commencement Date, unless extended or sooner terminated as provided for in this
Lease. If Landlord is unable to deliver possession of the Leased Premises to
Tenant as of the Commencement Date for any reason, including without limitation
the holding over of any tenant or occupant of the Leased Premises, then the term
"Commencement Date" shall mean such subsequent date upon which the Landlord is
able to deliver possession of the Leased Premises to Tenant.
ARTICLE III RENT
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Section 3.1 RENTAL . Tenant shall pay to Landlord as rental ("Rental")
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for each month during the Initial Term and Option Term(s) of this Lease (as that
term is defined below), no less than the Minimum Rent and no more than the
Maximum Rent (as those terms are defined below)
Tenant shall pay to Landlord as Rental for each month during the Initial
Term, the sum of $12,000 per month, plus 4% of the gross revenues of the Tenant
over $125,000 per month (excluding any dancer payments) with an initial minimum
rent of $12,000 and an initial maximum rent of $20,000. The minimum rent shall
increase during the Initial Term and any option term commencing in year four and
thereafter in years seven and ten and if the option term is exercised as
provided for herein, in years 13, 16 and 19, by $2,000 and the maximum rental
obligation shall likewise be increased commencing in year four and every three
years thereafter by $2,000. The initial Rental payment during the Initial Term
shall be due and payable on the Commencement Date and the Rental for each and
every month thereafter during the Term of this lease shall be due and payable in
advance on the first (1st) day of each month. If this lease commences on a date
other than the 1st day of the month, then the Rental shall be pro rated for the
balance of the month and paid in advance. In the event that Tenant fails to pay
Rent within five (5) days after the due date thereof, there shall be a late fee
due from Tenant in the amount of 10%.
Section 3.2 DEFINITION OF LEASE YEAR . The first lease year ("Lease
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Year") shall be considered to begin on the Commencement Date, and each
subsequent Lease Year if any shall be considered to begin on the applicable
anniversary date of the Commencement Date.
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Section 3.3 TENANT'S PAYMENT OF TAXES AND INSURANCE. In addition to
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the payment of Rental, Tenant shall pay to the Landlord each month during the
term of this Lease at the same time as the Tenant pays Rental as provided in
Section 3.1, $2,971, which the Landlord agrees to escrow each month, for the
payment of Real Property Taxes (subject to adjustment for any increase or
decrease in Real Property Taxes from year to year) as and when required under
Article V of this Lease and all of the insurance maintained by Landlord as and
when required under Section 9.3 of this Lease.
Section 3.4 ADDITIONAL RENTAL; PAYMENTS . All sums of money becoming
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due and payable by Tenant to Landlord under the terms of this Lease in addition
to the Rental, including without limitation Property Taxes and insurance as
provided in Section 3.3 of this Lease, shall constitute additional rental
("Additional Rental") hereunder (the Rental and the Additional Rental are
hereinafter sometimes collectively referred to as the "Rent"). Landlord shall
have the same remedies for default in the payment of Additional Rental as are
available to Landlord in the case of a default in the payment of Rental. All
Rent shall be payable at Landlord's address as provided herein (or at such other
address as may be designated by Landlord from time to time) and shall be payable
in lawful money of the United States of America. Tenant shall pay all Rent and
other sums of money as shall become due from and payable by Tenant to Landlord
under this Lease at the times and in the manner herein provided, without
deduction, offset, counterclaim, abatement, prior notice or demand.
Section 3.5 ACCOUNTING. The Tenant shall maintain a comprehensive
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system of records, books and accounts regarding the operation of the leased
premises. All records shall be subject to examination by the Landlord, or its
authorized agents, attorneys and accountants at all reasonable hours. No later
than the twentieth (20th) day of each month, with respect to the preceding
month, the Tenant shall render a statement of receipts and disbursements, a
schedules of accounts receivable and payable, together with a reconciled bank
statement as of the last day of the month.
ARTICLE IV NON-COMPLIANCE WITH OR VIOLATION OF SEXUALLY ORIENTED BUSINESS LAW
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In the event that the Leased Premises, in the sole determination of the Tenant,
is out of compliance with or in violation of, any present or future sexually
oriented business law, regulation or rule that results in the Tenant closing the
business to the public or results in a change of operation of the business in a
manner that adversely affects the Tenant, unless the closure of the business by
the Tenant was the result of its gross negligence or willful misconduct in
maintaining compliance with present of future sexually oriented business laws or
regulations, then the Tenant may, at its sole option and at any time thereafter
during the term of this Lease, terminate this Lease upon thirty (30) days
written notice to the Landlord. In the event of a termination of the Lease
pursuant to the terms and conditions of this Article IV, then the Tenant agrees
to pay the Landlord a $60,000 reletting fee.
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ARTICLE V
TAXES
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Section 5.1 REAL PROPERTY TAXES. The term "Real Property Taxes" for
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the purposes of this Lease shall mean all general and special taxes, and all
other general and special, ordinary and extraordinary, governmental charges
assessed, levied, charged, or imposed upon or attributable to the Leased
Premises during the Term of this Lease, or any holdover or renewal period, by
any political or governmental body or other authority, or subdivision thereof,
having jurisdiction over the Leased Premises; excluding, however, franchise,
estate, inheritance, succession, capital levy, transfer, income or excess
profits taxes imposed upon Landlord, and excluding the taxes on Tenant's
Property described in Section 5.2(c) of this Lease. In the event that any
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political or governmental body or other authority, or subdivision thereof,
having jurisdiction over the Leased Premises imposes a tax, assessment,
imposition, or charge either upon or against or measured by the rentals payable
by Tenant to Landlord or upon or against the occupation of renting land and/or
buildings, either by way of substitution for the taxes and assessments levied
against the Leased Premises or in addition thereto, such tax, assessment, or
charge shall be deemed to constitute a Property Tax for purposes of this Lease.
Section 5.2 PAYMENT OF TAXES.
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(a) Landlord shall pay before the Real Property Taxes become
delinquent, all Real Property Taxes levied or assessed against the Leased
Premises during each calendar year of the Term and the Renewal Term (hereinafter
defined), if any, of this Lease.
(b) Tenant shall pay to the Landlord $2,971 each month during the term
of this Lease at the same time as the Tenant pays Rental as provided in Section
3.1, which the Landlord agrees to escrow each month, for the payment of Real
Property Taxes, subject to adjustment for any increase or decrease in Real
Property Taxes from year to year.
(c) Tenant shall pay all ad valorem and other personal property taxes,
assessments, impositions or charges levied upon or applicable to any of Tenant's
goods, equipment, wares, fixtures, Trade Fixtures (hereinafter defined),
furniture, furnishings, machinery and other property (personal or otherwise) now
or hereafter placed in, upon or about the Leased Premises (collectively
"Tenant's Property") and all license and other fees or charges imposed on the
business conducted by Tenant on the Leased Premises before such taxes,
assessments, charges, licenses or fees become delinquent and shall provide
Landlord with paid tax receipts.
(d) Upon request by Tenant, Landlord will furnish Tenant annually
official tax receipts and other official receipts showing payment of all
property, assessments, fees and charges. The payment to be made by Tenant for
the year in which this Lease commences and terminates shall bear the same ratio
to the payment which would be required to be made for the full tax year as the
number of months of such tax year which elapsed after commencement or prior to
termination of this Lease, whichever is applicable, bears to a full tax year.
Upon request by Tenant, Landlord shall furnish to Tenant all tax statements from
all taxing authorities within ten (10) days of Landlord receiving such tax
statements.
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ARTICLE VI USE; PEACEFUL ENJOYMENT; LIGHT, AIR AND VIEW
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Section 6.1 USE. Tenant shall use and be permitted to use the Leased
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Premises for any lawful purpose, including the operation of an adult
entertainment business. Tenant shall keep the Leased Premises open for business
for such permitted use during normal business hours with adequate staff and
inventories. In connection with its use of and activities in, upon or about the
Leased Premises, Tenant, at its sole expense, will comply, and will cause
Tenant's Agents (hereinafter defined) to comply, with any and all applicable
laws, statutes, ordinances, permits, orders, decrees, guidelines, rules and
regulations in any way applicable to Tenant, Tenant's Property or the Leased
Premises (collectively, "Legal Requirements" and individually, "Legal
Requirement"). Tenant will not (a) use, occupy or permit the use or occupancy of
the Leased Premises for any purpose or in any manner which is not permitted
hereunder or which is nor may be, directly or indirectly, violative of any Legal
Requirement, or dangerous to life or property, or a public or private nuisance,
or disruptive or obstructive of any neighbor of the Leased Premises or
disruptive of the quiet enjoyment of any neighbor of the Leased Premises, (b)
keep, or permit to be kept, any substance in or conduct, or permit to be
conducted, any operation from the Leased Premises which might emit offensive or
hazardous odors or conditions onto, about or into the Leased Premises or the
property located outside the Leased Premises, or possess, or allow possession
of, illicit drugs, drug paraphernalia or contraband on the Leased Premises, or
commit, permit, or suffer to exist any act or omission affording the federal
government, or any state or local governmental agency, the right of forfeiture
as against the Leased Premises, or any part thereof, (c) cause, commit or permit
to remain any waste or damage to the Leased Premises, or any conditions which
adversely impair in the Landlord's reasonable judgment the value or
marketability of the Leased Premises, (d) install or permit to remain any
improvements to the Leased Premises (other than improvements which have first
been approved by Landlord) which are visible from the outside of the Leased
Premises, or exceed the structural loads of floors or walls of the Building, or
adversely affect the mechanical, plumbing or electrical systems of the Building
or affect the structural integrity thereof in any way, (e) commit, or permit to
be committed, any action or circumstance in, upon or about the Leased Premises
which, directly or indirectly, would justify any insurance carrier in canceling
or increasing the premium on any insurance policy covering the Leased Premises
or its contents, and if any increase so results, Tenant shall pay such increase
upon the Landlord's demand, or (f) store, land, replace, or permit to be stored,
landed or placed upon the Leased Premises, any helicopter, airplane or other
type of aircraft.
Section 6.2 PEACEFUL ENJOYMENT . Landlord covenants that Tenant shall
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and may peacefully have, hold and enjoy the Leased Premises for the Term of the
Lease and any and all renewals thereof, subject to the other terms, provisions,
agreements, covenants and conditions of this Lease, provided that Tenant pays
the Rent to be paid by Tenant under this Lease and fully and faithfully performs
all of Tenant's covenants, obligations and agreements contained in this Lease.
Section 6.3 LIGHT, AIR AND VIEW . Neither the diminution nor the
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shutting off of any light, air or view nor any other effect on the Leased
Premises by any structure or condition now or hereafter existing on property
adjacent to the Leased Premises shall affect this Lease or Tenant's obligations
hereunder, abate Rent or otherwise impose any liability on Landlord.
Section 6.4 LIEN AGAINST PROPERTY. In the event that the Landlord
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allows any liens to be taken against the Leased Premises or the real property
underlying the Leased Premises then the Landlord and the Tenant hereby agree
that in the event that there is a default under the lien or indebtedness
securing the lien, that such default shall not cause a termination of this Lease
Agreement. Landlord further agrees to provide the lienholder with a copy of
this Lease Agreement.
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ARTICLE VII UTILITIES
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Tenant shall pay all charges incurred for all utility and other services
used in, upon or about the Leased Premises, including, but not limited to,
water, gas, heat, light, power, telephone, sewer and sprinkler, all such charges
to be paid by Tenant to the utility company, municipality or other entity
furnishing such services before such charge shall become delinquent, together
with any required deposits. Tenant shall also provide all replacement light
bulbs and tubes after the Commencement Date of this Lease. In no event shall
Landlord be liable for any interruption or failure of utility services to, on or
within the Leased Premises, unless such interruption or failure is the result of
Landlord's gross negligence or Landlord's willful misconduct. No interruption or
malfunction of any utility services (including, without limitation, interruption
of such utilities as a result of the enactment or promulgation (regardless of
the ultimate validity or enforceability thereof) of any applicable law, statute,
ordinance, permit, rule, decree, order, guideline or regulation now or hereafter
enacted or promulgated by any governmental, quasi-governmental, regulatory or
executive authority) shall constitute an eviction or disturbance of Tenant's use
and possession of the Leased Premises or a breach by Landlord of any of its
obligations under this Lease or render Landlord liable for any damages
(including, without limitation, consequential or special damages) or entitle
Tenant to be relieved from any of its obligations under this Lease (including
the obligation to pay Rent) or grant Tenant any right of set-off, abatement or
recoupment, unless such interruption or malfunction is the result of Landlord's
gross negligence or Landlord's willful misconduct.
ARTICLE VIII MAINTENANCE AND SURRENDER
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Section 8.1"\l2
(a) LANDLORD'S OBLIGATIONS.
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Structural Integrity. Landlord shall maintain, repair, rebuild and
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replace, at its sole expense, the structural soundness of the Leased Property
including but not limited to: the roof, the exterior walls and the foundation of
the Building. Landlord shall repair and replace at its sole cost, subject to
Landlord's direction and supervision, any damage to the Leased Premises caused
by Landlord.
(b) LANDLORD'S DEFAULT IN OBLIGATIONS . In the event that Landlord
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shall fail or refuse to maintain, repair, rebuild, and replace the portions of
the Leased Premises for which it is responsible as provided herein, Tenant on
ninety (90) days written notice (or shorter time period in the event of an
emergency or business interruption), and without being obligated to do so, may
make such repairs or replacement as may be necessary to comply with the terms
hereof and Landlord agrees to reimburse Tenant, on demand, for the expense of
any such repairs or replacements. In the event that Landlord shall fail to pay
any such reimbursements upon demand, all such amounts shall bear interest at the
rate of 18% per annum until paid in full. Notwithstanding any other provision
of this Lease, if the maintenance, repair, rebuilding or replacement are not
made for any reason and such failure to maintain, repair or rebuild continues
for a period in excess of such 90-day period after receipt of written notice,
except as above provided, Tenant shall have the right to terminate this Lease on
written notice to Landlord. Thereafter, Tenant shall have a reasonable period
of time to remove its property from the Leased Premises. Following any such
termination, Landlord shall refund all prepaid rent for the period of time from
and including the date of such failure.
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Section 8.2 TENANT'S OBLIGATIONS. Tenant shall, at its sole expense,
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maintain the drives and grounds surrounding the Leased Premises, the Leased
Premises' concrete and paving (including sidewalks, parking areas and alleys),
the exterior lighting, the landscaping, the entry monuments, the railroad spur
(if any), and pedestrian walks, the fences and other open areas, all which
occupy or comprise part of the Leased Premises, reasonable wear and tear
excepted. In addition, Tenant shall, at its sole expense, maintain and repair
all parts of the Leased Premises (except only those parts for which Landlord is
expressly responsible under this Lease) in good condition and promptly make all
necessary repairs and replacements, including, but not limited to, the following
items: all glass, including windows, glass or plate glass, window mullions and
gaskets; doors and attached hardware; office entries; special store fronts;
interior walls, interior ceilings, cabinets, millwork, paneling and other finish
work; termite and pest extermination; floors and floor coverings; heating,
refrigeration, air conditioning systems and related mechanical equipment;
electrical systems; dock boards, dock levelers and bumpers; down spouts of roof
gutters attached to the exterior of the Building for damage caused by Tenant's
operation; plumbing fixtures, sanitary sewers, electrical facilities and
electrical fixtures; and all other fixtures and Trade Fixtures. Tenant shall
also be solely responsible for trash and other waste disposal from the Leased
Premises and will maintain adequate receptacles for such disposal. In no event
shall Tenant be entitled to use or dispose of any toxic, dangerous or hazardous
substances or pollutants without prior written approval of Landlord and in all
events such use and disposal must comply with all applicable Legal Requirements.
If Tenant fails to make such repairs or replacements, Landlord may, but shall
not be obligated to, make such repairs or replacements at Tenant's expense. Such
cost shall be payable to Landlord by Tenant on demand as Additional Rent and all
such amounts shall bear interest at the rate of 18% per annum until paid in
full. Replacement and repair parts, materials and equipment shall be of quality
equivalent to those initially installed within the Leased Premises; repair and
maintenance work shall be done in accordance with the then existing laws,
statutes, permits, orders, decrees, guidelines, rules, regulations and
ordinances pertaining thereto. Except insofar as Landlord is expressly obligated
under this Lease to maintain and repair the Leased Premises, in addition to the
maintenance and repair obligations of Tenant otherwise expressly set forth in
this Lease, Tenant is also obligated to perform, at Tenant's own cost and
expense and risk, all other maintenance and repairs necessary or appropriate to
cause the Leased Premises to be suitable for Tenant's intended commercial
purpose. Landlord shall repair and replace at its sole cost, subject to
Landlord's direction and supervision, any damage to the Leased Premises caused
by Landlord or any of Landlord's Agents or invitees. Notwithstanding any other
language herein contained, the Tenant will be obligated to maintain or repair
the air conditioning and heating system in the Leased Premises.
Section 8.3 SURRENDER OF POSSESSION. At the expiration or
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termination of this Lease or the surrender of possession of the Leased Premises,
the Tenant shall deliver the leased premises in good repair and condition,
reasonable wear and tear excepted. In the event Tenant should neglect to
maintain the Leased Premises, Landlord shall have the right, but not the
obligation, to cause repairs or corrections to be made, and any reasonable costs
therefor shall be payable by Tenant to Landlord upon demand. Upon the
expiration or termination of this Lease or the surrender of possession of the
Leased Premises, Tenant shall surrender all keys for the Leased Premises to
Landlord at the place then fixed for the payment of Rent.
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ARTICLE IX
INDEMNITY AND INSURANCE
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Section 9.1 INDEMNIFICATION . Tenant hereby unconditionally and
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irrevocably agrees to indemnify Landlord and Landlord's agents, employees,
officers, directors, shareholders, partners, venturers and representatives
(collectively, "Landlord's Related Parties") and hold Landlord and Landlord's
Related Parties harmless from and defend them against any and all claims,
actions, damages, liability, costs, and expenses (including, without limitation,
interest, court costs and penalties, attorneys' fees and disbursements and
amounts paid in settlement, or liability resulting from any change in federal,
state or local law or regulation or interpretation thereof), in connection with
any loss of life, any injury or damage to person or property or any other type
of injury or damage caused by, arising from or arising out of (i) any breach of
any of the agreements or covenants of Tenant under this Lease, (ii) failure by
Tenant to pay Personal Property Taxes as required by Section 5.2(c), (iii) any
occurrence in, upon or about the Leased Premises including, but not limited to,
occurrences caused by the sole, contributory, partial, joint, comparative or
concurrent negligence of Tenant or Tenant's respective employees, agents,
officers, directors, shareholders, partners, representatives, customers,
invitees, licensees, subtenants, concessionaires, contractors, servants,
vendors, materialmen, suppliers or any other person entering the Leased Premises
under express or implied invitation of Tenant (collectively, "Tenant's Agents"),
whether or not caused by the sole, contributory, partial, joint, comparative or
concurrent negligence of Landlord or Landlord's respective employees, agents,
officers, directors, shareholders, partners, representatives, customers,
invitees, licensees, concessionaires, contractors, servants, vendors,
materialmen, suppliers or any other person entering the Leased Premises under
express or implied invitation of Landlord (collectively, "Landlord's Agents"),
but not including occurrences caused solely by reason of the gross negligence or
willful misconduct of Landlord or of Landlord's employee or agents acting with
the scope of their employment or authority, (iv) the conduct of management of
any work done by Tenant or any of Tenant's Agents in, upon or about the Leased
Premises, (v) any occurrence in, upon or about the Leased Premises occasioned
wholly or in part by any act, omission or neglect claimed to have been caused by
Tenant or any of Tenant's Agents, or (vi) any occurrence occasioned by the
violation of any law, statute, permit, order, decree, guideline, rule,
regulation or ordinance by Tenant or any of Tenant's Agents, and Landlord and
Landlord's Related Parties shall not be liable to Tenant or any of Tenant's
Agents or to any other person whomsoever for any of the foregoing enumerated in
(i) through (vi) above. In any case in which Tenant has agreed to indemnify
Landlord, Landlord's Related Parties or any other person, such indemnity shall
be deemed to include an obligation on the part of Tenant to appear on behalf of
the indemnified party in any and all proceedings involving a claim or cause of
action covered by such indemnity and to defend the indemnified party against
such claim or cause of action, all at Tenant's cost; provided, however, at the
option of any party indemnified hereunder, such party shall have the right to
appear on its own behalf, employ its own legal counsel and defend any claim or
cause of action indemnified in this Section 9.1, all at Tenant's cost. This
indemnity provision is intended to indemnify Landlord and Landlord's Related
Parties against the consequences of their own negligence or fault as provided
above when Landlord or Landlord's Related Parties are solely negligent or
contributorily, partially, jointly, comparatively, or concurrently negligent
with Tenant or with any other party. The provisions of this Section 9.1 shall
survive the termination or expiration of this Lease.
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Section 9.2 WAIVER OF SUBROGATION RIGHTS. Anything in this Lease to
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the contrary notwithstanding, Landlord and Tenant each hereby waives any and all
rights of recovery, claims, actions or causes of action, against the other, its
agents, servants, representatives, directors, officers, partners, shareholders,
or employees, for any loss or damage that may occur to the Leased Premises, or
any improvements thereto, or any personal property of such party therein, which
is insured against under the terms of any insurance policies required to be
maintained pursuant to this Lease, regardless of cause or origin, including the
sole, contributory, partial, joint, comparative or concurrent negligence of the
other party hereto, its agents, servants, representatives, directors, partners,
shareholders, officers or employees, and covenants that no insurer shall hold
any right of subrogation against such other party or its respective agents,
servants, representatives, directors, partners, shareholders, officers or
employees. If the respective insurer of Landlord and Tenant does not permit
such a waiver without an appropriate endorsement to such party's insurance
policy, then Landlord or Tenant each covenant and agree to notify its insurer of
the waiver set forth herein and to secure from such insurer an appropriate
endorsement to its respective insurance policy with respect to such waiver. The
waiver set forth in this Section 9.2 shall be in addition to, and not in
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substitution for, any other waivers, indemnities or exclusions of liability set
forth in this Lease, including without limitation Section 9.1 and Section 9.3 of
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this Lease.
Section 9.3 INSURANCE.
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(a) Tenant shall maintain at its sole cost a policy or policies of
insurance insuring the Building and other improvements on the Leased Premises
(excluding improvements by Tenant) against fire, explosion and the risks known
as standard fire and extended coverage, in amounts representing at least eighty
percent (80%) of the replacement value of the Building and improvements and
payments for losses thereunder shall be made solely to Landlord.
(b) Tenant shall be obligated to insure any of Tenant's Property for
$300,000.
(c) Tenant shall, at its sole cost and expense, procure and maintain
during the Term and Renewal Term, if any, of the Lease comprehensive general
liability insurance (including personal injury liability, premises/operation,
property damage, independent contractors and broad form contractual in support
of Section 9.1 of this Lease (the indemnification of Landlord)) in amounts of
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not less than a single limit of $1,000,000 or an aggregate of $2,000,000,
comprehensive automobile liability insurance, business interruption insurance,
contractual liability insurance, property insurance with respect to Tenant's
Property, leasehold improvements, alterations and additions written on an "all
risk" basis for full replacement cost, worker's compensation and employer's
liability insurance and comprehensive catastrophe liability insurance, all
maintained with companies, on forms and in such amounts (or increased amounts)
as Landlord may, from time to time, reasonably require and endorsed to include
Landlord as an additional insured, with the premiums fully paid on or before the
<PAGE>
due dates. The insurer must be licensed to do business in the state in which
the Leased Premises are located and Landlord may require that Tenant obtain from
the insurer a statement as to good standing with the state board of insurance
and with the secretary of state where the insurer in incorporated. Tenant, and
not Landlord, will be liable for any costs or damages in excess of the statutory
limit for which Tenant would, in the absence of worker's compensation, be
liable. Notwithstanding the above, Tenant shall be required to secure property
damage insurance to Landlord's physical Leased Premises in an amount not less
than $1,200,000.
(d) In the event that Tenant fails to take out or maintain any policy
required by this Section 9.3 to be maintained by Tenant, Landlord may, upon
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advance written notice to Tenant, cause such insurance to be issued and Tenant
shall pay to Landlord the premium for such insurance within ten (10) days of
Landlord's demand.
(e) All policies of insurance required to be maintained by Tenant shall
specifically make Landlord a co-insured, make reference to the indemnity
agreement in Section 9.1 of this Lease and shall provide that Landlord shall be
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given at least thirty (30) days prior written notice of any cancellation or
non-renewal of any such policy. A duplicate original of each such policy or a
duly executed certificate of insurance with respect to each such policy will be
deposited with Landlord by Tenant on or before the Commencement Date, and a
duplicate original of each subsequent policy or a duly executed certificate of
insurance with respect to each subsequent policy shall be deposited with
Landlord at least thirty (30) days prior to the expiration of the preceding such
policy. All certificates of insurance should specify the additional insured
status, the waivers of subrogation and that Landlord shall be given at least
thirty (30) days prior written notice of any cancellation or non-renewal of any
such policy.
(f) All insurance carried by either Landlord or Tenant shall provide
for a waiver of rights of subrogation against Landlord and Tenant on the part of
the insurance carrier, to the extent that the same is permitted under the laws
and regulations governing the writing of insurance within the State of Texas.
All insurance policies obtained by Tenant shall be written as primary policies
(primary over any insurance carried by Landlord), not contributing with and not
in excess of coverage which Landlord may carry, if any, and shall name Landlord
as its interest may appear.
ARTICLE X WASTE AND ENVIRONMENTAL COMPLIANCE
----------------------------------
Section 10.1 TENANT'S ENVIRONMENTAL COVENANTS. Tenant covenants and
---------------------------------
agrees to comply strictly and in all respects with the requirements of any
applicable law, statute, ordinance, permit, decree, guideline, rule, regulation
or order pertaining to health or the environment (hereinafter sometimes
collectively called "Applicable Environmental Laws"), including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Conservation and Recovery Act, the Texas
Water Code and the Texas Solid Waste Disposal Act, as each of the foregoing may
be amended from time to time. Tenant shall not cause or permit any Hazardous
Materials (as hereinafter defined) to be generated, treated, stored, used,
installed or disposed in, on, under or about the Leased Premises. Tenant
represents, warrants, covenants and agrees that Tenant is not and will not
become involved in operations at the Leased Premises or at other locations which
<PAGE>
could lead to the imposition on Landlord or any of Landlord's Related Parties of
liability under any of the Applicable Environmental Laws. Tenant does hereby,
for itself and its heirs, legal representatives, successors, assigns and
grantees, agree to and hereby does indemnify, defend and hold harmless Landlord,
Landlord's Related Parties and each of their respective heirs, legal
representatives, assigns, successors and grantees, of and from any and all
liabilities, assessments, suits, damages, costs and expenses, attorneys' fees
and judgments related to or arising out of (i) the breach of any of the
agreements of Tenant under this Article X, (ii) the handling, installation,
---------
storage, use, generation, treatment or disposal of Hazardous Materials,
including any cleanup, remedial, removal, or restoration work required by the
Applicable Environmental Laws, or (iii) the assertion of any lien or claim
imposed against the Leased Premises or any portion thereof or Landlord or any of
Landlord's Related Parties pursuant to the Applicable Environmental Laws. The
covenants and agreements of Tenant under this Article X shall survive the
---------
expiration or termination of this Lease.
Section 10.2 DEFINITION OF HAZARDOUS MATERIALS. As used in this
------------------------------------
Lease, the term "Hazardous Materials" means any flammables, explosives,
radioactive materials, asbestos-containing materials, the group of organic
compounds known as polychlorinated byphenyls and other hazardous waste, toxic
substances or related materials, including without limitation substances defined
as "hazardous substances", "hazardous materials", "toxic substances" or "solid
waste" in the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, and the Texas Solid Waste Disposal Act, as each
of the foregoing may be amended from time to time.
Section 10.3 LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord
--------------------------------------------
represents and warrants to Tenant that it has no knowledge of any spillage,
leakage, dumping, discharge or disposal of any Hazardous Materials upon the
Leased Premises prior to May 1, 2000.
ARTICLE XI ALTERATIONS AND FIXTURES
--------------------------
Section 11.1 PRIOR LANDLORD CONSENT. Tenant shall not create any
------------------------
openings in the roof or exterior walls of the Leased Premises, nor make any
additions to the Leased Premises without prior written consent of Landlord.
Landlord shall have the sole and exclusive right to approve or disapprove the
proposed plans and specifications for such additions and the contractor which
Tenant proposes to employ, which proposed plans and modifications must be
permitted by the city and up to code. Approval by Landlord of any of Tenant's
drawings, plans and specifications prepared in connection with any additions to
the Leased Premises shall not constitute a representation or warranty of
Landlord as to the adequacy or sufficiency of such drawings, plans and
specifications, or additions to which they relate, for any use, purpose, or
condition, but such approval shall merely be the consent of Landlord as required
hereunder. Tenant shall notify Landlord upon completion of such additions and
Landlord shall have the right to inspect same for workmanship and compliance
with the approved drawings, plans and specifications.
<PAGE>
Section 11.2 TRADE FIXTURES. "Trade Fixtures" shall mean any and all
--------------
Signs (hereinafter defined) placed by Tenant in, upon or about the Leased
Premises pursuant to provisions hereof and any and all items of property used by
Tenant in, upon or about the Leased Premises for the carrying on of its business
and which may or may not be annexed to the Site by the Tenant but in any event
can be removed without material injury to the Leased Premises, including but not
limited to furniture, equipment, shelves, bins and machinery; provided, however,
that the term Trade Fixtures shall not include any permanent leasehold
improvements, including but not limited to any floor, wall or ceiling coverings,
any interior walls or partitions, any lighting fixtures, track lights or any
property a part of or associated with any electrical, plumbing or mechanical
system, notwithstanding that the same may have been installed in, upon or about
the Leased Premises. Notwithstanding anything in this Article XI to the
-----------
contrary, Tenant, at its own cost and expense, may erect such Trade Fixtures as
it desires provided that (a) such Trade Fixtures do not alter the basic
character of the Leased Premises, (b) such Trade Fixtures do not overload or
damage the Leased Premises, (c) such items may be removed without injury to the
Leased Premises, and (d) the construction, erection or installation thereof
complies with all Legal Requirements and with Landlord's specifications and
requirements. Tenant shall have the right to remove at the termination or
expiration of this Lease such Trade Fixtures owned by Tenant and so installed
(other than replacements for any such items originally installed by Landlord),
provided Tenant is not in default under this Lease and such removal is made
within ten (10) days after the termination or expiration of the Lease; provided,
however, Tenant shall promptly repair, within ten (10) days, any damage caused
by such removal and restore the Leased Premises to its original condition,
reasonable wear and tear excepted. Any Trade Fixtures which are not removed
from the Leased Premises and those which are removed by Landlord pursuant to
Landlord's right to do so shall, at Landlord's option, become Landlord's
property.
Section 11.3 REMOVAL. Any alterations, improvements, modifications,
-------
additions or fixtures made, installed or attached by either Landlord or Tenant
to, in or on the Leased Premises (other than Trade Fixtures) shall become the
property of Landlord and shall, at Landlord's election, be (a) surrendered with
the Leased Premises as part thereof at the termination or expiration of this
Lease without any payment, reimbursement or compensation therefor, or (b)
promptly removed by Tenant at Tenant's expense, and Tenant shall promptly repair
any damage caused by such removal and restore the Leased Premises to its
original condition, reasonable wear and tear excepted, and pay for the cost of
removal and restoration.
ARTICLE XII MECHANIC'S LIENS
----------------
Tenant shall not permit any mechanic's lien or any other liens,
encumbrances, claims or charges to be placed on the Leased Premises, on the
improvements thereon, on Landlord's interest therein, or upon Tenant's leasehold
interest therein, during the Term and Renewal Term, if any, of this Lease, and
in the event of the filing of any such lien, encumbrance, claim or charge,
Tenant shall promptly have same removed or Tenant may contest the filing of any
such lien if Tenant, at its expense, provides a bond acceptable to Landlord
which protects the Leased Premises against such lien or provides other
assurances or protections acceptable to Landlord that the lien will not attach
to or otherwise adversely affect the Leased Premises. Tenant has no authority,
express or implied, to create any lien, encumbrance, claim or charge of any kind
or nature whatsoever upon, or in any manner to bind the interest of Landlord or
of Tenant, including those who may furnish material or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of labor performed
or materials furnished in connection with any work performed on the Leased
<PAGE>
Premises and that it will save and hold Landlord harmless from and defend
Landlord against any and all loss, cost or expense based on or arising out of
asserted claims, liens, encumbrances or charges against the leasehold estate or
against the interest of Landlord in the Leased Premises or under the terms
hereof, but only to the extent that said liens are not created as a result of
Landlord's acts or omissions. Tenant agrees to give Landlord immediate written
notice of the placing of any lien, charge, claim or encumbrance against the
Leased Premises. Tenant shall not be required to discharge any such lien,
encumbrance, claim or charge as may be placed upon the Leased Premises by the
act of Landlord.
ARTICLE XIII SIGNS
-----
Tenant shall have the right to erect signs, graphics, window advertisings
or window coverings (collectively, "Signs") of such character and in such
locations (both interior and exterior) as may be agreed to by Landlord prior to
the erection of such Signs. Tenant shall not install any signs on the exterior
of the Building or any other improvements without the prior written consent of
Landlord. Tenant shall, at its expense, repair, paint and/or replace the
surface to which its Signs are attached upon vacation of the Leased Premises by
Tenant or removal or alteration of its Signs. All Signs must comply with all
Legal Requirements and all criteria established by Landlord.
ARTICLE XIV TRANSFERS BY TENANT
-------------------
Section 14.1 TRANSFERS. Tenant shall not, by operation of law or
---------
otherwise, (a) assign, transfer, mortgage, pledge, hypothecate or otherwise
encumber this Lease, the Leased Premises or any interest therein, (b) grant any
concession or license within the Leased Premises, (c) grant or transfer any
management privileges or rights with respect to the Leased Premises, (d) sublet
all or any part of the Leased Premises or any right or privilege appurtenant to
the Leased Premises, (e) permit any other party to occupy or use all or any part
of the Leased Premises or (f) advertise for any of the foregoing, without the
prior written consent of Landlord. If Tenant is other than an individual
person, any conveyance, assignment or transfer of more than fifty percent (50%)
interest in Tenant in a single transaction or a series of transactions, shall be
deemed to constitute a transfer or assignment prohibited by the immediately
preceding sentence unless it is to an entity which is under common control or
controls Tenant. If Tenant requests Landlord's consent to any transfer,
assignment or other transaction prohibited by this Section 14.1 (collectively, a
------------
"Transfer"), then Tenant shall provide Landlord with a written description of
all terms and conditions of the proposed transfer, copies of the proposed
documentation, and the following information about the proposed transferee:
name and address; reasonably satisfactory information about its business and
business history; its proposed use of the Leased Premises; banking, financial,
and other credit information; and general references sufficient to enable
Landlord to determine the proposed transferee's creditworthiness and character.
Tenant shall reimburse Landlord for its reasonable attorneys' fees and other
expenses incurred in connection with considering any request for its consent to
a Transfer. Landlord's consent to a Transfer shall not release Tenant from
performing its obligations under this Lease but rather Tenant's transferee shall
assume all of Tenant's obligations under this Lease in a writing satisfactory to
Landlord, and Tenant and its transferee shall be jointly and severally liable
therefor. Landlord's consent to any Transfer shall not waive Landlord's rights
<PAGE>
as to any subsequent Transfer. While the Leased Premises or any part thereof
are subject to a Transfer, Landlord may collect directly from such transferee
all rents or other sums relating to the Leased Premises becoming due to Tenant
or Landlord and apply such rents or other sums against the Rent and any other
sums payable hereunder. Tenant authorizes its transferees to make payments of
rent and any other sums due and payable, directly to Landlord upon receipt of
notice from Landlord to do so.
Section 14.2 ADDITIONAL TERMS. Subject to the terms and provisions of
----------------
Section 14.1 of this Lease, the rights and obligations of the parties to this
-------------
Lease shall inure to the benefit of and be binding upon their respective
successors, assigns, heirs and legal representatives. No Transfer by Tenant
shall be effective until an original of same executed by Tenant and the
transferee is delivered to Landlord and consented to by Landlord in writing.
Any attempted Transfer by Tenant in violation of the terms and covenants of this
Article XIV shall be void and shall constitute a default by Tenant under this
------------
Lease.
ARTICLE XV RIGHT OF ACCESS AND INSPECTION BY LANDLORD
------------------------------------------
Section 15.1 RIGHT OF ACCESS. Tenant shall permit Landlord and
-----------------
Landlord's Agents to enter into and upon the Leased Premises at all reasonable
times for the purpose of inspecting the same or showing the same to prospective
purchasers, or for the purpose of maintaining or making repairs as may be
required or permitted pursuant to this Lease and Landlord shall be allowed to
take all materials into and upon the Leased Premises that may be required
therefor without the same constituting an eviction of Tenant, actual or
constructive, a breach by Landlord of any of its obligations under this Lease,
relief of any of Tenant's obligations under this Lease or an entitlement to any
other right or remedy of Tenant, provided, however, that Landlord shall make
reasonable efforts not to interfere with the normal business operations of
Tenant. During the period that is two (2) months prior to the end of the Term
or Renewal Term (if any) hereof and at any time Tenant is in default, Landlord
or Landlord's Agents may enter the Leased Premises during reasonable times for
the purpose of showing the Leased Premises.
Section 15.2 INSPECTION. Tenant shall notify Landlord at least
----------
fifteen (15) days prior to vacating the Leased Premises and shall arrange to
meet with Landlord for a joint inspection of the Leased Premises. If Tenant
fails to give such notice or to arrange for such inspection, then Landlord's
inspection of the Leased Premises shall be deemed correct for the purpose of
determining Tenant's responsibility for repair and restoration of the Leased
Premises.
ARTICLE XVI RENEWAL OPTION AND OPTION TERM
------------------------------
RENEWAL OPTION. Tenant shall have the option to renew this Lease for one
---------------
period of ten (10) years, such period ("Renewal Term" or "Option Term") to
commence at the expiration of the Initial Term of this Lease. The rental
payment for the years comprising the renewal term shall be as set forth in
Section 3.1. Specifically, the base rent during year one and two of the renewal
term shall be $12,000, plus 4% of the gross revenues over $125,000 (excluding
any dancer payments) with a minimum rent of $18,000 and the maximum rent for
such applicable years shall be $26,000 and, thereafter, the minimum rent shall
increase in years three, six and nine of the Option Term by $2,000 and the
maximum rental obligation shall likewise be increased in years three, six and
nine of the Option Term by $2,000. Tenant shall exercise such option to renew
by delivering written notice of such election to Landlord at least 120 days
prior to the expiration of the Initial Term. Any such renewal of this Lease
shall be upon the same terms and conditions of this Lease, including further ten
year renewal options.
<PAGE>
ARTICLE XVII HOLDING OVER
------------
In the event Tenant remains in possession of the Leased Premises after the
expiration or termination of this Lease as renewed pursuant to Article XVI, if
-----------
applicable, without the execution of a new lease, then Tenant, at Landlord's
option, shall be deemed to be occupying the Leased Premises as a tenant at will
at a rental equal to one hundred fifty percent (150%) of the Rental in effect
during the last month prior to the expiration or termination of this Lease, and
shall otherwise remain subject to all the conditions, provisions and obligations
of this Lease insofar as the same are applicable to a tenancy at will, including
without limitation, the payment of Additional Rental. No holding over by Tenant
after the expiration or termination of this Lease shall be construed to extend
the Term or in any other manner be construed as permission by Landlord to hold
over.
ARTICLE XVIII DEFAULT BY TENANT AND LANDLORD'S REMEDIES
-----------------------------------------
Section 18.1 DEFAULT BY TENANT . The occurrence of any one or more of
-----------------
the following events shall constitute a default by Tenant under this Lease:
(a) Tenant shall fail to perform, observe or comply with any of the
terms, provisions, agreements, covenants or conditions of this Lease (other than
the failure specified in Section 18.1(b) hereof), such failure continuing for
---------------
thirty (30) days after written notice from Landlord of such failure;
(b) Tenant shall fail to pay to Landlord any Rent or any other monetary
charge due from Tenant hereunder as and when due and payable, such failure
continuing for ten (10) days after written notice from Landlord of such failure;
(c) Tenant shall Transfer this Lease or all of a part of the Leased
Premises without the prior written approval of Landlord;
(d) The interest of Tenant under this Lease shall be levied on under
execution or other legal process;
(e) Any petition in bankruptcy or other insolvency proceedings shall be
filed by or against Tenant, or any petition shall be filed or other action taken
to declare Tenant a bankrupt or to delay, reduce or modify Tenant's debts or
obligations or to reorganize or modify Tenant's capital structure or
indebtedness or to appoint a trustee, receiver or liquidator of Tenant or of any
property of Tenant, or any proceeding or other action shall be commenced or
taken by any governmental authority for the dissolution or liquidation of
Tenant;
(f) Tenant shall make an assignment for the benefit of creditors, or
Tenant shall make a transfer in fraud of creditors, or a receiver or trustee
shall be appointed for Tenant or any of its properties;
<PAGE>
(g) The admission by Tenant that it cannot meet its obligations as they
become due or the making by Tenant of an assignment for the benefit of its
creditors;
(h) Tenant shall desert, abandon or vacate the Leased Premises or any
substantial portion thereof;
(i) Tenant shall fail to operate its business for more than thirty (30)
days for any reason other than destruction or condemnation of the Leased
Premises;
(j) Tenant shall do or permit to be done anything which creates a lien
upon the Leased Premises; or
(k) The death or legal incapacity of Tenant if Tenant is an individual
person or the termination, dissolution or liquidation of Tenant if Tenant is a
corporation, partnership or other entity.
Section 18.2 LANDLORD'S REMEDIES. Upon the occurrence of any default
-------------------
by Tenant under this Lease, Landlord may, at its sole option, do any one or more
of the following:
(a) Terminate this Lease, whereupon Landlord shall have the remedies
set forth in Section 18.3 below.
-------------
(b) Without having terminated this Lease, enter upon and taken
possession of the Leased Premises, whereupon Landlord shall have the remedies
set forth in Section 18.4 below.
---------------
(c) Without any further notice to Tenant whatsoever, enter upon the
Leased Premises by use of a master key, a duplicate key, or other peaceable
means, and change, alter, and/or modify the door locks on all entry doors of the
Leased Premises, thereby permanently excluding Tenant and its officers,
principal, agents, employees and representatives therefrom. In the event that
Landlord has either permanently repossessed the Leased Premises pursuant to
Section 18.2(b), or has terminated this Lease by reason of Tenant's default as
------------
set forth in Section 18.2(a) above, Landlord shall not thereafter be obligated
---------------
to provide Tenant with a key to the Leased Premises at any time, regardless of
any amounts subsequently paid by Tenant; provided, however, that in any such
instance, during Landlord's normal business hours and at the convenience of
Landlord, and upon receipt of written request from Tenant accompanied by such
written waivers and releases as the Landlord may require, Landlord will (at
Landlord's option) either (i) escort Tenant or its authorized personnel to the
Leased Premises to retrieve any personal belongings or other property of Tenant
not subject to the Landlord's statutory lien or the lien and security interest
described in Section 18.7 of this Lease, or (ii) obtain a list from Tenant of
-------------
such personal property as Tenant intends to remove, whereupon, Landlord shall
remove such property and make it available to Tenant at a reasonable time and a
reasonable place designated by Landlord. If Landlord elects to exclude Tenant
from the Leased Premises without permanently repossessing or terminating
pursuant to the foregoing provisions of this Lease, then Landlord shall not be
obligated to provide Tenant a key to re-enter the Leased Premises until such
<PAGE>
time as all delinquent Rent and other amounts due under this Lease have been
paid in full and all other defaults, if any, have been completely cured to
Landlord's satisfaction (if such cure occurs prior to any actual permanent
repossession or termination), and Landlord has been given assurance reasonably
satisfactory to Landlord evidencing Tenant's ability to satisfy its remaining
obligations under this Lease. During any such temporary period of exclusion,
Landlord will, during Landlord's normal business hours and at Landlord's
convenience, upon receipt of written request from Tenant (accompanied by such
written waivers and releases as Landlord may require) escort Tenant or its
authorized personnel to the premises to retrieve personal belongings of Tenant
or its employees, and such other property of Tenant as is not subject to the
Landlord's statutory lien or the lien and security interest described in Section
-------
18.7 of this Lease.
----
Section 18.3 TERMINATION OF THE LEASE. Upon termination of this Lease
------------------------
by Landlord pursuant to Section 18.2(a) of this Lease, Landlord may forthwith
---------------
repossess the Leased Premises and be entitled to recover as damages a sum of
money equal to the total of (i) the cost of recovering the Leased Premises, (ii)
the cost of removing and storing Tenant's or any other occupant's property,
(iii) the unpaid Rent and any other sums accrued hereunder at the date of
termination, (iv) a sum equal to the amount, if any, by which the present value
(discounted at the rate of eight percent (8%) per annum) of the balance of the
Rental for the remainder of the Term exceeds the present value (discounted at
the same rate) of the fair market rental value of the Leased Premises for the
same period (it being the intention of Landlord and Tenant that Landlord shall
receive the benefit of its bargain), (v) the cost of restoring the Leased
Premises to good condition, reasonable wear and tear excepted, and (vi) any
other sum of money or damages owed by Tenant to Landlord. In the event Landlord
shall elect to terminate this Lease, Landlord shall at once have all the rights
of re-entry upon the Leased Premises, without becoming liable for damages, or
guilty of trespass. In the event of the termination of the Lease, Tenant agrees
to execute a Power of Attorney authorizing the re-assignment of the City of
Houston Sexually Oriented Business permit as well as all other applicable
business permits, to Landlord in the event of the termination of the lease.
Section 18.4 Termination of Possession. Upon termination of Tenant's
-------------------------
right of possession of the Leased Premises pursuant to Section 18.2(b) of this
---------------
Lease, Landlord may repossess the Leased Premises by forcible entry or detainer
suit or otherwise, without demand or notice of any kind to Tenant and without
terminating this Lease and without becoming liable for damages or guilty of
trespass, in which event Landlord may, but shall be under no obligation to,
relet the same for the account of Tenant (nor shall Landlord be under any
obligation to relet the Leased Premises before Landlord relets or leases any
other property under the ownership or control of Landlord) for such rent and
upon such terms as shall be satisfactory to Landlord. In such event, Tenant
shall be liable for and shall pay to Landlord all Rent payable by Tenant under
this Lease plus an amount equal to (i) the cost of recovering possession, (ii)
the cost of collection of the rent accruing from such reletting and (iii) any
other costs incurred by Landlord in connection with such reletting, reduced by
any sums received by Landlord through reletting the Leased Premises; provided,
however, that in no event shall Tenant be entitled to any excess of any sums
obtained by reletting over and above Rent provided in this Lease to be paid by
Tenant to Landlord. For the purpose of such reletting Landlord is authorized to
decorate or to make any repairs, changes, alterations or additions in or to the
Leased Premises that may be necessary. Landlord may file suit to recover any
<PAGE>
sums falling due under the terms of this Section 18.4 from time to time, and no
------------
delivery to or recovery by Landlord of any portion due Landlord hereunder shall
be any defense in any action to recover any amount not theretofore reduced to
judgment in favor of Landlord. No reletting shall be construed as an election
on the part of Landlord to terminate this Lease unless a written notice of such
intention is given to Tenant by Landlord. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous default.
Section 18.5 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS. Should
------------------------------------------------
Tenant fail to perform any of its obligations under this Lease, Landlord may
(but shall not be obligated to), without notice in an emergency or after three
(3) business days notice where there is no threat to life or property, enter
upon the Leased Premises and perform all or any part of such obligations. Upon
demand, Tenant shall reimburse Landlord for the cost to Landlord of performing
such obligations. No action taken by Landlord under this Section 18.5 shall
------------
relieve Tenant from any of its obligations under this Lease or from any
consequences or liabilities arising from the failure to perform such
obligations.
Section 18.6 CUMULATIVE REMEDIES. The rights and remedies of Landlord
-------------------
under this Article XVIII shall be non-exclusive and shall be in addition to and
-------------
cumulative of all other remedies available to Landlord under this Lease or at
law or in equity.
Section 18.7 LANDLORD'S LIEN. In consideration of the mutual benefits
----------------
arising under this Lease and in order to receive mutual benefits arising under
this Lease and in order to receive payment of all Rent payable by Tenant to
Landlord under this Lease and the faithful performance and observance of all
covenants and agreements of Tenant under this Lease, Tenant hereby grants to
Landlord a lien and security interest on and in all property of Tenant now or
hereafter placed in or upon the Leased Premises, including without limitation
all goods, wares, fixtures, Trade Fixtures, machinery, inventory, equipment,
furniture, furnishings and other personal property now or hereafter placed in or
upon the Leased Premises (collectively, the "Personal Property"), and such
Personal Property shall be and remain subject to such lien and security interest
of Landlord for payment of all Rent and other sums agreed to be paid by Tenant
under this Lease. Said lien and security interest shall be in addition to and
cumulative of the Landlord's liens provided by law. This Lease shall constitute
a security agreement under the Uniform Commercial Code as enacted and enforced
in the State of Texas (the "UCC") so that Landlord shall have and may enforce a
security interest on all such Personal Property. Such Personal Property shall
not be removed from the Leased Premises unless such removal is in the ordinary
course of Tenant's business and Tenant is not at the time of such removal in
default under this Lease. Tenant agrees to execute as debtor such financing
statement or statements as Landlord may now or hereafter reasonably request in
order that such security interest or interests may be protected pursuant to said
UCC. Landlord may at its election at any time file a copy of this Lease as a
financing statement. Landlord, as secured party, shall be entitled to all of
the rights and remedies afforded a secured party under said UCC, which rights
and remedies shall be in addition to and cumulative of Landlord's liens and
rights provided by law or by the other terms and provisions of this Lease.
Notwithstanding anything contained herein to the contrary, Landlord shall
subordinate all of its liens (contractual and statutory) to Tenant's financing
or all or any portion of its inventory, fixtures, furniture, and equipment.
Such subordination shall be evidenced by a subordination agreement to be
reasonably satisfactory to Landlord and such subordination shall be in an amount
not greater than the actual amount financed by Tenant.
<PAGE>
ARTICLE XIX SUBORDINATION
-------------
This Lease shall be subject and subordinated at all times to (a) all ground
or underlying leases now existing or which may hereinafter be executed affecting
the Leased Premises, and (b) the lien or liens of all mortgages and deeds of
trust in any amount or amounts whatsoever now or hereafter placed on the Leased
Premises or Landlord's interest or estate therein or on or against such ground
or underlying leases, so long as Tenant receives a Non-Disturbance and
Attornment Agreement. Tenant shall execute and deliver upon demand any
instruments, releases or other documents requested by any lessor or mortgagor
for the purpose of subjecting and subordinating this Lease to such ground
leases, mortgages or deeds of trust. Tenant shall attorn to any party
succeeding to Landlord's interest in the Leased Premises, whether by purchase,
foreclosure, deed in lieu of foreclosure, power of sale, termination of lease,
or otherwise, upon such party's request, so long as such attorned party agrees
not to disturb Tenant's right of possession as long as Tenant is abiding by the
terms of this Lease, and shall execute such agreements confirming such
attornment as such party may reasonably request. Tenant shall not seek to
enforce any remedy it may have for any default on the part of the Landlord
without first giving written notice by certified mail, return receipt requested,
specifying the default in reasonable detail, to any mortgagee or lessor under a
lien instrument or lease covering the Leased Premises whose address has been
given to Tenant, and affording such mortgagee or lessor a reasonable opportunity
to perform Landlord's obligations hereunder.
ARTICLE XX SALE BY LANDLORD
----------------
Landlord shall have the right at any time to sell, transfer, or assign, in
whole or in part, by operation of law or otherwise, its rights, benefits,
privileges, duties, obligations or interests hereunder or in the Leased Premises
without the prior consent of Tenant, and such sale, transfer or assignment shall
be binding upon Tenant. After such sale, transfer or assignment, Tenant shall
attorn to such purchaser, transferee, or assignee, upon such party's request, so
long as Tenant receives a Non-Disturbance and Attornment Agreement. Landlord
shall be released of all obligations hereunder after the effective date of such
sale, transfer or assignment.
ARTICLE XXI ESTOPPEL CERTIFICATES
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Tenant agrees within ten (10) days following request by Landlord to
execute, acknowledge and deliver to Landlord and any other persons specified by
Landlord, a certificate certifying (i) that this Lease is unmodified and in full
force and effect, or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect and the
date to which the Rent and other charges are paid in advance, if any, (ii) that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder, or so specifying such defaults, if any, as are claimed,
evidencing the status of the Lease as may be required either by a lender making
a loan to Landlord to be secured by a deed of trust or mortgage covering the
Leased Premises or a purchaser or a ground lessor of the Leased Premises from
Landlord and such other matters as may be reasonably requested by Landlord.
Tenant's failure to deliver such certificate within such time shall be
conclusive upon Tenant (i) that this Lease is in full force and effect, with
modification except as may be represented by Landlord, (ii) that to Tenant's
knowledge there are no uncured defaults in Landlord's performance, and (iii)
that no Rent has been paid in advance except as set forth in this Lease.
<PAGE>
ARTICLE XXII CASUALTY DAMAGE
---------------
Section 22.1 CASUALTY DAMAGE. If the Leased Premises shall be
----------------
destroyed or damaged by fire or any other casualty, Tenant shall immediately
give notice thereof to Landlord. If the Leased Premises or any portion thereof,
through no fault or neglect of Tenant or any of Tenant's Agents, shall be
destroyed or damaged by fire or any other casualty then, at the option of
Landlord, (i) if the Leased Premises are rendered untenantable in whole or in
part by reason of such casualty as determined by Landlord, Tenant shall be
entitled to a fair diminution of the Rent hereunder until such time as the
Leased Premises (exclusive of any of Tenant's Property placed in or incorporated
in the Leased Premises which is destroyed or damaged by fire or any other
casualty) are made tenantable as determined by Landlord by repair or restoration
or (ii) Landlord may terminate this Lease whereupon all Rent accrued up to the
time of such termination and any other sums due and owing shall be paid by
Tenant to Landlord (less any sums then due and owing Tenant by Landlord) and any
remaining sums due and owing by Landlord to Tenant shall be paid by Tenant. In
no event shall Landlord have any obligations to repair or restore any such
destruction or damage.
Section 22.2 REPAIR. If Landlord has elected to repair and restore
------
the Leased Premises to the extent stated in Section 22.1 of this Lease then the
------------
repair and restoration shall be done under the Landlord's control, provided that
any repair or restoration of the Leased Premises shall be such that the Leased
Premises are rebuilt in its like condition, size and structure as before the
repair and restoration. In such event, this Lease shall continue in full force
and effect, and the repairs will be made within a reasonable time thereafter
(not to exceed six (6) months from the date of receipt of insurance proceeds by
the Landlord). Should the repairs not be completed within such period, this
Lease will terminate. If this Lease is terminated as herein permitted, Landlord
shall refund to Tenant any prepaid Rent (unaccrued as of the date of damage or
destruction) and any other sums due and owing by Landlord to Tenant (less any
sums then due and owing Landlord by Tenant) and any remaining sums due and owing
by Tenant to Landlord shall be paid to Landlord. If Landlord has elected to
repair and reconstruct the Leased Premises to the extent stated above, the Term
will be extended for a time equal to the period of such repair and
reconstruction.
ARTICLE XXIII EMINENT DOMAIN
--------------
Section 23.1 TOTAL TAKING. In the event of a taking of the Leased
-------------
Premises or damage related to the exercise of the power of eminent domain by any
agency, authority, public utility, person, or corporation or entity empowered to
condemn property (including without limitation a voluntary conveyance by
Landlord in lieu of such taking or condemnation) (collectively, a "Taking") of
the entire Leased Premises or so much thereof as to prevent or substantially
impair its use by Tenant during the Term or renewal Term, if any, of this Lease
( a "Total Taking"), the rights of Tenant under the Lease and the leasehold
estate of Tenant in and to the Leased Premises shall cease and terminate as of
the date upon which title to the Leased Premises, or the portion thereof, passes
to and vests in the condemnor or the effective date of any order for possession
if issued prior to the date title vests in the condemnor ("Date of Taking"),
Landlord shall refund to Tenant any prepaid Rent and any other sums due and
owing to Tenant by Landlord (less any sums then due and owing Landlord by
Tenant), and Tenant shall pay to Landlord any remaining sums due and owing
<PAGE>
Landlord under the Lease, each prorated as of the Date of Taking where
applicable. All proceeds payable as a lump sum from any Total Taking shall be
payable as follows: first to Landlord until it receives the fair market value
of the portion of the Leased Premises so taken; then to Tenant until it receives
the fair market value of its unamortized non-building standard improvements and
personal property taken, if any; and the remainder of the award shall then be
paid to Landlord.
Section 23.2 PARTIAL TAKING. In the event of a Taking of only a part
--------------
of the Leased Premises which does not constitute a Total Taking during the Term
or Renewal Term, if any, of the Lease (a "Partial Taking"), the rights of Tenant
under the Lease and the leasehold estate of Tenant in and to the portion of the
Leased Premises taken shall cease and terminate as of the Date of Taking, and an
adjustment to the Rental in effect as of the Date of Taking shall be made based
upon the reduced value of the Leased Premises. All proceeds payable as a lump
sum from any Partial Taking shall be payable as follows: first to Landlord
until it receives the fair market value of the portion of the Leased Premises so
taken; then to Tenant until it receives the fair market value of its unamortized
non-building standard improvements and personal property taken, if any; and the
remainder of the award shall then be paid to Landlord. Should the Partial
Taking affect the Building, Landlord, from its portion of the award, shall
restore the remainder of the Building, as nearly as possible, to one
architectural unit provided that Landlord determines that such restoration can
be fully paid by Landlord's portion of the award.
ARTICLE XXIV [[[[[ RESERVED ]]]]]
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ARTICLE XXV MISCELLANEOUS
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Section 25.1 ATTORNEYS' FEES AND OTHER EXPENSES. In the event either
----------------------------------
party hereto defaults in the faithful performance or observance of any of the
terms, covenants, provisions, agreements or conditions contained in this Lease,
the party in default shall be liable for and shall pay to the non-defaulting
party all expenses incurred by such party in enforcing any of its remedies for
any such default, and if the non-defaulting party places the enforcement of all
or any part of this Lease in the hands of an attorney, the party in default
agrees to pay the non-defaulting party's reasonable attorneys' fees in such
connection.
Section 25.2 WAIVER. Failure on the part of Landlord to complain of
------
any action or nonaction on the part of Tenant, no matter how long the same may
continue, shall not be deemed to be a waiver by Landlord of any of its rights
hereunder. Further, it is covenanted and agreed that no waiver at any time of
any of the provisions of this Lease by Landlord shall be construed as a waiver
of any of the other provisions of this Lease and that a waiver at any time of
any of the provisions of this Lease shall not be construed a waiver at any
subsequent time of the same provisions. The consent or approval by Landlord to
or of any action by Tenant requiring Landlord's consent or approval shall not be
deemed to waive or render unnecessary Landlord's consent or approval to or of
any subsequent similar act by Tenant.
<PAGE>
Section 25.3 NOTICE. Any notice, request, approval, consent or other
------
communication required or contemplated by this Lease must be in writing, and
may, unless otherwise in this Lease expressly provided, be given or be served by
depositing the same in the United States Postal Service, post-paid and certified
and addressed to the party to be notified, with return receipt requested, or by
delivering the same in person to such party (or, in case of a corporate party,
to an officer of such party), or by prepaid telegram or express overnight mail
service, when appropriate, addressed to the party to be notified. Notice
deposited in the mail in the manner hereinabove described shall be effective
from and after three (3) days (exclusive of Saturdays, Sundays and postal
holidays) after such deposit. Notice given in any other manner shall be
effective only if and when delivered to the party to be notified or at such
party's address for purposes of notice as set forth herein. For purposes of
notice the addresses of the parties shall, until changed as herein provided, be
as follows:
For Landlord: WMF Investments, Inc.
16815 Royal crest Drive, Suite 260
Houston, Texas 77058
Attn: William M. Friedrich, Jr.
For Tenant: RCI Entertainment (Houston), Inc.
505 North Belt Drive, Suite 630
Houston, Texas 77060
Attn: Eric Langan
However, the parties hereto shall have the right from time to time to change
their respective addresses by giving written notice to the other party in the
manner set forth in this Section 25.3.
-------------
Section 25.4 MERGER OF ESTATES. The voluntary or other surrender of
------------------
this Lease by Tenant or a mutual cancellation thereof, shall not constitute a
merger and shall, at the option of Landlord, either terminate all or any
existing subleases or subtenancies, or operate as an assignment to Landlord of
Tenant's interest in any or all such subleases or subtenancies.
Section 25.5 CONSENT BY LANDLORD. In all circumstances under this
---------------------
Lease where the prior consent or permission of Landlord is required before
Tenant is authorized to take any particular type of action, such consent must be
in writing and the matter of whether to grant such consent or permission shall
be within the commercially reasonable judgment of Landlord.
Section 25.6 PRIOR AGREEMENTS SUPERSEDED; ENTIRE CONTRACT; AMENDMENT.
-------------------------------------------------------
Tenant agrees that this Lease supersedes and cancels any and all previous
statements, negotiations, arrangements, brochures, agreements and
understandings, if any, between Landlord and Tenant with respect to the subject
matter of this Lease or the Leased Premises and that this Lease, including
written extrinsic documents referred to herein, is the entire agreement of the
parties, and that there are no representations, understandings, stipulations,
agreements, warranties or promises (express or implied, oral or written) between
Landlord and Tenant with respect to the subject matter of the Lease or the
Leased Premises. It is likewise agreed that this Lease may not be altered,
amended, changed or extended except by an instrument in writing signed by both
Landlord and Tenant.
Section 25.7 TENANT'S AUTHORITY. Both Tenant and the person executing
------------------
this Lease on behalf of the Tenant warrant and represent unto Landlord that (a)
Tenant is a duly organized and legal corporation, in good standing and qualified
to do business in the State of Texas, (b) Tenant has full right, power and
authority to execute, deliver and perform this Lease, (c) the person executing
this Lease on behalf of Tenant is authorized to do so, (d) upon request of
Landlord, such person will deliver to Landlord satisfactory evidence of his or
her authority to execute this Lease on behalf of Tenant, and (e) upon execution
of this Lease by Tenant, this Lease shall constitute a valid and legally
binding obligation of Tenant.
<PAGE>
Section 25.8 COUNTERPARTS. This Lease may be executed in any number
------------
of counterparts, each of which when so executed and delivered shall be an
original, but such counterparts shall together constitute one and the same
instrument.
Section 25.9 GENDER. The pronouns of any gender shall include the
------
other genders and either the singular or the plural shall include the other.
Section 25.10 BROKERAGE. Landlord and Tenant each warrant to the
---------
other than, in connection with the negotiation or execution of this Lease, they
have not dealt with any broker. Tenant and Landlord shall each indemnify the
other against all costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or agent, other than
Broker, claiming the same by, through or under the indemnifying party.
Section 25.11 SUCCESSORS AND ASSIGNS. Subject to the provisions of
------------------------
this Lease, all covenants and obligations as contained within this Lease shall
bind and extend and inure to the benefit of Landlord, its heirs, legal
representatives, successors and assigns, and shall be binding upon Tenant, its
heirs, legal representatives, successors and assigns.
Section 25.12 RECORDING. This Lease (including any Exhibits or Riders
---------
hereto) shall not be recorded and no memorandum hereof shall be recorded without
the prior written consent of Landlord. Any such memorandum shall be executed in
a recordable form and shall comply with applicable Texas laws. In no event
shall such memorandum set forth the rental or other charges payable by Tenant
under this Lease; and any such memorandum shall expressly state that it is
executed pursuant to the provisions contained in this Lease, and is not intended
to vary the terms and conditions of this Lease.
Section 25.13 LEGAL INTERPRETATION. This Lease and the rights and
---------------------
obligations of the parties hereto shall be interpreted, construed and enforced
in accordance with the laws of the State of Texas and the United States. All
obligations of the parties hereto shall be performable in, and all legal actions
to enforce or construe this Lease shall be instituted in the courts of the
county in which the Leased Premises are located. The determination that one or
more provisions of this Lease is invalid, void, illegal or unenforceable shall
not affect or invalidate any other provision of this Lease, and this Lease shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained in this Lease. All obligations of either
party hereunder not fully performed after the expiration or termination of the
Term of this Lease shall survive the expiration or termination of the Term of
this Lease and shall be fully enforceable in accordance with those provisions
pertaining thereto. Article and section titles and captions appearing in this
Lease are for convenient reference only and shall not be used to interpret or
limit the meaning of any provision of this Lease. No custom or practice which
may evolve between the parties in the administration of the terms hereof shall
waive or diminish the right of Landlord to insist upon the performance by Tenant
in strict accordance with the terms hereof. This Lease is for the sole benefit
of Landlord and Tenant, and, without the express written consent thereto, no
third party shall be deemed a third party beneficiary hereof.
<PAGE>
Section 25.14 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies
------------------------------
by this Lease are cumulative and the use of any one right or remedy by either
party shall not preclude or waive its right to use any or all other rights or
remedies. Said rights and remedies are given in addition to any other rights
and remedies the parties may have at law or in equity.
Section 25.15 EXHIBITS AND RIDERS. The Exhibits and Riders (if any)
--------------------
attached to this Lease are hereby incorporated herein and hereby made a part of
this Lease.
IN TESTIMONY WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.
LANDLORD:
WMF INVESTMENTS, INC.
BY: ___________________________________
NAME: WILLIAM M. FRIEDRICH, JR.
TITLE: ___________________
TENANT:
RCI ENTERTAINMENT (HOUSTON), INC.
BY: ___________________________________
NAME: ERIC LANGAN
TITLE: PRESIDENT
<PAGE>
