EXHIBIT 10.11
AGREEMENT
THIS AGREEMENT is dated this 16th day of September, 1993 by and among XXXXXX'X
WAGON WHEEL, INC., a Nevada corporation ("Xxxxxx'x"), and HARD ROCK HOTEL, INC.,
a Nevada corporation ("Company").
R E C I T A L S:
X. Xxxxxx'x and the Company are parties to a management agreement dated
August 31, 1993 ("Management Agreement") which provides for certain rights and
obligations of the parties with respect to the Project. Capitalized terms not
otherwise defined herein shall have the same meaning as set forth in the
Management Agreement.
B. The parties would like to provide for additional rights and
obligations with the same effect as if such terms and conditions were set forth
in the Management Agreement.
The parties agree as follows:
1. INDEMNIFICATION TO PROJECT MANAGER. Company agrees to indemnify and
hold Project Manager free and harmless from all loss, liability or cost
(including reasonable attorneys' fees) which is not covered by insurance
proceeds and which Project Manager may sustain, incur or assume as a result of
any claims which may be alleged, made, instituted or maintained against Project
Manager, Xxxxxx, Xxxx Pond, or Company, jointly or severally, arising out of or
based upon the ownership, management, operation, condition or use of the
Project, including, without limitation, injury to persons(s) and damage to
property or business by reason of any cause whatsoever in and about the Project
or elsewhere, including claims by the Hard Rock Cafe for injury or loss of
business; provided, however, Company shall not be liable to indemnify and hold
Project manager harmless from any such uninsured loss, liability or cost
(including costs of defense) which is the result of grossly negligent, willful
misconduct or criminal conduct of Project manager or its employees.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date and year first set forth above.
XXXXXX'X: COMPANY:
XXXXXX'X WAGON WHEEL, INC., HARD ROCK HOTEL, INC.,
a Nevada corporation a Nevada corporation
By: /S/ XXXXXXX XXXXXX By: /S/ XXXXX XXXXXX
---------------------------- ----------------------------
XXXXXXX XXXXXX, XX., XXXXX X. XXXXXX,
Chairman of the Board President
By: /S/ XXXXXXX XXXXXXXXX By: /S/ XXX XXXXXXXX
---------------------------- ----------------------------
XXXXXXX XXXXXXXXX, XXX XXXXXXXX,
President Secretary
By: /S/ XXXXXXXX XXXXXXXXX
----------------------------
XXXXXXXX XXXXXXXXX,
Secretary
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MANAGEMENT AGREEMENT
By and Between
HARD ROCK HOTEL, INC.,
A Nevada corporation
and
XXXXXX'X WAGON WHEEL, INC.,
A Nevada corporation
DATED: August 30, 1993
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MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (hereinafter "Agreement") is made and
entered into in Stateline, Xxxxxxx County, Nevada, as of the 30th day of August,
1993, by and between HARD ROCK HOTEL, INC., a Nevada corporation, with its
principal place of business located at Hwy. 50 and Stateline Avenue, Stateline,
Nevada (hereinafter referred to as "Company"); and XXXXXX'X WAGON WHEEL, INC., a
Nevada corporation, with its principal place of business located at Hwy. 50 and
Stateline Avenue, Stateline, Nevada, (hereinafter referred to as "Project
Manager").
RECITALS
WHEREAS, Company has the rights and expertise in the development,
construction, financing, and management of the Hard Rock Hotel; and
WHEREAS, Xxxxx X. Xxxxxx is a licensee of the Hard Rock xxxx, logo, and
name, and all the exploitation rights with respect thereto in the State of
Nevada and elsewhere, as more particularly described in Section 1.27 below and
is the sole shareholder in Lily Pond Investments, Inc., a Nevada corporation;
and
WHEREAS, Project Manager is a Nevada Gaming Licensee and has expertise as a
developer and owner/operator as well as manager of hotel and casinos; and
WHEREAS, Company, Xxxxxx, Xxxx Pond Investments, Inc., and Project Manager
desire to enter into a series of agreements including a Management Agreement in
order to improve, develop, manage, operate, and maintain a Hard Rock
Hotel/Casino facility located in Las Vegas, Nevada (hereinafter the "Project")
in conformance with the terms and conditions of this Agreement in accordance
with local, state and federal law.
NOW, THEREFORE, in consideration with the mutual covenants contained
herein, the parties agree as follows:
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EXHIBIT 10.12
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounts: . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Annual Operating Budget . . . . . . . . . . . . . . . . . . . . 1
1.4 Annual Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Base Management Fee . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Capital Improvements. . . . . . . . . . . . . . . . . . . . . . 2
1.8 Capital Replacements. . . . . . . . . . . . . . . . . . . . . . 2
1.9 Company's Approval. . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Company's Bank Account. . . . . . . . . . . . . . . . . . . . . 2
1.11 Company's Return Account. . . . . . . . . . . . . . . . . . . . 2
1.12 Consumer Price Index. . . . . . . . . . . . . . . . . . . . . . 2
1.13 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Design, Development & Construction Budget: . . . . . . . . . . 3
1.15 Effective Date: . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 Fiscal Month. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 Furniture, Fixtures and Equipment: . . . . . . . . . . . . . . 4
1.20 Generally Accented Accounting Principles: . . . . . . . . . . 4
1.21 General Manager . . . . . . . . . . . . . . . . . . . . . . . . 4
1.22 Gross Revenues. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 Hotel/Casino. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 Incentive Fee . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 Initial Term. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.26 Lily Pond . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.27 Licensing Agreement . . . . . . . . . . . . . . . . . . . . . . 5
1.28 Xxxx. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.29 Xxxxxx. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.30 Opening: . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 Operating Accounts. . . . . . . . . . . . . . . . . . . . . . . 6
1.32 Operation Costs: . . . . . . . . . . . . . . . . . . . . . . . 6
1.33 Operating Equipment: . . . . . . . . . . . . . . . . . . . . . 8
1.34 Operating Supplies. . . . . . . . . . . . . . . . . . . . . . . 8
1.35 Operational Standards . . . . . . . . . . . . . . . . . . . . . 8
1.36 Pre-Opening . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5
1.37 Pre-Opening Program . . . . . . . . . . . . . . . . . . . . . . 9
1.38 Project: . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.39 Project Manager's Incentive Account . . . . . . . . . . . . . . 9
1.40 Reserve Fund. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.41 Return on Investment. . . . . . . . . . . . . . . . . . . . . . 9
1.42 Site. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.43 Stockholders Agreement. . . . . . . . . . . . . . . . . . . . . 9
1.44 Structure: . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.45 Sublicense Agreement. . . . . . . . . . . . . . . . . . . . . . 10
1.46 Supervisory Agreement . . . . . . . . . . . . . . . . . . . . . 10
1.47 Supervisory Fees. . . . . . . . . . . . . . . . . . . . . . . . 10
1.48 Technical Assistance Services . . . . . . . . . . . . . . . . . 10
1.49 Total Development Cost. . . . . . . . . . . . . . . . . . . . . 10
1.50 Working Capita1 Loans . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 2 TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Initial Term. . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Renewal Terms.. . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Exclusivity.. . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3 ANCILLARY AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 12
3.1 Stockholders Agreement. . . . . . . . . . . . . . . . . . . . . 12
3.2 Supervisory Agreement.. . . . . . . . . . . . . . . . . . . . . 12
3.3 Sublicense Agreement. . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4 SCOPE OF RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . 13
4 (A) (1) Technical Assistance Services. . . . . . . . . . . . . . 13
4 (A) (2) Pre-Opening Program. . . . . . . . . . . . . . . . . . . 14
4 (A) (3) Budget.. . . . . . . . . . . . . . . . . . . . . . . . . 16
4 (A) (4) Financial Capital Requirements.. . . . . . . . . . . . . 16
4 (A) (5) Operational Standards. . . . . . . . . . . . . . . . . . 16
4 (A) (6) Operating Accounts.. . . . . . . . . . . . . . . . . . . 16
4 (A) (7) Developing Pre-Opening Program.. . . . . . . . . . . . . 16
4 (A) (8) Pre-Opening Inspection.. . . . . . . . . . . . . . . . . 17
4 (A) (9) Permits and Licenses.. . . . . . . . . . . . . . . . . . 17
CONSTRUCTION AND RESPONSIBILITIES. . . . . . . . . . . . . . . . . . . . . 17
6
4 (B) (1) Construction Duties. . . . . . . . . . . . . . . . . . . 17
4 (B) (2) Conformance with Specifications. . . . . . . . . . . . . 18
4 (B) (3) Retention of Third Parties.. . . . . . . . . . . . . . . 18
4 (B) (4) Taxes and Assessments. . . . . . . . . . . . . . . . . . 19
OPENING OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 19
4 (C) (1) Permits. . . . . . . . . . . . . . . . . . . . . . . . . 19
4 (C) (2) Equipment and Supplies.. . . . . . . . . . . . . . . . . 19
4 (C) (3) Personnel. . . . . . . . . . . . . . . . . . . . . . . . 20
4 (C) (4) Sales. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4 (C) (5) Maintenance and Repairs. . . . . . . . . . . . . . . . . 22
4 (C) (6) Capital Expenditures. . . . . . . . . . . . . . . . . . 23
4 (C) (7) Compliance with Legal Requirements. . . . . . . . . . . 26
4 (C) (8) Accounting Matters and Fiscal Periods. . . . . . . . . . 27
4 (C) (9) Financial Statements. . . . . . . . . . . . . . . . . . 27
4 (C) (10) Annual Plan. . . . . . . . . . . . . . . . . . . . . . . 28
4 (C) (11) Bank Accounts. . . . . . . . . . . . . . . . . . . . . . 31
4 (C) (12) Priority of Disbursements. . . . . . . . . . . . . . . . 32
4 (C) (13) Adjustment to Bank Account.. . . . . . . . . . . . . . . 33
4 (C) (14) Insurance Coverage. . . . . . . . . . . . . . . . . . . 33
4 (C) (15) Insurance Policies. . . . . . . . . . . . . . . . . . . 34
4 (C) (16) Waiver of Liability. . . . . . . . . . . . . . . . . . . 35
4 (C) (17) Indemnification to Project Manager.. . . . . . . . . . . 35
4 (C) (18) Indemnification to Company.. . . . . . . . . . . . . . . 36
4 (C) (19) Legal Fees, etc.; Procedures.. . . . . . . . . . . . . . 36
4 (C) (20) Indemnified Parties. . . . . . . . . . . . . . . . . . . 37
4 (C) (21) Survival. . . . . . . . . . . . . . . . . . . . . . . . 37
4 (C) (22) Defense. . . . . . . . . . . . . . . . . . . . . . . . . 37
4 (C) (23) Hotel/Casino Brand Store Operations. . . . . . . . . . . 37
4 (C) (24) Lease Agreements. . . . . . . . . . . . . . . . . . . . 38
4 (C) (25) Consultation.. . . . . . . . . . . . . . . . . . . . . . 38
4 (C) (26) Inventory, Working Capita1 and Operating Expenses. . . . 38
4 (C) (27) Maintenance Agreements. . . . . . . . . . . . . . . . . 39
4 (C) (28) Employee Benefit Plans.. . . . . . . . . . . . . . . . . 39
4 (C) (29) Legal Action.. . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 5 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.1 Base Management Fee.. . . . . . . . . . . . . . . . . . . . . . 39
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5.2 Incentive Fee.. . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3 Distributions.. . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 6 DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.1 Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.2 Default by Project Manager. . . . . . . . . . . . . . . . . . . 41
6.3 Default by Company. . . . . . . . . . . . . . . . . . . . . . . 42
6.4 Curing Default. . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 7 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.2 Terminating Under Default.. . . . . . . . . . . . . . . . . . . 43
7.3 Condemnation or Destruction. . . . . . . . . . . . . . . . . . 44
7.4 Failure to Achieve Financial Results. . . . . . . . . . . . . . 44
7.5 Transfer of Interest. . . . . . . . . . . . . . . . . . . . . . 44
7.6 Sale or Lease of Project. . . . . . . . . . . . . . . . . . . . 45
7.7 Reduction of Interest.. . . . . . . . . . . . . . . . . . . . . 45
7.8 Termination Notice. . . . . . . . . . . . . . . . . . . . . . . 45
7.9 Rights and Remedies Upon Termination. . . . . . . . . . . . . . 45
7.10 Pre-Opening Termination.. . . . . . . . . . . . . . . . . . . . 45
7.11 Post-Opening Termination. . . . . . . . . . . . . . . . . . . . 45
7.12 Winding Up. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 8 MORTGAGES AND DEBT ENCUMBRANCES . . . . . . . . . . . . . . . . 46
8.1 Non-Encumbrance.. . . . . . . . . . . . . . . . . . . . . . . . 46
8.2 Notices to Mortgagees.. . . . . . . . . . . . . . . . . . . . . 47
8.3 Cure by Mortgagee. . . . . . . . . . . . . . . . . . . . . . . 47
8.4 Access to Premises. . . . . . . . . . . . . . . . . . . . . . . 47
8.5 Foreclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.6 Estoppel Certificates.. . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 9 CONDEMNATION AND DESTRUCTION. . . . . . . . . . . . . . . . . . 48
9.1 Condemnation and Destruction. . . . . . . . . . . . . . . . . . 48
9.2 Continuation. . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.3 Destruction.. . . . . . . . . . . . . . . . . . . . . . . . . . 48
8
9.4 Termination.. . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.2 Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.3 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . 50
10.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 50
10.6 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.7 Waiver and Modification.. . . . . . . . . . . . . . . . . . . . 51
10.8 Attorney's Fees.. . . . . . . . . . . . . . . . . . . . . . . . 51
10.9 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . 52
10.10 Understandings and Agreements. . . . . . . . . . . . . . . . . 52
10.11 Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.12 Power of Authority. . . . . . . . . . . . . . . . . . . . . . . 52
10.13 Interest and Penalties. . . . . . . . . . . . . . . . . . . . . 52
10.14 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.15 Incorporation of Documents. . . . . . . . . . . . . . . . . . . 53
10.16 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXHIBIT "A" CURRENT PROJECT MANAGER AFFILIATES . . . . . . . . . . . 55
EXHIBIT "B" PROJECTED ANNUAL OPERATING BUDGET. . . . . . . . . . . . 56
EXHIBIT "C" FIRST FISCAL YEAR'S ANNUAL PLAN. . . . . . . . . . . . . 57
EXHIBIT "D" STOCKHOLDERS AGREEMENT . . . . . . . . . . . . . . . . . 58
EXHIBIT "E" DESIGN, DEVELOPMENT AND CONSTRUCTION BUDGET. . . . . . . 59
EXHIBIT "F" LICENSE AGREEMENT . . . . . . . . . . . . . . . . . . . 60
EXHIBIT "G" OPERATIONAL STANDARDS. . . . . . . . . . . . . . . . . . 61
EXHIBIT "H" SITE . . . . . . . . . . . . . . . . . . . . . . . . . . 62
EXHIBIT "J" SUPERVISORY AGREEMENT . . . . . . . . . . . . . . . . . 63
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EXHIBIT "K" TARGETS FOR RETURN ON INVESTMENT . . . . . . . . . . . . 64
EXHIBIT "L" MINIMUM FINANCIAL RESULTS . . . . . . . . . . . . . . . 65
EXHIBIT "M" POST-OPENING TERMINATION FORMULA . . . . . . . . . . . . 67
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ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the respective meanings
indicated below. Terms not capitalized or otherwise defined herein shall
have the same meaning as in the Stockholders Agreement (as defined below).
1.1 ACCOUNTS: Those bank or financial institution accounts as are
necessary for the day-to-day and long-term management and operation of the
Project, including the Operating Costs Bank Account as defined in Section
4(C)(11)(a) (as defined below).
1.2 AFFILIATE: Any person or entity which, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with the subject entity. "Control" shall mean having ownership
of twenty percent (20%) or more of the (i) voting equity interests in an
entity; (ii) partnership interests in a partnership; (iii) general
partnership interests in a limited partnership; or (iv) voting or economic
benefit of any other type of entity. The current Affiliates of Project
Manager as of the date of this Agreement are set forth in Exhibit "A"
attached hereto and incorporated herein.
1.3 ANNUAL OPERATING BUDGET: operating Budget for each Fiscal Year,
as determined by Project Manager and approved by Company, projecting an
estimated income, wages and salaries, prizes, utilities, insurance, marketing
expenses, supervisorial costs, and any other overhead costs associated with
the Project, including all fees and reimbursements to Project Manager
provided for in this Agreement. A copy of the Projected Annual Operating
Budget for the upcoming Fiscal Year will be attached hereto and incorporated
herein as Exhibit "B" within one hundred eighty (180) days of execution of
this Agreement.
1.4 ANNUAL PLAN: stimated income and expense statements and budget
estimates for the upcoming Fiscal Year including pre-opening budget and
operations budget and programs. This plan shall also provide an Annual
Operating Budget for each upcoming Fiscal Year. The plan shall also include
budgets and estimates for expenditures for revisions, alterations,
rebuilding, replacements, additions and improvements in and to the Project,
the site, the building, and the furnishings and equipment, estimated working
capital requirements and expenditures with estimated payment and deposit
dates. The Annual Plan shall also include a concise written
1
narrative regarding Operating standards, policies and procedures for
day-to-day operations and projections concerning rooms, food, beverage,
entertainment, hotel merchandise sales, labor, credit, marketing and
advertising, and related matters. A copy of the First Fiscal Year's Annual
Plan will be attached hereto and incorporated herein as Exhibit "C" within
one hundred eighty (180) days of execution of this Agreement.
1.5 BASE MANAGEMENT FEE: Base Management Fee to be equal to four
percent (4%) of the annual Gross Revenues for each Fiscal Year to be payable
for each Fiscal Month, and as further defined in Section 5.1.
1.6 BOARD OF DIRECTORS: The Board of Directors shall be the Board of
Directors of Company as defined in the Stockholders Agreement, consisting of
seven (7) Managers (hereinafter "Board").
1.7 CAPITAL IMPROVEMENTS: All revisions, alterations, rebuilding,
replacements, additions and improvements in and to the Site, the Structure,
the Furniture, Fixtures and Equipment, other than Operating Equipment, as
determined under Generally Accepted Accounting Principals (as defined below).
1.8 CAPITAL REPLACEMENTS: Any modifications, refurbishing,
remodeling, alterations, additions, rebuilding or renovation of any portion
of the Project, including the Furniture, Fixtures, and Equipment associated
with the Project, as determined under Generally Accepted Accounting
Principals (as defined below).
1.9 COMPANY'S APPROVAL: A simple majority vote of the then existing
Board with respect to any matter submitted to Company for approval will be
required unless the context herein, or in a collateral instrument, requires a
greater vote.
1.10 COMPANY'S BANK ACCOUNT: That Bank Account established by Company
in which only Company or its designees are entitled or authorized to draw
upon said account, as more particularly described in Section 4(C)(11)(d).
1.11 COMPANY'S RETURN ACCOUNT: The account established on the books
and records of the Project which is more particularly described in Section
5.2.
1.12 CONSUMER PRICE INDEX: The "U.S. City Average, All Items" Consumer
Price Index (C.P.I.) for All Urban Consumers published by the Bureau of Labor
Statistics of the United States Department of Labor (Base: 1982-1984=100),
2
or any successor index thereto. If the Price Index is hereafter converted to
a different standard reference base or otherwise revised, any determination
hereunder which uses the Price Index shall be made with the use of such
conversion factor, formula or table for converting the Price Index as may be
published by the Bureau of Labor Statistics, or, if the Bureau of Labor
Statistics shall no longer publish the same, then with the use of such
conversion factor, formula or table as may be published by Prentice Hall,
Inc., or failing such publication, by any other nationally recognized
publisher of similar statistical information. If the Price Index shall cease
to be published, then for the purposes of this Agreement there shall be
substituted for the Price Index such other similar index as Company and
Project Manager shall reasonably agree.
1.13 DEFAULT: Those events as defined in Article 6.
1.14 DESIGN, DEVELOPMENT & CONSTRUCTION BUDGET: Total invested capital
in Project, approved by Company, Lily Pond (as defined below), and Project
Manager, and subject to periodic adjustments as approved by Company,
including real estate, all costs associated with structure and improvements,
allowances for Furniture, Fixtures and Equipment attached or used within the
Site and Structure, Construction, and Design Fees, Permits and Licenses,
Pre-Opening Program Costs, capitalized interest, and all associated financing
fees through the date that the Project receives a final Certificate of
Occupancy from the applicable governmental authority, but in no event not to
exceed EIGHTY MILLION DOLLARS ($80,000,000.00). A copy of the Design,
Development & Construction Budget will be attached hereto and incorporated
herein as Exhibit "E" within one hundred eighty (180) days of execution of
this Agreement.
1.15 EFFECTIVE DATE: Shall mean the latter date upon which all parties
have properly executed this Agreement, the Stockholders Agreement, and the
date the articles of incorporation of the Company have been filed.
1.16 FISCAL MONTH: Individual monthly accounting period ending on the
close of business on the last day of each calendar month.
1.17 FISCAL YEAR: Annual accounting period ending on the close of
business at the end of November 30th of each year.
1.18 FORCE MAJEURE: During the Term, or prior to the commencement
thereof, any (i) strike(s), lockout(s) or labor dispute(s); (ii) inability to
obtain labor or
3
materials, or reasonable substitutes therefore; or (iii) acts of God,
governmental restrictions, regulations or controls, enemy or hostile
governmental action, civil commotion, fire or other casualty, or other
conditions similar or dissimilar to those enumerated in this item (iii)
beyond the reasonable control of the party obligated to perform. If Company
or Project Manager shall, as the result of any of the above-described events,
fail punctually to perform any obligation on its part to be performed under
this Agreement, then such failure shall be excused and not be a breach of
this Agreement by the party in question, but only to the extent occasioned by
such event. If any right or option of either party to take any action under
or with respect to this Agreement is conditioned upon the same being
exercised within any prescribed period of time and such named date, then such
prescribed period of time and such named date shall be deemed to be extended
or delayed, as the case may be, for a period equal to the period of the delay
occasioned by any above-described event.
1.19 FURNITURE, FIXTURES AND EQUIPMENT: All Furniture, Fixtures and
Equipment (exclusive of Operating Equipment and fixtures attached to and
incorporated as a part of the Project) reasonably required for the operation
of the Project pursuant to the terms of this Agreement including, but not
limited to, office furniture, specialized equipment necessary for the
operation of a first class hotel and casino, food and beverage equipment,
laundries, and recreational facilities. Such items shall also include
specialized casino equipment, including cashier, money sorting and money
counting equipment, slot machines, table games, video gaming equipment, and
other similar gaming equipment as well as surveillance equipment. Above items
shall also include computer and communication systems.
1.20 GENERALLY ACCENTED ACCOUNTING PRINCIPLES: Accepted accounting
procedures and practices for the maintenance of books of account and records
on a daily, monthly and annual basis for hotel/casino operations, also known
as "GAAP".
1.21 GENERAL MANAGER: The individual selected and appointed by Project
Manager to represent the Project Manager at the Project and to manage and
supervise the activities of the Project on a day-to-day basis.
1.22 GROSS REVENUES: All revenues and income of any kind derived
directly or indirectly from the use or operation of the Project determined
substantially in accordance with Generally Accepted Accounting Principles
including, without limitation, total room sales; and gaming 'Gross Revenues',
as that term is defined in Nevada Revised Statutes 463.0161 as of the date of
this Agreement; and food and beverage sales; gross receipts from all
entertainment programs and mer-
4
chandise sales; and telephone, telegraph and telex revenues; rental or other
payments from lessees, sublessees and concessionaires and others occupying
space or rendering services at the Project (but not the gross receipts of
such lessees, sublessees or concessionaires unless the same is part of such
lessees', sublessees', or concessionaires' rental payments); and the actual
cash proceeds of business interruption or similar insurance and of temporary
condemnation awards after deducting necessary expenses in connection with the
adjustment or collection of such proceeds; excluding, however, any proceeds
from the sale, financing or refinancing or other disposition of the Project;
any proceeds from the sale, financing, refinancing or other disposition of
the Furniture, Fixtures and Equipment or other capital assets; proceeds of
any fire, extended coverage or other insurance policies (excluding any
proceeds of business interruption or similar insurance, as provided above);
condemnation (other than temporary) awards and other amounts received by
Company in lieu of or threat of condemnation; credits or refunds to guests,
gratuities or service charges or other similar receipts which Company or
Project Manager pays to employees, lessees or concessionaires; excise, sales,
gross receipts, admission, entertainment, tourist, taxes or similar charges
collected from patrons or guests or as part of the sale price for goods,
services or entertainment; any sum and credits received for lost or damaged
merchandise; any interest paid with respect to any Reserve Fund or Bank
Account; and the cost or value of any complimentary goods or services
(including, but not limited to, rooms, food and beverages) given or awarded
to employees, patrons or guests of the Project.
1.23 HOTEL/CASINO: As defined in Section 1.38, and including all
Furniture, Fixtures, and Equipment, Operating Equipment and Operating
Supplies as defined in Sections 1.19 and 1.33 and 1.24.
1.24 INCENTIVE FEE: All fees due and owing to Project Manager as
defined pursuant to Article 5.2.
1.25 INITIAL TERM: Shall commence on the date of execution of this
Agreement, plus a twenty-five (25) year period, commencing on the Opening as
set forth in Section 1.30.
1.26 LILY POND: Lily Pond Investments, Inc., a Nevada corporation,
wholly owned by Xxxxx X. Xxxxxx, assignee, or his estate.
1.27 LICENSING AGREEMENT: The agreement entered into between Xxxxxx
and Hard Rock Cafe, Licensing Corporation, a New York corporation ("HRCLC"),
5
whereby "HRCLC" has granted to Xxxxx X. Xxxxxx an exclusive license to use
the brand, name, xxxx and logo of "HARD ROCK HOTEL", pursuant to certain
terms and restrictions, a copy of which is attached hereto and incorporated
herein as Exhibit "F".
1.28 XXXX: The registered name, trademark, service xxxx, and
associated logos of the brand "Hard Rock Hotel".
1.29 XXXXXX: Xxxxx X. Xxxxxx, the individual or any successor
designated by Xxxxx X. Xxxxxx, or his successor, or the estate of Xxxxx X.
Xxxxxx, or his successor.
1.30 OPENING: Date on which the Project is first opened to the public
and commences business.
1.31 OPERATING ACCOUNTS: Bank or financial institution accounts
maintained by Project Manager in the name of the Project for the day-to-day
management of Project.
1.32 OPERATION COSTS: All costs and expenses of maintaining,
conducting and supervising the operation of the Project incurred pursuant to
this Agreement or as otherwise specifically provided herein which are
properly attributable to the Fiscal Month or Fiscal Year under consideration
under Generally Accepted Accounting Principles including, without limitation:
(a) the cost of all food and beverages sold or consumed
by Company, Project Manager, concessionaires or otherwise and of all
Operating Equipment and Operating Supplies, with the exception of the cost of
food and beverages and other items sold or consumed by lessees and
sublessees;
(b) salaries, wages and other benefits of Project
personnel, including costs of payroll taxes and employee benefits and all
other similar expenses not otherwise specifically referred to in this
definition which are referred to as "Administrative and General Expenses"
under Generally Accepted Accounting Principles. The salaries, wages,
benefits, and expenses including travel expenses of other employees or
executives of Project Manager, its Affiliates, Xxxxxx, Xxxx Pond or of
specialists not regularly employed by Project Manager, Xxxxxx, and/or Lily
Pond for use in the Project with respect to those individuals allocating time
or services to the Project on a non-exclusive basis up to maximum amounts to
be agreed
6
upon in writing by Company and Project Manager from time to time. Except as
herein otherwise expressly provided, all remaining salaries, wages, or other
benefits of employees or executives of Project Manager, its Affiliates,
Xxxxxx, and/or Lily Pond will not be deemed to be Operating Costs;
(c) the cost of all other goods and services obtained by
Project Manager in connection with its operation of the Project including,
without limitation, heat and utilities, office supplies and all services
performed by third parties, including leasing and expenses in connection with
telephone and data processing equipment and such other equipment as Company
shall designate;
(d) the cost of repairs to and maintenance of the Project
to the extent not paid for by the actual cash proceeds of any fire or casualty
insurance after deducting necessary expenses in connection with the adjustment
or collection of such proceeds;
(e) insurance premiums for all insurance maintained by
Company or Project Manager as provided in this Agreement with respect to the
Project, including, without limitation, property damage insurance, public
liability insurance, workers' compensation insurance, or insurance required
by similar employee benefits acts and such business interruption or other
insurance as may be provided for protection against claim, liabilities and
losses incurred with respect to deductibles applicable to the foregoing types
of insurance;
(f) all taxes, assessments, water/sewer charges, and
other charges (other than federal, state or local income taxes and franchise
taxes or the equivalent) payable by or assessed against Project Manager or
Company with respect to the operation of the Project;
(g) legal fees and fees of any accountants for services
related to the operation of the Project (including, but not limited to, the
audits required under Article 4 (C) (8) (b));
(h) the costs and expenses of technical consultants and
specialized operational experts, including key personnel of Xxxxxx, Xxxx
Pond, and Project Manager, as agreed on from time to time, for specialized
services in connection with non-recurring work on operational, functional,
decorating, design or construction problems and activities (but only to the
extent not included in the Design, Development and Construction Budget);
7
(i) all expenses for marketing the Project, including all
expenses of advertising, sales promotion and public relations activities;
(j) all Base Management and Incentive Fees;
(k) Supervisory Fees as defined in Section 1.47;
(l) to the extent not already excluded from Gross
Revenues, real estate taxes, ad valorem taxes, personal property taxes,
utility taxes and other taxes (as those terms are defined in the Generally
Accepted Accounting Principles), assessments for public improvements, and
municipal, county and state license and permit fees; and
Operating costs shall not include (i) depreciation and amortization
except as otherwise provided in this Agreement; (ii) debt service on any
mortgage; (iii) principal and interest payments on Working capital Loans;
(iv) payments allocated or made to the Reserve Fund; (v) expenses incurred
pursuant to the Design, Development and Construction Budget; (vi) any amount
which Company and Project Manager agree is a cost attributable to the
organization of Company (e.g., incorporation or other formation costs of
Company, preparation of Company's tax returns, audits of Company's books and
records, etc.) and should be considered an expense of Company.
1.33 OPERATING EQUIPMENT: All equipment necessary for the day-to-day
operation of the Hotel/Casino, including but not limited to, chips, tokens,
uniforms, playing cards, glassware, linens, silverware, utensils, and
dishware.
1.34 OPERATING SUPPLIES: All food, beverage, and immediately
consumable items utilized in operating the Project such as soap, cleaning
materials, matches, stationary, brochures, folios, and other similar items.
1.35 OPERATIONAL STANDARDS: As defined in Section 4 (A) (5), said
standards shall address all customer service departments where there is
customer contact. Department, position and activity standards will contain,
at a minimum, customer service and contact elements, procedural and personnel
service standards, staff or casting and scheduling requirements, as well as
staffing effectiveness and standards fulfillment tracking, and quality
assurance measurements and controls. A copy of
8
the Operational standards will be attached hereto and incorporated herein as
Exhibit "G" within one hundred eighty (180) days of execution of this
Agreement.
1.36 PRE-OPENING: That time period from Effective Date to the Opening
of the Project.
1.37 PRE-OPENING PROGRAM: As part of the Design, Development and
Construction Budget, a concise, written action plan delineating the key
actions to be taken by Project Manager to properly prepare the Project for a
successful opening including recruitment, training, marketing, advertising,
building preparation, Furniture, Fixture and Equipment installation,
operations planning and cost estimates.
1.38 PROJECT: A 305-room hotel and casino, 28,000-square feet of
casino space, two restaurants, several bars, Hotel Brand retail store,
parking garage, outdoor swim park, and recreational facilities located on 7.6
acres in Las Vegas, Nevada, on the Site (as defined below) together with all
entrances, exits, rights of ingress and egress, easements, and appurtenances
thereunto at the intersection of Paradise Road and Xxxxxx Avenue.
1.39 PROJECT MANAGER'S INCENTIVE ACCOUNT: The account established on
the books and records of the Project which is more particularly described in
Section 5.2.
1.40 RESERVE FUND: A fund maintained for capital replacements and
improvements for the Project to be maintained on the books of the Project by
Project Manager, with said fund being maintained in designated bank accounts
in the name of Owner and/or the Project.
1.41 RETURN ON INVESTMENT: Negotiated minimum return on investment at a
mutually acceptable cost of capital level which shall be defined and initially
established in Section 5.2.
1.42 SITE: Parcel or parcels of real estate located in Las Vegas,
Nevada, as more particularly described in Exhibit "H" attached hereto and
made a part hereof.
1.43 STOCKHOLDERS AGREEMENT: The Stockholders Agreement of Hard Rock
Hotel, Inc., a Nevada corporation, Xxxxxx'x Wagon Wheel, Inc. and Lily Pond
Investments, Inc., a Nevada corporation, wholly owned by Xxxxxx. A copy of
the document is attached hereto and incorporated herein as Exhibit "D".
9
1.44 STRUCTURE: All buildings, structures and improvements now located
or to be constructed on the Site and all fixtures and equipment attached to,
forming a part of and necessary for the operation of such buildings,
structures or improvements as a Project as contemplated by this Agreement
(including, without limitation, heating, lighting, plumbing, sanitary, air
conditioning, laundry, refrigeration, kitchen, elevator and similar items or
systems), guest rooms, and such (i) restaurants, bars and banquet, meeting
and other public areas, (ii) commercial space, including concessions and
shops, (iii) garage and parking space, (iv) storage and service areas, (v)
recreational facilities and areas, (vi) public grounds and gardens, (vii)
permanently affixed signage, (viii) aquatic facilities, and (ix) other
facilities and appurtenances, as reasonably necessary for the operation of
the building as a Project in accordance with the standards set forth in this
Agreement.
1.45 SUBLICENSE AGREEMENT: Any agreements or assignments entered into
by and between Xxxxxx, Xxxx Pond, and/or Company, incorporating by reference
the Licensing Agreement, whereby Company receives a license to use the name,
xxxx, and logo of "Hard Rock Hotel", in Xxxxx County, Nevada pursuant to the
terms and restrictions of the Licensing Agreement, a copy of said Sublicense
Agreement is attached hereto and incorporated herein as Exhibit "I".
1.46 SUPERVISORY AGREEMENT: Agreement between Company and Xxxxxx giving
Xxxxxx certain supervisory and oversight rights for a term of fifty-five (55)
years and a two percent (2%) fee, the supervisory fee, to be payable to Xxxxxx
based upon annual Gross Revenues which Agreement shall also incorporate the
Operational Standards. A copy of the Supervisory Agreement is attached hereto
and incorporated herein as Exhibit "J".
1.47 SUPERVISORY FEES: A fee to be payable from Company to Xxxxxx for
supervisory and oversight services at a sum of two- percent (2%) of Annual
Gross Revenues of Project.
1.48 TECHNICAL ASSISTANCE SERVICES: See Section 4 (A) (l).
1.49 TOTAL DEVELOPMENT COST: The sum of the total development cost of
the Project through the date the Project receives a final certificate of
occupancy from the relevant governmental authority, to the extent approved by
the approved mortgagee (including all hard and soft costs and all Pre-Opening
expenses, but excluding post completion operating shortfall reserves).
Within thirty (30) days following the Opening of the Project, Company and
Manager shall execute an addendum to this
10
Agreement setting forth the actual amount of the Total Development Cost,
which shall not exceed EIGHTY MILLION DOLLARS ($80,000,000.00).
1.50 WORKING CAPITA1 LOANS: Those funds furnished by Company to
Project Manager, upon the notification of Project Manager to Company of any
deficiency of a minimum balance as required by Section 4 (C) (11) (a).
Company shall furnish Project Manager with sufficient funds to make up any
said deficiency, which shall constitute a "Working Capital Loan", and shall
bear interest at a rate equal to the Prime Rate in effect from time to time
at First Interstate Bank of Nevada, N.A., or any successor thereto, plus
three (3) percentage points.
ARTICLE 2
TERM
2.1 INITIAL TERM. Initial term of this Agreement shall commence as
of the day of execution hereof, plus a period of twenty-five (25) years
commencing at 12:01 a.m. on the Opening, and shall terminate on midnight the
day before the anniversary date of Opening in the year 2018, subject to
sooner termination or extension as provided herein.
2.2 RENEWAL TERMS. Project Manager shall have an option to renew and
continue this Agreement for a period of fifteen (15) years (hereinafter "2nd
Term"). Project Manager shall also have an option to continue this Agreement
for a fifteen (15) year renewal period at conclusion of the 2nd Term which
shall be designated as the "3rd Term". Project Manager shall notify Company,
in writing, of its intent to exercise its option to perform under the renewal
term not less than one year prior to the date on which each respective
renewal term is to commence. Notwithstanding the foregoing, the Project
Manager's right to exercise said options is subject to the terms and
conditions of this Agreement regarding defaults by Project Manager or any
event which would constitute the event of default under Article 6 of this
Agreement. If at the time of exercise of the Option by Project Manager,
Project Manager has an uncured default or is not diligently pursuing cure of
default, then the Option for renewal shall be deemed null and void. Further,
said Option shall be deemed null and void with respect to the exercise of
termination by either party pursuant to Article 7.
2.3 EXCLUSIVITY. In the event the Project Manager participates in
other "Hard Rock Hotel" projects that include as a source of revenue a casino
operation, pursuant to Section 3.3 of the Stockholders Agreement, Project
Manager shall have
11
the right to serve as project manager for such future project(s) upon similar
terms and conditions as stated herein. In the event that the parties cannot
agree upon the terms and conditions of the management agreement of such
future project(s), if any, the dispute shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules. The rights and obligations of the Project
Manager, pursuant to this Section 2.3, shall in all cases be subject to
identical rights of termination as set forth in Article 6 and Sections 7.4,
7.5, and 7.7 of this Agreement and Section 3.3 of the Stockholders Agreement.
ARTICLE 3
ANCILLARY AGREEMENTS
3.1 STOCKHOLDERS AGREEMENT. Lily Pond and Project Managers Stockholders
Agreement concerning the formation of Hard Rock Hotel, Inc., a Nevada
corporation, and the development, ownership and control of the Project. The
Stockholders Agreement shall be the controlling document with respect to the
Project, and shall be deemed controlling with respect to any conflicts between
this Management Agreement, the Supervisory Agreement, and the stockholders
Agreement.
3.2 SUPERVISORY AGREEMENT. Xxxxxx and Company shall enter into a
Supervisory Agreement whereby Xxxxxx is given certain supervisory and
oversight rights with respect to the Project. This Agreement shall contain
Operational Standards by which both parties shall operate under the terms of
the Stockholders Agreement and subject to this Management Agreement. Xxxxxx
and Company agree to execute this Supervisory Agreement, and will assist with
the development, ownership and management of the Project. Any conflicts
between the Management and Supervisory Agreement, not addressed in the
Stockholders Agreement shall be resolved by Company, Project Manager and
Xxxxxx in accord with the Annual Plan, Operational standards, Annual
Operating Budgets and best business judgment to carry out the intent of the
parties.
3.3 SUBLICENSE AGREEMENT. Lily Pond and Company shall enter into a
Sublicense Agreement whereby Company is given an exclusive right and, license
to use the name, logo and Xxxx of the "Hard Rock Hotel" in Xxxxx County,
Nevada, subject to the terms and conditions of the Licensing Agreement as set
forth in Exhibit "F". Lily Pond represents and warrants that Lily Pond has a
license to use the Xxxx and the right to sublicense the use of the Xxxx, and
the same is registered with the
12
United States Department of Commerce. Lily Pond further warrants that Xxxxxx
has an exclusive license to parts of the Western United States, including the
State of Nevada and foreign countries for use of the Xxxx as more
particularly described in Exhibit "F". Pursuant to said Licensing Agreement,
Project Manager agrees that it shall maintain and promote the Project and all
related goods and services, as set forth in this Agreement, at the same level
of quality required in the terms of the Licensing Agreement and Sublicense
Agreement. Project Manager further agrees that it will protect the Xxxx as
is required by the terms of said License and Sublicense Agreement to the best
of its ability, and will notify Lily Pond of any known infringement thereon.
Lily Pond and Company shall simultaneously execute said Sublicense Agreement
at the time of execution of this Agreement.
ARTICLE 4
SCOPE OF RESPONSIBILITIES
A.
PRE-OPENING RESPONSIBILITIES. For the period commencing as of the date hereof
and until the opening date (hereinafter the "Pre-Opening"), the Project
Manager shall furnish the following benefits, services, and facilities:
4 (A) (1) TECHNICAL ASSISTANCE SERVICES. Project Manager shall make
available Technical Assistance Services embodying Project Manager's unique
experience in the designing and planning of modern first class hotels and
casinos by causing specialists to prepare a preliminary, architectural and
construction program and general outline for furnishing and equipping the
Project as is provided in the Stockholders Agreement. Project Manager shall
also provide advice, guidance, and supervision to Owner in connection with
the planning, designing, equipping, decorating, and furnishing of the
building relative to Furniture, Fixtures and Equipment. In this regard,
Project Manager shall prepare and submit for approval to the Company, a
Design, Development and Construction Budget with respect to the construction,
design, Furniture Fixtures and Equipment for the Project. Project Manager
shall also designate a construction coordinator for the purpose of
coordinating and effectuating the work of the various agents and specialists.
In the performance of such duties, Project Manager agrees to make available
to the Company the following:
13
(a) All information which Project Manager has with respect to
costs, quality, or otherwise of, Furniture, Fixtures and Equipment generally
used in Projects, including Furniture, Fixtures and Equipment used in other
hotel and casinos owned or operated by Project Manager; and
(b) All of its facilities and contacts for the purchase of
equipment, furnishings, and other personal property appropriate for the
Project and in connection therewith, to make purchases in accordance with the
Design, Development and Construction Budget approved by the Company. Title
to any such purchases shall be taken in the name of Company. All purchase
requisitions and orders shall be approved by the Company, and duplicates
thereof shall be sent to Project Manager.
Company shall reimburse Project Manager for all costs and expenses
incurred by Project Manager in connection with the rendition of the Technical
Assistance Services herein described, but not to exceed amounts set forth in
the Design, Development and Construction Budget prepared by Project Manager
and approved by Company except as may be modified by mutual agreement of
parties from time to time. Said costs shall include managers, attorneys, or
employees (on an allocated basis, in relation to proportion of time spent, in
the case of officers and employees not exclusively assigned to Project) or by
specialists not regularly employed by Project Manager, including related
business and travel expenses incurred by said individuals. Anything
contained herein or in the Design, Development and Construction Budget to the
contrary notwithstanding, Project Manager, at its sole discretion, may incur
such costs and expenses in connection with the rendition of only those
services as defined in this Section 4 (A) (l), it deems necessary or
desirable provided the aggregate of such costs shall not exceed the overall
Design, Development and Construction Budget limit therefore. Monthly
statements covering such costs and expenses shall be submitted by the Project
Manager to, and shall be paid by, the Company within thirty (30) days
thereafter.
4 (A) (2) PRE-OPENING PROGRAM. Project Manager further agrees to the
following:
(a) Prepare and submit for Company approval within one- hundred
eighty (180) days after the Effective Date, add put into effect within thirty
(30) days after receiving such approval, a plan for the organization,
services, sales and marketing program of the Project, and to engage a General
Manager and such assistants as may be necessary; and
14
(b) In the performance of the duties set forth in sub-paragraph
4 (A) (2) above, and consistently with the approved plan herein mentioned, to
direct to the attention of the Company and to consummate for the benefit of
the Company subject to its prior approval, agreements and arrangement with
concessionaires, licensees, tenants, suppliers, sub-contractors or other
intended users of the facilities of the Project to initiate and make efforts
to conclude programs and commitments for the period after the opening date of
the Project; and
(c) To recruit and train for and on behalf of the Company the
initial staff of the Project through such training programs and other
training techniques as Project Manager shall deem advisable and to test the
proposed operation of the Project by furnishing services usually necessary in
the operation of a hotel/casino, preparing the serving of food and beverages
and generally operating the Project for a test period to be agreed upon by
Company and Project Manager, which shall not exceed sixty (60) days,
immediately prior to the Opening date.
Project Manager shall submit to Company for its approval within one hundred
eighty (180) days after the Effective Date, an Annual Plan for the Project
governing Project Manager's conduct of its management duties. The Annual
Plan shall include, but not be limited to, drafting of Operational standards,
marketing and sales programs, capital expenditure plans, adequate accounting
procedures, internal control, and human resource policies and procedures.
The Company shall pay or reimburse Project Manager in full for all
costs, expenses of the training and Pre-Opening Program, as well as
pre-operational staffing, organization, and pre-opening operations (including
transportation, subsistence, telephone, pro rata costs of management or its
Affiliates and facilities used for such purposes or in connection with the
recruitment, training of staff and personnel, pre-operational staffing,
organization, pre-opening operations, and any other costs or expense in
connection therewith), and put forth the cost of all advertising, promotion,
literature, travel and business entertainment, including opening celebrations
and ceremonies, which occurred prior to or concurrently with the opening date
of the Project. Project Manager shall submit a budget for such costs and
expenses for approval by the Company, in the Design, Development and
Construction Budget and the parties shall comply therewith; any departures
therefrom shall be subject to the mutual approval in writing of Company and
Project Manager. Monthly statements with respect to such costs and
expenses, as shall be advanced by Project Manager, shall be submitted by
Project Manager to the Company and shall be paid by the Company within thirty
(30) days thereafter.
15
4 (A) (3) BUDGET. Project Manager shall develop and submit to Company
for its approval, within one hundred eighty (180) days after the Effective
Date, a Proposed Design, Development and Construction Budget. Said budget
shall estimate income, wages and salaries, prizes, utilities, insurance,
marketing expenses, and other overhead costs.
4 (A) (4) FINANCIAL CAPITAL REQUIREMENTS. Project Manager shall take
all steps reasonably necessary to consult with Lily Pond as necessary and
make application for, and to acquire sufficient financing for capitalization
of the Project as may be required and approved by Company in furtherance of
the stockholders Agreement.
4 (A) (5) OPERATIONAL STANDARDS. Project Manager shall prepare and
submit to Company for its approval, within one hundred eighty (180) days of
the Effective Date, Operational Standards. Operational Standards shall
address all customer service departments as identified by Project Manager.
Department, position, and activity standards will contain, at a minimum,
customer service and contact elements; procedural and personal service
standards; staff forecasting and scheduling requirements; staffing
effectiveness and standards fulfillment tracking and quality assurance
measurements and controls.
4 (A) (6) OPERATING ACCOUNTS. Project Manager shall establish one or
more bank accounts at a financial institution to be chosen by Project Manager
(hereinafter "Operating Accounts"). All signers of the Operating Accounts
shall be bonded and in an amount acceptable to both Project Manager and
Company, indemnifying the Project, and the parties hereto against any loss,
theft, embezzlement, or other fraudulent acts on the part of such signatory.
Accounts will be in the name of the Company, but only Project Manager, and
its designees shall be authorized to draw upon said accounts. Company shall
be required to deposit such sums or amounts in said accounts, that may be
established by the parties pursuant to the Design, Development and
Construction Budget and Pre-Opening Program, and shall always maintain
sufficient funds therein to pay all Pre-Opening expenses in accordance with
the monthly schedules and statements to be prepared by Project Manager.
4 (A) (7) DEVELOPING PRE-OPENING PROGRAM. The parties agree that
Xxxxxx and Project Manager both have considerable experience concerning
various aspects of operating hotel/casinos and attendant services.
Accordingly, any Operational standards to be prepared by Project Manager
shall be subject to input and approval by Xxxxxx solely as to food and
beverage issues. However, Xxxxxx
16
shall defer to Project Manager with respect to Operational standards
concerning gaming, lodging, marketing, and related support services.
4 (A) (8) PRE-OPENING INSPECTION. Prior to Opening, Project Manager
shall conduct a pre-opening inspection. Project Manager shall prepare a list
of all substantial and material deviations, if any, from plans and
specifications, contracts, or other requirements, which Company shall be
required to remedy or commence reasonable cure within ten (10) days of
receipt of same as a pre-condition to Project Manager's acceptance of the
Project. The Design, Development and Construction Budget may be
automatically increased upon the mutual approval of Company and Project
Manager to allow for any additional costs occasioned by any postponement
resulting from said material deviations. Project Manager may elect to
conditionally accept the Project and relieve Company from its obligations to
promptly remedy any material deficiency if done so in writing. In no event
shall Project Manager delay the opening of the Project to the public more
than ten (10) days after a receipt of a final Certificate of Occupancy for
all public areas of the Project and ninety percent (90%) of all guest rooms,
as well as, the requirements of all Xxxxx County, Nevada Ordinances regarding
use and occupancy of a hotel/casino at the location of Project having been
met.
4 (A) (9) PERMITS AND LICENSES. Project Manager shall be obligated
to obtain all liquor and gaming licenses and permits (except those legally
required to be obtained by Company) but shall not be obligated to pay any
fees or costs associated with same or obligated to obtain bonds or offer
Project Manager's credit in order to secure such licenses and/or permits.
Project Manager, as an Operating Cost, shall make all reasonable efforts
within Project Manager's control, and comply with any conditions or
requirements set out in any such licenses and/or permits, and at all times
operate and manage the Project in accordance with such conditions and
requirements.
B.
CONSTRUCTION AND RESPONSIBILITIES. The Project shall be constructed in Las
Vegas, Nevada, as set forth in the stockholders Agreement, and subject to the
following:
4 (B) (1) CONSTRUCTION DUTIES. Company agrees, under the plan of
financing initially agreed upon, and as set forth in the Stockholders
Agreement, to proceed with all reasonable diligence, to build a 305-room
Project on the Site. Said
17
structure shall include a 28,000 square foot casino, two restaurants, bars
and a retail store with "Hard Rock Hotel" merchandise, as well as parking
garage, outdoor aquatic facilities, recreational facilities, as well as other
facilities and appurtenances as are necessarily desirable for the operation
of a first class hotel/casino, together with all Furniture, Fixtures and
Equipment requisite for the operation of the Structure for purposes of the
Project (herein including, without limitation, heating, lighting, sanitation,
air conditioning, laundry, refrigeration, kitchen, elevator, and other
similar fixtures and equipment). Company shall further provide and install in
the structure at its sole cost and expense, the following:
(a) All Furniture, Fixtures, and Equipment;
(b) Office Furniture and Equipment;
(c) Operating Equipment; and
(d) Such other Furniture, Fixtures and Equipment as are
requisite for the efficient operation of a first class hotel and casino.
4 (B) (2) CONFORMANCE WITH SPECIFICATIONS. Company further agrees,
subject to the provisions of Section 4 (A) (8) that the Project shall be
constructed, outfitted, and completed in strict accordance with the plans,
specifications and designs as may be modified by Company and Project Manager
from time to time pursuant to written change orders and developed pursuant to
this Agreement and the stockholders Agreement, unless otherwise agreed to by
Project Manager.
4 (B) (3) RETENTION OF THIRD PARTIES. Company agrees to engage and
retain, at its expense, a firm or firms of architects, contractors, and such
engineers, designers, decorators, landscape architects, and other specialists
and consultants as shall be necessary and appropriate and as shall be
designated by the parties, each of whom shall have been approved in advance
by Company and Manager, all under written contracts approved by Company and
Project Manager. Project Manager shall submit, as promptly as possible, a
preliminary architectural program and general outline for the construction,
furnishing and equipping of the Project. Project Manager shall have the
right and obligation to cause such firms and persons to prepare full and
adequate plans, layouts, specifications, drawings and designs, both interior
and exterior, with respect to the Site, the Structure, and the Furniture,
Fixtures and Equipment. All such plans, layouts, specifications, drawings,
and designs, and any changes in or departures therefrom subsequently made or
18
authorized, shall be subject to the final mutual approval, in writing, of the
parties hereto.
4 (B) (4) TAXES AND ASSESSMENTS. Subject to Company's right to sell
or lease the Project in accordance with, and subject to the provisions of
this Agreement and the stockholders Agreement, Company covenants and agrees
that during the term of this Agreement, it will maintain full ownership of
the Site and building, and full ownership of the Furniture, Fixtures and
Equipment therein, excepting Company's right to finance and lease Furniture,
Fixtures and Equipment as necessary. Company further agrees that throughout
the term of this Agreement, Company will pay, keep, observe, and perform all
payments, terms, covenants, conditions, and obligations to be made, kept,
observed, or performed by the Company under any lease, concession, or other
agreement or security instrument in respect to the Site, the Structure, or
the Furniture, Fixtures and Equipment. Company further agrees that Project
Manager shall have the right and authority for and on behalf of Company, but
no obligation to pay prior to delinquency, all taxes, assessments, and
charges of every kind, including, without limitation, real estate taxes and
assessments, personal property taxes, gaming taxes; and water and sewer
charges, which may become a lien on the Project or any part thereof, and
which may be due and payable during the term of this Agreement, unless
payment thereof is in good faith being contested by Company, at Company sole
expense, and without cost to Project Manager, so long as enforcement thereof
is stayed.
C.
OPENING OPERATIONS
4 (C) (1) PERMITS. Company or Project Manager, if Company so elects
and Project Manager is legally able or legally required to do so, at the sole
cost and expense of Company, shall obtain on or before the Opening and
thereafter keep in full force, and effect, all licenses and permits,
including gaming, liquor, bar, restaurant, sign and hotel licenses, as may be
required for the operation of the Project as a first class hotel and casino
as contemplated hereunder. Project Manager agrees upon request from Company
to assist in Owner's efforts to obtain licenses and permits required to
operate the Project and to advise Company of the need for any licenses or
permits required for the operation of the Project.
4 (C) (2) EQUIPMENT AND SUPPLIES. After Opening, Project Manager
shall obtain and maintain all Operating Supplies and Operating Equipment as
Project
19
Manager deems reasonably necessary for the operation of the Project in
accordance with this Agreement and subject to the then current provisions of
the Annual Plan and Operational standards.
4 (C) (3) PERSONNEL.
(a) Project Manager, either directly or through its designated
Affiliates and subsidiaries, will hire, supervise, direct, discharge and
determine the compensation, other benefits and terms of employment of Project
Manager's personnel working in the Project. Project Manager or its
designated subsidiary is to be the sole judge of the fitness and
qualifications of such personnel and is vested with absolute discretion in
hiring, supervising directing, discharging and determining the compensation,
other benefits and terms of employment of such personnel. It is expressly
understood and agreed that all personnel (other than the personnel of any
lessee or concessionaire of food and beverage, gift shop, or other concession
with respect to the Project) shall be solely the employees of Project Manager
or its designated subsidiary. Company, Lily Pond, and Xxxxxx may consult,
advise or communicate with Project Manager and its designated subsidiary or
the General Manager of the Project regarding Project personnel or problems
related to personnel at any time, but Company, Lily Pond, and Xxxxxx shall
not interfere with or give orders or instructions to any personnel employed
at the Project. Subject to the Annual Plan, Company shall be solely
responsible for and shall reimburse Project Manager for any and all expenses
incurred by Project Manager at the Project by Project Manager (including, by
way of example only, all salaries, wages and other compensation and benefits
and other amounts that may be required by any current or future union plans).
Notwithstanding the above, Project Manager shall consult (which consultation
may include, at the request of Company, Lily Pond, or Xxxxxx, a review of a
resume, an interview, etc.) with a designated representative of Company, Lily
Pond, and Xxxxxx prior to the hiring, termination or transfer of the General
Manager of the Project and those individuals in charge of hotel, casino,
entertainment, human resources, marketing and sales of food and beverage.
Project Manager shall seriously consider all objections and comments of
Company, Lily Pond, and Xxxxxx, but Project Manager shall make the final
decision on any such action with respect to the individuals in charge of
hotel, casino, entertainment, human resources, marketing, sales of food and
beverage.
(b) Subject to the Annual Plan, Company shall reimburse Project
Manager for all reasonable travel expenses incurred by any of Project
Manager's employees or employees of Project Manager's subsidiaries relative
to (i) developing,
20
constructing renovating, furnishing and supplying the Project; (ii) hiring
and training Project employees; (iii) maintaining the physical condition and
appearance of the Project; (iv) maintaining and promoting proper operational
procedures and practices; (iv) maintaining books and records; and (v)
otherwise performing duties undertaken by or rights granted to Project
Manager in this Agreement. Project Manager shall have sole discretion, which
shall be reasonably exercised, to determine the necessity of such travel.
Those employees of Project Manager who are not on-site Project personnel
shall also be provided with complimentary or discounted lodging, as an
Operating Cost of the Project, whenever said employees are on the premises of
the Project or in the vicinity to perform projects for the direct benefit of
the Project. All other complimentary requests made by employees of Project
Manager, its subsidiaries, Xxxxxx, or Company shall be subject to the
reasonable approval of Project Manager. Project Manager agrees to honor
complimentary requests subject to availability and upon reasonable notice by
telephone or in writing from an authorized employee of Company or Lily Pond.
(c) Not later than ninety (90) days prior to the Opening and
not less than thirty (30) days prior to scheduled expiration date of required
insurance policies, Project Manager shall provide evidence to Company of
statutory or self-insured Worker's Compensation Insurance and/or Employer's
Liability Insurance, with waiver of subrogation endorsements in favor of
Company and Project Manager and any applicable subsidiary and an endorsement
to include Project Manager as an additional insured, for each such employee.
The insurance coverages required hereunder (including, without limitation,
the carrier, policy limits of each and waiver of subrogation endorsements
must be in form, substance and amount satisfactory to Company in all respects
and if not, Project Manager shall obtain such insurance from another provider
selected by Company in its sole and absolute discretion). Any statutory
Worker's Compensation and/or Employer's Liability Insurance provided by
Project Manager or its designated subsidiary may be effected under a
self-insured retention or other form of self-insurance permitted by law. The
maximum cost to be incurred by Company under any such plan shall be the
lesser of the actual incurred expense as determined by the administrator of
the plan or the applicable manual class rates issued by the Nevada Rating
Bureau multiplied times the payroll per $100 multiplied times the experience
modification factor assigned by the Nevada Rating Bureau to the
management/employer.
(d) The general hiring and discharge policies of employees at
the Project shall, in all respects, comply with all "Equal Employment
Opportunity" laws and regulations, and Project Manager agrees to comply with
all laws, regulations and
21
ordinances regarding the employment and payment of persons engaged in the
operation of the Project including, without limitation, all "Equal Employment
Opportunity" laws and regulations.
(e) Project Manager shall keep Company informed of all
negotiations with labor unions representing such employees at the Project,
and Project Manager or its subsidiaries shall not sign any union contracts
covering such employees at the Project which have not been previously
approved in writing by Company, unless required by law to do so without
Company's approval (which, in all cases, shall be furnished to Company as
soon as reasonably possible).
4 (C) (4) SALES. Marketing and Advertising. Subject to the Annual
Plan but at Company's sole and absolute discretion, after the Opening,
Project Manager, as an Operating Cost, shall advertise and promote the
business of the Project, institute and supervise a sales and marketing
program solely in Company's name (separate and independent of the local and
national sales and marketing programs of Project Manager or Xxxxxx and other
hotels, casinos, bars, and restaurants managed, operated and/or owned by
Project Manager, Lily Pond, or Xxxxxx), and coordinate with tour programs
marketed by airlines, travel agents and government tourist departments when
Project Manager deems the same to be advisable for the operation of the
Project. Subject to the Annual Plan, Project Manager may cause the Project
to participate in sales and promotional campaigns and activities involving
complimentary rooms, food and beverages to bona fide travel agents, tourist
officials and airline representatives where such is customary in the travel
industry. Anything to the contrary notwithstanding contained in this Section
4 (C) (4), Project Manager shall not use the Xxxx in any manner in connection
with, or otherwise engage in, sales, marketing or advertising except in
accordance with the provisions of section 3.3, the License Agreement and
Supervisory Agreement.
4 (C) (5) MAINTENANCE AND REPAIRS. Subject to the Annual Plan,
Project Manager shall make or cause to be made, all repairs, replacements,
corrections and maintenance items to the Project as shall be required in the
normal and ordinary course of operation of the Project and as shall be
required to comply with Operational Standards. In conjunction therewith and
subject to Section 4 (C) (2), Project Manager is authorized to make and enter
into in the name of, for the Account of and at the expense of Company, all
such contracts and agreements as in Project Manager's opinion are reasonably
necessary for the repair and maintenance of the Project and to cause the same
to be paid when due.
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4 (C) (6) CAPITAL EXPENDITURES.
(a) Company recognizes the necessity of making Capital
Replacements, the cost of which are capitalized and amortized, rather than
being expensed, in accordance with the Generally Accepted Accounting
Principles. Company agrees to expend such amounts for Capital Replacements
as shall be reasonably required in the normal and ordinary course of
operation of the Project to operate the Project in accordance with the
Operational standards. Project Manager shall have the responsibility of
recommending to Company the desired and reasonably necessary Capital
Replacements and the design and specifics thereof. Unless Company and
Project Manager otherwise agree, Project Manager shall be responsible for the
design, selection and installation of Capital Replacements subject to the
terms of the Supervisory Agreement. All Capital Replacements, so long as
there is compliance with Operational Standards (regardless whether
implemented by Company or Project Manager), shall be made to the extent
reasonably feasible in a manner that will minimize any adverse impact on the
operation of the Project and the guests of the Project.
(b) It is recognized that expenditures for Capital Replacements
are incapable of precise calculation in advance. Therefore, there shall be
paid over in cash in each Fiscal Month after Opening, a percentage of Gross
Revenues, into a Reserve Fund to pay for Capital Replacements. Contributions
to this Reserve Fund shall be two percent (2%) of Gross Revenues for the
first three years of this Agreement, and three percent (3%) of Gross Revenues
thereafter, provided, however, that Company will no longer be required to
deposit funds into the Reserve Fund once the Reserve Fund equals or exceeds
an amount equal to twice the then current budget for Capital Replacements.
Project Manager shall establish the Reserve Fund in Company' s name at a bank
or banks selected by Company and approved in writing by Project Manager
(which approval shall not be unreasonably withheld or delayed), with
signatures of Project Manager and Company or their designees being jointly
required and authorized on said accounts. If Project Manager is responsible
for implementing a Capital Replacement in accordance with the provisions of
Section 4 (C) (6) (a), any expenditures for Capital Replacements during any
Fiscal Year which have been budgeted in the Annual Plan or otherwise approved
in writing by Company may be made by Project Manager without Company's
additional approval (provided that Project Manager may not exceed any line
item by more than ten percent (10%) of the amount originally budgeted
therefore in the Annual Plan) and, to the extent funds are available, shall
be made by Project Manager from the Reserve Fund (including accrued interest
and unused accumulations from earlier years). In
23
the event that Company elects to be responsible for implementing a Capital
Replacement, the cost thereof shall be paid or reimbursed to Company from the
Reserve Fund to the extent funds are available. Any amounts remaining in the
Reserve Fund at the close of each respective Fiscal Year shall be carried
forward and retained in the Reserve Fund until fully used as herein provided.
To the extent the Reserve Fund is insufficient at a particular time, or to
the extent the Reserve Fund plus anticipated contributions for the ensuing
Fiscal Year is less than the amount required by the Annual Plan for the
ensuing Fiscal Year, then in either such event, Company shall supply the
necessary funds by deposit to the Reserve Fund within ninety (90) days of
delivery of notice from Project Manager to that effect; provided, however,
that during such ninety (90) day period, Company and Project Manager have
jointly agreed that such additional funds are reasonably necessary for the
proper operation of the Project. Company and Project Manager shall cooperate
in good faith to the extent feasible to schedule the dates for implementing
Capital Replacement items to avoid the necessity of depositing additional
funds in anticipation of Reserve Fund contributions to be received at a later
date. All proceeds from the sale of capital items no longer needed for the
operation of the Project shall be deposited to the Reserve Fund. Sale of
such items shall be at the reasonable discretion of Project Manager and
conducted in a commercially reasonable manner after prior written notice to
Company. Notwithstanding anything herein to the contrary, Company's written
approval (which shall not be unreasonably withheld or delayed) shall be
required with respect to the sale of any capital item with a fair market
value of TEN THOUSAND DOLLARS ($10,000) or more (unless otherwise previously
approved in the Annual Plan). Upon termination of this Agreement for any
reason, Project Manager's right to expend any unused portion of the Reserve
Fund shall terminate and the balance of the fund shall be paid over to
Company, less any sums then due to Project Manager.
24
(c) In addition to Capital Replacements provided for in the
then current Annual Plan, Project Manager shall have the further right to
make such alterations, additions or improvements in or to the Project which
Project Manager reasonably deems to be beneficial to the Project or its
operations; provided, however, that no such alterations, addition, or
improvement shall be made without Company's prior written approval if the
amount payable under the contract for said alteration, addition or
improvement is not budgeted for in the Annual Plan or exceeds the sum of TEN
THOUSAND DOLLARS ($10,000) in the aggregate per Fiscal Year (which amount is
based upon the purchasing power of money upon Opening and shall be
periodically adjusted by Project Manager with reference to the Consumer Price
Index defined in Section 1.9 above, to retain the same purchasing power).
Expenditures under this Article 4 (C) (6) (c) shall be paid from the Reserve
Fund. Notwithstanding the foregoing, Company shall have the right to
contract for, supervise and control any such alterations, additions or
improvements whose costs exceed TEN THOUSAND DOLLARS ($10,000) (which amount
is based upon the purchasing power of money upon Opening and shall be
periodically adjusted by Project Manager with reference to the National
Average of the Consumer Price Index to retain the same purchasing power).
Project Manager shall have the right to consult with Company regarding any
such plans prepared by or on behalf of Company with respect to such
alterations, additions or improvements.
(d) In the event a condition should exist in, on, or about the
Project of an emergency nature, including structural repairs, which requires
that immediate repairs are necessary to preserve and protect the Project and
assure its continued operation and to protect the health and safety of the
guests or employees, Project Manager, on behalf of Company and as an
Operating Cost, is authorized to take all steps and to make all expenditures
reasonably necessary to repair and correct any such condition, whether or not
provisions have been made in the applicable Annual Plan for any such
emergency expenditures. Project Manager agrees that it shall make such
repairs and replacements only after Project Manager has made a reasonable
attempt (if circumstances permit) to inform Company of the existence of such
emergency, the repairs and replacements Project Manager proposes to make, and
the estimated amount of expenditures to be incurred. If Project Manager has
been unable to advise Company in advance, it shall promptly notify Company
after taking any necessary action. Expenditures made by Project Manager in
connection with an emergency shall be paid for first from the Reserve Fund to
the extent funds are available, and then from the Operating Cost Bank
Account. Company shall replenish funds paid from the Reserve Fund with any
insurance proceeds received by Company in connection with the emergency
condition or situation, and Company
25
shall replenish any difference between the insurance proceeds and the amount
used for such emergency from the Reserve Fund. If circumstances require,
Company shall also immediately replenish the Operating Cost Bank Account to
the extent funds were withdrawn there from for the purposes of this
subsection 4 (C) (6) (d)
(e) In the event that repairs to, or additions, changes, or
corrections in the Project of any nature shall be required by reason of any
laws, ordinances, rules or regulations now or hereafter in force, or by order of
any governmental or municipal power, department, agency, authority or officer,
such repairs, additions, changes or corrections shall be made at the direction
of Company, unless Project Manager and Company otherwise agree. Project
Manager shall have the right to reasonably consult with Company regarding any
such plans and specifications prepared by or on behalf of Company with respect
to such alterations, additions, or improvements. Project Manager shall inform
Company of the existence of the governmental regulations and the repairs,
additions, changes or corrections Project Manager believes are required to be
made and the estimated expenditures to be incurred. Company shall designate
(subject to Project Manager's approval which shall not be unreasonably withheld
or delayed) the work to be performed and a schedule for its implementation.
Such work shall be accomplished with as little hindrance to the operation of the
Project and the Project guests as possible. If expenditures are required to be
made to comply with governmental requirements that were not anticipated in the
Annual Plan, the Annual Plan shall be revised by Project Manager and Company and
payment therefore shall be made in accordance with the provisions of Section 4
(C) (6) (d). Company shall have the right to contest the validity or
application of any such governmental requirements.
4 (C) (7) COMPLIANCE WITH LEGAL REQUIREMENTS. Company and Project
Manager shall take reasonable actions (to the extent of the delegation of
responsibilities hereunder) as may be necessary to comply with any and all laws,
orders or requirements of any federal, state, county, or municipal agency
affecting the Project or the ownership or operations thereof by Company or
Project Manager or other authority having jurisdiction thereover. Project
Manager, however, shall not take any such action in accordance with this Section
4 (C) (7) as long as Company notifies Project Manager and Company is diligently
contesting, or has affirmed its intention to contest, and promptly institutes
proceedings contesting any tax payment or assessment, or any governmental or
regulatory order or requirement (except that, where failure to comply promptly
with any such order or requirements might expose Project Manager to criminal
liability or materially and adversely affect the operation of the Project,
Project Manager may take such action without Company's approval)
26
and Company agrees to indemnify Project Manager for all loss, cost and
expense incurred by Project Manager because of Company's contest of any such
tax, payment or assessment, order or requirements. Project Manager promptly
shall notify Company in writing of all such orders and notices or
requirements that are received by Project Manager.
4 (C) (8) ACCOUNTING MATTERS AND FISCAL PERIODS.
(a) The books and records reflecting the Project operations
shall be kept by Project Manager in accordance with the Generally Accepted
Accounting Principles applied on a consistent basis, and shall be maintained
at the Project. Company's, Lily Pond's, and Project Manager' s independent
accounting firms shall each have the right and privilege of examining the
books and records of the Project upon reasonable prior notice to Project
Manager.
(b) Company, as an Operating Cost, shall cause a certified
audit of the Project operations to be performed annually at the end of each
Fiscal Year (and upon termination of this Agreement if not coincident with a
Fiscal Year End) by a nationally recognized, independent "Big Six" Certified
Public Accounting firm, with expertise in gaming, appointed by Company.
(c) The Generally Accepted Accounting Principles, which provide
for an annual fiscal accounting period, shall be the accounting system utilized
for the Project.
Project Manager will deliver or cause to be delivered to Company the
statements and documents set forth in Section 4 (C) (9) below.
4 (C) (9) FINANCIAL STATEMENTS. On or before the twentieth (20th) day
of each Fiscal Month, Project Manager shall deliver to Company, a profit and
loss statement, statement of income, balance sheet, and statement of cash flows
showing the results of the operation of the Project for the preceding Fiscal
Month and the year-to-date, and having attached thereto a computation of the
management fees for such preceding months and the year-to-date. Within ninety
(90) days after the end of the operating year, Project Manager shall cause to be
delivered to Company a balance sheet and related statement of profit and loss
(including all supporting departmental schedules of revenues and expenses),
showing the assets employed in the operation of
27
the Project and the liabilities incurred in connection therewith as of the
last day of the Project's preceding Fiscal Year, the net results of the
operation of the Project during the preceding year, and having attached
thereto a computation of the Supervisory Fees and Management Fees for such
year. Project Manager shall also provide the following:
(a) within ninety (90) days after the end of each Fiscal Year, a
balance sheet, together with a comparison to the previous Fiscal Year (after the
first full Fiscal Year) and a related detailed statement of profit and loss
(including all supporting departmental schedules of revenues and expenses),
together with a comparison to the previous Fiscal Year and the current Annual
Plan, and having annexed thereto a computation in reasonable detail of the
Management Base Fees and Management Incentive Fees for such Fiscal Year;
(b) upon Company's request, on a weekly basis (by no later than
the close of business on Monday), a summary of the previous week's revenue and
estimated expenses; and
(c) upon Company's request, such other additional statements,
computations and reports as Company shall reasonably request in writing.
4 (C) (10) ANNUAL PLAN.
(a) Not less than sixty (60) days prior to the commencement of
each full Fiscal Year thereafter, Project Manager shall submit to Company, for
Company's approval, the proposed Annual Plan.
(b) In connection with the submission of the Annual Plan to
Company, Company will meet with Project Manager within fifteen (15) days after
the date the proposed Annual Plan is delivered to Company to conduct an in-depth
review of same.
(c) Each Annual Plan will be subject to the approval of Company
which shall not be unreasonably withheld or delayed. It is the intention of the
parties to complete the review and approval of a proposed Annual Plan no later
than forty-five (45) days after the initial delivery of it to Company. Company
shall be required to approve or disapprove each proposed Annual Plan within
thirty (30) days after the date Company and Project Manager have met to discuss
each such proposed Annual Plan by providing written notice to Project Manager.
Any notice that disapproves a proposed Annual Plan must contain specific
28
objections thereto in reasonable detail. If Company fails to provide written
notice to Project Manager of any specific objections to a proposed Annual
Plan within such thirty (30) day period, Project Manager shall be entitled to
provide written notice of such fact to Company, requesting Company's
response. If. Company fails to provide Project Manager with specific written
objections to the proposed Annual Plan within ten (10) days following such
written notice, the proposed Annual Plan submitted by Project Manager shall
be deemed to be approved. In the event Company disapproves or raises any
objections to any items contained in a proposed Annual Plan or any revisions
thereto, Company and Project Manager agree to cooperate with each other in
good faith to discuss and resolve the disputed or objectionable proposed
items. In the event Company and Project Manager are not able to reach a
mutually acceptable agreement concerning any disputed or objectionable item
within a period of fifteen (15) days after the date Company provides written
notice of its objections to Project Manager, if the disputed or objectionable
item would not materially or adversely affect Project Manager's ability to
comply with operating objectives, Company's decision with respect thereto
shall govern, but if the disputed or objectionable item would materially or
adversely affect Project Manager's ability to comply with operating
objectives, either party shall be entitled to submit the dispute to
arbitration in accordance with the provisions of the Uniform Arbitration Act,
except as set forth below:
(i) The accounting firm selected to review and audit the records
of the Project, set forth in Section 4 (C) (8) (b), shall select an independent
nationally recognized accounting firm experienced in gaming, upon the written
request of any party hereto with respect to any dispute as to the provisions of
Section 4 (C) (10). The arbitrating accounting firm shall be required to render
a decision in fifteen (15) days after being notified of its selection. Fees and
expenses of the arbitrating accounting firm will be paid by the non-prevailing
party, or if there is no prevailing party, then said costs and expenses shall be
borne equally between Company and Project Manager. The decision of the
arbitration accounting firm shall be binding to all parties hereto, but shall
not be construed as modifying or altering the terms of this Agreement or the
parties' rights and responsibilities with respect thereto.
(d) Project Manager shall reforecast the Annual Plan from time to
time to reflect any unanticipated significant changes, variables or events or to
include significant additional unanticipated items of income or expense. Any
such revision shall be submitted to Company for approval, which approval shall
not be unreasonably withheld and shall be deemed given and accepted unless a
specific written objection thereto is delivered by Company to Project Manager
within thirty (30) days after submission thereof. Upon request of Company,
Project Manager shall
29
provide Company with a summary of the data and information utilized in
preparing an Annual Plan and any revisions thereto. Project Manager shall
not be deemed to have made any guarantee, warranty or representation
whatsoever in connection with any Annual Plan, and Company acknowledges that
an Annual Plan is intended only to be a reasonable estimate. Company
acknowledges that there may be unforeseen expenditures required to complete
or correct deficiencies in the Project and that any such expenditures may not
be reflected in the Annual Plan or capable of being paid from the Reserve
Fund.
(e) On a monthly basis, Project Manager's representative shall
meet with Company to discuss the performance of the Project over the prior
Fiscal Month and Project Manager's plans and expectations for the ensuing Fiscal
Month.
(f) Project Manager shall be permitted to reallocate part or all
of the amount budgeted with respect to any line item of the Annual Plan to
another line item in the same department, but may not reallocate from one
department to another department without the prior written consent of Company.
(g) If Project Manager encounters circumstances which require
unbudgeted and unexpected expenditures not foreseen at the time of preparation
of the Annual Plan and which Project Manager deems reasonably necessary, in
addition to and without limiting the instances described in Article 4 (C) (10)
(f), Project Manager may, without Company's approval but only after delivering
prior written notice to Company, make such expenditures for so long as the same
will not, in any Fiscal Month, exceed ten percent (10%) of the amount budgeted
for any department or, if greater, with respect to expenditures for gaming,
room, entertainment, food, and/or beverage departments, such expenditures will
not exceed an amount such that the ratio of the amount so expended to the
revenues of the affected department exceeds the ratio (expressed as a
percentage) of the expenses budgeted to the revenues forecast, rounded up to the
next full percentage point. If Project Manager expects that such future
expenditures will in any Fiscal Month exceed (i) ten percent (10%) of the amount
budgeted for such department or, if greater, (ii) an amounts such that the ratio
of the amount so expended to the revenues of gaming, room, entertainment, food,
and/or beverage departments will exceed the ratio (expressed as a percentage) as
forecast, rounded up to the next full percentage point, Project Manager shall
have the right, from time to time during such Fiscal Year, to submit a revision
to the Annual Plan to Company for approval, which approval shall be granted or
denied in the same manner as the initial Annual Plan.
30
4 (C) (11) BANK ACCOUNTS.
(a) Project Manager shall select and establish bank Accounts at
one or more banking institutions in Company's name. The Bank Account for
Operating Costs ("The Operating Costs Bank Account") shall be separate and
distinct from any other accounts, reserves, or deposits required by this
Agreement and Project Manager's designees shall be the only parties authorized
to draw upon said Account. The Operating Costs Bank Account shall be an
interest bearing account if such an account is reasonably available and all
interest earned shall be credited to the Operating Costs Bank Account. Company
shall deposit in the Operating Costs Bank Account an amount of money to be
agreed upon by Company and Project Manager as and when needed (which amount
shall be adjusted by Project Manager as provided below). This amount as
adjusted shall be the "Minimum Balance" required to be maintained by Company in
the Operating Costs Bank Account during the term of this Agreement. After the
first twelve (12) full Fiscal Months after Opening, the Minimum Balance shall be
adjusted, so as to in no event be less than the Operating Costs for the
preceding Fiscal Month plus all amounts reserved in said Account for amounts
accrued but not paid on a monthly basis as provided in Article 4 (C) (12). This
Minimum Balance shall serve as working capital for Project operations. Upon
notification of any working capital deficiency from Project Manager, accompanied
by an explanation of the reason for the deficiency, Company shall furnish
Project Manager immediately upon request with sufficient funds to make up any
deficiency in the Minimum Balance which funds shall constitute "Working Capital
Loans" and shall bear interest at a rate equal to the Prime Rate of interest in
effect from time to time at First Interstate Bank of Nevada, N.A., or its
successor, plus three (3) percentage points. In the alternative, Project Manager
may elect, upon approval of Company, to either furnish sufficient funds to
make-up any deficiency on the Minimum Balance which funds shall be considered
"Working Capital Loans", and shall bear interest as set forth herein above, or
Project Manager, with consent of Company, may guarantee "Working Capital Loans"
from third parties, and any said monies loaned or guaranteed by Project Manager
shall be used to increase Project Manager's equity in the Project, as is set
forth and defined in detail in Article V of the Stockholders Agreement as
"Contribution Loans". Working Capital Loans shall be repaid to Company and/or
Project Manager in the priority set forth in Article 4 (C) (12).
(b) Subject to the terms and conditions of this Agreement, all
sums received from the operation of the Project and all sums advanced by Company
for purposes other than Capital Replacement shall be deposited in the Operating
31
Costs Bank Account. Project Manager may make payments pursuant to this
Agreement from the Operating Costs Bank Account for the purposes described in
Article 4 (C) (12), or may make such payments from its own account(s) and
obtain immediate reimbursement from the Operating Costs Bank Account.
(c) Nothing herein contained shall be construed to deprive
Project Manager of the right to maintain separate payroll and/or credit card
collection accounts or xxxxx cash funds (all in Company's name) and to make
payments therefrom as permitted pursuant here to and as the same are customary
in the Project business or Project Manager's other business.
(d) On a monthly basis, Project Manager shall transfer all
amounts in the Operating Costs Bank Account in excess of the Minimum Balance to
Company's Bank Account pursuant to Article 4 (C) (13). Company's Bank Account
shall be established at one or more banking institutions selected by Company and
Company's designees shall be the only parties authorized to draw upon Company's
Bank Account.
4 (C) (12) PRIORITY OF DISBURSEMENTS. All Gross Revenues shall be
deposited in the Operating Costs Bank Account on a daily basis. Project Manager
shall disburse funds from the Operating Costs Bank Account on at least a monthly
basis, for and on behalf of Company (or, to the extent Company has a duty from
time to time to make such expenditures, directly to Company), in the following
order of priority and to the extent available:
(a) all Operating Costs as defined in Section 1.32, excepting
those costs set forth in Section 1.32(j) and 1.32(k); and
(b) the payment of all principal and interest on any Approved
Mortgage; and
(c) all remaining Operating Costs, not included in Section 4 (C)
(l2) (a) above, including, without further limitation, Base Management Fees,
Supervisory Fees and Incentive Fees; and
(d) the payment for emergency expenditures to the extent paid
from the Bank Account or deposited in the Reserve Fund as provided under Section
4(C) (6) (d); and
32
(e) deposits into the Reserve Fund under Article 4 (C) (6); and
(f) deposits into the Operating Costs Bank Account to maintain
the Minimum Balances as provided under Section 4 (C) (11) (a); and
(g) the payment of all accrued and unpaid interest on any Working
Capital Loans; and
(h) the payment of all outstanding principal on any Working
Capital Loans; and
(i) the remaining balance thereof to Company.
In following the above order of priority, Project Manager will reserve
funds in the Bank Account each Fiscal Month for payment of any Operating
Costs or any of the above items which Project Manager has a duty to pay that
are not paid on a monthly basis (e.g., real estate taxes, insurance premiums
and so on). Project Manager shall perform the function of paying all
Operating Costs and other items set forth above (including, but not limited
to, debt service, real estate taxes, insurance premiums, etc.) unless
otherwise instructed by Company and Company supplies Project Manager with
adequate information.
4 (C) (13) ADJUSTMENT TO BANK ACCOUNT. After the disbursements pursuant
to Article 4 (C) (12), any excess funds remaining in the Bank Account over the
Minimum Balance shall be disbursed immediately to Company's Bank Account as soon
as reasonably possible following the close of the financial reports for the
Fiscal Month (but in no event later than twenty (20) days after the end of each
such Fiscal Month). Correspondingly, any deficiency in the Bank Account shall be
remedied by Company as required in Section 4 (C) (11) (a) or shall be provided
by Project Manager as required in Article 5, if applicable. Notwithstanding that
Project Manager is authorized to and shall make disbursements in the order set
forth in Article 4 (C) (12) to the extent funds are available (subject to the
then current Annual Plan), Company solely will be liable for all Operating
Costs.
4 (C) (14) INSURANCE COVERAGE. Company, or Project Manager if Company
so elects, agrees to procure and maintain at all times during the term hereof,
as an Operating Cost, property, casualty, and liability insurance in such
amounts and coverages as Company may from time to time desire which shall be no
less than that necessary to conform to reasonable industry standards for a
similar
33
hotel and casino, taking into consideration inflation and any events or
trends of liability which affect the risks attendant to owning and operating
the Project.
4 (C) (15) INSURANCE POLICIES.
(a) All insurance provided for under this Article 4 shall be
effected by policies issued by insurance companies of good reputation and of
sound financial responsibility and licensed by the State of Nevada.
(b) notwithstanding anything herein to the contrary, Project
Manager's obligations under this Agreement shall not be effective until all
required insurance coverage has been obtained. Such insurance shall include,
during the Pre-Opening Program, builder's risk and liability insurance (but not
innkeeper's or garage keeper's liability) and upon Opening, all coverages
referenced in Article 4, except builder's risk.
(c) All liability, business interruption and crime insurance
policies shall be written in the name of Company with Project Manager and
Company being named thereon as additional insureds.
(d) All insurance policies shall be endorsed specifically to the
effect that the proceeds of any crime or business interruption losses shal1 be
made payable to Company and Project Manager jointly, as their interests may
appear. All such policies of insurance shall also be endorsed specifically to
the effect that such policies shall not be canceled or materially changed
without at least thirty (30) days prior written notice to Company and Project
Manager. To the extent obtainable without significantly increasing the premium
cost, all policies of comprehensive public liability insurance and comprehensive
crime insurance shall contain an endorsement to the effect that such insurance
shall be primary to any other similar insurance carried by Company or Project
Manager.
(e) Certificates of Insurance shall be sent to:
Xxxxxx'x Resort Hotel and Casino
X.X. Xxx 000
Xxxxxxxxx, XX 00000
Attn: Corporate Controller
34
or to such other address as to which Project Manager may from time to time
designate by written notice to Company.
(f) if Company fails, within fifteen (15) days after notice of
such failure from Project Manager, to provide insurance as required by this
Article 4, or to pay any premiums therefore when due, Project Manager shall have
the right (but not the obligation) to procure such insurance or pay such
premiums, and any cost or expense thus incurred by Project Manager shall be
immediately reimbursed to Project Manager from the Bank Account or from funds
provided directly by Company.
4 (C) (16) WAIVER OF LIABILITY. To the extent covered by insurance,
Project Manager, and Company each waives, releases and discharges the other from
all claims or demands which each may have or acquire against the other, or
against each other's directors, officers, agents, employees or partners, with
respect to any claim for any losses, damages, liability or expenses (including
attorneys' fees) incurred or sustained by either of them on account of injury to
persons or damage to property or business arising out of the ownership,
management, operation and maintenance of the Project, regardless whether any
such claim or demand may arise because of the fault or negligence of the other
party or its officers, directors, partners, agents and employees. To the extent
a loss, damage or expense is a result of the other party's negligence, in the
event of any such loss, damage, liability or expense, Company and Manger each
shall look to the insurance maintained with respect to the Project or otherwise
by such party and shall not make any claim or seek any recovery against the
other party. Each policy of insurance maintained with respect to the Project
shall contain a specific waiver of subrogation reflecting the provisions of this
Section 4 (C) (16), or a provision to the effect that the existence of the
preceding waiver shall not affect the validity of any such policy or the
obligation of the insurer to pay the full amount of any covered loss sustained.
4 (C) (17) INDEMNIFICATION TO PROJECT MANAGER. Company agrees to
indemnify and hold Project Manager free and harmless from all loss, liability or
cost (including reasonable attorneys' fees) which is not covered by insurance
proceeds and which Project Manager may sustain, incur or assume as a result of
any claims which may be alleged, made instituted or maintained against Project
Manager, Xxxxxx, Xxxx Pond, or Company, jointly or severally, arising out of or
based upon the ownership, management, operation, condition or use of the
Project, including, without limitation, injury to persons(s) and damage to
property or business by reason of any cause whatsoever in and about the Project
or elsewhere; provided, however,
35
Company shall not be liable to indemnify and hold Project Manager harmless
from any such uninsured loss, liability or cost (including costs of defense)
which is the result of grossly negligent, willful misconduct or criminal
conduct of Project Manager or its employees.
4 (C) (18) INDEMNIFICATION TO COMPANY. Project Manager agrees to
indemnify and hold Company free and harmless from all loss, liability, or cost
(including reasonable attorneys' fees) which is not covered by insurance
proceeds and which Company may sustain, incur, or assume as a result of any
claims which may be alleged, made, instituted or maintained against Project
Manager, Xxxxxx, Xxxx Pond, or Company, jointly or severally, arising out of or
based upon the ownership, management, operation, condition or use of the Project
including, without limitation, injury to person(s) and damage to property or
business by reason of any cause whatsoever in and about the Project or
elsewhere, and any requirement or award relating to course of employment,
working conditions, wages and/or compensation of employees or former employees
at the Project, only to the extent any such injury or damage is caused by the
gross negligence, willful misconduct or criminal conduct of Project Manager or
its employees. However, Project Manager shall not be liable to indemnify and
hold Company, and Lily Pond harmless from any such uninsured loss, liability or
cost (including costs of defense) which is the result of grossly negligent,
willful misconduct, or criminal conduct of Company or their employees.
4 (C) (19) LEGAL FEES, ETC.; PROCEDURES. Each indemnitor under this
Article 4 shall reimburse each indemnitee for any legal fees and costs,
including reasonable attorneys' fees and other litigation expenses, reasonably
incurred by such indemnitee in connection with investigating or defending
against claims with respect to which indemnity is provided hereunder; provided,
however, that an indemnitor shall not be required to indemnify an indemnitee for
any payment made by such indemnitee to any claimant in settlement of claims
unless such settlement has been previously approved by the indemnitor, which
approval shall not be unreasonably withheld or delayed. If claims are asserted
or threatened, or if any action or suit is commenced or threatened with respect
thereto, for which indemnity may be sought against an indemnitor hereunder, the
indemnitee shall notify the indemnitor in writing within ten (10) days after the
indemnitee shall have had actual knowledge of the threat, assertion or
commencement of the claims, which notice shall specify in reasonable detail the
matter for which indemnity may be sought. The indemnitor shall have the right,
upon notice to the indemnitee given within thirty (30) days following its
receipt of the indemnitee's notice (or shorter period if such notice
36
specifies such shorter period and provides reasonable reason therefore), to
take primary responsibility for the prosecution, defense or settlement of
such matter, including the employment of counsel chosen by the indemnitor
with the approval of the indemnitee, which approval shall not be unreasonably
withheld or delayed, and payment of expenses in connection therewith. The
indemnitee shall provide, without cost to the indemnitor, all relevant
records and information reasonably required by the indemnitor for such
prosecution, defense or settlement and shall cooperate with the indemnitor to
the fullest extent possible. The indemnitee shall have the right to employ
its own counsel in any such matter with respect to which the indemnitor has
elected to take primary responsibility for prosecution, defense or
settlement, but the fees and expenses of such counsel shall be the expense of
the indemnitee.
4 (C) (20) INDEMNIFIED PARTIES. The indemnities contained in this
Article shall run to the benefit of Project Manager, and Company, and their
respective Affiliates, and the shareholders, directors, officers, partners and
employees of Project Manager and Company, and of their respective Affiliates.
4 (C) (21) SURVIVAL. The provisions of this Article 4 shall survive any
cancellation, termination or expiration of this Agreement and shall remain in
full force and effect until such time as the applicable statute of limitation
shall cut off all claims that are the subject of the provisions of this Article.
4 (C) (22) DEFENSE.
(a) Notwithstanding anything herein to the contrary, Company
agrees to defend promptly and diligently, as an Operating Cost, any claim,
action or proceeding brought against Project Manager, or Company jointly or
severally arising out of or connected with any of the matters referred to in
Section 4 (C) (17).
(b) If any claim contains an allegation that Project Manager, its
agents, shareholders, officers, directors, employees or independent contractors,
has been grossly negligent or has engaged in willful misconduct, but such
allegations are not proven or upheld in any action, proceeding, charge or
prosecution, the rights of the parties under Article 4(C) (16), 4(C) (17), 4(C)
(18), and 4(C) (19) shall be governed based upon the holding or findings
rendered with respect to any such claim rather than the allegations.
4 (C) (23) HOTEL/CASINO BRAND STORE OPERATIONS. Project Manager and
Company agree that Xxxxxx shall have the exclusive right to supervise, oversee,
and
37
direct Project brand store operations to be sold in the Project including
design, display, pricing, merchandising and related Operational Standards,
subject to Company's prior written approval and budgets as set forth in the
Annual Plan. Revenue received for the sale of said merchandise shall be deemed
part of the Gross Revenues under this Agreement.
4 (C) (24) LEASE AGREEMENTS. Project Manager shall be responsible for
the leasing of space in the Project in Company's name to lessees, subject to
lease or occupancy agreements, and keeping with the Operational Standards of the
Project, and subject to Company's prior written approval. Project Manager will
supervise and control operations of all lessees in a manner which is consistent
with the Operational Standards, and which will generate maximum revenues to
Company. Revenues received by Company under any lease or occupancy agreements
shall be deemed a part of the Gross Revenues as defined under this Agreement.
4 (C) (25) CONSULTATION. Subject to the terms and conditions of this
Agreement, Project Manager shall keep designated representatives of Lily Pond,
as well as Company, informed of operational and critical events, including a
monthly written report to Lily Pond and Company of same. In any event, Project
Manager shall make designated representatives available to Company and Lily Pond
for questions or consultations with respect to the day-to-day activities of
Project Manager and the Project. Unless otherwise provided herein, Project
Manager shall have the discretion and responsibility with respect to such items
as guest admittance, gaming policies and layouts, guest service charges and room
rates and labor. Notwithstanding the foregoing, the Food and Beverage services
and Entertainment standards and policies shall be approved by Xxxxxx subject to
the provisions of this Agreement and consistent with Operational Standards,
budgets, Supervisory Agreement, and Annual Plans as agreed upon by Company, Lily
Pond and Project Manager from time to time, including such standards as
necessary to maintain, preserve, and promote the quality and integrity of the
name and xxxx.
4 (C) (26) INVENTORY, WORKING CAPITA1 AND OPERATING EXPENSES. Subject to
the prior written approval by Company in compliance with the provisions set
forth in this Agreement and without exceeding any expense as authorized in the
applicable Annual Plan and Operational Standards, Company agrees to provide at
its expense, and Project Manager shall order on behalf of Company, sufficient
initial inventories of Operating Supplies. Company further agrees to provide
and maintain working capital sufficient at all times to ensure the uninterrupted
and efficient operation of the Project, including sufficient funds to pay
current liabilities as they fall due, and to
38
replace necessary operating inventories as they are consumed, all in
compliance with the detailed procedures set forth in the Annual Business Plan
and Operational Standards.
4 (C) (27) MAINTENANCE AGREEMENTS. Project Manager shall be responsible
for entering into any and all agreements and incur necessary expenses, on behalf
of Company, to conduct and maintain day-to-day activities in the Project, in
keeping with the provisions of the Operating Standards and Annual Plans.
4 (C) (28) EMPLOYEE BENEFIT PLANS. If in the reasonable opinion of
Project Manager, it is desirable at any time, during the term of this Agreement
to provide for the benefit of the employees of the Project, pension, profit
sharing, or other employee retirement, disability or benefit plans similar to
those now or hereafter applicable to employees of Project Manager or its
subsidiaries or Affiliates or other hotels/casinos operated by Project Manager
or any of its subsidiaries or Affiliates, Project Manager shall either: (a)
elect to adopt such a plan or plans as an employer, provided the provisions of
such plan or plans permit such action and Project is designated as an affiliated
company by Project Manager, or (b) establish a similar independent plan or plans
for the benefit of the employees of the Project.
4 (C) (29) LEGAL ACTION. Project Manager shall have the right to
institute in its own name or in the name of Company, as an Operating Cost, any
and all legal actions or proceedings to collect charges, rent or other income
from Project or to remove any tenants, terminate a lease, license, or concession
agreement, a breach thereof or default entered by any tenant, licensee or
concessionaire or supplier. Company may take at Company's expense any
appropriate steps to protect and/or litigate to final decision in any
appropriate forum, any violation, or rule or regulation concerning the Project.
Any counsel to be engaged under this paragraph shall be selected by Project
Manager, and agreed upon by Company.
ARTICLE 5
FEES
5.1 BASE MANAGEMENT FEE. In consideration of the services to be
provided by Project Manager, Company agrees to pay Project Manager a Base
Management Fee. Said Base Management Fee shall be equal to four percent (4%) of
the estimated annual Gross Revenues, to be calculated computing estimated Gross
Revenues on a monthly basis of the Project. Gross Revenues shall be calculated
as
39
defined in Article I above. The Base Management Fee shall be due and payable
the twentieth (20th) day of each month, representing compensation for the
preceding month. Should the actual aggregate installments of the Base
Management Fee paid in any Fiscal Year be more or less than the total annual
Management fee due for the entire Fiscal Year, Project Manager or Company, as
the case may be shall pay to the other the amount of such overpayment or
underpayment within ninety (90) days after the end of such Fiscal Year.
5.2 INCENTIVE FEE. In addition to the Base Management Fee, and as
further consideration for the services of Project Manager, Project Manager shall
be entitled to an Incentive Fee of up to two percent (2%) of annual Gross
Revenues, as defined in Article I, upon exceeding certain Return On Investment
targets as set forth below: (a) Return on Investment shall be defined as
follows:
(1) Investment shall be the Total Development Cost (as defined in
Section 1.49), adjusted annually as follows:
(i) commencing on the Opening Day of the Initial Term and
continuing for the balance of the term, Investment shall be deemed to increase
cumulatively at a rate equal to the annual Consumer Price Index (as defined in
Section 1.12), such rate not to exceed six percent (6%) per annum; and
(ii) shall be deemed to increase by the actual. cost of
additions or alterations to the Project, after the receipt of the final
certificate of occupancy for the Project, which are not paid from the Reserve
Fund and/or are not deemed Operating Costs, but only with respect to that
portion thereof which Company and Project Manager in good faith agree, on a
prospective basis (before such addition or alteration commences) is reasonably
projected to produce a Return at least equal to that of the target, as
established herein, of such additional amount of the Total Development Cost of
the proposed additions or alterations.
(2) Return shall be the Cash Flow from Operations equaling:
(i) Net income before tax plus interest expense, plus
depreciation and amortization expense, less actual operating capital
expenditures (within the parameters of the Annual Plan and which in no Fiscal
Year shall be less than one percent (1%) of Gross Revenues) excluding capital
expenditures for facility additions and/or alterations as specified above; and
40
(ii) in the event that Incentive Fees have been accrued,
they will be added back to the net income amount.
The Return, as defined above, shall be divided by the Investment, as defined
above, and the quotient shall equal the Return on Investment. The annual Return
on Investment targets and Incentive Fee Achievement schedule are set forth in
Exhibit "X", attached hereto and incorporated herein.
5.3 DISTRIBUTIONS. Project Manager shall be paid an Incentive Fee as
calculated in section 5.2, the twentieth (20th) day of each month immediately
following the prior Month once the Incentive Fee targets have been achieved,
and thereafter, on the twentieth (20th) day of each Fiscal Month during the
remaining Fiscal Year. If the aggregate installments of the Incentive Fees paid
in any Fiscal Year shall be more or less than the total actual Incentive Fees
due for the entire Fiscal Year, Project Manager or Company, as the case may be,
shall pay to the other the amount of such overpayment or underpayment within
ninety (90) days after the end of each such operating year.
ARTICLE 6
DEFAULT
6.1 DEFAULT. Upon the occurrence of any event of default, this
Agreement may be terminated at the option of the non-defaulting party which
shall be effective within thirty (30) days after written notice of same and
subject to the provisions of Section 6.4. Default shall include the events set
forth in Sections 6.2 and 6.3 below.
6.2 DEFAULT BY PROJECT MANAGER.
(a) Project Manager applies for or consents to the appointment of
receiver, trustee, or liquidator of Project Manager; or
(b) Project Manager files a voluntary petition for bankruptcy, or
makes a general assignment for benefit of creditors; or
(c) Involuntary bankruptcy proceedings or any order, judgment or
decree shall be entered by any court of competent jurisdiction or the
application of a creditor, adjudicating Project Manager bankrupt or insolvent,
and such order,
41
judgment or decree shall continue unstayed and in effect for a period of
ninety (90) days; or
(d) Project Manager shall fail to keep, observe, or perform any
material covenant, agreement, term, or provision of this Agreement to be kept or
observed or performed by Project Manager, which is not directly caused by
Company, and such default shall continue for a period of thirty (30) days after
written notice thereof by Company to Project Manager; or
(e) The Nevada Gaming Commission or Nevada Gaming Control Board
issues any notification that Project Manager or any of its officers or directors
is in violation or unsuitable under any Nevada Gaming statutes or regulations;
or
(f) Any uncured default by Project Manager, in its capacity as
shareholder of Company, under the Stockholders Agreement; or
(g) Any material and unauthorized interference by Project Manager
with Xxxxxx'x rights and obligations under the Supervisory Agreement.
6.3 DEFAULT BY COMPANY.
(a) Company shall fail to keep, observe, or perform any material
covenant, agreement, term or provision of this Agreement to be kept, observed,
or performed by Company, which is not directly caused by Project Manager and
such default shall continue for a period of thirty (30) days after notice
thereof by Project Manager to Company; or
(b) Company shall apply for or consent to the appointment of a
receiver, trustee or liquidator of Company, or a substantial part of Company's
assets; or
(c) Company files a voluntary petition for bankruptcy or makes a
general assignment for the benefit of creditors; or
(d) An order, judgment or decree is entered by any Court of
competent jurisdiction, or the application of a creditor adjudicating the
Company bankrupt or insolvent, or approving a petition of reorganization of the
Company or appointing a receiver, trustee, or liquidator of the Company or all
or a substantial part
42
of the assets of the Company, and such order, judgment or decree shall
continue unstayed and in effect for a period of thirty (30) days; or
(e) The Nevada Gaming Commission, or Nevada Gaming Control Board
issues any notification that Company or any of its officers or directors is in
violation or unsuitable under any Nevada Gaming statutes and regulations; or
(f) Notwithstanding Section 6.3(a) above, if Company fails to
timely pay Project Manager the fees set forth in this Agreement within five (5)
days after written notice thereof, by Project Manager to Company, and said
failure was not caused by the acts of Project Manager; or
(g) Any uncured default by Xxxxxx or Lily Pond under the
stockholders Agreement, the Supervisory Agreement, or Sublicense Agreement.
6.4 CURING DEFAULT. Upon receipt of any notice of default, the
defaulting party shall immediately undertake to cure within said period as
identified in Article 6. If such default is not susceptible to being cured with
all due diligence within the stated cure period, the defaulting party shall
proceed promptly with all due diligence to cure the same and thereafter to
prosecute the curing of such default with all due diligence. The time for the
defaulting party to cure the same shall be extended for such periods as may be
necessary to cure the same with due diligence. However, the cumulative total of
said extensions shall not exceed ninety (90) days without the written consent of
the non-defaulting party. After cure, the default shall be of no force and
effect, and the after cure rights and obligations of the parties shall be the
same as existed prior to the giving of notice of the default.
However, this provision shall not apply to Section 6.3(f).
ARTICLE 7
TERMINATION
7.1 TERMINATION. Either party may terminate this Agreement for any
reason set forth in this Article 7.
7.2 TERMINATING UNDER DEFAULT. Any party may terminate this Agreement
in the event of a default, as set forth in Article 6 above, at the option of the
non-defaulting party, subject to all applicable notice and cure requirements.
43
7.3 CONDEMNATION OR DESTRUCTION. Either party may terminate this
Agreement for the condemnation or destruction of the Project subject to the
terms and conditions set forth in Article 9 of this Agreement.
7.4 FAILURE TO ACHIEVE FINANCIAL RESULTS.
(a) Either party shall have the right to terminate this Agreement
in the event that minimum Return on Investment levels are not achieved at
specified times and under certain conditions which are set forth in Exhibit "L"
attached hereto and incorporated herein. Notwithstanding the foregoing, to the
extent adverse operating results are directly attributable (as reasonably
determined by the accountants for the Project) to any reason of force majeure,
or other similar circumstance beyond the control of Project Manager, such
operating results shall be disregarded for the purpose of this Section.
(b) If either party terminates this Agreement pursuant to Section
7.4(a), such right may be exercised provided that (i) notice of termination
shall be given within sixty (60) days after the receipt by both parties of the
certified profit and loss statement for such Fiscal Year, and (ii) the notice
shall specify a termination date not less than thirty (30) days after giving of
such notice.
7.5 TRANSFER OF INTEREST. The parties hereto expressly agree and
acknowledge that the rights and duties set forth in this Management Agreement
are personal to Project Manager and Company, and that the parties have entered
into this Agreement in reliance on the business skills and personal character of
each other. Accordingly, neither party may assign its interest unless the
provisions of Section 10.5 are complied with. Any attempt to do any of the
foregoing without the prior express written permission of the non-transferring
party shall be null and void and of no effect, and shall constitute a material
breach of this Agreement for which the non-transferring party may terminate
subject to the provisions of this Article 7. Notwithstanding the foregoing, any
public stock offering by either Company, Lily Pond or Project Manager shall be
excepted from the provisions of this Section 7.5, and either party shall have
the right to make said offering without the express written permission of the
non-offering party, subject to the terms of the stockholders Agreement.
44
7.6 SALE OR LEASE OF PROJECT. Project Manager shall have the right to
terminate this Agreement should Company elect to sell, assign, convey, or lease
all or, substantially all, of the Project.
7.7 REDUCTION OF INTEREST. Should Project Manager reduce its equity
interest in the Project below twenty percent (20%) of its initial cumulative
total of Class A and Class B stock or cease to own or maintain gaming operations
elsewhere, then Company shall have the right to terminate this Agreement. If
the current shareholders of Project Manager cease to own forty percent (40%) or
more of the overall voting power of Project Manager (including, without
limitation, the right to elect directors), the Company shall have the right to
terminate this Agreement.
7.8 TERMINATION NOTICE. Any termination given pursuant to this Article
shall be effective as of the date specified in the notice of termination which
will not be less than thirty (30) nor more than one-hundred eighty (180) days
after the date of such notice, excepting notification requirements as set forth
in Article 6 for any default set forth therein.
7.9 RIGHTS AND REMEDIES UPON TERMINATION. A party terminating this
Agreement shall retain all other rights and remedies which may be provided at
law or equity in addition to any rights provided in this Agreement including the
right of termination.
7.10 PRE-OPENING TERMINATION. Company shall have the right to terminate
this Agreement, at any time prior to opening of the Project, should Company
elect not to develop the Project. Notwithstanding the foregoing, Company shall
be required, on or before the date of termination, to reimburse and compensate
Project Manager for all fees, costs, expenses, and payments due and owing to
Project Manager up to the time of termination, and assume all liabilities
incurred by Project Manager pursuant to this Agreement.
7.11 POST-OPENING TERMINATION. Excepting the provisions of Article 6,
Company shall not have the right to terminate this Agreement at its sole
discretion without liability until three years after the opening of the Project.
Company shall be required to pay and reimburse Project Manager for all fees,
costs, expenses, and payments due Project Manager up to the time of termination,
as well as a termination fee to be calculated for certain time periods from the
term of this Agreement as set forth in Exhibit "M" attached hereto and
incorporated herein.
45
7.12 WINDING UP. Upon any termination of this Agreement, for any reason
whatsoever, each party shall immediately pay all fees and payments due under the
terms of the Agreement up to the date of termination. The parties shall provide
the other party with an itemized statement showing all fees, charges and
expenses, and other matters that may be due or owing therein. Project Manager
shall deliver to Company, or its designated agents, copies of all books and
records maintained by Project Manager for the Project, and all funds in the
possession of the Project Manager which may be belonging to Company subject to
Project Manager's rights of setoff for any monies that may be due and owing
under the terms of this Agreement. Project Manager shall release, assign and
transfer any and all interests it may have in the real and personal property and
any agreements or encumbrances with respect thereto or the Project, other than
those items of real and personal property which were paid for and owned by
Project Manager. Project Manager shall make itself available for a period of
thirty (30) days after termination to consult with and advise Company regarding
the operation and maintenance or closure of the Project upon receipt of a
reasonable consultation fee to be agreed upon by Project Manager and Company.
Company shall be solely responsible for, and shall pay the costs of cancellation
of any agreements or continued performance under any agreements entered into by
Project Manager or Company prior to the date of termination. Company shall
further be solely responsible for all severance and termination benefits due to
the employees of Company and/or Project Manager whose services are terminated.
Company shall further continue to honor all commitments concerning the Project
including guest room reservations, conventions, bookings, banquets, tours, and
any other commitments outstanding as of the time of termination. This paragraph
shall be deemed a covenant running with the Project, and shall survive
termination or expiration of this Agreement, and shall be specifically
enforceable by Project Manager and Company.
ARTICLE 8
MORTGAGES AND DEBT ENCUMBRANCES
8.1 NON-ENCUMBRANCE. Project Manager shall not mortgage or encumber the
Project, including the real and personal property, Furniture, Fixtures and
Equipment therein without the prior written consent of Company. Company shall
provide Project Manager at the commencement of each Fiscal Year, a listing of
all mortgages and encumbrances on the Project including all real and personal
property, Furniture, Fixtures and Equipment, and shall identify the mortgage or
debt
46
encumbrance holders, the nature of the encumbrances, and the amount of the
encumbrances.
8.2 NOTICES TO MORTGAGEES. Project Manager shall be required to give a
copy of any notice of default or notice of termination that it receives under
this Agreement to any mortgagee or encumbrance holder designated in Company's
list of encumbrances or as the Company may designate from time to time, and as
is required by the provisions of this Agreement for giving of notices. Project
Manager may also provide any notice of default or termination that Company may
receive to the designated mortgagee or debt encumbrance holder as Company may
designate.
8.3 CURE BY MORTGAGEE. Should Company default, or should an event of
termination occur as set forth in Articles 6 or 7, and any mortgagee or
encumbrance holder shall be entitled to cure the default on behalf of Company
pursuant to the provisions of Article 6 and 7, then Project Manager shall accept
same.
8.4 ACCESS TO PREMISES. Upon reasonable advance notice from any
mortgagee or debt encumbrance holder designated by Company, Project Manager
shall accord the entity and its agents the right to enter upon any part of the
Project premises at any reasonable time for the purposes of examining,
inspecting and copying the books and records of the Project.
8.5 FORECLOSURE. If any mortgagee or debt encumbrance holder shall
obtain ownership of the Project due to any legal proceedings, foreclosure, or
conveyance in lieu of foreclosure and shall have cured any existing defaults of
Company, Project Manager may elect to continue with the Management Agreement
with said mortgagee or debt encumbrance holder or may elect to terminate this
Agreement. If the mortgagee or debt encumbrance holder continues with this
Agreement, Company and Project Manager shall acknowledge the same in writing.
8.6 ESTOPPEL CERTIFICATES. Project Manager shall provide, at the request
of Company, to those mortgagees or debt encumbrance holders designated by
Company, a statement in writing certifying this Agreement has not been modified
and is in full force and effect, or if there have been such modifications
stating the modifications. Said estoppel certificate shall also require Project
Manager to state whether or not, to the best of Project Manager's knowledge,
there exists any default or termination, and if so, specifying the event of
default or termination. Said estoppel certificate shall be delivered within ten
(10) days of receipt of a written
47
request. Company shall be required to provide a similar estoppel certificate
to Project Manager upon request.
ARTICLE 9
CONDEMNATION AND DESTRUCTION
9.1 CONDEMNATION AND DESTRUCTION. If the whole of the Project shall be
taken or condemned in any eminent domain, condemnation, compulsory acquisition
or like proceeding by any competent authority for any public or quasi-public use
or purpose, or a portion thereof is condemned such as to make it imprudent or
unreasonable, in Company's and Project Manager's reasonable opinion, to use the
remaining portion of the Project for a first class hotel and casino of the type
and class agreed upon immediately preceding such taking of condemnation, and in
any such event, the term of this Agreement shall cease and terminate as of the
date in which Company shall be required to surrender possession of the Project
as a consequence of such taking or condemnation. Project Manager shall continue
to supervise and direct the management and operation of the Project until such
time as Company is required to surrender possession of the Project as a
consequence of such taking or condemnation. Project Manager shall be
compensated, pursuant to the terms of this Agreement, for services provided up
to the date of surrender and possession. Upon surrender and possession, this
Agreement shall immediately terminate, and Project Manager shall not be entitled
to share in any award granted to Company for such taking or condemnation other
than as it may be entitled to as an equity holder.
9.2 CONTINUATION. If this Agreement is not terminated as set forth in
Section 9.1, then Company shall be required to immediately undertake efforts to
repair or rebuild the Project, or any part thereof to its pre-condemnation
status to the extent reasonably possible. Company shall be responsible for
immediately commencing and diligently proceeding with said repairs, alterations,
or modifications pursuant to a timeframe to be agreed to by Project Manager,
with Project Manager having the right to participate in supervision of said work
pursuant to Article 4(A) and 4(B). The obligations of Company, pursuant to this
Agreement, shall xxxxx during the period of said repairs if the entire Project
is required to be inoperable, so long as Company diligently proceeds with the
requirements of restoration.
9.3 DESTRUCTION. If the Project is destroyed in whole or in part by
fire or other casualty, then Company shall be required to commence necessary
repairs,
48
construction, or modifications within thirty (30) days after the date of said
casualty, and shall continue to diligently repair, construct, or modify the
Project. If the Project continues to operate throughout the reconstruction,
repair, or modification, then this Agreement shall remain in full force and
effect, however, should the Project cease to operate during the period of
construction, repair, or modification, then the provisions of this Agreement
will xxxxx during this period, other than right of Project Manager to
participate in the construction, repair and modification of the facility as
set forth in the provisions of Article 4(A) and 4(B).
9.4 TERMINATION. Notwithstanding Sections 9.2 and 9.3, should the
Project be materially destroyed during the term of this Agreement by fire or
other casualty which would make it imprudent or unreasonable in Company's
absolute discretion to rebuild and operate the Project and Company gives Project
Manager written notice thereof within thirty (30) days after the date of said
casualty, and Company elects to terminate the operation of the Project for one
year or more, then Company and Project Manager shall each have the right and
option, upon thirty (30) days advance written notice, to terminate this
Agreement subject to the provisions of Section 7.11. If neither party shall
elect to terminate this Agreement, then Company shall be required to immediately
commence with construction, repair, or modification of the premises within
thirty (3O) days after the date of casualty and diligently pursue same.
ARTICLE 10
MISCELLANEOUS
10.1 NOTICES. All notices or other communications required pursuant to
this Agreement shall be in writing and personally served or delivered by
overnight express mail, or by certified or registered mail to the
representatives of Company or Project Manager as set forth below. Delivery will
be deemed complete upon mailing or delivery to overnight courier
If to Company: If to Project Manager:
HARD ROCK HOTEL XXXXXX'X RESORT Hotel&Casino
X.X. Xxx 000 P.O. Box 128
U.S. Hwy. 50 & Stateline Ave. U.S. Xxx. 00 & Xxxxxxxxx Xxx.
Xxxxxxxxx, Xxxxxx 00000 Xxxxxxxxx, Xxxxxx 00000
Attn:________________________ Attn: President and Chief Executive Officer
49
With Courtesy Copy of all notices to Project Manager and Company to be
provided to:
Xxxxxxxxx & Xxxxxx, Ltd. Xxxxxxx Xxxxx, Esq.
X.X. Xxx 0000 000 Xxxx Xxxxxx, Xxx. 0000
000 Xxxxxxxxx Xxxxx, Xxx. 0000 Xxx Xxxx, Xxx Xxxx 10169
Stateline, Nevada 89449-3390
Attn: Xxxxxx X. Xxxxxx, Esq.
Xxxxxx & Silver, Ltd.
Lily Pond Investments, Inc., 0000 Xxxxxx Xxxxxx Xxxx.
a Nevada corporation 14th Floor
000 Xxxxx Xxxxxxxxx Xxxxxxxxx Xxx Xxxxx, Xxxxxx 00000
Xxx Xxxxxxx, XX 00000 Attn: Xxxxxxx Xxxxxx, Esq.
10.2 AGENCY. Nothing herein shall be deemed to be construed to create a
relationship of employee/employer, joint venturers or partners of Project
Manager, Lily Pond and Company or each other, and neither partner shall have the
power or authority to enter into any agreement without the other party's consent
except as may be provided for in this Agreement.
10.3 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Nevada. Jurisdiction and venue with
respect to any legal action to interpret or enforce the terms of this Agreement
shall be brought in any appropriate court or other forum in the State of Nevada.
10.4 SEVERABILITY. Should any Court, administrative or legislative body
uphold or declare any of the terms or provisions hereof to be invalid or
unenforceable for any reason, the validity or unenforceability of said
provisions shall not affect the remaining terms or provisions of this Agreement.
10.5 SUCCESSORS AND ASSIGNS. Neither party shall have the right to assign
this Agreement or any obligations or rights hereunder without the prior written
consent of the non-assigning party. Notwithstanding the foregoing, Project
Manager may assign its rights and obligations herein to any majority owned
subsidiary or Affiliate of Project Manager so long as said Affiliate or
subsidiary is of like experience, ability and reputation, and complies with all
terms and requirements of this Agreement. Further, Project Manager may assign
this Agreement to any successor or assignee manager which may result from any
incorporation, merger or
50
result from a consolidation or reorganization of Project Manager, provided
that Project Manager maintains majority ownership of any entity resulting
from such incorporation, merger, consolidation or reorganization. However,
any public stock offering referenced in Section 7.5 shall not be subject to
the provisions of this Section 10.5. All attempted assignments of this
Agreement by any party not in compliance with the provisions hereof, shall be
void as to the party not having consented to such assignment. With respect to
any assignment prohibited by this section, Company shall be deemed to have
accepted any assignment by Project Manager as provided herein unless a
written objection is delivered within ten (10) days of receipt of written
notice of Project Manager's proposed assignment. Any information or
documents provided to Company by Project Manager or its proposed assignee
shall be kept in confidence and shall not be disclosed to any parties,
persons or organizations without the prior written consent of the
non-disclosing parties as may be required by law. Should Company elect to
sell the Project to a purchaser, Company shall notify Project Manager in
writing no less than ninety (90) days prior to any such intended sale of the
Project. As part of such notification, Company shall provide Project Manager
with the identity of the purchaser and reasonably complete information
regarding the purchase to the extent necessary so that Project Manager can
assess the purchaser's qualifications and standards to make an election as to
whether to continue this Agreement with the new purchaser. Should Project
Manager elect to continue the Agreement, then it shall notify Company and any
prospective purchaser within thirty (30) days of receipt of notice from
Company of the intended sale.
10.6 SUCCESSORS. Subject to the conditions set forth in this Agreement,
this Agreement shall inure to the benefit of, and be binding upon the parties
hereto, and their respective heirs, legal representatives, successors, and
assigns.
10.7 WAIVER AND MODIFICATION. Neither party may modify or be deemed to
have waived its rights or obligations under the terms or provisions of this
Agreement without said waiver or modification being set forth in writing and
executed by the party to be charged. Waiver of any requirement of strict
performance, covenant, agreement, term, or condition or breach of this Agreement
shall not alter or affect the remaining terms of this Agreement and each and
every covenant, agreement, term and condition of this Agreement shall continue
in full force and effect with respect to any other existing or subsequent breach
by any party or so-called rights and remedies of the parties.
51
10.8 ATTORNEY'S FEES. Should either party commence any legal action to
interpret or enforce the provisions of this Agreement, then the prevailing party
in any such action shall be entitled to a reasonable award of attorney's fees
and costs associated therewith.
10.9 FORCE MAJEURE. If Project Manager, in its reasonable opinion,
determines it is necessary to cease operations of the Project in order to
protect the Project, Company, Project Manager, or the health, safety and welfare
of the patrons and employees for any reason of force majeure or act of God, then
in such event, Project Manager shall have the right to close and cease or
suspend such operations for up to a period of sixty (60) days. If after sixty
(60) days, conditions which would cause the interruption have not been improved
sufficiently to allow reasonable resumption of operations, as reasonably
determined by Project Manager, then either party may terminate this Agreement
upon thirty (30) days advance written notice after the sixtieth (60th) day of
suspension of operations.
10.10 UNDERSTANDINGS AND AGREEMENTS. This Agreement, the Stockholders
Agreement, Supervisory Agreement, and the Sublicense Agreement constitute all of
the understandings and agreements of the parties of whatsoever nature or kind,
whether oral or written. No other representations have been made or relied upon
other than as set forth therein.
10.11 COVENANT. Any covenant, term, or provision of this Agreement, which
in order to be effective, must survive the termination of this Agreement, shall
survive any such termination.
10.12 POWER OF AUTHORITY. The parties hereto represent and warrant that
they have full power and authority to enter into and execute this Agreement and
to be bound and perform the terms hereof, and that the parties executing this
Agreement on behalf of Company, and Project Manager respectively are fully
authorized to act on behalf of said respective parties. Upon request, each party
shall furnish the other evidence of such authority.
10.13 INTEREST AND PENALTIES. Any amounts payable, due and owing
hereunder by any party shall bear interest at a rate equal to the greater of (a)
the Prime Rate in effect from time to time at First Interstate Bank of Nevada,
N.A., plus three (3) percentage points, or (b) eighteen percent (18%) per annum
until paid in full, if not paid within the time provisions as required by this
Agreement.
52
10.14 BROKERAGE. The parties hereto each represent and warrant to the
other that neither has sought the services of a broker or agent in this
transaction, and neither has employed nor authorized any persons to act in such
capacity. Project Manager and Company each hereby agree to indemnify and hold
the other harmless from and against any and all claims, loss, liability, damage,
or expense (including court costs, and reasonable attorney's fees) suffered or
incurred by the other party as a result of a claim brought by any person or
entity claiming to be engaged as a client or broker or agent by the indemnifying
party.
10.15 INCORPORATION OF DOCUMENTS. All references to ancillary agreements,
documents and exhibits in this Agreement shall be deemed to be an incorporation
of said documents, agreements, and exhibits to this Agreement, and both parties
hereto represent and warrant that they have had an opportunity to review and
approve all such documents, agreements, and exhibits.
10.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
constitute one and the same Agreement.
53
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement effective the day and year first above written.
COMPANY: PROJECT MANAGER:
HARD ROCK HOTEL, INC., XXXXXX'X WAGON WHEEL, INC.,
A Nevada corporation a Nevada corporation
By: /S/ XXXXX XXXXXX By: /S/ XXXXXXX XXXXXX
---------------- ----------------------
Xxxxxxx Xxxxxx, Xx.
Its: PRESIDENT Chairman of the Board
----------------
By: /S/ XXXXXXX XXXXXXXXX
----------------------
Xxxxxxx Xxxxxxxxx
President
By: /S/ XXXXXXXX XXXXXXXXX
----------------------
Xxxxxxxx Xxxxxxxxx
Secretary
EXHIBIT "A"
CURRENT PROJECT MANAGER AFFILIATES
STATES WHERE
OWNERSHIP, DIRECTORS, QUALIFIED TO DO
NAME OFFICERS BUSINESS
---- ------------------------- ---------------
XxxxXx 100% owned by Xxxxxx'x Nevada
Wagon Wheel, Inc.
Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxxx
Wagon Wheel Stages, Inc. 100% owned by Xxxxxx'x Nevada
Wagon Wheel, Inc. California
Xxxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx
Reno Projects, Inc. 100% owned by Xxxxxx'x Nevada
Wagon Wheel, Inc.
Xxx Xxxxxx
Xxxxxxxx Xxxxxxxxx 53.l9% owner of Xxxxxx'x N/A
Wagon Wheel, Inc.
EXHIBIT "B"
PROJECTED ANNUAL OPERATING BUDGET
The Annual Operating Budget will be prepared by Project Manager for submission
to the Board of Directors of Hard Rock Hotel, Inc., a Nevada corporation, within
one hundred eighty (180) days after execution of the Management Agreement, as
provided for in Section 4 (A) (2) (d) of the Management Agreement.
Defined at 1.3, incorporated as a component of the Annual Plan (defined at
1.4), Exhibit "C".
Referenced within body of document: 4 (A) (2) (d), 1.32 (detail of
Operating Costs).
Description: The Annual Operating Budget will be comprised of various
financial and statistical reports by operating and support departments and
functions, projecting income and expenses by detail line item (see
Operating Costs, 1.32) for the next Fiscal Year in monthly series.
Departmental and functional operating assumptions in support of financial
projections will include, but not be limited to, major program plans
(marketing and sales, promotions, hotel sales, human resources and
benefits, capital expenditures, etc.) and department specific objectives
prepared by operating and administrative managers.
EXHIBIT "C"
FIRST FISCAL YEAR'S ANNUAL PLAN
The Annual (business) Plan, governing the conduct of operations of the Hard Rock
Hotel, Inc., a Nevada corporation, will be prepared by the Project Manager for
submission to the Board of Directors within one hundred eighty (180) days after
execution of the Management Agreement, as provided for in Section 4 (A) (2) (d)
of the Management Agreement.
Each Annual (business) Plan for subsequent Fiscal Years after Opening will be
presented to the Board of Directors by Project Manager at least sixty (60) days
prior to the start of the referenced Fiscal Year, as provided for in Section 4
(C) (10) of the Management Agreement.
Defined at 1.4, incorporating and/or referencing other elements:
Annual Operating Budget, 1.3, Exhibit "B"
Capital Improvements, 1.7
Capital Replacements, 1.8
Operating Costs, 1.32
Operating Equipment, 1.33
Operating Supplies, 1.34
Operational Standards, 1.35, Exhibit "G"
Capital Expenditures, 4 (C) (6)
Referenced within body of document: 4 (A)(2)(d), 4(C)(2), 4(C)(3),
4(C)(4), 4(C)(6), 4(C)(10), 4(C)(23), 4(C)(24), 4(C)(25), 4(C)(26),
4(C)(27).
Description: The Annual (business) Plan for each Fiscal Year subsumes the
Annual Operating Budget (with Projected Operating Costs), Capital
Expenditures (Improvements and Replacements), Operating Equipment and
Supplies, and Operational Standards. Key Programming assumptions,
financial plans and budgets associated therewith, Operational Standards,
operating and regulatory rules, policies, and procedures, and managerial
and departmental objectives will be documented by Project Manager for
approval by the Board of Directors and will be subject to change as part of
the Annual Plan process and periodically
throughout the subject Fiscal Year, as provided for in Section 4(C)(10)(d)
and (g) in the Management Agreement.
EXHIBIT "D"
STOCKHOLDERS AGREEMENT
EXHIBIT "E"
DESIGN, DEVELOPMENT AND CONSTRUCTION BUDGET
The Design, Development and Construction Budget will be prepared by Project
Manager's construction coordinator, the General Manager and Project design and
development consultants and sub-contractors for submission to the Board of
Directors within one hundred eighty (180) days after the execution of the
Management Agreement, as provided for in Section 4(A)(3) of the Management
Agreement.
Defined at 1.12, incorporating and referencing other elements:
Furniture, Fixtures & Equipment, 1.19
Pre-Opening Program, 1.37
Referenced within body of document: 4(A)(l), 4(A)(2), 4(A)(3),
4(A)(7), 4(A)(8), 4(B)(l)
Description: Total invested capital to build and open the Project for
operation will not exceed EIGHTY MILLION DOLLARS ($80,000,000), including
the value of the land; all design, permitting and construction costs: all
furniture, fixtures and equipment; financing fees paid during the
construction period under terms of debt financing commitment; capitalized
interest incurred during construction period; all costs associated with
Pre-Opening program; and working capital requirements to establish start-up
Operating Supplies and other inventories.
EXHIBIT "F"
LICENSE AGREEMENT
EXHIBIT "G"
OPERATIONAL STANDARDS
Operational Standards, associated with the Annual (business) Plan, will be
prepared by the Project Manager as part of the First Fiscal Year's Annual Plan,
within one hundred eighty (180) days after execution of the Management Agreement
for submission to the Board of Directors, as provided for in Section 4 (A) (5)
of the Management Agreement.
Defined at 1.35, incorporating and referencing other elements:
Annual Plan, 1.4, Exhibit "C"
Annual Operating Budget, 1.3, Exhibit "B"
Referenced within body of document: 4(A)(2)(d), 4(A)(5), 4(A)(7),
4(C)(2), 4(C)(6), 4(C)(10), 4(C)(23), 4(C)(24), 4(C)(25), 4(C)(26),
4(C)(28).
Description: Operational Standards - to be developed by department, job
classification and function - will include service and procedural
standards; operating and regulatory rules, policies and procedures;
training and orientation programs; and quality assurance and regulatory
compliance tracking/monitoring processes.
EXHIBIT "H"
SITE
The estate of interest in the land described or referred to in this Schedule
covered by this report is:
A FEE
Title to said estate or interest at the date hereof is vested in:
RED, WHITE AND BLUE PICTURES, INC., a California corporation
The land referred to in this report is situated in the State of Nevada, County
of Xxxxx, and is described as follows:
That portion of the Northwest Quarter (NW 1/4) of Section 22, Township 21 South,
Range 61 East, M.D.B. & M., described as follows:
Parcel One (1) as shown by map thereof in File 61 of Parcel Maps, Page 52, in
the Office of the County Recorder of Xxxxx County, Nevada.
EXHIBIT "J"
SUPERVISORY AGREEMENT
EXHIBIT "K"
TARGETS FOR RETURN ON INVESTMENT
Pursuant to Section 5.2, the following shall represent the Return on Investment
targets relevant to Incentive Fee achievements:
Year 1 15%
Year 2 16.5%
Year 3 and thereafter 17.5%
A. Accounts:
During the term of this Agreement, Company's Return Account and Project
Manager's Incentive Account shall be established and maintained on the books and
records for the Project. Company's Return Account is established for the sole
purpose of determining when the Incentive Fee begins to accrue and does not
create any obligation to pay any Cash Flow from Operations to Company. Each
amount allocated to Project Manager's Incentive Account pursuant to Section 5.2
shall constitute a credit to that account and each amount distributed on account
of Project Manager's Incentive Account pursuant to Section 5.2 shall constitute
a debit to that account. During each Fiscal Year, Cash Flow from Operations for
each Fiscal Month shall be allocated to Company's and Project Manager's Account
at the end of each Fiscal Month in the following manner and priority:
B. Incentive Fee Achievement Schedule:
(i) First, all Cash Flow from Operations for each Fiscal Month shall be
credited to Company's Return Account until the amount credited to Company's
Return Account during the then current Fiscal Month equals an amount equal to
one-twelfth (1/12) of Company's Return on Investment.
(ii) Second, all Cash Flow from Operations in excess of that amount
credited to Company's Return Account under subsection (i) above for each Fiscal
Month shall be credited fifteen percent (15%) to Project Manager's Incentive
Account and eighty-five percent (85%) to Company's Return Account;
(iii) The cumulative amount credited to Project Manager's Incentive Account
under subsection (ii) above during any Fiscal Year shall never exceed the amount
equal to two percent (2%) of cumulative Gross Revenues for the relevant Fiscal
Year-to-Date. All Cash Flow from Operations in excess of the two percent (2%) of
Gross Revenue limitation otherwise allowable to Project Manager's Incentive
Account under subsection (ii) above shall be credited to Company's Return
Account.
EXHIBIT "L"
MINIMUM FINANCIAL RESULTS
Pursuant to Section 7.4, the following minimum Return targets are established
for the specified times and under the conditions as outlined below:
Minimum Return
FISCAL YEAR (AS DEFINED IN SECTION 5.2)
Through the end of Fiscal Year 2 None
Fiscal Year 3 10% per annum
Fiscal Year 4 11% per annum
Fiscal Year 5 and thereafter 12% per annum
Notwithstanding Section 7.4 (a), Company's right to terminate this Agreement
pursuant to Section 7.4 (b), in the event that minimum Return on Investment
targets referred to above are not met in any one Fiscal Year shall be subject to
the following:
(i) subject to subsections (ii) and (iii) below, if the Rolling Average, as
defined below, equals or exceeds the Return on Investment target required for
the then current Fiscal Year, Company shall not have the right to terminate this
Agreement as a result of Project Manager's failure to achieve minimum Return on
Investment for the then current Fiscal Year. In the event that the Rolling
Average does not equal or exceed the Return on Investment required for the then
current Fiscal Year, this Agreement shall continue in full force and effect
provided that the minimum Return on Investment target for the next Fiscal Year
is achieved; if not, Company shall have the right to terminate this Agreement;
and,
(ii) during the Initial Term of the Agreement, Project Manager may avail
itself of the Rolling Average cure provision set forth in subsection (i) above
no more than three (3) times during the Initial Term of this Agreement, and, for
the balance of the term of this Agreement (including all Renewal Terms), Project
Manager may avail itself of the Rolling Average cure provision set forth in
subsection (i) above no more than three (3) additional times during the
remaining term of this Agreement; and
(iii) notwithstanding the provision of subsections (i) and (ii) above, in
the event that the minimum Return On Investment target is not achieved for two
(2) consecutive Fiscal Years, Company shall have the right to terminate this
Agreement.
(iv) Rolling Average is defined as the average of the then current Fiscal
Year's Return on Investment plus the two (2) immediately preceding Fiscal Years'
Return on Investment.
EXHIBIT "M"
POST-OPENING TERMINATION FORMULA
Pursuant to Section 7.11, in the event of a Post-Opening Termination by Company,
Project Manager shall receive a termination fee as follows:
(A) Company may not terminate this Agreement before the end of the third
full year of operation from the date of Opening.
(B) In the event that termination occurs after the completion of the
third full year of operation from the date of Opening, the
termination fee will be an amount calculated as follows:
(1) the actual Base Management Fee and Incentive Fees earned in
the three (3) most recently completed full Fiscal Years shall
be summed and divided by three to determine the actual
average annual fee amount; and
(2) the amount in (B) (1) above shall be extended on an annual
basis ("the Annual Fee") for the balance of years remaining
in the Initial or any applicable Renewal Term of this
Agreement; and
(3) the resulting stream of actual average Annual Fee amounts
shall be discounted at a rate of 13% to determine the
termination fee payment.
