EXHIBIT 10.4
GAMING MACHINE LEASE AND ADDITIONAL SERVICE AGREEMENT
THIS AGREEMENT is made this 1st of February 1999, by and between
KACHINA GAMING, a division of AutoLend Group, Inc., a New Mexico
headquartered company ("Kachina" or "Lessor"), and Benevolent and
Protective Order of Elk, a New Mexico nonprofit organization ("Proprietor"
or "Lessee"), located at 000 X Xxxxx (Box 619) Silver City.
Preliminary Statement
The State of New Mexico ("State") has adopted the Gaming Control Act which
permits certain nonprofit organizations within the state to possess and
operate gaming machines on their premises for the purpose of raising
revenues for educational and other purposes.
Proprietor is an organization established under New Mexico law which is
qualified to participate in the State's gaming program as a state operator
upon licensing by the State.
Kachina is willing to provide gaming equipment; is familiar with New Mexico
state laws and regulations pertaining to gaming operations, gaming facility
design and set up, and licensing; and has sufficient resources to supply
and assist Proprietor in setting up its gaming machines in strict
accordance with state law upon its licensing as a gaming machine
distributor by the State.
Proprietor desires to retain Kachina to assist in setting up its gaming
machine operation ("Project") and provide all gaming equipment.
NOW THEREFORE, in consideration of the mutual promises and undertakings set
forth below, the adequacy and sufficiency of which as consideration to
establish a legally binding contract is expressly acknowledged by both
parties, the parties agree as follows:
1. Kachina's Services. Kachina will provide the following services
("Services") to Proprietor at the location described in Exhibit A ("Premises"),
attached to this agreement:
A. Lease and deliver gaming laboratory approved gaming machines, computer
software and related equipment, Exhibit B ("Equipment") for Proprietor's
Project;
B. Provide additional services from the following list;
(1) Assist Proprietor in securing all required licenses for its Project;
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(2) Work with Proprietor to determine the appropriate mix, number and type of
gaming machines and design a gaming machine layout in compliance with State
laws and regulations;
(3) Provide training to the Proprietor with regard to compliance with state
laws, rules and regulations; operation and maintenance of gaming machines;
state reporting requirements; and other subjects required for the
Proprietor to legally and successfully operate its Project in compliance
with state laws;
(4) Service gaming machines on a regular and emergency basis within a
reasonable time period, and provide a toll-free phone number for service
calls;
(5) Assist Proprietor in preparing reports as required by the State;
(6) Collect gaming machine revenues and pay over to Proprietor all such
revenues after deducting taxes and Kachina's fees as set forth below;
(7) Reimburse Proprietor for state license fees, background investigation fees,
operator license fees and work permit fees during the term of this
Agreement on the gaming equipment furnished to Proprietor;
(8) Provide a "house bank loan" if needed;
(9) Provide a loan for facility improvement to ensure the facility meets all
regulatory requirements.
2. Fees to Kachina as Exclusive Gaming Equipment Supplier.
Kachina shall be the exclusive supplier of all gaming equipment permitted by the
Gaming Control Act to Proprietor and to the Premises for the term of this
agreement; and Kachina shall have exclusive access to the coin and currency
boxes on all gaming machines upon the Premises. Fees shall be as follows:
A. In exchange for the delivery and lease of the machines (as in 1.A.
above), Proprietor shall pay Kachina XXXXX of Net Revenues collected.
B. In exchange for any or all of Kachina's additional services (as in
1.B. above, or elsewhere in this agreement), Proprietor shall pay Kachina
another XXXXX of Net Revenues collected.
"Net Revenues" means the total amount of money wagered less pay out of all
prizes and New Mexico Gaming Taxes. If State law and regulations do not
permit fees to be paid to Kachina as described above, Kachina shall have
the option of withdrawing from the agreement, or eliminating some or all
services that are not specifically detailed in 1.A. above.
Proprietor shall not be required to make a per machine payment to terminate
the lease; lease termination shall be governed by
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Section 15. There are no other fees payable to Kachina other than the percentage
payment set out in this Section.
3. Proprietor's Responsibilities. Proprietor shall allow the gaming machines
to be placed in prominent places within the Premises as soon as such gaming
machines are delivered by Kachina. Proprietor shall provide a comfortable,
secure gaming environment and be open during all legal gaming hours at its sole
expense. Proprietor shall furnish Kachina all necessary electrical outlets and
electricity for the operation of its Equipment at Proprietor's sole expense. In
the event any of the Equipment becomes inoperable, Proprietor agrees to notify
Kachina immediately in order for Kachina to provide service to the Equipment or
to replace the Equipment with the same or similar kind or quality of Equipment.
Kachina and Proprietor shall apply to the Gaming Control Board for appropriate
licenses, and any required renewals, in order to be licensed under the Gaming
Control Act for the purpose of conducting gaming as described in the Gaming
Control Act. Such applications shall be filed as soon as practicable after
forms, rules, and regulations are adopted by the Gaming Control Board.
4. Term. The initial term of this agreement shall be for thirty-six from the
date first written above. This agreement will automatically renew for an
additional year and upon the same terms and conditions unless, at least 60 days
before the end of the initial term, one party provides the other with written
notice of renegotiation or cancellation of this agreement.
5. Indemnification and Insurance. Proprietor agrees to indemnify Kachina for
damages to or destruction of Kachina's Equipment on the Premises excluding
normal wear and tear. PROPRIETOR WARRANTS THAT IT WILL USE AND CAUSE ALL
EQUIPMENT TO BE USED IN A LAWFUL MANNER.
Proprietor now and at all times hereafter, agrees to and does hold Kachina,
its members, managers, employees, agents and its
respective successors and permitted assigns harmless from and against all
damages, liabilities, obligations, deficiencies, claims, actions, demands,
judgments, interest, losses, diminution in value, proceedings, costs and
expenses, all of whatever kind or nature, including, without limitation,
reasonable attorneys fees and other legal costs and expenses, incurred by
Kachina as a result of Proprietor's failure to comply with the terms of this
Agreement and/or Proprietor's operation of gaming machines on its Premises.
Proprietor shall secure comprehensive liability insurance in the minimum
amount of $1,000,000 per occurrence and $2,000,000 aggregate from an insurance
company reasonably acceptable to Kachina. Kachina shall be named as an
additional named insured. The policy shall provide that it shall not be canceled
without at least 30 day written notice to Kachina.
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6. Modification, Illegality and Severability. If the rules and regulations
under the Gaming Control Act or of the Gaming Control Board or other local,
state or federal law or regulations, be such that any provisions herein may be
deemed invalid, then the parties agree to modify the Lease as necessary to bring
it into conformity with those rules and regulations, while maintaining the
intent of the parties to the Lease. Any such modification will not affect the
remaining provisions of the Lease. This agreement shall not be effective until
it is reviewed and approved (either specifically or in generic form) by the New
Mexico Gaming Control Board, in accordance with rule 15 NMAC 1.10.32.4.
7. Service, Observation, and Quantity of Machines. Kachina shall service and
maintain the Equipment and keep it in operable condition. Proprietor shall not
open the gaming devices, physically extract money or tokens from them, or
otherwise tamper with them in any manner.
Kachina maintains the right to decide to repair or replace machines. Lessor
shall decide if the usage volume for the location justifies keeping the maximum
number of machines as permitted by law or if fewer machines is appropriate in
the circumstances.
Kachina and its agents and employees shall have the right to enter into and
upon the Proprietor's premises where the Equipment is located, at all reasonable
times during normal business hours, for the purpose of collecting cash from the
machines, maintenance and replacing, inspecting, or observing the use of the
Equipment. However, under no circumstances may Kachina interfere with the
operation of Proprietor's business.
8. Ownership. Proprietor warrants that the Equipment leased under
this Agreement is Kachina's sole and exclusive property. Proprietor further
warrants that the Equipment will be located at the address first set out above.
Proprietor shall have no right or interest in such Property except as expressly
set forth in this Lease. Proprietor shall not mortgage or encumber the Equipment
at any time. If Proprietor leases its premises from a third party, then
Proprietor will use its best efforts to obtain a Landlord's Lien Waiver with
respect to the Equipment. A separate document providing for such waiver will be
provided by Kachina. Any new premises lease entered into by Proprietor after the
execution of this Agreement shall be required to include such a Landlord's Lien
wavier.
Proprietor shall not allow a lien of any nature whatsoever to be filed or
maintained against the Equipment or gaming revenues. If any lien is filed in
contravention of this provision, Proprietor shall notify Kachina and take
immediate steps to remove or satisfy
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it within 10 days of receipt of notice of said lien. If such lien is not removed
or satisfied within 45 days of its filing, Kachina may terminate this agreement
without further notice, and remove its Equipment. All Equipment shall bear the
name "Kachina Gaming" and shall state thereon that said Equipment is the sole
property of Kachina Gaming.
9. Competitive Equipment. During the term of the Lease, or any renewal term
thereof, Proprietor will not enter into any other agreement, lease, purchase
order, or contract of any kind with any other manufacturer, distributor,
supplier, lessor, or vendor of gaming devices, gaming machines, or any other
type of machines or contrivances which feature gambling methods, nor place upon
its premises any form of such equipment which would compete with the purpose,
use, or operation of the Equipment, unless permission is obtained in writing
from Kachina, which may withhold such permission in its sole discretion for any
reason.
10. Records. The State of New Mexico will require that the gaming devices and
gaming machines be connected to its central accounting system which monitors the
operation of those devices and machines. Proprietor agrees it will cooperate
fully with the State (or any of its agencies) and with Kachina in facilitating
this connection.
Kachina and Proprietor will each maintain separate full and complete books and
records regarding the operation and use of the Property as required by law. Each
party may inspect those books and records of the other party which pertain to
the operation and use of the Property upon reasonable written notice to that
party. Reasonable notice is a minimum of seven (7) days.
11. Compliance with Gaming Laws. Proprietor warrants it shall not
knowingly do any act which will cause the leased Property of Kachina to be
confiscated or appropriated by any agency of the State of New Mexico, or any
other government-related agency. In the event any of the Property leased
hereunder is confiscated or appropriated by any such agency, then the Proprietor
shall be responsible to Kachina for the value of the leased Property confiscated
or appropriated, and for any loss of earnings under this Agreement.
12. Remedies. Both parties acknowledge the remedies at law for breach of this
agreement are inadequate given the highly competitive nature of the gaming
machine industry, and the difficulty of finding alternate locations not
committed to existing agreements. Proprietor further acknowledges the unique
nature of this location. Proprietor further acknowledges that the loss of this
location will result in irreparable harm to Kachina. As a result, the parties
agree that either party may petition a court of competent jurisdiction and
obtain a restraining order and/or
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injunction requiring compliance with the terms of this Agreement. The parties
hereto agree that the proper jurisdiction and venue for any action in court to
enforce or interpret this Agreement shall be the Second Judicial District of New
Mexico, Bernadillo County, New Mexico.
Notwithstanding the foregoing, in the event of a breach by Proprietor, in
addition to any other remedy available, Kachina may elect to terminate this
Agreement and remove all Equipment without interference from Proprietor or its
member; and Kachina shall be entitled to liquidated damages in an amount equal
to Kachina's average weekly revenues, prior to said breach, multiplied by the
number of weeks remaining in the unexpired term of this Agreement. The court
will also award attorneys fees, costs, and pre and post judgment interest at the
post judgment interest rate.
13. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns.
Kachina may assign this Agreement without limitation and Proprietor agrees to
any assignment by Kachina during the term of this Agreement. Proprietor shall
not assign this Agreement to any third party. If Proprietor relocates its
business or nonprofit operations, Proprietor shall allow Kachina, at its option
and expense, to transport Kachina's Equipment (or to deliver similar Equipment)
to the new location, under the same terms and condition set forth in this
Agreement.
14. Miscellaneous Terms. In the event that a court of competent jurisdiction
declares any of the conditions or terms herein invalid
or unenforceable for any reason, the remaining provisions shall be given full
force and effect. This Agreement shall be irrevocable by the parties hereto.
Each party to this Agreement warrants and represents that the signatory
hereof on its behalf has full, lawful authority to enter into this agreement.
The parties further certify that there are no reservations or understandings
except as provided in this Agreement. Any prior statements, offers,
representations or understandings are deemed a matter of negotiation only and
are merged into this Agreement which contains the only agreement between the
parties regarding the subject matter described herein. Proprietor further
certifies that there are no contracts or agreements with any other party
regarding the subject matter herein.
15. Termination. This Agreement may be terminated as follows:
(a) By either party for breach of any material term hereof, provided that the
non-breaching party has given written notice of the breach and an
opportunity to the defaulting
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party to cure the breach; and further provided that the breaching party has
failed to cure the breach within 20 days of actual receipt of notice of the
breach or in such other time as may be reasonable given the nature of the
default;
(b) By Kachina it, in the thirty-day period following the end of the first six
months of actual gaming operations, Kachlna provides a minimum of 90 days
advance written notice to Proprietor; in such case, Kachina shall have a
one-time option to unilaterally terminate this agreement;
(c) By either party at the end of the initial term of this agreement upon
providing the other party written notice at least 60 days before the
expiration of the initial term.
16. Notice. Notice under this Agreement shall be deemed sufficient if given by
First Class Mail and facsimile to the address below,
if to Kachina Gaming: if to Proprietor:
Attn.: President Benevolent and Protective Order of Elks
AutoLend Group, Inc, 000 X. Xxxxx
000 Xxxxxxx XX, 0xx Xxxxx Xxxxxx Xxxx XX 88067-0619
Xxxxxxxxxxx, XX 00000 Ph. (000)000-0000
Ph. (000) 000-0000 Fx.
Fx. (505) 768-llll
THE PARTIES HERETO SIGNIFY THEIR AGREEMENT as evidenced by their signatures
below.
KACHINA GAMING PROPRIETOR
A division of AutoLend Group, Inc. Benevolent and Protective Order of Elks
Organization
By: Xxxx X. Xxxxxx(signed and typed) By: R.E. Xxxxxxx (signed)
Vice President, Gaming Its Authorized Agent
Its Authorized Agent Xxxxxx X. Xxxxxxx
Name(Printed)
E.R. Exalted Ruler
Title
