-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WkJWFyMj/PJw0K+ccTPv2UIZVhSFDkpcU/onTw5jq6aTg9O0idDsVWdrCs0k4NQN FzUGpboWXTihJVPzZ4CxlA== 0000950117-98-002179.txt : 19981221 0000950117-98-002179.hdr.sgml : 19981221 ACCESSION NUMBER: 0000950117-98-002179 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19981003 FILED AS OF DATE: 19981218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARK RESTAURANTS CORP CENTRAL INDEX KEY: 0000779544 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133156768 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09453 FILM NUMBER: 98772427 BUSINESS ADDRESS: STREET 1: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 BUSINESS PHONE: 2122068800 MAIL ADDRESS: STREET 1: 85 FIFTH AVENUE STREET 2: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 10-K405 1 ARK RESTAURANTS CORP. 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE -- SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended October 3, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE -- SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-9453 ------------------------------ ARK RESTAURANTS CORP. ----------------------------------------------------------- (Exact name of Registrant as specified in its charter) New York 13-3156768 - ------------------------------- ----------------------------------- (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 85 Fifth Avenue, New York, N.Y. 10003 ------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 206-8800 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- ----------------------- Common Stock, $.01 par value NASDAQ/NMS Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ X ]. The aggregate market value at December 15, 1998 of shares of the Registrant's Common Stock, $.01 par value (based upon the closing price per share of such stock on the Nasdaq National Market) held by non-affiliates of the Registrant was approximately $24,314,080. Solely for the purposes of this calculation, shares held by directors and officers of the Registrant have been excluded. Such exclusion should not be deemed a determination or an admission by the Registrant that such individuals are, in fact, affiliates of the Registrant. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At December 15, 1998, there were outstanding 3,653,499 shares of the Registrant's Common Stock, $.01 par value. Document Incorporated by Reference: Certain portions of the Registrant's definitive proxy statement to be filed not later than February 1, 1999 pursuant to Regulation 14A are incorporated by reference in Items 10 through 13 of Part III of this Annual Report on Form 10-K. -2- PART I Item 1. Business General Ark Restaurants Corp. (the "Registrant" or the "Company") is a holding company which, through subsidiaries, owns and operates 21 restaurants and manages five restaurants owned by others. Fourteen of the restaurants owned or managed by the Company are located in New York City, three are located in Washington, D.C., four are located in Las Vegas, Nevada (three of which are within the New York-New York Hotel & Casino), three are located in Boston, Massachusetts, and one is located in each of McLean, Virginia and Islamorada, Florida. At the New York-New York Hotel & Casino, the Company also operates the room service, banquet facilities and employee dining room and a complex of nine smaller eateries. The Company's other operations include catering businesses in New York City and Washington, D.C., as well as wholesale and retail bakeries in New York City, and a cafe at the Warner Bros. studio store in New York City. The Company was formed in 1983 to concentrate the ownership of four restaurants previously operated by the Company's principals. Until 1987 all of the Company's facilities were located in the New York City metropolitan area. In 1987, three facilities were opened in Boston, Massachusetts. Since then the Company has opened five facilities in the Washington, D.C. metropolitan area (one of which has been sold), one in Islamorada, Florida and one in Jersey City, New Jersey (a management agreement that was terminated in fiscal 1998). In January 1997, the Company opened a group of restaurants in the new 2,100-room hotel known as the New York-New York Hotel & Casino in Las Vegas, Nevada. In addition to the shift from a Manhattan-based operation, the nature of the facilities operated by the Company has shifted from smaller, neighborhood restaurants to larger, destination restaurants intended to benefit from high patron traffic attributable to the uniqueness of the restaurant's location. Most of the restaurants opened in recent years are of the latter description and the Company intends to concentrate on developing or acquiring similar facilities in the future. The Company opened two such restaurants in fiscal 1995 (B. Smith's in Washington and Bryant Park Grill and Cafe in New York) one in fiscal 1997 (the restaurant operations at the New York-New York Hotel & Casino in Las Vegas, Nevada) and two in fiscal 1998 (the Stage Deli located at the Forum Shops in Las Vegas, Nevada and Red located at the South Street Seaport in New York). In fiscal 1998, the Company continued its efforts to sell some of its smaller, neighborhood restaurants. Three such facilities were sold in fiscal 1998 and two have been sold since the end of fiscal 1998. The names and themes of each of the Company's restaurants are different except for the Company's four America restaurants, two Sequoia restaurants and two Gonzalez y Gonzalez restaurants. The menus in the Company's restaurants are extensive, offering a wide variety of high quality foods at generally moderate prices. One of the Company's restaurants, Lutece, may be classified as expensive. The atmosphere at many of the restaurants is lively and extremely casual. Most of the restaurants have separate bar areas utilized by diners awaiting tables. A majority of the net sales of the Company is derived from dinner as opposed to lunch service. Most of the restaurants are open seven days a week and most serve lunch as well as dinner. While decors differ from restaurant to restaurant, interiors are marked by distinctive architectural and design elements which often incorporate dramatic interior open spaces and extensive glass exteriors. The wall treatments, lighting and decorations are typically vivid, unusual and, in some cases, highly theatrical. -3- The following table sets forth certain information with respect to the Company's facilities currently in operation.
Seating Capacity(2) Restaurant Size Indoor- Lease Name Location Year Opened(1) (Square feet) (Outdoor) Expiration(3) ---- -------- -------------- ------------- --------- ------------- Metropolitan Cafe First Avenue 1982 4,000 180-(50) 2006 New York, New York (between 52nd and 53rd Streets) Ernie's Broadway 1983 6,600 300 2008 New York, New York (between 75th and 76th Streets) America 18th Street 1984 9,600 350 2004 New York, New York (between 5th Avenue and Broadway) Woody's (4) Seventh Avenue South 1986 1,700 90 2001 New York, New York (between Charles and 10th Streets) B. Smith's Eighth Avenue 1986 8,000 400 2011(5) New York, New York (at 47th Street) The Marketplace Faneuil Hall Market 1987 3,000 100 2000 Cafe (4) Boston, Massachusetts El Rio Grande Third Avenue 1987 4,000 160 2014 (4)(6) New York, New York (between 38th and 39th Streets) The Brewskeller Faneuil Hall Market 1987 1,500 50 2000 Pub (4) Boston, Massachusetts Gonzalez y Broadway 1989 6,000 250 1999 Gonzalez New York, New York (between Houston and Bleeker Streets) America Union Station 1989 10,000 400 2009 Washington, D.C. Center Cafe Union Station 1989 4,000 200 2009 Washington, D.C. Sequoia Washington Harbour 1990 26,000 600-(400) 2005 Washington, D.C.
-4-
Seating Capacity(2) Restaurant Size Indoor- Lease Name Location Year Opened(1) (Square feet) (Outdoor) Expiration(3) ---- -------- -------------- ------------- --------- ------------- Sequoia South Street Seaport 1991 12,000 300-(100) 2006 New York, New York Canyon Road First Avenue 1984 2,500 130 2004 New York, New York (between 76th and 77th Streets) Louisiana Broadway 1992 4,500 130 1999 Community Bar & New York, New York Grill (between Houston & Bleeker Streets) Savannah (4) Faneuil Hall Market 1987 2,500 130 2000 Boston, Massachusetts America Tyson's Corner 1994 11,000 400 2014 McLean, Virginia Lutece East 50th Street 1994 2,500 92 2019 New York, New York (between 2nd and 3rd Avenues) Lorelei Islamorada, Florida 1994 10,000 400 2029 Restaurant and Cabana Bar Columbus Bakery Columbus Avenue 1988 3,000 75 2002 New York, New York (between 82nd and 83rd Streets) Bryant Park Bryant Park 1995 25,000 180-(820) 2025 Grill & Cafe New York, New York Columbus Bakery First Avenue 1995 2000 75 2006 New York, New York (between 52nd and 53rd Streets) Granny's (4) Warner Bros. 1996 1,000 48 (7) Studio Store New York, New York (at 57th Street) America New York-New York 1997 20,000 450 2017(8) Hotel & Casino Las Vegas, Nevada Gallagher's New York-New York 1997 5,000 160 2017(8) Hotel & Casino Las Vegas, Nevada Gonzalez y New York-New York 1997 2,000 200 2017(8) Gonzalez Hotel & Casino Las Vegas, Nevada
-5-
Seating Capacity(2) Restaurant Size Indoor- Lease Name Location Year Opened(1) (Square feet) (Outdoor) Expiration(3) ---- -------- -------------- ------------- --------- ------------- Village Eateries New York-New York 1997 6,300 400(10) 2017(8) (9) Hotel & Casino Las Vegas, Nevada The Grill Room World Financial Center 1997 10,000 250 2012 New York, New York The Stage Deli Forum Shops 1998 5,000 200 2008 Las Vegas, Nevada Red South Street Seaport 1998 7,000 150(150) 2013(5) New York, New York
(1) Restaurants are, from time to time, renovated and/or renamed. "Year Opened" refers to the year in which the Company or an affiliated predecessor of the Company first opened, acquired or began managing a restaurant at the applicable location, notwithstanding that the restaurant may have been renovated and/or renamed since that date. (2) Seating capacity refers to the seating capacity of the indoor part of a restaurant available for dining in all seasons and weather conditions. Outdoor seating capacity, if applicable, is set forth in parentheses and refers to the seating capacity of terraces and sidewalk cafes which are available for dining only in the warm seasons and then only in clement weather. (3) Assumes the exercise of all available lease renewal options. (4) Restaurant owned by a third party and managed by the Company. Management fees earned by the Company are based either on a percentage of cash flow of the restaurant or a fixed amount or a combination of the two. (5) Includes one five year renewal option exercisable by the Company. (6) The Company owns a 19% interest in the partnership which owns El Rio Grande. (7) The management agreement for this facility is terminable by either party upon 60 days' notice. (8) Includes two five-year renewal options exercisable by the Company if certain sales goals are achieved during the two year period prior to the exercise of the renewal option. Under the America lease, the sales goal is $6.0 million. Under the Gallagher's lease the sales goal is $3.0 million. Under the lease for Gonzalez y Gonzalez and the Village Eateries, the combined sales goal is $10.0 million. Each of the restaurants is currently operating at a level substantially in excess of the minimum sales level required to exercise the renewal option for such restaurant. (9) The Company operates nine small fast food restaurants in a food court at this hotel facility. The Company also operates the hotel's room service, banquet facilities and employee cafeteria. (10) Represents common area seating. -6- Restaurant Expansion During the second quarter of fiscal 1998, the Company purchased the Stage Deli in the Forum Shops at Caesar's Shopping Center in Las Vegas, Nevada. This 200-seat restaurant operates under a license agreement with the owner of the original Stage Deli in New York City. During the fourth quarter of fiscal 1998, the Company opened its second restaurant at the South Street Seaport in New York City. This facility, Red, is a 7,000 square foot restaurant with the Southwestern theme. During the second quarter of fiscal 1997, the Company's facilities at the New York-New York Hotel & Casino in Las Vegas, Nevada opened. The Company's facilities consist of a 450-seat restaurant (named America and modeled after the Company's other America restaurants), a 160-seat steakhouse (named Gallagher's under a license agreement from the owner of the New York restaurant of that name), a 120-seat restaurant (named Gonzalez y Gonzalez and modeled after the Company's New York restaurant of the same name) and a group of nine small fast food restaurants in a food court with a New York theme. In addition, the Company operates the hotel's room service, its banquet facilities and its employee cafeteria. The restaurant facilities at the New York-New York Hotel & Casino represent the Company's first effort at designing, constructing and operating restaurants in Las Vegas and the first such facilities in conjunction with a large-scale hotel and casino operation. The number of patrons served at the various facilities at the New York-New York Hotel & Casino far exceeds the number of patrons served by the Company in any other single location. During the third quarter of fiscal 1997, the Company opened The Grill Room at a 10,000 square foot site in the World Financial Center in downtown New York City. During the third quarter of fiscal 1996, the Company purchased two restaurants, Jim McMullen and Mackinac Bar and Grill, which it had been managing and which the Company subsequently sold. During the first quarter of fiscal 1995, the Company opened its second B. Smith's, this one in Union Station, Washington D.C. This facility was sold to the manager of the restaurant in December 1998. During the first quarter of fiscal 1996, the Company opened a bakery (another Columbus Bakery), operating on a retail basis similar to that of the existing Columbus Bakery on Columbus Avenue in Manhattan, in premises adjacent to the Company's Metropolitan Cafe restaurant on First Avenue in Manhattan. Both Columbus Bakery facilities supply baked goods to other facilities of the Company in Manhattan and also sell at retail, coffee, baked goods and prepared foods on a "take out" basis or for on premise consumption. The Company is a party to a joint venture agreement with Sony Theatres' Loeks Star Partners and Millennium Partners to develop and operate four restaurants containing a total of approximately 50,000 square feet at a large theater development in Southfield, Michigan. The Company anticipates that its share of the required capital contributions to meet the construction costs, initial inventories and pre-opening expenses will be $6,500,000. The project is currently in the design phase and the Company expects to open such restaurants in the third quarter of fiscal 1999. The Company recently entered into a lease for a 10,000 square foot site of Union Station in Washington, D.C. where the Company operates two restaurants. The Company expects to open a 500 seat restaurant in the second quarter of fiscal 1999. The opening of a new restaurant is invariably accompanied by substantial pre-opening expenses and early operating losses associated with the training of personnel, excess kitchen costs and costs of supervision and other expenses during the pre-opening period and during a post-opening "shake out" period until operations can be -7- considered to be functioning normally. The amount of such pre-opening expense and early operating loss can generally be expected to depend upon the size and complexity of the facility being opened. The Company estimates that such pre-opening expenses and early operating losses were approximately $200,000 in fiscal 1998, $2,000,000 in fiscal 1997 and approximately $200,000 in fiscal 1996. The Company's restaurants generally do not achieve substantial increases from year to year in net sales or profits. The Company will have to continue to open new and successful restaurants or expand existing restaurants to achieve significant increases in net sales or to replace net sales of restaurants which experience declining popularity or which close because of lease expirations or other reasons. After a restaurant is opened, there can be no assurance that such restaurant will be successful, particularly since in many instances the Company will not operate new restaurants under a tradename currently used by the Company, thereby requiring each new restaurant to establish its own identity. The Company intends to continue to direct its restaurant expertise and financial resources in developing larger restaurants benefitting from the high patron traffic of unique locations, such as the Sequoia and Red restaurants in the South Street Seaport in New York, the Sequoia restaurant in Washington Harbour in Washington, the America restaurant in Union Station in Washington, the Bryant Park facilities in New York and the Las Vegas facilities. Nevertheless, the Company also intends to take advantage of other opportunities considered to be favorable when they occur, such as the acquisition of the highly regarded restaurant Lutece. Recent Restaurant Dispositions In the third quarter of fiscal 1996, the Company sold the Whale's Tail restaurant in Oxnard, California, which the Company had acquired in November 1993. In the first quarter of fiscal 1997, the Company sold three of its smaller restaurants (Mackinac Bar & Grill, The Museum Cafe and Albuquerque Eats/The Rodeo Bar), each of which was operating at a loss at the time of its sale. In fiscal 1998, the Company sold three of its smaller restaurants (Jim McMullen, An American Place and Beekman 1776 Tavern). Since the end of fiscal 1998, the Company has sold two of its smaller restaurants (Perretti's and B. Smith's in Washington, D.C.). Restaurant Management Each restaurant is managed by its own manager and has its own chef. Food products and other supplies are purchased from various unaffiliated suppliers, in most cases by the Company's headquarters personnel. Each of the Company's restaurants has two or more assistant managers and assistant chefs. The executive chef department designs menus and supervises the kitchens. Financial and management control is maintained at the corporate level through the use of an automated data processing system that includes centralized accounting and reporting. The Company has developed its own proprietary software which processes information input daily at the Company's restaurants. The Company believes that the information generated by this process enables it to monitor closely the activities at each restaurant and enhances the Company's ability to effectively manage its restaurants. Employees At December 5, 1998, the Company employed 2,256 persons (including employees at managed facilities), 39 of whom were headquarters personnel, 155 of whom were restaurant management personnel, 687 of whom were kitchen personnel and 1,375 of whom were restaurant service personnel. A number of the Company's restaurant service personnel are employed on a part-time basis. Changes in minimum wage levels may affect the labor costs -8- of the Company and the restaurant industry generally because a large percentage of restaurant personnel are paid at or slightly above the minimum wage. With the exception of the employees at Lutece in New York, the Company's employees are not covered by a collective bargaining agreement. The Company believes its employee relations are satisfactory. Government Regulation The Company is subject to various federal, state and local laws and regulations affecting its business, including a variety of regulatory provisions relating to the wholesomeness of food, sanitation, health, safety and licensing in the sale of alcoholic beverages. A number of the Company's restaurants have open or enclosed outdoor cafes which require the approval of, or licensing by, a number of governmental agencies. The suspension by any regulatory agency of the food service or the liquor license of any of the Company's restaurants would have a material adverse effect upon the affected restaurant and may adversely affect the Company as a whole. The New York State Liquor Authority must approve any transaction in which a shareholder of the Company increases his holdings to 10% or more of the outstanding capital stock of the Company and any transaction involving 10% or more of the outstanding capital stock of the Company. Seasonal Nature of Business The Company's business is highly seasonal. The second quarter of the Company's fiscal year, consisting of the non-holiday portion of the cold weather season in New York, Boston and Washington (January, February and March), is the poorest performing quarter. The Company achieves its best results during the warm weather, attributable to the Company's extensive outdoor dining availability, particularly at Bryant Park and Sequoia in Washington (the Company's largest restaurants) and the Company's outdoor cafes. The Company's facilities in Las Vegas operate on a more level basis through the year. Forward-Looking Statements This report contains forward looking statements that involve risks and uncertainties. Discussions containing such forward-looking statements may be found in the material set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as throughout this report generally. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below. Competition. The restaurant business is intensely competitive and involves an extremely high degree of risk. The Company believes that a large number of new restaurants open each year and that a significant number of them do not succeed. Even successful restaurants rapidly can lose popularity due to changes in consumer tastes, turnover in personnel, the opening of competitive restaurants, unfavorable reviews and other factors. There can be no assurance that the Company's existing restaurants will retain their current popularity or that new restaurants opened by the Company will be successful. There is active competition for competent chefs and management personnel and intense competition among major restaurateurs and food service companies for the larger, unique sites suitable for restaurants. -9- Importance of New Restaurants. The Company's restaurants generally do not achieve substantial increases from year to year in net sales or profits. The Company will have to continue to open new and successful restaurants or expand existing restaurants to achieve significant increases in net sales or to replace net sales of restaurants which experience declining popularity or which close because of lease expirations or other reasons. The acquisition or construction of new restaurants requires significant capital resources. New large scale projects that have been the focus of the Company's efforts in recent years would likely require additional financing. After a restaurant is opened, there can be no assurance that such restaurant will be successful, particularly since in many instances the Company will not operate new restaurants under a tradename currently used by the Company, thereby requiring each new restaurant to establish its own identity. Dependence on Key Personnel. The success of the Company depends to a significant extent upon the performance of senior management and in particular on the services of Michael Weinstein, President of the Company. The loss of the services of Mr. Weinstein would have a material adverse effect on the Company. Government Regulation. The Company is subject to various Federal, state and local laws and regulations affecting its business, including regulatory provisions relating to the wholesomeness of food, sanitation, health, safety and licensing in the sale of alcoholic beverages. The suspension by any regulatory agency of the food service or the liquor license of any of the Company's restaurants would have a material adverse effect upon the affected restaurant and may adversely affect the Company as a whole. The wholesomeness of food served at the Company's restaurants is dependent in part upon third party purveyors. Item 2. Properties The Company's restaurant facilities identified in the chart above and its executive offices are occupied under leases. Most of the Company's restaurant leases provide for the payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for the payment of a percentage of the Company's sales at such facility. These leases (excluding leases for managed restaurants) have initial terms expiring as follows:
Years Lease Number of Term Expire Facilities ----------- ---------- 1999-2000 5 2001-2005 5 2006-2010 13 2011-2015 3 2016-2020 1 2021-2025 1 2026-2030 1
The Company's executive, administrative and clerical offices, located in approximately 8,500 square feet of office space at 85 Fifth Avenue, New York, New York, are occupied under a lease which expires in October 2008, which includes one five-year renewal option. The Company maintains an office in Washington, D.C. for its catering operations under a short-term lease. For information concerning the Company's future minimum rental commitments under non-cancelable operating leases, see Note 8 of Notes to Consolidated Financial Statements. -10- Item 3. Legal Proceedings In the ordinary course of its business, the Company is a party to various lawsuits arising from accidents at its restaurants and workmen's compensation claims, which are generally handled by the Company's insurance carriers. The employment by the Company of management personnel, waiters, waitresses and kitchen staff at a number of different restaurants has resulted in the institution, from time to time, of litigation alleging violation by the Company of employment discrimination laws. The Company does not believe that any of such suits will have a materially adverse effect upon the Company, its financial condition or operations. A lawsuit was commenced against the Company in October 1997 in the District Court for the Southern District of New York by 44 present and former employees alleging various violations of Federal wage and hour laws. The complaint seeks an injunction against further violations of the labor laws and payment of unpaid minimum wages, overtime and other allegedly required amounts, liquidated damages, penalties and attorneys fees. The Company believes that most of the claims asserted in this litigation, including those with respect to minimum wages, are insubstantial. The Company believes that there were certain violations of overtime requirements, which have today been largely corrected, for which the Company will have liability. While the Company does not believe that the liability to any single employee for overtime violations will be consequential to it, the Company's aggregate liability will depend in large part on the number of persons who "opt-in" to the lawsuit asserting similar violations. This uncertainty prevents the Company from making any reasonable estimate of its ultimate liability. However, based upon information available to the Company at this time, including the fact that as of December 15, 1998 less than two percent (2%) of the persons eligible have in fact opted in, the Company does not believe that the amount of liability which may be sustained in this action will have a materially adverse effect on its business and financial condition. A lawsuit was commenced against the Company in April 1997 in the District Court for Clark County, Nevada by two former employees and one current employee of the Company's Las Vegas subsidiary alleging that (i) the Company forced food service personnel at the Company's Las Vegas restaurant facilities to pay a portion of their tips back to the Company in violation of Nevada law and (ii) the Company failed to timely pay wages to terminated employees. The action was brought as a class action on behalf of all similarly situated employees. The Company believes that the first allegation is without merit and that the Company will have no liability. The Company also believes that its liability, if any, from an adverse result in connection with the second allegation would be inconsequential. The Company intends to vigorously defend against these claims. In addition, several unfair labor practice charges have been filed against the Company before the National Labor Relations Board with respect to the Company's Las Vegas subsidiary. One consolidated complaint alleged that the Company unlawfully terminated seven employees and disciplined seven other employees allegedly in retaliation for their Union activities. An Administrative Law Judge (ALJ) found that five employees were terminated unlawfully and two were discharged for valid reasons. As far as the discipline, the Judge found that the Company acted legally in disciplining four employees but not lawfully with respect to three employees. The Company has appealed the adverse rulings of the ALJ to the National Labor Relations Board in Washington, D.C. The Company believes that there are reasonable grounds for obtaining a reversal of the unfavorable findings by the ALJ. Another consolidated complaint issued recently alleges that four employees were terminated and three other employees disciplined because of their union activities. A hearing is scheduled on these new charges in January 1999. The Company believes that these affected employees were terminated or disciplined for appropriate reasons such as violating reasonable work rules. The Company does not believe that an adverse outcome in any of the unfair labor practice charges will have a material adverse effect upon the Company's financial condition or operations. The Company believes that these unfair labor practice charges and the litigation pending in Nevada described above are part of an ongoing campaign by the Culinary Workers Union which is seeking to represent employees at the Company's Las Vegas restaurants. However, rather than pursue the normal election process pursuant to which employees are given the freedom to choose whether they should be represented by a union, a process which the Company supports, the Company believes the union is seeking to achieve recognition as the bargaining agent for such employees through a campaign directed not at the Company's employees but at the Company itself and its stockholders. The Company intends to continue to support the right of its employees to decide such matters and to oppose the efforts of the Culinary Workers Union to circumvent that process. -11- An action was commenced in May 1998 in Superior Court of the District of Columbia against the Company and its Washington, D.C. subsidiaries by seven present and former employees of the restaurants owned by such subsidiaries alleging violations of the District of Columbia Wage & Hour Act relating to minimum wages and overtime compensation. While the action is in its early stages, the Company does not believe that its liability, if any, from an adverse result in this matter would have a material adverse effect upon its business or financial condition. A lawsuit was commenced against the Company in October 1998 in Superior Court of Los Angeles County, California by a former employee alleging that her employment was terminated on the basis of her age in violation of the California Fair Employment and Housing Act. The Company believes that the allegations are without merit. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Executive Officers of the Company The following table sets forth the names and ages of executive officers of the Company and all offices held by each person:
Name Age Positions and Offices ---- --- --------------------- Michael Weinstein 55 President Vincent Pascal 55 Vice President and Secretary Robert Towers 51 Vice President and Treasurer Andrew Kuruc 40 Vice President and Controller Mitchell Levy 37 Vice President
Each executive officer of the Company serves at the pleasure of the Board of Directors and until his successor is duly elected and qualifies. Michael Weinstein has been President and a director of the Company since its inception in January 1983. Since 1978, Mr. Weinstein has been an officer, director and 25% shareholder of Easy Diners, Inc., a restaurant management company which operates three restaurants in New York City. Easy Diners, Inc. is not a parent, subsidiary or other affiliate of the Company. Mr. Weinstein spends substantially all of his business time on Company-related matters. Vincent Pascal was elected Vice President, Assistant Secretary and a director of the Company in October 1985. Mr. Pascal became Secretary of the Company in January 1994. -12- Robert Towers has been employed by the Company since November 1983 and was elected Vice President, Treasurer and a director in March 1987. Andrew Kuruc has been employed as Controller of the Company since April 1987 and was elected as a director of the Company in November 1989. Mitchell Levy has been employed as Vice President of the Company since March 1998. For more than five years prior to that time, Mr. Levy was a partner in the law firm of Solomon, Green & Ostrow. -13- PART II Item 5. Market For Registrant's Common Equity and Related Stockholder Matters Market Information The Company's Common Stock, $.01 par value, is traded in the over-the-counter market on the Nasdaq National Market ("Nasdaq") under the symbol "ARKR". The high and low sale prices for the Common Stock from March 31, 1996 through October 3, 1998 are as follows:
Calendar 1996 High Low - ------------- ---- --- Third Quarter 10 7 3/4 Fourth Quarter 12 3/4 9 1/4 Calendar 1997 - ------------- First Quarter 15 1/4 10 1/4 Second Quarter 11 1/4 7 5/8 Third Quarter 11 1/2 8 1/4 Fourth Quarter 12 1/2 10 3/4 Calendar 1998 - ------------- First Quarter 13 1/8 11 1/2 Second Quarter 12 1/8 11 Third Quarter 12 3/8 9 1/4 Dividends The Company has not paid cash dividends since its inception and does not intend to pay dividends in the foreseeable future. Under the terms of the Credit Agreement between the Company and its main lender, the Company may pay cash dividends and redeem shares of Common Stock in any fiscal year only to the extent of an aggregate amount equal to 20% of the Company's consolidated operating cash flow for such fiscal year. Number of Shareholders As of December 11, 1998, there were 86 holders of record of the Company's Common Stock. -14- Item 6. Selected Consolidated Financial Data The following table sets forth certain financial data for the fiscal years ended 1994 through 1998. This information should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto appearing at page F-1.
Year Ended ----------------------------------------------------------------------------------------- October 3, September 27, September 28, September 30, October 1, 1998 1997 1996 1995 1994 OPERATING DATA: Net sales $ 117,398,453 $ 104,326,386 $ 76,795,940 $ 73,026,907 $ 60,404,339 Gross restaurant profit 86,132,751 75,874,499 55,934,475 53,001,963 43,562,653 Operating income 7,589,465 2,785,713 497,996 960,794 840,452 Other income, net 91,417 96,550 743,615 937,763 507,200 Income before provision for income taxes and extraordinary item 7,680,882 2,882,263 1,241,611 1,898,557 1,347,652 Income before extraordinary item 4,612,141 1,737,655 788,762 1,121,126 643,032 NET INCOME 4,612,141 1,737,655 788,762 1,121,126 1,150,802 Income per share before extraordinary item and cumulative effect of accounting change: Basic $ 1.21 $ 0.47 $ 0.24 $ 0.34 $ 0.20 Diluted $ 1.20 $ 0.46 $ 0.24 $ 0.34 $ 0.20 NET INCOME PER SHARE: Basic $ 1.21 $ 0.47 $ 0.24 $ 0.34 $ 0.36 Diluted $ 1.20 $ 0.46 $ 0.24 $ 0.34 $ 0.36 Weighted average number of shares used in computation 3,852,019 3,742,811 3,272,857 3,252,669 3,223,833 BALANCE SHEET DATA (end of period): Total assets 43,102,179 41,268,098 32,379,479 28,541,920 21,768,747 Working capital (deficit) (719,343) (2,373,859) (1,303,920) 40,996 1,517,601 Long-term debt 5,014,634 6,126,797 6,403,866 4,014,162 761,386 Shareholders' equity 29,062,140 25,888,880 17,804,394 16,706,301 15,210,202 Shareholders' equity per share 7.54 6.92 5.44 5.14 4.72 Facilities in operation at end of year, including managed 42 46 32 32 27
-15- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Accounting period The Company's fiscal year ends on the Saturday nearest September 30. The fiscal year ended October 3, 1998 included 53 weeks while the fiscal years ended September 27, 1997 and September 28, 1996 included 52 weeks. Net Sales Net sales at restaurants owned by the Company increased by 12.5% from fiscal 1997 to fiscal 1998 and by 35.8% from fiscal 1996 to fiscal 1997. The increase in fiscal 1998 was substantially due to sales from the food and beverage operations in the New York-New York Hotel & Casino resort in Las Vegas ("the Las Vegas facilities") which opened in January 1997. At the Las Vegas facilities the Company operates a 450 seat, twenty four hour a day restaurant (America); a 160 seat steakhouse (named Gallagher's under a license agreement with the owner of the New York restaurant of that name); a 200 seat Mexican restaurant (Gonzalez y Gonzalez); the resort's room service, banquet facilities and an employee dining facility. The Company also operates a complex of nine smaller eateries (Village Eateries) in the resort which simulate the experience of walking through New York City's Little Italy and Greenwich Village. The increase in fiscal 1998 was also due in part to the acquisition of a restaurant located in the Forum Shops at Caesar's Shopping Center in Las Vegas (the Stage Deli of Las Vegas) and to the first full operating year of a restaurant which the Company opened in fiscal 1997 (The Grill Room). Same store sales in fiscal 1998 increased by 3.1% principally due to increased customer counts. The increase in fiscal 1997 was primarily due to sales from the Las Vegas facilities which opened in January 1997. Same store sales in fiscal 1997 increased by 2.6% principally due to increased customer counts. Costs and Expenses The Company's cost of sales consists principally of food and beverage costs at restaurants owned by the Company. Cost of sales as a percentage of net sales was 26.6% in fiscal 1998, 27.3% in fiscal 1997, and 27.2% in fiscal 1996. Cost of sales in fiscal 1997 were impacted by higher cost of sales experienced during the early operating period at the Company's Las Vegas operations. Operating expenses of the Company, consisting of restaurant payroll, occupancy and other expenses at restaurants owned by the Company, as a percentage of net sales, were 62.7% in fiscal 1998, 65.9% in fiscal 1997 and 67.9% in fiscal 1996. This decrease in operating expenses in fiscal 1998 as compared to fiscal 1997 was principally due to efficiencies achieved at the Company's Las Vegas facilities and to a lesser extent to a benefit from the 3.1% increase in same store sales at the Company's other facilities. The decrease in operating expenses in fiscal 1997 as compared to fiscal 1996 was principally due to benefits achieved from the sale of three restaurants in fiscal 1997 which had operated at a loss in fiscal 1996 and to a lesser extent to a benefit from the 2.6% increase in same store sales. Restaurant payroll was 35.1% of net sales in fiscal 1998, 36.9% in fiscal 1997 and 36.1% in fiscal 1996. The increase in fiscal 1997 was principally due to higher payroll costs at the Company's Las Vegas food and beverage operations as compared to the Company's other operations and to a lesser extent from increases in minimum wage rates. Occupancy expenses (consisting of rent, rent taxes, real estate taxes, insurance and utility costs) were 11.7% in fiscal 1998, 12.5% in fiscal 1997 and 12.8% in fiscal 1996. The Company incurred pre-opening expenses and early operating losses at newly opened restaurants of approximately $200,000 in fiscal 1998, $2,000,000 in fiscal 1997 and $200,000 in fiscal 1996. The fiscal 1997 expenses and losses were from the opening of the Company's Las Vegas facilities. The Company typically incurs -16- significant pre-opening expenses in connection with its new restaurants which are expensed as incurred. Furthermore, it is not uncommon that such restaurants experience operating losses during the early months of operation. General and administrative expenses, as a percentage of net sales, were 5.2% in both fiscal 1998 and fiscal 1997 as compared to 5.8% in fiscal 1996. The decrease in fiscal 1997 was primarily due to the fact that the Company was able to manage the 35.8% increase in net sales with a lower percentage increase in general and administrative expenses. If net sales at managed restaurants were included in consolidated net sales, general and administrative expenses as a percentage of net sales would have been 4.7% in fiscal 1998, 4.6% in fiscal 1997 and 5.0% in fiscal 1996. As of October 3, 1998 the Company managed five restaurants owned by others (El Rio Grande and Woody's in Manhattan, the Marketplace Cafe, Savannah, and the Brewskeller Pub in Boston, Massachusetts), and a cafe in a store in New York City (Warner Bros.). Net sales of these restaurant facilities, which are not included in consolidated net sales were $12,738,000 in fiscal 1998, $14,151,000 in fiscal 1997 and $12,802,000 in fiscal 1996. Interest expense was $608,000 in fiscal 1998, $755,000 in fiscal 1997 and $426,000 in fiscal 1996, net of amounts capitalized. The decrease in fiscal 1998 from fiscal 1997 is principally due to repayments of borrowings incurred in fiscal 1997. Such borrowings financed the construction costs and working capital requirements of the Las Vegas restaurant facilities which opened in January 1997. Interest income was $210,000 in fiscal 1998, $72,000 in fiscal 1997 and $87,000 in fiscal 1996. The increase in fiscal 1998. as compared to fiscal 1997 is due to interest earned on notes issued in connection with restaurants sold in fiscal 1997 and fiscal 1998. Other income, which generally consists of purchasing service fees, and the sale of logo merchandise at various restaurants, was $490,000 in fiscal 1998, $780,000 in fiscal 1997 and $1,083,000 in fiscal 1996. A significant portion of the amounts received in fiscal 1997 and fiscal 1996 was principally due to amounts the Company received by a third party due to the temporary closing in fiscal 1994 and fiscal 1995 of a restaurant (Ernie's). Income Taxes The provision for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each New York subsidiary on a non-consolidated basis. Most of the restaurants owned or managed by the Company are owned or managed by a separate subsidiary. For state and local income tax purposes, the losses incurred by a subsidiary may only be used to offset that subsidiary's income with the exception of the restaurants which operate in the District of Columbia. Accordingly, the Company's overall effective tax rate has varied depending on the level of losses incurred at individual subsidiaries. The Company's overall effective tax rate was 40% in both fiscal 1998 and fiscal 1997 and 37% in fiscal 1996. The Company's overall effective tax rate in the future will be affected by factors such as the level of losses incurred at the Company's New York facilities (which cannot be consolidated for state and local tax purposes), pre-tax income earned outside of New York City (Nevada has no state income tax and other states in which the Company operate have income tax rates substantially lower in comparison to New York) and the utilization of state and local net operating loss carry forwards. In order to more effectively utilize tax loss carry forwards at restaurants that were unprofitable, the Company has merged certain profitable subsidiaries with certain loss subsidiaries. As a result of the enactment of the Revenue Reconciliation Act of 1993, the Company is entitled, commencing January 1, 1994, to a tax credit based on the amount of FICA taxes paid by the Company with respect -17- to the tip income of restaurant service personnel. The net benefit to the Company was $506,000 in fiscal 1998, $373,000 in fiscal 1997 and $349,000 in fiscal 1996. The Internal Revenue Service is currently examining the Company's Federal Income Tax returns for the fiscal years ended September 28, 1991 through October 1, 1994, and has proposed certain adjustments, all of which are being contested by the Company. The adjustments primarily relate to (i) pre-opening, legal and accounting expenses incurred in connection with new or acquired restaurants that the Internal Revenue Service asserts should have been capitalized and amortized rather than currently expensed and (ii) travel and meal expenses for which the Internal Revenue Service asserts the Company did not comply with certain record keeping requirements of the Internal Revenue Code. The Company does not believe that any adjustments resulting from such examination will have a material effect on the Company's financial condition. Liquidity and Sources of Capital The Company's primary source of capital is cash provided by operations and funds available from the revolving credit agreement with its main bank. The Company utilizes capital primarily to fund the cost of developing and opening new restaurants and acquiring existing restaurants. The net cash used in investing activities in fiscal 1998 ($4,179,000), fiscal 1997 ($10,445,000) and fiscal 1996 ($6,693,000) was principally from the Company's continued investment in fixed assets associated with constructing new restaurants and acquiring existing restaurants. In fiscal 1998 the Company acquired an existing restaurant in Las Vegas (the Stage Deli) and in fiscal 1997 the Company finished and opened the Las Vegas restaurant facilities which had also been in construction since fiscal 1996. The net cash used in financing activities in fiscal 1998 ($2,825,000) was principally due to the repurchase of 159,000 shares of the Company's outstanding common stock and repayments of debt on the Company's main credit facility in excess of borrowings on such facility. The net cash provided by financing activities in fiscal 1997 ($5,643,000) was principally due to proceeds of a private placement of 551,454 shares of the Company's common stock. In fiscal 1996 net cash provided by financing activities ($2,321,000) was principally from the Company's borrowings on its main credit facility exceeding repayments on such facility. At October 3, 1998 the Company had a working capital deficit of $719,000 as compared to working capital deficit of $2,374,000 at September 27, 1997. The working capital deficit at the end of fiscal 1997 was significantly impacted by cash expended for the construction of the Las Vegas facilities which opened in January 1997. The restaurant business does not require the maintenance of significant inventories or receivables, thus the Company is able to operate with negative working capital. The Company's Revolving Credit and Term Loan Facility with its main bank includes a $10,000,000 facility for use in construction of and acquisition of new restaurants and for working capital purposes at the Company's existing restaurants. The facility allows the Company to borrow up to $10,000,000 until April 2000 at which time outstanding loans mature. The loans bear interest at a rate of prime plus 1/2%. At October 3, 1998 the Company had borrowings of $2,600,000 outstanding on the facility. The Company also has a two year $1,000,000 Letter of Credit Facility for use in lieu of lease security deposits. At October 3, 1998 the Company had delivered $556,000 in irrevocable letters of credit on this facility. In December 1996, the Company raised net proceeds of $6,028,000 through a private placement of 551,454 shares of its common stock at $11 per share. The proceeds were used to repay a portion of the Company's outstanding borrowings on its Revolving Credit and Term Loan Facility and for the payment of capital expenditures on the Las Vegas restaurant facilities. -18- The amount of indebtedness that may be incurred by the Company is limited by the revolving credit agreement with its main bank. Certain provisions of the agreement may impair the Company's ability to borrow funds. Restaurant Expansion The Company recently began construction on a 500 plus seat Southwestern style restaurant at Union Station in Washington, D.C., where the Company operates two other restaurants. The Company expects to incur up to $1,800,000 in capital costs and other pre-opening expenses to open this restaurant. The Company expects to open this restaurant in the March 1999 fiscal quarter. The Company expects to shortly begin construction on its previously announced project at a large theatre development in Southfield, Michigan under a joint venture agreement with Sony Theatres' Loeks Star Partners and Millennium Partners. There the Company will develop and operate four restaurants containing a total of approximately 50,000 square feet. The Company anticipates that its share of the required capital contributions to meet the construction costs, initial inventories and pre-opening expenses will be $6,500,000. The project is currently scheduled to open in the June 1999 fiscal quarter Although the Company is not currently committed to any other projects, the Company is exploring additional opportunities for expansion of its business. The Company expects to fund its projects through cash from operations and existing credit facilities. Additional expansion may require additional external financing. Recent Developments In the first quarter of fiscal 1999, the Company sold a restaurant located in New York City (Perretti Italian Cafe) and a restaurant located in Washington, D.C. (B. Smith's) for an aggregate selling price of $1,225,000 of which $975,000 was paid in cash and the balance was financed by notes. The Company expects to record a gain of approximately $600,000 on these sales. The Financial Accounting Standards Board has recently issued several new accounting pronouncements: SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," revises employers' disclosures about pension and other postretirement benefit plans. It standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practical, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures that are no longer useful as they were under SFAS No. 87, "Employers' Accounting for Pension," and SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefits Pension Plans and Termination Benefits." SFAS No. 132 is effective for fiscal years beginning after December 15, 1998. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that the Company recognizes all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designed as a hedge of the exposure to changes in fair value of a recognized asset or liability or hedge of the exposure to variable cash flows of a forecasted transaction. The accounting for changes in fair value of a derivative (e.g., through earnings or outside earnings, through comprehensive income) depends on the intended use of the derivative and the resulting designation. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" requires costs of start-up activities -19- and organization costs to be expensed as incurred. Currently some companies capitalize start-up costs whereas others expense start-up as incurred. Additionally, there is a diverse range of amortization periods among companies that capitalize start-up costs. The statement is effective for fiscal years beginning after December 15, 1998. The Company currently expenses all start-up costs as incurred while organization costs are capitalized and amortized over five years. Year 2000 The Company has assessed and continues to assess the impact of the year 2000 issue on its reporting systems and operations. The year 2000 issue exists because many computer systems and applications currently use two-digit fields to designate a year. When the century date occurs, date-sensitive systems may recognize the year 2000 as 1900 or not at all. This inability to recognize or properly treat the year 2000 may cause systems to process critical financial and operational information incorrectly. Based on a review of the Company's computer systems, management does not currently believe the cost of remediation will exceed $100,000. The Company has initiated communications with its significant vendors and service providers to determine the extent to which the Company's systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. At the Company's facilities at the New York-New York Hotel and Casino, for example, the Company utilizes and interfaces with systems provided by the Hotel and the failure of the Hotel's computer systems to adequately address the Year 2000 issue may have a material adverse effect upon the Company. The Company has been advised by the Hotel that its systems are expected to be Year 2000 compliant. The Company is dependent upon major credit card issuers for the remittance to the Company of charges incurred by customers. The Company has been advised that the major credit card issuers in the United States have addressed the Year 2000 issues they confront and do expect that their systems will function properly in the Year 2000. Other vendors and service providers with which the Company does business may not have adequately addressed the Year 2000 issue. However, the Company believes that there are numerous sources for the various products and services used by the Company and does not anticipate that Year 2000 compliance issues confronted by its vendors and service providers will have a material adverse effect upon the Company. Item 8. Financial Statements and Supplementary Data See page F-1. Item 9. Changes in and Disagreements on With Accountants Accounting and Financial Disclosure None. -20- PART III Item 10. Directors and Executive Officers of the Registrant See Part I, Item 4. "Executive Officers of the Company." Other information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than February 1, 1999 pursuant to Regulation 14A of the General Rules and Regulations ("Regulation 14A") under the Securities Exchange Act of 1934, as amended. Item 11. Executive Compensation The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than February 1, 1999 pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than February 1, 1999 pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than February 1, 1999 pursuant to Regulation 14A. -21- PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
Page ---- (a) (1) Financial Statements: Report of Independent Certified Public Accountants F-1 Consolidated Balance Sheets -- at October 3, 1998 and September 27, 1997 F-2 Consolidated Statements of Operations -- For each of the three fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996 F-3 Consolidated Statements of Shareholders' Equity -- For each of the three fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996 F-4 Consolidated Statements of Cash Flows -- For each of the three fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996 F-5 Notes to Consolidated Financial Statements F-6
(2) Exhibits: 3.1 Certificate of Incorporation of the Registrant, filed on January 4, 1983, incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 (the "1994 10-K"). 3.2 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on October 11, 1985, incorporated by reference to Exhibit 3.2 to the 1994 10-K. 3.3 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on July 21, 1988, incorporated by reference to Exhibit 3.3 to the 1994 10-K. 3.4 By-Laws of the Registrant, incorporated by reference to Exhibit 3.4 to the 1994 10-K. 10.1 Amended and Restated Redemption Agreement dated June 29, 1993 between the Registrant and Michael Weinstein, incorporated by reference to Exhibit 10.1 to the 1994 10-K. 10.2 Form of Indemnification Agreement entered into between the Registrant and each of its Directors and Executive Officers incorporated by reference to Exhibit 10.2 to the 1994 10-K. 10.3 Ark Restaurants Corp. Amended Stock Option Plan, incorporated by reference to Exhibit 10.3 to the 1994 10-K. 10.4 Second Amended and Restated Credit Agreement dated as of March 5, 1996 between the Company and Bank Leumi Trust Company of New York, incorporated by reference to Exhibit 10.52 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1996 (the "March 1996 10-Q"). 10.5 Ark Restaurants Corp. 1996 Stock Option Plan, incorporated by reference to Exhibit 10.53 to the March 1996 10-Q. *10.6 Lease Agreement dated May 17, 1996 between New York-New York Hotel, LLC, and Las Vegas America Corp.(1) *10.7 Lease Agreement dated May 17, 1996 between New York-New York Hotel, LLC, and Las Vegas Festival Food Corp.(1) *10.8 Lease Agreement dated May 17, 1996 between New York-New York Hotel, LLC, and Las Vegas Steakhouse Corp.(1) *21 Subsidiaries of the Registrant. *23 Consent of Deloitte & Touche LLP. *27 Financial Data Schedule pursuant to Article 5 of Regulation S-X filed with EDGAR Version only.
--------------------------------- *Filed Herewith (1) Certain information has been omitted and filed separately with the SEC pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (b) Reports on Form 8-K; None -22- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Ark Restaurants Corp. We have audited the accompanying consolidated balance sheets of Ark Restaurants Corp. and its subsidiaries as of October 3, 1998 and September 27, 1997, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three fiscal years in the period ended October 3, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Ark Restaurants Corp. and subsidiaries as of October 3, 1998 and September 27, 1997, and the results of their operations and their cash flows for each of the three fiscal years in the period ended October 3, 1998, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP New York, New York November 20, 1998 F-1 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
October 3, September 27, ASSETS 1998 1997 CURRENT ASSETS: Cash and cash equivalents $ 1,023,046 $ 722,283 Accounts receivable 2,507,307 1,975,434 Current portion of long-term receivables (Note 2) 415,755 277,402 Inventories 1,950,146 2,044,689 Deferred income taxes (Note 12) 908,468 915,534 Prepaid expenses and other current assets 491,129 432,816 ----------- ----------- Total current assets 7,295,851 6,368,158 ----------- ----------- LONG-TERM RECEIVABLES (Note 2) 1,119,110 971,023 ASSETS HELD FOR SALE (Note 3) 1,767,782 1,892,639 FIXED ASSETS - At cost (Notes 4 and 7): Leasehold improvements 22,464,922 22,526,150 Furniture, fixtures and equipment 18,591,938 18,387,492 Leasehold improvements in progress 18,906 50,053 ----------- ----------- 41,075,766 40,963,695 Less accumulated depreciation and amortization 15,833,403 14,037,200 ----------- ----------- 25,242,363 26,926,495 ----------- ----------- INTANGIBLE ASSETS - Net (Note 4) 5,514,932 3,346,176 DEFERRED INCOME TAXES (Note 12) 1,030,908 1,081,006 OTHER ASSETS (Note 5) 1,131,233 682,601 ----------- ----------- $43,102,179 $41,268,098 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 3,563,068 $ 3,560,250 Accrued expenses and other current liabilities (Note 6) 2,907,766 3,098,356 Current maturities of capital lease obligations (Note 8) 229,944 245,412 Current maturities of long-term debt (Note 7) 609,283 1,424,129 Accrued income taxes (Note 12) 705,133 413,870 ----------- ----------- Total current liabilities 8,015,194 8,742,017 ----------- ----------- OBLIGATIONS UNDER CAPITAL LEASES (Note 8) 148,494 406,533 LONG-TERM DEBT - Net of current maturities (Notes 4 and 7) 4,405,351 4,702,668 OPERATING LEASE DEFERRED CREDIT (Note 8) 1,471,000 1,528,000 COMMITMENTS AND CONTINGENCIES (Notes 7 and 8) SHAREHOLDERS' EQUITY (Notes 7, 9 and 10): Common stock, par value $.01 per share - authorized, 10,000,000 shares; issued, 5,187,836 and 5,177,836 shares, respectively 51,879 51,779 Additional paid-in capital 14,214,898 14,131,383 Retained earnings 17,565,258 12,953,117 ----------- ----------- 31,832,035 27,136,279 Less treasury stock, 1,504,337 and 1,345,337 shares 2,769,895 1,247,399 ----------- ----------- 29,062,140 25,888,880 ----------- ----------- $43,102,179 $41,268,098 =========== ===========
See notes to consolidated financial statements. F-2 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
Year Ended --------------------------------------------------- October 3, September 27, September 28, 1998 1997 1996 NET SALES $117,398,453 $104,326,386 $ 76,795,940 COST OF SALES 31,265,702 28,451,887 20,861,465 ------------ ------------ ------------ Gross restaurant profit 86,132,751 75,874,499 55,934,475 MANAGEMENT FEE INCOME (Note 11) 1,139,799 1,153,264 1,204,808 ------------ ------------ ------------ 87,272,550 77,027,763 57,139,283 OPERATING EXPENSES: Payroll and payroll benefits 41,171,865 38,520,986 27,740,390 Occupancy 13,788,992 13,031,811 9,843,110 Depreciation 3,998,272 3,320,739 2,664,892 Other 14,671,521 13,922,524 11,918,198 ------------ ------------ ------------ 73,630,650 68,796,060 52,166,590 GENERAL AND ADMINISTRATIVE EXPENSES 6,052,435 5,445,990 4,474,697 ------------ ------------ ------------ 79,683,085 74,242,050 56,641,287 ------------ ------------ ------------ OPERATING INCOME 7,589,465 2,785,713 497,996 ------------ ------------ ------------ OTHER EXPENSE (INCOME): Interest expense (Note 7) 608,278 755,383 425,810 Interest income (209,577) (71,652) (86,708) Other income (Note 13) (490,118) (780,281) (1,082,717) ------------ ------------ ------------ (91,417) (96,550) (743,615) ------------ ------------ ------------ INCOME BEFORE PROVISION FOR INCOME TAXES 7,680,882 2,882,263 1,241,611 PROVISION FOR INCOME TAXES (Note 12) 3,068,741 1,144,608 452,849 ------------ ------------ ------------ NET INCOME $ 4,612,141 $ 1,737,655 $ 788,762 ============ ============ ============ NET INCOME PER SHARE - BASIC $ 1.21 $ .47 $ .24 ============ ============ ============ NET INCOME PER SHARE - DILUTED $ 1.20 $ .46 $ .24 ============ ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES - BASIC 3,826,255 3,714,116 3,238,419 ========= ========= ========= WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED 3,852,019 3,742,811 3,272,857 ========= ========= =========
See notes to consolidated financial statements. F-3 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED OCTOBER 3, 1998, SEPTEMBER 27, 1997, AND SEPTEMBER 28, 1996 - --------------------------------------------------------------------------------
Common Stock Additional Total -------------------------- Paid-In Retained Treasury Shareholders' Shares Amount Capital Earnings Stock Equity BALANCE, SEPTEMBER 30, 1995 4,536,382 $ 45,364 $ 7,481,636 $ 10,426,700 $ (1,247,399) $ 16,706,301 Exercise of stock options 72,500 725 183,650 -- -- 184,375 Tax benefit on exercise of options -- -- 124,956 -- -- 124,956 Net income -- -- -- 788,762 -- 788,762 --------- -------- ----------- ----------- ----------- ----------- BALANCE, SEPTEMBER 28, 1996 4,608,882 46,089 7,790,242 11,215,462 (1,247,399) 17,804,394 Common stock private placement 551,454 5,515 6,023,111 -- -- 6,028,626 Issuance of warrants -- -- 175,000 -- -- 175,000 Exercise of stock options 17,500 175 85,450 -- -- 85,625 Tax benefit on exercise of options -- -- 57,580 -- -- 57,580 Net income -- -- -- 1,737,655 -- 1,737,655 --------- -------- ----------- ----------- ----------- ----------- BALANCE, SEPTEMBER 27, 1997 5,177,836 51,779 14,131,383 12,953,117 (1,247,399) 25,888,880 Exercise of stock options 10,000 100 64,900 -- -- 65,000 Purchase of treasury stock -- -- -- -- (1,522,496) (1,522,496) Tax benefit on exercise of options -- -- 18,615 -- -- 18,615 Net income -- -- -- 4,612,141 -- 4,612,141 ----------- -------- ------------ ------------ ------------ ------------ BALANCE, OCTOBER 3, 1998 $ 5,187,836 $ 51,879 $ 14,214,898 $ 17,565,258 $ (2,769,895) $ 29,062,140 =========== ======== ============ ============ ============ ============
See notes to consolidated financial statements. F-4 ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
Year Ended ---------------------------------------------------- October 3, September 27, September 28, 1998 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,612,141 $ 1,737,655 $ 788,762 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of fixed assets 3,432,104 3,047,422 2,324,304 Amortization of intangibles 566,168 445,123 492,207 Loss (gain) on sale of restaurants (258,684) (229,000) 297,000 Provision for uncollectible long-term receivables -- -- 96,000 Operating lease deferred credit (57,000) (19,000) 10,000 Deferred income taxes 57,164 (431,966) (692,492) Changes in assets and liabilities: Increase in accounts receivable (531,873) (512,935) (184,672) Increase in inventories (17,020) (890,567) (65,597) Increase (decrease) in prepaid expenses and other current assets (58,313) 112,961 603,675 (Increase) decrease in other assets, net (543,820) 60,008 (232,205) Increase in accounts payable - trade 2,818 1,194,311 330,167 Increase in accrued income taxes 291,263 89,476 59,025 Increase (decrease) in accrued expenses and other current liabilities (190,590) 13,672 181,392 ------------ ----------- ----------- Net cash provided by operating activities 7,304,358 4,617,160 4,007,566 ------------ ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets (1,713,847) (11,006,116) (6,833,018) Additions to intangible assets (229,524) (11,639) (110,849) Issuance of demand notes and long-term receivables (81,580) -- (63,092) Payments received on demand notes and long-term receivables 315,908 264,370 171,651 Restaurant sales 265,000 308,000 250,000 Restaurant acquisitions (2,735,000) -- (108,000) ------------ ----------- ----------- Net cash used in investing activities (4,179,043) (10,445,385) (6,693,308) ------------ ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payment on long-term debt (8,012,164) (10,277,900) (1,857,045) Issuance of long-term debt 6,900,000 10,000,831 4,100,000 Exercise of stock options 83,615 143,205 309,331 Principal payment on capital lease obligations (273,507) (251,257) (230,825) Purchase of treasury stock (1,522,496) -- -- Proceeds from common stock private placement -- 6,028,626 -- ------------ ----------- ----------- Net cash provided by (used in) financing activities (2,824,552) 5,643,505 2,321,461 ------------ ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS 300,763 (184,720) (364,281) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 722,283 907,003 1,271,284 ------------ ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,023,046 $ 722,283 $ 907,003 ============ =========== =========== SUPPLEMENTAL INFORMATION: Cash payments for the following were: Interest $ 608,278 $ 931,383 $ 515,810 ============ =========== =========== Income taxes $ 2,699,651 $ 1,502,643 $ 966,434 ============ =========== ===========
See notes to consolidated financial statements. F-5 ARK RESTAURANTS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED OCTOBER 3, 1998, SEPTEMBER 27, 1997, AND SEPTEMBER 28, 1996 - -------------------------------------------------------------------------------- 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ark Restaurants Corp. and subsidiaries (the "Company") own and operate 21 restaurants, and manage five restaurants, of which 14 are in New York City, three in Washington, D.C., four in Las Vegas, Nevada (three within the New York New York Hotel and Casino Resort), three in Boston, Massachusetts and one each in McLean, Virginia; and Islamorada, Florida. Along with the three restaurants within the New York New York Hotel & Casino Resort, the Company also operates the Resort's room service, banquet facilities, employee dining room and a complex of nine smaller cafes and food operations. The Company's other operations include catering businesses in New York City and Washington, D.C. as well as wholesale and retail bakeries in New York City and, a cafe at the Warner Bros. store in New York City. ACCOUNTING PERIOD - The Company's fiscal year ends on the Saturday nearest September 30. The fiscal year ended October 3, 1998, included 53 weeks and the fiscal years ended September 27, 1997, and September 28, 1996 included 52 weeks. SIGNIFICANT ESTIMATES - In the process of preparing its consolidated financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. The primary estimates underlying the Company's financial statements include allowances for potential bad debts on accounts and notes receivable, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters. Management bases its estimates on certain assumptions, which they believe are reasonable in the circumstances, and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a material effect on the Company's consolidated financial position or the results of operation. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Investments in affiliated companies where the Company is able to exercise significant influence over operating and financial policies even though the Company holds 50% or less of the voting stock, are accounted for under the equity method. CASH EQUIVALENTS - Cash equivalents include instruments with original maturities of three months or less. ACCOUNTS RECEIVABLE - Included in accounts receivable are amounts due from employees of $1,069,852 and $719,871 for fiscal years ended October 3, 1998 and September 27, 1997. Such amounts, which are due on demand, are principally due to various employees exercising stock options in accordance with the Company's Stock Option Plan (See note 10). F-6 INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out) or market, and consist of food and beverages, merchandise for sale and other supplies. FIXED ASSETS - Leasehold improvements and furniture, fixtures and equipment are stated at cost. Depreciation of furniture, fixtures and equipment (including equipment under capital leases) is computed using the straight-line method over the estimated useful lives of the respective assets (7 years). Amortization of improvements to leased properties is computed using the straight-line method based upon the initial term of the applicable lease or the estimated useful life of the improvements, whichever is less, and ranges from 5 to 35 years. The Company annually assesses any impairments in value of long-lived assets and certain identifiable intangibles to be held and used. For all periods presented, no impairments were deemed necessary. Certain costs incurred during the construction period of restaurants, including rental of premises, training and payroll, were expensed as incurred. INTANGIBLE AND OTHER ASSETS - Costs associated with acquiring leases and subleases, principally purchased leasehold rights, have been capitalized and are being amortized on the straight-line method based upon the initial terms of the applicable lease agreements, which range from 10 to 21 years. Goodwill recorded in connection with the acquisition of shares of the Company's common stock from a former shareholder, as discussed in Note 4, is being amortized over a period of 40 years. Goodwill arising from restaurant acquisitions is being amortized over periods ranging from 10 to 15 years or lease term, whichever period is shorter. Legal and other costs incurred to organize restaurant corporations are capitalized as organization costs and are amortized over a period of 5 years. Covenants not to compete arising from restaurant acquisitions are amortized over the contractual period of 5 years. Certain legal and bank commitment fees incurred in connection with the Company's Revolving Credit and Term Loan Facility, as discussed in Note 7, were capitalized as deferred financing fees and are being amortized over four years, the term of the facility. The Company periodically assesses the recoverability of intangible assets on an asset by asset basis using the projected undiscounted operating income. OPERATING LEASE DEFERRED CREDIT - Several of the Company's operating leases contain predetermined increases in the rentals payable during the term of such leases. For these leases, the aggregate rental expense over the lease term is recognized on a straight-line basis over the lease term. The excess of the expense charged to operations in any year and amounts payable under the leases during that year are recorded as a deferred credit. The deferred credit subsequently reverses over the lease term (Note 8). OCCUPANCY EXPENSES - Occupancy expenses include rent, rent taxes, real estate taxes, insurance and utility costs. INCOME PER SHARE OF COMMON STOCK - Net income per share is computed in accordance with Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share," and is calculated on the basis of the weighted average number of common shares outstanding during each period plus the additional dilutive effect of common stock equivalents. Common stock equivalents consist of dilutive stock options. F-7 STOCK OPTIONS - The Company accounts for its stock options granted to employees under the intrinsic value-based method for employee stock-based compensation and provides pro forma disclosure of net income and earnings per share as if the accounting provision of SFAS No.123 had been adopted. The company generally does not grant options to outsiders. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - The Financial Accounting Standard Board has issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components. The Company believes that there are no items that would require presentation in a separate statement of comprehensive income. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also established standards for related disclosures about products and services, geographic areas, and major customers. Management believes that there are no items that would require segment presentation. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - The Financial Accounting Standards Board has recently issued several new accounting pronouncements. SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," revises employers' disclosures about pension and other postretirement benefit plans. It standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practical, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures that are no longer as useful as they were under SFAS No 87, "Employers' Accounting for Pension," and SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and Termination Benefits." SFAS No. 132 is effective for fiscal years beginning after December 15, 1998. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that the Company recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designed as a hedge of the exposure to changes in fair value of a recognized asset or liability or hedge of the exposure to variable cash flows of a forecasted transaction. The accounting for changes in fair value of a derivative (e.g., through earnings or outside earnings, through comprehensive income) depends on the intended use of the derivative and the resulting designation. SFAS No 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Statement of Position 98-5, "Reporting on the Costs of Start-Up activities" requires costs of start-up activities and organization costs to be expensed as incurred. Currently some companies capitalize start-up costs whereas others expense start-up costs as incurred. Additionally, there is a diverse range of amortization periods among companies that capitalize start-up costs. The Statement is effective for F-8 fiscal years beginning after December 15, 1998. The Company currently expenses all start-up costs as incurred while organization costs are capitalized and amortized over five years. The effect of the adoption of these Statements on the Company's consolidated financial statements is not expected to be material. RECLASSIFICATIONS - Certain reclassifications have been made to the 1997 and 1996 financial statements to conform to the 1998 presentation. F-9 2. LONG-TERM RECEIVABLES Long-term receivables consist of the following:
October 3, September 27, 1998 1997 Note receivable secured by fixed assets and lease at a restaurant sold by the Company, at 8% interest; due in monthly installments through December 2006 (a) $ 564,769 $ 687,497 Note receivable secured by fixed assets and lease at a restaurant sold by the Company, at 7.5% interest; due in monthly installments through March 2002 (b) 153,187 190,798 Note receivable secured by fixed assets and lease at a restaurant sold by the Company, at 7.5% interest; due in monthly installments through April 2000 (c) 331,700 -- Note receivable secured by fixed assets and lease at a restaurant sold by the Company, at 7.5% interest; due in monthly installments commencing May 2000 through December 2008 (c) 207,983 -- Advances for construction and working capital, at one of the Company's managed locations, at 15% interest; due in monthly installments through December 2000 164,446 225,983 Advances for construction, at one of the Company's managed locations, at prime plus 1%; due in monthly installments through December 1999 33,662 59,632 Note receivable, secured by personal guarantees of officers of a managed restaurant and fixed assets at that location, at 15% interest; due in monthly installments, through September 2000 79,118 79,118 Other -- 5,397 ---------- ---------- 1,534,865 1,248,425 Less current portion 415,755 277,402 ---------- ---------- $1,119,110 $ 971,023 ========== ==========
(a) In December 1996, the Company sold a restaurant for $900,000. Cash of $50,000 was received on sale and the balance is due in installments through December 2006. (b) In October 1996, the Company sold a restaurant for $258,500. Cash of $50,000 was received on sale and the balance is due in installments through March 2002. The Company recognized a gain of $134,000 on this sale in the fiscal year ended September 27, 1997. F-10 (c) In October 1997, the Company sold a restaurant for $1,750,000, of which $200,000 was paid in cash and the balance is due in monthly installments under the terms of two notes bearing interest at a rate of 7.5%. One note, with an initial principal balance of $400,000, is being paid in 24 monthly installments of $18,569 through April 2000. The second note, with an initial principal balance of $1,150,000, will be paid in 104 monthly installments of $14,500 commencing May 2000 and ending December 2008. At December 2008, the then outstanding balance of $519,260 matures. The Company recognized a gain on sale of approximately $185,000 in the fiscal year ended October 3, 1998. Additional deferred gains totaling $1,024,000 could be recognized in future period as the notes are collected. The Company deferred recognizing this additional gain and recorded an allowance for possible uncollectible notes against the second outstanding note. This uncertainty is based on the significant length of time of this note (over 10 years) and the substantial balance which matures in December 2008 ($519,260). The carrying value of the Company's long-term receivables approximates its current aggregate fair value. 3. ASSETS HELD FOR SALE At October 3, 1998 the Company was actively pursuing the sale of three restaurants and accordingly reclassified the net fixed assets ($1,625,834) and inventories ($141,948) as assets held for sale. At September 27, 1997 the Company was actively pursuing the sale of two restaurants and, accordingly, reclassified the net fixed assets ($1,669,251), net intangible assets ($180,619) and inventories ($42,769) as assets held for sale. (See Note 2.) 4. INTANGIBLE ASSETS Intangible assets consist of the following:
October 3, September 27, 1998 1997 Goodwill (a) $6,222,877 $3,802,877 Purchased leasehold rights (b) 652,740 552,740 Noncompete agreements and other (a) 790,000 790,000 Organization costs 678,491 586,954 ---------- ---------- 8,344,108 5,732,571 Less accumulated amortization 2,829,176 2,386,395 ---------- ---------- $5,514,932 $3,346,176 ========== ==========
(a) In August 1985, certain subsidiaries of the Company acquired approximately one-third of the then outstanding shares of common stock (964,599 shares), from a former officer and director of the Company for a purchase price of $3,000,000. The consolidated balance sheets reflect the allocation of $2,946,000 to goodwill. F-11 At September 28, 1996 the Company was actively pursuing the sale of one of the two restaurants it acquired in fiscal 1996 and, accordingly, reclassified net intangible assets of $452,000 to assets held for sale. In the fiscal year ended September 27, 1997, the Company completed the sale of such restaurant and also actively pursued the sale of the other restaurant it had acquired in the fiscal year ended September 28, 1996. Accordingly, the Company reclassified net intangible assets of $180,619 to assets held for sale at September 27, 1997 (see Note 3). During fiscal 1998 the Company acquired a restaurant for $2,735,000 in cash. The acquisition was accounted for as a purchase transaction with the purchase price allocated as follows: leasehold improvements $200,000, furniture, fixtures and equipment $300,000 and goodwill $2,235,000. (b) Purchased leasehold rights arise from acquiring leases and subleases of various restaurants. 5. OTHER ASSETS Other assets consist of the following:
October 3, September 27, 1998 1997 Deposits $ 353,674 $ 408,797 Deferred financing fees 214,192 271,292 Investments in and advances to affiliates (a) 563,367 2,512 ---------- ---------- $1,131,233 $ 682,601 ========== ==========
(a) The Company, through a wholly owned subsidiary, became a general partner with a 19% interest in a partnership which acquired on July 1, 1987 an existing Mexican food restaurant, El Rio Grande, in New York City. Several related parties also participate as limited partners in the partnership. The Company's equity in earnings of the limited partnership was $80,000, $40,000, and $48,000, for the years ended October 3, 1998, and September 27, 1997 and September 28, 1996, respectively. The Company also manages El Rio Grande through another wholly owned subsidiary on behalf of the partnership. Management fee income relating to these services was $421,000, $311,000, and $450,000 for the years ended October 3, 1998, September 27, 1997, and September 28, 1996, respectively (Note 11). 6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following:
1998 1997 Sales tax payable .............................. $ 928,225 $ 803,805 Accrued wages and payroll related costs ........ 675,520 878,795 Other current liabilities ...................... 1,304,021 1,415,756 ----------- ---------- $2,907,766 $3,098,356 ========== ==========
F-12 7. LONG-TERM DEBT Long-term debt consists of the following:
October 3, September 27, 1998 1997 Revolving Credit and Term Loan Facility with interest at the prime rate, plus 1/2%, payable on April 30, 2000 (a) $2,600,000 $2,750,000 Notes issued in connection with refinancing of restaurant equipment, at 8.75%, payable in monthly installments through January 2002 (b) 1,990,827 2,538,581 Note issued in connection with acquisition of restaurant site, at 7.25%, payable in monthly installments through January 1, 2000 (c) 423,807 475,554 Note issued in connection with acquisition of restaurant site, at 8.5%, payable in monthly installments through April 2001 (d) -- 362,662 ---------- ---------- 5,014,634 6,126,797 Less current maturities 609,283 1,424,129 ---------- ---------- $4,405,351 $4,702,668 ========== ==========
(a) The Company's Revolving Credit and Term Loan Facility with its main bank (Bank Leumi USA), as amended May 1998, includes a $10,000,000 facility to finance the development and construction of new restaurants and for working capital purposes at the Company's existing restaurants. Outstanding loans bear interest at 1/2% above the bank's prime rate. Any outstanding loans on April 2000 are due in full. The Facility also includes a two-year Letter of Credit Facility for use in lieu of lease security deposits. The Company generally is required to pay commissions of 1 1/2% per annum on outstanding letters of credit. The Company's subsidiaries each guaranteed the obligations of the Company under the foregoing facilities and granted security interests in their respective assets as collateral for such guarantees. In addition, the Company pledged stock of such subsidiaries as security for obligations of the Company under such facilities. The agreement includes restrictions relating to, among other things, indebtedness for borrowed money, capital expenditures, advances to managed businesses, mergers, sale of assets, dividends, and liens on the property of the Company. The agreement also contains financial covenants requiring the Company to maintain a minimum ratio of debt to net worth, minimum shareholders' equity, and a minimum ratio of cash flow prior to debt service. The Company is in compliance with all covenants. (b) In January 1997, the Company borrowed from its main bank, $2,851,000 to refinance the purchase of various restaurant equipment at its food and beverage facilities in a hotel and casino in Las Vegas, Nevada. The notes bear interest at 8.75% per annum and are payable in 60 equal monthly installments of $58,833 inclusive of interest, until maturity in January 2002. The Company granted the bank a security interest in such restaurant equipment. In connection with such F-13 financing, the Company granted the bank the right to purchase 35,000 shares of the Company's common stock at the exercise price of $11.625 per share through December 2001. The fair value of the warrants was estimated at the date of grant, credited to additional paid-in capital and is being amortized over the life of the warrant. (c) In November 1994, the Company issued a $600,000 note in connection with the acquisition of a restaurant in the Florida Keys. The Company remits monthly payments of $7,044 inclusive of interest until January 1, 2000, at which time the outstanding balance of $358,511 is due. The debt is secured by the leasehold improvements and tangible personal property at the restaurant. (d) In April 1996 the Company acquired a restaurant for $550,000, which was financed by issuing a note payable in monthly installments of $13,461, inclusive of interest. At September 27, 1997, the Company was actively pursuing the sale of this restaurant and accordingly has classified the total balance due of $362,662 as a current liability within the current maturities of long-term debt balance. Required principal payments on long-term debt are as follows:
Year Amount 1999 $ 609,283 2000 3,567,899 2001 654,351 2002 183,101 ---------- $5,014,634 ==========
During the fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996, interest expense was $608,278, $931,383 and $515,810, respectively, of which $176,000 and $90,000 was capitalized during the fiscal years ended September 27, 1997 and September 28, 1996. The carrying value of the Company's long-term debt approximates its current aggregate fair value. 8. COMMITMENTS AND CONTINGENCIES LEASES - The Company leases its restaurants, bar facilities, and administrative headquarters through its subsidiaries under terms expiring at various dates through 2029. Most of the leases provide for the payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for the payment of a percentage of the restaurants' sales in excess of stipulated amounts at such facility. F-14 As of October 3, 1998, future minimum lease payments, net of sublease rentals, under noncancellable leases are as follows:
Operating Capital Year Leases Leases 1999 $ 6,828,683 $253,720 2000 6,621,874 154,118 2001 6,724,662 - 2002 6,773,420 - 2003 6,750,061 - Thereafter 31,493,094 - ----------- -------- Total minimum payments $65,191,794 407,838 =========== Less amount representing interest 29,400 -------- Present value of net minimum lease payments $378,438 ========
In connection with the leases included in the table above, the Company obtained and delivered irrevocable letters of credit in the aggregate amount of $556,130 as security deposits under such leases. Rent expense was $9,940,639, $9,102,267 and $6,117,296 during the fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996, respectively. Rent expense for the fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996 includes approximately $57,000, $19,000 and $10,000 operating lease deferred credits, representing the difference between rent expense recognized on a straight-line basis and actual amounts currently payable. Contingent rentals, included in rent expense, were $2,769,721, $2,432,404 and $547,038 for the fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996, respectively. LEGAL PROCEEDINGS - In the ordinary course of its business, the Company is a party to various lawsuits arising from accidents at its restaurants and workmen's compensation claims, which are generally handled by the Company's insurance carriers. The employment by the Company of management personnel, waiters, waitresses and kitchen staff at a number of different restaurants has resulted in the institution, from time to time, of litigation alleging violation by the Company of employment discrimination laws. The Company does not believe that any of such suits will have a materially adverse effect upon the Company, its financial condition or operations. A lawsuit was commenced against the Company in October 1997 in the District Court for the Southern District of New York by 44 present and former employees alleging various violations of Federal wage and hour laws. The complaint seeks an injunction against further violations of the labor laws and payment of unpaid minimum wages, overtime and other allegedly required amounts, liquidated damages, penalties and attorneys' fees. The Company believes that most of the claims asserted in the his litigation, including those with respect to minimum wages, are insubstantial. The Company believes that there were certain violations of overtime requirements, which have today been largely corrected, for which the Company will have liability. While the Company does not believe that the liability to any F-15 single employee for overtime violations will be consequential to it, the Company's aggregate liability will depend in large part on the number of persons who "opt in" to the lawsuit asserting similar violations. This uncertainty prevents the Company from making any reasonable estimate of its ultimate liability. However, based upon information available to the Company at this time, including the fact that as of December 15, 1998 less than two percent (2%) of the persons eligible have in fact opted in, the Company does not believe that the amount of liability which may be sustained in this action will have a materially adverse effect on its business financial condition. A lawsuit was commenced against the Company in April 1997 in the District Court for Clark County, Nevada by two former employees and one current employee of the Company's Las Vegas subsidiary alleging that (i) the Company forced food service personnel at the Company's Las Vegas facilities to pay a portion of their tips back to the Company in violation of Nevada law and (ii) the Company failed to timely pay wages to terminated employees. The action was brought as a class action on behalf of all similarly situated employees. The Company believes that the first allegation is without merit and that the Company will have no liability. The Company also believes that its liability, if any, from an adverse result in connection with the second allegation would be inconsequential. The Company intends to vigorously defend against these claims. In addition, several unfair labor practice charges have been filed against the Company before the National Labor Relations Board with respect to the Company's Las Vegas subsidiary. One consolidated complaint alleged that the Company unlawfully terminated seven employees and disciplined seven other employees allegedly in retaliation for their union activities. An Administrative Law Judge (ALJ) found that five employees were terminated unlawfully and two were discharged for valid reasons. As far as the discipline, the Judge found that the Company acted legally in disciplining four employees but not lawfully with respect to three employees. The Company has appealed the adverse rulings of the ALJ to the National Labor Relations Board in Washington, D.C. The Company believes that there are reasonable grounds for obtaining a reversal of the unfavorable findings by the ALJ. Another consolidated complaint issued recently alleges that four employees were terminated and three other employees disciplined because of their union activities. A hearing is scheduled on these new charges in January 1999. The Company believes that these affected employees were terminated or disciplined for appropriate reasons such as violating reasonable work rules. The Company does not believe that an adverse outcome in any of the unfair labor practice charges will have a material adverse effect upon the Company's financial condition or operations. The Company believes that these unfair labor practice charges and the litigation pending in Nevada described above are part of an ongoing campaign by the Culinary Workers Union which is seeking to represent employees at the Company's Las Vegas restaurants. However, rather than pursue the normal election process pursuant to which employees are given the freedom to choose whether they should be represented by a union, a process which the Company supports, the Company believes the union is seeking to achieve recognition as the bargaining agent for such employees through a campaign directed not at the Company's employees but at the Company itself and its stockholders. The Company intends to continue to support the right of its employees to decide such matters and to oppose the efforts of the Culinary Workers Union to circumvent that process. An action was commenced in May 1998 in Superior Court of the District of Columbia against the Company and its Washington, D.C. subsidiaries by seven present and former employees of the restaurants owned by such subsidiaries alleging violations of the District of Columbia Wage & Hours Act relating to minimum wages and overtime compensation. While the action is in its early stages, the Company does not believe that its liability, if any, from an adverse result in this matter would have a material adverse effect upon its business or financial condition. A lawsuit was commenced against the Company in October 1998 in Superior Court of Los Angeles County, California by a former employee alleging that her employment was terminated on the basis of her age in violation of the California Fair Employment and Housing Act. The Company believes that the allegations are without merit. F-16 9. SHAREHOLDERS' EQUITY COMMON STOCK PRIVATE PLACEMENT - In December 1996, the Company raised net proceeds of $6,028,626 in a private placement of 551,454 shares of its common stock at $11 per share. The proceeds of such offering were used to repay a portion of the Company's outstanding bank borrowings and for the payment of capital expenditures on its Las Vegas restaurant facilities at the New York New York Hotel & Casino in Las Vegas which opened in January 1997. COMMON STOCK REPURCHASE PLAN - In August 1998 the Company authorized the repurchase of up to 500,000 shares of the Company outstanding common stock. As of October 3, 1998, the company had repurchased 159,000 shares at a total cost of $1,522,496. 10. STOCK OPTIONS On October 15, 1985, the Company adopted a Stock Option Plan (the "Plan") pursuant to which the Company reserved for issuance an aggregate of 175,000 shares of common stock. In May 1991 and March 1994, the Company amended such Plan to increase the number of shares issuable under the Plan to 350,000 and 447,650, respectively. In March 1996, the Company adopted a second plan and reserved for issuance an additional 135,000 shares. In March 1997, the Company amended this plan to increase the number of shares included under the plan to 270,000. Options granted under the Plans to key employees and directors are exercisable at prices at least equal to the fair market value of such stock on the dates the options were granted. The options expire five years after the date of grant and are generally exercisable as to 25% of the shares commencing on the first anniversary of the date of grant and as to an additional 25% commencing on each of the second, third and fourth anniversaries of the date of grant. Additional information follows:
1998 1997 1996 --------------------------- -------------------------- --------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding, beginning of year 227,500 $ 10.38 105,625 $ 7.18 189,125 $ 5.45 Options: Granted 100,000 11.38 150,000 11.71 -- Exercised (10,000) 6.50 (17,500) 4.89 (72,500) 2.54 Canceled or expired (6,000) 8.63 (10,625) 6.37 (11,000) 8.00 ------- ------- ------- Outstanding, end of year (a) 311,500 10.86 227,500 10.38 105,625 7.18 ------- ------- ------- Price Range, Outstanding Shares $8.00 - $12.00 $6.50 - $12.00 $4.38 - $8.00 -------------- -------------- ------------- Weighted Average Years 3.2 Years 3,53 Years 2.67 Years --------- ---------- ---------- Shares available for future grant 20,000 120,000 135,000 ------ ------- ------- Options exercisable (a) 117,583 10.13 47,500 7.65 43,125 6.34 ------- ------- -------
F-17 (a) Options become exercisable at various times until expiration dates ranging from August 1999 through March 2003. Statement of Financial Accountings Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123") requires the Company to disclose pro forma net income and pro forma earnings per share information for employee stock option grants made in the fiscal years ended October 3, 1998, and September 27, 1997 as if the fair-value method defined in SFAS No. 123 had been applied. The fair value of each stock-option grant is estimated on the date of grant using the Black-Scholes option pricing. The assumptions for fiscal 1998 include; risk free interest rate of 5.5%; no dividend yield; expected life of 4 years; and expected volatility of 75%. The assumptions for fiscal 1997 include; risk-free interest rate of 6.5%; no dividend yield; expected life of 4 years and expected volatility of 38%. The pro forma impact was as follows:
Year Ended ------------------------------- October 3, September 27, 1998 1997 Net earnings as reported $ 4,612,141 $ 1,737,655 Net earnings - pro forma 4,464,576 1,694,991 Earnings per share as reported - basic $ 1.21 $ .47 Earnings per share as reported - diluted 1.20 .46 Earnings per share pro forma - basic 1.17 .46 Earnings per share pro forma - diluted 1.16 .45
No options were granted during fiscal 1996 and therefore no pro forma is required. The exercise of nonqualified stock options in the fiscal years ended October 3, 1998, September 27, 1997 and September 28, 1996 resulted in income tax benefits of $18,615, $57,580 and $124,956, respectively, which were credited to additional paid-in capital. The income tax benefits result from the difference between the market price on the exercise date and the option price. 11. MANAGEMENT FEE INCOME As of October 3, 1998, the Company provides management services to five restaurants owned by outside parties. In accordance with the contractual arrangements, the Company earns fixed fees and management fees based on restaurant sales and operating profits as defined by the various management agreements. Restaurants managed had net sales of $12,738,639, $14,151,888 and $12,802,305 during the management periods within the years ended October 3, 1998, September 27, 1997 and September 28, 1996, respectively, which are not included in consolidated net sales of the Company. 12. INCOME TAXES The provision for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each subsidiary on a nonconsolidated basis. For New York F-18 State and City income tax purposes, the losses incurred by a subsidiary may only be used to offset that subsidiary's income. The provision for income taxes consists of the following:
Year Ended -------------------------------------------------- October 3, September 27, September 28, 1998 1997 1996 Current provision: Federal $1,892,997 $ 668,391 $ 519,771 State and local 1,117,363 908,183 625,570 ---------- --------- --------- 3,010,360 1,576,574 1,145,341 ---------- --------- --------- Deferred provision (credit): Federal 100,486 (329,602) (592,721) State and local (42,105) (102,364) (99,771) ---------- --------- --------- 58,381 (431,966) (692,492) ---------- --------- --------- $3,068,741 $1,144,608 $ 452,849 ========== ========== =========
The provision for income taxes differs from the amount computed by applying the Federal statutory rate due to the following:
Year Ended --------------------------------------------------------- October 3, September 27, September 28, 1998 1997 1996 Provision for Federal income taxes (34%) $ 2,612,000 $ 980,000 $ 426,000 State and local income taxes net of Federal tax benefit 710,000 532,000 347,000 Amortization of goodwill 26,000 26,000 26,000 Tax credits (506,000) (373,000) (349,000) Other 226,741 (20,392) 2,849 ----------- ----------- --------- $ 3,068,741 $ 1,144,608 $ 452,849 =========== =========== =========
F-19 Deferred tax assets or liabilities are established for (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss carryforwards. The tax effects of items comprising the Company's net deferred tax asset are as follows:
October 3, September 27, 1998 1997 Deferred tax assets: Operating loss carryforwards $ 839,253 $ 858,937 Operating lease deferred credits 634,516 657,958 Carryforward tax credits 1,086,025 1,157,368 Depreciation and amortization 22,104 11,045 Valuation allowance (642,522) (688,768) ----------- ----------- $ 1,939,376 $ 1,996,540 =========== ===========
A valuation allowance for deferred taxes is required if, based on the evidence, it is more likely than not that some of the deferred tax assets will not be realized. The Company believes that uncertainty exists with respect to future realization of certain operating loss carryforwards and operating lease deferred credits. Therefore, the Company provided a valuation allowance of $642,522 at October 3, 1998 and $688,768 at September 27, 1997. The Company has state operating loss carryforwards of $11,094,610 and local operating loss carryforwards of $8,083,505 which expire in the years 2002 through 2012. The Internal Revenue Service is currently examining the Company's federal income tax returns for fiscal years ended September 28, 1991 through October 1, 1994, and the Internal Revenue Service has proposed certain adjustments, all of which are being contested by the Company. The adjustments primarily relate to (i) pre-opening, legal and accounting expenses incurred in connection with new or acquired restaurants that the Internal Revenue Service asserts should have been capitalized and amortized rather than currently expensed and (ii) travel and meal expenses for which the Internal Revenue Service asserts the Company did not comply with certain record keeping requirements of the Internal Revenue Code. The Company does not believe that any adjustments resulting from this examination will have a material effect on the Company's financial condition. F-20 13. OTHER INCOME Other income consists of the following:
Year Ended ------------------------------------------------------ October 3, September 27, September 28, 1998 1997 1996 Purchasing service fees $ 124,455 $ 86,073 $ 55,551 Insurance proceeds (a) - 377,427 726,415 Sales of logo T-shirts and hats 160,596 171,259 214,291 Other 205,067 145,522 86,460 --------- --------- ----------- $ 490,118 $ 780,281 $ 1,082,717 ========= ========= ===========
(a) In July 1994, the Company was required to close a restaurant in Manhattan (Ernie's) on a temporary basis to enable structural repairs to be made to the ceiling of the restaurant. The cost of such repairs, other ongoing restaurant operating expenses and a guaranteed profit were borne by a third party. The restaurant reopened in February 1995 and the agreement provided that the third party continue to guarantee some level of operating profits through January 1998. During the fiscal years ended September 27, 1997, the Company received $377,427 and $726,415, respectively, in excess of the continuing restaurant operating expenses. 14. INCOME PER SHARE OF COMMON STOCK The Company adopted in the first quarter of fiscal 1998, The Financial Accounting Standards Board Statement No. 128, "Earnings per Share," which established new standards for computing and presenting earnings per share. The Company now discloses "Basic Earnings per Share," which is based upon the weighted average number of shares of common stock outstanding during each period and "Diluted Earnings per Share," which requires the Company to include common stock equivalents consisting of dilutive stock options and warrants. The Company also applied the new standard to the periods ended September 27, 1997 and September 28, 1996. F-21 A reconciliation of the numerators and denominators of the basic and diluted per share computations follow.
Income Shares Per-Share (Numerator) (Denominator) Amount Year ended October 3, 1998: Basic EPS $ 4,612,141 3,826,255 $ 1.21 Stock options and warrants - 25,764 0.01 ------------ --------- ------ Diluted EPS 4,612,141 3,852,019 1.20 Year ended September 27, 1997: Basic EPS 1,737,655 3,714,116 0.47 Stock options and warrants - 28,695 0.01 ------------ --------- ------ Diluted EPS 1,737,655 3,742,811 0.46 Year ended September 28, 1996: Basic EPS 788,762 3,238,419 0.24 Stock options and warrants - 34,438 - ------------ --------- ------ Diluted EPS 788,762 3,272,857 0.24
15. QUARTERLY INFORMATION (UNAUDITED) The following table sets forth certain quarterly operating data.
Fiscal Quarter Ended ----------------------------------------------------------------------------- December 27, March 28, June 27 October 3 1997 1998 1998 1998 1998 Net sales $26,940,384 $25,198,012 $33,029,512 $32,230,545 Gross restaurant profit 19,692,165 18,345,554 24,432,866 23,662,166 Net income (loss) 727,441 (254,154) 2,428,676 1,710,178 Net income (loss) per share - basic and diluted $ 0.19 $ (0.07) $ 0.63 $ 0.45 Fiscal Quarter Ended ----------------------------------------------------------------------------- December 28, March 29, June 28 September 27, 1996 1997 1997 1997 1997 Net sales $18,166,656 $24,887,795 $31,469,304 $29,802,631 Gross restaurant profit 13,068,926 17,775,683 22,922,594 22,107,296 Net income (loss) (552,503) (1,108,203) 1,947,476 1,450,885 Net income (loss) per share basic and diluted $ (0.16) $ (0.29) $ 0.51 $ 0.38
F-22 16. SUBSEQUENT EVENTS (UNAUDITED) RESTAURANT SALES - In the first quarter of fiscal 1999, the Company sold a restaurant located in New York City and a restaurant located in Washington, D.C. for an aggregate selling price of $1,225,000, of which $975,000 was received in cash and $250,000 was financed by notes. The notes are due in monthly installments of $5,537, inclusive of interest at 10%, from May 1999 through April 2004. The Company expects to recognize gains of approximately $600,000 on these sales. ****** F-23 EXHIBIT INDEX
Exh. No. Description -------- ------------ 3.1 Certificate of Incorporation of the Registrant, filed on January 4, 1983, incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 1994 (the "1994 10-K"). 3.2 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on October 11, 1985, incorporated by reference to Exhibit 3.2 to the 1994 10-K. 3.3 Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on July 21, 1988, incorporated by reference to Exhibit 3.3 to the 1994 10-K. 3.4 By-Laws of the Registrant, incorporated by reference to Exhibit 3.4 to the 1994 10-K. 10.1 Amended and Restated Redemption Agreement dated June 29, 1993 between the Registrant and Michael Weinstein, incorporated by reference to Exhibit 10.1 to the 1994 10-K. 10.2 Form of Indemnification Agreement entered into between the Registrant and each of its Directors and Executive Officers incorporated by reference to Exhibit 10.2 to the 1994 10-K. 10.3 Ark Restaurants Corp. Amended Stock Option Plan, incorporated by reference to Exhibit 10.3 to the 1994 10-K. 10.4 Second Amended and Restated Credit Agreement dated as of March 5, 1996 between the Company and Bank Leumi Trust Company of New York, incorporated by reference to Exhibit 10.52 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1996 (the "March 1996 10-Q"). 10.5 Ark Restaurants Corp. 1996 Stock Option Plan, incorporated by reference to Exhibit 10.53 to the March 1996 10-Q. *10.6 Lease Agreement dated May 17, 1996 between New York-New York Hotel, LLC, and Las Vegas America Corp.(1) *10.7 Lease Agreement dated May 17, 1996 between New York-New York Hotel, LLC, and Las Vegas Festival Food Corp.(1) *10.8 Lease Agreement dated May 17, 1996 between New York-New York Hotel, LLC, and Las Vegas Steakhouse Corp.(1) *21 Subsidiaries of the Registrant. *23 Consent of Deloitte & Touche LLP. *27 Financial Data Schedule pursuant to Article 5 of Regulation S-X filed with EDGAR Version only.
--------------------------------- *Filed Herewith (1) Certain information has been omitted and filed separately with the SEC pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 15 day of December, 1998. ARK RESTAURANTS CORP. By: /s/Michael Weinstein ---------------------------- MICHAEL WEINSTEIN, President Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been duly signed by the following persons in the capacities and on the date indicated.
Signature Title Date - --------- ----- ---- /s/ Ernest Bogen Chairman of the Board December 15, 1998 - ---------------- (Ernest Bogen) /s/ Michael Weinstein President and Director December 15, 1998 - --------------------- (Michael Weinstein) /s/ Vincent Pascal Vice President, December 15, 1998 - ------------------ (Vincent Pascal) Secretary and Director /s/ Robert Towers Vice President, Treasurer, December 15, 1998 - ----------------- (Robert Towers) Principal Financial Officer and Director /s/ Andrew Kuruc Vice President, Controller, December 15, 1998 - ---------------- (Andrew Kuruc) Principal Accounting Officer and Director /s/ Donald D. Shack Director December 15, 1998 - ------------------- (Donald D. Shack) /s/ Jay Galin Director December 15, 1998 - ------------- (Jay Galin) /s/ Paul Gordon Director December 15, 1998 - --------------- (Paul Gordon)
EX-10 2 EXHIBIT 10.6 LEASE AGREEMENT THIS LEASE is made and entered into this 17th day of May, 1996, by and between NEW YORK-NEW YORK HOTEL, LLC, a Nevada limited liability company, herein referred to as "Landlord", and LAS VEGAS AMERICA CORP., a Nevada corporation, herein referred to as "Tenant". R E C I T A L S A. Landlord is the owner of that certain real property located in Las Vegas, Nevada upon which Landlord is constructing a hotel and casino which will be known as the New York-New York Hotel (the "Hotel"); and B. Tenant desires to lease an area within the Hotel for the operation of a 24 hour full service "America" restaurant (the "Restaurant"). NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows: ARTICLE 1 DESCRIPTION AND LOCATION OF PREMISES 1.1 Premises. Landlord, in reliance upon and in consideration of the representations, warranties, covenants and conditions herein contained on the part of Tenant, hereby lets and demises to Tenant, and Tenant hereby rents, hires and takes of and from Landlord for the term and upon the provisions, covenants and conditions herein set forth, that certain area (the "Premises") cross-hatched on Exhibit "A" attached hereto and incorporated herein by reference. The Premises consists of approximately 20,000 square feet. 1.2 Relocation of Premises. Tenant acknowledges that Landlord shall have an absolute right from time to time to relocate the Premises within the Hotel at any time during the term hereof provided that the site to which the Premises is relocated shall be approximately the same size as the original Premises and shall be exposed to reasonably equivalent pedestrian traffic. Landlord shall notify Tenant of such relocation not less than sixty (60) days prior to the date thereof. Landlord shall reconstruct on the relocated Premises improvements substantially identical to those constructed by Tenant and Landlord in the Premises prior to the relocation. As of the latter of the date specified in Landlord's notice to Tenant or ten (10) days after Landlord has notified Tenant that it has completed the improvements to be constructed by Landlord on the relocated Premises, Tenant shall surrender the Premises originally demised to Tenant hereunder and move to the relocated Premises. All reasonable out-of-pocket costs incurred by Tenant in moving to the relocated Premises shall be reimbursed to Tenant by Landlord. The relocated Premises shall thereafter be deemed to be the Premises for all purposes of this Lease as if originally demised to Tenant hereunder. Tenant agrees 1 that, promptly on demand, it shall execute an amendment to Exhibit A designating the location of the relocated Premises. If the relocated Premises are not ready for Tenant's occupancy for the operation of the Restaurant on the date on which the Premises originally demised must be surrendered to Landlord under this Section 1.2, then all rent and other charges under this Lease shall be abated until the relocated Premises has been completed and are ready for Tenant's occupancy for the operation of the Restaurant. If any period referred to in the preceding sentence continues for more than twenty-one (21) days (the period which begins after the expiration of such twenty-one (21) days and which ends when the relocated Premises is completed and ready for Tenant's occupancy for the operation of the Restaurant is referred to herein as the "Extended Hiatus Period"), Landlord shall make the following payments to Tenant: (i) for all employees of the Restaurant actually paid by Tenant (and provided that all such employees are actually employed and fully compensated by Tenant during the twenty-one (21) days preceding the Extended Hiatus Period), Tenant's full, normal payroll expense for the Extended Hiatus Period (including, without limitation, payroll taxes, health and disability insurance, unemployment insurance contributions and pension and profit-sharing contributions), but less any compensation paid to any employees of the Restaurant as employees of another restaurant operated by an affiliate of Tenant; (ii) an amount equal to the Net Profit (as defined below) of the Restaurant for the Extended Hiatus Period. Such amounts shall be paid monthly to Tenant, on the first day of each calendar month, beginning with the month following the month in which the Extended Hiatus Period begins; each of such payments shall include all sums due hereunder in respect of the preceding month and shall be pro rated for any partial month. Tenant shall submit to Landlord each month a statement, in reasonable detail, showing the amounts then due to Tenant under this Section 1.2, and Landlord's payment shall be based on such statement (subject to Landlord's right to dispute such statement in good faith). As used in this Section 1.2: the term "Agreed Gross Receipts" shall mean, for each month during the Extended Hiatus Period, an amount equal to the average of the Gross Sales of the Restaurant for each of the three calendar months immediately preceding the month in which the Extended Hiatus Period begins; and the term "Net Profit" shall mean, for each such month, one-twelfth of the net profit of the Restaurant reported (in accordance with GAAP) on Tenant's books for the calendar year preceding the year in which the Extended Hiatus Period begins. Any payments due to Tenant under this Section 1.2 and unpaid at the end of the Extended Hiatus Period, may (without limiting Tenant's remedies) be deducted by Tenant from the installments of Base Rent and Percentage Rent thereafter coming due under this Lease. 1.3 Modification of Premises. In connection with any remodeling of all or any portion of the Hotel, Landlord shall have the right to change the dimensions or reduce the size of the Premises. However, no such reduction may result in the size of the Premises being less than ninety percent (90%) of its original size or in the remaining portion of the Premises not being suitable for the conduct of Tenant's business hereunder, or in a material change in the nature or conduct of Tenant's operations in the Premises. In the event of any remodeling pursuant to this Section 1.3, Landlord shall repair any resulting damage to the Premises, and shall restore the Premises (including Tenant's interior design concept) so as to create an architecturally and functionally harmonious space. In connection with any such remodeling, Landlord may require Tenant to cease conducting 2 business from the Premises for up to thirty (30) days. Rent shall be abated during any period that Landlord requires Tenant to cease conducting business. ARTICLE 2 IMPROVEMENT OF PREMISES 2.1 Landlord's Work. Landlord shall, at its expense, construct the Premises shell in substantial accordance with plans and specifications prepared or to be prepared by Landlord's architect, incorporating in such construction all "Landlord's Work" set forth in the "Work Letter" attached hereto as Exhibit "B". Landlord represents and warrants to Tenant that Landlord's Work will be constructed in compliance with all applicable laws, including building codes, and will conform in all material respects to the building plans which have been made available to Tenant. Landlord's Work with respect to the Premises will substantially conform to Landlord's Building Plans, as described in Section 2.3. 2.2 Tenant's Work. All work in the Premises not provided herein to be done by Landlord shall be performed by Tenant (hereinafter called "Tenant's Work"), including, but not limited to, all work designated as Tenant's Work in the Work Letter, and Tenant shall commence Tenant's Work as soon as reasonably practicable after Landlord has substantially completed Landlord's Work and delivered the Premises to Tenant, and shall do and perform at its expense all Tenant's Work diligently and promptly and in accordance with the terms of the Work Letter. Tenant covenants and agrees that it shall expend not less than the amount required for the construction of the Tenant's Work in accordance with plans approved by Landlord. 2.3 Tenant's Obligations Before Commencement Date. Landlord has made available to Tenant and to Tenant's architect and space planning consultants, Landlord's plans and specifications for Landlord's Work ("Landlord's Building Plans"). Not later than thirty (30) days after receipt of Landlord's Building Plans, Tenant will deliver to Landlord Tenant's proposed plans and specifications for Tenant's Work in such detail as Landlord may reasonably require (a "Preliminary Submittal"). Within ten (10) business days after receipt of the Preliminary Submittal, Landlord shall notify Tenant of any nonconformity's with the Work Letter, Landlord's Plans or any other failure to meet with Landlord's approval, to the extent the same is required by an express provision of this Lease. Tenant shall, within fifteen (15) days after receipt of any such notice, submit "Final Construction Documents" based upon the Preliminary Submittal and incorporating Landlord's comments thereto. Landlord shall notify Tenant of its approval or disapproval of the Final Construction Documents within ten (10) days after receipt. Upon approval, Landlord shall return one (1) set of approved Final Construction Documents to Tenant and the same shall become a part hereof by this reference as Exhibit "B-2". Approval of construction documents by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy or sufficiency, or compliance with applicable codes, and Tenant shall be solely responsible for such construction documents and for obtaining all governmental approvals which are required for Tenant's Work. 3 Tenant shall not commence any of Tenant's Work until Landlord has approved Tenant's Final Construction Drawings in writing. During the construction of Tenant's Work, Landlord shall cooperate and shall cause its contractors to cooperate in good faith with Tenant and its contractors, to the end that construction may be completed as promptly as possible. Provided that the Delivery Date, as hereinafter defined, is no later than June 15, 1996, Tenant shall complete Tenant's Work by November 15, 1996 (the "Required Completion Date"). Landlord shall give Tenant five (5) days prior written notice of the Delivery Date, such Delivery Date being the date upon which (i) Landlord's Work in the Premises has been substantially completed in accordance with the requirements therefor and (ii) the Premises are available for the commencement of Tenant's Work. If the Delivery Date is later than June 15, 1996, the Required Completion Date shall be one hundred fifty-three (153) days after the actual Delivery Date. Tenant hereby releases Landlord and its contractors from any claim whatsoever for damages against Landlord or its contractors for any delay in the date on which the Premises shall be ready for delivery to Tenant or for any delay in commencing or completing any of Landlord's Work; provided, however, that (i) nothing contained in the foregoing provisions of this paragraph shall relieve Landlord of its obligations under the final sentence of the preceding paragraph; and (ii) if the Delivery Date does not occur on or before December 15, 1997, or if the Hotel (including the casino) does not open for business on or before such date, then Tenant may terminate this Lease by notice given to Landlord not later than January 15, 1998, in which event Landlord shall promptly pay to Tenant the amount of all costs then paid or payable by Tenant in connection with Tenant's Work, and neither party shall otherwise have any rights against or obligations to the other with respect to this Lease or the Premises. 2.4 Failure of Tenant to Perform. The parties recognize that it would be extremely difficult or impossible to determine Landlord's damages resulting from Tenant's failure to open for business fully fixtured, stocked and staffed on the Required Completion Date, including, but not limited to, damages from loss of Percentage Rent (hereinafter defined) from Tenant and other tenants, diminished leaseability, and/or mortgageability and damage to the economic value of the Hotel. Accordingly, if Tenant fails to proceed diligently with Tenant's Work or to open for business fully fixtured, stocked and staffed on or before the Required Completion Date (except to the extent that any delay is caused by Landlord's failure to complete any material portion of Landlord's Work in a timely manner or by any unreasonable interference with Tenant's Work by Landlord's contractors, or by Landlord's failure to allow Tenant's contractors to have access to the Premises to construct Tenant's Work), such failure shall be a Tenant Event of Default and Landlord may, on ten (10) days notice to Tenant and in addition to the right to exercise any other remedies and rights herein or at law provided, proceed with Tenant's Work using any contractor Landlord desires and making any changes or revisions to Landlord's Work required because of any delay or failure of Tenant to perform its obligations hereunder, all at Tenant's expense. In addition, Landlord shall have the right to collect rent from the Required Completion Date in an amount equal to the Base Rent (hereinafter defined) and other additional rent and other amounts payable by Tenant hereunder, together with an amount equal to fifty percent (50%) of 1/365ths of the Base Rent for each day that 4 Tenant has failed to open for business on and after the Required Completion Date, which latter amount shall be in lieu of Percentage Rent that might have been earned had Tenant opened in a timely fashion. In the event that Tenant fails to make a timely Preliminary Submittal or to timely submit its Final Construction Documents, as provided in this Lease, then Landlord shall have the right, in addition to its other rights and remedies as herein provided, to collect from Tenant One Hundred Dollars ($100.00) per calendar day for each day that such plans are not so submitted. All remedies in this Lease or at law provided shall be cumulative and not exclusive and shall survive the expiration of the Lease Term or the earlier termination of this Lease. 2.5 Condition of Premises. Tenant's taking possession of the Premises for the construction of Tenant's Work shall be conclusive evidence of Tenant's acceptance thereof in good order and satisfactory condition; except for such matters as Tenant shall, within thirty (30) days after taking possession of the Premises, specify in a written notice or notices to Landlord (hereinafter, "Punch List Items") and except for latent defects in Landlord's Work which were not discoverable in the exercise of ordinary prudence during such thirty (30) day period. Landlord shall diligently correct all Punch List Items which constitute defects in Landlord's Work. Tenant agrees that no representations respecting the condition of the Premises, no warranties or guarantees, expressed or implied, with respect to workmanship or any defects in material, and no promise to decorate, alter, repair or improve the Premises either before or after the execution hereof, have been made by Landlord or its agents to Tenant unless the same are contained herein. 2.6 Refurbishment. Tenant shall keep the Premises and all of Tenants' personal property in a first class condition and state of repair in keeping with the standards of the Hotel throughout the Term of this Lease. Not less than once every five (5) years during the Term, as defined below, including any renewal term, Tenant agrees that it will substantially refurbish the Premises, it being understood that the refurbishment may be accomplished in phases during each five (5) year period, as Tenant reasonably determines. ARTICLE 3 TERM 3.1 Lease Term. The term (the "Term") of this Lease shall be for a period of Ten (10) years, commencing on the earlier of (i) the Required Completion Date; or (ii) the first date upon which the Premises is open for business to the general public (the "Opening Date"), unless terminated earlier as elsewhere herein provided. The date upon which the Term commences shall be referred to herein as the "Commencement Date". At such time as the Commencement Date has been determined, Landlord shall insert the Commencement Date and the expiration date of the Term on Exhibit "C" attached hereto and deliver a copy thereof to Tenant, which shall thereafter be incorporated in, and form a part of, this Lease. 3.2 Holding Over. Should Tenant hold possession of the Premises with the consent of Landlord after the expiration of the stated Term of this Lease, such holding over shall create a 5 tenancy from month to month only, upon the same terms and conditions as are herein set forth. If any such holding over is without Landlord's express written consent, the Percentage Rent and the Base Rent shall be equal to one hundred fifty percent (150%) of the Percentage Rent and the Base Rent which were payable during the last month of the Lease Term. 3.3 Option to Renew. Tenant shall have two (2) five (5) year options to renew subject to Tenant's average Gross Sales being at least Six Million Dollars ($6,000,000) per year for the immediate two (2) prior Lease Years. Such options shall be exercised, if at all, by written notice to Landlord not later than one hundred eighty (180) days prior to the end of the then current term. The Base Rent for the first renewal Term hereunder shall be increased to [omitted]* per month, and the Base Rent for the second renewal Term hereunder shall be increased to [omitted]* per month. ARTICLE 4 RENT 4.1 Base Rent. Tenant shall pay minimum rent to Landlord during the Term of the Lease at the rate of [omitted]* per month for years 1 through 10, (the "Base Rent"), in advance, beginning on the Commencement Date and continuing on the first day of each calendar month thereafter. If the month in which the Term commences or ends is not a full calendar month, then the Base Rent for such month shall be prorated on the basis of the actual number of days in such month. 4.2 Percentage Rent. Tenant shall pay to Landlord at the time and in the manner set forth herein the amount by which the following applicable percentage of Gross Sales during each month of the Lease Year exceeds the Base Rent for such period (hereinafter called the "Percentage Rent"):
Gross Sales Percentage Rental Payable ----------- ------------------------- [omitted]* [omitted]*
Notwithstanding the foregoing, the Percentage Rent in respect of any Lease Year shall not exceed the applicable percentage of Gross Sales for the full Lease Year. Accordingly, if the monthly payments of Percentage Rent made during any Lease Year exceed the aggregate Percentage Rent due for such Lease Year, the amount of any overpayment shall be applied pursuant to Section 4.5. 4.3 Lease Year. "Lease Year," as used herein, means each calendar year during the Term, together with the "Partial Lease Year" which begins on the Commencement Date and ends on December 31 of the year in which the Commencement Date occurs and the Partial Lease Year, if any, which ends on the date upon which the Term expires or the Lease is otherwise terminated. - ----------------- * Certain Information has been Omitted and Filed Separately with the SEC Pursuant to a Request for Confidential Treatment Pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended. 6 4.4 Gross Sales. As used in this Lease, "Gross Sales" means the aggregate selling price received by Tenant (except as provided herein with respect to promotional and complimentary meals) of all products, merchandise and services ("Products") sold in, upon or from the Premises by Tenant, its subtenants, licensees and concessionaires, personally or from any vending or coin operated or token operated device, whether for check, cash, on credit or otherwise, including other types of "cashless" transactions, excluding only the following: (i) monies and credit received by Tenant in the settlement of claims for loss or damage of Tenant's Products; (ii) an amount equal to the cash refunded or credit allowed on Products returned by customers and accepted by Tenant, or the amount of cash refunded or credit allowed thereon in lieu of Tenant's acceptance thereof, but only to the extent that the sales relating to such Products were made in, about or from the Premises; provided, however, that in no event shall the cost or value of any coupons, trading stamps, premiums, advertising or other promotional devices be deducted or excluded from Tenant's Gross Sales or be otherwise construed as a discount, refund, allowance or credit hereunder. Any credit or refund shall reduce Gross Sales for the accounting period during which such credit or refund is made but shall not affect Gross Sales, for the period in which the original sale was made; and (iii) sales taxes, casino entertainment taxes, if any, so called luxury taxes now or hereafter imposed upon the sale of Products, whether such taxes are added separately to the selling price thereof and collected from customers or paid by Tenant and included in the retail selling price; (iv) any sales of product, merchandise, services or the like by Landlord. (v) promotional or complimentary meals served without charge (up to $1,000 per month, noncumulative, and the parties agree that, except as provided in clause 4.4(ix) below, the menu price of all other promotional or complimentary meals shall be included in Gross Sales; (vi) the value of complimentary appetizer or dessert items furnished as a part of a meal which is included in Gross Sales; (vii) amounts which are deducted from meal checks in response to customer dissatisfaction; (viii) goods or food items delivered to another restaurant of Tenant where such delivery is made solely for the convenient operation of Tenant's business and not for the purpose of consummating a sale made in, upon or from the Premises; 7 (ix) Landlord's Complimentaries, as described in Section 5.5 below, up to $1,212,000 per Lease Year; (x) Receipts from pay telephones in the Premises; (xi) gratuities received by Tenant; (xii) the sale of Tenant's trade fixtures and equipment not in the ordinary course of business; and (xiii) meals furnished to Tenant's employees without profit. All gross income of Tenant or any other person, firm or corporation from any operations in, at or upon the Premises which are not specifically excluded by this Section shall be included in Gross Sales. All sales originating at, upon or from the Premises shall be considered as made and completed thereon and shall be included in Tenant's Gross Sales, even though bookkeeping and payment of the account therefor may be transferred to another place for collection, and even though actual filling of the sale or order or actual delivery of the merchandise may be made from a place other than the Premises. In the event Tenant elects to allow its customers to make credit purchases, no credit shall be allowed for uncollected or uncollectible credit accounts. Each sale upon credit shall be treated as a sale for the full price in the month during which such sale is made, regardless of the time of when or whether Tenant shall receive payment therefor. Tenant agrees that it will not directly or indirectly operate an "America" Restaurant at any other Las Vegas Strip location, including any location within a hotel and/or casino property, during the Term of this Lease. 4.5 Percentage Rent Payments. On or before the 15th day of each calendar month during the Term of this Lease (including the calendar month next succeeding the last month of the Term hereof), Tenant shall deliver to Landlord a written statement signed and certified by Tenant or an officer of Tenant as being true and correct, setting forth the amount of Tenant's Gross Sales during the immediately preceding calendar month, and on the same date Tenant shall pay Landlord the percentage rental for the immediately preceding calendar month. Within thirty (30) days after the end of each Lease Year during the Term of this Lease, Tenant shall deliver to Landlord a written statement, signed and certified by Tenant or an officer of Tenant to be true and correct, setting forth the amount of Tenant's Gross Sales made during each month of the immediately preceding year. If Tenant has paid Landlord for such Lease Year Percentage Rent that is less than Tenant is obligated to pay for such period, Tenant shall pay Landlord the amount of such deficiency concurrently with Tenant's delivery of its annual report of Gross Sales hereunder. If Tenant has paid more than the Percentage Rent required to be paid for such period, Landlord shall credit the amount of such excess against rent next coming due hereunder from Tenant, or, if the Term has expired, Landlord shall pay the amount of such excess to Tenant directly. 8 4.6 Books and Records; Audit. Tenant agrees that it will keep complete books of accounts reflecting Gross Sales,and all of the business activities with respect to the Premises and will comply with generally accepted accounting principles ("GAAP"). Said books of account shall, at a minimum, include: 1. Dated and time stamped cash register tapes (customer receipt and detail audit) which provide a non-resettable, non-clearing gross sales total and/or consecutively numbered duplicate sales tickets which are to be dated and time stamped. When consecutively numbered sales tickets are utilized, 8 Tenant shall maintain the vendor invoice for such sales ticket purchases, which shall accurately reflect the commencing and ending numbers of all sequences. Documentation of voided sales must be kept with regular sales tickets and tapes and originals of voided tickets must be retained. 2. Daily sales summaries showing Nevada and out-of-state sales. 3. Monthly sales journals showing breakdown of sales by day. 4. Authenticated bank deposit slips showing deposits of daily sales. If deposits are not made on a daily basis, then the number of days' receipts deposited should be shown on the deposit slip and in the monthly sales journal. 5. Monthly state sales tax returns and cancelled checks showing payment of those taxes; 6. The portion of Federal Income Tax returns showing Tenant's gross receipts for the same period of time that Tenant is required to maintain its Federal Income Tax returns by the Internal Revenue Service. 7. All of Tenant's purchase orders and invoices relating to the purchase, exchange, or replacement of Products sold or to be sold by Tenant at, upon, or from the Premises. Landlord shall have the right to examine such books and records at any reasonable time and place. Lessor shall have the right at any time during the Term and within thirty (30) days after the end of the Term to have an audit conducted of Tenant's books of account by Landlord's employees or auditors of Landlord's choice. If any audit reveals Gross Sales were understated by more than two percent (2%), the entire cost and expense of such audit shall be borne by Tenant. It is further agreed that an understatement by Tenant of five percent (5%) or more of Gross Sales during any three (3) months being audited shall be deemed an Event of Default unless such understatement was caused by the fraud of Tenant's employees without Tenant's knowledge. 9 4.7 Place for Payments. All Base Rent, Percentage Rent and other monies required to be paid by Tenant hereunder (collectively referred to herein as "rent") shall be paid to Landlord without deduction or offset, and, except as may be specifically set forth in this Lease without prior notice or demand, in lawful money of the United States of America, at 3790 Las Vegas Blvd. South, Las Vegas, Nevada, 89109 or at such other place as Landlord may, from time to time, designate in writing. If the time for payment of any amount due from Tenant to Landlord is not set forth in this Lease, such amount shall be due within five (5) business days after such amount is billed by Landlord. 4.8 Interest. Any rent due from Tenant to Landlord which is not paid within five (5) business days after the date due shall bear interest at two percent (2%) per annum in excess of the Prime Rate of Interest published from time to time in the "Money Rates" section of the Wall Street Journal (or a comparable interest rate selected by Landlord in the event the Wall Street Journal no longer publishes a Prime Rate) (hereinafter, the "Default Rate"). 4.9 Late Charge. In the event Tenant is more than ten (10) days late in paying any rent due under this Lease more than twice during the same Lease Year, then, beginning with the third such delinquent payment of rent, and continuing with each subsequent payment of rent during the Term which is more than ten (10) days late, Tenant shall pay Landlord a late charge equal to five percent (5%) of the delinquent rent, and, provided that Landlord gives Tenant written notice of the delinquent rent, Tenant shall pay an equivalent late charge every ten (10) days thereafter until the delinquent rent, including all interest and assessed late charges, has been paid in full. The parties agree that the amount of such late charge represents a reasonable estimate of the cost and expense that would be incurred by Landlord in processing each delinquent payment of rent by Tenant and that such late charge shall be paid to Landlord as liquidated damages for each delinquent payment, but the payment of such late charge shall not excuse or cure any default by Tenant under this Lease. The parties further agree that the payment of late charges and the payment of interest provided for in Section 4.8 above are distinct and separate from one another in that the payment of interest is to compensate Landlord for the use of Landlord's money by Tenant, while the payment of a late charge is to compensate Landlord for the additional administrative expense incurred by Landlord in handling and processing delinquent payments. 4.10 Failure to Achieve Minimum Sales. Notwithstanding anything to the contrary contained elsewhere in this Lease, Landlord may, at the end of the fifth full Lease Year or any subsequent Lease Year, terminate this Lease, without compensation to Tenant, in the event that Tenant's average monthly Gross Sales for a period consisting of three consecutive months during any such Lease Year is less than $400,000, unless Tenant pays to Landlord, in addition to Base Rent, an amount equal to the difference between Tenant's Percentage Rent for such months and the amount of Percentage Rent which would have been due from Tenant had Tenant's actual average Gross Sales for such months been $400,000. Termination hereunder shall be upon ninety (90) days written notice. Tenant acknowledges that Landlord has made no representation to Tenant regarding anticipated Gross Sales or projected number of visitors and guests in the Hotel. 10 ARTICLE 5 GUEST RELATIONS; COMPLIMENTARIES 5.1 Standard of Operations. Tenant acknowledges that the Hotel is a first class hotel and that the maintenance of Landlord's reputation and the reputation of the Hotel, as well as the goodwill of all of Landlord's guests and invitees, is essential to Landlord and that any impairment thereof may cause great damage to Landlord. Tenant therefore covenants that it shall operate the Premises in accordance with high standards of honesty, integrity, quality and courtesy so as to maintain and enhance the reputation and goodwill of Landlord and the Hotel and at all times in keeping with and not inconsistent with or detrimental to the operation by Landlord of an exclusive, first-class resort hotel facility. Tenant shall regularly monitor the performance of each of Tenant's employees at the Premises so that such standards may be consistently maintained. Tenant therefore further agrees that repeated failure to maintain such standards shall be deemed an Event of Default by Tenant and that repeated complaints from customers or guests which are reasonable and which are not promptly remedied by Tenant shall be evidence of Tenant's failure to maintain such standards. 5.2 Room Charges. Tenant may permit Hotel guests to charge purchases from Tenant to their room account. Tenant shall be solely responsible for ascertaining that any persons purporting to be Hotel guests are in fact Hotel guests and shall further be solely responsible for the credit worthiness of such persons. Landlord shall not be responsible for uncollected or uncollectible charges; provided that Landlord shall have the duty to exercise its good faith efforts to collect any charges by Tenant's customers to their hotel rooms. Tenant shall, at Tenant's expense, use Landlord's point-of-sale system in order to record all guest charges, and Landlord shall make its point of sale system available to Tenant at no cost to Tenant (i.e., Tenant's input devices shall be purchased and maintained by Tenant at its cost but Landlord will not impose an additional charge or fee for the use of Landlord's point of sale system). Tenant agrees to comply with all rules and regulations which Landlord may, in its reasonable discretion, from time to time, adopt to facilitate charges to rooms and/or to minimize uncollected charges. 5.3 Room Charge Accountings. Landlord shall cause to be prepared and delivered to Tenant a weekly accounting of all charges to Hotel guest accounts by Tenant's customers and concurrently therewith shall deliver to Tenant any sums collected with respect to such charges. If any customer account was paid by credit card, Landlord shall deduct from the amounts due to Tenant such charges as the credit card company actually imposes on the Hotel; Landlord's accounting shall specify all such deductions. 5.4 Collections. In the event that any Hotel guest pays any portion of his bill but refuses to pay any charges of Tenant, Tenant agrees separately to bill such guests and to pursue collection independently of Landlord. Landlord will make reasonable efforts to consult with Tenant in connection with such charges and will cooperate with Tenant's efforts to collect the same. In the event Tenant determines that collection efforts (other than the sending of a routine reminder notice 11 or statement) are necessary to collect an unpaid bill by one of its customers, Tenant shall inform Landlord in writing of the identity of such customer at least five (5) days prior to the commencement of any collection effort. 5.5 Complimentaries. Landlord may desire to provide designated Hotel guests with complimentary food and beverages ("Complimentaries") at the Premises. From time to time Landlord and Tenant shall develop procedures for authorization of Complimentaries and for reimbursement by Landlord of sixty-five percent (65%) of the full retail cost for the first $500,000 of Complimentaries in any Lease Year; seventy percent (70%) of full retail cost for Complimentaries in excess of $500,000, up to $600,000, in any Lease Year; seventy-five percent (75%) of full retail cost for Complimentaries in excess of $600,000, up to $700,000, in any Lease Year; eighty percent (80%) of full retail cost for Complimentaries in excess of $700,000, up to $900,000, in any Lease Year; eighty-three percent (83%) of full retail cost for Complimentaries in excess of $900,000, up to $1,200,000, in any Lease Year and one hundred percent (100%) of full retail cost for Complimentaries in excess of $1,200,000, and Complimentaries in excess of $1,200,000 shall be included in the computation of Gross Sales. Tenant recognizes that Landlord is not responsible for the payment of gratuities on Complimentaries. Landlord agrees to pay to Tenant any gratuities with respect to Complimentaries which are charged by customers to their Hotel guest accounts as provided in Section 5.2 and 5.3 above. In addition to the foregoing, Landlord may request Tenant to provide complimentary food and beverages, in an amount not exceeding $1,000 in value in any month (on a noncumulative basis), to persons other than Hotel guests or casino patrons; Landlord shall not be obligated to reimburse Tenant for the cost of such meals, and the value of such meals shall not be included in Gross Sales. In the event Tenant desires to provide complimentary food and/or beverages to any of its guests, Tenant shall be responsible for payment of the full retail value thereof in excess of One Thousand Dollars ($1,000) per month and the same shall be included in computation of Gross Sales. However, there shall not be included in Gross Sales: the value of complimentary items furnished by Tenant as part of a meal which is included in Gross Sales; or amounts deducted from meal checks in response to customer dissatisfaction. ARTICLE 6 EMPLOYEES; BONDING 6.1 Staffing. Tenant shall staff the Premises with such number of its employees as are reasonably required for the proper and efficient operation of Tenant's business. Tenant agrees to adopt its own rules of conduct and personal appearance standards which are consistent with the first class standards of the Hotel. Tenant shall, at Tenant's expense, require its prospective and present employees to participate in a pre-employment drug testing program. Such program shall not apply to persons who have been employed by an affiliate of Tenant for in excess of three (3) years; and, in connection with such program, Tenant may advise its employees that the testing is a requirement of the Hotel. 12 6.2 Gaming Compliance. Tenant acknowledges that Landlord, its parent, subsidiaries and affiliates are businesses that are or may be subject to and exist because of privileged licenses issued by governmental authorities. If requested to do so by Landlord, Tenant shall obtain any license, qualification, clearance or the like which shall be requested or required of Tenant by Landlord or any regulatory authority having jurisdiction over Landlord or any parent company, subsidiary or affiliate of Landlord. If Tenant fails to satisfy such requirement or if Landlord or any parent company, subsidiary or affiliate of Landlord is directed to cease business with Tenant by any such authority, or if Landlord shall in good faith determine that Tenant, or any of its officers, directors or employees was or is involved in any relationship which jeopardizes Landlord's business or such licenses, or those of its parent, subsidiaries or affiliates, or if any such license is threatened to be, or is, denied, curtailed, suspended or revoked by reason of any improper activities of Tenant or any such related person and if, promptly after receiving notice thereof from Landlord (which notice must contain sufficient particulars to permit Tenant to take appropriate action), Tenant does not cease such activities or sever the relationship of any such person to Tenant so as to satisfy Landlord and the appropriate governmental authority, this Lease may be terminated by Landlord on not less than thirty (30) days notice to Tenant and without liability to either party. 6.3 Restricted Areas. Tenant shall not cause or permit its employees to enter upon those areas of the Hotel which are designated "Employees Only". Access to such areas is to be restricted to the employees of Landlord. The foregoing shall not apply to employee lavatories or to the employee cafeteria. However, in the case of the employee cafeteria, (i) the use thereof by Tenant's employees will be permitted only so long as such use does not unreasonably interfere with the use of such cafeteria by Landlord's employees, and (ii) Tenant shall cause its employees to abide by reasonable scheduling requirements established by Landlord. 6.4 Bonding. All employees of Tenant who are reasonably expected to perform a portion of their tasks in portions of the Hotel outside of the Premises (including, for example, employees who are expected to deliver items to rooms in the Hotel) shall be bonded in such amounts as may be reasonably required by Landlord from time to time. In no event shall any employee of Tenant perform work in portions of the Hotel outside of the Premises until the bond for such employee has been delivered to Landlord and Landlord has approved the same, in writing. 6.5 Tenant's Employees. Tenant shall be responsible for all salaries, employee benefits, social security taxes, federal and state unemployment insurance and any and all similar taxes relating to its employees and for workers' compensation coverage with respect thereto pursuant to applicable law. Tenant's employees shall not be entitled to participate in, or to receive, any of Landlord's employee benefit or welfare plans, nor shall they be deemed agents of Landlord for purposes of this Lease. Tenant shall be responsible for verifying its employees' work authorizations under federal law, including any necessary employment verification process under the Immigration Reform and Control Act of 1986, as amended, before such employees perform services at the Premises. 13 6.6 Tenant's Employment Policies. Landlord and Tenant agree that Tenant shall have the sole and complete responsibility for establishing the employment practices, policies, procedures and terms and conditions of employment of Tenant's employees. Nothing contained in this Lease shall be used to infer or create a single or joint employer relationship between Landlord and Tenant, as the terms single and joint employer are interpreted by the National Labor Relations Board, courts and administrative agencies. ARTICLE 7 POSSESSION AND SURRENDER OF PREMISES 7.1 Acceptance. Tenant shall, by entering upon and occupying the Premises, be deemed to have accepted the Premises subject to the conditions and limitations stated in Section 2.5 above. 7.2 Surrender. Upon any surrender of the Premises, or termination or expiration of this Lease, Tenant shall, except as otherwise provided in this Lease, redeliver the Premises to Landlord in the same condition in which it existed at the Opening Date, reasonable wear and tear, repairs which are the obligation of Landlord and permitted alterations and installations excepted, and deliver to Landlord all keys for, and all combinations for locks, safes and/or vaults in the Premises. 14 7.3 Fixtures. All fixtures (except trade fixtures) which may be made or installed or placed by either Tenant or Landlord upon the Premises, either before or during the Term of this Lease, shall remain upon the Premises and shall be surrendered with the Premises at the termination of this Lease. 7.4 Removal of Trade Fixtures. Upon the termination of this Lease, Tenant shall be entitled to remove from the Premises all of its trade fixtures, furnishings and equipment, including the personal property shown on Tenant's Plans. If Tenant fails to remove any trade fixtures from the Premises prior to the end of the Lease Term or prior to any earlier termination thereof, such trade fixtures shall become Landlord's property. 7.5 Failure to Surrender. If the Premises is not surrendered at the end of the Lease Term, Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant founded on such delay. ARTICLE 8 USE OF PREMISES 8.1 Permitted Use. The Premises is leased to Tenant solely for the purpose of conducting thereon on a non-exclusive basis an "America" full service restaurant, offering a 24 hour menu and serving a variety of food, nonalcoholic and alcoholic beverages. Tenant may offer catering service from the Premises. Tenant may also offer souvenir items for sale, so long as such items make specific reference to Tenant's tradename and do not include the words "New York" or "NY" or show or, in Landlord's sole judgment, otherwise make use of Landlord's name, theme or intellectual property. Food items to be offered from the Premises and the pricing thereof shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. Except for Tenant's initial pricing, Landlord agrees that prices which do not exceed four (4) times Tenant's actual costs shall not require further approval. Tenant shall not use or suffer to be used the Premises, or any portion thereof, for any other purpose or purposes whatsoever, without Landlord's written consent therefor first had and obtained, and such consent may be withheld in Landlord's sole and absolute discretion. Without limiting the generality of the foregoing, Tenant shall not conduct gaming activities at the Premises. Landlord hereby reserves to itself the right to conduct keno gaming on the Premises, the location and type of which shall be subject to Tenants' approval, which approval shall not be unreasonably withheld or delayed but which may take into account the preservation of Tenant's theme, considering location, design, sound sensitivity and ambience. As provided in Section 4.4 above, Tenant shall not operate a restaurant or similar operation under the tradename used by Tenant at the Premises at any other Las Vegas Strip location, including any location within a hotel and/or casino property, during the Term of this Lease. 8.2 Tenants' Trade Name. Tenant shall conduct business under the trade name "America" and no other without prior written consent of Landlord which shall not be unreasonably 15 withheld. Tenant shall not conduct any business at any time either before or after the termination of this Lease, either in the Premises or elsewhere, under a name in which the words "New York-New York" appear; provided, however, that Tenant may conduct its business in the Premises under such a name (and the trade name set forth above) and use the logo of Landlord in advertising, but such use of Landlord's logo shall be deemed a revocable license or privilege only, terminable at any time, which confers no property rights on Tenant, and which, in any event, shall cease upon the expiration or sooner termination of this Lease. Any such use shall not occur without the consent of Landlord to the presentation of its name and/or logo, which consent shall not be unreasonably withheld. Neither such approval of name and use of logo nor anything herein shall be deemed to abridge the right of Landlord to grant or license the use of the words "New York-New York" to any other person at any time. During the Term of this Lease Tenant hereby grants Landlord a license to use Tenant's trade name and any marks related to such trade name for the limited purpose of promoting and advertising the Restaurant. Any such use shall not occur without the consent of Tenant to the presentation of its name and/or logo, which consent shall not be unreasonably withheld. 8.3 Liquor License. Immediately after execution of this Lease, Tenant shall make application for a liquor license in order to be able to provide liquor service at the Premises. If Tenant is unable to obtain a liquor license for a reason not related to the identity of Landlord or Landlord's ownership or operation of the Hotel (other than the Premises) within ninety (90) days after the commencement of the Lease Term, then Landlord may treat the same as an Event of Default; provided, however, that so long as (i) Tenant is diligently and in good faith seeking to obtain a liquor license; and (ii) Tenant obtains the required liquor license no later than March 17, 1997, no Event of Default shall be deemed to have occurred hereunder. Should the Premises open for business prior to Tenant's obtaining the necessary liquor license(s), Tenant shall apply for a temporary liquor license and, until a temporary license is obtained, Landlord shall have the right, but not the obligation, to provide liquor service to the Premises for so long as Landlord may lawfully do so and Tenant does not hold the necessary liquor license(s). In such event, Landlord shall be entitled to retain all revenue derived therefrom and Tenant shall have no claim or right to such revenue. 8.4 Product Agreements. Tenant acknowledges that Landlord may enter into agreements with Coke or Pepsi-Cola which will require that only certain beverage products may be offered for sale or use within the Hotel, including the Premises. Tenant agrees that upon reasonable notice from Landlord it will abide by the terms and conditions of such agreements as they may relate to product use within the Premises; provided that (i) such agreements provide that the subject products will be offered at the lowest available price; (ii) the service provided and the quality of the subject products is reasonably comparable to the quality of similar products which would be available to Tenant in the Las Vegas marketplace; and (iii) any such product agreement for soda shall require that Tenant receive its soda equipment without charge. 8.5 Prohibited Uses. Tenant shall not permit the Premises to be used for any of the following purposes: 16 a. Vending Machines. Tenant shall not, without Landlord's prior written approval, operate or permit to be operated on the Premises any coin or token operated vending machines or similar device for the sale or leasing to the public of any goods, wares, merchandise, food, beverages, and/or service, including, without limitation, pay telephones, pay lockers, pay toilets, scales and amusement devices. Notwithstanding the foregoing, Tenant may have pay telephones in the Premises so long as the company which services such telephones is the company which services Landlord's pay telephones in the Hotel. b. No Residential Use. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof as living quarters, sleeping quarters or lodging rooms. c. No Non-Retail Use. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof for office, clerical or other nonselling purposes, provided, however, that space in the Premises may be used for such purposes to the extent reasonably required for the conduct of Tenant's permitted business. d. No Fire Sales. Tenant shall not, without Landlord's prior written approval, conduct or permit any fire, bankruptcy or auction sale in, on or about the Premises. e. No Obstructions. Tenant shall not, without Landlord's prior written approval, which shall not be unreasonably withheld, cover or obstruct any windows, glass doors, lights, skylights, or other apertures that reflect or admit light into the Premises, except for temporary closures and obstructions during remodeling, repair or maintenance work in the Premises. f. No Animals. Tenant shall not keep or permit the keeping of any animals of any kind in, about or upon the Premises without Landlord's prior written approval. g. No Warehouse Use. Tenant shall not use the Premises for storage or warehouse purposes beyond such use as is reasonably required to keep Tenant's business adequately stocked for sales of product and merchandise in, at or from the Premises. 8.6 Approval of Fixtures and Equipment. All fixtures and other equipment to be used by Tenant in, about or upon the Premises shall be subject to the prior written approval of Landlord, which shall not be unreasonably withheld. 8.7 Maintenance of Personal Property. Except as provided for elsewhere herein, Tenant shall keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) Tenant's personal property and all portions of the Premises (other than Landlord's Work) and every part thereof and any and all appurtenances thereto wherever located. Tenant shall also keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) any special equipment, fixtures or facilities (other than Landlord's Work) which special facilities shall include 17 but not be limited to grease traps, located outside the Premises. Tenant shall store all trash and garbage in metal or other Health Department approved containers so as not to be visible or create a nuisance to guests, customers and business invitees in the Hotel, and so as not to create or permit any health or fire hazard, and arrange for the prompt and regular removal thereof. Landlord shall keep and maintain in good order, condition, and repair (including, except as otherwise provided in this Lease, any such replacement and restoration as is required for that purpose) those portions of the Premises constituting Landlord's Work, as well as the common areas of the Hotel in the vicinity of the Premises and cause all such areas to be in compliance with all governmental rules, regulations, ordinances, statutes and laws, and the orders and regulations of the National Board of Fire Underwriters, the Insurance Service Office, or any other body now or hereafter exercising similar functions, now or hereafter in effect. 8.8 Compliance with Law. Except as provided in the following sentence, Tenant shall at all times during the Term of this Lease comply with and shall cause the Premises to be in compliance with all governmental rules, regulations, ordinances, statutes and laws, and the orders and regulations of the National Board of Fire Underwriters, the Insurance Service Office, or any other body now or hereafter exercising similar functions, now or hereafter in effect pertaining to the Hotel, the Premises or Tenant's use thereof. Landlord shall cause those portions of the Premises constituting Landlord's Work to be in compliance with all governmental rules, regulations, ordinances, statutes and laws. Tenant shall not, without the prior written consent of Landlord and all insurance companies which have issued any insurance of any kind whatsoever with respect to the Hotel or the Premises, sell, or suffer to be kept, used or sold in, upon or about the Premises any gasoline, distillate or other petroleum products or any other substance or material of an explosive, inflammable or radiological nature, except for the lawful use of petroleum products in a manner and for such purposes as are customarily associated with the operation of a restaurant. 8.9 Rules and Regulations. Tenant hereby covenants and agrees that it shall and shall make all reasonable efforts to ensure that its agents, employees, servants, contractors, subtenants and licensees shall abide by any reasonable rules and regulations as Landlord may, from time to time, reasonably adopt for the safety, care and cleanliness of the Premises, or the Hotel or for the preservation of good order thereon or to assure the operation of a first-class resort hotel facility. All such rules and regulations shall be enforced by Landlord uniformly and in a nondiscriminatory manner. 8.10 Business Practices and Minimum Hours of Operation. Tenant shall operate the Premises during the entire Lease Term in accordance with sound business practices, due diligence and efficiency so as to provide the maximum Gross Sales which may reasonably be expected to be produced by such manner of operation. Tenant shall maintain in the Premises Tenant's personal property necessary for the conduct of Tenant's business therein, in a businesslike manner, shall carry at all times in the Premises sufficient quantities of Products as shall be reasonably designed to produce the maximum return to Landlord and Tenant, and shall staff the Premises at all times with sufficient personnel to serve its customers. All Products shall meet the high standards of the Hotel. 18 Tenant shall conduct its business in the Premises Twenty Four (24) hours per day, every day of the year. In the event of breach by Tenant of any of the conditions of this paragraph, Landlord shall have, in addition to any and all remedies herein provided, the right, at its option, to collect an amount equal to one-thirtieth (1/30) of the highest monthly Percentage Rent to which Landlord is or was entitled during the preceding twelve (12) month period for each and every day, or any portion thereof, that Tenant is not open for business as herein provided. Said amount shall be due on demand and shall be deemed to be in lieu of any Percentage Rent that might have been earned during such period of Tenant's failure to conduct its business as herein provided. Tenant shall be open for such additional hours as shall be set from time to time by Landlord, and Tenant may, upon prior written notice to Landlord, remain open additional hours. 8.11 Private Parties. Tenant shall not materially restrict the use of Premises to guests or patrons of the Hotel nor conduct any private parties therein, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, provided that Landlord is satisfied, in its reasonable judgment, that the conduct of any such party will not deprive Hotel guests of adequate access to the Restaurant. 8.12 Photographic Services. Tenant shall permit the photographic concessionaire with whom Landlord has entered into an agreement to provide photographic services to patrons of Tenant's restaurant on the Premises, provided the same does not unreasonably interfere with the conduct of Tenant's business or the ambiance of the Restaurant. 8.13 Interference with Other Tenants. Tenant shall not do, permit or suffer anything to be done, or kept upon the Premises which will obstruct or interfere with the rights of other tenants, Landlord or the patrons and customers of any of them, or which may reasonably be anticipated to annoy any of them or their patrons or customers by reason of unreasonable noise or other objectionable conduct, nor will Tenant commit or permit any nuisance on the Premises or commit or suffer any immoral or illegal act to be committed thereon. 8.14 Refunds and Settlements by Landlord. In the event a dispute shall arise between Tenant and any of its customers concerning the acceptability of Tenant's Products which results in a customer demanding a refund from Landlord, Landlord may in good faith and in the exercise of a reasonable business judgment make such refund or rebate to avoid embarrassment to the Hotel and to retain the goodwill of its customers. In such case Tenant will forthwith reimburse Lessor in the amount of such refund or rebate. 8.15 Advertising and Signage. All advertising, signs, placards or other promotional events proposed to be posted, shown or exhibited by Tenant in or upon the Premises and all additional outside advertising (including, without limitation, television, radio and print advertising) which mentions Landlord or the Hotel, shall be subject to the prior written approval of Landlord. Without limiting the foregoing, Tenant shall not advertise at the Premises any other premises owned or operated by Tenant without the prior written consent of Landlord, which consent shall not be 19 unreasonably withheld. Tenant acknowledges that the Premises may be designated by a particular suite number. In such event, Tenant agrees to include and use such suite number on all of its stationary, correspondence, sales receipts and advertisements as part of its address. Tenant agrees to forthwith remove or cease any such advertising, sign, placard or exhibit which in the reasonable judgment of Landlord is deemed to be objectionable or inconsistent with the decor or policies of Landlord in the operation of the Hotel. Tenant shall also refrain from any advertising which is so objectionable, in Landlord's reasonable judgment, as to result in embarrassment to Landlord, loss of goodwill or damage to the reputation of the Hotel. None of Tenant's signs, placards or advertising shall be exhibited outside of the Premises or in the lobby or any other part of the Hotel without Landlord's prior written consent. However, Landlord shall permit outside advertising consistent in tone and content with that allowed to other restaurants in the Hotel upon the same terms as are required of such other restaurants. At no time during the Term of this Lease nor for a period of six (6) months after its termination shall Tenant place or cause to be placed, whether on or off the Premises, any window card, sign or other advertising, including newspaper adds, which recites that Tenant has lost its lease, is going out of business or is vacating the Premises. Landlord shall provide reasonable directional signage within the Hotel to assist customers in locating the Premises. 8.16 Intellectual Property. Tenant represents and warrants to Landlord that Tenant owns, or has obtained an appropriate license to use, all copyrights, trademarks, tradenames and other intellectual property rights used in Tenant's business, including, without limitation, all rights in Tenant's tradename, trade or service mark and logo. The parties acknowledge, however, that Tenant's tradename "America" cannot be protected by trademark. 8.17 Security. Tenant acknowledges that Landlord's security department and security officers are not responsible for providing security services in the Premises and that all such responsibility is the obligation of Tenant. In no event shall Landlord be liable to Tenant or any third-party for the security department's failure to respond to a request for aid or assistance by Tenant. 8.18 Conduct of Tenant. Tenant acknowledges that Landlord, its parent, subsidiaries and affiliates have a reputation for offering high-quality entertainment and/or services to the public, and that it and its affiliates are subject to regulation and licensing, and desire to maintain their reputation and receive positive publicity. Tenant therefore agrees that throughout the Term of this Lease, it and its officers and management will not conduct themselves in a manner that adversely affects or is detrimental to the reputation or image of Landlord or its affiliates, and will not directly or indirectly make any oral, written or recorded public statement or comment that is disparaging, critical, defamatory or otherwise not in the best interests of Landlord. Landlord shall use its good faith business judgment in determining whether Tenant's conduct or that of its officers and management adversely affects Landlord or its affiliates, and, upon such determination, Landlord shall have the right to terminate this Lease upon notice to Tenant without liability to either party if Tenant does not cause such activity to be terminated and use its reasonable best efforts to remedy or mitigate any material harm done to Landlord within thirty (30) days after such notice from Landlord. The 20 termination or removal of any person responsible for actions or statements prohibited by this Section 8.18 shall constitute full compliance with Tenant's obligations to remedy such default. 8.19 Emissions and Hazardous Materials. Except for small quantities of substances customarily used in the operation of a restaurant and kept and used by Tenant in accordance with applicable laws, Tenant shall not, without the prior written consent of Landlord, cause or permit, knowingly or unknowingly, any Hazardous Material (hereinafter defined) to be brought upon, kept, used, discharged, leaked, or emitted in or about, or treated at the Premises. As used in this Lease, "Hazardous Material(s)" shall mean any hazardous, toxic or radioactive substance, material, matter or waste which is or becomes regulated by any federal, state or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement, and shall include asbestos, petroleum products and the terms "Hazardous Substance" and "Hazardous Waste" as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended 42 U.S.C. 'SS' 9601 et seq. ("CERCLA"), and the Resource Conservation and Liability Act, as amended 42 U.S.C. 'SS' 9601 et seq. ("RCRA"). To obtain Landlord's consent, Tenant shall prepare an "Environmental Audit" for Landlord's review. Such Environmental Audit shall list: (1) the name(s) of each Hazardous Material and a Material Safety Date Sheet ("MSDS") as required by the Occupational Safety and Health Act; (2) the volume proposed to be used, stored and/or treated at the Premises (monthly); (3) the purpose of such Hazardous Material; (4) the proposed on-premises storage location(s); (5) the name(s) of the proposed off-premises disposal entity; and (6) an emergency preparedness plan in the event of a release or spill. Additionally, the Environmental Audit shall include copies of all required federal, state, and local permits concerning or related to the proposed use, storage, or treatment of any Hazardous Material(s) at the Premises. Tenant shall submit a new Environmental Audit whenever it proposes to use, store, or treat a new Hazardous Material at the Premises or when the volume of existing Hazardous Materials to be used, stored or treated at the Premises expands by ten percent (10%) during any thirty (30) day period. If Landlord in its reasonable judgment finds the Environmental Audit acceptable, then Landlord shall deliver to Tenant Landlord's written consent. Notwithstanding such consent, Landlord may revoke its consent upon:(1) Tenant's failure to remain in full compliance with applicable environmental permits and/or any other requirements under federal state, or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement (including but not limited to CERCLA and RCRA related to environmental safety, human health, or employee safety; (2) the Tenant's business operations pose or potentially pose a human health risk to other Tenants; or (3) the Tenant expands its use, storage, or treatment of any Hazardous Material(s) in a manner inconsistent with the safe operation of a restaurant and hotel. Should Landlord consent in writing to Tenant bringing, using, storing or treating any Hazardous Material(s) in or upon the Premises, Tenant shall strictly obey and adhere to any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements (including but not limited to CERCLA and RCRA which in any way regulate, govern or impact Tenant's possession, use, storage, treatment or disposal of said Hazardous Material(s). In addition, Tenant represents and warrants to Landlord that (1) Tenant shall apply for and remain in compliance with any and all federal, state or local permits in regard to Hazardous Materials; (2) Tenant shall report to any and all applicable governmental 21 authorities any release of reportable quantities of any Hazardous Material(s) as required by any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements; (3) Tenant, within five (5) days of receipt, shall send to Landlord a copy of any notice, order, inspection report, or other document issued by any governmental authority relevant to the Tenant's compliance status with environmental or health and safety laws; and, (4) Tenant shall remove from the Premises all Hazardous Materials at the termination of this Lease, except for those, if any, introduced by Landlord or at Landlord's direction. In addition to, and in no way limiting Tenant's duties and obligations as set forth in Article 16 of this Lease, should Tenant breach any of its duties and obligations as set forth in this Section 8.20, or if the presence of any Hazardous Material(s) brought onto or occurring on the Premises after the Delivery Date results in contamination of the Premises, the Hotel, any land other than the Hotel, the atmosphere or any water or waterway (including groundwater), or if contamination of the Premises or of the Hotel by any Hazardous Material(s) otherwise occurs for which Tenant is otherwise legally liable to Landlord for damages resulting therefrom, Tenant shall indemnify, save harmless, and at Landlord's option and with attorneys approved in writing by Landlord, defend Landlord, and their contractors, agents, employees, partners, officers, directors and mortgagees, if any, from any and all claims, demands, damages, expenses, fees, costs, fines, penalties, suits, proceedings, actions, causes of action, and losses of any and every kind and nature (including, without limitation, diminution in value of the Premises or the Hotel, damages for the loss or restriction on use of the rentable or usable space or of any amenity of the Premises or the Hotel, damages arising from any adverse impact on marketing space in the Hotel, and sums paid in settlement of claims and for attorney's fees, consultant fees and expert fees, which may arise during or after the Lease Term or any extension thereof as a result of such contamination). This includes, without limitation, costs and expenses, incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence of Hazardous Material(s) on or about the Premises or the Hotel, or because of the presence of Hazardous Material(s) anywhere else which came or otherwise emanated from Tenant or the Premises. Without limiting the foregoing, if the presence of any Hazardous Material(s) on or about the Premises or the Hotel caused or permitted by Tenant results in any contamination of the Premises or the Hotel, Tenant shall, at its sole expense, promptly take all actions and expense necessary to return the Premises and/or the Hotel to the condition existing prior to the introduction of any such Hazardous Material(s) to the Premises or the Hotel; provided, however, that Landlord's approval of such actions shall first be obtained in writing. Nothing contained herein shall be deemed to limit Landlord's obligations under law for the removal of Hazardous Materials which exist on the Premises prior to the delivery thereof to Tenant or to impose upon Tenant any obligation for the removal of such Hazardous Materials. 22 ARTICLE 9 ALTERATIONS AND IMPROVEMENTS Tenant may make no alteration, repairs, additions or improvements in, to or about the Premises (collectively, "Tenant Alterations"), without the prior written consent of Landlord, which shall not be unreasonably be withheld, and Landlord may impose as a condition to such consent such requirements as Landlord, in its reasonable discretion, may deem necessary or desirable, including without limitation, (a) the right to approve the plans and specifications for any work, (b) the right to require insurance satisfactory to Landlord, (c) the right to require evidence of Tenant's ability to make full payment for any work, (d) requirements as to the manner in which or the time or times at which work may be performed and (e) the right to designate the contractor or contractors to perform Tenant Alterations which affect the fire sprinkler or life safety systems of the Hotel. All Tenant Alterations shall be compatible with a first class hotel/casino complex and completed in accordance with Landlord's requirements and all applicable rules, regulations and requirements of governmental authorities and insurance carriers. Tenant shall pay to Landlord Landlord's reasonable charges (which shall be assessed by Landlord at its cost, without profit) for reviewing and inspecting all Tenant Alterations to assure full compliance with all of Landlord's requirements. Landlord does not expressly or implicitly covenant or warrant that any plans or specifications submitted by Tenant are safe or that the same comply with any applicable laws, ordinances, codes, rules or regulations. Further, Tenant shall indemnify, protect, defend and hold Landlord harmless from any loss, cost or expense, including attorneys' fees and costs, incurred by Landlord as a result of any defects in design, materials or workmanship resulting from Tenant Alterations. If requested by Landlord, Tenant shall provide Landlord with copies of all contracts, receipts, paid vouchers, and any other documentation in connection with the construction of such Tenant Alterations. Tenant shall promptly pay all costs incurred in connection with all Tenant Alterations. Notwithstanding the foregoing provisions of this Article 9, Landlord's prior consent shall not be required with respect to any Tenant Alteration which (i) costs less than Twenty-Five Thousand Dollars ($25,000); (ii) does not materially affect the interior or exterior appearance of the Premises; and (iii) does not affect fire sprinklers, life safety, plumbing, electrical or mechanical systems of the Hotel. ARTICLE 10 LANDLORD'S REPAIR OBLIGATION Landlord agrees to keep in good structural order, condition and repair the exterior walls, and roof of the Hotel and all portions of Landlord's Work except for any damage thereto as to which Article 21 applies and other damage caused by any act or negligence of Tenant or its agents, employees, servants, contractors, subtenants or licensees (which other damage shall be promptly repaired by Tenant at Tenant's expense). ARTICLE 11 PARKING AND COMMON AREAS Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers and business invitees shall have the nonexclusive right, in common with Landlord and all others to 23 whom Landlord has or may hereafter grant rights, to use such common areas of the Hotel (including, but not limited to, the parking lot, walkways, sidewalks, hallways, lobby and public restrooms) as may be designated from time to time by Landlord, subject to such rules and regulations as Landlord may from time to time impose, provided such designation and such rules and regulations do not materially interfere with Tenant's business. Subject to the foregoing: Tenant agrees that it, its agents, employees, servants, contractors, subtenants and licensees shall abide by such rules and regulations and that Landlord shall have the exclusive management and control of all common areas; Landlord may at any time close any common area or other portions of the Hotel to make repairs or changes, to prevent the acquisition of public rights in such areas, or to discourage noncustomer parking (provided that no such closure (other than temporary closures which are necessary to make repairs or changes) materially and adversely affects access to the Premises). Landlord may do such other acts in and to the common areas and the other portions of the Hotel as in its judgment may be desirable. Landlord agrees, however, to use all reasonable efforts to maintain adequate access to the Premises when the Premises is open for business so that Tenant's customers and staff can enter and leave the Restaurant. All parking areas which Tenant's employees may be permitted to use are to be used under a revocable license, and if any such license is revoked, or if the amount of such area is diminished, Landlord shall not be subject to any liability, nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation or diminution of such areas be deemed constructive or actual eviction; provided, however, that Landlord shall exercise its rights with respect to such revocable license for parking by Tenant's employees in a nondiscriminatory manner. Tenant shall direct its employees to park only in those areas (which may include off-site parking areas) designated by Landlord from time to time for such purposes. Landlord agrees to maintain the common areas in the vicinity of the Premises in good condition and to keep the same clean and neat in appearance. ARTICLE 12 TAXES 12.1 Personal Property Taxes. Tenant shall be liable for and shall pay before delinquency (and, upon demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of the payment thereof) all taxes, fees and assessments of whatsoever kind or nature, and penalties and interest thereon, if any, levied against Tenant's property or any other personal property of whatsoever kind and belonging to Tenant or any person claiming by, through or under Tenant, situate or installed in or upon the Premises, whether or not affixed to the realty. If at any time during the Term of this Lease any such taxes on personal property are separately assessed as part of the tax on the real property of which the Premises is a part, then in such event Tenant shall pay to Landlord the amount of such additional taxes upon presentation of appropriate evidence as to the amount due. 12.2 Other Taxes. Tenant shall pay when due all taxes, assessments or fees for which Tenant is liable under applicable law and which arise directly or indirectly from Tenant's operations at the Premises. Within five (5) days of written demand from Landlord, Tenant shall furnish Landlord evidence satisfactory to Landlord of the timely payment of any such tax, assessment or fee. 24 12.3 Tax on Rents. If at any time during the Term of this Lease, under the laws of the United States, Nevada or any political subdivision thereof, a tax or excise on rents, however described, is levied or assessed by the United States, Nevada or any political subdivision against Landlord on account of any rent reserved under this Lease, all such tax or excise on rents shall be paid by Tenant. The foregoing shall not apply to any income, franchise, profits, estate, gift, or similar tax imposed on Landlord. 12.4 Statements Received by Landlord. Whenever Landlord shall receive any statement or bill for any tax, payable in whole or in part by Tenant as additional rent, or shall otherwise be required to make any payment on account thereof, Tenant shall pay the amount due hereunder within ten (10) days after demand therefor (or, if later, within 10 days prior to the last date on which such tax may be paid without penalty) accompanied by delivery to Tenant of a copy of such tax statement, if any. 12.5 Casino Entertainment Tax. Tenant agrees that it will collect any applicable Casino Entertainment Tax ("CET") associated with the sale of food, beverage or merchandise from the Premises and will pay the same to the taxing authority on a timely basis, or if not permitted to pay the same directly, shall remit the CET due to Landlord no later than the 10th day of the month following the month in which the taxable sales occurred. Tenant shall make all documents containing information relative to the computation of the CET available for inspection upon notice by representatives of Landlord and the Gaming Authorities. This obligation shall continue beyond the Term of this Lease. Tenant shall be liable for any and all CET, interest and penalties found to be payable in connection with the sale of food, beverage or merchandise from the Premises as a result of understated taxable revenues, insufficiency of records or, if Tenant is permitted to pay the CET directly to the taxing authority, untimely payment of the CET. If Tenant is not permitted to pay the CET directly to the taxing authority, then, if Tenant has timely remitted the payment to Landlord as required in this Section 12.5,Tenant shall not be liable for the untimely payment of the CET to the taxing authority. ARTICLE 13 SERVICES TO THE PREMISES 13.1 Utilities. Landlord shall provide customary utility lines stubbed to the Premises, including supply and return lines for air conditioning, in the manner and to the extent set forth in the Work Letter. Except as otherwise provided in the Work Letter, the distribution of utility lines within the Premises shall be the responsibility of Tenant, at Tenant's cost. Tenant shall pay all "hook-up fees," connection charges and other similar charges which may be levied by utility provides as a fee for connecting the Premises to the utility supply. Landlord shall pay for all gas, power and electric current, sewer and all other utilities (including sewer usage charges, but not sewer "hook-up fees" or connection charges) used by Tenant in the Premises; Tenant acknowledges that, because of the nature of the Premises, Tenant might not have access to the controls for heating,air conditioning or lighting at the Premises and shall not attempt to make any changes to such controls located outside 25 the Premises. Landlord, at Landlord's cost, shall provide Tenant with one telephone line and a house phone. Tenant shall be responsible for local and long distance service. Tenant may at Tenant's expense, install other telephone lines (including pay telephones), provided the same are not incompatible with the Hotel's telephone system. Landlord, at Landlord's cost, shall provide garbage service for the Premises; provided that Tenant shall be responsible for removing garbage from the Premises and transporting the same to Landlord's designated trash enclosure or dumpster. In addition, heating, air conditioning, sewer, hot, cold and chilled water and natural gas (for cooking purposes) shall be supplied to the Premises without additional cost to Tenant. Heat and air conditioning shall be supplied so as to maintain comfort levels in keeping with those of the Hotel and, in any event, so as to keep the Premises reasonably comfortable at all times. Hot, cold, and chilled water shall be supplied in such quantities and at such temperatures as are suitable for Tenant's operations. Landlord may, from time to time, prescribe reasonable rules and regulations for the implementation of this Section. Tenant shall not install any equipment which can exceed the capacity of any utility facilities serving the Premises and if any equipment installed by Tenant requires additional utility facilities, the same shall be installed at Tenant's expense in compliance with all code requirements and plans and specifications which must first be approved in writing by Landlord, which approval shall not be unreasonably withheld. 13.2 Limitation upon Landlord's Obligation. Landlord shall not be obligated to perform any service or to repair or maintain any structure or facility except as provided in this Article and Articles 10 and 11 of this Lease. The cost of any service, maintenance or repairs made by Landlord pursuant to this Lease which are made necessary because of the negligence or misuse of Tenant, Tenant's agents, employees, servants, contractors, subtenants, licensees, shall be paid by Tenant within ten (10) days after receipt of a billing therefor from Landlord. Landlord reserves the right to temporarily stop any service when Landlord deems such stoppage necessary, whether by reason of accident or emergency, or for repairs or improvements or otherwise. Landlord shall not be liable under any circumstances for loss or injury however occurring, through or in connection with or incident to any stoppage of such services. Landlord shall have no responsibility or liability for failure to supply any services or maintenance or to make any repairs when prevented from doing so by any cause beyond Landlord's control. Landlord shall not be obligated to inspect the Premises and shall not be obligated to make any repairs or perform any maintenance within the Premises hereunder unless first notified of the need thereof in writing by Tenant. In the event that Landlord shall fail to commence such repairs or maintenance within ten (10) days after said notice (or two (2) days after said notice if the failure of the item requiring repair materially interferes with the conduct of Tenant's business), Tenant's sole right and remedy for such failure shall be, after further notice to Landlord, to make such repairs or perform such maintenance and to deduct the cost and expenses thereof from the rent payable hereunder; provided, however, that the amount of such deduction not exceed the reasonable value of such repairs or maintenance; and provided, further, if such repairs or maintenance are needed because of act or omission of Tenant, its agents, servants, employees, customers, invitees or licensees, the cost thereof shall be paid by Tenant. To the extent that Landlord is required to perform any service or repair, Landlord shall do so with reasonable diligence and in a manner which is reasonably calculated to avoid interference with Tenant's business in the Premises. 26 ARTICLE 14 INSURANCE 14.1 Liability Insurance. Tenant shall, at all times during the term hereof, at its sole cost and expense, procure and maintain in full force and effect a policy or policies of commercial general liability insurance including coverage for both owned and non-owned automobiles and contractual indemnity coverage issued by an insurance carrier reasonably acceptable to Landlord assuring against loss, damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever (subject to usual and customary policy exclusions) in connection with the Premises or Tenant's use thereof. Such liability insurance shall be evidenced by a single limits policy or policies in an aggregate amount of not less than Ten Million Dollars ($10,000,000.00). Such liability insurance shall include fire legal liability coverage of not less than the amount of Landlord's deductible under Landlord's property insurance for the Hotel, as such deductible amount may be modified from time to time ("Landlord's Deductible"), so long as such insurance is available upon commercially reasonable terms. Upon request from Tenant, Landlord shall notify Tenant of the current amount of Landlord's Deductible. Landlord expects that the initial amount of Landlord's Deductible will be Five Hundred Thousand Dollars ($500,000). Landlord, Primadonna Resorts and MGM Grand Hotel, Inc. shall be named as an additional insured (but not named insureds) (and at Landlord's option, any other persons, firms or corporations having an interest and designated by Landlord shall be named as additionally insured (but not named insured)) under each such policy of insurance. 14.2 Property Insurance. Tenant shall, at all times during the term hereof, at its sole cost and expense, procure and maintain in full force and effect standard form of fire and casualty with standard "ALL-RISK" coverage protecting against all risks of physical loss or damage, including, without limitation, sprinkler leakage coverage and plate glass insurance covering all plate glass in the Premises and all of Tenant's property, improvements and betterments to the Premises and Tenant's products and merchandise, and the personal property of others in Tenant's possession in, upon or about the Premises. Such insurance shall be in an amount equal to the current replacement value of the property required to be insured. Tenant and Landlord, as their interests may appear, shall be the named loss payee (and at Landlord's option, Landlord's lender shall be named as additional loss payee) under each such policy of insurance. Tenant shall also carry business interruption insurance covering actual losses for a period of not less than twelve (12) months. 14.3 Policy Requirements. All policies required hereunder shall be with companies licensed to do business in Nevada and with a "General Policyholder's Rating" of A- or better and a "financial rating" of VII or better in the most recent edition of Best's Insurance Guide (or similar rating service if such guide is no longer published). A certificate issued by the insurance carrier for 27 each policy of insurance required to be maintained by Tenant hereunder, and, upon request of Landlord, a copy of each such policy, shall be delivered to Landlord and all other additional insureds no later than ten (10) days after execution of this Lease and thereafter, as to policy renewals, within thirty (30) days prior to the expiration of the terms of each such policy. Each of said certificates of insurance and each such policy of insurance required to be maintained by Tenant hereunder shall be from an insurer and in form and substance reasonably satisfactory to Landlord and shall expressly evidence insurance coverage as required by this Lease and shall contain an endorsement or provision requiring not less than thirty (30) days written notice to Landlord and all other additional insured prior to the cancellation, diminution in the perils insured against, or reduction of the amount of coverage of the particular policy in question (provided that such thirty (30) day period may be reduced to ten (10) days if the cause for cancellation of the insurance policy is Tenant's failure to pay the insurance premium). In addition to the foregoing certificates, Tenant shall at all times during the Term hereof furnish Landlord with a current certificate of worker's compensation coverage evidencing coverage at Nevada statutory limits. Each policy of insurance provided for in Section 14.2, shall contain an express waiver of any and all rights of subrogation thereunder whatsoever against Landlord, its officers, agents and employees. All policies to be maintained in this Article 14, shall be written as primary policies and not contributing with or in excess of the coverage, if any, which Landlord may carry. Any other provision contained in this Article 14 or elsewhere in this Lease notwithstanding, the amounts of all insurance required hereunder to be maintained by Tenant shall be not less than an amount sufficient to prevent Landlord from becoming a coinsurer. The limits of the public liability insurance required to be maintained by Tenant under this Lease shall in no way limit or diminish Tenant's liability under Article 16 hereof and such limits shall be subject to increase at any time and from time to time during the Term if Landlord, in the exercise of reasonable discretion, deems such an increase necessary for its adequate protection; provided, however, that (i) Landlord may not exercise its right under this sentence more frequently than one time in any calendar year; and (ii) Tenant shall not be required to increase its required insurance coverage if the increased coverage would be unreasonable in light of insurance requirements for similarly situated tenants in similar projects in Las Vegas, Nevada. Coverage required by this Article 14 may be provided by a blanket policy or policies provided that the protection afforded pursuant to said policies with respect to the Premises and the Hotel shall not be less than that which is required pursuant to the terms hereof for a separate policy or policies. 14.4 Hazardous Activities. Tenant shall not use or occupy, or permit the Premises to be used or occupied, in a manner which will increase the rates of fire or any other insurance for the Premises or the Hotel; provided that Tenant's lawful use of the Premises as a restaurant as contemplated in this Lease shall not constitute a default under this Section 14.4. Subject to the foregoing, Tenant shall also not use or occupy, or permit the Premises to be used or occupied, in a manner which will make void or voidable any insurance then in force with respect thereto or the Hotel, or which will make it impossible to obtain fire or other insurance with respect thereto or the Hotel. If by reason of Tenant's default under the provisions of this Section, the fire or any other insurance rates for the Premises or the Hotel be higher than they otherwise would be, Tenant shall reimburse Landlord, as additional rent, on the first day of the calendar month next succeeding notice 28 by Landlord to Tenant of said increase, for that part of all insurance premiums thereafter paid by Landlord which shall have been charged because of such failure of Tenant. 14.5 Waiver of Subrogation. Each Party hereby waives subrogation and any and all rights of recovery from the other,its officers, agents and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in their insurance actually carried or required to be carried pursuant to this Lease and to the extent of such insurance coverage or required coverage, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof to the extent of such insurance coverage or required coverage. Notwithstanding the foregoing provisions of this Section 14.5, Landlord waives its right of recovery against Tenant for damage to the Hotel caused by the negligence of Tenant or Tenant's employees or agents, to the extent that the cost of repairing such damage exceeds Landlord's Deductible, and Tenant waives its right of recovery against Landlord for damage to Tenant's property caused by the negligence of Landlord or Landlord's employees or agents, to the extent that the cost of repairing such damage exceeds any applicable insurance deductible amount maintained by Tenant. 14.6 Landlord's Insurance. During the Term, Landlord shall maintain such property insurance as may be required by Landlord's lenders. Upon request form Tenant, Landlord shall furnish Tenant with a current certificate showing Landlord's insurance coverage. ARTICLE 15 LIENS 15.1 Indemnity for Liens. Tenant, at all times, shall indemnify and hold harmless Landlord, the Hotel, the Premises, the leasehold estate created by this Lease, any trade fixtures, equipment or personal property within the Premises, and each of them, from any claim, lien, tax lien or levy, attachment, garnishment, encumbrance, litigation or judgment, to the extent arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever. Similarly, Landlord, at all times, shall indemnify and hold harmless Tenant, the leasehold state created by this Lease, any trade fixtures equipment or personal property within the Premises, and each of them, from any claim, lien, tax lien or levy, attachment, garnishment, encumbrance, litigation or judgment, to the extent arising directly or indirectly from any obligation, action or inaction of Landlord whatsoever. 15.2 Prevention of Liens. Tenant, at all times, shall keep the Landlord, the Hotel, the Premises, the leasehold estate created by this Lease, any trade fixtures, equipment or personal property within the Premises, free and clear from any claim, liens, tax lien or levy, attachment, garnishment or encumbrance to the extent arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever. However, this Section 15.2, and Section 15.1, shall not apply to the granting of a security interest in Tenant's personal property in connection with a financing by Tenant or Tenant's direct or indirect parent corporation. 29 15.3 Release of Liens. If a mechanics' lien, tax lien or other lien is filed against the Hotel arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever, Tenant shall discharge or cause to be discharged (by bond or otherwise) such lien within thirty (30) days after Tenant receives notice of the filing thereof and shall not allow any such lien to be foreclosed upon. If such a mechanic's lien or other lien is filed against the Hotel, and Tenant fails to timely discharge such lien, Landlord may, without waiving its rights and remedies based on such breach of Tenant and without releasing Tenant from any of its obligations, cause such liens to be released by any means it shall deem proper, including payment in satisfaction of the claim giving rise to such lien. Tenant shall pay to Landlord within thirty (30) days following notice by Landlord, any sum paid by Landlord to remove such liens, together with interest at Landlord's cost of money from the date of such payment by Landlord. Tenant's obligation under the Section shall survive the expiration of the Term of this Lease or the earlier termination of this Lease. 15.4 Notice of Nonresponsibility. Tenant shall give Landlord at least ten (10) business days prior written notice before the commencement of any work, construction, alteration or repair on the Premises to afford Landlord the opportunity to record appropriate notices of nonresponsibility. ARTICLE 16 INDEMNIFICATION Tenant hereby covenants and agrees to indemnify, save, and hold Landlord, the Premises and the leasehold estate created by this Lease free, clear and harmless from any and all liability, loss, costs, expenses, including attorneys' fees, judgments, claims, liens, and demands of any kind whatsoever in connection with, arising out of, or by reason of any accident, injury, or damage, howsoever and by whomsoever caused, to any person or property whatsoever occurring, in, upon, about, or relating to Tenant's activities or use of the Premises or any portion thereof, including, without limitation, any infringement by Tenant or by any person engaged by Tenant or acting on Tenant's behalf of any copyright, patent, trademark or similar intellectual property rights of any other person or entity, other than pursuant to and in compliance with a license granted by Landlord. Landlord shall not be liable to Tenant or to any other person whatsoever for any damage occasioned by fire, smoke, falling plaster, electricity, plumbing, gas, water, steam, sprinkler, or other pipe and sewage system or by the bursting, running, or leaking of any tank, washstand, closet or waste of other pipes, nor for any damages occasioned by water being upon or coming through the roof, skylight, vent, trap door, or otherwise or for any damage arising from any acts or neglect of co-lessees or other occupants of the Hotel or of adjacent property, or of Landlord, or of the public, nor, to the extent provided in Section 13.2, shall Landlord be liable in damages or otherwise for any failure to furnish, or interruption of, service of any utility. 30 ARTICLE 17 SUBORDINATION 17.1 Subordination of Tenant's Interest. Tenant agrees that this Lease and Tenant's interest in the Premises is secondary, junior and inferior to the lien of any mortgage, deed of trust or other encumbrance, together with any renewals, extensions or replacements thereof, now or hereafter placed, charged or enforced against the Premises, or any portion thereof, or any property of which the Premises is a part (hereinafter, a "Mortgage"). Notwithstanding the foregoing, upon request by Landlord, Tenant shall execute and deliver at any time, and from time to time, such documents as may be required to effectuate such subordination. 17.2 Priority. In the event that the mortgagee or beneficiary of any Mortgage elects to have this Lease a prior lien to its mortgage or deed of trust, then and in such event, upon such mortgagee's or beneficiary's giving written notice to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of recordation of such mortgage or deed of trust. 17.3 Attornment. Tenant shall, in the event any proceedings are brought for the foreclosure of the Premises in the event of exercise of the power of sale under any Mortgage covering the Premises, or in the event of a sale of Landlord's interest in the Premises attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease. 17.4 Nondisturbance. Landlord, Tenant and Landlord's current lender shall enter into a nondisturbance and attornment agreement on the lender's form providing that, so long as no Tenant Event of Default occurs under this Lease, such lender will recognize this Lease and Tenant's rights hereunder. Tenant's obligation to subordinate its leasehold interest to any future Mortgage shall be subject to Tenant's receipt of a commercially reasonable nondisturbance and attornment agreement from the holder of such Mortgage. ARTICLE 18 ASSIGNMENT AND SUBLETTING 18.1 Assignment or Sublease without Consent Prohibited. The economic provisions and rental rates set forth in this Lease were negotiated by Landlord in consideration of, and would not have been granted by Landlord but for, the specific nature of the leasehold interest granted to Tenant hereunder, as such interest is limited and defined by various provisions throughout this Lease, including, but not limited to, the provisions of this Article 18 which define and limit the transferability of such leasehold interest. Landlord hereby reserves the right to receive any increased rental value of the Premises during the Term hereof as the same may be realized by any transfer of said estate (but not any value realized for Tenant's business or furniture, fixtures and equipment), except to the extent Tenant is specifically granted the right to transfer all or part of its leasehold and to retain all or part of the increased rental value thereof pursuant to the provisions of this Article 18. Except for the grant of a security interest in Tenant's personal property in connection with a financing by Tenant or its direct or indirect parent corporation, Tenant shall not directly or indirectly, 31 voluntarily or by operation of law sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the Premises or Tenant's leasehold estate hereunder (collectively "Assignment"), or permit the Premises to be occupied or used by anyone other than Tenant or sublet the Premises (collectively "Sublease") or any portion thereof without Landlord's prior written consent in each instance. 18.2 Notice of Proposed Sublease or Assignment. If Tenant desires at any time to enter into an Assignment of this Lease or a Sublease of the Premises or any portion thereof, it shall first give written notice to Landlord of its desire to do so, which notice shall contain (a) the name of the proposed assignee, subtenant or occupant, (b) the nature of the proposed assignee's, subtenant's or occupant's business to be carried on in the Premises, (c) the material terms and provisions of the proposed Assignment or Sublease, as reasonably requested by Landlord and (d) such financial information as Landlord may reasonably request concerning the proposed assignee, subtenant or occupant. 18.3 Landlord's Options. At any time within thirty (30) days after Landlord's receipt of the notice specified in Section 18.2 above together with any information requested by Landlord pursuant to subsections (c) and (d) of such Section 18.2, Landlord may by written notice to Tenant elect to (a) Sublease itself the portion of the Premises specified in Tenant's notice or any portion thereof for the term specified in such notice, in the case of a proposed Sublease, or (b) take an Assignment of Tenant's leasehold estate specified in Tenant's notice hereunder, or any portion thereof, in the case of a proposed Assignment. In the event Landlord elects to Sublease or take an Assignment from Tenant as described in subsections (a) and (b) above, it shall do so upon the terms set forth in Tenant's notice. 18.4 Standards for Consent. If Landlord does not elect either of the options set forth in subsections (a) and (b) of Section 18.3 above, Landlord shall not unreasonably withhold its consent to any Assignment, Sublease or Subleases to a third party or parties ("transferees"); provided, however, that Landlord's refusal to consent to any Assignment or Sublease shall be deemed reasonable if: (i) The transferee, in Landlord's reasonable opinion, is not of reputable and good character; (ii) The proposed transferee (itself or through its management or controlling organization), in Landlord's reasonable judgment, is not an experienced, proven and successful operator of businesses comparable to the type contemplated by this Lease; (iii) If the proposed use of the Premises by the subtenant or assignee is not a restaurant of similar kind and quality to the Restaurant, the purposes for which the transferee intends to use the Premises are, in Landlord's reasonable judgment, incompatible with the Hotel or the business operations of other Tenants in the Hotel; 32 (iv) In the reasonable judgment of the Landlord the purpose for which the subtenant or assignee intends to use the Premises is not in keeping with the standards of Landlord for the Hotel as a first class resort hotel facility, or is in violation of the terms of any other lease in the Hotel, it being understood that the purpose for which any subtenant or assignee intends to use the Premises may not be in violation of this Lease; (v) The proposed transferee has been involved in bona fide negotiations with Landlord for space in the Hotel within the preceding twelve (12) months and Landlord has available other comparable space in the Hotel to offer to the prospective subtenant or assignee; (vi) The proposed subtenant or assignee is either an occupant of the Hotel (but only if Landlord can offer comparable space in the Hotel to such proposed assignee or sublessee) or a government (or subdivision or agency thereof); (vii) Taking into account funds available from and committed by a controlling organization: the proposed assignee or sublessee is, in the reasonable judgment of Landlord, insolvent or financially unable to meet the projected costs of the obligations to be assumed for the unexpired Term of this Lease; or the proposed assignee or sublessee has a net worth which is, in the reasonable opinion of Landlord, insufficient to enable it to operate a successful first class business of the type contemplated herein and to meet the projected costs of obligations to be assumed for the unexpired Term of this Lease; (viii) The transferee operates another similar business, under the same trade name to be used at the Premises, at a Las Vegas Strip location, including any location within a hotel and/or casino property; (ix) An Event of Default has occurred and is continuing under this Lease; (x) The proposed Sublease is for less than all of the Premises; or (xi) The proposed Sublease or Assignment is to be effective within two (2) years after the Commencement Date at a time when Tenant's Restaurant is profitable. If Landlord consents to any Sublease or Assignment under this Section 18.4, Tenant may thereafter within thirty (30) days after Landlord's consent, but not later than the expiration of said thirty (30) days, enter into such Sublease of the Premises or portion thereof, or Assignment upon the terms and conditions set forth in the notice furnished by Tenant to Landlord pursuant to Section 18.2 above. 18.5 No Release of Tenant. No consent by Landlord to any Assignment or Sublease by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether 33 arising before or after the Assignment or Sublease. The consent by Landlord to any Assignment or Sublease shall not relieve Tenant from the obligation to obtain Landlord's express written consent to any other Assignment or Sublease. Any Assignment or Sublease which is not in compliance with this Article 18 shall be void as against the Landlord and, at the option of Landlord, shall constitute a material default by Tenant under this Lease. The acceptance of rent by Landlord from a proposed assignee or sublessee shall not constitute the consent to such Assignment or Sublease by Landlord. Notwithstanding the foregoing, if Landlord exercises its option under Section 18.3 with respect to an Assignment or a Sublease of all or substantially all of the Premises, or if Landlord consents to an Assignment to a successor tenant with a net worth (including the net worth of any guarantor or guarantors) not less than that of Tenant at the time of such Assignment, then Tenant shall be relieved of any liability under this Lease accruing after the effective date of such Assignment. 18.6 Assumption of Tenant's Obligations. Each assignee or other transferee, other than Landlord, shall assume, as provided in this Section 18.6, all obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant from and after the effective date of the assignment for the payment of the rent, and for the performance of all the terms, covenants, conditions and agreements herein contained on Tenant's part to be performed for the Term of this Lease. No Assignment shall be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and an instrument in recordable form which contains a covenant of assumption by the assignee reasonably satisfactory in substance and form to Landlord, consistent with the requirements of this Section 18.6, but the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee from its liability as set forth above. 18.7 Assignment to Affiliate. Notwithstanding the foregoing provisions of Section 18.1, 18.2, 18.3 and 18.4 above, Tenant may assign this Lease without Landlord's consent to any corporation or partnership in which ARK Restaurants Corp. owns more than fifty percent (50%) of all ownership interests; provided that ARK Restaurants Corp. (or another restaurant operator with comparable experience and a comparable reputation which is otherwise reasonably acceptable to Landlord) retains control over the management of Tenant's business in the Premises. The provisions of Sections 18.1, 18.2, 18.3 and 18.4 shall not apply to any assignment which is permitted by this Section 18.7. ARTICLE 19 INSOLVENCY AND DEATH It is understood and agreed that neither this Lease nor any interest therein or hereunder, nor any estate hereby created in favor of Tenant, shall pass by operation of law under any state or federal insolvency, bankruptcy, or inheritance act, or any similar law now or hereafter in effect, to any trustee, receiver, assignee for the benefit of creditors, heirs, legatees, devisees or any other person whomsoever without the express written consent of Landlord first had and obtained therefor. 34 ARTICLE 20 CONDEMNATION 20.1 Awards. Should the whole or any part of the Premises be condemned or taken by a competent authority for any public or quasi-public purpose, all awards payable on account of such condemnation and taking shall be payable to Landlord, and Tenant hereby waives any and all interest therein. Tenant shall, however, be entitled to retain any award made separately to Tenant by the condemning authority. 20.2 Taking of the Premises. If the whole of the Premises shall be so condemned and taken, then this Lease shall terminate upon such taking. If greater than one-third (1/3) of the floor space of the Premises is condemned or taken or if by reason of any condemnation or taking the remainder of the Premises will not be reasonably adequate for the operation of Tenant's business after Landlord completes such repairs or alterations as Landlord elects to make, either Landlord or Tenant shall have the option to terminate this Lease by notifying the other party hereto of such election in writing within forty-five (45) days after such taking. If by such condemnation and taking one-third (1/3) or less of the Premises has been taken or if a part only of the Premises is taken and the remaining part thereof is suitable for the purposes for which Tenant has leased said Premises, this Lease shall continue in full force and effect. In the event a partial taking does not terminate this Lease, Tenant shall make repairs and restorations to the remaining premises of the nature of Tenant's Work required by Exhibit B, Landlord shall make the proceeds of any condemnation award available to Tenant for such purposes and if Tenant has closed Tenant shall reopen for business promptly after completion of the restoration. 20.3 Taking of the Hotel. Notwithstanding the provisions of Section 20.2, if any part of the Hotel or the Premises shall be so taken or appropriated, and if in the reasonable judgment of either Landlord or Tenant, the Restaurant would not be able to be operated profitably in consequence of such taking, then either Landlord or Tenant, as the case may be, shall have the right, at its option, to terminate this Lease by notifying the other within six (6) months of such taking. 20.4 Deed-in-Lieu. For the purposes hereof, a deed in lieu of condemnation shall be deemed a taking. ARTICLE 21 DESTRUCTION OF PREMISES 21.1 Landlord's Right of Termination. In the case of the destruction of all or any material portion of the Premises, whether by fire or other casualty, not caused by the intentional misconduct of Tenant, Landlord shall, except as provided in Sections 21.2 and 21.3 below, diligently repair all structural elements of the Premises, including structural steel and reinforced concrete. So long as Landlord proceeds with such work with reasonable dispatch, this Lease shall not terminate, but shall continue in full force and effect. In determining what constitutes reasonable dispatch, 35 consideration shall be given to delays caused by Force Majeure events. If this Lease is terminated pursuant to this Article 21, all rights and obligations hereunder shall cease and terminate as of the date of termination. 21.2 Damage Caused by Tenant. Notwithstanding Section 21.1, in the event the Premises, or any portion thereof, shall be damaged by fire or other casualty due to the intentional misconduct of Tenant, then, without prejudice to any other rights and remedies of Landlord, this Lease shall not terminate, the damage shall be repaired by Tenant, and Percentage Rent payable by Tenant shall be determined by the method set forth in Section 8.11 of this Lease. 21.3 Damage to Hotel. In the event of any damage not limited to, or not including, the Premises, such that the building of which the Premises is a part is damaged to the extent of twenty-five percent (25%) or more of the cost of replacement, or the buildings and improvements (taken in the aggregate) of the Hotel owned by Landlord shall be damaged to the extent of more than twenty-five percent (25%) of the aggregate cost of replacement, Landlord may, if Landlord elects not to reopen the Hotel or if Landlord elects to reopen the Hotel using a theme or concept other than the "New York-New York" theme and concept, elect or terminate this Lease upon giving notice of such election in writing to Tenant within one hundred twenty (120) days after the occurrence of the event causing the damage. 21.4 Repair Obligations. The provisions of this Article 21 with respect to repair by Landlord shall be limited, as set forth above, to the structural elements of the Premises, and when such work in completed, the Premises shall be deemed restored and rendered tenantable, and Tenant shall restore the remainder of the Premises and Tenant's Work, replace its stock in trade, and if Tenant has closed, Tenant shall promptly reopen for business. Landlord shall make available to Tenant, to the extent of the insurance proceeds received by Landlord with respect to Landlord's Work and not otherwise used by Landlord to complete its repair of the structural elements of the Premises, sufficient funds to perform such repair as is necessary to place the Premises in the condition specified for the commencement of Tenant's Work. 21.5 Insurance Proceeds. Subject to the provisions of Section 21.1 above, all insurance proceeds payable under any fire and extended coverage risk insurance covering the Hotel and/or the Premises shall be payable solely to Landlord, and Tenant shall have no interest therein. Tenant shall in no case be entitled to compensation for damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent provided for in this Section 21, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. 36 ARTICLE 22 RIGHT OF ACCESS 22.1 Right of Access. Landlord, and its authorized agents and representatives shall be entitled to enter the Premises at any reasonable time for the purpose of observing, posting or keeping posted thereon notices provided for hereunder, and such other notices as Landlord may deem necessary or appropriate for protection of Landlord and/or its interest in the Premises; for the purpose of inspecting the Premises or any portion thereof; and for the purpose of making repairs to the Premises or any other portion of the Hotel and performing any work therein or thereon which Landlord may elect or be required to make hereunder, or which may be necessary to comply with any laws, ordinances, rules, regulations or requirements of any public authority or any applicable standards that may, from time to time, be established by the [Insurance Services Office] or any similar body, or which Landlord may deem necessary or appropriate to prevent waste, loss, damage or deterioration to or in connection with the Premises or any other portion of the Hotel or for the purpose of conducting its legitimate business purposes therein or for any other lawful purpose. Except in an emergency, Landlord shall coordinate any entry hereunder with Tenant so as to avoid unnecessary interference with Tenant's business in the Premises. Landlord shall have the right to use any means which Landlord may deem proper to open all doors in the Premises in an emergency. Entry into the Premises obtained by Landlord by any such means shall not be deemed to be forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof. Nothing contained herein shall impose or be deemed to impose any duty on the part of Landlord to do any work or repair, maintenance, reconstruction or restoration, which under any provision of this Lease is required to be done by Tenant; and the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to do the same. 22.2 Inconvenience to Tenant. Landlord may, during the progress of any work on the Premises, keep and store upon the Premises all necessary materials, tools and equipment. Provided that Landlord has taken all reasonable steps so as not to interfere with Tenant's business, Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of business or quiet enjoyment, or other damage or loss to Tenant by reason of making any such repairs or performing any such work upon the Premises, or on account of bringing materials, supplies and equipment into, upon or through the Premises during the course thereof, and the obligations of Tenant under this Lease shall not thereby be affected in any manner whatsoever. Landlord shall, however, in connection with the performance of such work, cause as little inconvenience, disturbance or other damage or loss to Tenant as may be reasonably possible under the circumstances. 22.3 Right to Show the Premises. Landlord, and/or its authorized agents and representatives, shall be entitled to enter the Premises at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final year of the Term of this Lease, Landlord shall be entitled to exhibit the Premises for lease. Any such entry shall be effected, to the extent reasonably practicable, so as not to interfere with Tenant's business. 37 ARTICLE 23 LANDLORD'S RIGHT OF PERFORMANCE Whenever under any provision of this Lease, Tenant shall be obligated to make any payment or expenditure, or to do any act or thing, or to incur any liability whatsoever, and Tenant fails, refuses or neglects to perform as herein required, Landlord shall be entitled, but shall not be obligated, to make any such payment or to do any such act or thing, or to incur any such liability, all on behalf of and at the cost and for the account of Tenant; provided that Landlord shall first give Tenant reasonable notice of its intention to exercise its right of performance hereunder. In such event, the amount thereof with interest thereon at the Default Rate per annum shall constitute and be collectable as additional rent on demand. ARTICLE 24 ESTOPPEL CERTIFICATES Tenant agrees that within ten (10) days of any demand therefor by Landlord, Tenant will execute and deliver to Landlord or Landlord's designee a recordable certificate stating that this Lease is in full force and effect, such defenses or offsets as are claimed by Tenant, if any, the date to which all rentals have been paid, and such other information concerning the Lease, the Premises and Tenant as Landlord or said designee may reasonably request. ARTICLE 25 TENANT'S DEFAULT 25.1 Events of Default. Landlord shall have all the rights and remedies provided in this Section or elsewhere herein, in the event that any of the following (sometimes referred to herein as an "Event of Default") shall occur: (a) Tenant shall default in the payment of any sum of money required to be paid hereunder and such default continues for ten (10) days after written notice thereof from Landlord to Tenant; or (b) Tenant shall default in the performance of any other provision, covenant or condition of this Lease on the part of Tenant to be kept and performed and such default continues for twenty (20) days after written notice thereof from Landlord to Tenant; provided, however, that if the default complained of in such notice is of such a nature that the same can be rectified or cured, but cannot with reasonable diligence be done within said twenty (20) day period, then such default shall be deemed to be rectified or cured if Tenant shall, within said twenty (20) day period, commence to rectify and cure the same and shall thereafter complete such rectification and cure with all due diligence, and in any event (but subject to Section 29.3), within forty (40) days from the date of giving of such notice; or (c) Tenant should vacate or abandon the Premises during the Term of this Lease; or 38 (d) Tenant should fail to obtain the discharge or release of any lien as required by Article 15 hereof; or (e) There is filed any execution, attachment, levy or seizure against Tenant or the leasehold estate created by this Lease and the same continues in effect for a period of thirty (30) days (except as otherwise provided in this Lease); or (f) There is filed any petition in bankruptcy or the Tenant is adjudicated as a bankrupt or insolvent, or there is appointed a receiver or trustee to take possession of Tenant or of all or substantially all of the assets of Tenant, or there is a general assignment by Tenant for the benefit of creditors, or any action is taken by or against Tenant under any state or federal insolvency or bankruptcy act, or any similar law now or hereafter in effect, and any such proceeding (if involuntary) is not dismissed within forty-five (45) days; or (g) There shall occur any other event or condition which is described in this Lease as an "Event of Default" and the same is not remedied after notice and the expiration of any applicable cure period set forth in this Lease. 25.2 Landlord's Remedies. Upon the occurrence of any Tenant Event of Default, subject to Tenant's right to dispute the claim of default pursuant to Article 30, and subject to the provisions of Article 30 which may allow for the tolling of applicable cure periods, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever; (1) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises, or any part thereof, by force if necessary, without being liable to prosecution or for any claim for damages; and Landlord may recover from Tenant: (a) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (b) The worth at the time of award of any amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus (c) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of the 39 award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus (d) Any other reasonable amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease; and (e) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. All such amounts shall be computed on the basis of the monthly amount thereof payable on the date of Tenant's default; except that Percentage Rent shall be computed on the basis of the monthly average of all Percentage Rent received by or payable to Landlord during the period that Tenant was conducting Tenant's business in the Premises in the manner and to the extent required by this Lease, or on the basis of the monthly amount thereof payable on the date of Tenant's default, if greater. As used in paragraphs (a) and (b) above, the "worth at the time of award" is computed by allowing interest in the per annum amount equal to the Default Rate. As used in paragraph (c) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one (1%) percent per annum. (2) Enter upon and take possession of the Premises and expel or remove Tenant and other persons who may be occupying the Premises, or any part thereof, by force if necessary, without being liable to prosecution or for any claim for damages, and relet the Premises, as Tenant's agent, and receive the rent therefor; and Tenant agrees to pay Landlord on demand any deficiency that may arise by reason of such reletting; or (3) Enter upon the Premises, without being liable to prosecution or for any claim for damages, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any reasonable and necessary expenses which Landlord may incur in thus effecting compliance with Tenant's obligations hereunder. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damage accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon the occurrence of a Tenant Event of Default shall not be deemed or construed to constitute a waiver of such default. 40 ARTICLE 26 QUIET POSSESSION Tenant, upon paying the rentals and other payments herein required from Tenant, and upon Tenant's performance of all of the terms, covenants and conditions of this Lease on its part to be kept and performed, may quietly have, hold and enjoy the Premises during the Term of this Lease without any disturbance from Landlord or from any other person claiming through Landlord. ARTICLE 27 SALE BY LANDLORD 27.1 Landlord's Right to Assign or Transfer. It is agreed that Landlord may (in connection with a sale, transfer or financing of all or any substantial part of the Hotel) at any time assign or transfer its interest as Landlord in and to this Lease, or the rents payable hereunder, or at any time sell or transfer its interest in the fee of the Premises, or its interest in and to the Premises, without notice or obtaining any approval from Tenant. 27.2 Attornment. Tenant hereby agrees to attorn to the assignee, transferee, or purchaser of Landlord under any provision of this Article 27 from and after the date of notice to Tenant of such assignment, transfer or sale, in the same manner and with the same force and effect as though this Lease were made, in the first instance, by and between Tenant and such assignee, transferee or purchaser. 27.3 Release of Landlord. In the event of any sale or exchange of the Premises by Landlord and the assumption of Landlord's obligations under this Lease by Landlord's transferee, Landlord shall be and is hereby relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease, arising out of any act, occurrence or omission relating to the Premises occurring after the consummation of such sale or exchange. ARTICLE 28 DEFAULT BY LANDLORD Except as otherwise expressly provided in this Lease, it is agreed that in the event Landlord fails or refuses to perform any of the provisions, covenants or conditions of this Lease on Landlord's part to be kept or performed, that Tenant, prior to exercising any right or remedy Tenant may have against Landlord on account of such default, shall give a thirty (30) day written notice to Landlord of such default, stating in said notice the default with which Landlord is charged. Tenant agrees that if the default complained of in the notice provided for by this Section 28 is of such a nature that the same can be rectified or cured by Landlord, but cannot with reasonable diligence be rectified or cured within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Landlord within said thirty (30) day period shall commence the rectification and curing thereof 41 and shall continue thereafter with all due diligence to cause such rectification and curing to proceed, and so does complete the same, with the use of diligence as aforesaid. ARTICLE 29 MISCELLANEOUS 29.1 Waiver of Jury Trial. The parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and/or any claim of injury or damage. 29.2 Waiver. The waiver by Landlord or Tenant of any default or breach of any of the terms, covenants or conditions hereof on the part of the other to be kept and performed shall not be a waiver of any preceding or subsequent breach of the same or any other term, covenant or condition contained herein. The subsequent acceptance of rent or any other payment hereunder by Tenant to Landlord shall not be construed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease other than the failure of Tenant to pay the particular rental or other payment or portion thereof so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rental or other payment. No payment by Tenant or receipt by Landlord of a lesser amount than therein provided shall be deemed to be other than on account of the earliest rent due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept any such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this Lease. This Section 29.2 may not be waived. 29.3 Force Majeure. Whenever a day is appointed herein on which, or a period of time is appointed in which, either party hereto is required to do or complete any act, matter or thing, the time for the doing or completion thereof shall be extended by a period of time equal to the number of days on or during which such party is prevented from the doing or completion of such act, matter or thing because of labor disputes, civil commotion, war, warlike operation, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials, or to obtain fuel or energy, weather or other acts of God, or other causes beyond such party's reasonable control (financial inability excepted); provided, however, that nothing contained herein shall excuse Tenant from the prompt payment of any rent or charge required of Tenant hereunder. Tenant agrees that a recognitional or informational picket line shall not be deemed a force majeure event. 29.4 Delivery of Notices. Any and all notices and demands by or from Landlord to Tenant, or by or from Tenant to Landlord, required or desired to be given hereunder shall be in writing and shall be validly given or made if served either personally during normal business hours or if deposited in the United States mail, certified or registered, postage prepaid, return receipt 42 requested or if delivered by a nationally recognized, next business day delivery courier service (such as Federal Express or Express Mail), or served by facsimile during normal business hours (with an answer back and a duplicate copy sent by another permitted method hereunder or by first class mail). If such notice or demand be served by registered or certified mail or courier service in the manner provided, service shall be conclusively deemed made the first business day delivery is attempted or upon receipt, whichever is sooner. Service by personal service or facsimile transmission shall be deemed made upon receipt. Any notice or demand to Landlord shall be addressed to Landlord as follows: William Sherlock New York-New York Hotel 3790 Las Vegas Boulevard Las Vegas, Nevada 89109 Telefax: (702)740-6510 With a copy to: Gary Primm New York-New York Hotel 3790 Las Vegas Boulevard Las Vegas, Nevada 89109 Telefax: (702)679-7222 Any notice or demand to Tenant shall be addressed to Tenant at: c/o Ark Restaurants Corp. 85 Fifth Avenue New York, New York 10003-3019 Attention: Michael Weinstein Telefax: (212)206-8814 With a copy to: Shack & Siegel, P.C. 530 Fifth Avenue New York, New York 10036 Attention: Donald D. Shack, Esq. Telefax: (212)730-1964 Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective,however, until the actual receipt thereof by the other party. 29.5 Remedies Cumulative. The various rights, options, elections and remedies of Landlord contained in this Lease shall be cumulative and no one of them shall be construed as 43 exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. 29.6 Successors and Assigns. The terms, provisions, covenants and conditions contained in this Lease shall apply to, bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns (where assignment is permitted) of Landlord and Tenant, respectively. 29.7 Partial Invalidity. If any term, provision, covenant or condition of this Lease, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of this Lease, and all applications thereof, not held invalid, void or unenforceable, shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. 29.8 Time of the Essence. Time is of the essence of this Lease and all of the terms, provisions, covenants and conditions hereof. 29.9 Entire Agreement. This Lease contains the entire agreement between the parties with respect to the leasing of the Restaurant and cannot be changed or terminated orally. 29.10 No Partnership. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent or of partnership or of joint venture or of any association between Landlord and Tenant. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. 29.11 Brokers. Tenant warrants that it has had no dealings with any broker or agent in connection with this Lease, and covenants to pay, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with respect to this Lease or the negotiation thereof. 29.12 Captions. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference to this Lease and in no way whatsoever define, limit or describe the scope or intent of this Lease, nor in any way affect this Lease. 29.13 Usage. Masculine or feminine pronouns shall be substituted for the neuter form and vice versa, and the plural shall be substituted for the singular form and vice versa, in any place or places herein in which the context requires such substitution or substitutions. 29.14 Governing Law. The laws of the State of Nevada shall govern the validity, construction, performance and effect of this Lease. 44 29.15 Covenants. Whenever in this Lease any words of obligation or duty are used in connection with either party, such words shall have the same force and effect as though framed in the form of express covenants on the part of the party obligated. 29.16 Joint and Several Obligations. In the event Landlord or Tenant now or hereafter shall consist of more than one person, firm or corporation, then and in such event, all such persons, firms or corporations shall be jointly and severally liable as Tenant or Landlord, as appropriate, hereunder. 29.17 Submission of Lease. The submission of this Lease for examination does not constitute a reservation of or option for the Premises and this Lease becomes effective as a Lease only upon execution and delivery thereof by Landlord and Tenant. 29.18 Liens and Actions Affecting Property. Should any claim or lien be filed against the Premises, or any action or proceeding be instituted affecting the title to the Premises, Tenant shall give Landlord written notice thereof as soon as Tenant obtains actual knowledge thereof. 29.19 Construction. This Lease shall not be construed either for or against Landlord or Tenant, but this Lease shall be interpreted in accordance with the general tenor of the language. 29.20 Authority. If Tenant is not a natural person, Tenant hereby represents that it is qualified and authorized to enter into, and perform its obligations under, this Lease. ARTICLE 30 DISPUTE RESOLUTION If any controversy or claim between the parties hereto arises out of this Lease, other than a claim by Landlord arising from any failure by Tenant to pay rent as and when such rent becomes due, and if the parties are unable to agree by direct negotiations, the parties shall promptly mediate any such disagreement or dispute under the Commercial Mediation Rules of the American Arbitration Association. If the parties are unable to resolve such disagreement or dispute through mediation, then such disagreement or dispute (excluding an action by Landlord in unlawful detainer by reason of a default in the payment of rent, as provided above) shall be submitted to binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association. The arbitrators shall be appointed under the Commercial Arbitration Rules of the American Arbitration Association. As soon as the panel has been convened, a hearing date shall be set within twenty-one (21) days thereafter. Written submittals shall be presented and exchanged by both parties ten (10) days before the hearing date, including reports prepared by experts upon whom either party intends to rely. At such time the parties will also exchange copies of all documentary evidence upon which they will rely at the arbitration hearing and a list of the witnesses whom they intend to call to testify at the hearing. Each party shall also make its respective experts available for deposition by 45 the other party prior to the hearing date. The hearings shall be concluded no later than five (5) days after the initial hearing date. The arbitrators shall make their award within ten (10) business days after the conclusion of the hearing. In the event of a three-member panel, the decision in which two (2) of the members of the arbitration panel concur shall be the award of the arbitrators. Except as otherwise specified herein, there shall be no discovery or dispositive motion practice (such as motions for summary judgment or to dismiss or the like) except as may be permitted by the arbitrators, who shall authorize only such discovery as is shown to be absolutely necessary to insure a fair hearing and no such discovery or motions permitted by the arbitrators shall in any way conflict with the time limits contained herein. The arbitrators shall not be bound by the rules of evidence or civil procedure, but rather may consider such writings and oral presentations as reasonable businessmen would use in the conduct of their day-to-day affairs, and may require the parties to submit some or all of their presentation as the arbitrators may deem appropriate. It is the intention of the parties to limit live testimony and cross-examination to the extent absolutely necessary to insure a fair hearing to the parties on the significant matters submitted to arbitration. The parties have included the foregoing provisions limiting the scope and extent of the arbitration with the intention of providing for prompt, economic and fair resolution of any dispute submitted to arbitration. If Landlord gives Tenant notice of a claimed default pursuant to Article 25 of this Lease, and if either (i) such claimed default can be cured by Tenant's expenditure of an amount which is reasonably expected to be One Hundred Thousand Dollars ($100,000) or less, or (ii) such claimed default arises under Section 6.2 of this Lease, Tenant's election to dispute such claimed default pursuant to the provisions of this Article 30 shall not extend or toll the running of any cure period provided in Article 25; provided that the foregoing is not intended to preclude or limit Tenant's right to perform under protest and to retain any claim it may have against Landlord for reimbursement of the cost of performance. However, if either (i) the out-of-pocket costs to Tenant of curing such claimed default are reasonably expected to exceed One Hundred Thousand Dollars ($100,000), or (ii) such claimed default cannot reasonably be cured by Tenant's expenditure of money, then, unless such claimed default arises under Section 6.2 of this Lease, any cure period provided in Article 25 for the claimed default shall be tolled during the resolution of such dispute hereunder. The arbitrators shall have the discretion to award the costs of arbitration, arbitrators' fees and the respective attorneys' fees of each party between the parties as they see fit. Judgment upon the award entered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Notwithstanding the parties' agreement to mediate or arbitrate their disputes as provided herein, any party may seek emergency relief in a court of law without waiving the right to arbitrate. 46 The arbitrators shall make their award in accordance with applicable law and based on the evidence presented by the parties, and at the request of either party at the start of the arbitration, shall include in their award findings of fact and conclusions of law supporting the award. 47 Nothing contained herein is intended to, nor shall, limit Landlord's right to pursue any action in unlawful detainer in the case of an Event of Default by Tenant in the payment of Base Rent or Percentage Rent. IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. LANDLORD NEW YORK - NEW YORK HOTEL, LLC a Nevada limited liability company By: /s/ William Sherlock ------------------------------- Title: President and CEO ---------------------------- TENANT LAS VEGAS AMERICA CORP. a Nevada corporation By: /s/ Michael Weinstein ------------------------------- Title: President ---------------------------- 48 EXHIBIT "A" PREMISES [SCHEMATIC DRAWING] A - 1 EXHIBIT "B" WORK LETTER FOR AMERICA CAFE I. LANDLORD'S WORK - The following work is to be performed by Landlord and Tenant where indicated: A. COMMON AREA 1. Utilities: a. Sanitary Sewer and Grease Waste Piping - The Landlord will pay for the cost of below-slab piping, stub ups, floor drains and floor sinks in the Employee Cafeteria and for a proportionate one-third cost in the Prep Kitchen area. The Landlord will install sanitary sewer and grease waste stubs to all other Tenant kitchen locations. The Tenant will provide distribution piping, floor drains and floor sinks in all other locations. Invert and line size will be specified by JBA. Tenant is responsible for payment of the sewer hookup charges, as well as any similar fees and charges levied on the Hotel for Tenant usage. b. Grease Interceptors - The Landlord will provide at its expense one or more grease interceptors that will be shared by all grease producers. The cost of maintaining the interceptor will be shared by all grease producers. The cost sharing formula should be based on grease production as determined by an impartial engineer. The Tenant will maintain grease lines that are used exclusively by the Tenant. The Landlord will maintain all shared grease piping. c. Domestic Water - The Landlord will stub into each demised area cold water and 140 degrees softened hot water. The Tenant will use the 120 degrees hard hot water where it is practical for the Landlord to provide it and for Tenant to use it. The size of the supply taps will be specified by the Landlord's engineer. d. Rendering Management - The Landlord will provide space for the Tenants rendering storage bins in the loading dock area. The Tenant will maintain the area. If the rendering bin area is shared with other B-1 Tenants, the Landlord will require all Tenants to contribute a fair share to the maintenance of this area. e. Electrical Service - The Landlord will provide conduit, conductors, and back boxes for all Tenant circuit panels. Where a direct feed from the Landlord's switchgear to the Tenant's equipment is needed, the Landlord will provide conduit and conductors to the equipment disconnect. Conductor size panels, and voltages will be specified by the Tenant's engineer. Final connection to Landlord's switchgear will be done by the Landlord at the Landlord's expense. f. Gas - Landlord will provide, install and maintain a main gas feed that is sufficient to operate Tenant's equipment and business at a point within the Premises to be determined by Tenant and Landlord. g. Sprinkler System - Landlord will install an automatic fire sprinkler system to the Premises in compliance with the requirements of local and state agencies. Such sprinkler system will be based on a specific grid and spacing plan for Tenant, provided that Tenant delivers such plan to Landlord's sprinkler contractor prior to the installation of a standard grid and spacing. The cost to Tenant of modifying the sprinkler system will be the cost of relocation re-sizing or adding sprinkler mains or heads to the specific grid and spacing for Tenant's business. Modification of the sprinkler system within the Premises will be subject to the review and approval of the Landlord and its design professionals and performed by Landlord's contractor at Tenant's expense. Modifications required by Tenant outside its Premises and related to modifications of the existing system will be done by Landlord at Tenant's expense. In conjunction with the sprinkler system, Tenant will install, at Tenant's expense, one smoke detector in the Premises at a point to be determined by Landlord. Where required by local code, Tenant shall also install at Tenant's expense, life safety equipment such as audiovisual horn devises or additional smoke detector devices. Landlord confirms fire hose cabinets are not required within any Tenant spaces. h. HVAC System - The Landlord is responsible for the installation and maintenance of all HVAC equipment and all main distribution ductwork to the demised premise. The Tenant is responsible for connecting to the taps provided, all VAV boxes and low velocity distribution ductwork within the demised premise. The Tenant will provide all local controls and interface with the Landlord's EMS B-2 system as needed. The Tenant will return air to the return taps provided within the demised premise or to the common plenum above the demised premise. The Tenant will provide transfer grills and fans as required within the demised premise as needed to insure proper air balance. i. Smoke Evacuation - Landlord will provide, install and maintain a smoke evacuation system for the premises. The Tenant understands that to the extent that the smoke evacuations system and the Tenant's kitchen exhaust system share the same control sequence the Landlord will use the Tenant's kitchen exhaust for smoke evacuation. The Landlord will pay for any control wiring or relays that may be needed to interlock these two systems. j. Kitchen Exhaust System - The Landlord will install all exhaust ductwork from the collars on the Tenant's hoods to the roof, including all fireproofing, clean-outs, roof curbs, and pitch pockets. The Tenant will maintain all exhaust ductwork in accordance with all codes and accepted practice. The Tenant will supply and install all hoods, exhaust fans, and related wiring. The Landlord will provide all hard wire and low voltage control interlocks between the Tenant's exhaust system and the Landlord's make-up air system, smoke evacuation system, fire control system, and energy management system. k. Fire Dampers - Landlord shall provide and install fire dampers, in accordance with all codes. Landlord shall also provide and install fire dampers where the Landlord's ductwork passes through service corridor or other fire separations. Tenant shall provide all fire dampers required for Tenant's toilet and dishwasher exhaust floor penetrations, if any are required. l. Supplemental Make-up Air - The Landlord will supply and install the supplemental make-up air system. Tenant will maintain all supplemental make-up air fans dedicated solely to Tenant spaces. m. Chilled Water for Refrigeration - The Landlord agrees to stub chilled water into each demised premise. Identification of equipment to use water-cooled and air-cooled compressors will be the joint effort of Landlord and Tenant. B-3 B. BUILDINGS 1. Structure a. Demising Partitions - The Landlord will construct all demising partitions. All the finishes on the common area side will be provided by the Landlord and all of the finishes on the Tenant side will be provided by the Tenant. b. Landlord shall pour the floor slab designed for a live load of not less than 120 lbs. PSF for the Premises. II. TENANT'S WORK - The following work required to complete and place the Premises in finished condition ready to open for business is to be performed by the Tenant at the Tenant's own expense. Tenant's Work includes, but is not limited to the following: A. GENERAL PROVISIONS All work done by Tenant shall be governed in all respects by, and be subject to the following: 1. Tenant shall deliver to Landlord within ten (10) days after the execution of this Lease and prior to the commencement of any of the Tenant Work, an irrevocable Letter of Credit in the amount of One Million Dollars ($1,000,000) or the cost of the build out whichever is less, issued by a surety company licensed to do business in the State of Nevada and acceptable to Landlord, naming Landlord as obligee, and guaranteeing completion of Tenant's Work in accordance with the Lease, free and clear of all mechanics' or other liens or security interests. The form of such completion bond shall be subject to the review and approval of Landlord, which approval may be withheld by Landlord in its reasonable discretion. Tenant's Work shall at all times be conducted consistent with the labor agreement for the Hotel, if any. 2. All Tenant's Work shall conform to applicable statutes, ordinances, regulations and codes and the requirements of all rating bureaus and which by this reference is incorporated into and made a part of this Lease. Tenant shall obtain and convey to Landlord all approvals with respect to electrical, water, sewer, heating, cooling, and telephone work, all as may be required by any agency or utility company. 3. Except for minor and routine matters, no approval by Landlord shall be deemed valid unless in writing and signed by Landlord. B-4 4. Prior to commencement of Tenant's Work and until completion thereof, or Tenant obtaining a Certificate of Occupancy or Temporary Certificate, or commencement of the Lease Term, whichever is the last to occur, Tenant shall effect and maintain Builder's Risk Insurance covering Landlord, Tenant, Tenant's contractors and Tenant's subcontractors, as their interests may appear, against loss or damage by fire, vandalism and malicious mischief and such other risks as are customarily covered by a standard "All Risk" policy of insurance protecting against all risk of physical loss or damage to all Tenant's Work in place and all materials stored at the site of Tenant's Work and all materials, equipment, supplies and temporary structures of all kinds incidental to Tenant's Work, and equipment, all while forming a part of or contained in such improvements or temporary structures, or while on the Premises or within the Center all to the actual replacement cost thereof at all times on a completed value basis. In addition, Tenant agrees to indemnify and hold Landlord harmless against any and all claims for injury to persons or damage to property by reason of the use of the Premises, except to the extent caused by Landlord or Landlord's agents or contractor, for the performance of Tenant's Work, and claims, fines, and penalties arising out of any failure to Tenant or its agents, contractors and employees to comply with any law, ordinance, code requirement, regulations or other requirement applicable to Tenant's Work and Tenant agrees to require all contractors and subcontractors engaged in the performance of Tenant's Work to effect and maintain and deliver to Tenant and Landlord, certificates evidencing the existence of, and covering Landlord, Tenant and Tenant's contractors, prior to commencement of Tenant's Work and until completion thereof, the following insurance coverages: a. Workmen's Compensation and Occupational Disease Insurance in accordance with the laws of the State of Nevada. b. Comprehensive General Liability Insurance, including independent contractors, contractual and completed operations, including death resulting therefrom, and personal injury in the limits of $10,000,000 for the general contractor, $6,000,000 for the mechanical, electrical and plumbing contractors, and $1,000,000 for all other subcontractors, for any one occurrence and property damage in the limits of $10,000,000 for any one occurrence or a combined single limit policy of $10,000,000 per occurrence. c. Comprehensive Automobile Insurance, including "non-owned" automobiles, against bodily injury, including death resulting B-5 therefrom, in the limits of $1,000,000 for any one occurrence and $1,000,000 property damage or a combined single limit of $1,000,000. 5. Tenant agrees that the contract of every contractor, subcontractor, material supplier or entity performing labor upon, or furnishing materials or equipment to the Premises in connection with Tenant's Work shall contain the following provision: "Contractor acknowledges that this provision is required under Tenant's lease (hereinafter the "LEASE") of the Premises to be improved under this Contract (the "LEASED PREMISES") from New York-New York Hotel, LLC ("LANDLORD"). In consideration of Tenant's engagement of Contractor to perform the work hereunder, and as an inducement to Tenant to enter into this Contract with Contractor, Contractor acknowledges, covenants and agrees that any mechanics' lien which it may hereafter file, claim, hold or assert with respect to the work hereunder (i) shall attach only to Tenant's interest in the Premises under the Lease and (ii) shall be subject, subordinate and inferior to the lien of any mortgage(s) now or hereafter held upon and against the Landlord by any lender(s) now or hereafter providing funds for the financing for the Premises or the Hotel in which the Premises is located, notwithstanding that any such mortgage(s) may be recorded after the commencement of work hereunder and that Contractor's mechanics lien otherwise might be entitled to priority over any such mortgage(s). 6. If Landlord in its sole and absolute discretion determines that the Hotel or the business conducted therein would otherwise be adversely affected, any or all construction work shall be done by recognized union labor. B. FLOOR SLAB All Tenant's with rest room facilities or food preparation areas shall install a floor slab waterproofing membrane in the Premises at Tenant's expense. All floor penetrations must be sleeved and waterproofed, except slabs on grade. C. STOREFRONT AND INTERIORS 1. Storefronts shall be designed within parameters of the Landlord's schedule and constructed with the Landlord's written approval. All storefronts must have a New York City theme in keeping with the theme, quality and style of B-6 the Hotel and must be approved by the Landlord before construction commences. 2. All materials employed in the construction of storefronts and interiors shall be as approved by Landlord and as defined by applicable building codes. 3. Storefront and Interior color schemes must harmonize with the color scheme of the surrounding building/storefront types and must be approved by the Landlord. 4. All swinging entrance doors must be recessed in such a manner that the door, when open, will not project beyond the lease line. D. CEILING 1. All ceilings and coves shall not exceed 14'0" above the finished floor (excluding mezzanines) unless otherwise approved by Landlord. 2. Tenant's ceilings shall be acoustic tile, gypsum board and/or plaster, suspended by adequate suspension systems to conform to final requirements of governing authorities and Landlord. 3. The space above the ceiling line, which is not occupied or allotted to Landlord's Work (structural members, duct work, piping, etc.) may be used for the installation of suspended ceiling, recessed lighting fixtures and duct work. Under no circumstances will Tenant's Work be hung or suspended from non-structural construction. Any Tenant Work involving the hanging or suspension of construction shall be accomplished only by methods, in locations and by use of assemblies approved by Landlord and Landlord's engineer. E. WALLS. All interior walls shall meet all applicable building codes. Tenant shall install insulation on the demising walls and interior walls as made necessary by building code, acoustics, or design. Tenant shall provide any necessary bracing or blocking. F. INTERIOR PAINTING. All interior painting and decoration shall be Tenant Work. B-7 G. FLOOR COVERING. The Landlord and Tenant will jointly coordinate floor transitions at all entrances. The Tenant's floor finishes will be applied directly to the slab provided. H. FURNITURE, FIXTURES AND SIGNS. The Tenant will provide identification signage only. All decor signage in the common area will be provided by the Landlord. All furnishings, trade fixtures, and related parts, including installation shall be Tenant Work. I. SUBMITTALS. Preliminary Submittal by the Tenant shall include storefronts and interiors, plans, elevations, specifications, color and material boards, and a colored elevation of the storefront facade. J. PLUMBING. All plumbing and plumbing fixtures are required by applicable codes, except utility service to the area, shall be Tenant Work. K. TOILET ROOM FIXTURES. Furnishing and installation of wiring, lighting fixtures, mechanical toilet exhaust systems, towel cabinets, soap dishes, hand dryers, deodorizers, mirrors and other similar items in toilet rooms within the Premises or as additionally required by code shall be Tenant Work. L. HEATING, VENTILATION AND AIR CONDITIONING. 1. Tenant's exhaust systems shall provide the required exhaust air capacities and shall be independent of the central cooling system. Tenant's exhaust systems shall be inoperative during other than regular business hours. Makeup or replacement air shall be provided by Landlord. 2. Tenant's HVAC systems shall be complete with air distributions systems, ventilating systems, control systems, insulation and all other components required to make a complete system. Tenant's HVAC system components shall be installed in locations as designated by the Landlord. B-8 3. The Tenant will install and maintain toilet exhaust fans and ductwork for all Tenant installed bathrooms. The Tenant's ductwork will terminate at a curb or sleeve provided by the Tenant and installed by the Landlord. The Landlord will provide a vertical chase and floor penetration as needed en route between the Tenant's bathroom and the roof or wall penetration. The Landlord will locate the penetration as close as possible to the Tenant's bathroom. In the event that a roof mounted fan is used the Landlord will also provide a pitch pocket. The Tenant will provide design information prior to the roof pour. 4. In the basement and in the first floor spaces that fall below the high rise structure, the Tenant will connect all vents to the closest inverted T-Y if this has been provided. In the food court, the Tenant will pipe all vents into the roof sleeves provided by the Landlord above each demised area. 5. The Tenant will install and maintain dishwasher fans and ductwork for all Tenant installed kitchens. The Tenant's ductwork will terminate at a curb or sleeve provided by the Tenant and installed by the Landlord. The Landlord will provide a vertical chase and floor penetration as needed en route between the Tenant's kitchen and the roof or wall penetration. The Landlord will locate the penetration as close as possible to the Tenant's kitchen. In the event that a roof mounted fan is used the Landlord will also provide a pitch pocket. The Tenant will provide design information prior to the roof pour. 6. Upon completion of all work, the Tenant will test and prepare an air balance report for all HVAC and exhaust equipment dedicated to the Tenant's demised premises. A copy of that report will be forwarded to the Landlord. If it is more practical to have one contractor balance the Tenant and Landlord equipment together, then the Tenant agrees to pay a fair share of that costs. M. MECHANICAL EQUIPMENT. All mechanical equipment including dumb-waiters, elevators, escalators, freight elevators, conveyors, and their shafts and doors, located within the Premises, including electrical work for these items. Locations, size and design of roof vents, HVAC equipment, units, hoods and caps shall be approved by Landlord. Landlord reserves the right of disapproval of any equipment to be placed on the roof, provided Landlord makes a suitable substitute location available. Tenant shall install equipment at locations where structural reinforcements are provided. The roof load is to be determined by Landlord's structural engineer's load requirements. Landlord approved changes in the structure as necessary to accommodate Tenant's equipment shall be made by Landlord at Tenant's expense. B-9 Cuts, curbs and openings including any structural support and steel, shall be provided and performed by a contractor designated by Landlord at Landlord's expense. In addition, all cant strips, base furnishings and other work necessary to complete the permanent weather proofing of Landlord's roof as a result of roof cuts or openings required by Tenant shall be performed by a contractor designed by Landlord at Landlord's expense. N. ELECTRICAL. 1. All interior distribution panels, lighting panels, power panels, conduits, outlet boxes, switches, outlets and wires within the Premises shall be Tenant Work. Tenant shall provide electric conduit and boxes in the concrete floor slab, ceiling and walls, including all electrical service panels, pull boxes and equipment. Landlord will provide all work outlined in Section I.1.e of this Work Letter. 2. All electrical fixtures, including lighting fixtures and equipment, and installation thereof shall be Tenant Work. Lighting systems (except security and emergency lighting) must be controlled by lighting contractors. 3. All conduit for necessary for telephone wires within the Premises shall be Tenant Work. 4. Wiring connections to Tenant's equipment within the Premises shall be Tenant Work. O. POINT OF SALES SYSTEMS. 1. The Tenant will install a POS system that is fully compatible with the Landlord's system. The Landlord will supply the Tenant with compatibility criteria and make the criteria part of this Work Letter. The Landlord will stub a POS conduit into each demised premise. P. TEMPORARY SERVICES. Any temporary services required by Tenant during its construction period, including heat, water or electrical service shall be secured from Landlord or Landlord's contractor, as the case may be, at Tenant's sole cost and expense. Q. SUBSEQUENT REPAIRS AND ALTERATIONS. B-10 Landlord reserves the right to require changes in Tenant's Work when necessary by reason of code requirements. R. DOORS AND EXITING REQUIREMENTS. 1. Tenant will be responsible for adherence to exiting codes. 2. Tenant will maintain a clear exiting path through the stockroom to Tenant's rear door for those Premises that contain a rear door. S. CONSTRUCTION ACTIVITIES. 1. If the Tenant requires any roof penetrations in addition to those already provided for in this lease then the Landlord will provide such penetrations at the Tenant's expense. 2. Any additional structural support necessitated by Tenant's mezzanines and/or equipment, fixtures or inventory shall be provided by Tenant at Tenant's expense and approved by Landlord. 3. If Tenant will not open by the date the Hotel opens for business and such date is after the Commencement Date, Tenant shall be responsible for the installation and expense of the temporary storefront or barricade shielding the interior of the Premises from the Hotel as well as for the removal and cost thereof after opening for business. If Tenant is under construction prior to the date of Hotel is open for business, such temporary storefront shall be installed at least three (3) days prior to such opening date. 4. All construction activities on site must be coordinated directly with Mr. Randy Keiper, Superintendent for Marnell Corrao Associates (MCA). General site rules to be observed are: a. Normal construction work hours are 6:00 A.M to 2:30 P.M. b. All construction workers on site must belong to trade unions. Those from outside the Las Vegas area must check in with the local unions to comply with their regulations. All employees on site must receive a badge from MCA to enter the site. c. Tenant contractors must schedule all deliveries with Randy Kuiper, Marnell Corrao's Project Superintendent. Tenant contractors must provide their own forklifts and cranes for offloading. B-11 d. Tenant contractors may use MCA man hoists free of charge during normal working hours. e. Tenant contractors may schedule the use of the material hoist after normal working hours. Extra cost of operators and mechanics will be shared by all users. f. All employee parking must be off site. g. No space is available for offices for Tenant contractors on site, except within their own spaces. Landlord will make conduit available to Tenant as soon as it is installed in the permanent structure. h. Temporary power and water is available to Tenant spaces. Tenant electrical subcontractor may have to pull wire to Tenant space. i. Cutting of holes through existing walls or slabs for equipment access requires Landlord's written approval beforehand. Structural members must be analyzed by structural engineer at Tenant's expense. j. A common trash container will be located on site to be used by all Tenant contractors. Tenants will share the cost of trash removal based on a fair square footage formula. k. Tenants will provide their own portable toilets on site. Contacts should be made with "Mr. Potty" to simplify maintenance and reduce costs. l. All construction work performed within the Tenant's demised premise, after it has been turned over to the Tenant, must be coordinated with Terry Higgins or his designated agent. Whenever possible, Landlord or its Agent, will provide prior notification to the Tenant or its Agent. Whenever possible, both parties must schedule the work to take place at a time that is mutually agreeable. B-12 FIRST AMENDMENT TO LEASE AGREEMENT "AMERICA RESTAURANT" This First Amendment to Lease Agreement ("FIRST AMENDMENT") is made and entered into as of the 6th day of November, 1996, by and between NEW YORK-NEW YORK HOTEL, LLC, a Nevada limited liability company ("LANDLORD"), and LAS VEGAS AMERICA CORP., a Nevada corporation ("TENANT"). RECITALS A. Landlord and Tenant have entered into a certain Lease Agreement, dated as of the 17th day of May, 1996, (the "LEASE") for the operation of a twenty-four (24) hour full service "America" restaurant in Landlord's New York-New York Hotel, all as more particularly described therein. All terms defined in the Lease shall have the same meanings when used in this First Amendment, unless a different meaning is clearly expressed herein. B. The parties hereto desire to amend the Lease to reflect the agreement of Landlord and Tenant that Tenant will provide room service and poolside food service to guests of the Hotel and will operate and provide food and beverage service to Landlord's Employee Dining Room in the Hotel. ARTICLE I ROOM SERVICE 1.1 GENERAL ROOM SERVICE OBLIGATION. Tenant shall provide, on an exclusive basis, food and beverage room service to guests of the Hotel, twenty-four (24) hours per day, seven days per week, every day of the year. Tenant shall maintain such equipment and staffing as may be required to respond promptly to room service orders, and Tenant shall require its staff to maintain an appearance and a level of courteous service to guests of the Hotel which are both consistent with the standards of the Hotel. Landlord and Tenant agree to cooperate with one another to develop standards and minimum requirements for Tenant's room service operations. 1.2 MENU AND PRICING. The initial room service menu, including pricing (the "ROOM SERVICE MENU"), shall be provided to Landlord for Landlord's review and written approval not later than November 30, 1996. Any proposed modifications to the Room Service Menu shall also be subject to Landlord's review and written approval, which approval shall not be unreasonably withheld. Tenant shall replace all room service menus as required to reflect any approved modifications to such menus, or, at Landlord's option, Landlord shall replace such menus and Tenant shall reimburse Landlord for the cost of such replacement. Except for Tenant's initial pricing, Landlord agrees that prices which do not exceed four (4) times Tenant's actual costs shall not require further approval. The parties acknowledge that the quality and pricing of room service items are important to the reputation of the Hotel and to the overall level of service which the Hotel provides to its guests. Accordingly, subject to the terms of this Section 1.2 Landlord may approve or reject any proposed Room Service Menu in Landlord's reasonable discretion. 1.3 GROSS SALES FROM ROOM SERVICE. Gross Sales, as defined in Section 4.4 of the Lease, shall include the selling price received by Tenant for all room service items. 1.4 SERVICE CHARGE. Tenant shall be entitled to bill and collect from Hotel guests a service charge (the "SERVICE CHARGE") of Two Dollars ($2.00) for each "room order," and such Service Charge shall not be included in Tenant's Gross Sales. For purposes of this Section 1.4, a "ROOM ORDER" shall mean a delivery to a room in response to a room service order, without regard to the number of items or meals ordered and delivered and without regard to the number of guests served. The parties intend that the Service Charge shall remain reasonably comparable to similar charges for room service at similar resort properties on the Las Vegas strip. Tenant's Service Charge may therefor be adjusted from time to time by agreement of Landlord and Tenant as room service charges at similar resort properties are adjusted. ARTICLE II EMPLOYEE DINING 2.1 GENERAL EMPLOYEE DINING OBLIGATION. Tenant shall operate and provide food and beverage service to Landlord's employee dining room (the "EMPLOYEE DINING ROOM"), twenty-four (24) hours per day, seven days per week, every day of the year. No additional rent shall be charged to Tenant for the Employee Dining Room premises. Revenues derived by Tenant from the operation of the Employee Dining Room shall not be included in Tenant's Gross Sales, and Tenant shall not pay Percentage Rent with respect to such revenues. 2.2 BUILD-OUT. The Employee Dining Room will be built-out and furnished by Landlord at Landlord's cost and expense. Landlord shall reimburse Tenant for the reasonable cost of all food service fixtures and serving line equipment and cleaning supplies (but not tableware) used by Tenant exclusively in the Employee Dining Room ("LANDLORD REIMBURSABLES"), provided that all such fixtures and equipment and the pricing thereof have been approved by Landlord in advance, which approval shall not be unreasonably withheld, and that Tenant's request for reimbursement for any Landlord Reimbursables is supported by paid invoices, canceled checks or such other evidence of cost and payment as may be reasonably requested by Landlord. All items which are necessary for the operation of the Employee Dining Room and which are not Landlord Reimbursables, as defined above, shall be the responsibility of Tenant. 2.3 CLEANING AND MAINTENANCE. Tenant shall be responsible for the routine cleaning and maintenance of the (i) food preparation and serving areas of the Employee Dining Room; and (ii) all items used in the Employee Dining Room. Tenant shall replace or repair any such items which are lost or damaged; provided that, with respect to Landlord Reimbursables, Tenant shall only be 2 obligated to repair or replace items which are lost or damaged as a result of negligence or misuse by Tenant or its employees. Landlord shall repair and/or replace all other lost or damaged Landlord Reimbursables, and Landlord shall be responsible for the routine cleaning and maintenance of the dining area of the Employee Dining Room. 2.4 MENU AND PRICING. The quality and selection of food and beverages supplied to the Employee Dining Room shall be subject to Landlord's review and approval, which approval shall not be unreasonably withheld, and shall be at least comparable to other food and beverage service to employee dining facilities in similar resort properties on the Las Vegas Strip. Each meal shall include a main course with vegetable or salad, dessert and beverage, and the parties anticipate that the initial price per meal will be Four Dollars ($4.00). Such price per meal may be adjusted from time to time to reflect changes in Tenant's costs so long as such adjustments are approved, in advance, by Landlord, which approval shall not be unreasonably withheld. If Landlord requires that any of its employees be provided beverages without charge to the employee, Landlord shall be billed and shall reimburse Tenant directly for the cost of such beverages. If Landlord permits Tenant and/or other tenants to use such "free beverage" service, then the cost thereof shall be prorated among Landlord and such other users based upon the number of meals served in the Employee Dining Room to the employees of each such user. 2.5 RESTRICTED ACCESS AND PRIVILEGES. Landlord intends to use an employee dining card which may be electronically scanned to verify the dining room privileges of the card holder and which may be used to bill Landlord for the cost of the meal given to such employee if and to the extent that Landlord provides meals to its employees at Landlord's cost. Tenant agrees to honor any such system, as well as any modification or substitution therefor adopted by Landlord, and to deny service to any employee who is unable to provide the required proof of dining privileges. In addition, prior to commencing any free beverage service pursuant to Section 2.4 above, Tenant shall provide to Landlord, for Landlord's review and approval, proposed procedures for controlling access to and monitoring the usage of any such free service. 2.6 USE BY TENANT'S EMPLOYEES. Provided that such use does not interfere with dining room service to Landlord's employees, Tenant shall have the right to serve Tenant's employees, at Tenant's cost, in the Employee Dining Room. ARTICLE III POOL SERVICE 3.1 GENERAL OBLIGATION. Tenant shall provide food service to the pool area of the Hotel (the "POOL AREA"). 3.2 MENU AND PRICING. The initial menu for food service to the Pool Area, including pricing (the "POOL SERVICE MENU"), shall be provided to Landlord for Landlord's 3 review and written approval. Any proposed modifications to the Pool Service Menu shall also be subject to Landlord's review and written approval, which approval shall not be unreasonably withheld. Tenant shall replace all menus as required to reflect any approved modifications to such menus, or, at Landlord's option, Landlord shall replace such menus and Tenant shall reimburse Landlord for the cost of such replacement. Except for Tenant's initial pricing, Landlord agrees that prices which do not exceed four (4) times Tenant's actual costs shall not require further approval. The parties acknowledge that the quality and pricing of food items are important to the reputation of the Hotel and to the overall level of service which the Hotel provides to its guests. Accordingly, subject to the terms of this Section 3.2, Landlord may approve or reject the quality, selection of food served in the Pool Area. Tenant shall not sell or otherwise offer beverages in the Pool Area. 3.4 ADDITIONAL RENT. Gross Sales shall include the selling price received by Tenant for all items sold at or from the Pool Area ("POOL AREA GROSS SALES") and Tenant shall pay to Landlord, as Percentage Rent with respect to such sales, sixteen percent (16%) of Tenant's Pool Area Gross Sales. Such Percentage Rent shall be paid from the first dollar of Pool Area Gross Sales. ARTICLE IV DEFAULT Upon the occurrence of a default by Tenant in the performance of its obligations with respect to room service, employee dining or pool service, as described in Articles I, II and III above, provided that such default is not cured by Tenant within ten (10) days after written notice from Landlord, Landlord shall have the right, without limiting its other remedies, to terminate Tenant's rights under this First Amendment with respect the service (i.e., room service, employee dining or pool service) which is the subject of Tenant's default. Such default shall not, however, constitute an Event of Default pursuant to Article 25 of the Lease, nor give Landlord the right to terminate the Lease. Upon any termination of Tenant's rights pursuant to this Article IV by reason of a default by Tenant, Landlord shall have the right to have access to and the use of Tenant's kitchen facilities to the extent reasonably necessary for Landlord or Landlord's designee to provide room service, pool service and employee dining in keeping with the standards of the Hotel. No such use of Tenant's kitchen shall constitute a constructive eviction of Tenant nor entitle Tenant to any reduction in rent due under the Lease. ARTICLE V MISCELLANEOUS 5.1 PROCEDURES AND REQUIREMENTS. Landlord may adopt reasonable procedures and requirements for the performance of the obligations of Tenant hereunder. Tenant shall abide by all such procedures and requirements, as they may be amended from time to time by Landlord. Landlord shall give Tenant notice of any procedures and requirements hereunder, as well as any modification of such procedures and requirements, at least ten (10) days prior to the effective date of the same. 4 5.2 CONFIRMATION OF LEASE. Except as specifically amended or modified herein, each and every term, covenant, and condition of the Lease as amended is hereby ratified and shall remain in full force and effect. 5.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their legal representatives, successors and permitted assigns. 5.4 GOVERNING LAW. This instrument shall be interpreted and construed in accordance with the law of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first above written. LANDLORD: NEW YORK-NEW YORK HOTEL, LLC a Nevada limited liability company /s/ William J. Sherlock --------------------------------------- William J. Sherlock President and Chief Executive Officer TENANT: LAS VEGAS AMERICA CORP. a Nevada corporation By: /s/ Michael Weinstein --------------------------------------- Title: President 5 EX-10 3 EXHIBIT 10.7 LEASE AGREEMENT THIS LEASE is made and entered into this 17th day of May, 1996, by and between NEW YORK-NEW YORK HOTEL, LLC, a Nevada limited liability company, herein referred to as "Landlord", and LAS VEGAS FESTIVAL FOOD CORP., a Nevada corporation, herein referred to as "Tenant". R E C I T A L S A. Landlord is the owner of that certain real property located in Las Vegas, Nevada upon which Landlord is constructing a hotel and casino which will be known as the New York- New York Hotel (the "Hotel"); and B. Tenant desires to lease an area within the Hotel for the operation of quick service restaurants, together with food service stands and kiosks and one full service restaurant, in a food court setting (the "Food Court"). NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows: ARTICLE 1 DESCRIPTION AND LOCATION OF PREMISES 1.1 Premises. Landlord, in reliance upon and in consideration of the representations, warranties, covenants and conditions herein contained on the part of Tenant, hereby lets and demises to Tenant, and Tenant hereby rents, hires and takes of and from Landlord for the term and upon the provisions, covenants and conditions herein set forth, that certain area (the "Premises") cross-hatched on Exhibit "A" attached hereto and incorporated herein by reference. The Premises consists of approximately 8,336 square feet, together with approximately 17,000 square feet of storage, office and kitchen space located in the basement of the Hotel. 1.2 Relocation of Premises. Tenant acknowledges that Landlord shall have an absolute right from time to time to relocate the Premises within the Hotel at any time during the term hereof provided that the site to which the Premises is relocated shall be approximately the same size as the original Premises and shall be exposed to reasonably equivalent pedestrian traffic. Landlord shall notify Tenant of such relocation not less than sixty (60) days prior to the date thereof. Landlord shall reconstruct on the relocated Premises improvements substantially identical to those constructed by Tenant and Landlord in the Premises prior to the relocation. As of the latter of the date specified in Landlord's notice to Tenant or ten (10) days after Landlord has notified Tenant that it has completed the improvements to be constructed by Landlord on the relocated Premises, Tenant shall surrender the Premises originally demised to Tenant hereunder and move to the relocated Premises. All reasonable out-of-pocket costs incurred by Tenant in moving to the relocated Premises shall be 1 reimbursed to Tenant by Landlord. The relocated Premises shall thereafter be deemed to be the Premises for all purposes of this Lease as if originally demised to Tenant hereunder. Tenant agrees that, promptly on demand, it shall execute an amendment to Exhibit A designating the location of the relocated Premises. If the relocated Premises are not ready for Tenant's occupancy for the operation of the Food Court on the date on which the Premises originally demised must be surrendered to Landlord under this Section 1.2, then all rent and other charges under this Lease shall be abated until the relocated Premises has been completed and are ready for Tenant's occupancy for the operation of the Food Court. If any period referred to in the preceding sentence continues for more than twenty-one (21) days (the period which begins after the expiration of such twenty-one (21) days and which ends when the relocated Premises is completed and ready for Tenant's occupancy for the operation of the Food Court is referred to herein as the "Extended Hiatus Period"), Landlord shall make the following payments to Tenant: (i) for all employees of the Food Court actually paid by Tenant (and provided that all such employees are actually employed and fully compensated by Tenant during the twenty-one (21) days preceding the Extended Hiatus Period), Tenant's full, normal payroll expense for the Extended Hiatus Period (including, without limitation, payroll taxes, health and disability insurance, unemployment insurance contributions and pension and profit-sharing contributions), but less any compensation paid to any employees of the Food Court as employees of another restaurant operated by an affiliate of Tenant; (ii) an amount equal to the Net Profit (as defined below) of the Food Court for the Extended Hiatus Period. Such amounts shall be paid monthly to Tenant, on the first day of each calendar month, beginning with the month following the month in which the Extended Hiatus Period begins; each of such payments shall include all sums due hereunder in respect of the preceding month and shall be pro rated for any partial month. Tenant shall submit to Landlord each month a statement, in reasonable detail, showing the amounts then due to Tenant under this Section 1.2, and Landlord's payment shall be based on such statement (subject to Landlord's right to dispute such statement in good faith). As used in this Section 1.2: the term "Agreed Gross Receipts" shall mean, for each month during the Extended Hiatus Period, an amount equal to the average of the Gross Sales of the Food Court for each of the three calendar months immediately preceding the month in which the Extended Hiatus Period begins; and the term "Net Profit" shall mean, for each such month, one-twelfth of the net profit of the Food Court reported (in accordance with GAAP) on Tenant's books for the calendar year preceding the year in which the Extended Hiatus Period begins. Any payments due to Tenant under this Section 1.2 and unpaid at the end of the Extended Hiatus Period, may (without limiting Tenant's remedies) be deducted by Tenant from the installments of Base Rent and Percentage Rent thereafter coming due under this Lease. 1.3 Modification of Premises. In connection with any remodeling of all or any portion of the Hotel, Landlord shall have the right to change the dimensions or reduce the size of the Premises. However, no such reduction may result in the size of the Premises being less than ninety percent (90%) of its original size or in the remaining portion of the Premises not being suitable for the conduct of Tenant's business hereunder, or in a material change in the nature or conduct of Tenant's operations in the Premises. In the event of any remodeling pursuant to this Section 1.3, Landlord shall repair any resulting damage to the Premises, and shall restore the Premises (including 2 Tenant's interior design concept) so as to create an architecturally and functionally harmonious space. In connection with any such remodeling, Landlord may require Tenant to cease conducting business from the Premises for up to thirty (30) days. Rent shall be abated during any period that Landlord requires Tenant to cease conducting business. ARTICLE 2 IMPROVEMENT OF PREMISES 2.1 Landlord's Work. Landlord shall, at its expense, construct portions of the Premises in substantial accordance with plans and specifications prepared or to be prepared by Landlord's architect, incorporating in such construction all "Landlord's Work" set forth in the "Work Letter" attached hereto as Exhibit "B". Landlord shall supply the design and construct, as a part of Landlord's Work, the exterior to all buildings in the Food Court. Landlord represents and warrants to Tenant that Landlord's Work will be constructed in compliance with all applicable laws, including building codes, and will conform in all material respects to the building plans which have been made available to Tenant. Landlord's Work with respect to the Premises will substantially conform to Landlord's Building Plans, as described in Section 2.3. 2.2 Tenant's Work. All work in the Premises not provided herein to be done by Landlord shall be performed by Tenant (hereinafter called "Tenant's Work"), including, but not limited to, all work designated as Tenant's Work in the Work Letter, and Tenant shall commence Tenant's Work as soon as reasonably practicable after Landlord has substantially completed Landlord's Work and delivered the Premises to Tenant, and shall do and perform at its expense all Tenant's Work diligently and promptly and in accordance with the terms of the Work Letter. Tenant covenants and agrees that it shall expend not less than the amount required for the construction of the Tenant's Work in accordance with plans approved by Landlord. 2.3 Tenant's Obligations Before Commencement Date. Landlord has made available to Tenant and to Tenant's architect and space planning consultants, Landlord's plans and specifications for Landlord's Work ("Landlord's Building Plans"). Not later than thirty (30) days after receipt of Landlord's Building Plans, Tenant will deliver to Landlord Tenant's proposed plans and specifications for Tenant's Work in such detail as Landlord may reasonably require (a "Preliminary Submittal"). Within ten (10) business days after receipt of the Preliminary Submittal, Landlord shall notify Tenant of any nonconformity's with the Work Letter, Landlord's Plans or any other failure to meet with Landlord's approval, to the extent the same is required by an express provision of this Lease. Tenant shall, within fifteen (15) days after receipt of any such notice, submit "Final Construction Documents" based upon the Preliminary Submittal and incorporating Landlord's comments thereto. Landlord shall notify Tenant of its approval or disapproval of the Final Construction Documents within ten (10) days after receipt. Upon approval, Landlord shall return one (1) set of approved Final Construction Documents to Tenant and the same shall become a part hereof by this reference as Exhibit "B-2". Approval of construction documents by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy or sufficiency, or 3 compliance with applicable codes, and Tenant shall be solely responsible for such construction documents and for obtaining all governmental approvals which are required for Tenant's Work. Tenant shall not commence any of Tenant's Work until Landlord has approved Tenant's Final Construction Drawings in writing. During the construction of Tenant's Work, Landlord shall cooperate and shall cause its contractors to cooperate in good faith with Tenant and its contractors, to the end that construction may be completed as promptly as possible. Provided that the Delivery Date, as hereinafter defined, is no later than June 15, 1996, Tenant shall complete Tenant's Work by November 15, 1996 (the "Required Completion Date"). Landlord shall give Tenant five (5) days prior written notice of the Delivery Date, such Delivery Date being the date upon which (i) Landlord's Work in the Premises has been substantially completed in accordance with the requirements therefor and (ii) the Premises are available for the commencement of Tenant's Work. If the Delivery Date is later than June 15, 1996, the Required Completion Date shall be one hundred fifty-three (153) days after the actual Delivery Date. Tenant hereby releases Landlord and its contractors from any claim whatsoever for damages against Landlord or its contractors for any delay in the date on which the Premises shall be ready for delivery to Tenant or for any delay in commencing or completing any of Landlord's Work; provided, however, that (i) nothing contained in the foregoing provisions of this paragraph shall relieve Landlord of its obligations under the final sentence of the preceding paragraph; and (ii) if the Delivery Date does not occur on or before December 15, 1997, or if the Hotel (including the casino) does not open for business on or before such date, then Tenant may terminate this Lease by notice given to Landlord not later than January 15, 1998, in which event Landlord shall promptly pay to Tenant the amount of all costs then paid or payable by Tenant in connection with Tenant's Work, and neither party shall otherwise have any rights against or obligations to the other with respect to this Lease or the Premises. 2.4 Failure of Tenant to Perform. The parties recognize that it would be extremely difficult or impossible to determine Landlord's damages resulting from Tenant's failure to open for business fully fixtured, stocked and staffed on the Required Completion Date, including, but not limited to, damages from loss of Percentage Rent (hereinafter defined) from Tenant and other tenants, diminished leaseability, and/or mortgageability and damage to the economic value of the Hotel. Accordingly, if Tenant fails to proceed diligently with Tenant's Work or to open for business fully fixtured, stocked and staffed on or before the Required Completion Date (except to the extent that any delay is caused by Landlord's failure to complete any material portion of Landlord's Work in a timely manner or by any unreasonable interference with Tenant's Work by Landlord's contractors, or by Landlord's failure to allow Tenant's contractors to have access to the Premises to construct Tenant's Work), such failure shall be a Tenant Event of Default and Landlord may, on ten (10) days notice to Tenant and in addition to the right to exercise any other remedies and rights herein or at law provided, proceed with Tenant's Work using any contractor Landlord desires and making any changes or revisions to Landlord's Work required because of any delay or failure of Tenant to perform its obligations hereunder, all at Tenant's expense. In addition, Landlord shall have the right to collect rent from the Required Completion Date in an amount equal to the Base Rent 4 (hereinafter defined) and other additional rent and other amounts payable by Tenant hereunder, together with an amount equal to fifty percent (50%) of 1/365ths of the Base Rent for each day that Tenant has failed to open for business on and after the Required Completion Date, which latter amount shall be in lieu of Percentage Rent that might have been earned had Tenant opened in a timely fashion. In the event that Tenant fails to make a timely Preliminary Submittal or to timely submit its Final Construction Documents, as provided in this Lease, then Landlord shall have the right, in addition to its other rights and remedies as herein provided, to collect from Tenant One Hundred Dollars ($100.00) per calendar day for each day that such plans are not so submitted. All remedies in this Lease or at law provided shall be cumulative and not exclusive and shall survive the expiration of the Lease Term or the earlier termination of this Lease. 2.5 Condition of Premises. Tenant's taking possession of the Premises for the construction of Tenant's Work shall be conclusive evidence of Tenant's acceptance thereof in good order and satisfactory condition; except for such matters as Tenant shall, within thirty (30) days after taking possession of the Premises, specify in a written notice or notices to Landlord (hereinafter, "Punch List Items") and except for latent defects in Landlord's Work which were not discoverable in the exercise of ordinary prudence during such thirty (30) day period. Landlord shall diligently correct all Punch List Items which constitute defects in Landlord's Work. Tenant agrees that no representations respecting the condition of the Premises, no warranties or guarantees, expressed or implied, with respect to workmanship or any defects in material, and no promise to decorate, alter, repair or improve the Premises either before or after the execution hereof, have been made by Landlord or its agents to Tenant unless the same are contained herein. 2.6 Refurbishment. Tenant shall keep the Premises and all of Tenants' personal property in a first class condition and state of repair in keeping with the standards of the Hotel throughout the Term of this Lease. Not less than once every five (5) years during the Term, as defined below, including any renewal term, Tenant agrees that it will substantially refurbish the Premises, it being understood that the refurbishment may be accomplished in phases during each five (5) year period, as Tenant reasonably determines. ARTICLE 3 TERM 3.1 Lease Term. The term (the "Term") of this Lease shall be for a period of Ten (10) years, commencing on the earlier of (i) the Required Completion Date; or (ii) the first date upon which the Premises is open for business to the general public (the "Opening Date"), unless terminated earlier as elsewhere herein provided. The date upon which the Term commences shall be referred to herein as the "Commencement Date". At such time as the Commencement Date has been determined, Landlord shall insert the Commencement Date and the expiration date of the Term on Exhibit "C" attached hereto and deliver a copy thereof to Tenant, which shall thereafter be incorporated in, and form a part of, this Lease. 5 3.2 Holding Over. Should Tenant hold possession of the Premises with the consent of Landlord after the expiration of the stated Term of this Lease, such holding over shall create a tenancy from month to month only, upon the same terms and conditions as are herein set forth. If any such holding over is without Landlord's express written consent, the Percentage Rent and the Base Rent shall be equal to one hundred fifty percent (150%) of the Percentage Rent and the Base Rent which were payable during the last month of the Lease Term. 3.3 Option to Renew. Tenant shall have two(2) five (5) year options to renew subject to Tenant's average Gross Sales being at least Ten Million Dollars ($10,000,000) per year for the immediate two (2) prior Lease Years. Each such option shall be exercised, if at all, by written notice to Landlord not less than one hundred eighty (180) days prior to the end of the then current term. The Base Rent for the first renewal Term hereunder shall be increased to [omitted]* per month, and the Base Rent for the second renewal Term hereunder shall be increased to [omitted]* per month. ARTICLE 4 RENT 4.1 Base Rent. Tenant shall pay minimum rent to Landlord during the Term of the Lease at the rate of [omitted]* per month for years 1 through 10, (the "Base Rent"), in advance, beginning on the Commencement Date and continuing on the first day of each calendar month thereafter. If the month in which the Term commences or ends is not a full calendar month, then the Base Rent for such month shall be prorated on the basis of the actual number of days in such month. 4.2 Percentage Rent. Tenant shall pay to Landlord at the time and in the manner set forth herein the amount by which the following applicable percentage of Gross Sales during each month of the Lease Year exceeds the Base Rent for such period (hereinafter called the "Percentage Rent"):
Gross Sales Percentage Rental Payable ----------- ------------------------- [omitted]* [omitted]*
Notwithstanding the foregoing, the Percentage Rent in respect of any Lease Year shall not exceed the applicable percentage of Gross Sales for the full Lease Year. Accordingly, if the monthly payments of Percentage Rent made during any Lease Year exceed the aggregate Percentage Rent due for such Lease Year, the amount of any overpayment shall be applied pursuant to Section 4.5. 4.3 Lease Year. "Lease Year," as used herein, means each calendar year during the Term, together with the "Partial Lease Year" which begins on the Commencement Date and ends - ----------------- * Certain Information has been Omitted and Filed Separately with the SEC Pursuant to a Request for Confidential Treatment Pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended. 6 on December 31 of the year in which the Commencement Date occurs and the Partial Lease Year, if any, which ends on the date upon which the Term expires or the Lease is otherwise terminated. 4.4 Gross Sales. As used in this Lease, "Gross Sales" means the aggregate selling price received by Tenant (except as provided herein with respect to promotional and complimentary meals) of all products, merchandise and services ("Products") sold in, upon or from the Premises by Tenant, its subtenants, licensees and concessionaires, personally or from any vending or coin operated or token operated device, whether for check, cash, on credit or otherwise, including other types of "cashless" transactions, excluding only the following: (i) monies and credit received by Tenant in the settlement of claims for loss or damage of Tenant's Products; (ii) an amount equal to the cash refunded or credit allowed on Products returned by customers and accepted by Tenant, or the amount of cash refunded or credit allowed thereon in lieu of Tenant's acceptance thereof, but only to the extent that the sales relating to such Products were made in, about or from the Premises; provided, however, that in no event shall the cost or value of any coupons, trading stamps, premiums, advertising or other promotional devices be deducted or excluded from Tenant's Gross Sales or be otherwise construed as a discount, refund, allowance or credit hereunder. Any credit or refund shall reduce Gross Sales for the accounting period during which such credit or refund is made but shall not affect Gross Sales, for the period in which the original sale was made; and (iii) sales taxes, casino entertainment taxes, if any, so called luxury taxes now or hereafter imposed upon the sale of Products, whether such taxes are added separately to the selling price thereof and collected from customers or paid by Tenant and included in the retail selling price; (iv) any sales of product, merchandise, services or the like by Landlord. (v) promotional or complimentary meals served without charge (up to $1,000 per month, noncumulative, and the parties agree that, except as provided in clause 4.4(ix) below, the menu price of all other promotional or complimentary meals shall be included in Gross Sales; (vi) the value of complimentary appetizer or dessert items furnished as a part of a meal which is included in Gross Sales; (vii) amounts which are deducted from meal checks in response to customer dissatisfaction; 7 (viii) goods or food items delivered to another restaurant of Tenant where such delivery is made solely for the convenient operation of Tenant's business and not for the purpose of consummating a sale made in, upon or from the Premises; (ix) Receipts from pay telephones in the Premises; (x) gratuities received by Tenant; (xi) the sale of Tenant's trade fixtures and equipment not in the ordinary course of business; and (xii) meals furnished to Tenant's employees without profit. All gross income of Tenant or any other person, firm or corporation from any operations in, at or upon the Premises which are not specifically excluded by this Section shall be included in Gross Sales. All sales originating at, upon or from the Premises shall be considered as made and completed thereon and shall be included in Tenant's Gross Sales, even though bookkeeping and payment of the account therefor may be transferred to another place for collection, and even though actual filling of the sale or order or actual delivery of the merchandise may be made from a place other than the Premises. In the event Tenant elects to allow its customers to make credit purchases, no credit shall be allowed for uncollected or uncollectible credit accounts. Each sale upon credit shall be treated as a sale for the full price in the month during which such sale is made, regardless of the time of when or whether Tenant shall receive payment therefor. 4.5 Percentage Rent Payments. On or before the 15th day of each calendar month during the Term of this Lease (including the calendar month next succeeding the last month of the Term hereof), Tenant shall deliver to Landlord a written statement signed and certified by Tenant or an officer of Tenant as being true and correct, setting forth the amount of Tenant's Gross Sales during the immediately preceding calendar month, and on the same date Tenant shall pay Landlord the percentage rental for the immediately preceding calendar month. Within thirty (30) days after the end of each Lease Year during the Term of this Lease, Tenant shall deliver to Landlord a written statement, signed and certified by Tenant or an officer of Tenant to be true and correct, setting forth the amount of Tenant's Gross Sales made during each month of the immediately preceding year. If Tenant has paid Landlord for such Lease Year Percentage Rent that is less than Tenant is obligated to pay for such period, Tenant shall pay Landlord the amount of such deficiency concurrently with Tenant's delivery of its annual report of Gross Sales hereunder. If Tenant has paid more than the Percentage Rent required to be paid for such period, Landlord shall credit the amount of such excess against rent next coming due hereunder from Tenant, or, if the Term has expired, Landlord shall pay the amount of such excess to Tenant directly. 4.6 Books and Records; Audit. Tenant agrees that it will keep complete books of accounts reflecting Gross Sales,and all of the business activities with respect to the Premises and will 8 comply with generally accepted accounting principles ("GAAP"). Said books of account shall, at a minimum, include: 1. Dated and time stamped cash register tapes (customer receipt and detail audit) which provide a non-resettable, non-clearing gross sales total and/or consecutively numbered duplicate sales tickets which are to be dated and time stamped. When consecutively numbered sales tickets are utilized, Tenant shall maintain the vendor invoice for such sales ticket purchases, which shall accurately reflect the commencing and ending numbers of all sequences. Documentation of voided sales must be kept with regular sales tickets and tapes and originals of voided tickets must be retained. 2. Daily sales summaries showing Nevada and out-of-state sales. 3. Monthly sales journals showing breakdown of sales by day. 4. Authenticated bank deposit slips showing deposits of daily sales. If deposits are not made on a daily basis, then the number of days' receipts deposited should be shown on the deposit slip and in the monthly sales journal. 5. Monthly state sales tax returns and cancelled checks showing payment of those taxes; 6. The portion of Federal Income Tax returns showing Tenant's gross receipts for the same period of time that Tenant is required to maintain its Federal Income Tax returns by the Internal Revenue Service. 7. All of Tenant's purchase orders and invoices relating to the purchase, exchange, or replacement of Products sold or to be sold by Tenant at, upon, or from the Premises. Landlord shall have the right to examine such books and records at any reasonable time and place. Lessor shall have the right at any time during the Term and within thirty (30) days after the end of the Term to have an audit conducted of Tenant's books of account by Landlord's employees or auditors of Landlord's choice. If any audit reveals Gross Sales were understated by more than two percent (2%), the entire cost and expense of such audit shall be borne by Tenant. It is further agreed that an understatement by Tenant of five percent (5%) or more of Gross Sales during any three (3) months being audited shall be deemed an Event of Default unless such understatement was caused by the fraud of Tenant's employees without Tenant's knowledge. 4.7 Place for Payments. All Base Rent, Percentage Rent and other monies required to be paid by Tenant hereunder (collectively referred to herein as "rent") shall be paid to Landlord 9 without deduction or offset, and, except as may be specifically set forth in this Lease without prior notice or demand, in lawful money of the United States of America, at 3790 Las Vegas Blvd. South, Las Vegas, Nevada, 89109 or at such other place as Landlord may, from time to time, designate in writing. If the time for payment of any amount due from Tenant to Landlord is not set forth in this Lease, such amount shall be due within five (5) business days after such amount is billed by Landlord. 4.8 Interest. Any rent due from Tenant to Landlord which is not paid within five (5) business days after the date due shall bear interest at two percent (2%) per annum in excess of the Prime Rate of Interest published from time to time in the "Money Rates" section of the Wall Street Journal (or a comparable interest rate selected by Landlord in the event the Wall Street Journal no longer publishes a Prime Rate) (hereinafter, the "Default Rate"). 4.9 Late Charge. In the event Tenant is more than ten (10) days late in paying any rent due under this Lease more than twice during the same Lease Year, then, beginning with the third such delinquent payment of rent, and continuing with each subsequent payment of rent during the Term which is more than ten (10) days late, Tenant shall pay Landlord a late charge equal to five percent (5%) of the delinquent rent, and, provided that Landlord gives Tenant written notice of the delinquent rent, Tenant shall pay an equivalent late charge every ten (10) days thereafter until the delinquent rent, including all interest and assessed late charges, has been paid in full. The parties agree that the amount of such late charge represents a reasonable estimate of the cost and expense that would be incurred by Landlord in processing each delinquent payment of rent by Tenant and that such late charge shall be paid to Landlord as liquidated damages for each delinquent payment, but the payment of such late charge shall not excuse or cure any default by Tenant under this Lease. The parties further agree that the payment of late charges and the payment of interest provided for in Section 4.8 above are distinct and separate from one another in that the payment of interest is to compensate Landlord for the use of Landlord's money by Tenant, while the payment of a late charge is to compensate Landlord for the additional administrative expense incurred by Landlord in handling and processing delinquent payments. 4.10 Failure to Achieve Minimum Sales. Notwithstanding anything to the contrary contained elsewhere in this Lease, Landlord may, at the end of the fifth full Lease Year or any subsequent Lease Year, terminate this Lease, without compensation to Tenant, in the event that Tenant's average monthly Gross Sales for a period consisting of three consecutive months during any such Lease Year is less than Eight Hundred Thirty-Three Thousand Three Hundred Thirty- Three Dollars ($833,333), unless Tenant pays to Landlord, in addition to Base Rent, an amount equal to the difference between Tenant's Percentage Rent for such months and the amount of Percentage Rent which would have been due from Tenant had Tenant's actual average Gross Sales for such months been Eight Hundred Thirty-Three Thousand Three Hundred Thirty-Three Dollars ($833,333). Termination hereunder shall be upon ninety (90) days written notice. Tenant acknowledges that Landlord has made no representation to Tenant regarding anticipated Gross Sales or projected number of visitors and guests in the Hotel. 10 ARTICLE 5 GUEST RELATIONS Tenant acknowledges that the Hotel is a first class hotel and that the maintenance of Landlord's reputation and the reputation of the Hotel, as well as the goodwill of all of Landlord's guests and invitees, is essential to Landlord and that any impairment thereof may cause great damage to Landlord. Tenant therefore covenants that it shall operate the Premises in accordance with high standards of honesty, integrity, quality and courtesy so as to maintain and enhance the reputation and goodwill of Landlord and the Hotel and at all times in keeping with and not inconsistent with or detrimental to the operation by Landlord of an exclusive, first-class resort hotel facility. Tenant shall regularly monitor the performance of each of Tenant's employees at the Premises so that such standards may be consistently maintained. Tenant therefore further agrees that repeated failure to maintain such standards shall be deemed an Event of Default by Tenant and that repeated complaints from customers or guests which are reasonable and which are not promptly remedied by Tenant shall be evidence of Tenant's failure to maintain such standards. ARTICLE 6 EMPLOYEES; BONDING 6.1 Staffing. Tenant shall staff the Premises with such number of its employees as are reasonably required for the proper and efficient operation of Tenant's business. Tenant agrees to adopt its own rules of conduct and personal appearance standards which are consistent with the first class standards of the Hotel. Tenant shall, at Tenant's expense, require its prospective and present employees to participate in a pre-employment drug testing program. Such program shall not apply to persons who have been employed by an affiliate of Tenant for in excess of three (3) years; and, in connection with such program, Tenant may advise its employees that the testing is a requirement of the Hotel. 6.2 Gaming Compliance. Tenant acknowledges that Landlord, its parent, subsidiaries and affiliates are businesses that are or may be subject to and exist because of privileged licenses issued by governmental authorities. If requested to do so by Landlord, Tenant shall obtain any license, qualification, clearance or the like which shall be requested or required of Tenant by Landlord or any regulatory authority having jurisdiction over Landlord or any parent company, subsidiary or affiliate of Landlord. If Tenant fails to satisfy such requirement or if Landlord or any parent company, subsidiary or affiliate of Landlord is directed to cease business with Tenant by any such authority, or if Landlord shall in good faith determine that Tenant, or any of its officers, directors or employees was or is involved in any relationship which jeopardizes Landlord's business or such licenses, or those of its parent, subsidiaries or affiliates, or if any such license is threatened to be, or is, denied, curtailed, suspended or revoked by reason of any improper activities of Tenant or any such related person and if, promptly after receiving notice thereof from Landlord (which notice must contain sufficient particulars to permit Tenant to take appropriate action), Tenant does not cease such activities or sever the relationship of any such person to Tenant so as to satisfy 11 Landlord and the appropriate governmental authority, this Lease may be terminated by Landlord on not less than thirty (30) days notice to Tenant and without liability to either party. 6.3 Restricted Areas. Tenant shall not cause or permit its employees to enter upon those areas of the Hotel which are designated "Employees Only". Access to such areas is to be restricted to the employees of Landlord. The foregoing shall not apply to employee lavatories or to the employee cafeteria. However, in the case of the employee cafeteria, (i) the use thereof by Tenant's employees will be permitted only so long as such use does not unreasonably interfere with the use of such cafeteria by Landlord's employees, and (ii) Tenant shall cause its employees to abide by reasonable scheduling requirements established by Landlord. 6.4 Bonding. All employees of Tenant who are reasonably expected to perform a portion of their tasks in portions of the Hotel outside of the Premises (including, for example, employees who are expected to deliver items to rooms in the Hotel) shall be bonded in such amounts as may be reasonably required by Landlord from time to time. In no event shall any employee of Tenant perform work in portions of the Hotel outside of the Premises until the bond for such employee has been delivered to Landlord and Landlord has approved the same, in writing. 6.5 Tenant's Employees. Tenant shall be responsible for all salaries, employee benefits, social security taxes, federal and state unemployment insurance and any and all similar taxes relating to its employees and for workers' compensation coverage with respect thereto pursuant to applicable law. Tenant's employees shall not be entitled to participate in, or to receive, any of Landlord's employee benefit or welfare plans, nor shall they be deemed agents of Landlord for purposes of this Lease. Tenant shall be responsible for verifying its employees' work authorizations under federal law, including any necessary employment verification process under the Immigration Reform and Control Act of 1986, as amended, before such employees perform services at the Premises. 6.6 Tenant's Employment Policies. Landlord and Tenant agree that Tenant shall have the sole and complete responsibility for establishing the employment practices, policies, procedures and terms and conditions of employment of Tenant's employees. Nothing contained in this Lease shall be used to infer or create a single or joint employer relationship between Landlord and Tenant, as the terms single and joint employer are interpreted by the National Labor Relations Board, courts and administrative agencies. ARTICLE 7 POSSESSION AND SURRENDER OF PREMISES 7.1 Acceptance. Tenant shall, by entering upon and occupying the Premises, be deemed to have accepted the Premises subject to the conditions and limitations stated in Section 2.5 above. 7.2 Surrender. Upon any surrender of the Premises, or termination or expiration of this Lease, Tenant shall, except as otherwise provided in this Lease, redeliver the Premises to Landlord 12 in the same condition in which it existed at the Opening Date, reasonable wear and tear, repairs which are the obligation of Landlord and permitted alterations and installations excepted, and deliver to Landlord all keys for, and all combinations for locks, safes and/or vaults in the Premises. 7.3 Fixtures. All fixtures (except trade fixtures) which may be made or installed or placed by either Tenant or Landlord upon the Premises, either before or during the Term of this Lease, shall remain upon the Premises and shall be surrendered with the Premises at the termination of this Lease. 7.4 Removal of Trade Fixtures. Upon the termination of this Lease, Tenant shall be entitled to remove from the Premises all of its trade fixtures, furnishings and equipment, including the personal property shown on Tenant's Plans. If Tenant fails to remove any trade 13 fixtures from the Premises prior to the end of the Lease Term or prior to any earlier termination thereof, such trade fixtures shall become Landlord's property. 7.5 Failure to Surrender. If the Premises is not surrendered at the end of the Lease Term, Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant founded on such delay. ARTICLE 8 USE OF PREMISES 8.1 Permitted Use. The Premises is leased to Tenant solely for the purpose of conducting thereon on a non-exclusive basis a food court consisting of four (4) quick service restaurants, one (1) full service restaurant of approximately 3,400 square feet, and an agreed upon number of food carts, food stands and kiosks serving, at a minimum, hamburgers, pizza, chicken and ribs, deli foods, mexican foods, coffee, ice cream, pretzels, non-alcoholic beverages and retail items which are approved by Landlord (such approval not to be unreasonably withheld). Tenant may offer alcoholic beverages only in its mexican food court restaurant and only if (i) Tenant provides table service in such restaurant; and (ii) such beverages are served for consumption only in the Food Court; and (iii) Tenant maintains all licenses and permits which are required under applicable law with respect to the service of such beverages. Food items to be offered from the Premises and the pricing thereof shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. Except for Tenant's initial pricing, Landlord agrees that prices which do not exceed four (4) times Tenant's actual costs shall not require further approval. Tenant shall not use or suffer to be used the Premises, or any portion thereof, for any other purpose or purposes whatsoever, without Landlord's written consent therefor first had and obtained, and such consent may be withheld in Landlord's sole and absolute discretion. Without limiting the generality of the foregoing, Tenant shall not conduct gaming activities at the Premises. Landlord hereby reserves to itself the right to conduct keno gaming on the Premises, the location and type of which shall be subject to Tenants' approval, which approval shall not be unreasonably withheld or delayed but which may take into account the preservation of Tenant's theme, considering location, design, sound sensitivity and ambience. As provided in Section 4.4 above, Tenant shall not operate a restaurant or similar operation under the tradename used by Tenant at the Premises at any other Las Vegas Strip location, including any location within a hotel and/or casino property, during the Term of this Lease. 8.2 Tenant's Trade Names. Tenant shall operate the quick service restaurants in the Food Court under trade names mutually agreed upon by Landlord and Tenant and no other trade names shall be used without prior written consent of Landlord which shall not be unreasonably withheld. Tenant shall not conduct any business at any time either before or after the termination of this Lease, either in the Premises or elsewhere, under a name in which the words "New York- New York" appear; provided, however, that Tenant may conduct its business in the Premises under such 14 a name (and the trade name set forth above) and use the logo of Landlord in advertising, but such use of Landlord's logo shall be deemed a revocable license or privilege only, terminable at any time, which confers no property rights on Tenant, and which, in any event, shall cease upon the expiration or sooner termination of this Lease. Any such use shall not occur without the consent of Landlord to the presentation of its name and/or logo, which consent shall not be unreasonably withheld. Neither such approval of name and use of logo nor anything herein shall be deemed to abridge the right of Landlord to grant or license the use of the words "New York-New York" to any other person at any time. During the Term of this Lease Tenant hereby grants Landlord a license to use Tenant's trade name and any marks related to such trade name for the limited purpose of promoting and advertising the Food Court. Any such use shall not occur without the consent of Tenant to the presentation of its name and/or logo, which consent shall not be unreasonably withheld. 8.3 Liquor License. Landlord will cooperate with Tenant with respect to Tenant's application for a liquor license for its full service restaurant in the Premises. 8.4 Product Agreements. Tenant acknowledges that Landlord may enter into agreements with Coke or Pepsi-Cola which will require that only certain beverage products may be offered for sale or use within the Hotel, including the Premises. Tenant agrees that upon reasonable notice from Landlord it will abide by the terms and conditions of such agreements as they may relate to product use within the Premises; provided that (i) such agreements provide that the subject products will be offered at the lowest available price; (ii) the service provided and the quality of the subject products is reasonably comparable to the quality of similar products which would be available to Tenant in the Las Vegas marketplace; and (iii) any such product agreement for soda shall require that Tenant receive its soda equipment without charge. 8.5 Prohibited Uses. Tenant shall not permit the Premises to be used for any of the following purposes: a. Vending Machines. Tenant shall not, without Landlord's prior written approval, operate or permit to be operated on the Premises any coin or token operated vending machines or similar device for the sale or leasing to the public of any goods, wares, merchandise, food, beverages, and/or service, including, without limitation, pay telephones, pay lockers, pay toilets, scales and amusement devices. Notwithstanding the foregoing, Tenant may have pay telephones in the Premises so long as the company which services such telephones is the company which services Landlord's pay telephones in the Hotel. b. No Residential Use. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof as living quarters,sleeping quarters or lodging rooms. c. No Non-Retail Use. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof for office, clerical or other nonselling purposes, provided, 15 however, that space in the Premises may be used for such purposes to the extent reasonably required for the conduct of Tenant's permitted business. d. No Fire Sales. Tenant shall not, without Landlord's prior written approval, conduct or permit any fire, bankruptcy or auction sale in, on or about the Premises. e. No Obstructions. Tenant shall not, without Landlord's prior written approval, which shall not be unreasonably withheld, cover or obstruct any windows, glass doors, lights, skylights, or other apertures that reflect or admit light into the Premises, except for temporary closures and obstructions during remodeling, repair or maintenance work in the Premises. f. No Animals. Tenant shall not keep or permit the keeping of any animals of any kind in, about or upon the Premises without Landlord's prior written approval. g. No Warehouse Use. Tenant shall not use the Premises for storage or warehouse purposes beyond such use as is reasonably required to keep Tenant's business adequately stocked for sales of product and merchandise in, at or from the Premises. 8.6 Approval of Fixtures and Equipment. All fixtures and other equipment to be used by Tenant in, about or upon the Premises shall be subject to the prior written approval of Landlord, which shall not be unreasonably withheld. 8.7 Maintenance of Personal Property. Except as provided for elsewhere herein, Tenant shall keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) Tenant's personal property and all portions of the Premises (other than Landlord's Work) and every part thereof and any and all appurtenances thereto wherever located. Tenant shall be solely responsible to equip and to keep and maintain the Food Court dining area, including without limitation the floors, tables, chairs, and counters in the dining area, in a clean and sanitary condition at all times. Tenant shall also keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) any special equipment, fixtures or facilities (other than Landlord's Work) which special facilities shall include but not be limited to grease traps, located outside the Premises. Landlord shall regularly scrub the floor in the Food Court dining area. Tenant shall store all trash and garbage in metal or other Health Department approved containers so as not to be visible or create a nuisance to guests, customers and business invitees in the Hotel, and so as not to create or permit any health or fire hazard, and arrange for the prompt and regular removal thereof to garbage disposal locations designated by Landlord. Landlord shall keep and maintain in good order, condition, and repair (including, except as otherwise provided in this Lease, any such replacement and restoration as is required for that purpose) those portions of the Premises constituting Landlord's Work, as well as the common areas of the Hotel in the vicinity of the Premises and cause all such areas to be in compliance with all governmental rules, regulations, ordinances, statutes and laws, and the orders 16 and regulations of the National Board of Fire Underwriters, the Insurance Service Office, or any other body now or hereafter exercising similar functions, now or hereafter in effect. 8.8 Compliance with Law. Except as provided in the following sentence, Tenant shall at all times during the Term of this Lease comply with and shall cause the Premises to be in compliance with all governmental rules, regulations, ordinances, statutes and laws, and the orders and regulations of the National Board of Fire Underwriters, the Insurance Service Office, or any other body now or hereafter exercising similar functions, now or hereafter in effect pertaining to the Hotel, the Premises or Tenant's use thereof. Landlord shall cause those portions of the Premises constituting Landlord's Work to be in compliance with all governmental rules, regulations, ordinances, statutes and laws. Tenant shall not, without the prior written consent of Landlord and all insurance companies which have issued any insurance of any kind whatsoever with respect to the Hotel or the Premises, sell, or suffer to be kept, used or sold in, upon or about the Premises any gasoline, distillate or other petroleum products or any other substance or material of an explosive, inflammable or radiological nature, except for the lawful use of petroleum products in a manner and for such purposes as are customarily associated with the operation of a restaurant. 8.9 Rules and Regulations. Tenant hereby covenants and agrees that it shall make all reasonable efforts to ensure that its agents, employees, servants, contractors, subtenants and licensees shall abide by any reasonable rules and regulations as Landlord may, from time to time, reasonably adopt for the safety, care and cleanliness of the Premises, or the Hotel or for the preservation of good order thereon or to assure the operation of a first-class resort hotel facility. All such rules and regulations shall be enforced by Landlord uniformly and in a nondiscriminatory manner. 8.10 Business Practices and Minimum Hours of Operation. Tenant shall operate the Premises during the entire Lease Term in accordance with sound business practices, due diligence and efficiency so as to provide the maximum Gross Sales which may reasonably be expected to be produced by such manner of operation. Tenant shall maintain in the Premises Tenant's personal property necessary for the conduct of Tenant's business therein, in a businesslike manner, shall carry at all times in the Premises sufficient quantities of Products as shall be reasonably designed to produce the maximum return to Landlord and Tenant, and shall staff the Premises at all times with sufficient personnel to serve its customers. All Products shall meet the high standards of the Hotel. Tenant shall conduct its business in the Premises, every day of the year during such hours as Landlord may reasonably require, provided that Tenant shall be open for business in at least three (3) of its restaurants or quick service restaurants in the Premises at least sixteen (16) hours per day. In the event of breach by Tenant of any of the conditions of this paragraph, Landlord shall have, in addition to any and all remedies herein provided, the right, at its option, to collect an amount equal to one-thirtieth (1/30) of the highest monthly Percentage Rent to which Landlord is or was entitled during the preceding twelve (12) month period for each and every day, or any portion thereof, that Tenant is not open for business as herein provided. Said amount shall be due on demand and shall be deemed to be in lieu of any Percentage Rent that might have been earned during such period of Tenant's failure to conduct its business as herein provided. Tenant shall be open for such additional 17 hours as shall be set from time to time by Landlord, and Tenant may, upon prior written notice to Landlord, remain open additional hours. 8.11 Photographic Services. Tenant shall permit the photographic concessionaire with whom Landlord has entered into an agreement to provide photographic services to patrons of Tenant's food court on the Premises, provided the same does not unreasonably interfere with the conduct of Tenant's business. 8.12 Interference with Other Tenants. Tenant shall not do, permit or suffer anything to be done, or kept upon the Premises which will obstruct or interfere with the rights of other tenants, Landlord or the patrons and customers of any of them, or which may reasonably be anticipated to annoy any of them or their patrons or customers by reason of unreasonable noise or other objectionable conduct, nor will Tenant commit or permit any nuisance on the Premises or commit or suffer any immoral or illegal act to be committed thereon. 8.13 Refunds and Settlements by Landlord. In the event a dispute shall arise between Tenant and any of its customers concerning the acceptability of Tenant's Products which results in a customer demanding a refund from Landlord, Landlord may in good faith and in the exercise of a reasonable business judgment make such refund or rebate to avoid embarrassment to the Hotel and to retain the goodwill of its customers. In such case Tenant will forthwith reimburse Lessor in the amount of such refund or rebate. 8.14 Advertising and Signage. All advertising, signs, placards or other promotional events proposed to be posted, shown or exhibited by Tenant in or upon the Premises and all additional outside advertising (including, without limitation, television, radio and print advertising) which mentions Landlord or the Hotel, shall be subject to the prior written approval of Landlord. Without limiting the foregoing, Tenant shall not advertise at the Premises any other premises owned or operated by Tenant without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Tenant acknowledges that the Premises may be designated by a particular suite number. In such event, Tenant agrees to include and use such suite number on all of its stationary, correspondence, sales receipts and advertisements as part of its address. Tenant agrees to forthwith remove or cease any such advertising, sign, placard or exhibit which in the reasonable judgment of Landlord is deemed to be objectionable or inconsistent with the decor or policies of Landlord in the operation of the Hotel. Tenant shall also refrain from any advertising which is so objectionable, in Landlord's reasonable judgment, as to result in embarrassment to Landlord, loss of goodwill or damage to the reputation of the Hotel. None of Tenant's signs, placards or advertising shall be exhibited outside of the Premises or in the lobby or any other part of the Hotel without Landlord's prior written consent. However, Landlord shall permit outside advertising consistent in tone and content with that allowed to other restaurants in the Hotel upon the same terms as are required of such other restaurants. At no time during the Term of this Lease nor for a period of six (6) months after its termination shall Tenant place or cause to be placed, whether on or off the Premises, any window card, sign or other advertising, including newspaper adds, which recites that 18 Tenant has lost its lease, is going out of business or is vacating the Premises. Landlord shall provide reasonable directional signage within the Hotel to assist customers in locating the Premises. 8.15 Intellectual Property. Tenant represents and warrants to Landlord that Tenant owns, or has obtained an appropriate license to use, all copyrights, trademarks, tradenames and other intellectual property rights used in Tenant's business, including, without limitation, all rights in Tenant's tradename, trade or service mark and logo. 8.16 Security. Except as provided herein, Tenant acknowledges that Landlord's security department and security officers are not responsible for providing security services in the Premises and that all such responsibility is the obligation of Tenant. Landlord shall, however, provide security service to those portions of the common areas of the Premises which are under Landlord's control (which shall not include any seating areas). In no event shall Landlord be liable to Tenant or any third party for the security department's failure to respond to a request for aid or assistance by Tenant. 8.17 Conduct of Tenant. Tenant acknowledges that Landlord, its parent, subsidiaries and affiliates have a reputation for offering high-quality entertainment and/or services to the public, and that it and its affiliates are subject to regulation and licensing, and desire to maintain their reputation and receive positive publicity. Tenant therefore agrees that throughout the Term of this Lease, it and its officers and management will not conduct themselves in a manner that adversely affects or is detrimental to the reputation or image of Landlord or its affiliates, and will not directly or indirectly make any oral, written or recorded public statement or comment that is disparaging, critical, defamatory or otherwise not in the best interests of Landlord. Landlord shall use its good faith business judgment in determining whether Tenant's conduct or that of its officers and management adversely affects Landlord or its affiliates, and, upon such determination, Landlord shall have the right to terminate this Lease upon notice to Tenant without liability to either party if Tenant does not cause such activity to be terminated and use its reasonable best efforts to remedy or mitigate any material harm done to Landlord within thirty (30) days after such notice from Landlord. The termination or removal of any person responsible for actions or statements prohibited by this Section 8.18 shall constitute full compliance with Tenant's obligations to remedy such default. 8.18 Emissions and Hazardous Materials. Except for small quantities of substances customarily used in the operation of a restaurant and kept and used by Tenant in accordance with applicable laws, Tenant shall not, without the prior written consent of Landlord, cause or permit, knowingly or unknowingly, any Hazardous Material (hereinafter defined) to be brought upon, kept, used, discharged, leaked, or emitted in or about, or treated at the Premises. As used in this Lease, "Hazardous Material(s)" shall mean any hazardous, toxic or radioactive substance, material, matter or waste which is or becomes regulated by any federal, state or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement, and shall include asbestos, petroleum products and the terms "Hazardous Substance" and "Hazardous Waste" as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended 42 19 U.S.C. 'SS' 9601 et seq. ("CERCLA"), and the Resource Conservation and Liability Act, as amended 42 U.S.C. 'SS' 9601 et seq. ("RCRA"). To obtain Landlord's consent, Tenant shall prepare an "Environmental Audit" for Landlord's review. Such Environmental Audit shall list: (1) the name(s) of each Hazardous Material and a Material Safety Date Sheet ("MSDS") as required by the Occupational Safety and Health Act; (2) the volume proposed to be used, stored and/or treated at the Premises (monthly); (3) the purpose of such Hazardous Material; (4) the proposed on-premises storage location(s); (5) the name(s) of the proposed off-premises disposal entity; and (6) an emergency preparedness plan in the event of a release or spill. Additionally, the Environmental Audit shall include copies of all required federal, state, and local permits concerning or related to the proposed use, storage, or treatment of any Hazardous Material(s) at the Premises. Tenant shall submit a new Environmental Audit whenever it proposes to use, store, or treat a new Hazardous Material at the Premises or when the volume of existing Hazardous Materials to be used, stored or treated at the Premises expands by ten percent (10%) during any thirty (30) day period. If Landlord in its reasonable judgment finds the Environmental Audit acceptable, then Landlord shall deliver to Tenant Landlord's written consent. Notwithstanding such consent, Landlord may revoke its consent upon:(1) Tenant's failure to remain in full compliance with applicable environmental permits and/or any other requirements under federal state, or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement (including but not limited to CERCLA and RCRA related to environmental safety, human health, or employee safety; (2) the Tenant's business operations pose or potentially pose a human health risk to other Tenants; or (3) the Tenant expands its use, storage, or treatment of any Hazardous Material(s) in a manner inconsistent with the safe operation of a restaurant and hotel. Should Landlord consent in writing to Tenant bringing, using, storing or treating any Hazardous Material(s) in or upon the Premises, Tenant shall strictly obey and adhere to any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements (including but not limited to CERCLA and RCRA which in any way regulate, govern or impact Tenant's possession, use, storage, treatment or disposal of said Hazardous Material(s). In addition, Tenant represents and warrants to Landlord that (1) Tenant shall apply for and remain in compliance with any and all federal, state or local permits in regard to Hazardous Materials; (2) Tenant shall report to any and all applicable governmental authorities any release of reportable quantities of any Hazardous Material(s) as required by any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements; (3) Tenant, within five (5) days of receipt, shall send to Landlord a copy of any notice, order, inspection report, or other document issued by any governmental authority relevant to the Tenant's compliance status with environmental or health and safety laws; and, (4) Tenant shall remove from the Premises all Hazardous Materials at the termination of this Lease, except for those, if any, introduced by Landlord or at Landlord's direction. In addition to, and in no way limiting Tenant's duties and obligations as set forth in Article 16 of this Lease, should Tenant breach any of its duties and obligations as set forth in this Section 8.20, or if the presence of any Hazardous Material(s) brought onto or occurring on the Premises after the Delivery Date results in contamination of the Premises, the Hotel, any land other than the Hotel, the atmosphere or any water or waterway (including groundwater), or if contamination of the 20 Premises or of the Hotel by any Hazardous Material(s) otherwise occurs for which Tenant is otherwise legally liable to Landlord for damages resulting therefrom, Tenant shall indemnify, save harmless, and at Landlord's option and with attorneys approved in writing by Landlord, defend Landlord, and their contractors, agents, employees, partners, officers, directors and mortgagees, if any, from any and all claims, demands, damages, expenses, fees, costs, fines, penalties, suits, proceedings, actions, causes of action, and losses of any and every kind and nature (including, without limitation, diminution in value of the Premises or the Hotel, damages for the loss or restriction on use of the rentable or usable space or of any amenity of the Premises or the Hotel, damages arising from any adverse impact on marketing space in the Hotel, and sums paid in settlement of claims and for attorney's fees, consultant fees and expert fees, which may arise during or after the Lease Term or any extension thereof as a result of such contamination). This includes, without limitation, costs and expenses, incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence of Hazardous Material(s) on or about the Premises or the Hotel, or because of the presence of Hazardous Material(s) anywhere else which came or otherwise emanated from Tenant or the Premises. Without limiting the foregoing, if the presence of any Hazardous Material(s) on or about the Premises or the Hotel caused or permitted by Tenant results in any contamination of the Premises or the Hotel, Tenant shall, at its sole expense, promptly take all actions and expense necessary to return the Premises and/or the Hotel to the condition existing prior to the introduction of any such Hazardous Material(s) to the Premises or the Hotel; provided, however, that Landlord's approval of such actions shall first be obtained in writing. Nothing contained herein shall be deemed to limit Landlord's obligations under law for the removal of Hazardous Materials which exist on the Premises prior to the delivery thereof to Tenant or to impose upon Tenant any obligation for the removal of such Hazardous Materials. ARTICLE 9 ALTERATIONS AND IMPROVEMENTS Tenant may make no alteration, repairs, additions or improvements in, to or about the Premises (collectively, "Tenant Alterations"), without the prior written consent of Landlord, which shall not be unreasonably withheld, and Landlord may impose as a condition to such consent such requirements as Landlord, in its reasonable discretion, may deem necessary or desirable, including without limitation, (a) the right to approve the plans and specifications for any work, (b) the right to require insurance satisfactory to Landlord, (c) the right to require evidence of Tenant's ability to make full payment for any work, (d) requirements as to the manner in which or the time or times at which work may be performed and (e) the right to designate the contractor or contractors to perform Tenant Alterations which affect the fire sprinkler or life safety systems of the Hotel. All Tenant Alterations shall be compatible with a first class hotel/casino complex and completed in accordance with Landlord's requirements and all applicable rules, regulations and requirements of governmental authorities and insurance carriers. Tenant shall pay to Landlord Landlord's reasonable charges 21 (which shall be assessed by Landlord at its cost, without profit) for reviewing and inspecting all Tenant Alterations to assure full compliance with all of Landlord's requirements. Landlord does not expressly or implicitly covenant or warrant that any plans or specifications submitted by Tenant are safe or that the same comply with any applicable laws, ordinances, codes, rules or regulations. Further, Tenant shall indemnify, protect, defend and hold Landlord harmless from any loss, cost or expense, including attorneys' fees and costs, incurred by Landlord as a result of any defects in design, materials or workmanship resulting from Tenant Alterations. If requested by Landlord, Tenant shall provide Landlord with copies of all contracts, receipts, paid vouchers, and any other documentation in connection with the construction of such Tenant Alterations. Tenant shall promptly pay all costs incurred in connection with all Tenant Alterations. Notwithstanding the foregoing provisions of this Article 9, Landlord's prior consent shall not be required with respect to any Tenant Alteration which (i) costs less than Twenty-Five Thousand Dollars ($25,000); (ii) does not materially affect the interior or exterior appearance of the Premises; and (iii) does not affect fire sprinklers, life safety, plumbing, electrical or mechanical systems of the Hotel. ARTICLE 10 LANDLORD'S REPAIR OBLIGATION Landlord agrees to keep in good structural order, condition and repair the exterior walls, and roof of the Hotel and all portions of Landlord's Work except for any damage thereto as to which Article 21 applies and other damage caused by any act or negligence of Tenant or its agents, employees, servants, contractors, subtenants or licensees (which other damage shall be promptly repaired by Tenant at Tenant's expense). ARTICLE 11 PARKING AND COMMON AREAS Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers and business invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use such common areas of the Hotel (including, but not limited to, the parking lot, walkways, sidewalks, hallways, lobby and public restrooms) as may be designated from time to time by Landlord, subject to such rules and regulations as Landlord may from time to time impose, provided such designation and such rules and regulations do not materially interfere with Tenant's business. Subject to the foregoing: Tenant agrees that it, its agents, employees, servants, contractors, subtenants and licensees shall abide by such rules and regulations and that Landlord shall have the exclusive management and control of all common areas; Landlord may at any time close any common area or other portions of the Hotel to make repairs or changes, to prevent the acquisition of public rights in such areas, or to discourage noncustomer parking (provided that no such closure (other than temporary closures which are necessary to make repairs or changes) materially and adversely affects access to the Premises). Landlord may do such other acts in and to the common areas and the other portions of the Hotel as in its judgment may be desirable. Landlord agrees, however, to use all reasonable efforts to maintain adequate access to the 22 Premises when the Premises is open for business so that Tenant's customers and staff can enter and leave the Food Court. All parking areas which Tenant's employees may be permitted to use are to be used under a revocable license, and if any such license is revoked, or if the amount of such area is diminished, Landlord shall not be subject to any liability, nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation or diminution of such areas be deemed constructive or actual eviction; provided, however, that Landlord shall exercise its rights with respect to such revocable license for parking by Tenant's employees in a nondiscriminatory manner. Tenant shall direct its employees to park only in those areas (which may include off-site parking areas) designated by Landlord from time to time for such purposes. Landlord agrees to maintain the common areas in the vicinity of the Premises in good condition and to keep the same clean and neat in appearance. ARTICLE 12 TAXES 12.1 Personal Property Taxes. Tenant shall be liable for and shall pay before delinquency (and, upon demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of the payment thereof) all taxes, fees and assessments of whatsoever kind or nature, and penalties and interest thereon, if any, levied against Tenant's property or any other personal property of whatsoever kind and belonging to Tenant or any person claiming by, through or under Tenant, situate or installed in or upon the Premises, whether or not affixed to the realty. If at any time during the Term of this Lease any such taxes on personal property are separately assessed as part of the tax on the real property of which the Premises is a part, then in such event Tenant shall pay to Landlord the amount of such additional taxes upon presentation of appropriate evidence as to the amount due. 12.2 Other Taxes. Tenant shall pay when due all taxes, assessments or fees for which Tenant is liable under applicable law and which arise directly or indirectly from Tenant's operations at the Premises. Within five (5) days of written demand from Landlord, Tenant shall furnish Landlord evidence satisfactory to Landlord of the timely payment of any such tax, assessment or fee. 12.3 Tax on Rents. If at any time during the Term of this Lease, under the laws of the United States, Nevada or any political subdivision thereof, a tax or excise on rents, however described, is levied or assessed by the United States, Nevada or any political subdivision against Landlord on account of any rent reserved under this Lease, all such tax or excise on rents shall be paid by Tenant. The foregoing shall not apply to any income, franchise, profits, estate, gift, or similar tax imposed on Landlord. 12.4 Statements Received by Landlord. Whenever Landlord shall receive any statement or bill for any tax, payable in whole or in part by Tenant as additional rent, or shall otherwise be required to make any payment on account thereof, Tenant shall pay the amount due hereunder within ten (10) days after demand therefor (or, if later, within 10 days prior to the last date on which such 23 tax may be paid without penalty) accompanied by delivery to Tenant of a copy of such tax statement, if any. 12.5 Casino Entertainment Tax. Tenant agrees that it will collect any applicable Casino Entertainment Tax ("CET") associated with the sale of food, beverage or merchandise from the Premises and will pay the same to the taxing authority on a timely basis, or if not permitted to pay the same directly, shall remit the CET due to Landlord no later than the 10th day of the month following the month in which the taxable sales occurred. Tenant shall make all documents containing information relative to the computation of the CET available for inspection upon notice by representatives of Landlord and the Gaming Authorities. This obligation shall continue beyond the Term of this Lease. Tenant shall be liable for any and all CET, interest and penalties found to be payable in connection with the sale of food, beverage or merchandise from the Premises as a result of understated taxable revenues, insufficiency of records or, if Tenant is permitted to pay the CET directly to the taxing authority, untimely payment of the CET. If Tenant is not permitted to pay the CET directly to the taxing authority, then, if Tenant has timely remitted the payment to Landlord as required in this Section 12.5,Tenant shall not be liable for the untimely payment of the CET to the taxing authority. ARTICLE 13 SERVICES TO THE PREMISES 13.1 Utilities. Landlord shall provide customary utility lines stubbed to each enclosed food service area in the Premises, including supply and return lines for air conditioning, in the manner and to the extent set forth in the Work Letter. Except as otherwise provided in the Work Letter, the distribution of utility lines within the Premises shall be the responsibility of Tenant, at Tenant's cost. Tenant shall pay all "hook-up fees," connection charges and other similar charges which may be levied by utility provides as a fee for connecting the Premises to the utility supply. Landlord shall pay for all gas, power and electric current, sewer and all other utilities (including sewer usage charges, but not sewer "hook-up fees" or connection charges) used by Tenant in the Premises; Tenant acknowledges that, because of the nature of the Premises, Tenant might not have access to the controls for heating,air conditioning or lighting at the Premises and shall not attempt to make any changes to such controls located outside the Premises. Landlord, at Landlord's cost, shall provide Tenant with one telephone line and a house phone. Tenant shall be responsible for local and long distance service. Tenant may at Tenant's expense, install other telephone lines (including pay telephones), provided the same are not incompatible with the Hotel's telephone system. Landlord, at Landlord's cost, shall provide garbage service for the Premises; provided that Tenant shall be responsible for removing garbage from the Premises and transporting the same to Landlord's designated trash enclosure or dumpster. In addition, heating, air conditioning, sewer, hot, cold and chilled water and natural gas (for cooking purposes) shall be supplied to the Premises without additional cost to Tenant. Heat and air conditioning shall be supplied so as to maintain comfort levels in keeping with those of the Hotel and, in any event, so as to keep the Premises reasonably comfortable at all times. Hot, cold, and chilled water shall be supplied in such quantities 24 and at such temperatures as are suitable for Tenant's operations. Landlord may, from time to time, prescribe reasonable rules and regulations for the implementation of this Section. Tenant shall not install any equipment which can exceed the capacity of any utility facilities serving the Premises and if any equipment installed by Tenant requires additional utility facilities, the same shall be installed at Tenant's expense in compliance with all code requirements and plans and specifications which must first be approved in writing by Landlord, which approval shall not be unreasonably withheld. 13.2 Limitation upon Landlord's Obligation. Landlord shall not be obligated to perform any service or to repair or maintain any structure or facility except as provided in this Article and Articles 10 and 11 of this Lease. The cost of any service, maintenance or repairs made by Landlord pursuant to this Lease which are made necessary because of the negligence or misuse of Tenant, Tenant's agents, employees, servants, contractors, subtenants, licensees, shall be paid by Tenant within ten (10) days after receipt of a billing therefor from Landlord. Landlord reserves the right to temporarily stop any service when Landlord deems such stoppage necessary, whether by reason of accident or emergency, or for repairs or improvements or otherwise. Landlord shall not be liable under any circumstances for loss or injury however occurring, through or in connection with or incident to any stoppage of such services. Landlord shall have no responsibility or liability for failure to supply any services or maintenance or to make any repairs when prevented from doing so by any cause beyond Landlord's control. Landlord shall not be obligated to inspect the Premises and shall not be obligated to make any repairs or perform any maintenance within the Premises hereunder unless first notified of the need thereof in writing by Tenant. In the event that Landlord shall fail to commence such repairs or maintenance within ten (10) days after said notice (or two (2) days after said notice if the failure of the item requiring repair materially interferes with the conduct of Tenant's business), Tenant's sole right and remedy for such failure shall be, after further notice to Landlord, to make such repairs or perform such maintenance and to deduct the cost and expenses thereof from the rent payable hereunder; provided, however, that the amount of such deduction not exceed the reasonable value of such repairs or maintenance; and provided, further, if such repairs or maintenance are needed because of act or omission of Tenant, its agents, servants, employees, customers, invitees or licensees, the cost thereof shall be paid by Tenant. To the extent that Landlord is required to perform any service or repair, Landlord shall do so with reasonable diligence and in a manner which is reasonably calculated to avoid interference with Tenant's business in the Premises. ARTICLE 14 INSURANCE 14.1 Liability Insurance. Tenant shall, at all times during the term hereof, at its sole cost and expense, procure and maintain in full force and effect a policy or policies of commercial general liability insurance including coverage for both owned and non-owned automobiles and contractual indemnity coverage issued by an insurance carrier reasonably acceptable to Landlord assuring against loss, damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever (subject to usual and customary policy exclusions) in connection with the Premises or Tenant's use thereof. Such liability insurance shall be evidenced 25 by a single limits policy or policies in an aggregate amount of not less than Ten Million Dollars ($10,000,000.00). Such liability insurance shall include fire legal liability coverage of not less than the amount of Landlord's deductible under Landlord's property insurance for the Hotel, as such deductible amount may be modified from time to time ("Landlord's Deductible"), so long as such insurance is available upon commercially reasonable terms. Upon request from Tenant, Landlord shall notify Tenant of the current amount of Landlord's Deductible. Landlord expects that the initial amount of Landlord's Deductible will be Five Hundred Thousand Dollars ($500,000). Landlord, Primadonna Resorts and MGM Grand Hotel, Inc. shall be named as an additional insured (but not named insureds) (and at Landlord's option, any other persons, firms or corporations having an interest and designated by Landlord shall be named as additionally insured (but not named insured)) under each such policy of insurance. 14.2 Property Insurance. Tenant shall, at all times during the term hereof, at its sole cost and expense, procure and maintain in full force and effect standard form of fire and casualty with standard "ALL-RISK" coverage protecting against all risks of physical loss or damage, including, without limitation, sprinkler leakage coverage and plate glass insurance covering all plate glass in the Premises and all of Tenant's property, improvements and betterments to the Premises and Tenant's products and merchandise, and the personal property of others in Tenant's possession in, upon or about the Premises. Such insurance shall be in an amount equal to the current replacement value of the property required to be insured. Tenant and Landlord, as their interests may appear, shall be the named loss payee (and at Landlord's option, Landlord's lender shall be named as additional loss payee) under each such policy of insurance. Tenant shall also carry business interruption insurance covering actual losses for a period of not less than twelve (12) months. 14.3 Policy Requirements. All policies required hereunder shall be with companies licensed to do business in Nevada and with a "General Policyholder's Rating" of A- or better and a "financial rating" of VII or better in the most recent edition of Best's Insurance Guide (or similar rating service if such guide is no longer published). A certificate issued by the insurance carrier for each policy of insurance required to be maintained by Tenant hereunder, and, upon request of Landlord, a copy of each such policy, shall be delivered to Landlord and all other additional insureds no later than ten (10) days after execution of this Lease and thereafter, as to policy renewals, within thirty (30) days prior to the expiration of the terms of each such policy. Each of said certificates of insurance and each such policy of insurance required to be maintained by Tenant hereunder shall be from an insurer and in form and substance reasonably satisfactory to Landlord and shall expressly evidence insurance coverage as required by this Lease and shall contain an endorsement or provision requiring not less than thirty (30) days written notice to Landlord and all other additional insured prior to the cancellation, diminution in the perils insured against, or reduction of the amount of coverage of the particular policy in question (provided that such thirty (30) day period may be reduced to ten (10) days if the cause for cancellation of the insurance policy is Tenant's failure to pay the insurance premium). In addition to the foregoing certificates, Tenant shall at all times during the Term hereof furnish Landlord with a current certificate of worker's compensation coverage evidencing coverage at Nevada statutory limits. Each policy of insurance provided for in Section 26 14.2, shall contain an express waiver of any and all rights of subrogation thereunder whatsoever against Landlord, its officers, agents and employees. All policies to be maintained in this Article 14, shall be written as primary policies and not contributing with or in excess of the coverage, if any, which Landlord may carry. Any other provision contained in this Article 14 or elsewhere in this Lease notwithstanding, the amounts of all insurance required hereunder to be maintained by Tenant shall be not less than an amount sufficient to prevent Landlord from becoming a coinsurer. The limits of the public liability insurance required to be maintained by Tenant under this Lease shall in no way limit or diminish Tenant's liability under Article 16 hereof and such limits shall be subject to increase at any time and from time to time during the Term if Landlord, in the exercise of reasonable discretion, deems such an increase necessary for its adequate protection; provided, however, that (i) Landlord may not exercise its right under this sentence more frequently than one time in any calendar year; and (ii) Tenant shall not be required to increase its required insurance coverage if the increased coverage would be unreasonable in light of insurance requirements for similarly situated tenants in similar projects in Las Vegas, Nevada. Coverage required by this Article 14 may be provided by a blanket policy or policies provided that the protection afforded pursuant to said policies with respect to the Premises and the Hotel shall not be less than that which is required pursuant to the terms hereof for a separate policy or policies. 14.4 Hazardous Activities. Tenant shall not use or occupy, or permit the Premises to be used or occupied, in a manner which will increase the rates of fire or any other insurance for the Premises or the Hotel; provided that Tenant's lawful use of the Premises as a restaurant as contemplated in this Lease shall not constitute a default under this Section 14.4. Subject to the foregoing, Tenant shall also not use or occupy, or permit the Premises to be used or occupied, in a manner which will make void or voidable any insurance then in force with respect thereto or the Hotel, or which will make it impossible to obtain fire or other insurance with respect thereto or the Hotel. If by reason of Tenant's default under the provisions of this Section, the fire or any other insurance rates for the Premises or the Hotel be higher than they otherwise would be, Tenant shall reimburse Landlord, as additional rent, on the first day of the calendar month next succeeding notice by Landlord to Tenant of said increase, for that part of all insurance premiums thereafter paid by Landlord which shall have been charged because of such failure of Tenant. 14.5 Waiver of Subrogation. Each Party hereby waives subrogation and any and all rights of recovery from the other,its officers, agents and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in their insurance actually carried or required to be carried pursuant to this Lease and to the extent of such insurance coverage or required coverage, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof to the extent of such insurance coverage or required coverage. Notwithstanding the foregoing provisions of this Section 14.5, Landlord waives its right of recovery against Tenant for damage to the Hotel caused by the negligence of Tenant or Tenant's employees or agents, to the extent that the cost of repairing such damage exceeds Landlord's Deductible, and Tenant waives its right of recovery against Landlord for damage to Tenant's property caused by the negligence of Landlord or Landlord's employees or 27 agents, to the extent that the cost of repairing such damage exceeds any applicable insurance deductible amount maintained by Tenant. 14.6 Landlord's Insurance.During the Term, Landlord shall maintain such property insurance as may be required by Landlord's lenders. Upon request form Tenant, Landlord shall furnish Tenant with a current certificate showing Landlord's insurance coverage. ARTICLE 15 LIENS 15.1 Indemnity for Liens. Tenant, at all times, shall indemnify and hold harmless Landlord, the Hotel, the Premises, the leasehold estate created by this Lease, any trade fixtures, equipment or personal property within the Premises, and each of them, from any claim, lien, tax lien or levy, attachment, garnishment, encumbrance, litigation or judgment, to the extent arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever. Similarly, Landlord, at all times, shall indemnify and hold harmless Tenant, the leasehold state created by this Lease, any trade fixtures equipment or personal property within the Premises, and each of them, from any claim, lien, tax lien or levy, attachment, garnishment, encumbrance, litigation or judgment, to the extent arising directly or indirectly from any obligation, action or inaction of Landlord whatsoever. 15.2 Prevention of Liens. Tenant, at all times, shall keep the Landlord, the Hotel, the Premises, the leasehold estate created by this Lease, any trade fixtures, equipment or personal property within the Premises, free and clear from any claim, liens, tax lien or levy, attachment, garnishment or encumbrance to the extent arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever. However, this Section 15.2, and Section 15.1, shall not apply to the granting of a security interest in Tenant's personal property in connection with a financing by Tenant or Tenant's direct or indirect parent corporation. 15.3 Release of Liens. If a mechanics' lien, tax lien or other lien is filed against the Hotel arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever, Tenant shall discharge or cause to be discharged (by bond or otherwise) such lien within thirty (30) days after Tenant receives notice of the filing thereof and shall not allow any such lien to be foreclosed upon. If such a mechanic's lien or other lien is filed against the Hotel, and Tenant fails to timely discharge such lien, Landlord may, without waiving its rights and remedies based on such breach of Tenant and without releasing Tenant from any of its obligations, cause such liens to be released by any means it shall deem proper, including payment in satisfaction of the claim giving rise to such lien. Tenant shall pay to Landlord within thirty (30) days following notice by Landlord, any sum paid by Landlord to remove such liens, together with interest at Landlord's cost of money from the date of such payment by Landlord. Tenant's obligation under the Section shall survive the expiration of the Term of this Lease or the earlier termination of this Lease. 28 15.4 Notice of Nonresponsibility. Tenant shall give Landlord at least ten (10) business days prior written notice before the commencement of any work, construction, alteration or repair on the Premises to afford Landlord the opportunity to record appropriate notices of nonresponsibility. ARTICLE 16 INDEMNIFICATION Tenant hereby covenants and agrees to indemnify, save, and hold Landlord, the Premises and the leasehold estate created by this Lease free, clear and harmless from any and all liability, loss, costs, expenses, including attorneys' fees, judgments, claims, liens, and demands of any kind whatsoever in connection with, arising out of, or by reason of any accident, injury, or damage, howsoever and by whomsoever caused, to any person or property whatsoever occurring, in, upon, about, or relating to Tenant's activities or use of the Premises or any portion thereof, including, without limitation, any infringement by Tenant or by any person engaged by Tenant or acting on Tenant's behalf of any copyright, patent, trademark or similar intellectual property rights of any other person or entity, other than pursuant to and in compliance with a license granted by Landlord. Landlord shall not be liable to Tenant or to any other person whatsoever for any damage occasioned by fire, smoke, falling plaster, electricity, plumbing, gas, water, steam, sprinkler, or other pipe and sewage system or by the bursting, running, or leaking of any tank, washstand, closet or waste of other pipes, nor for any damages occasioned by water being upon or coming through the roof, skylight, vent, trap door, or otherwise or for any damage arising from any acts or neglect of co-lessees or other occupants of the Hotel or of adjacent property, or of Landlord, or of the public, nor, to the extent provided in Section 13.2, shall Landlord be liable in damages or otherwise for any failure to furnish, or interruption of, service of any utility. ARTICLE 17 SUBORDINATION 17.1 Subordination of Tenant's Interest. Tenant agrees that this Lease and Tenant's interest in the Premises is secondary, junior and inferior to the lien of any mortgage, deed of trust or other encumbrance, together with any renewals, extensions or replacements thereof, now or hereafter placed, charged or enforced against the Premises, or any portion thereof, or any property of which the Premises is a part (hereinafter, a "Mortgage"). Notwithstanding the foregoing, upon request by Landlord, Tenant shall execute and deliver at any time, and from time to time, such documents as may be required to effectuate such subordination. 17.2 Priority. In the event that the mortgagee or beneficiary of any Mortgage elects to have this Lease a prior lien to its mortgage or deed of trust, then and in such event, upon such 29 mortgagee's or beneficiary's giving written notice to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of recordation of such mortgage or deed of trust. 17.3 Attornment. Tenant shall, in the event any proceedings are brought for the foreclosure of the Premises in the event of exercise of the power of sale under any Mortgage covering the Premises, or in the event of a sale of Landlord's interest in the Premises attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease. 17.4 Nondisturbance. Landlord, Tenant and Landlord's current lender shall enter into a nondisturbance and attornment agreement on the lender's form providing that, so long as no Tenant Event of Default occurs under this Lease, such lender will recognize this Lease and Tenant's rights hereunder. Tenant's obligation to subordinate its leasehold interest to any future Mortgage shall be subject to Tenant's receipt of a commercially reasonable nondisturbance and attornment agreement from the holder of such Mortgage. ARTICLE 18 ASSIGNMENT AND SUBLETTING 18.1 Assignment or Sublease without Consent Prohibited. The economic provisions and rental rates set forth in this Lease were negotiated by Landlord in consideration of, and would not have been granted by Landlord but for, the specific nature of the leasehold interest granted to Tenant hereunder, as such interest is limited and defined by various provisions throughout this Lease, including, but not limited to, the provisions of this Article 18 which define and limit the transferability of such leasehold interest. Landlord hereby reserves the right to receive any increased rental value of the Premises during the Term hereof as the same may be realized by any transfer of said estate (but not any value realized for Tenant's business or furniture, fixtures and equipment), except to the extent Tenant is specifically granted the right to transfer all or part of its leasehold and to retain all or part of the increased rental value thereof pursuant to the provisions of this Article 18. Except for the grant of a security interest in Tenant's personal property in connection with a financing by Tenant or its direct or indirect parent corporation, Tenant shall not directly or indirectly, voluntarily or by operation of law sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the Premises or Tenant's leasehold estate hereunder (collectively "Assignment"), or permit the Premises to be occupied or used by anyone other than Tenant or sublet the Premises (collectively "Sublease") or any portion thereof without Landlord's prior written consent in each instance. 18.2 Notice of Proposed Sublease or Assignment. If Tenant desires at any time to enter into an Assignment of this Lease or a Sublease of the Premises or any portion thereof, it shall first give written notice to Landlord of its desire to do so, which notice shall contain (a) the name of the proposed assignee, subtenant or occupant, (b) the nature of the proposed assignee's, subtenant's or 30 occupant's business to be carried on in the Premises, (c) the material terms and provisions of the proposed Assignment or Sublease, as reasonably requested by Landlord and (d) such financial information as Landlord may reasonably request concerning the proposed assignee, subtenant or occupant. 18.3 Landlord's Options. At any time within thirty (30) days after Landlord's receipt of the notice specified in Section 18.2 above together with any information requested by Landlord pursuant to subsections (c) and (d) of such Section 18.2, Landlord may by written notice to Tenant elect to (a) Sublease itself the portion of the Premises specified in Tenant's notice or any portion thereof for the term specified in such notice, in the case of a proposed Sublease, or (b) take an Assignment of Tenant's leasehold estate specified in Tenant's notice hereunder, or any portion thereof, in the case of a proposed Assignment. In the event Landlord elects to Sublease or take an Assignment from Tenant as described in subsections (a) and (b) above, it shall do so upon the terms set forth in Tenant's notice. 18.4 Standards for Consent. If Landlord does not elect either of the options set forth in subsections (a) and (b) of Section 18.3 above, Landlord shall not unreasonably withhold its consent to any Assignment, Sublease or Subleases to a third party or parties ("transferees"); provided, however, that Landlord's refusal to consent to any Assignment or Sublease shall be deemed reasonable if: (i) The transferee, in Landlord's reasonable opinion, is not of reputable and good character; (ii) The proposed transferee (itself or through its management or controlling organization), in Landlord's reasonable judgment, is not an experienced, proven and successful operator of businesses comparable to the type contemplated by this Lease; (iii) If the proposed use of the Premises by the subtenant or assignee is not a restaurant of similar kind and quality to the Food Court, the purposes for which the transferee intends to use the Premises are, in Landlord's reasonable judgment, incompatible with the Hotel or the business operations of other Tenants in the Hotel; (iv) In the reasonable judgment of the Landlord the purpose for which the subtenant or assignee intends to use the Premises is not in keeping with the standards of Landlord for the Hotel as a first class resort hotel facility, or is in violation of the terms of any other lease in the Hotel, it being understood that the purpose for which any subtenant or assignee intends to use the Premises may not be in violation of this Lease; (v) The proposed transferee has been involved in bona fide negotiations with Landlord for space in the Hotel within the preceding twelve (12) months and Landlord has 31 available other comparable space in the Hotel to offer to the prospective subtenant or assignee; (vi) The proposed subtenant or assignee is either an occupant of the Hotel (but only if Landlord can offer comparable space in the Hotel to such proposed assignee or sublessee) or a government (or subdivision or agency thereof); (vii) Taking into account funds available from and committed by a controlling organization: the proposed assignee or sublessee is, in the reasonable judgment of Landlord, insolvent or financially unable to meet the projected costs of the obligations to be assumed for the unexpired Term of this Lease; or the proposed assignee or sublessee has a net worth which is, in the reasonable opinion of Landlord, insufficient to enable it to operate a successful first class business of the type contemplated herein and to meet the projected costs of obligations to be assumed for the unexpired Term of this Lease; (viii) The transferee operates another similar business, under the same trade name to be used at the Premises, at a Las Vegas Strip location, including any location within a hotel and/or casino property; (ix) An Event of Default has occurred and is continuing under this Lease; (x) The proposed Sublease is for less than all of the Premises; or (xi) The proposed Sublease or Assignment is to be effective within two (2) years after the Commencement Date at a time when Tenant's Food Court is profitable. If Landlord consents to any Sublease or Assignment under this Section 18.4, Tenant may thereafter within thirty (30) days after Landlord's consent, but not later than the expiration of said thirty (30) days, enter into such Sublease of the Premises or portion thereof, or Assignment upon the terms and conditions set forth in the notice furnished by Tenant to Landlord pursuant to Section 18.2 above. 18.5 No Release of Tenant. No consent by Landlord to any Assignment or Sublease by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after the Assignment or Sublease. The consent by Landlord to any Assignment or Sublease shall not relieve Tenant from the obligation to obtain Landlord's express written consent to any other Assignment or Sublease. Any Assignment or Sublease which is not in compliance with this Article 18 shall be void as against the Landlord and, at the option of Landlord, shall constitute a material default by Tenant under this Lease. The acceptance of rent by Landlord from a proposed assignee or sublessee shall not constitute the consent to such Assignment or Sublease by Landlord. Notwithstanding the foregoing, if Landlord exercises its option under Section 18.3 with respect to an Assignment or a Sublease of all or substantially all of the Premises, or if Landlord consents to an 32 Assignment to a successor tenant with a net worth (including the net worth of any guarantor or guarantors) not less than that of Tenant at the time of such Assignment, then Tenant shall be relieved of any liability under this Lease accruing after the effective date of such Assignment. 18.6 Assumption of Tenant's Obligations. Each assignee or other transferee, other than Landlord, shall assume, as provided in this Section 18.6, all obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant from and after the effective date of the assignment for the payment of the rent, and for the performance of all the terms, covenants, conditions and agreements herein contained on Tenant's part to be performed for the Term of this Lease. No Assignment shall be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and an instrument in recordable form which contains a covenant of assumption by the assignee reasonably satisfactory in substance and form to Landlord, consistent with the requirements of this Section 18.6, but the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee from its liability as set forth above. 18.7 Assignment to Affiliate. Notwithstanding the foregoing provisions of Section 18.1, 18.2, 18.3 and 18.4 above, Tenant may assign this Lease without Landlord's consent to any corporation or partnership in which ARK Restaurants Corp. owns more than fifty percent (50%) of all ownership interests; provided that ARK Restaurants Corp. (or another restaurant operator with comparable experience and a comparable reputation which is otherwise reasonably acceptable to Landlord) retains control over the management of Tenant's business in the Premises. The provisions of Sections 18.1, 18.2, 18.3 and 18.4 shall not apply to any assignment which is permitted by this Section 18.7. ARTICLE 19 INSOLVENCY AND DEATH It is understood and agreed that neither this Lease nor any interest therein or hereunder, nor any estate hereby created in favor of Tenant, shall pass by operation of law under any state or federal insolvency, bankruptcy, or inheritance act, or any similar law now or hereafter in effect, to any trustee, receiver, assignee for the benefit of creditors, heirs, legatees, devisees or any other person whomsoever without the express written consent of Landlord first had and obtained therefor. ARTICLE 20 CONDEMNATION 20.1 Awards. Should the whole or any part of the Premises be condemned or taken by a competent authority for any public or quasi-public purpose, all awards payable on account of such condemnation and taking shall be payable to Landlord, and Tenant hereby waives any and all interest therein. Tenant shall, however, be entitled to retain any award made separately to Tenant by the condemning authority. 33 20.2 Taking of the Premises. If the whole of the Premises shall be so condemned and taken, then this Lease shall terminate upon such taking. If greater than one-third (1/3) of the floor space of the Premises is condemned or taken or if by reason of any condemnation or taking the remainder of the Premises will not be reasonably adequate for the operation of Tenant's business after Landlord completes such repairs or alterations as Landlord elects to make, either Landlord or Tenant shall have the option to terminate this Lease by notifying the other party hereto of such election in writing within forty-five (45) days after such taking. If by such condemnation and taking one-third (1/3) or less of the Premises has been taken or if a part only of the Premises is taken and the remaining part thereof is suitable for the purposes for which Tenant has leased said Premises, this Lease shall continue in full force and effect. In the event a partial taking does not terminate this Lease, Tenant shall make repairs and restorations to the remaining premises of the nature of Tenant's Work required by Exhibit B, Landlord shall make the proceeds of any condemnation award available to Tenant for such purposes and if Tenant has closed Tenant shall reopen for business promptly after completion of the restoration. 20.3 Taking of the Hotel. Notwithstanding the provisions of Section 20.2, if any part of the Hotel or the Premises shall be so taken or appropriated, and if in the reasonable judgment of either Landlord or Tenant, the Food Court would not be able to be operated profitably in consequence of such taking, then either Landlord or Tenant, as the case may be, shall have the right, at its option, to terminate this Lease by notifying the other within six (6) months of such taking. 20.4 Deed-in-Lieu. For the purposes hereof, a deed in lieu of condemnation shall be deemed a taking. ARTICLE 21 DESTRUCTION OF PREMISES 21.1 Landlord's Right of Termination. In the case of the destruction of all or any material portion of the Premises, whether by fire or other casualty, not caused by the intentional misconduct of Tenant, Landlord shall, except as provided in Sections 21.2 and 21.3 below, diligently repair all structural elements of the Premises, including structural steel and reinforced concrete. So long as Landlord proceeds with such work with reasonable dispatch, this Lease shall not terminate, but shall continue in full force and effect. In determining what constitutes reasonable dispatch, consideration shall be given to delays caused by Force Majeure events. If this Lease is terminated pursuant to this Article 21, all rights and obligations hereunder shall cease and terminate as of the date of termination. 21.2 Damage Caused by Tenant. Notwithstanding Section 21.1, in the event the Premises, or any portion thereof, shall be damaged by fire or other casualty due to the intentional misconduct of Tenant, then, without prejudice to any other rights and remedies of Landlord, this Lease shall not terminate, the damage shall be repaired by Tenant, and Percentage Rent payable by Tenant shall be determined by the method set forth in Section 8.11 of this Lease. 34 21.3 Damage to Hotel. In the event of any damage not limited to, or not including, the Premises, such that the building of which the Premises is a part is damaged to the extent of twenty-five percent (25%) or more of the cost of replacement, or the buildings and improvements (taken in the aggregate) of the Hotel owned by Landlord shall be damaged to the extent of more than twenty-five percent (25%) of the aggregate cost of replacement, Landlord may, if Landlord elects not to reopen the Hotel or if Landlord elects to reopen the Hotel using a theme or concept other than the "New York-New York" theme and concept, elect or terminate this Lease upon giving notice of such election in writing to Tenant within one hundred twenty (120) days after the occurrence of the event causing the damage. 21.4 Repair Obligations. The provisions of this Article 21 with respect to repair by Landlord shall be limited, as set forth above, to the structural elements of the Premises, and when such work in completed, the Premises shall be deemed restored and rendered tenantable, and Tenant shall restore the remainder of the Premises and Tenant's Work, replace its stock in trade, and if Tenant has closed, Tenant shall promptly reopen for business. Landlord shall make available to Tenant, to the extent of the insurance proceeds received by Landlord with respect to Landlord's Work and not otherwise used by Landlord to complete its repair of the structural elements of the Premises, sufficient funds to perform such repair as is necessary to place the Premises in the condition specified for the commencement of Tenant's Work. 21.5 Insurance Proceeds. Subject to the provisions of Section 21.1 above, all insurance proceeds payable under any fire and extended coverage risk insurance covering the Hotel and/or the Premises shall be payable solely to Landlord, and Tenant shall have no interest therein. Tenant shall in no case be entitled to compensation for damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent provided for in this Section 21, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. ARTICLE 22 RIGHT OF ACCESS 22.1 Right of Access. Landlord, and its authorized agents and representatives shall be entitled to enter the Premises at any reasonable time for the purpose of observing, posting or keeping posted thereon notices provided for hereunder, and such other notices as Landlord may deem necessary or appropriate for protection of Landlord and/or its interest in the Premises; for the purpose of inspecting the Premises or any portion thereof; and for the purpose of making repairs to the Premises or any other portion of the Hotel and performing any work therein or thereon which Landlord may elect or be required to make hereunder, or which may be necessary to comply with any laws, ordinances, rules, regulations or requirements of any public authority or any applicable standards that may, from time to time, be established by the [Insurance Services Office] or any similar body, or which Landlord may deem necessary or appropriate to prevent waste, loss, damage 35 or deterioration to or in connection with the Premises or any other portion of the Hotel or for the purpose of conducting its legitimate business purposes therein or for any other lawful purpose. Except in an emergency, Landlord shall coordinate any entry hereunder with Tenant so as to avoid unnecessary interference with Tenant's business in the Premises. Landlord shall have the right to use any means which Landlord may deem proper to open all doors in the Premises in an emergency. Entry into the Premises obtained by Landlord by any such means shall not be deemed to be forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof. Nothing contained herein shall impose or be deemed to impose any duty on the part of Landlord to do any work or repair, maintenance, reconstruction or restoration, which under any provision of this Lease is required to be done by Tenant; and the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to do the same. 22.2 Inconvenience to Tenant. Landlord may, during the progress of any work on the Premises, keep and store upon the Premises all necessary materials, tools and equipment. Provided that Landlord has taken all reasonable steps so as not to interfere with Tenant's business, Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of business or quiet enjoyment, or other damage or loss to Tenant by reason of making any such repairs or performing any such work upon the Premises, or on account of bringing materials, supplies and equipment into, upon or through the Premises during the course thereof, and the obligations of Tenant under this Lease shall not thereby be affected in any manner whatsoever. Landlord shall, however, in connection with the performance of such work, cause as little inconvenience, disturbance or other damage or loss to Tenant as may be reasonably possible under the circumstances. 22.3 Right to Show the Premises. Landlord, and/or its authorized agents and representatives, shall be entitled to enter the Premises at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final year of the Term of this Lease, Landlord shall be entitled to exhibit the Premises for lease. Any such entry shall be effected, to the extent reasonably practicable, so as not to interfere with Tenant's business. ARTICLE 23 LANDLORD'S RIGHT OF PERFORMANCE Whenever under any provision of this Lease, Tenant shall be obligated to make any payment or expenditure, or to do any act or thing, or to incur any liability whatsoever, and Tenant fails, refuses or neglects to perform as herein required, Landlord shall be entitled, but shall not be obligated, to make any such payment or to do any such act or thing, or to incur any such liability, all on behalf of and at the cost and for the account of Tenant; provided that Landlord shall first give Tenant reasonable notice of its intention to exercise its right of performance hereunder. In such event, the amount thereof with interest thereon at the Default Rate per annum shall constitute and be collectable as additional rent on demand. 36 ARTICLE 24 ESTOPPEL CERTIFICATES Tenant agrees that within ten (10) days of any demand therefor by Landlord, Tenant will execute and deliver to Landlord or Landlord's designee a recordable certificate stating that this Lease is in full force and effect, such defenses or offsets as are claimed by Tenant, if any, the date to which all rentals have been paid, and such other information concerning the Lease, the Premises and Tenant as Landlord or said designee may reasonably request. ARTICLE 25 TENANT'S DEFAULT 25.1 Events of Default. Landlord shall have all the rights and remedies provided in this Section or elsewhere herein, in the event that any of the following (sometimes referred to herein as an "Event of Default") shall occur: (a) Tenant shall default in the payment of any sum of money required to be paid hereunder and such default continues for ten (10) days after written notice thereof from Landlord to Tenant; or (b) Tenant shall default in the performance of any other provision, covenant or condition of this Lease on the part of Tenant to be kept and performed and such default continues for twenty (20) days after written notice thereof from Landlord to Tenant; provided, however, that if the default complained of in such notice is of such a nature that the same can be rectified or cured, but cannot with reasonable diligence be done within said twenty (20) day period, then such default shall be deemed to be rectified or cured if Tenant shall, within said twenty (20) day period, commence to rectify and cure the same and shall thereafter complete such rectification and cure with all due diligence, and in any event (but subject to Section 29.3), within forty (40) days from the date of giving of such notice; or (c) Tenant should vacate or abandon the Premises during the Term of this Lease; or (d) Tenant should fail to obtain the discharge or release of any lien as required by Article 15 hereof; or (e) There is filed any execution, attachment, levy or seizure against Tenant or the leasehold estate created by this Lease and the same continues in effect for a period of thirty (30) days (except as otherwise provided in this Lease); or 37 (f) There is filed any petition in bankruptcy or the Tenant is adjudicated as a bankrupt or insolvent, or there is appointed a receiver or trustee to take possession of Tenant or of all or substantially all of the assets of Tenant, or there is a general assignment by Tenant for the benefit of creditors, or any action is taken by or against Tenant under any state or federal insolvency or bankruptcy act, or any similar law now or hereafter in effect, and any such proceeding (if involuntary) is not dismissed within forty-five (45) days; or (g) There shall occur any other event or condition which is described in this Lease as an "Event of Default" and the same is not remedied after notice and the expiration of any applicable cure period set forth in this Lease. 25.2 Landlord's Remedies. Upon the occurrence of any Tenant Event of Default, subject to Tenant's right to dispute the claim of default pursuant to Article 30, and subject to the provisions of Article 30 which may allow for the tolling of applicable cure periods, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever; (1) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises, or any part thereof, by force if necessary, without being liable to prosecution or for any claim for damages; and Landlord may recover from Tenant: (a) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (b) The worth at the time of award of any amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus (c) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus (d) Any other reasonable amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease; and 38 (e) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. All such amounts shall be computed on the basis of the monthly amount thereof payable on the date of Tenant's default; except that Percentage Rent shall be computed on the basis of the monthly average of all Percentage Rent received by or payable to Landlord during the period that Tenant was conducting Tenant's business in the Premises in the manner and to the extent required by this Lease, or on the basis of the monthly amount thereof payable on the date of Tenant's default, if greater. As used in paragraphs (a) and (b) above, the "worth at the time of award" is computed by allowing interest in the per annum amount equal to the Default Rate. As used in paragraph (c) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one (1%) percent per annum. (2) Enter upon and take possession of the Premises and expel or remove Tenant and other persons who may be occupying the Premises, or any part thereof, by force if necessary, without being liable to prosecution or for any claim for damages, and relet the Premises, as Tenant's agent, and receive the rent therefor; and Tenant agrees to pay Landlord on demand any deficiency that may arise by reason of such reletting; or (3) Enter upon the Premises, without being liable to prosecution or for any claim for damages, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any reasonable and necessary expenses which Landlord may incur in thus effecting compliance with Tenant's obligations hereunder. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damage accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon the occurrence of a Tenant Event of Default shall not be deemed or construed to constitute a waiver of such default. ARTICLE 26 QUIET POSSESSION Tenant, upon paying the rentals and other payments herein required from Tenant, and upon Tenant's performance of all of the terms, covenants and conditions of this Lease on its part to be kept and performed, may quietly have, hold and enjoy the Premises during the Term of this Lease without any disturbance from Landlord or from any other person claiming through Landlord. 39 ARTICLE 27 SALE BY LANDLORD 27.1 Landlord's Right to Assign or Transfer. It is agreed that Landlord may (in connection with a sale, transfer or financing of all or any substantial part of the Hotel) at any time assign or transfer its interest as Landlord in and to this Lease, or the rents payable hereunder, or at any time sell or transfer its interest in the fee of the Premises, or its interest in and to the Premises, without notice or obtaining any approval from Tenant. 27.2 Attornment. Tenant hereby agrees to attorn to the assignee, transferee, or purchaser of Landlord under any provision of this Article 27 from and after the date of notice to Tenant of such assignment, transfer or sale, in the same manner and with the same force and effect as though this Lease were made, in the first instance, by and between Tenant and such assignee, transferee or purchaser. 27.3 Release of Landlord. In the event of any sale or exchange of the Premises by Landlord and the assumption of Landlord's obligations under this Lease by Landlord's transferee, Landlord shall be and is hereby relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease, arising out of any act, occurrence or omission relating to the Premises occurring after the consummation of such sale or exchange. ARTICLE 28 DEFAULT BY LANDLORD Except as otherwise expressly provided in this Lease, it is agreed that in the event Landlord fails or refuses to perform any of the provisions, covenants or conditions of this Lease on Landlord's part to be kept or performed, that Tenant, prior to exercising any right or remedy Tenant may have against Landlord on account of such default, shall give a thirty (30) day written notice to Landlord of such default, stating in said notice the default with which Landlord is charged. Tenant agrees that if the default complained of in the notice provided for by this Section 28 is of such a nature that the same can be rectified or cured by Landlord, but cannot with reasonable diligence be rectified or cured within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Landlord within said thirty (30) day period shall commence the rectification and curing thereof and shall continue thereafter with all due diligence to cause such rectification and curing to proceed, and so does complete the same, with the use of diligence as aforesaid. ARTICLE 29 MISCELLANEOUS 29.1 Waiver of Jury Trial. The parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the 40 relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and/or any claim of injury or damage. 29.2 Waiver. The waiver by Landlord or Tenant of any default or breach of any of the terms, covenants or conditions hereof on the part of the other to be kept and performed shall not be a waiver of any preceding or subsequent breach of the same or any other term, covenant or condition contained herein. The subsequent acceptance of rent or any other payment hereunder by Tenant to Landlord shall not be construed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease other than the failure of Tenant to pay the particular rental or other payment or portion thereof so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rental or other payment. No payment by Tenant or receipt by Landlord of a lesser amount than therein provided shall be deemed to be other than on account of the earliest rent due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept any such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this Lease. This Section 29.2 may not be waived. 29.3 Force Majeure. Whenever a day is appointed herein on which, or a period of time is appointed in which, either party hereto is required to do or complete any act, matter or thing, the time for the doing or completion thereof shall be extended by a period of time equal to the number of days on or during which such party is prevented from the doing or completion of such act, matter or thing because of labor disputes, civil commotion, war, warlike operation, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials, or to obtain fuel or energy, weather or other acts of God, or other causes beyond such party's reasonable control (financial inability excepted); provided, however, that nothing contained herein shall excuse Tenant from the prompt payment of any rent or charge required of Tenant hereunder. Tenant agrees that a recognitional or informational picket line shall not be deemed a force majeure event. 29.4 Delivery of Notices. Any and all notices and demands by or from Landlord to Tenant, or by or from Tenant to Landlord, required or desired to be given hereunder shall be in writing and shall be validly given or made if served either personally during normal business hours or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested or if delivered by a nationally recognized, next business day delivery courier service (such as Federal Express or Express Mail), or served by facsimile during normal business hours (with an answer back and a duplicate copy sent by another permitted method hereunder or by first class mail). If such notice or demand be served by registered or certified mail or courier service in the manner provided, service shall be conclusively deemed made the first business day delivery is attempted or upon receipt, whichever is sooner. Service by personal service or facsimile transmission shall be deemed made upon receipt. Any notice or demand to Landlord shall be addressed to Landlord as follows: 41 William Sherlock New York-New York Hotel 3790 Las Vegas Boulevard Las Vegas, Nevada 89109 Telefax: (702)740-6510 With a copy to: Gary Primm New York-New York Hotel 3790 Las Vegas Boulevard Las Vegas, Nevada 89109 Telefax: (702)679-7222 Any notice or demand to Tenant shall be addressed to Tenant at: c/o Ark Restaurants Corp. 85 Fifth Avenue New York, New York 10003-3019 Attention: Michael Weinstein Telefax: (212)206-8814 With a copy to: Shack & Siegel, P.C. 530 Fifth Avenue New York, New York 10036 Attention: Donald D. Shack, Esq. Telefax: (212)730-1964 Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective,however, until the actual receipt thereof by the other party. 29.5 Remedies Cumulative. The various rights, options, elections and remedies of Landlord contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. 29.6 Successors and Assigns. The terms, provisions, covenants and conditions contained in this Lease shall apply to, bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns (where assignment is permitted) of Landlord and Tenant, respectively. 42 29.7 Partial Invalidity. If any term, provision, covenant or condition of this Lease, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of this Lease, and all applications thereof, not held invalid, void or unenforceable, shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. 29.8 Time of the Essence. Time is of the essence of this Lease and all of the terms, provisions, covenants and conditions hereof. 29.9 Entire Agreement. This Lease contains the entire agreement between the parties with respect to the leasing of the Food Court and cannot be changed or terminated orally. 29.10 No Partnership. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent or of partnership or of joint venture or of any association between Landlord and Tenant. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. 29.11 Brokers. Tenant warrants that it has had no dealings with any broker or agent in connection with this Lease, and covenants to pay, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with respect to this Lease or the negotiation thereof. 29.12 Captions. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference to this Lease and in no way whatsoever define, limit or describe the scope or intent of this Lease, nor in any way affect this Lease. 29.13 Usage. Masculine or feminine pronouns shall be substituted for the neuter form and vice versa, and the plural shall be substituted for the singular form and vice versa, in any place or places herein in which the context requires such substitution or substitutions. 29.14 Governing Law. The laws of the State of Nevada shall govern the validity, construction, performance and effect of this Lease. 29.15 Covenants. Whenever in this Lease any words of obligation or duty are used in connection with either party, such words shall have the same force and effect as though framed in the form of express covenants on the part of the party obligated. 29.16 Joint and Several Obligations. In the event Landlord or Tenant now or hereafter shall consist of more than one person, firm or corporation, then and in such event, all such persons, 43 firms or corporations shall be jointly and severally liable as Tenant or Landlord, as appropriate, hereunder. 29.17 Submission of Lease. The submission of this Lease for examination does not constitute a reservation of or option for the Premises and this Lease becomes effective as a Lease only upon execution and delivery thereof by Landlord and Tenant. 29.18 Liens and Actions Affecting Property. Should any claim or lien be filed against the Premises, or any action or proceeding be instituted affecting the title to the Premises, Tenant shall give Landlord written notice thereof as soon as Tenant obtains actual knowledge thereof. 29.19 Construction. This Lease shall not be construed either for or against Landlord or Tenant, but this Lease shall be interpreted in accordance with the general tenor of the language. 29.20 Authority. If Tenant is not a natural person, Tenant hereby represents that it is qualified and authorized to enter into, and perform its obligations under, this Lease. ARTICLE 30 DISPUTE RESOLUTION If any controversy or claim between the parties hereto arises out of this Lease, other than a claim by Landlord arising from any failure by Tenant to pay rent as and when such rent becomes due, and if the parties are unable to agree by direct negotiations, the parties shall promptly mediate any such disagreement or dispute under the Commercial Mediation Rules of the American Arbitration Association. If the parties are unable to resolve such disagreement or dispute through mediation, then such disagreement or dispute (excluding an action by Landlord in unlawful detainer by reason of a default in the payment of rent, as provided above) shall be submitted to binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association. The arbitrators shall be appointed under the Commercial Arbitration Rules of the American Arbitration Association. As soon as the panel has been convened, a hearing date shall be set within twenty-one (21) days thereafter. Written submittals shall be presented and exchanged by both parties ten (10) days before the hearing date, including reports prepared by experts upon whom either party intends to rely. At such time the parties will also exchange copies of all documentary evidence upon which they will rely at the arbitration hearing and a list of the witnesses whom they intend to call to testify at the hearing. Each party shall also make its respective experts available for deposition by the other party prior to the hearing date. The hearings shall be concluded no later than five (5) days after the initial hearing date. The arbitrators shall make their award within ten (10) business days after the conclusion of the hearing. In the event of a three-member panel, the decision in which two (2) of the members of the arbitration panel concur shall be the award of the arbitrators. 44 Except as otherwise specified herein, there shall be no discovery or dispositive motion practice (such as motions for summary judgment or to dismiss or the like) except as may be permitted by the arbitrators, who shall authorize only such discovery as is shown to be absolutely necessary to insure a fair hearing and no such discovery or motions permitted by the arbitrators shall in any way conflict with the time limits contained herein. The arbitrators shall not be bound by the rules of evidence or civil procedure, but rather may consider such writings and oral presentations as reasonable businessmen would use in the conduct of their day-to-day affairs, and may require the parties to submit some or all of their presentation as the arbitrators may deem appropriate. It is the intention of the parties to limit live testimony and cross-examination to the extent absolutely necessary to insure a fair hearing to the parties on the significant matters submitted to arbitration. The parties have included the foregoing provisions limiting the scope and extent of the arbitration with the intention of providing for prompt, economic and fair resolution of any dispute submitted to arbitration. If Landlord gives Tenant notice of a claimed default pursuant to Article 25 of this Lease, and if either (i) such claimed default can be cured by Tenant's expenditure of an amount which is reasonably expected to be One Hundred Thousand Dollars ($100,000) or less, or (ii) such claimed default arises under Section 6.2 of this Lease, Tenant's election to dispute such claimed default pursuant to the provisions of this Article 30 shall not extend or toll the running of any cure period provided in Article 25; provided that the foregoing is not intended to preclude or limit Tenant's right to perform under protest and to retain any claim it may have against Landlord for reimbursement of the cost of performance. However, if either (i) the out-of-pocket costs to Tenant of curing such claimed default are reasonably expected to exceed One Hundred Thousand Dollars ($100,000), or (ii) such claimed default cannot reasonably be cured by Tenant's expenditure of money, then, unless such claimed default arises under Section 6.2 of this Lease, any cure period provided in Article 25 for the claimed default shall be tolled during the resolution of such dispute hereunder. The arbitrators shall have the discretion to award the costs of arbitration, arbitrators' fees and the respective attorneys' fees of each party between the parties as they see fit. Judgment upon the award entered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Notwithstanding the parties' agreement to mediate or arbitrate their disputes as provided herein, any party may seek emergency relief in a court of law without waiving the right to arbitrate. The arbitrators shall make their award in accordance with applicable law and based on the evidence presented by the parties, and at the request of either party at the start of the arbitration, shall include in their award findings of fact and conclusions of law supporting the award. 45 Nothing contained herein is intended to, nor shall, limit Landlord's right to pursue any action in unlawful detainer in the case of an Event of Default by Tenant in the payment of Base Rent or Percentage Rent. IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. LANDLORD NEW YORK - NEW YORK HOTEL, LLC a Nevada limited liability company By: /s/ William Sherlock ------------------------------- Title: President & CEO ---------------------------- TENANT LAS VEGAS FESTIVAL FOOD CORP. a Nevada corporation By: /s/ Michael Weinstein ------------------------------- Title: President ---------------------------- 46 EXHIBIT "A" PREMISES [SCHEMATIC DRAWING] A - 1 May 10, 1996 SAN GENNARO FOODCOURT NEW YORK/NEW YORK CASINO HOTEL LAS VEGAS, NEVADA JOB NO. 5504.06 RE: Square Footage and Limits of The San Gennaro Foodcourt Area impacted by the foodcourt: 25,300 SF The foodcourt includes: (5) Restaurants 1 Firehouse Bar 'B' Que 884 SF 2 Burger Place 1168 SF 3 Mexican Southwest 1788 SF w/courtyard dining area 1348 SF 4 Deli 898 SF 5 Pizza Shop 735 SF TOTAL 6821 SF (3) Stands/Bars 6 Ice Cream Shop 315 SF 7 Espresso Bar 324 SF 8 Fruit/Smoothie Stand 250 SF TOTAL 889 SF Misc. 9 Nicole Miller (retail) 180 SF 10 Firehouse Retail 200 SF 11 Office 190 SF 12 Employee Bathroom 56 SF TOTAL 626 SF TOTAL 8336 SF Exhibit A (Page 3 of 3) A-3 EXHIBIT "B" WORK LETTER FOR FOOD COURT AND PREP KITCHEN I. LANDLORD'S WORK - The following work is to be performed by Landlord and Tenant where indicated: A. COMMON AREA 1. Utilities: a. Sanitary Sewer and Grease Waste Piping - The Landlord will pay for the cost of below-slab piping, stub ups, floor drains and floor sinks in the Employee Cafeteria and for a proportionate one-third cost in the Prep Kitchen area. The Landlord will install sanitary sewer and grease waste stubs to all other Tenant kitchen locations. The Tenant will provide distribution piping, floor drains and floor sinks in all other locations. Invert and line size will be specified by JBA. Tenant is responsible for payment of the sewer hookup charges, as well as any similar fees and charges levied on the Hotel for Tenant usage. b. Grease Interceptors - The Landlord will provide at its expense one or more grease interceptors that will be shared by all grease producers. The cost of maintaining the interceptor will be shared by all grease producers. The cost sharing formula should be based on grease production as determined by an impartial engineer. The Tenant will maintain grease lines that are used exclusively by the Tenant. The Landlord will maintain all shared grease piping. c. Domestic Water - The Landlord will stub into each demised area cold water and 140 degrees softened hot water. The Tenant will use the 120 degrees hard hot water where it is practical for the Landlord to provide it and for Tenant to use it. The size of the supply taps will be specified by the Landlord's engineer. d. Rendering Management - The Landlord will provide space for the Tenants rendering storage bins in the loading dock area. The Tenant will maintain the area. If the rendering bin area is shared with other B-1 Tenants, the Landlord will require all Tenants to contribute a fair share to the maintenance of this area. e. Electrical Service - The Landlord will provide conduit, conductors, and back boxes for all Tenant circuit panels. Where a direct feed from the Landlord's switchgear to the Tenant's equipment is needed, the Landlord will provide conduit and conductors to the equipment disconnect. Conductor size panels, and voltages will be specified by the Tenant's engineer. Final connection to Landlord's switchgear will be done by the Landlord at the Landlord's expense. f. Gas - Landlord will provide, install and maintain a main gas feed that is sufficient to operate Tenant's equipment and business at a point within the Premises to be determined by Tenant and Landlord. g. Sprinkler System - Landlord will install an automatic fire sprinkler system to the Premises in compliance with the requirements of local and state agencies. Such sprinkler system will be based on a specific grid and spacing plan for Tenant, provided that Tenant delivers such plan to Landlord's sprinkler contractor prior to the installation of a standard grid and spacing. The cost to Tenant of modifying the sprinkler system will be the cost of relocation re-sizing or adding sprinkler mains or heads to the specific grid and spacing for Tenant's business. Modification of the sprinkler system within the Premises will be subject to the review and approval of the Landlord and its design professionals and performed by Landlord's contractor at Tenant's expense. Modifications required by Tenant outside its Premises and related to modifications of the existing system will be done by Landlord at Tenant's expense. In conjunction with the sprinkler system, Tenant will install, at Tenant's expense, one smoke detector in the Premises at a point to be determined by Landlord. Where required by local code, Tenant shall also install at Tenant's expense, life safety equipment such as audiovisual horn devises or additional smoke detector devices. Landlord confirms fire hose cabinets are not required within any Tenant spaces. h. HVAC System - The Landlord is responsible for the installation and maintenance of all HVAC equipment and all main distribution ductwork to the demised premise. The Tenant is responsible for connecting to the taps provided, all VAV boxes and low velocity distribution ductwork within the demised premise. The Tenant will provide all local controls and interface with the Landlord's EMS B-2 system as needed. The Tenant will return air to the return taps provided within the demised premise or to the common plenum above the demised premise. The Tenant will provide transfer grills and fans as required within the demised premise as needed to insure proper air balance. i. Smoke Evacuation - Landlord will provide, install and maintain a smoke evacuation system for the premises. The Tenant understands that to the extent that the smoke evacuations system and the Tenant's kitchen exhaust system share the same control sequence the Landlord will use the Tenant's kitchen exhaust for smoke evacuation. The Landlord will pay for any control wiring or relays that may be needed to interlock these two systems. j. Kitchen Exhaust System - The Landlord will install all exhaust ductwork from the collars on the Tenant's hoods to the roof, including all fireproofing, clean-outs, roof curbs, and pitch pockets. The Tenant will maintain all exhaust ductwork in accordance with all codes and accepted practice. The Tenant will supply and install all hoods, exhaust fans, and related wiring. The Landlord will provide all hard wire and low voltage control interlocks between the Tenant's exhaust system and the Landlord's make-up air system, smoke evacuation system, fire control system, and energy management system. k. Fire Dampers - Landlord shall provide and install fire dampers, in accordance with all codes. Landlord shall also provide and install fire dampers where the Landlord's ductwork passes through service corridor or other fire separations. Tenant shall provide all fire dampers required for Tenant's toilet and dishwasher exhaust floor penetrations, if any are required. l. Supplemental Make-up Air - The Landlord will supply and install the supplemental make-up air system. Tenant will maintain all supplemental make-up air fans dedicated solely to Tenant spaces. m. Chilled Water for Refrigeration - The Landlord agrees to stub chilled water into each demised premise. Identification of equipment to use water-cooled and air-cooled compressors will be the joint effort of Landlord and Tenant. B-3 B. BUILDINGS 1. Structure a. Demising Partitions - The Landlord will construct all demising partitions. All the finishes on the common area side will be provided by the Landlord and all of the finishes on the Tenant side will be provided by the Tenant. b. Landlord shall pour the floor slab designed for a live load of not less than 120 lbs. PSF for the Premises. II. TENANT'S WORK - The following work required to complete and place the Premises in finished condition ready to open for business is to be performed by the Tenant at the Tenant's own expense. Tenant's Work includes, but is not limited to the following: A. GENERAL PROVISIONS All work done by Tenant shall be governed in all respects by, and be subject to the following: 1. Tenant shall deliver to Landlord within ten (10) days after the execution of this Lease and prior to the commencement of any of the Tenant Work, an irrevocable Letter of Credit in the amount of One Million Dollars ($1,000,000) or the cost of the build out whichever is less, issued by a surety company licensed to do business in the State of Nevada and acceptable to Landlord, naming Landlord as obligee, and guaranteeing completion of Tenant's Work in accordance with the Lease, free and clear of all mechanics' or other liens or security interests. The form of such completion bond shall be subject to the review and approval of Landlord, which approval may be withheld by Landlord in its reasonable discretion. Tenant's Work shall at all times be conducted consistent with the labor agreement for the Hotel, if any. 2. All Tenant's Work shall conform to applicable statutes, ordinances, regulations and codes and the requirements of all rating bureaus and which by this reference is incorporated into and made a part of this Lease. Tenant shall obtain and convey to Landlord all approvals with respect to electrical, water, sewer, heating, cooling, and telephone work, all as may be required by any agency or utility company. 3. Except for minor and routine matters, no approval by Landlord shall be deemed valid unless in writing and signed by Landlord. B-4 4. Prior to commencement of Tenant's Work and until completion thereof, or Tenant obtaining a Certificate of Occupancy or Temporary Certificate, or commencement of the Lease Term, whichever is the last to occur, Tenant shall effect and maintain Builder's Risk Insurance covering Landlord, Tenant, Tenant's contractors and Tenant's subcontractors, as their interests may appear, against loss or damage by fire, vandalism and malicious mischief and such other risks as are customarily covered by a standard "All Risk" policy of insurance protecting against all risk of physical loss or damage to all Tenant's Work in place and all materials stored at the site of Tenant's Work and all materials, equipment, supplies and temporary structures of all kinds incidental to Tenant's Work, and equipment, all while forming a part of or contained in such improvements or temporary structures, or while on the Premises or within the Center all to the actual replacement cost thereof at all times on a completed value basis. In addition, Tenant agrees to indemnify and hold Landlord harmless against any and all claims for injury to persons or damage to property by reason of the use of the Premises, except to the extent caused by Landlord or Landlord's agents or contractor, for the performance of Tenant's Work, and claims, fines, and penalties arising out of any failure to Tenant or its agents, contractors and employees to comply with any law, ordinance, code requirement, regulations or other requirement applicable to Tenant's Work and Tenant agrees to require all contractors and subcontractors engaged in the performance of Tenant's Work to effect and maintain and deliver to Tenant and Landlord, certificates evidencing the existence of, and covering Landlord, Tenant and Tenant's contractors, prior to commencement of Tenant's Work and until completion thereof, the following insurance coverages: a. Workmen's Compensation and Occupational Disease Insurance in accordance with the laws of the State of Nevada. b. Comprehensive General Liability Insurance, including independent contractors, contractual and completed operations, including death resulting therefrom, and personal injury in the limits of $10,000,000 for the general contractor, $6,000,000 for the mechanical, electrical and plumbing contractors, and $1,000,000 for all other subcontractors, for any one occurrence and property damage in the limits of $10,000,000 for any one occurrence or a combined single limit policy of $10,000,000 per occurrence. c. Comprehensive Automobile Insurance, including "non-owned" automobiles, against bodily injury, including death resulting B-5 therefrom, in the limits of $1,000,000 for any one occurrence and $1,000,000 property damage or a combined single limit of $1,000,000. 5. Tenant agrees that the contract of every contractor, subcontractor, material supplier or entity performing labor upon, or furnishing materials or equipment to the Premises in connection with Tenant's Work shall contain the following provision: "Contractor acknowledges that this provision is required under Tenant's lease (hereinafter the "LEASE") of the Premises to be improved under this Contract (the "LEASED PREMISES") from New York-New York Hotel, LLC ("LANDLORD"). In consideration of Tenant's engagement of Contractor to perform the work hereunder, and as an inducement to Tenant to enter into this Contract with Contractor, Contractor acknowledges, covenants and agrees that any mechanics' lien which it may hereafter file, claim, hold or assert with respect to the work hereunder (i) shall attach only to Tenant's interest in the Premises under the Lease and (ii) shall be subject, subordinate and inferior to the lien of any mortgage(s) now or hereafter held upon and against the Landlord by any lender(s) now or hereafter providing funds for the financing for the Premises or the Hotel in which the Premises is located, notwithstanding that any such mortgage(s) may be recorded after the commencement of work hereunder and that Contractor's mechanics lien otherwise might be entitled to priority over any such mortgage(s). 6. If Landlord in its sole and absolute discretion determines that the Hotel or the business conducted therein would otherwise be adversely affected, any or all construction work shall be done by recognized union labor. B. FLOOR SLAB All Tenant's with rest room facilities or food preparation areas shall install a floor slab waterproofing membrane in the Premises at Tenant's expense. All floor penetrations must be sleeved and waterproofed, except slabs on grade. C. STOREFRONT AND INTERIORS 1. Storefronts shall be designed within parameters of the Landlord's schedule and constructed with the Landlord's written approval. All storefronts must have a New York City theme in keeping with the theme, quality and style of B-6 the Hotel and must be approved by the Landlord before construction commences. 2. All materials employed in the construction of storefronts and interiors shall be as approved by Landlord and as defined by applicable building codes. 3. Storefront and Interior color schemes must harmonize with the color scheme of the surrounding building/storefront types and must be approved by the Landlord. 4. All swinging entrance doors must be recessed in such a manner that the door, when open, will not project beyond the lease line. D. CEILING 1. All ceilings and coves shall not exceed 14'0" above the finished floor (excluding mezzanines) unless otherwise approved by Landlord. 2. Tenant's ceilings shall be acoustic tile, gypsum board and/or plaster, suspended by adequate suspension systems to conform to final requirements of governing authorities and Landlord. 3. The space above the ceiling line, which is not occupied or allotted to Landlord's Work (structural members, duct work, piping, etc.) may be used for the installation of suspended ceiling, recessed lighting fixtures and duct work. Under no circumstances will Tenant's Work be hung or suspended from non-structural construction. Any Tenant Work involving the hanging or suspension of construction shall be accomplished only by methods, in locations and by use of assemblies approved by Landlord and Landlord's engineer. E. WALLS. All interior walls shall meet all applicable building codes. Tenant shall install insulation on the demising walls and interior walls as made necessary by building code, acoustics, or design. Tenant shall provide any necessary bracing or blocking. F. INTERIOR PAINTING. All interior painting and decoration shall be Tenant Work. B-7 G. FLOOR COVERING. The Landlord and Tenant will jointly coordinate floor transitions at all entrances. The Tenant's floor finishes will be applied directly to the slab provided. H. FURNITURE, FIXTURES AND SIGNS. The Tenant will provide identification signage only. All decor signage in the common area will be provided by the Landlord. All furnishings, trade fixtures, and related parts, including installation shall be Tenant Work. I. SUBMITTALS. Preliminary Submittal by the Tenant shall include storefronts and interiors, plans, elevations, specifications, color and material boards, and a colored elevation of the storefront facade. J. PLUMBING. All plumbing and plumbing fixtures are required by applicable codes, except utility service to the area, shall be Tenant Work. K. TOILET ROOM FIXTURES. Furnishing and installation of wiring, lighting fixtures, mechanical toilet exhaust systems, towel cabinets, soap dishes, hand dryers, deodorizers, mirrors and other similar items in toilet rooms within the Premises or as additionally required by code shall be Tenant Work. L. HEATING, VENTILATION AND AIR CONDITIONING. 1. Tenant's exhaust systems shall provide the required exhaust air capacities and shall be independent of the central cooling system. Tenant's exhaust systems shall be inoperative during other than regular business hours. Makeup or replacement air shall be provided by Landlord. 2. Tenant's HVAC systems shall be complete with air distributions systems, ventilating systems, control systems, insulation and all other components required to make a complete system. Tenant's HVAC system components shall be installed in locations as designated by the Landlord. B-8 3. The Tenant will install and maintain toilet exhaust fans and ductwork for all Tenant installed bathrooms. The Tenant's ductwork will terminate at a curb or sleeve provided by the Tenant and installed by the Landlord. The Landlord will provide a vertical chase and floor penetration as needed en route between the Tenant's bathroom and the roof or wall penetration. The Landlord will locate the penetration as close as possible to the Tenant's bathroom. In the event that a roof mounted fan is used the Landlord will also provide a pitch pocket. The Tenant will provide design information prior to the roof pour. 4. In the basement and in the first floor spaces that fall below the high rise structure, the Tenant will connect all vents to the closest inverted T-Y if this has been provided. In the food court, the Tenant will pipe all vents into the roof sleeves provided by the Landlord above each demised area. 5. The Tenant will install and maintain dishwasher fans and ductwork for all Tenant installed kitchens. The Tenant's ductwork will terminate at a curb or sleeve provided by the Tenant and installed by the Landlord. The Landlord will provide a vertical chase and floor penetration as needed en route between the Tenant's kitchen and the roof or wall penetration. The Landlord will locate the penetration as close as possible to the Tenant's kitchen. In the event that a roof mounted fan is used the Landlord will also provide a pitch pocket. The Tenant will provide design information prior to the roof pour. 6. Upon completion of all work, the Tenant will test and prepare an air balance report for all HVAC and exhaust equipment dedicated to the Tenant's demised premises. A copy of that report will be forwarded to the Landlord. If it is more practical to have one contractor balance the Tenant and Landlord equipment together, then the Tenant agrees to pay a fair share of that costs. M. MECHANICAL EQUIPMENT. All mechanical equipment including dumb-waiters, elevators, escalators, freight elevators, conveyors, and their shafts and doors, located within the Premises, including electrical work for these items. Locations, size and design of roof vents, HVAC equipment, units, hoods and caps shall be approved by Landlord. Landlord reserves the right of disapproval of any equipment to be placed on the roof, provided Landlord makes a suitable substitute location available. Tenant shall install equipment at locations where structural reinforcements are provided. The roof load is to be determined by Landlord's structural engineer's load requirements. Landlord approved changes in the structure as necessary to accommodate Tenant's equipment shall be made by Landlord at Tenant's expense. B-9 Cuts, curbs and openings including any structural support and steel, shall be provided and performed by a contractor designated by Landlord at Landlord's expense. In addition, all cant strips, base furnishings and other work necessary to complete the permanent weather proofing of Landlord's roof as a result of roof cuts or openings required by Tenant shall be performed by a contractor designed by Landlord at Landlord's expense. N. ELECTRICAL. 1. All interior distribution panels, lighting panels, power panels, conduits, outlet boxes, switches, outlets and wires within the Premises shall be Tenant Work. Tenant shall provide electric conduit and boxes in the concrete floor slab, ceiling and walls, including all electrical service panels, pull boxes and equipment. Landlord will provide all work outlined in Section I.1.e of this Work Letter. 2. All electrical fixtures, including lighting fixtures and equipment, and installation thereof shall be Tenant Work. Lighting systems (except security and emergency lighting) must be controlled by lighting contractors. 3. All conduit for necessary for telephone wires within the Premises shall be Tenant Work. 4. Wiring connections to Tenant's equipment within the Premises shall be Tenant Work. O. POINT OF SALES SYSTEMS. 1. The Tenant will install a POS system that is fully compatible with the Landlord's system. The Landlord will supply the Tenant with compatibility criteria and make the criteria part of this Work Letter. The Landlord will stub a POS conduit into each demised premise. P. TEMPORARY SERVICES. Any temporary services required by Tenant during its construction period, including heat, water or electrical service shall be secured from Landlord or Landlord's contractor, as the case may be, at Tenant's sole cost and expense. Q. SUBSEQUENT REPAIRS AND ALTERATIONS. B-10 Landlord reserves the right to require changes in Tenant's Work when necessary by reason of code requirements. R. DOORS AND EXITING REQUIREMENTS. 1. Tenant will be responsible for adherence to exiting codes. 2. Tenant will maintain a clear exiting path through the stockroom to Tenant's rear door for those Premises that contain a rear door. S. CONSTRUCTION ACTIVITIES. 1. If the Tenant requires any roof penetrations in addition to those already provided for in this lease then the Landlord will provide such penetrations at the Tenant's expense. 2. Any additional structural support necessitated by Tenant's mezzanines and/or equipment, fixtures or inventory shall be provided by Tenant at Tenant's expense and approved by Landlord. 3. If Tenant will not open by the date the Hotel opens for business and such date is after the Commencement Date, Tenant shall be responsible for the installation and expense of the temporary storefront or barricade shielding the interior of the Premises from the Hotel as well as for the removal and cost thereof after opening for business. If Tenant is under construction prior to the date of Hotel is open for business, such temporary storefront shall be installed at least three (3) days prior to such opening date. 4. All construction activities on site must be coordinated directly with Mr. Randy Keiper, Superintendent for Marnell Corrao Associates (MCA). General site rules to be observed are: a. Normal construction work hours are 6:00 A.M to 2:30 P.M. b. All construction workers on site must belong to trade unions. Those from outside the Las Vegas area must check in with the local unions to comply with their regulations. All employees on site must receive a badge from MCA to enter the site. c. Tenant contractors must schedule all deliveries with Randy Kuiper, Marnell Corrao's Project Superintendent. Tenant contractors must provide their own forklifts and cranes for offloading. B-11 d. Tenant contractors may use MCA man hoists free of charge during normal working hours. e. Tenant contractors may schedule the use of the material hoist after normal working hours. Extra cost of operators and mechanics will be shared by all users. f. All employee parking must be off site. g. No space is available for offices for Tenant contractors on site, except within their own spaces. Landlord will make conduit available to Tenant as soon as it is installed in the permanent structure. h. Temporary power and water is available to Tenant spaces. Tenant electrical subcontractor may have to pull wire to Tenant space. i. Cutting of holes through existing walls or slabs for equipment access requires Landlord's written approval beforehand. Structural members must be analyzed by structural engineer at Tenant's expense. j. A common trash container will be located on site to be used by all Tenant contractors. Tenants will share the cost of trash removal based on a fair square footage formula. k. Tenants will provide their own portable toilets on site. Contacts should be made with "Mr. Potty" to simplify maintenance and reduce costs. l. All construction work performed within the Tenant's demised premise, after it has been turned over to the Tenant, must be coordinated with Terry Higgins or his designated agent. Whenever possible, Landlord or its Agent, will provide prior notification to the Tenant or its Agent. Whenever possible, both parties must schedule the work to take place at a time that is mutually agreeable. B-12 FIRST AMENDMENT TO LEASE AGREEMENT (FOOD COURT) This First Amendment to Lease Agreement ("FIRST AMENDMENT") is made and entered into as of the _____ day of December, 1996, by and between NEW YORK-NEW YORK HOTEL, LLC, a Nevada limited liability company ("LANDLORD"), and LAS VEGAS FESTIVAL FOOD CORP., a Nevada corporation ("TENANT"). RECITALS A. Landlord and Tenant have entered into a certain Lease Agreement, dated as of the 17th day of May, 1996, (the "LEASE") for the operation of a food court (the "FOOD COURT") in Landlord's New York-New York Hotel, all as more particularly described therein. All terms defined in the Lease shall have the same meanings when used in this First Amendment, unless a different meaning is clearly expressed herein. B. The parties hereto desire to amend Section 8.1 of the Lease to reflect the agreement of Landlord and Tenant that Tenant may offer beer and wine in certain restaurants in the Food Court. ARTICLE I AMENDMENT Without limiting the right of Tenant to offer alcoholic beverages in its mexican food court restaurant pursuant to Section 8.1 of the Lease, Tenant may offer beer and wine in each of the following restaurants in the Food Court: (i) Hook & Ladder No. 9; (ii) Greenburg & Sons Deli; and (iii) Sirrico's Pizza, subject to the following conditions. Any of the preceding restaurants may offer beer and wine, if and only if (i) Tenant provides table service in such restaurant; (ii) the beer and wine are served for consumption in the Food Court only; and (iii) Tenant maintains all licenses and permits which are required under applicable law with respect to the service of beer and wine. ARTICLE II MISCELLANEOUS 2.1 CONFIRMATION OF LEASE. Except as specifically amended or modified herein, each and every term, covenant, and condition of the Lease as amended is hereby ratified and shall remain in full force and effect. 2.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their legal representatives, successors and permitted assigns. 2.3 GOVERNING LAW. This instrument shall be interpreted and construed in accordance with the law of the State of Nevada. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first above written. LANDLORD: NEW YORK-NEW YORK HOTEL, LLC a Nevada limited liability company /s/ William Weinstein ---------------------------------- William J. Sherlock President and Chief Executive Officer TENANT: LAS VEGAS FESTIVAL CORP. a Nevada corporation By: /s/ Michael Weinstein ----------------------------------- Title: President 2 EX-10 4 EXHIBIT 10.8 LEASE AGREEMENT THIS LEASE is made and entered into this 17th day of May, 1996, by and between NEW YORK-NEW YORK HOTEL, LLC, a Nevada limited liability company, herein referred to as "Landlord", and LAS VEGAS STEAKHOUSE CORP., a Nevada corporation, herein referred to as "Tenant". R E C I T A L S A. Landlord is the owner of that certain real property located in Las Vegas, Nevada upon which Landlord is constructing a hotel and casino which will be known as the New York-New York Hotel (the "Hotel"); and B. Tenant desires to lease an area within the Hotel for the operation of a full service "Gallagher's Steak House" restaurant (the "Restaurant"). NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows: ARTICLE 1 DESCRIPTION AND LOCATION OF PREMISES 1.1 Premises. Landlord, in reliance upon and in consideration of the representations, warranties, covenants and conditions herein contained on the part of Tenant, hereby lets and demises to Tenant, and Tenant hereby rents, hires and takes of and from Landlord for the term and upon the provisions, covenants and conditions herein set forth, that certain area (the "Premises") cross-hatched on Exhibit "A" attached hereto and incorporated herein by reference. The Premises consists of approximately five thousand (5,000) square feet. 1.2 Relocation of Premises. Tenant acknowledges that Landlord shall have an absolute right from time to time to relocate the Premises within the Hotel at any time during the term hereof provided that the site to which the Premises is relocated shall be approximately the same size as the original Premises and shall be exposed to reasonably equivalent pedestrian traffic. Landlord shall notify Tenant of such relocation not less than sixty (60) days prior to the date thereof. Landlord shall reconstruct on the relocated Premises improvements substantially identical to those constructed by Tenant and Landlord in the Premises prior to the relocation. As of the latter of the date specified in Landlord's notice to Tenant or ten (10) days after Landlord has notified Tenant that it has completed the improvements to be constructed by Landlord on the relocated Premises, Tenant shall surrender the Premises originally demised to Tenant hereunder and move to the relocated Premises. All reasonable out-of-pocket costs incurred by Tenant in moving to the relocated Premises shall be reimbursed to Tenant by Landlord. The relocated Premises shall thereafter be deemed to be the Premises for all purposes of this Lease as if originally demised to Tenant hereunder. Tenant agrees 1 that, promptly on demand, it shall execute an amendment to Exhibit A designating the location of the relocated Premises. If the relocated Premises are not ready for Tenant's occupancy for the operation of the Restaurant on the date on which the Premises originally demised must be surrendered to Landlord under this Section 1.2, then all rent and other charges under this Lease shall be abated until the relocated Premises has been completed and are ready for Tenant's occupancy for the operation of the Restaurant. If any period referred to in the preceding sentence continues for more than twenty-one (21) days (the period which begins after the expiration of such twenty-one (21) days and which ends when the relocated Premises is completed and ready for Tenant's occupancy for the operation of the Restaurant is referred to herein as the "Extended Hiatus Period"), Landlord shall make the following payments to Tenant: (i) for all employees of the Restaurant actually paid by Tenant (and provided that all such employees are actually employed and fully compensated by Tenant during the twenty-one (21) days preceding the Extended Hiatus Period), Tenant's full, normal payroll expense for the Extended Hiatus Period (including, without limitation, payroll taxes, health and disability insurance, unemployment insurance contributions and pension and profit-sharing contributions), but less any compensation paid to any employees of the Restaurant as employees of another restaurant operated by an affiliate of Tenant; (ii) an amount equal to the Net Profit (as defined below) of the Restaurant for the Extended Hiatus Period. Such amounts shall be paid monthly to Tenant, on the first day of each calendar month, beginning with the month following the month in which the Extended Hiatus Period begins; each of such payments shall include all sums due hereunder in respect of the preceding month and shall be pro rated for any partial month. Tenant shall submit to Landlord each month a statement, in reasonable detail, showing the amounts then due to Tenant under this Section 1.2, and Landlord's payment shall be based on such statement (subject to Landlord's right to dispute such statement in good faith). As used in this Section 1.2: the term "Agreed Gross Receipts" shall mean, for each month during the Extended Hiatus Period, an amount equal to the average of the Gross Sales of the Restaurant for each of the three calendar months immediately preceding the month in which the Extended Hiatus Period begins; and the term "Net Profit" shall mean, for each such month, one-twelfth of the net profit of the Restaurant reported (in accordance with GAAP) on Tenant's books for the calendar year preceding the year in which the Extended Hiatus Period begins. Any payments due to Tenant under this Section 1.2 and unpaid at the end of the Extended Hiatus Period, may (without limiting Tenant's remedies) be deducted by Tenant from the installments of Base Rent and Percentage Rent thereafter coming due under this Lease. 1.3 Modification of Premises. In connection with any remodeling of all or any portion of the Hotel, Landlord shall have the right to change the dimensions or reduce the size of the Premises. However, no such reduction may result in the size of the Premises being less than ninety percent (90%) of its original size or in the remaining portion of the Premises not being suitable for the conduct of Tenant's business hereunder, or in a material change in the nature or conduct of Tenant's operations in the Premises. In the event of any remodeling pursuant to this Section 1.3, Landlord shall repair any resulting damage to the Premises, and shall restore the Premises (including Tenant's interior design concept) so as to create an architecturally and functionally harmonious space. In connection with any such remodeling, Landlord may require Tenant to cease conducting 2 business from the Premises for up to thirty (30) days. Rent shall be abated during any period that Landlord requires Tenant to cease conducting business. ARTICLE 2 IMPROVEMENT OF PREMISES 2.1 Landlord's Work. Landlord shall, at its expense, construct the Premises shell in substantial accordance with plans and specifications prepared or to be prepared by Landlord's architect, incorporating in such construction all "Landlord's Work" set forth in the "Work Letter" attached hereto as Exhibit "B". Landlord represents and warrants to Tenant that Landlord's Work will be constructed in compliance with all applicable laws, including building codes, and will conform in all material respects to the building plans which have been made available to Tenant. Landlord's Work with respect to the Premises will substantially conform to Landlord's Building Plans, as described in Section 2.3. 2.2 Tenant's Work. All work in the Premises not provided herein to be done by Landlord shall be performed by Tenant (hereinafter called "Tenant's Work"), including, but not limited to, all work designated as Tenant's Work in the Work Letter, and Tenant shall commence Tenant's Work as soon as reasonably practicable after Landlord has substantially completed Landlord's Work and delivered the Premises to Tenant, and shall do and perform at its expense all Tenant's Work diligently and promptly and in accordance with the terms of the Work Letter. Tenant covenants and agrees that it shall expend not less than the amount required for the construction of the Tenant's Work in accordance with plans approved by Landlord. 2.3 Tenant's Obligations Before Commencement Date. Landlord has made available to Tenant and to Tenant's architect and space planning consultants, Landlord's plans and specifications for Landlord's Work ("Landlord's Building Plans"). Not later than thirty (30) days after receipt of Landlord's Building Plans, Tenant will deliver to Landlord Tenant's proposed plans and specifications for Tenant's Work in such detail as Landlord may reasonably require (a "Preliminary Submittal"). Within ten (10) business days after receipt of the Preliminary Submittal, Landlord shall notify Tenant of any nonconformity's with the Work Letter, Landlord's Plans or any other failure to meet with Landlord's approval, to the extent the same is required by an express provision of this Lease. Tenant shall, within fifteen (15) days after receipt of any such notice, submit "Final Construction Documents" based upon the Preliminary Submittal and incorporating Landlord's comments thereto. Landlord shall notify Tenant of its approval or disapproval of the Final Construction Documents within ten (10) days after receipt. Upon approval, Landlord shall return one (1) set of approved Final Construction Documents to Tenant and the same shall become a part hereof by this reference as Exhibit "B-2". Approval of construction documents by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy or sufficiency, or compliance with applicable codes, and Tenant shall be solely responsible for such construction documents and for obtaining all governmental approvals which are required for Tenant's Work. 3 Tenant shall not commence any of Tenant's Work until Landlord has approved Tenant's Final Construction Drawings in writing. During the construction of Tenant's Work, Landlord shall cooperate and shall cause its contractors to cooperate in good faith with Tenant and its contractors, to the end that construction may be completed as promptly as possible. Provided that the Delivery Date, as hereinafter defined, is no later than June 15, 1996, Tenant shall complete Tenant's Work by November 15, 1996 (the "Required Completion Date"). Landlord shall give Tenant five (5) days prior written notice of the Delivery Date, such Delivery Date being the date upon which (i) Landlord's Work in the Premises has been substantially completed in accordance with the requirements therefor and (ii) the Premises are available for the commencement of Tenant's Work. If the Delivery Date is later than June 15, 1996, the Required Completion Date shall be one hundred fifty-three (153) days after the actual Delivery Date. Tenant hereby releases Landlord and its contractors from any claim whatsoever for damages against Landlord or its contractors for any delay in the date on which the Premises shall be ready for delivery to Tenant or for any delay in commencing or completing any of Landlord's Work; provided, however, that (i) nothing contained in the foregoing provisions of this paragraph shall relieve Landlord of its obligations under the final sentence of the preceding paragraph; and (ii) if the Delivery Date does not occur on or before December 15, 1997, or if the Hotel (including the casino) does not open for business on or before such date, then Tenant may terminate this Lease by notice given to Landlord not later than January 15, 1998, in which event Landlord shall promptly pay to Tenant the amount of all costs then paid or payable by Tenant in connection with Tenant's Work, and neither party shall otherwise have any rights against or obligations to the other with respect to this Lease or the Premises. 2.4 Failure of Tenant to Perform. The parties recognize that it would be extremely difficult or impossible to determine Landlord's damages resulting from Tenant's failure to open for business fully fixtured, stocked and staffed on the Required Completion Date, including, but not limited to, damages from loss of Percentage Rent (hereinafter defined) from Tenant and other tenants, diminished leaseability, and/or mortgageability and damage to the economic value of the Hotel. Accordingly, if Tenant fails to proceed diligently with Tenant's Work or to open for business fully fixtured, stocked and staffed on or before the Required Completion Date (except to the extent that any delay is caused by Landlord's failure to complete any material portion of Landlord's Work in a timely manner or by any unreasonable interference with Tenant's Work by Landlord's contractors, or by Landlord's failure to allow Tenant's contractors to have access to the Premises to construct Tenant's Work), such failure shall be a Tenant Event of Default and Landlord may, on ten (10) days notice to Tenant and in addition to the right to exercise any other remedies and rights herein or at law provided, proceed with Tenant's Work using any contractor Landlord desires and making any changes or revisions to Landlord's Work required because of any delay or failure of Tenant to perform its obligations hereunder, all at Tenant's expense. In addition, Landlord shall have the right to collect rent from the Required Completion Date in an amount equal to the Base Rent (hereinafter defined) and other additional rent and other amounts payable by Tenant hereunder, together with an amount equal to fifty percent (50%) of 1/365ths of the Base Rent for each day that 4 Tenant has failed to open for business on and after the Required Completion Date, which latter amount shall be in lieu of Percentage Rent that might have been earned had Tenant opened in a timely fashion. In the event that Tenant fails to make a timely Preliminary Submittal or to timely submit its Final Construction Documents, as provided in this Lease, then Landlord shall have the right, in addition to its other rights and remedies as herein provided, to collect from Tenant One Hundred Dollars ($100.00) per calendar day for each day that such plans are not so submitted. All remedies in this Lease or at law provided shall be cumulative and not exclusive and shall survive the expiration of the Lease Term or the earlier termination of this Lease. 2.5 Condition of Premises. Tenant's taking possession of the Premises for the construction of Tenant's Work shall be conclusive evidence of Tenant's acceptance thereof in good order and satisfactory condition; except for such matters as Tenant shall, within thirty (30) days after taking possession of the Premises, specify in a written notice or notices to Landlord (hereinafter, "Punch List Items") and except for latent defects in Landlord's Work which were not discoverable in the exercise of ordinary prudence during such thirty (30) day period. Landlord shall diligently correct all Punch List Items which constitute defects in Landlord's Work. Tenant agrees that no representations respecting the condition of the Premises, no warranties or guarantees, expressed or implied, with respect to workmanship or any defects in material, and no promise to decorate, alter, repair or improve the Premises either before or after the execution hereof, have been made by Landlord or its agents to Tenant unless the same are contained herein. 2.6 Refurbishment. Tenant shall keep the Premises and all of Tenants' personal property in a first class condition and state of repair in keeping with the standards of the Hotel throughout the Term of this Lease. Not less than once every five (5) years during the Term, as defined below, including any renewal term, Tenant agrees that it will substantially refurbish the Premises, it being understood that the refurbishment may be accomplished in phases during each five (5) year period, as Tenant reasonably determines. ARTICLE 3 TERM 3.1 Lease Term. The term (the "Term") of this Lease shall be for a period of Ten (10) years, commencing on the earlier of (i) the Required Completion Date; or (ii) the first date upon which the Premises is open for business to the general public (the "Opening Date"), unless terminated earlier as elsewhere herein provided. The date upon which the Term commences shall be referred to herein as the "Commencement Date". At such time as the Commencement Date has been determined, Landlord shall insert the Commencement Date and the expiration date of the Term on Exhibit "C" attached hereto and deliver a copy thereof to Tenant, which shall thereafter be incorporated in, and form a part of, this Lease. 3.2 Holding Over. Should Tenant hold possession of the Premises with the consent of Landlord after the expiration of the stated Term of this Lease, such holding over shall create a 5 tenancy from month to month only, upon the same terms and conditions as are herein set forth. If any such holding over is without Landlord's express written consent, the Percentage Rent and the Base Rent shall be equal to one hundred fifty percent (150%) of the Percentage Rent and the Base Rent which were payable during the last month of the Lease Term. 3.3 Option to Renew. Tenant shall have two (2) five (5) year options to renew subject to Tenant's average Gross Sales being at least Three Million Dollars ($3,000,000) per year for the immediate two (2) prior Lease Years. Each such option shall be exercised, if at all, by written notice to Landlord not less than one hundred eighty (180) days prior to the end of the then current term. The Base Rent for the first renewal Term hereunder shall be increased to [omitted]* per month, and the Base Rent for the second renewal Term hereunder shall be increased to [omitted]* per month. ARTICLE 4 RENT 4.1 Base Rent. Tenant shall pay minimum rent to Landlord during the Term of the Lease at the rate of [omitted]* per month for years 1 through 10, (the "Base Rent"), in advance, beginning on the Commencement Date and continuing on the first day of each calendar month thereafter. If the month in which the Term commences or ends is not a full calendar month, then the Base Rent for such month shall be prorated on the basis of the actual number of days in such month. 4.2 Percentage Rent. Tenant shall pay to Landlord at the time and in the manner set forth herein the amount by which the following applicable percentage of Gross Sales during each month of the Lease Year exceeds the Base Rent for such period (hereinafter called the "Percentage Rent"):
Gross Sales Percentage Rental Payable ----------- ------------------------- [omitted]* [omitted]*
Notwithstanding the foregoing, the Percentage Rent in respect of any Lease Year shall not exceed the applicable percentage of Gross Sales for the full Lease Year. Accordingly, if the monthly payments of Percentage Rent made during any Lease Year exceed the aggregate Percentage Rent due for such Lease Year, the amount of any overpayment shall be applied pursuant to Section 4.5. 4.3 Lease Year. "Lease Year," as used herein, means each calendar year during the Term, together with the "Partial Lease Year" which begins on the Commencement Date and ends on December 31 of the year in which the Commencement Date occurs and the Partial Lease Year, if any, which ends on the date upon which the Term expires or the Lease is otherwise terminated. - ----------------- * Certain Information has been Omitted and Filed Separately with the SEC Pursuant to a Request for Confidential Treatment Pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as amended. 6 4.4 Gross Sales. As used in this Lease, "Gross Sales" means the aggregate selling price received by Tenant (except as provided herein with respect to promotional and complimentary meals) of all products, merchandise and services ("Products") sold in, upon or from the Premises by Tenant, its subtenants, licensees and concessionaires, personally or from any vending or coin operated or token operated device, whether for check, cash, on credit or otherwise, including other types of "cashless" transactions, excluding only the following: (i) monies and credit received by Tenant in the settlement of claims for loss or damage of Tenant's Products; (ii) an amount equal to the cash refunded or credit allowed on Products returned by customers and accepted by Tenant, or the amount of cash refunded or credit allowed thereon in lieu of Tenant's acceptance thereof, but only to the extent that the sales relating to such Products were made in, about or from the Premises; provided, however, that in no event shall the cost or value of any coupons, trading stamps, premiums, advertising or other promotional devices be deducted or excluded from Tenant's Gross Sales or be otherwise construed as a discount, refund, allowance or credit hereunder. Any credit or refund shall reduce Gross Sales for the accounting period during which such credit or refund is made but shall not affect Gross Sales, for the period in which the original sale was made; and (iii) sales taxes, casino entertainment taxes, if any, so called luxury taxes now or hereafter imposed upon the sale of Products, whether such taxes are added separately to the selling price thereof and collected from customers or paid by Tenant and included in the retail selling price; (iv) any sales of product, merchandise, services or the like by Landlord. (v) promotional or complimentary meals served without charge (up to $1,000 per month, noncumulative, and the parties agree that, except as provided in clause 4.4(ix) below, the menu price of all other promotional or complimentary meals shall be included in Gross Sales; (vi) the value of complimentary appetizer or dessert items furnished as a part of a meal which is included in Gross Sales; (vii) amounts which are deducted from meal checks in response to customer dissatisfaction; (viii) goods or food items delivered to another restaurant of Tenant where such delivery is made solely for the convenient operation of Tenant's business and not for the purpose of consummating a sale made in, upon or from the Premises; 7 (ix) Landlord's Complimentaries, as described in Section 5.5 below, up to Five Hundred Thousand Dollars ($500,000) per Lease Year; (x) Receipts from pay telephones in the Premises; (xi) gratuities received by Tenant; (xii) the sale of Tenant's trade fixtures and equipment not in the ordinary course of business; and (xiii) meals furnished to Tenant's employees without profit. All gross income of Tenant or any other person, firm or corporation from any operations in, at or upon the Premises which are not specifically excluded by this Section shall be included in Gross Sales. All sales originating at, upon or from the Premises shall be considered as made and completed thereon and shall be included in Tenant's Gross Sales, even though bookkeeping and payment of the account therefor may be transferred to another place for collection, and even though actual filling of the sale or order or actual delivery of the merchandise may be made from a place other than the Premises. In the event Tenant elects to allow its customers to make credit purchases, no credit shall be allowed for uncollected or uncollectible credit accounts. Each sale upon credit shall be treated as a sale for the full price in the month during which such sale is made, regardless of the time of when or whether Tenant shall receive payment therefor. Tenant agrees that it will not directly or indirectly operate a "Gallagher's Steak House" Restaurant at any other Las Vegas Strip location, including any location within a hotel and/or casino property, during the Term of this Lease. 4.5 Percentage Rent Payments. On or before the 15th day of each calendar month during the Term of this Lease (including the calendar month next succeeding the last month of the Term hereof), Tenant shall deliver to Landlord a written statement signed and certified by Tenant or an officer of Tenant as being true and correct, setting forth the amount of Tenant's Gross Sales during the immediately preceding calendar month, and on the same date Tenant shall pay Landlord the percentage rental for the immediately preceding calendar month. Within thirty (30) days after the end of each Lease Year during the Term of this Lease, Tenant shall deliver to Landlord a written statement, signed and certified by Tenant or an officer of Tenant to be true and correct, setting forth the amount of Tenant's Gross Sales made during each month of the immediately preceding year. If Tenant has paid Landlord for such Lease Year Percentage Rent that is less than Tenant is obligated to pay for such period, Tenant shall pay Landlord the amount of such deficiency concurrently with Tenant's delivery of its annual report of Gross Sales hereunder. If Tenant has paid more than the Percentage Rent required to be paid for such period, Landlord shall credit the amount of such excess against rent next coming due hereunder from Tenant, or, if the Term has expired, Landlord shall pay the amount of such excess to Tenant directly. 8 4.6 Books and Records; Audit. Tenant agrees that it will keep complete books of accounts reflecting Gross Sales,and all of the business activities with respect to the Premises and will comply with generally accepted accounting principles ("GAAP"). Said books of account shall, at a minimum, include: 1. Dated and time stamped cash register tapes (customer receipt and detail audit) which provide a non-resettable, non-clearing gross sales total and/or consecutively numbered duplicate sales tickets which are to be dated and time stamped. When consecutively numbered sales tickets are utilized, Tenant shall maintain the vendor invoice for such sales ticket purchases, which shall accurately reflect the commencing and ending numbers of all sequences. Documentation of voided sales must be kept with regular sales tickets and tapes and originals of voided tickets must be retained. 2. Daily sales summaries showing Nevada and out-of-state sales. 3. Monthly sales journals showing breakdown of sales by day. 4. Authenticated bank deposit slips showing deposits of daily sales. If deposits are not made on a daily basis, then the number of days' receipts deposited should be shown on the deposit slip and in the monthly sales journal. 5. Monthly state sales tax returns and cancelled checks showing payment of those taxes; 6. The portion of Federal Income Tax returns showing Tenant's gross receipts for the same period of time that Tenant is required to maintain its Federal Income Tax returns by the Internal Revenue Service. 7. All of Tenant's purchase orders and invoices relating to the purchase, exchange, or replacement of Products sold or to be sold by Tenant at, upon, or from the Premises. Landlord shall have the right to examine such books and records at any reasonable time and place. Lessor shall have the right at any time during the Term and within thirty (30) days after the end of the Term to have an audit conducted of Tenant's books of account by Landlord's employees or auditors of Landlord's choice. If any audit reveals Gross Sales were understated by more than two percent (2%), the entire cost and expense of such audit shall be borne by Tenant. It is further agreed that an understatement by Tenant of five percent (5%) or more of Gross Sales during any three (3) months being audited shall be deemed an Event of Default unless such understatement was caused by the fraud of Tenant's employees without Tenant's knowledge. 9 4.7 Place for Payments. All Base Rent, Percentage Rent and other monies required to be paid by Tenant hereunder (collectively referred to herein as "rent") shall be paid to Landlord without deduction or offset, and, except as may be specifically set forth in this Lease without prior notice or demand, in lawful money of the United States of America, at 3790 Las Vegas Blvd. South, Las Vegas, Nevada, 89109 or at such other place as Landlord may, from time to time, designate in writing. If the time for payment of any amount due from Tenant to Landlord is not set forth in this Lease, such amount shall be due within five (5) business days after such amount is billed by Landlord. 4.8 Interest. Any rent due from Tenant to Landlord which is not paid within five (5) business days after the date due shall bear interest at two percent (2%) per annum in excess of the Prime Rate of Interest published from time to time in the "Money Rates" section of the Wall Street Journal (or a comparable interest rate selected by Landlord in the event the Wall Street Journal no longer publishes a Prime Rate) (hereinafter, the "Default Rate"). 4.9 Late Charge. In the event Tenant is more than ten (10) days late in paying any rent due under this Lease more than twice during the same Lease Year, then, beginning with the third such delinquent payment of rent, and continuing with each subsequent payment of rent during the Term which is more than ten (10) days late, Tenant shall pay Landlord a late charge equal to five percent (5%) of the delinquent rent, and, provided that Landlord gives Tenant written notice of the delinquent rent, Tenant shall pay an equivalent late charge every ten (10) days thereafter until the delinquent rent, including all interest and assessed late charges, has been paid in full. The parties agree that the amount of such late charge represents a reasonable estimate of the cost and expense that would be incurred by Landlord in processing each delinquent payment of rent by Tenant and that such late charge shall be paid to Landlord as liquidated damages for each delinquent payment, but the payment of such late charge shall not excuse or cure any default by Tenant under this Lease. The parties further agree that the payment of late charges and the payment of interest provided for in Section 4.8 above are distinct and separate from one another in that the payment of interest is to compensate Landlord for the use of Landlord's money by Tenant, while the payment of a late charge is to compensate Landlord for the additional administrative expense incurred by Landlord in handling and processing delinquent payments. 4.10 Failure to Achieve Minimum Sales. Notwithstanding anything to the contrary contained elsewhere in this Lease, Landlord may, at the end of the fifth full Lease Year or any subsequent Lease Year, terminate this Lease, without compensation to Tenant, in the event that Tenant's average monthly Gross Sales for a period consisting of three consecutive months during any such Lease Year is less than Three Hundred Thousand Dollars ($300,000), unless Tenant pays to Landlord, in addition to Base Rent, an amount equal to the difference between Tenant's Percentage Rent for such months and the amount of Percentage Rent which would have been due from Tenant had Tenant's actual average Gross Sales for such months been Three Hundred Thousand Dollars ($300,000). Termination hereunder shall be upon ninety (90) days written notice. Tenant 10 acknowledges that Landlord has made no representation to Tenant regarding anticipated Gross Sales or projected number of visitors and guests in the Hotel. ARTICLE 5 GUEST RELATIONS; COMPLIMENTARIES 5.1 Standard of Operations. Tenant acknowledges that the Hotel is a first class hotel and that the maintenance of Landlord's reputation and the reputation of the Hotel, as well as the goodwill of all of Landlord's guests and invitees, is essential to Landlord and that any impairment thereof may cause great damage to Landlord. Tenant therefore covenants that it shall operate the Premises in accordance with high standards of honesty, integrity, quality and courtesy so as to maintain and enhance the reputation and goodwill of Landlord and the Hotel and at all times in keeping with and not inconsistent with or detrimental to the operation by Landlord of an exclusive, first-class resort hotel facility. Tenant shall regularly monitor the performance of each of Tenant's employees at the Premises so that such standards may be consistently maintained. Tenant therefore further agrees that repeated failure to maintain such standards shall be deemed an Event of Default by Tenant and that repeated complaints from customers or guests which are reasonable and which are not promptly remedied by Tenant shall be evidence of Tenant's failure to maintain such standards. 5.2 Room Charges. Tenant may permit Hotel guests to charge purchases from Tenant to their room account. Tenant shall be solely responsible for ascertaining that any persons purporting to be Hotel guests are in fact Hotel guests and shall further be solely responsible for the credit worthiness of such persons. Landlord shall not be responsible for uncollected or uncollectible charges; provided that Landlord shall have the duty to exercise its good faith efforts to collect any charges by Tenant's customers to their hotel rooms. Tenant shall, at Tenant's expense, use Landlord's point-of-sale system in order to record all guest charges, and Landlord shall make its point of sale system available to Tenant at no cost to Tenant (i.e., Tenant's input devices shall be purchased and maintained by Tenant at its cost but Landlord will not impose an additional charge or fee for the use of Landlord's point of sale system). Tenant agrees to comply with all rules and regulations which Landlord may, in its reasonable discretion, from time to time, adopt to facilitate charges to rooms and/or to minimize uncollected charges. 5.3 Room Charge Accountings. Landlord shall cause to be prepared and delivered to Tenant a weekly accounting of all charges to Hotel guest accounts by Tenant's customers and concurrently therewith shall deliver to Tenant any sums collected with respect to such charges. If any customer account was paid by credit card, Landlord shall deduct from the amounts due to Tenant such charges as the credit card company actually imposes on the Hotel; Landlord's accounting shall specify all such deductions. 5.4 Collections. In the event that any Hotel guest pays any portion of his bill but refuses to pay any charges of Tenant, Tenant agrees separately to bill such guests and to pursue collection 11 independently of Landlord. Landlord will make reasonable efforts to consult with Tenant in connection with such charges and will cooperate with Tenant's efforts to collect the same. In the event Tenant determines that collection efforts (other than the sending of a routine reminder notice or statement) are necessary to collect an unpaid bill by one of its customers, Tenant shall inform Landlord in writing of the identity of such customer at least five (5) days prior to the commencement of any collection effort. 5.5 Complimentaries. Landlord may desire to provide designated Hotel guests with complimentary food and beverages ("Complimentaries") at the Premises. From time to time Landlord and Tenant shall develop procedures for authorization of Complimentaries, up to Five Hundred Thousand Dollars ($500,000) per Lease Year, and for reimbursement by Landlord of seventy-five percent (75%) of the full retail cost for the Complimentaries in any Lease Year. Tenant recognizes that Landlord is not responsible for the payment of gratuities on Complimentaries. Landlord agrees to pay to Tenant any gratuities with respect to Complimentaries which are charged by customers to their Hotel guest accounts as provided in Section 5.2 and 5.3 above. In addition to the foregoing, Landlord may request Tenant to provide complimentary food and beverages, in an amount not exceeding $1,000 in value in any month (on a noncumulative basis), to persons other than Hotel guests or casino patrons; Landlord shall not be obligated to reimburse Tenant for the cost of such meals, and the value of such meals shall not be included in Gross Sales. In the event Tenant desires to provide complimentary food and/or beverages to any of its guests, Tenant shall be responsible for payment of the full retail value thereof in excess of One Thousand Dollars ($1,000) per month and the same shall be included in computation of Gross Sales. However, there shall not be included in Gross Sales: the value of complimentary items furnished by Tenant as part of a meal which is included in Gross Sales; or amounts deducted from meal checks in response to customer dissatisfaction. ARTICLE 6 EMPLOYEES; BONDING 6.1 Staffing. Tenant shall staff the Premises with such number of its employees as are reasonably required for the proper and efficient operation of Tenant's business. Tenant agrees to adopt its own rules of conduct and personal appearance standards which are consistent with the first class standards of the Hotel. Tenant shall, at Tenant's expense, require its prospective and present employees to participate in a pre-employment drug testing program. Such program shall not apply to persons who have been employed by an affiliate of Tenant for in excess of three (3) years; and, in connection with such program, Tenant may advise its employees that the testing is a requirement of the Hotel. 6.2 Gaming Compliance. Tenant acknowledges that Landlord, its parent, subsidiaries and affiliates are businesses that are or may be subject to and exist because of privileged licenses issued by governmental authorities. If requested to do so by Landlord, Tenant shall obtain any license, qualification, clearance or the like which shall be requested or required of Tenant by 12 Landlord or any regulatory authority having jurisdiction over Landlord or any parent company, subsidiary or affiliate of Landlord. If Tenant fails to satisfy such requirement or if Landlord or any parent company, subsidiary or affiliate of Landlord is directed to cease business with Tenant by any such authority, or if Landlord shall in good faith determine that Tenant, or any of its officers, directors or employees was or is involved in any relationship which jeopardizes Landlord's business or such licenses, or those of its parent, subsidiaries or affiliates, or if any such license is threatened to be, or is, denied, curtailed, suspended or revoked by reason of any improper activities of Tenant or any such related person and if, promptly after receiving notice thereof from Landlord (which notice must contain sufficient particulars to permit Tenant to take appropriate action), Tenant does not cease such activities or sever the relationship of any such person to Tenant so as to satisfy Landlord and the appropriate governmental authority, this Lease may be terminated by Landlord on not less than thirty (30) days notice to Tenant and without liability to either party. 6.3 Restricted Areas. Tenant shall not cause or permit its employees to enter upon those areas of the Hotel which are designated "Employees Only". Access to such areas is to be restricted to the employees of Landlord. The foregoing shall not apply to employee lavatories or to the employee cafeteria. However, in the case of the employee cafeteria, (i) the use thereof by Tenant's employees will be permitted only so long as such use does not unreasonably interfere with the use of such cafeteria by Landlord's employees, and (ii) Tenant shall cause its employees to abide by reasonable scheduling requirements established by Landlord. 6.4 Bonding. All employees of Tenant who are reasonably expected to perform a portion of their tasks in portions of the Hotel outside of the Premises (including, for example, employees who are expected to deliver items to rooms in the Hotel) shall be bonded in such amounts as may be reasonably required by Landlord from time to time. In no event shall any employee of Tenant perform work in portions of the Hotel outside of the Premises until the bond for such employee has been delivered to Landlord and Landlord has approved the same, in writing. 6.5 Tenant's Employees. Tenant shall be responsible for all salaries, employee benefits, social security taxes, federal and state unemployment insurance and any and all similar taxes relating to its employees and for workers' compensation coverage with respect thereto pursuant to applicable law. Tenant's employees shall not be entitled to participate in, or to receive, any of Landlord's employee benefit or welfare plans, nor shall they be deemed agents of Landlord for purposes of this Lease. Tenant shall be responsible for verifying its employees' work authorizations under federal law, including any necessary employment verification process under the Immigration Reform and Control Act of 1986, as amended, before such employees perform services at the Premises. 6.6 Tenant's Employment Policies. Landlord and Tenant agree that Tenant shall have the sole and complete responsibility for establishing the employment practices, policies, procedures and terms and conditions of employment of Tenant's employees. Nothing contained in this Lease shall be used to infer or create a single or joint employer relationship between Landlord and Tenant, 13 as the terms single and joint employer are interpreted by the National Labor Relations Board, courts and administrative agencies. ARTICLE 7 POSSESSION AND SURRENDER OF PREMISES 7.1 Acceptance. Tenant shall, by entering upon and occupying the Premises, be deemed to have accepted the Premises subject to the conditions and limitations stated in Section 2.5 above. 7.2 Surrender. Upon any surrender of the Premises, or termination or expiration of this Lease, Tenant shall, except as otherwise provided in this Lease, redeliver the Premises to Landlord in the same condition in which it existed at the Opening Date, reasonable wear and tear, repairs which are the obligation of Landlord and permitted alterations and installations excepted, and deliver to Landlord all keys for, and all combinations for locks, safes and/or vaults in the Premises. 7.3 Fixtures. All fixtures (except trade fixtures) which may be made or installed or placed by either Tenant or Landlord upon the Premises, either before or during the Term of this Lease, shall remain upon the Premises and shall be surrendered with the Premises at the termination of this Lease. 14 7.4 Removal of Trade Fixtures. Upon the termination of this Lease, Tenant shall be entitled to remove from the Premises all of its trade fixtures, furnishings and equipment, including the personal property shown on Tenant's Plans. If Tenant fails to remove any trade fixtures from the Premises prior to the end of the Lease Term or prior to any earlier termination thereof, such trade fixtures shall become Landlord's property. 7.5 Failure to Surrender. If the Premises is not surrendered at the end of the Lease Term, Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant founded on such delay. ARTICLE 8 USE OF PREMISES 8.1 Permitted Use. The Premises is leased to Tenant solely for the purpose of conducting thereon on a non-exclusive basis a "Gallagher's Steak House" full service restaurant, serving a variety of food, nonalcoholic and alcoholic beverages. Tenant may offer catering service from the Premises. Tenant may also offer souvenir items for sale, so long as such items make specific reference to Tenant's tradename and do not include the words "New York" or "NY" or show or, in Landlord's sole judgment, otherwise make use of Landlord's name, theme or intellectual property. Food items to be offered from the Premises and the pricing thereof shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. Except for Tenant's initial pricing, Landlord agrees that prices which do not exceed four (4) times Tenant's actual costs shall not require further approval. Tenant shall not use or suffer to be used the Premises, or any portion thereof, for any other purpose or purposes whatsoever, without Landlord's written consent therefor first had and obtained, and such consent may be withheld in Landlord's sole and absolute discretion. Without limiting the generality of the foregoing, Tenant shall not conduct gaming activities at the Premises. Landlord hereby reserves to itself the right to conduct keno 15 gaming on the Premises, the location and type of which shall be subject to Tenants' approval, which approval shall not be unreasonably withheld or delayed but which may take into account the preservation of Tenant's theme, considering location, design, sound sensitivity and ambience. As provided in Section 4.4 above, Tenant shall not operate a restaurant or similar operation under the tradename used by Tenant at the Premises at any other Las Vegas Strip location, including any location within a hotel and/or casino property, during the Term of this Lease. 8.2 Tenants' Trade Name. Tenant shall conduct business under the trade name "Gallagher's Steak House" and no other without prior written consent of Landlord which shall not be unreasonably withheld. Tenant shall not conduct any business at any time either before or after the termination of this Lease, either in the Premises or elsewhere, under a name in which the words "New York-New York" appear; provided, however, that Tenant may conduct its business in the Premises under such a name (and the trade name set forth above) and use the logo of Landlord in advertising, but such use of Landlord's logo shall be deemed a revocable license or privilege only, terminable at any time, which confers no property rights on Tenant, and which, in any event, shall cease upon the expiration or sooner termination of this Lease. Any such use shall not occur without the consent of Landlord to the presentation of its name and/or logo, which consent shall not be unreasonably withheld. Neither such approval of name and use of logo nor anything herein shall be deemed to abridge the right of Landlord to grant or license the use of the words "New York-New York" to any other person at any time. During the Term of this Lease Tenant hereby grants Landlord a license to use Tenant's trade name and any marks related to such trade name for the limited purpose of promoting and advertising the Restaurant. Any such use shall not occur without the consent of Tenant to the presentation of its name and/or logo, which consent shall not be unreasonably withheld. 8.3 Liquor License. Immediately after execution of this Lease, Tenant shall make application for a liquor license in order to be able to provide liquor service at the Premises. If Tenant is unable to obtain a liquor license for a reason not related to the identity of Landlord or Landlord's ownership or operation of the Hotel (other than the Premises) within ninety (90) days after the commencement of the Lease Term, then Landlord may treat the same as an Event of Default; provided, however, that so long as (i) Tenant is diligently and in good faith seeking to obtain a liquor license; and (ii) Tenant obtains the required liquor license no later than March 17, 1997, no Event of Default shall be deemed to have occurred hereunder. Should the Premises open for business prior to Tenant's obtaining the necessary liquor license(s), Tenant shall apply for a temporary liquor license and, until a temporary license is obtained, Landlord shall have the right, but not the obligation, to provide liquor service to the Premises for so long as Landlord may lawfully do so and Tenant does not hold the necessary liquor license(s). In such event, Landlord shall be entitled to retain all revenue derived therefrom and Tenant shall have no claim or right to such revenue. 8.4 Product Agreements. Tenant acknowledges that Landlord may enter into agreements with Coke or Pepsi-Cola which will require that only certain beverage products may be offered for sale or use within the Hotel, including the Premises. Tenant agrees that upon reasonable 16 notice from Landlord it will abide by the terms and conditions of such agreements as they may relate to product use within the Premises; provided that (i) such agreements provide that the subject products will be offered at the lowest available price; (ii) the service provided and the quality of the subject products is reasonably comparable to the quality of similar products which would be available to Tenant in the Las Vegas marketplace; and (iii) any such product agreement for soda shall require that Tenant receive its soda equipment without charge. 8.5 Prohibited Uses. Tenant shall not permit the Premises to be used for any of the following purposes: a. Vending Machines. Tenant shall not, without Landlord's prior written approval, operate or permit to be operated on the Premises any coin or token operated vending machines or similar device for the sale or leasing to the public of any goods, wares, merchandise, food, beverages, and/or service, including, without limitation, pay telephones, pay lockers, pay toilets, scales and amusement devices. Notwithstanding the foregoing, Tenant may have pay telephones in the Premises so long as the company which services such telephones is the company which services Landlord's pay telephones in the Hotel. b. No Residential Use. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof as living quarters,sleeping quarters or lodging rooms. c. No Non-Retail Use. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof for office, clerical or other nonselling purposes, provided, however, that space in the Premises may be used for such purposes to the extent reasonably required for the conduct of Tenant's permitted business. d. No Fire Sales. Tenant shall not, without Landlord's prior written approval, conduct or permit any fire, bankruptcy or auction sale in, on or about the Premises. e. No Obstructions. Tenant shall not, without Landlord's prior written approval, which shall not be unreasonably withheld, cover or obstruct any windows, glass doors, lights, skylights, or other apertures that reflect or admit light into the Premises, except for temporary closures and obstructions during remodeling, repair or maintenance work in the Premises. f. No Animals. Tenant shall not keep or permit the keeping of any animals of any kind in, about or upon the Premises without Landlord's prior written approval. g. No Warehouse Use. Tenant shall not use the Premises for storage or warehouse purposes beyond such use as is reasonably required to keep Tenant's business adequately stocked for sales of product and merchandise in, at or from the Premises. 17 8.6 Approval of Fixtures and Equipment. All fixtures and other equipment to be used by Tenant in, about or upon the Premises shall be subject to the prior written approval of Landlord, which shall not be unreasonably withheld. 8.7 Maintenance of Personal Property. Except as provided for elsewhere herein, Tenant shall keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) Tenant's personal property and all portions of the Premises (other than Landlord's Work) and every part thereof and any and all appurtenances thereto wherever located. Tenant shall also keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) any special equipment, fixtures or facilities (other than Landlord's Work) which special facilities shall include but not be limited to grease traps, located outside the Premises. Tenant shall store all trash and garbage in metal or other Health Department approved containers so as not to be visible or create a nuisance to guests, customers and business invitees in the Hotel, and so as not to create or permit any health or fire hazard, and arrange for the prompt and regular removal thereof. Landlord shall keep and maintain in good order, condition, and repair (including, except as otherwise provided in this Lease, any such replacement and restoration as is required for that purpose) those portions of the Premises constituting Landlord's Work, as well as the common areas of the Hotel in the vicinity of the Premises and cause all such areas to be in compliance with all governmental rules, regulations, ordinances, statutes and laws, and the orders and regulations of the National Board of Fire Underwriters, the Insurance Service Office, or any other body now or hereafter exercising similar functions, now or hereafter in effect. 8.8 Compliance with Law. Except as provided in the following sentence, Tenant shall at all times during the Term of this Lease comply with and shall cause the Premises to be in compliance with all governmental rules, regulations, ordinances, statutes and laws, and the orders and regulations of the National Board of Fire Underwriters, the Insurance Service Office, or any other body now or hereafter exercising similar functions, now or hereafter in effect pertaining to the Hotel, the Premises or Tenant's use thereof. Landlord shall cause those portions of the Premises constituting Landlord's Work to be in compliance with all governmental rules, regulations, ordinances, statutes and laws. Tenant shall not, without the prior written consent of Landlord and all insurance companies which have issued any insurance of any kind whatsoever with respect to the Hotel or the Premises, sell, or suffer to be kept, used or sold in, upon or about the Premises any gasoline, distillate or other petroleum products or any other substance or material of an explosive, inflammable or radiological nature, except for the lawful use of petroleum products in a manner and for such purposes as are customarily associated with the operation of a restaurant. 8.9 Rules and Regulations. Tenant hereby covenants and agrees that it shall make all reasonable efforts to ensure that its agents, employees, servants, contractors, subtenants and licensees shall abide by any reasonable rules and regulations as Landlord may, from time to time, reasonably adopt for the safety, care and cleanliness of the Premises, or the Hotel or for the preservation of good 18 order thereon or to assure the operation of a first-class resort hotel facility. All such rules and regulations shall be enforced by Landlord uniformly and in a nondiscriminatory manner. 8.10 Business Practices and Minimum Hours of Operation. Tenant shall operate the Premises during the entire Lease Term in accordance with sound business practices, due diligence and efficiency so as to provide the maximum Gross Sales which may reasonably be expected to be produced by such manner of operation. Tenant shall maintain in the Premises Tenant's personal property necessary for the conduct of Tenant's business therein, in a businesslike manner, shall carry at all times in the Premises sufficient quantities of Products as shall be reasonably designed to produce the maximum return to Landlord and Tenant, and shall staff the Premises at all times with sufficient personnel to serve its customers. All Products shall meet the high standards of the Hotel. Tenant's minimum hours and days of operation shall be mutually agreed upon by Landlord and Tenant. In the event of breach by Tenant of any of the conditions of this paragraph, Landlord shall have, in addition to any and all remedies herein provided, the right, at its option, to collect an amount equal to one-thirtieth (1/30) of the highest monthly Percentage Rent to which Landlord is or was entitled during the preceding twelve (12) month period for each and every day, or any portion thereof, that Tenant is not open for business as herein provided. Said amount shall be due on demand and shall be deemed to be in lieu of any Percentage Rent that might have been earned during such period of Tenant's failure to conduct its business as herein provided. Tenant shall be open for such additional hours as shall be set from time to time by Landlord, and Tenant may, upon prior written notice to Landlord, remain open additional hours. 8.11 Private Parties. Tenant shall not materially restrict the use of Premises to guests or patrons of the Hotel nor conduct any private parties therein, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, provided that Landlord is satisfied, in its reasonable judgment, that the conduct of any such party will not deprive Hotel guests of adequate access to the Restaurant. 8.12 Photographic Services. Tenant shall permit the photographic concessionaire with whom Landlord has entered into an agreement to provide photographic services to patrons of Tenant's restaurant on the Premises, provided the same does not unreasonably interfere with the conduct of Tenant's business or the ambiance of the Restaurant. 8.13 Interference with Other Tenants. Tenant shall not do, permit or suffer anything to be done, or kept upon the Premises which will obstruct or interfere with the rights of other tenants, Landlord or the patrons and customers of any of them, or which may reasonably be anticipated to annoy any of them or their patrons or customers by reason of unreasonable noise or other objectionable conduct, nor will Tenant commit or permit any nuisance on the Premises or commit or suffer any immoral or illegal act to be committed thereon. 8.14 Refunds and Settlements by Landlord. In the event a dispute shall arise between Tenant and any of its customers concerning the acceptability of Tenant's Products which results in 19 a customer demanding a refund from Landlord, Landlord may in good faith and in the exercise of a reasonable business judgment make such refund or rebate to avoid embarrassment to the Hotel and to retain the goodwill of its customers. In such case Tenant will forthwith reimburse Lessor in the amount of such refund or rebate. 8.15 Advertising and Signage. All advertising, signs, placards or other promotional events proposed to be posted, shown or exhibited by Tenant in or upon the Premises and all additional outside advertising (including, without limitation, television, radio and print advertising) which mentions Landlord or the Hotel, shall be subject to the prior written approval of Landlord. Without limiting the foregoing, Tenant shall not advertise at the Premises any other premises owned or operated by Tenant without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Tenant acknowledges that the Premises may be designated by a particular suite number. In such event, Tenant agrees to include and use such suite number on all of its stationary, correspondence, sales receipts and advertisements as part of its address. Tenant agrees to forthwith remove or cease any such advertising, sign, placard or exhibit which in the reasonable judgment of Landlord is deemed to be objectionable or inconsistent with the decor or policies of Landlord in the operation of the Hotel. Tenant shall also refrain from any advertising which is so objectionable, in Landlord's reasonable judgment, as to result in embarrassment to Landlord, loss of goodwill or damage to the reputation of the Hotel. None of Tenant's signs, placards or advertising shall be exhibited outside of the Premises or in the lobby or any other part of the Hotel without Landlord's prior written consent. However, Landlord shall permit outside advertising consistent in tone and content with that allowed to other restaurants in the Hotel upon the same terms as are required of such other restaurants. At no time during the Term of this Lease nor for a period of six (6) months after its termination shall Tenant place or cause to be placed, whether on or off the Premises, any window card, sign or other advertising, including newspaper adds, which recites that Tenant has lost its lease, is going out of business or is vacating the Premises. Landlord shall provide reasonable directional signage within the Hotel to assist customers in locating the Premises. 8.16 Intellectual Property. Tenant represents and warrants to Landlord that Tenant owns, or has obtained an appropriate license to use, all copyrights, trademarks, tradenames and other intellectual property rights used in Tenant's business, including, without limitation, all rights in Tenant's tradename, trade or service mark and logo. 8.17 Security. Tenant acknowledges that Landlord's security department and security officers are not responsible for providing security services in the Premises and that all such responsibility is the obligation of Tenant. In no event shall Landlord be liable to Tenant or any third-party for the security department's failure to respond to a request for aid or assistance by Tenant. 8.18 Conduct of Tenant. Tenant acknowledges that Landlord, its parent, subsidiaries and affiliates have a reputation for offering high-quality entertainment and/or services to the public, and that it and its affiliates are subject to regulation and licensing, and desire to maintain their reputation and receive positive publicity. Tenant therefore agrees that throughout the Term of this Lease, it and 20 its officers and management will not conduct themselves in a manner that adversely affects or is detrimental to the reputation or image of Landlord or its affiliates, and will not directly or indirectly make any oral, written or recorded public statement or comment that is disparaging, critical, defamatory or otherwise not in the best interests of Landlord. Landlord shall use its good faith business judgment in determining whether Tenant's conduct or that of its officers and management adversely affects Landlord or its affiliates, and, upon such determination, Landlord shall have the right to terminate this Lease upon notice to Tenant without liability to either party if Tenant does not cause such activity to be terminated and use its reasonable best efforts to remedy or mitigate any material harm done to Landlord within thirty (30) days after such notice from Landlord. The termination or removal of any person responsible for actions or statements prohibited by this Section 8.18 shall constitute full compliance with Tenant's obligations to remedy such default. 8.19 Emissions and Hazardous Materials. Except for small quantities of substances customarily used in the operation of a restaurant and kept and used by Tenant in accordance with applicable laws, Tenant shall not, without the prior written consent of Landlord, cause or permit, knowingly or unknowingly, any Hazardous Material (hereinafter defined) to be brought upon, kept, used, discharged, leaked, or emitted in or about, or treated at the Premises. As used in this Lease, "Hazardous Material(s)" shall mean any hazardous, toxic or radioactive substance, material, matter or waste which is or becomes regulated by any federal, state or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement, and shall include asbestos, petroleum products and the terms "Hazardous Substance" and "Hazardous Waste" as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended 42 U.S.C. 'SS' 9601 et seq. ("CERCLA"), and the Resource Conservation and Liability Act, as amended 42 U.S.C. 'SS' 9601 et seq. ("RCRA"). To obtain Landlord's consent, Tenant shall prepare an "Environmental Audit" for Landlord's review. Such Environmental Audit shall list: (1) the name(s) of each Hazardous Material and a Material Safety Date Sheet ("MSDS") as required by the Occupational Safety and Health Act; (2) the volume proposed to be used, stored and/or treated at the Premises (monthly); (3) the purpose of such Hazardous Material; (4) the proposed on-premises storage location(s); (5) the name(s) of the proposed off-premises disposal entity; and (6) an emergency preparedness plan in the event of a release or spill. Additionally, the Environmental Audit shall include copies of all required federal, state, and local permits concerning or related to the proposed use, storage, or treatment of any Hazardous Material(s) at the Premises. Tenant shall submit a new Environmental Audit whenever it proposes to use, store, or treat a new Hazardous Material at the Premises or when the volume of existing Hazardous Materials to be used, stored or treated at the Premises expands by ten percent (10%) during any thirty (30) day period. If Landlord in its reasonable judgment finds the Environmental Audit acceptable, then Landlord shall deliver to Tenant Landlord's written consent. Notwithstanding such consent, Landlord may revoke its consent upon:(1) Tenant's failure to remain in full compliance with applicable environmental permits and/or any other requirements under federal state, or local law, ordinance, order, rule, regulation, code or any other governmental restriction or requirement (including but not limited to CERCLA and RCRA related to environmental safety, human health, or employee safety; (2) the Tenant's business operations pose or potentially pose a human health risk to other Tenants; or (3) the Tenant expands 21 its use, storage, or treatment of any Hazardous Material(s) in a manner inconsistent with the safe operation of a restaurant and hotel. Should Landlord consent in writing to Tenant bringing, using, storing or treating any Hazardous Material(s) in or upon the Premises, Tenant shall strictly obey and adhere to any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements (including but not limited to CERCLA and RCRA which in any way regulate, govern or impact Tenant's possession, use, storage, treatment or disposal of said Hazardous Material(s). In addition, Tenant represents and warrants to Landlord that (1) Tenant shall apply for and remain in compliance with any and all federal, state or local permits in regard to Hazardous Materials; (2) Tenant shall report to any and all applicable governmental authorities any release of reportable quantities of any Hazardous Material(s) as required by any and all federal, state or local laws, ordinances, orders, rules, regulations, codes or any other governmental restrictions or requirements; (3) Tenant, within five (5) days of receipt, shall send to Landlord a copy of any notice, order, inspection report, or other document issued by any governmental authority relevant to the Tenant's compliance status with environmental or health and safety laws; and, (4) Tenant shall remove from the Premises all Hazardous Materials at the termination of this Lease, except for those, if any, introduced by Landlord or at Landlord's direction. In addition to, and in no way limiting Tenant's duties and obligations as set forth in Article 16 of this Lease, should Tenant breach any of its duties and obligations as set forth in this Section 8.20, or if the presence of any Hazardous Material(s) brought onto or occurring on the Premises after the Delivery Date results in contamination of the Premises, the Hotel, any land other than the Hotel, the atmosphere or any water or waterway (including groundwater), or if contamination of the Premises or of the Hotel by any Hazardous Material(s) otherwise occurs for which Tenant is otherwise legally liable to Landlord for damages resulting therefrom, Tenant shall indemnify, save harmless, and at Landlord's option and with attorneys approved in writing by Landlord, defend Landlord, and their contractors, agents, employees, partners, officers, directors and mortgagees, if any, from any and all claims, demands, damages, expenses, fees, costs, fines, penalties, suits, proceedings, actions, causes of action, and losses of any and every kind and nature (including, without limitation, diminution in value of the Premises or the Hotel, damages for the loss or restriction on use of the rentable or usable space or of any amenity of the Premises or the Hotel, damages arising from any adverse impact on marketing space in the Hotel, and sums paid in settlement of claims and for attorney's fees, consultant fees and expert fees, which may arise during or after the Lease Term or any extension thereof as a result of such contamination). This includes, without limitation, costs and expenses, incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence of Hazardous Material(s) on or about the Premises or the Hotel, or because of the presence of Hazardous Material(s) anywhere else which came or otherwise emanated from Tenant or the Premises. Without limiting the foregoing, if the presence of any Hazardous Material(s) on or about the Premises or the Hotel caused or permitted by Tenant results in any contamination of the Premises or the Hotel, Tenant shall, at its sole expense, promptly take all actions and expense necessary to return the Premises and/or the Hotel to the condition existing prior to the introduction of any such Hazardous Material(s) to the 22 Premises or the Hotel; provided, however, that Landlord's approval of such actions shall first be obtained in writing. Nothing contained herein shall be deemed to limit Landlord's obligations under law for the removal of Hazardous Materials which exist on the Premises prior to the delivery thereof to Tenant or to impose upon Tenant any obligation for the removal of such Hazardous Materials. ARTICLE 9 ALTERATIONS AND IMPROVEMENTS Tenant may make no alteration, repairs, additions or improvements in, to or about the Premises (collectively, "Tenant Alterations"), without the prior written consent of Landlord, which shall not be unreasonably withheld, and Landlord may impose as a condition to such consent such requirements as Landlord, in its reasonable discretion, may deem necessary or desirable, including without limitation, (a) the right to approve the plans and specifications for any work, (b) the right to require insurance satisfactory to Landlord, (c) the right to require evidence of Tenant's ability to make full payment for any work, (d) requirements as to the manner in which or the time or times at which work may be performed and (e) the right to designate the contractor or contractors to perform Tenant Alterations which affect the fire sprinkler or life safety systems of the Hotel. All Tenant Alterations shall be compatible with a first class hotel/casino complex and completed in accordance with Landlord's requirements and all applicable rules, regulations and requirements of governmental authorities and insurance carriers. Tenant shall pay to Landlord Landlord's reasonable charges (which shall be assessed by Landlord at its cost, without profit) for reviewing and inspecting all Tenant Alterations to assure full compliance with all of Landlord's requirements. Landlord does not expressly or implicitly covenant or warrant that any plans or specifications submitted by Tenant are safe or that the same comply with any applicable laws, ordinances, codes, rules or regulations. Further, Tenant shall indemnify, protect, defend and hold Landlord harmless from any loss, cost or expense, including attorneys' fees and costs, incurred by Landlord as a result of any defects in design, materials or workmanship resulting from Tenant Alterations. If requested by Landlord, Tenant shall provide Landlord with copies of all contracts, receipts, paid vouchers, and any other documentation in connection with the construction of such Tenant Alterations. Tenant shall promptly pay all costs incurred in connection with all Tenant Alterations. Notwithstanding the foregoing provisions of this Article 9, Landlord's prior consent shall not be required with respect to any Tenant Alteration which (i) costs less than Twenty-Five Thousand Dollars ($25,000); (ii) does not materially affect the interior or exterior appearance of the Premises; and (iii) does not affect fire sprinklers, life safety, plumbing, electrical or mechanical systems of the Hotel. ARTICLE 10 LANDLORD'S REPAIR OBLIGATION Landlord agrees to keep in good structural order, condition and repair the exterior walls, and roof of the Hotel and all portions of Landlord's Work except for any damage thereto as to which 23 Article 21 applies and other damage caused by any act or negligence of Tenant or its agents, employees, servants, contractors, subtenants or licensees (which other damage shall be promptly repaired by Tenant at Tenant's expense). ARTICLE 11 PARKING AND COMMON AREAS Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers and business invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use such common areas of the Hotel (including, but not limited to, the parking lot, walkways, sidewalks, hallways, lobby and public restrooms) as may be designated from time to time by Landlord, subject to such rules and regulations as Landlord may from time to time impose, provided such designation and such rules and regulations do not materially interfere with Tenant's business. Subject to the foregoing: Tenant agrees that it, its agents, employees, servants, contractors, subtenants and licensees shall abide by such rules and regulations and that Landlord shall have the exclusive management and control of all common areas; Landlord may at any time close any common area or other portions of the Hotel to make repairs or changes, to prevent the acquisition of public rights in such areas, or to discourage noncustomer parking (provided that no such closure (other than temporary closures which are necessary to make repairs or changes) materially and adversely affects access to the Premises). Landlord may do such other acts in and to the common areas and the other portions of the Hotel as in its judgment may be desirable. Landlord agrees, however, to use all reasonable efforts to maintain adequate access to the Premises when the Premises is open for business so that Tenant's customers and staff can enter and leave the Restaurant. All parking areas which Tenant's employees may be permitted to use are to be used under a revocable license, and if any such license is revoked, or if the amount of such area is diminished, Landlord shall not be subject to any liability, nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation or diminution of such areas be deemed constructive or actual eviction; provided, however, that Landlord shall exercise its rights with respect to such revocable license for parking by Tenant's employees in a nondiscriminatory manner. Tenant shall direct its employees to park only in those areas (which may include off-site parking areas) designated by Landlord from time to time for such purposes. Landlord agrees to maintain the common areas in the vicinity of the Premises in good condition and to keep the same clean and neat in appearance. ARTICLE 12 TAXES 12.1 Personal Property Taxes. Tenant shall be liable for and shall pay before delinquency (and, upon demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of the payment thereof) all taxes, fees and assessments of whatsoever kind or nature, and penalties and interest thereon, if any, levied against Tenant's property or any other personal property of whatsoever kind and belonging to Tenant or any person claiming by, through or under Tenant, 24 situate or installed in or upon the Premises, whether or not affixed to the realty. If at any time during the Term of this Lease any such taxes on personal property are separately assessed as part of the tax on the real property of which the Premises is a part, then in such event Tenant shall pay to Landlord the amount of such additional taxes upon presentation of appropriate evidence as to the amount due. 12.2 Other Taxes. Tenant shall pay when due all taxes, assessments or fees for which Tenant is liable under applicable law and which arise directly or indirectly from Tenant's operations at the Premises. Within five (5) days of written demand from Landlord, Tenant shall furnish Landlord evidence satisfactory to Landlord of the timely payment of any such tax, assessment or fee. 12.3 Tax on Rents. If at any time during the Term of this Lease, under the laws of the United States, Nevada or any political subdivision thereof, a tax or excise on rents, however described, is levied or assessed by the United States, Nevada or any political subdivision against Landlord on account of any rent reserved under this Lease, all such tax or excise on rents shall be paid by Tenant. The foregoing shall not apply to any income, franchise, profits, estate, gift, or similar tax imposed on Landlord. 12.4 Statements Received by Landlord. Whenever Landlord shall receive any statement or bill for any tax, payable in whole or in part by Tenant as additional rent, or shall otherwise be required to make any payment on account thereof, Tenant shall pay the amount due hereunder within ten (10) days after demand therefor (or, if later, within 10 days prior to the last date on which such tax may be paid without penalty) accompanied by delivery to Tenant of a copy of such tax statement, if any. 12.5 Casino Entertainment Tax. Tenant agrees that it will collect any applicable Casino Entertainment Tax ("CET") associated with the sale of food, beverage or merchandise from the Premises and will pay the same to the taxing authority on a timely basis, or if not permitted to pay the same directly, shall remit the CET due to Landlord no later than the 10th day of the month following the month in which the taxable sales occurred. Tenant shall make all documents containing information relative to the computation of the CET available for inspection upon notice by representatives of Landlord and the Gaming Authorities. This obligation shall continue beyond the Term of this Lease. Tenant shall be liable for any and all CET, interest and penalties found to be payable in connection with the sale of food, beverage or merchandise from the Premises as a result of understated taxable revenues, insufficiency of records or, if Tenant is permitted to pay the CET directly to the taxing authority, untimely payment of the CET. If Tenant is not permitted to pay the CET directly to the taxing authority, then, if Tenant has timely remitted the payment to Landlord as required in this Section 12.5,Tenant shall not be liable for the untimely payment of the CET to the taxing authority. 25 ARTICLE 13 SERVICES TO THE PREMISES 13.1 Utilities. Landlord shall provide customary utility lines stubbed to the Premises, including supply and return lines for air conditioning, in the manner and to the extent set forth in the Work Letter. Except as otherwise provided in the Work Letter, the distribution of utility lines within the Premises shall be the responsibility of Tenant, at Tenant's cost. Tenant shall pay all "hook-up fees," connection charges and other similar charges which may be levied by utility provides as a fee for connecting the Premises to the utility supply. Landlord shall pay for all gas, power and electric current, sewer and all other utilities (including sewer usage charges, but not sewer "hook-up fees" or connection charges) used by Tenant in the Premises; Tenant acknowledges that, because of the nature of the Premises, Tenant might not have access to the controls for heating,air conditioning or lighting at the Premises and shall not attempt to make any changes to such controls located outside the Premises. Landlord, at Landlord's cost, shall provide Tenant with one telephone line and a house phone. Tenant shall be responsible for local and long distance service. Tenant may at Tenant's expense, install other telephone lines (including pay telephones), provided the same are not incompatible with the Hotel's telephone system. Landlord, at Landlord's cost, shall provide garbage service for the Premises; provided that Tenant shall be responsible for removing garbage from the Premises and transporting the same to Landlord's designated trash enclosure or dumpster. In addition, heating, air conditioning, sewer, hot, cold and chilled water and natural gas (for cooking purposes) shall be supplied to the Premises without additional cost to Tenant. Heat and air conditioning shall be supplied so as to maintain comfort levels in keeping with those of the Hotel and, in any event, so as to keep the Premises reasonably comfortable at all times. Hot, cold, and chilled water shall be supplied in such quantities and at such temperatures as are suitable for Tenant's operations. Landlord may, from time to time, prescribe reasonable rules and regulations for the implementation of this Section. Tenant shall not install any equipment which can exceed the capacity of any utility facilities serving the Premises and if any equipment installed by Tenant requires additional utility facilities, the same shall be installed at Tenant's expense in compliance with all code requirements and plans and specifications which must first be approved in writing by Landlord, which approval shall not be unreasonably withheld. 13.2 Limitation upon Landlord's Obligation. Landlord shall not be obligated to perform any service or to repair or maintain any structure or facility except as provided in this Article and Articles 10 and 11 of this Lease. The cost of any service, maintenance or repairs made by Landlord pursuant to this Lease which are made necessary because of the negligence or misuse of Tenant, Tenant's agents, employees, servants, contractors, subtenants, licensees, shall be paid by Tenant within ten (10) days after receipt of a billing therefor from Landlord. Landlord reserves the right to temporarily stop any service when Landlord deems such stoppage necessary, whether by reason of accident or emergency, or for repairs or improvements or otherwise. Landlord shall not be liable under any circumstances for loss or injury however occurring, through or in connection with or incident to any stoppage of such services. Landlord shall have no responsibility or liability for failure to supply any services or maintenance or to make any repairs when prevented from doing so 26 by any cause beyond Landlord's control. Landlord shall not be obligated to inspect the Premises and shall not be obligated to make any repairs or perform any maintenance within the Premises hereunder unless first notified of the need thereof in writing by Tenant. In the event that Landlord shall fail to commence such repairs or maintenance within ten (10) days after said notice (or two (2) days after said notice if the failure of the item requiring repair materially interferes with the conduct of Tenant's business), Tenant's sole right and remedy for such failure shall be, after further notice to Landlord, to make such repairs or perform such maintenance and to deduct the cost and expenses thereof from the rent payable hereunder; provided, however, that the amount of such deduction not exceed the reasonable value of such repairs or maintenance; and provided, further, if such repairs or maintenance are needed because of act or omission of Tenant, its agents, servants, employees, customers, invitees or licensees, the cost thereof shall be paid by Tenant. To the extent that Landlord is required to perform any service or repair, Landlord shall do so with reasonable diligence and in a manner which is reasonably calculated to avoid interference with Tenant's business in the Premises. ARTICLE 14 INSURANCE 14.1 Liability Insurance. Tenant shall, at all times during the term hereof, at its sole cost and expense, procure and maintain in full force and effect a policy or policies of commercial general liability insurance including coverage for both owned and non-owned automobiles and contractual indemnity coverage issued by an insurance carrier reasonably acceptable to Landlord assuring against loss, damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever (subject to usual and customary policy exclusions) in connection with the Premises or Tenant's use thereof. Such liability insurance shall be evidenced by a single limits policy or policies in an aggregate amount of not less than Ten Million Dollars ($10,000,000.00). Such liability insurance shall include fire legal liability coverage of not less than the amount of Landlord's deductible under Landlord's property insurance for the Hotel, as such deductible amount may be modified from time to time ("Landlord's Deductible"), so long as such insurance is available upon commercially reasonable terms. Upon request from Tenant, Landlord shall notify Tenant of the current amount of Landlord's Deductible. Landlord expects that the initial amount of Landlord's Deductible will be Five Hundred Thousand Dollars ($500,000). Landlord, Primadonna Resorts and MGM Grand Hotel, Inc. shall be named as an additional insured (but not named insureds) (and at Landlord's option, any other persons, firms or corporations having an interest and designated by Landlord shall be named as additionally insured (but not named insured)) under each such policy of insurance. 14.2 Property Insurance. Tenant shall, at all times during the term hereof, at its sole cost and expense, procure and maintain in full force and effect standard form of fire and casualty with standard "ALL-RISK" coverage protecting against all risks of physical loss or damage, including, without limitation, sprinkler leakage coverage and plate glass insurance covering all plate glass in the Premises and all of Tenant's property, improvements and betterments to the Premises and Tenant's products and merchandise, and the personal property of others in Tenant's possession in, 27 upon or about the Premises. Such insurance shall be in an amount equal to the current replacement value of the property required to be insured. Tenant and Landlord, as their interests may appear, shall be the named loss payee (and at Landlord's option, Landlord's lender shall be named as additional loss payee) under each such policy of insurance. Tenant shall also carry business interruption insurance covering actual losses for a period of not less than twelve (12) months. 14.3 Policy Requirements. All policies required hereunder shall be with companies licensed to do business in Nevada and with a "General Policyholder's Rating" of A- or better and a "financial rating" of VII or better in the most recent edition of Best's Insurance Guide (or similar rating service if such guide is no longer published). A certificate issued by the insurance carrier for each policy of insurance required to be maintained by Tenant hereunder, and, upon request of Landlord, a copy of each such policy, shall be delivered to Landlord and all other additional insureds no later than ten (10) days after execution of this Lease and thereafter, as to policy renewals, within thirty (30) days prior to the expiration of the terms of each such policy. Each of said certificates of insurance and each such policy of insurance required to be maintained by Tenant hereunder shall be from an insurer and in form and substance reasonably satisfactory to Landlord and shall expressly evidence insurance coverage as required by this Lease and shall contain an endorsement or provision requiring not less than thirty (30) days written notice to Landlord and all other additional insured prior to the cancellation, diminution in the perils insured against, or reduction of the amount of coverage of the particular policy in question (provided that such thirty (30) day period may be reduced to ten (10) days if the cause for cancellation of the insurance policy is Tenant's failure to pay the insurance premium). In addition to the foregoing certificates, Tenant shall at all times during the Term hereof furnish Landlord with a current certificate of worker's compensation coverage evidencing coverage at Nevada statutory limits. Each policy of insurance provided for in Section 14.2, shall contain an express waiver of any and all rights of subrogation thereunder whatsoever against Landlord, its officers, agents and employees. All policies to be maintained in this Article 14, shall be written as primary policies and not contributing with or in excess of the coverage, if any, which Landlord may carry. Any other provision contained in this Article 14 or elsewhere in this Lease notwithstanding, the amounts of all insurance required hereunder to be maintained by Tenant shall be not less than an amount sufficient to prevent Landlord from becoming a coinsurer. The limits of the public liability insurance required to be maintained by Tenant under this Lease shall in no way limit or diminish Tenant's liability under Article 16 hereof and such limits shall be subject to increase at any time and from time to time during the Term if Landlord, in the exercise of reasonable discretion, deems such an increase necessary for its adequate protection; provided, however, that (i) Landlord may not exercise its right under this sentence more frequently than one time in any calendar year; and (ii) Tenant shall not be required to increase its required insurance coverage if the increased coverage would be unreasonable in light of insurance requirements for similarly situated tenants in similar projects in Las Vegas, Nevada. Coverage required by this Article 14 may be provided by a blanket policy or policies provided that the protection afforded pursuant to said policies with respect to the Premises and the Hotel shall not be less than that which is required pursuant to the terms hereof for a separate policy or policies. 28 14.4 Hazardous Activities. Tenant shall not use or occupy, or permit the Premises to be used or occupied, in a manner which will increase the rates of fire or any other insurance for the Premises or the Hotel; provided that Tenant's lawful use of the Premises as a restaurant as contemplated in this Lease shall not constitute a default under this Section 14.4. Subject to the foregoing, Tenant shall also not use or occupy, or permit the Premises to be used or occupied, in a manner which will make void or voidable any insurance then in force with respect thereto or the Hotel, or which will make it impossible to obtain fire or other insurance with respect thereto or the Hotel. If by reason of Tenant's default under the provisions of this Section, the fire or any other insurance rates for the Premises or the Hotel be higher than they otherwise would be, Tenant shall reimburse Landlord, as additional rent, on the first day of the calendar month next succeeding notice by Landlord to Tenant of said increase, for that part of all insurance premiums thereafter paid by Landlord which shall have been charged because of such failure of Tenant. 14.5 Waiver of Subrogation. Each Party hereby waives subrogation and any and all rights of recovery from the other,its officers, agents and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in their insurance actually carried or required to be carried pursuant to this Lease and to the extent of such insurance coverage or required coverage, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof to the extent of such insurance coverage or required coverage. Notwithstanding the foregoing provisions of this Section 14.5, Landlord waives its right of recovery against Tenant for damage to the Hotel caused by the negligence of Tenant or Tenant's employees or agents, to the extent that the cost of repairing such damage exceeds Landlord's Deductible, and Tenant waives its right of recovery against Landlord for damage to Tenant's property caused by the negligence of Landlord or Landlord's employees or agents, to the extent that the cost of repairing such damage exceeds any applicable insurance deductible amount maintained by Tenant. 14.6 Landlord's Insurance.During the Term, Landlord shall maintain such property insurance as may be required by Landlord's lenders. Upon request form Tenant, Landlord shall furnish Tenant with a current certificate showing Landlord's insurance coverage. ARTICLE 15 LIENS 15.1 Indemnity for Liens. Tenant, at all times, shall indemnify and hold harmless Landlord, the Hotel, the Premises, the leasehold estate created by this Lease, any trade fixtures, equipment or personal property within the Premises, and each of them, from any claim, lien, tax lien or levy, attachment, garnishment, encumbrance, litigation or judgment, to the extent arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever. Similarly, Landlord, at all times, shall indemnify and hold harmless Tenant, the leasehold state created by this Lease, any trade fixtures equipment or personal property within the Premises, and each of them, from any claim, 29 lien, tax lien or levy, attachment, garnishment, encumbrance, litigation or judgment, to the extent arising directly or indirectly from any obligation, action or inaction of Landlord whatsoever. 15.2 Prevention of Liens. Tenant, at all times, shall keep the Landlord, the Hotel, the Premises, the leasehold estate created by this Lease, any trade fixtures, equipment or personal property within the Premises, free and clear from any claim, liens, tax lien or levy, attachment, garnishment or encumbrance to the extent arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever. However, this Section 15.2, and Section 15.1, shall not apply to the granting of a security interest in Tenant's personal property in connection with a financing by Tenant or Tenant's direct or indirect parent corporation. 15.3 Release of Liens. If a mechanics' lien, tax lien or other lien is filed against the Hotel arising directly or indirectly from any obligation, action or inaction of Tenant whatsoever, Tenant shall discharge or cause to be discharged (by bond or otherwise) such lien within thirty (30) days after Tenant receives notice of the filing thereof and shall not allow any such lien to be foreclosed upon. If such a mechanic's lien or other lien is filed against the Hotel, and Tenant fails to timely discharge such lien, Landlord may, without waiving its rights and remedies based on such breach of Tenant and without releasing Tenant from any of its obligations, cause such liens to be released by any means it shall deem proper, including payment in satisfaction of the claim giving rise to such lien. Tenant shall pay to Landlord within thirty (30) days following notice by Landlord, any sum paid by Landlord to remove such liens, together with interest at Landlord's cost of money from the date of such payment by Landlord. Tenant's obligation under the Section shall survive the expiration of the Term of this Lease or the earlier termination of this Lease. 15.4 Notice of Nonresponsibility. Tenant shall give Landlord at least ten (10) business days prior written notice before the commencement of any work, construction, alteration or repair on the Premises to afford Landlord the opportunity to record appropriate notices of nonresponsibility. ARTICLE 16 INDEMNIFICATION Tenant hereby covenants and agrees to indemnify, save, and hold Landlord, the Premises and the leasehold estate created by this Lease free, clear and harmless from any and all liability, loss, costs, expenses, including attorneys' fees, judgments, claims, liens, and demands of any kind whatsoever in connection with, arising out of, or by reason of any accident, injury, or damage, howsoever and by whomsoever caused, to any person or property whatsoever occurring, in, upon, about, or relating to Tenant's activities or use of the Premises or any portion thereof, including, without limitation, any infringement by Tenant or by any person engaged by Tenant or acting on Tenant's behalf of any copyright, patent, trademark or similar intellectual property rights of any other person or entity, other than pursuant to and in compliance with a license granted by Landlord. Landlord shall not be liable to Tenant or to any other person whatsoever for any damage occasioned 30 by fire, smoke, falling plaster, electricity, plumbing, gas, water, steam, sprinkler, or other pipe and sewage system or by the bursting, running, or leaking of any tank, washstand, closet or waste of other pipes, nor for any damages occasioned by water being upon or coming through the roof, skylight, vent, trap door, or otherwise or for any damage arising from any acts or neglect of co-lessees or other occupants of the Hotel or of adjacent property, or of Landlord, or of the public, nor, to the extent provided in Section 13.2, shall Landlord be liable in damages or otherwise for any failure to furnish, or interruption of, service of any utility. ARTICLE 17 SUBORDINATION 17.1 Subordination of Tenant's Interest. Tenant agrees that this Lease and Tenant's interest in the Premises is secondary, junior and inferior to the lien of any mortgage, deed of trust or other encumbrance, together with any renewals, extensions or replacements thereof, now or hereafter placed, charged or enforced against the Premises, or any portion thereof, or any property of which the Premises is a part (hereinafter, a "Mortgage"). Notwithstanding the foregoing, upon request by Landlord, Tenant shall execute and deliver at any time, and from time to time, such documents as may be required to effectuate such subordination. 17.2 Priority. In the event that the mortgagee or beneficiary of any Mortgage elects to have this Lease a prior lien to its mortgage or deed of trust, then and in such event, upon such mortgagee's or beneficiary's giving written notice to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of recordation of such mortgage or deed of trust. 17.3 Attornment. Tenant shall, in the event any proceedings are brought for the foreclosure of the Premises in the event of exercise of the power of sale under any Mortgage covering the Premises, or in the event of a sale of Landlord's interest in the Premises attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease. 17.4 Nondisturbance. Landlord, Tenant and Landlord's current lender shall enter into a nondisturbance and attornment agreement on the lender's form providing that, so long as no Tenant Event of Default occurs under this Lease, such lender will recognize this Lease and Tenant's rights hereunder. Tenant's obligation to subordinate its leasehold interest to any future Mortgage shall be subject to Tenant's receipt of a commercially reasonable nondisturbance and attornment agreement from the holder of such Mortgage. 31 ARTICLE 18 ASSIGNMENT AND SUBLETTING 18.1 Assignment or Sublease without Consent Prohibited. The economic provisions and rental rates set forth in this Lease were negotiated by Landlord in consideration of, and would not have been granted by Landlord but for, the specific nature of the leasehold interest granted to Tenant hereunder, as such interest is limited and defined by various provisions throughout this Lease, including, but not limited to, the provisions of this Article 18 which define and limit the transferability of such leasehold interest. Landlord hereby reserves the right to receive any increased rental value of the Premises during the Term hereof as the same may be realized by any transfer of said estate (but not any value realized for Tenant's business or furniture, fixtures and equipment), except to the extent Tenant is specifically granted the right to transfer all or part of its leasehold and to retain all or part of the increased rental value thereof pursuant to the provisions of this Article 18. Except for the grant of a security interest in Tenant's personal property in connection with a financing by Tenant or its direct or indirect parent corporation, Tenant shall not directly or indirectly, voluntarily or by operation of law sell, assign, encumber, pledge or otherwise transfer or hypothecate all or any part of the Premises or Tenant's leasehold estate hereunder (collectively "Assignment"), or permit the Premises to be occupied or used by anyone other than Tenant or sublet the Premises (collectively "Sublease") or any portion thereof without Landlord's prior written consent in each instance. 18.2 Notice of Proposed Sublease or Assignment. If Tenant desires at any time to enter into an Assignment of this Lease or a Sublease of the Premises or any portion thereof, it shall first give written notice to Landlord of its desire to do so, which notice shall contain (a) the name of the proposed assignee, subtenant or occupant, (b) the nature of the proposed assignee's, subtenant's or occupant's business to be carried on in the Premises, (c) the material terms and provisions of the proposed Assignment or Sublease, as reasonably requested by Landlord and (d) such financial information as Landlord may reasonably request concerning the proposed assignee, subtenant or occupant. 18.3 Landlord's Options. At any time within thirty (30) days after Landlord's receipt of the notice specified in Section 18.2 above together with any information requested by Landlord pursuant to subsections (c) and (d) of such Section 18.2, Landlord may by written notice to Tenant elect to (a) Sublease itself the portion of the Premises specified in Tenant's notice or any portion thereof for the term specified in such notice, in the case of a proposed Sublease, or (b) take an Assignment of Tenant's leasehold estate specified in Tenant's notice hereunder, or any portion thereof, in the case of a proposed Assignment. In the event Landlord elects to Sublease or take an Assignment from Tenant as described in subsections (a) and (b) above, it shall do so upon the terms set forth in Tenant's notice. 18.4 Standards for Consent. If Landlord does not elect either of the options set forth in subsections (a) and (b) of Section 18.3 above, Landlord shall not unreasonably withhold its consent to any Assignment, Sublease or Subleases to a third party or parties ("transferees"); provided, however, that Landlord's refusal to consent to any Assignment or Sublease shall be deemed reasonable if: 32 (i) The transferee, in Landlord's reasonable opinion, is not of reputable and good character; (ii) The proposed transferee (itself or through its management or controlling organization), in Landlord's reasonable judgment, is not an experienced, proven and successful operator of businesses comparable to the type contemplated by this Lease; (iii) If the proposed use of the Premises by the subtenant or assignee is not a restaurant of similar kind and quality to the Restaurant, the purposes for which the transferee intends to use the Premises are, in Landlord's reasonable judgment, incompatible with the Hotel or the business operations of other Tenants in the Hotel; (iv) In the reasonable judgment of the Landlord the purpose for which the subtenant or assignee intends to use the Premises is not in keeping with the standards of Landlord for the Hotel as a first class resort hotel facility, or is in violation of the terms of any other lease in the Hotel, it being understood that the purpose for which any subtenant or assignee intends to use the Premises may not be in violation of this Lease; (v) The proposed transferee has been involved in bona fide negotiations with Landlord for space in the Hotel within the preceding twelve (12) months and Landlord has available other comparable space in the Hotel to offer to the prospective subtenant or assignee; (vi) The proposed subtenant or assignee is either an occupant of the Hotel (but only if Landlord can offer comparable space in the Hotel to such proposed assignee or sublessee) or a government (or subdivision or agency thereof); (vii) Taking into account funds available from and committed by a controlling organization: the proposed assignee or sublessee is, in the reasonable judgment of Landlord, insolvent or financially unable to meet the projected costs of the obligations to be assumed for the unexpired Term of this Lease; or the proposed assignee or sublessee has a net worth which is, in the reasonable opinion of Landlord, insufficient to enable it to operate a successful first class business of the type contemplated herein and to meet the projected costs of obligations to be assumed for the unexpired Term of this Lease; (viii) The transferee operates another similar business, under the same trade name to be used at the Premises, at a Las Vegas Strip location, including any location within a hotel and/or casino property; (ix) An Event of Default has occurred and is continuing under this Lease; (x) The proposed Sublease is for less than all of the Premises; or 33 (xi) The proposed Sublease or Assignment is to be effective within two (2) years after the Commencement Date at a time when Tenant's Restaurant is profitable. If Landlord consents to any Sublease or Assignment under this Section 18.4, Tenant may thereafter within thirty (30) days after Landlord's consent, but not later than the expiration of said thirty (30) days, enter into such Sublease of the Premises or portion thereof, or Assignment upon the terms and conditions set forth in the notice furnished by Tenant to Landlord pursuant to Section 18.2 above. 18.5 No Release of Tenant. No consent by Landlord to any Assignment or Sublease by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after the Assignment or Sublease. The consent by Landlord to any Assignment or Sublease shall not relieve Tenant from the obligation to obtain Landlord's express written consent to any other Assignment or Sublease. Any Assignment or Sublease which is not in compliance with this Article 18 shall be void as against the Landlord and, at the option of Landlord, shall constitute a material default by Tenant under this Lease. The acceptance of rent by Landlord from a proposed assignee or sublessee shall not constitute the consent to such Assignment or Sublease by Landlord. Notwithstanding the foregoing, if Landlord exercises its option under Section 18.3 with respect to an Assignment or a Sublease of all or substantially all of the Premises, or if Landlord consents to an Assignment to a successor tenant with a net worth (including the net worth of any guarantor or guarantors) not less than that of Tenant at the time of such Assignment, then Tenant shall be relieved of any liability under this Lease accruing after the effective date of such Assignment. 18.6 Assumption of Tenant's Obligations. Each assignee or other transferee, other than Landlord, shall assume, as provided in this Section 18.6, all obligations of Tenant under this Lease and shall be and remain liable jointly and severally with Tenant from and after the effective date of the assignment for the payment of the rent, and for the performance of all the terms, covenants, conditions and agreements herein contained on Tenant's part to be performed for the Term of this Lease. No Assignment shall be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and an instrument in recordable form which contains a covenant of assumption by the assignee reasonably satisfactory in substance and form to Landlord, consistent with the requirements of this Section 18.6, but the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee from its liability as set forth above. 18.7 Assignment to Affiliate. Notwithstanding the foregoing provisions of Section 18.1, 18.2, 18.3 and 18.4 above, Tenant may assign this Lease without Landlord's consent to any corporation or partnership in which ARK Restaurants Corp. owns more than fifty percent (50%) of all ownership interests; provided that ARK Restaurants Corp. (or another restaurant operator with comparable experience and a comparable reputation which is otherwise reasonably acceptable to Landlord) retains control over the management of Tenant's business in the Premises. The provisions 34 of Sections 18.1, 18.2, 18.3 and 18.4 shall not apply to any assignment which is permitted by this Section 18.7. ARTICLE 19 INSOLVENCY AND DEATH It is understood and agreed that neither this Lease nor any interest therein or hereunder, nor any estate hereby created in favor of Tenant, shall pass by operation of law under any state or federal insolvency, bankruptcy, or inheritance act, or any similar law now or hereafter in effect, to any trustee, receiver, assignee for the benefit of creditors, heirs, legatees, devisees or any other person whomsoever without the express written consent of Landlord first had and obtained therefor. ARTICLE 20 CONDEMNATION 20.1 Awards. Should the whole or any part of the Premises be condemned or taken by a competent authority for any public or quasi-public purpose, all awards payable on account of such condemnation and taking shall be payable to Landlord, and Tenant hereby waives any and all interest therein. Tenant shall, however, be entitled to retain any award made separately to Tenant by the condemning authority. 20.2 Taking of the Premises. If the whole of the Premises shall be so condemned and taken, then this Lease shall terminate upon such taking. If greater than one-third (1/3) of the floor space of the Premises is condemned or taken or if by reason of any condemnation or taking the remainder of the Premises will not be reasonably adequate for the operation of Tenant's business after Landlord completes such repairs or alterations as Landlord elects to make, either Landlord or Tenant shall have the option to terminate this Lease by notifying the other party hereto of such election in writing within forty-five (45) days after such taking. If by such condemnation and taking one-third (1/3) or less of the Premises has been taken or if a part only of the Premises is taken and the remaining part thereof is suitable for the purposes for which Tenant has leased said Premises, this Lease shall continue in full force and effect. In the event a partial taking does not terminate this Lease, Tenant shall make repairs and restorations to the remaining premises of the nature of Tenant's Work required by Exhibit B, Landlord shall make the proceeds of any condemnation award available to Tenant for such purposes and if Tenant has closed Tenant shall reopen for business promptly after completion of the restoration. 20.3 Taking of the Hotel. Notwithstanding the provisions of Section 20.2, if any part of the Hotel or the Premises shall be so taken or appropriated, and if in the reasonable judgment of either Landlord or Tenant, the Restaurant would not be able to be operated profitably in consequence of such taking, then either Landlord or Tenant, as the case may be, shall have the right, at its option, to terminate this Lease by notifying the other within six (6) months of such taking. 35 20.4 Deed-in-Lieu. For the purposes hereof, a deed in lieu of condemnation shall be deemed a taking. ARTICLE 21 DESTRUCTION OF PREMISES 21.1 Landlord's Right of Termination. In the case of the destruction of all or any material portion of the Premises, whether by fire or other casualty, not caused by the intentional misconduct of Tenant, Landlord shall, except as provided in Sections 21.2 and 21.3 below, diligently repair all structural elements of the Premises, including structural steel and reinforced concrete. So long as Landlord proceeds with such work with reasonable dispatch, this Lease shall not terminate, but shall continue in full force and effect. In determining what constitutes reasonable dispatch, consideration shall be given to delays caused by Force Majeure events. If this Lease is terminated pursuant to this Article 21, all rights and obligations hereunder shall cease and terminate as of the date of termination. 21.2 Damage Caused by Tenant. Notwithstanding Section 21.1, in the event the Premises, or any portion thereof, shall be damaged by fire or other casualty due to the intentional misconduct of Tenant, then, without prejudice to any other rights and remedies of Landlord, this Lease shall not terminate, the damage shall be repaired by Tenant, and Percentage Rent payable by Tenant shall be determined by the method set forth in Section 8.11 of this Lease. 21.3 Damage to Hotel. In the event of any damage not limited to, or not including, the Premises, such that the building of which the Premises is a part is damaged to the extent of twenty-five percent (25%) or more of the cost of replacement, or the buildings and improvements (taken in the aggregate) of the Hotel owned by Landlord shall be damaged to the extent of more than twenty-five percent (25%) of the aggregate cost of replacement, Landlord may, if Landlord elects not to reopen the Hotel or if Landlord elects to reopen the Hotel using a theme or concept other than the "New York-New York" theme and concept, elect or terminate this Lease upon giving notice of such election in writing to Tenant within one hundred twenty (120) days after the occurrence of the event causing the damage. 21.4 Repair Obligations. The provisions of this Article 21 with respect to repair by Landlord shall be limited, as set forth above, to the structural elements of the Premises, and when such work in completed, the Premises shall be deemed restored and rendered tenantable, and Tenant shall restore the remainder of the Premises and Tenant's Work, replace its stock in trade, and if Tenant has closed, Tenant shall promptly reopen for business. Landlord shall make available to Tenant, to the extent of the insurance proceeds received by Landlord with respect to Landlord's Work and not otherwise used by Landlord to complete its repair of the structural elements of the Premises, sufficient funds to perform such repair as is necessary to place the Premises in the condition specified for the commencement of Tenant's Work. 36 21.5 Insurance Proceeds. Subject to the provisions of Section 21.1 above, all insurance proceeds payable under any fire and extended coverage risk insurance covering the Hotel and/or the Premises shall be payable solely to Landlord, and Tenant shall have no interest therein. Tenant shall in no case be entitled to compensation for damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent provided for in this Section 21, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. ARTICLE 22 RIGHT OF ACCESS 22.1 Right of Access. Landlord, and its authorized agents and representatives shall be entitled to enter the Premises at any reasonable time for the purpose of observing, posting or keeping posted thereon notices provided for hereunder, and such other notices as Landlord may deem necessary or appropriate for protection of Landlord and/or its interest in the Premises; for the purpose of inspecting the Premises or any portion thereof; and for the purpose of making repairs to the Premises or any other portion of the Hotel and performing any work therein or thereon which Landlord may elect or be required to make hereunder, or which may be necessary to comply with any laws, ordinances, rules, regulations or requirements of any public authority or any applicable standards that may, from time to time, be established by the [Insurance Services Office] or any similar body, or which Landlord may deem necessary or appropriate to prevent waste, loss, damage or deterioration to or in connection with the Premises or any other portion of the Hotel or for the purpose of conducting its legitimate business purposes therein or for any other lawful purpose. Except in an emergency, Landlord shall coordinate any entry hereunder with Tenant so as to avoid unnecessary interference with Tenant's business in the Premises. Landlord shall have the right to use any means which Landlord may deem proper to open all doors in the Premises in an emergency. Entry into the Premises obtained by Landlord by any such means shall not be deemed to be forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof. Nothing contained herein shall impose or be deemed to impose any duty on the part of Landlord to do any work or repair, maintenance, reconstruction or restoration, which under any provision of this Lease is required to be done by Tenant; and the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to do the same. 22.2 Inconvenience to Tenant. Landlord may, during the progress of any work on the Premises, keep and store upon the Premises all necessary materials, tools and equipment. Provided that Landlord has taken all reasonable steps so as not to interfere with Tenant's business, Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of business or quiet enjoyment, or other damage or loss to Tenant by reason of making any such repairs or performing any such work upon the Premises, or on account of bringing materials, supplies and equipment into, upon or through the Premises during the course thereof, and the obligations of Tenant under this Lease shall not thereby be affected in any manner whatsoever. Landlord shall, however, in connection with the 37 performance of such work, cause as little inconvenience, disturbance or other damage or loss to Tenant as may be reasonably possible under the circumstances. 22.3 Right to Show the Premises. Landlord, and/or its authorized agents and representatives, shall be entitled to enter the Premises at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final year of the Term of this Lease, Landlord shall be entitled to exhibit the Premises for lease. Any such entry shall be effected, to the extent reasonably practicable, so as not to interfere with Tenant's business. ARTICLE 23 LANDLORD'S RIGHT OF PERFORMANCE Whenever under any provision of this Lease, Tenant shall be obligated to make any payment or expenditure, or to do any act or thing, or to incur any liability whatsoever, and Tenant fails, refuses or neglects to perform as herein required, Landlord shall be entitled, but shall not be obligated, to make any such payment or to do any such act or thing, or to incur any such liability, all on behalf of and at the cost and for the account of Tenant; provided that Landlord shall first give Tenant reasonable notice of its intention to exercise its right of performance hereunder. In such event, the amount thereof with interest thereon at the Default Rate per annum shall constitute and be collectable as additional rent on demand. ARTICLE 24 ESTOPPEL CERTIFICATES Tenant agrees that within ten (10) days of any demand therefor by Landlord, Tenant will execute and deliver to Landlord or Landlord's designee a recordable certificate stating that this Lease is in full force and effect, such defenses or offsets as are claimed by Tenant, if any, the date to which all rentals have been paid, and such other information concerning the Lease, the Premises and Tenant as Landlord or said designee may reasonably request. ARTICLE 25 TENANT'S DEFAULT 25.1 Events of Default. Landlord shall have all the rights and remedies provided in this Section or elsewhere herein, in the event that any of the following (sometimes referred to herein as an "Event of Default") shall occur: (a) Tenant shall default in the payment of any sum of money required to be paid hereunder and such default continues for ten (10) days after written notice thereof from Landlord to Tenant; or 38 (b) Tenant shall default in the performance of any other provision, covenant or condition of this Lease on the part of Tenant to be kept and performed and such default continues for twenty (20) days after written notice thereof from Landlord to Tenant; provided, however, that if the default complained of in such notice is of such a nature that the same can be rectified or cured, but cannot with reasonable diligence be done within said twenty (20) day period, then such default shall be deemed to be rectified or cured if Tenant shall, within said twenty (20) day period, commence to rectify and cure the same and shall thereafter complete such rectification and cure with all due diligence, and in any event (but subject to Section 29.3), within forty (40) days from the date of giving of such notice; or (c) Tenant should vacate or abandon the Premises during the Term of this Lease; or (d) Tenant should fail to obtain the discharge or release of any lien as required by Article 15 hereof; or (e) There is filed any execution, attachment, levy or seizure against Tenant or the leasehold estate created by this Lease and the same continues in effect for a period of thirty (30) days (except as otherwise provided in this Lease); or (f) There is filed any petition in bankruptcy or the Tenant is adjudicated as a bankrupt or insolvent, or there is appointed a receiver or trustee to take possession of Tenant or of all or substantially all of the assets of Tenant, or there is a general assignment by Tenant for the benefit of creditors, or any action is taken by or against Tenant under any state or federal insolvency or bankruptcy act, or any similar law now or hereafter in effect, and any such proceeding (if involuntary) is not dismissed within forty-five (45) days; or (g) There shall occur any other event or condition which is described in this Lease as an "Event of Default" and the same is not remedied after notice and the expiration of any applicable cure period set forth in this Lease. 25.2 Landlord's Remedies. Upon the occurrence of any Tenant Event of Default, subject to Tenant's right to dispute the claim of default pursuant to Article 30, and subject to the provisions of Article 30 which may allow for the tolling of applicable cure periods, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever; (1) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take 39 possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises, or any part thereof, by force if necessary, without being liable to prosecution or for any claim for damages; and Landlord may recover from Tenant: (a) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (b) The worth at the time of award of any amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus (c) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus (d) Any other reasonable amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease; and (e) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. All such amounts shall be computed on the basis of the monthly amount thereof payable on the date of Tenant's default; except that Percentage Rent shall be computed on the basis of the monthly average of all Percentage Rent received by or payable to Landlord during the period that Tenant was conducting Tenant's business in the Premises in the manner and to the extent required by this Lease, or on the basis of the monthly amount thereof payable on the date of Tenant's default, if greater. As used in paragraphs (a) and (b) above, the "worth at the time of award" is computed by allowing interest in the per annum amount equal to the Default Rate. As used in paragraph (c) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one (1%) percent per annum. (2) Enter upon and take possession of the Premises and expel or remove Tenant and other persons who may be occupying the Premises, or any part thereof, by force if necessary, without being liable to prosecution or for any claim for damages, and relet the Premises, as Tenant's agent, and receive the rent therefor; and Tenant agrees to pay Landlord on demand any deficiency that may arise by reason of such reletting; or 40 (3) Enter upon the Premises, without being liable to prosecution or for any claim for damages, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any reasonable and necessary expenses which Landlord may incur in thus effecting compliance with Tenant's obligations hereunder. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damage accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon the occurrence of a Tenant Event of Default shall not be deemed or construed to constitute a waiver of such default. ARTICLE 26 QUIET POSSESSION Tenant, upon paying the rentals and other payments herein required from Tenant, and upon Tenant's performance of all of the terms, covenants and conditions of this Lease on its part to be kept and performed, may quietly have, hold and enjoy the Premises during the Term of this Lease without any disturbance from Landlord or from any other person claiming through Landlord. ARTICLE 27 SALE BY LANDLORD 27.1 Landlord's Right to Assign or Transfer. It is agreed that Landlord may (in connection with a sale, transfer or financing of all or any substantial part of the Hotel) at any time assign or transfer its interest as Landlord in and to this Lease, or the rents payable hereunder, or at any time sell or transfer its interest in the fee of the Premises, or its interest in and to the Premises, without notice or obtaining any approval from Tenant. 27.2 Attornment. Tenant hereby agrees to attorn to the assignee, transferee, or purchaser of Landlord under any provision of this Article 27 from and after the date of notice to Tenant of such assignment, transfer or sale, in the same manner and with the same force and effect as though this Lease were made, in the first instance, by and between Tenant and such assignee, transferee or purchaser. 27.3 Release of Landlord. In the event of any sale or exchange of the Premises by Landlord and the assumption of Landlord's obligations under this Lease by Landlord's transferee, 41 Landlord shall be and is hereby relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease, arising out of any act, occurrence or omission relating to the Premises occurring after the consummation of such sale or exchange. ARTICLE 28 DEFAULT BY LANDLORD Except as otherwise expressly provided in this Lease, it is agreed that in the event Landlord fails or refuses to perform any of the provisions, covenants or conditions of this Lease on Landlord's part to be kept or performed, that Tenant, prior to exercising any right or remedy Tenant may have against Landlord on account of such default, shall give a thirty (30) day written notice to Landlord of such default, stating in said notice the default with which Landlord is charged. Tenant agrees that if the default complained of in the notice provided for by this Section 28 is of such a nature that the same can be rectified or cured by Landlord, but cannot with reasonable diligence be rectified or cured within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Landlord within said thirty (30) day period shall commence the rectification and curing thereof and shall continue thereafter with all due diligence to cause such rectification and curing to proceed, and so does complete the same, with the use of diligence as aforesaid. ARTICLE 29 MISCELLANEOUS 29.1 Waiver of Jury Trial. The parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and/or any claim of injury or damage. 29.2 Waiver. The waiver by Landlord or Tenant of any default or breach of any of the terms, covenants or conditions hereof on the part of the other to be kept and performed shall not be a waiver of any preceding or subsequent breach of the same or any other term, covenant or condition contained herein. The subsequent acceptance of rent or any other payment hereunder by Tenant to Landlord shall not be construed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease other than the failure of Tenant to pay the particular rental or other payment or portion thereof so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rental or other payment. No payment by Tenant or receipt by Landlord of a lesser amount than therein provided shall be deemed to be other than on account of the earliest rent due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept any such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided in this Lease. This Section 29.2 may not be waived. 42 29.3 Force Majeure. Whenever a day is appointed herein on which, or a period of time is appointed in which, either party hereto is required to do or complete any act, matter or thing, the time for the doing or completion thereof shall be extended by a period of time equal to the number of days on or during which such party is prevented from the doing or completion of such act, matter or thing because of labor disputes, civil commotion, war, warlike operation, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials, or to obtain fuel or energy, weather or other acts of God, or other causes beyond such party's reasonable control (financial inability excepted); provided, however, that nothing contained herein shall excuse Tenant from the prompt payment of any rent or charge required of Tenant hereunder. Tenant agrees that a recognitional or informational picket line shall not be deemed a force majeure event. 29.4 Delivery of Notices. Any and all notices and demands by or from Landlord to Tenant, or by or from Tenant to Landlord, required or desired to be given hereunder shall be in writing and shall be validly given or made if served either personally during normal business hours or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested or if delivered by a nationally recognized, next business day delivery courier service (such as Federal Express or Express Mail), or served by facsimile during normal business hours (with an answer back and a duplicate copy sent by another permitted method hereunder or by first class mail). If such notice or demand be served by registered or certified mail or courier service in the manner provided, service shall be conclusively deemed made the first business day delivery is attempted or upon receipt, whichever is sooner. Service by personal service or facsimile transmission shall be deemed made upon receipt. Any notice or demand to Landlord shall be addressed to Landlord as follows: William Sherlock New York-New York Hotel 3790 Las Vegas Boulevard Las Vegas, Nevada 89109 Telefax: (702)740-6510 With a copy to: Gary Primm New York-New York Hotel 3790 Las Vegas Boulevard Las Vegas, Nevada 89109 Telefax: (702)679-7222 Any notice or demand to Tenant shall be addressed to Tenant at: 43 c/o Ark Restaurants Corp. 85 Fifth Avenue New York, New York 10003-3019 Attention: Michael Weinstein Telefax: (212)206-8814 With a copy to: Shack & Siegel, P.C. 530 Fifth Avenue New York, New York 10036 Attention: Donald D. Shack, Esq. Telefax: (212)730-1964 Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective,however, until the actual receipt thereof by the other party. 29.5 Remedies Cumulative. The various rights, options, elections and remedies of Landlord contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. 29.6 Successors and Assigns. The terms, provisions, covenants and conditions contained in this Lease shall apply to, bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns (where assignment is permitted) of Landlord and Tenant, respectively. 29.7 Partial Invalidity. If any term, provision, covenant or condition of this Lease, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all provisions, covenants and conditions of this Lease, and all applications thereof, not held invalid, void or unenforceable, shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. 29.8 Time of the Essence. Time is of the essence of this Lease and all of the terms, provisions, covenants and conditions hereof. 29.9 Entire Agreement. This Lease contains the entire agreement between the parties with respect to the leasing of the Restaurant and cannot be changed or terminated orally. 29.10 No Partnership. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent or of partnership or of joint venture or of any association between Landlord and Tenant. Neither the 44 method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. 29.11 Brokers. Tenant warrants that it has had no dealings with any broker or agent in connection with this Lease, and covenants to pay, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with respect to this Lease or the negotiation thereof. 29.12 Captions. The captions appearing at the commencement of the sections hereof are descriptive only and for convenience in reference to this Lease and in no way whatsoever define, limit or describe the scope or intent of this Lease, nor in any way affect this Lease. 29.13 Usage. Masculine or feminine pronouns shall be substituted for the neuter form and vice versa, and the plural shall be substituted for the singular form and vice versa, in any place or places herein in which the context requires such substitution or substitutions. 29.14 Governing Law. The laws of the State of Nevada shall govern the validity, construction, performance and effect of this Lease. 29.15 Covenants. Whenever in this Lease any words of obligation or duty are used in connection with either party, such words shall have the same force and effect as though framed in the form of express covenants on the part of the party obligated. 29.16 Joint and Several Obligations. In the event Landlord or Tenant now or hereafter shall consist of more than one person, firm or corporation, then and in such event, all such persons, firms or corporations shall be jointly and severally liable as Tenant or Landlord, as appropriate, hereunder. 29.17 Submission of Lease. The submission of this Lease for examination does not constitute a reservation of or option for the Premises and this Lease becomes effective as a Lease only upon execution and delivery thereof by Landlord and Tenant. 29.18 Liens and Actions Affecting Property. Should any claim or lien be filed against the Premises, or any action or proceeding be instituted affecting the title to the Premises, Tenant shall give Landlord written notice thereof as soon as Tenant obtains actual knowledge thereof. 29.19 Construction. This Lease shall not be construed either for or against Landlord or Tenant, but this Lease shall be interpreted in accordance with the general tenor of the language. 29.20 Authority. If Tenant is not a natural person, Tenant hereby represents that it is qualified and authorized to enter into, and perform its obligations under, this Lease. 45 ARTICLE 30 DISPUTE RESOLUTION If any controversy or claim between the parties hereto arises out of this Lease, other than a claim by Landlord arising from any failure by Tenant to pay rent as and when such rent becomes due, and if the parties are unable to agree by direct negotiations, the parties shall promptly mediate any such disagreement or dispute under the Commercial Mediation Rules of the American Arbitration Association. If the parties are unable to resolve such disagreement or dispute through mediation, then such disagreement or dispute (excluding an action by Landlord in unlawful detainer by reason of a default in the payment of rent, as provided above) shall be submitted to binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association. The arbitrators shall be appointed under the Commercial Arbitration Rules of the American Arbitration Association. As soon as the panel has been convened, a hearing date shall be set within twenty-one (21) days thereafter. Written submittals shall be presented and exchanged by both parties ten (10) days before the hearing date, including reports prepared by experts upon whom either party intends to rely. At such time the parties will also exchange copies of all documentary evidence upon which they will rely at the arbitration hearing and a list of the witnesses whom they intend to call to testify at the hearing. Each party shall also make its respective experts available for deposition by the other party prior to the hearing date. The hearings shall be concluded no later than five (5) days after the initial hearing date. The arbitrators shall make their award within ten (10) business days after the conclusion of the hearing. In the event of a three-member panel, the decision in which two (2) of the members of the arbitration panel concur shall be the award of the arbitrators. Except as otherwise specified herein, there shall be no discovery or dispositive motion practice (such as motions for summary judgment or to dismiss or the like) except as may be permitted by the arbitrators, who shall authorize only such discovery as is shown to be absolutely necessary to insure a fair hearing and no such discovery or motions permitted by the arbitrators shall in any way conflict with the time limits contained herein. The arbitrators shall not be bound by the rules of evidence or civil procedure, but rather may consider such writings and oral presentations as reasonable businessmen would use in the conduct of their day-to-day affairs, and may require the parties to submit some or all of their presentation as the arbitrators may deem appropriate. It is the intention of the parties to limit live testimony and cross-examination to the extent absolutely necessary to insure a fair hearing to the parties on the significant matters submitted to arbitration. The parties have included the foregoing provisions limiting the scope and extent of the arbitration with the intention of providing for prompt, economic and fair resolution of any dispute submitted to arbitration. If Landlord gives Tenant notice of a claimed default pursuant to Article 25 of this Lease, and if either (i) such claimed default can be cured by Tenant's expenditure of an amount which is reasonably expected to be One Hundred Thousand Dollars ($100,000) or less, or (ii) such claimed default arises under Section 6.2 of this Lease, Tenant's election to dispute such claimed default 46 pursuant to the provisions of this Article 30 shall not extend or toll the running of any cure period provided in Article 25; provided that the foregoing is not intended to preclude or limit Tenant's right to perform under protest and to retain any claim it may have against Landlord for reimbursement of the cost of performance. However, if either (i) the out-of-pocket costs to Tenant of curing such claimed default are reasonably expected to exceed One Hundred Thousand Dollars ($100,000), or (ii) such claimed default cannot reasonably be cured by Tenant's expenditure of money, then, unless such claimed default arises under Section 6.2 of this Lease, any cure period provided in Article 25 for the claimed default shall be tolled during the resolution of such dispute hereunder. The arbitrators shall have the discretion to award the costs of arbitration, arbitrators' fees and the respective attorneys' fees of each party between the parties as they see fit. Judgment upon the award entered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Notwithstanding the parties' agreement to mediate or arbitrate their disputes as provided herein, any party may seek emergency relief in a court of law without waiving the right to arbitrate. The arbitrators shall make their award in accordance with applicable law and based on the evidence presented by the parties, and at the request of either party at the start of the arbitration, shall include in their award findings of fact and conclusions of law supporting the award. 47 Nothing contained herein is intended to, nor shall, limit Landlord's right to pursue any action in unlawful detainer in the case of an Event of Default by Tenant in the payment of Base Rent or Percentage Rent. IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. LANDLORD NEW YORK - NEW YORK HOTEL, LLC a Nevada limited liability company By: /s/ William Sherlock ------------------------------ Title: President & CEO --------------------------- TENANT LAS VEGAS STEAKHOUSE CORP. a Nevada corporation By: /s/ Michael Weinstein ------------------------------ Title: President --------------------------- 48 EXHIBIT "A" PREMISES [SCHEMATIC DRAWING] A - 1 EXHIBIT "B" WORK LETTER FOR GALLAGHER'S STEAK HOUSE I. LANDLORD'S WORK - The following work is to be performed by Landlord and Tenant where indicated: A. COMMON AREA 1. Utilities: a. Sanitary Sewer and Grease Waste Piping - The Landlord will pay for the cost of below-slab piping, stub ups, floor drains and floor sinks in the Employee Cafeteria and for a proportionate one-third cost in the Prep Kitchen area. The Landlord will install sanitary sewer and grease waste stubs to all other Tenant kitchen locations. The Tenant will provide distribution piping, floor drains and floor sinks in all other locations. Invert and line size will be specified by JBA. Tenant is responsible for payment of the sewer hookup charges, as well as any similar fees and charges levied on the Hotel for Tenant usage. b. Grease Interceptors - The Landlord will provide at its expense one or more grease interceptors that will be shared by all grease producers. The cost of maintaining the interceptor will be shared by all grease producers. The cost sharing formula should be based on grease production as determined by an impartial engineer. The Tenant will maintain grease lines that are used exclusively by the Tenant. The Landlord will maintain all shared grease piping. c. Domestic Water - The Landlord will stub into each demised area cold water and 140 degrees softened hot water. The Tenant will use the 120 degrees hard hot water where it is practical for the Landlord to provide it and for Tenant to use it. The size of the supply taps will be specified by the Landlord's engineer. d. Rendering Management - The Landlord will provide space for the Tenants rendering storage bins in the loading dock area. The Tenant will maintain the area. If the rendering bin area is shared with other B-1 Tenants, the Landlord will require all Tenants to contribute a fair share to the maintenance of this area. e. Electrical Service - The Landlord will provide conduit, conductors, and back boxes for all Tenant circuit panels. Where a direct feed from the Landlord's switchgear to the Tenant's equipment is needed, the Landlord will provide conduit and conductors to the equipment disconnect. Conductor size panels, and voltages will be specified by the Tenant's engineer. Final connection to Landlord's switchgear will be done by the Landlord at the Landlord's expense. f. Gas - Landlord will provide, install and maintain a main gas feed that is sufficient to operate Tenant's equipment and business at a point within the Premises to be determined by Tenant and Landlord. g. Sprinkler System - Landlord will install an automatic fire sprinkler system to the Premises in compliance with the requirements of local and state agencies. Such sprinkler system will be based on a specific grid and spacing plan for Tenant, provided that Tenant delivers such plan to Landlord's sprinkler contractor prior to the installation of a standard grid and spacing. The cost to Tenant of modifying the sprinkler system will be the cost of relocation re-sizing or adding sprinkler mains or heads to the specific grid and spacing for Tenant's business. Modification of the sprinkler system within the Premises will be subject to the review and approval of the Landlord and its design professionals and performed by Landlord's contractor at Tenant's expense. Modifications required by Tenant outside its Premises and related to modifications of the existing system will be done by Landlord at Tenant's expense. In conjunction with the sprinkler system, Tenant will install, at Tenant's expense, one smoke detector in the Premises at a point to be determined by Landlord. Where required by local code, Tenant shall also install at Tenant's expense, life safety equipment such as audiovisual horn devises or additional smoke detector devices. Landlord confirms fire hose cabinets are not required within any Tenant spaces. h. HVAC System - The Landlord is responsible for the installation and maintenance of all HVAC equipment and all main distribution ductwork to the demised premise. The Tenant is responsible for connecting to the taps provided, all VAV boxes and low velocity distribution ductwork within the demised premise. The Tenant will provide all local controls and interface with the Landlord's EMS B-2 system as needed. The Tenant will return air to the return taps provided within the demised premise or to the common plenum above the demised premise. The Tenant will provide transfer grills and fans as required within the demised premise as needed to insure proper air balance. i. Smoke Evacuation - Landlord will provide, install and maintain a smoke evacuation system for the premises. The Tenant understands that to the extent that the smoke evacuations system and the Tenant's kitchen exhaust system share the same control sequence the Landlord will use the Tenant's kitchen exhaust for smoke evacuation. The Landlord will pay for any control wiring or relays that may be needed to interlock these two systems. j. Kitchen Exhaust System - The Landlord will install all exhaust ductwork from the collars on the Tenant's hoods to the roof, including all fireproofing, clean-outs, roof curbs, and pitch pockets. The Tenant will maintain all exhaust ductwork in accordance with all codes and accepted practice. The Tenant will supply and install all hoods, exhaust fans, and related wiring. The Landlord will provide all hard wire and low voltage control interlocks between the Tenant's exhaust system and the Landlord's make-up air system, smoke evacuation system, fire control system, and energy management system. k. Fire Dampers - Landlord shall provide and install fire dampers, in accordance with all codes. Landlord shall also provide and install fire dampers where the Landlord's ductwork passes through service corridor or other fire separations. Tenant shall provide all fire dampers required for Tenant's toilet and dishwasher exhaust floor penetrations, if any are required. l. Supplemental Make-up Air - The Landlord will supply and install the supplemental make-up air system. Tenant will maintain all supplemental make-up air fans dedicated solely to Tenant spaces. m. Chilled Water for Refrigeration - The Landlord agrees to stub chilled water into each demised premise. Identification of equipment to use water-cooled and air-cooled compressors will be the joint effort of Landlord and Tenant. B-3 B. BUILDINGS 1. Structure a. Demising Partitions - The Landlord will construct all demising partitions. All the finishes on the common area side will be provided by the Landlord and all of the finishes on the Tenant side will be provided by the Tenant. b. Landlord shall pour the floor slab designed for a live load of not less than 120 lbs. PSF for the Premises. II. TENANT'S WORK - The following work required to complete and place the Premises in finished condition ready to open for business is to be performed by the Tenant at the Tenant's own expense. Tenant's Work includes, but is not limited to the following: A. GENERAL PROVISIONS All work done by Tenant shall be governed in all respects by, and be subject to the following: 1. Tenant shall deliver to Landlord within ten (10) days after the execution of this Lease and prior to the commencement of any of the Tenant Work, an irrevocable Letter of Credit in the amount of One Million Dollars ($1,000,000) or the cost of the build out whichever is less, issued by a surety company licensed to do business in the State of Nevada and acceptable to Landlord, naming Landlord as obligee, and guaranteeing completion of Tenant's Work in accordance with the Lease, free and clear of all mechanics' or other liens or security interests. The form of such completion bond shall be subject to the review and approval of Landlord, which approval may be withheld by Landlord in its reasonable discretion. Tenant's Work shall at all times be conducted consistent with the labor agreement for the Hotel, if any. 2. All Tenant's Work shall conform to applicable statutes, ordinances, regulations and codes and the requirements of all rating bureaus and which by this reference is incorporated into and made a part of this Lease. Tenant shall obtain and convey to Landlord all approvals with respect to electrical, water, sewer, heating, cooling, and telephone work, all as may be required by any agency or utility company. 3. Except for minor and routine matters, no approval by Landlord shall be deemed valid unless in writing and signed by Landlord. B-4 4. Prior to commencement of Tenant's Work and until completion thereof, or Tenant obtaining a Certificate of Occupancy or Temporary Certificate, or commencement of the Lease Term, whichever is the last to occur, Tenant shall effect and maintain Builder's Risk Insurance covering Landlord, Tenant, Tenant's contractors and Tenant's subcontractors, as their interests may appear, against loss or damage by fire, vandalism and malicious mischief and such other risks as are customarily covered by a standard "All Risk" policy of insurance protecting against all risk of physical loss or damage to all Tenant's Work in place and all materials stored at the site of Tenant's Work and all materials, equipment, supplies and temporary structures of all kinds incidental to Tenant's Work, and equipment, all while forming a part of or contained in such improvements or temporary structures, or while on the Premises or within the Center all to the actual replacement cost thereof at all times on a completed value basis. In addition, Tenant agrees to indemnify and hold Landlord harmless against any and all claims for injury to persons or damage to property by reason of the use of the Premises, except to the extent caused by Landlord or Landlord's agents or contractor, for the performance of Tenant's Work, and claims, fines, and penalties arising out of any failure to Tenant or its agents, contractors and employees to comply with any law, ordinance, code requirement, regulations or other requirement applicable to Tenant's Work and Tenant agrees to require all contractors and subcontractors engaged in the performance of Tenant's Work to effect and maintain and deliver to Tenant and Landlord, certificates evidencing the existence of, and covering Landlord, Tenant and Tenant's contractors, prior to commencement of Tenant's Work and until completion thereof, the following insurance coverages: a. Workmen's Compensation and Occupational Disease Insurance in accordance with the laws of the State of Nevada. b. Comprehensive General Liability Insurance, including independent contractors, contractual and completed operations, including death resulting therefrom, and personal injury in the limits of $10,000,000 for the general contractor, $6,000,000 for the mechanical, electrical and plumbing contractors, and $1,000,000 for all other subcontractors, for any one occurrence and property damage in the limits of $10,000,000 for any one occurrence or a combined single limit policy of $10,000,000 per occurrence. c. Comprehensive Automobile Insurance, including "non-owned" automobiles, against bodily injury, including death resulting B-5 therefrom, in the limits of $1,000,000 for any one occurrence and $1,000,000 property damage or a combined single limit of $1,000,000. 5. Tenant agrees that the contract of every contractor, subcontractor, material supplier or entity performing labor upon, or furnishing materials or equipment to the Premises in connection with Tenant's Work shall contain the following provision: "Contractor acknowledges that this provision is required under Tenant's lease (hereinafter the "LEASE") of the Premises to be improved under this Contract (the "LEASED PREMISES") from New York-New York Hotel, LLC ("LANDLORD"). In consideration of Tenant's engagement of Contractor to perform the work hereunder, and as an inducement to Tenant to enter into this Contract with Contractor, Contractor acknowledges, covenants and agrees that any mechanics' lien which it may hereafter file, claim, hold or assert with respect to the work hereunder (i) shall attach only to Tenant's interest in the Premises under the Lease and (ii) shall be subject, subordinate and inferior to the lien of any mortgage(s) now or hereafter held upon and against the Landlord by any lender(s) now or hereafter providing funds for the financing for the Premises or the Hotel in which the Premises is located, notwithstanding that any such mortgage(s) may be recorded after the commencement of work hereunder and that Contractor's mechanics lien otherwise might be entitled to priority over any such mortgage(s). 6. If Landlord in its sole and absolute discretion determines that the Hotel or the business conducted therein would otherwise be adversely affected, any or all construction work shall be done by recognized union labor. B. FLOOR SLAB All Tenant's with rest room facilities or food preparation areas shall install a floor slab waterproofing membrane in the Premises at Tenant's expense. All floor penetrations must be sleeved and waterproofed, except slabs on grade. C. STOREFRONT AND INTERIORS 1. Storefronts shall be designed within parameters of the Landlord's schedule and constructed with the Landlord's written approval. All storefronts must have a New York City theme in keeping with the theme, quality and style of B-6 the Hotel and must be approved by the Landlord before construction commences. 2. All materials employed in the construction of storefronts and interiors shall be as approved by Landlord and as defined by applicable building codes. 3. Storefront and Interior color schemes must harmonize with the color scheme of the surrounding building/storefront types and must be approved by the Landlord. 4. All swinging entrance doors must be recessed in such a manner that the door, when open, will not project beyond the lease line. D. CEILING 1. All ceilings and coves shall not exceed 14'0" above the finished floor (excluding mezzanines) unless otherwise approved by Landlord. 2. Tenant's ceilings shall be acoustic tile, gypsum board and/or plaster, suspended by adequate suspension systems to conform to final requirements of governing authorities and Landlord. 3. The space above the ceiling line, which is not occupied or allotted to Landlord's Work (structural members, duct work, piping, etc.) may be used for the installation of suspended ceiling, recessed lighting fixtures and duct work. Under no circumstances will Tenant's Work be hung or suspended from non-structural construction. Any Tenant Work involving the hanging or suspension of construction shall be accomplished only by methods, in locations and by use of assemblies approved by Landlord and Landlord's engineer. E. WALLS. All interior walls shall meet all applicable building codes. Tenant shall install insulation on the demising walls and interior walls as made necessary by building code, acoustics, or design. Tenant shall provide any necessary bracing or blocking. F. INTERIOR PAINTING. All interior painting and decoration shall be Tenant Work. B-7 G. FLOOR COVERING. The Landlord and Tenant will jointly coordinate floor transitions at all entrances. The Tenant's floor finishes will be applied directly to the slab provided. H. FURNITURE, FIXTURES AND SIGNS. The Tenant will provide identification signage only. All decor signage in the common area will be provided by the Landlord. All furnishings, trade fixtures, and related parts, including installation shall be Tenant Work. I. SUBMITTALS. Preliminary Submittal by the Tenant shall include storefronts and interiors, plans, elevations, specifications, color and material boards, and a colored elevation of the storefront facade. J. PLUMBING. All plumbing and plumbing fixtures are required by applicable codes, except utility service to the area, shall be Tenant Work. K. TOILET ROOM FIXTURES. Furnishing and installation of wiring, lighting fixtures, mechanical toilet exhaust systems, towel cabinets, soap dishes, hand dryers, deodorizers, mirrors and other similar items in toilet rooms within the Premises or as additionally required by code shall be Tenant Work. L. HEATING, VENTILATION AND AIR CONDITIONING. 1. Tenant's exhaust systems shall provide the required exhaust air capacities and shall be independent of the central cooling system. Tenant's exhaust systems shall be inoperative during other than regular business hours. Makeup or replacement air shall be provided by Landlord. 2. Tenant's HVAC systems shall be complete with air distributions systems, ventilating systems, control systems, insulation and all other components required to make a complete system. Tenant's HVAC system components shall be installed in locations as designated by the Landlord. B-8 3. The Tenant will install and maintain toilet exhaust fans and ductwork for all Tenant installed bathrooms. The Tenant's ductwork will terminate at a curb or sleeve provided by the Tenant and installed by the Landlord. The Landlord will provide a vertical chase and floor penetration as needed en route between the Tenant's bathroom and the roof or wall penetration. The Landlord will locate the penetration as close as possible to the Tenant's bathroom. In the event that a roof mounted fan is used the Landlord will also provide a pitch pocket. The Tenant will provide design information prior to the roof pour. 4. In the basement and in the first floor spaces that fall below the high rise structure, the Tenant will connect all vents to the closest inverted T-Y if this has been provided. In the food court, the Tenant will pipe all vents into the roof sleeves provided by the Landlord above each demised area. 5. The Tenant will install and maintain dishwasher fans and ductwork for all Tenant installed kitchens. The Tenant's ductwork will terminate at a curb or sleeve provided by the Tenant and installed by the Landlord. The Landlord will provide a vertical chase and floor penetration as needed en route between the Tenant's kitchen and the roof or wall penetration. The Landlord will locate the penetration as close as possible to the Tenant's kitchen. In the event that a roof mounted fan is used the Landlord will also provide a pitch pocket. The Tenant will provide design information prior to the roof pour. 6. Upon completion of all work, the Tenant will test and prepare an air balance report for all HVAC and exhaust equipment dedicated to the Tenant's demised premises. A copy of that report will be forwarded to the Landlord. If it is more practical to have one contractor balance the Tenant and Landlord equipment together, then the Tenant agrees to pay a fair share of that costs. M. MECHANICAL EQUIPMENT. All mechanical equipment including dumb-waiters, elevators, escalators, freight elevators, conveyors, and their shafts and doors, located within the Premises, including electrical work for these items. Locations, size and design of roof vents, HVAC equipment, units, hoods and caps shall be approved by Landlord. Landlord reserves the right of disapproval of any equipment to be placed on the roof, provided Landlord makes a suitable substitute location available. Tenant shall install equipment at locations where structural reinforcements are provided. The roof load is to be determined by Landlord's structural engineer's load requirements. Landlord approved changes in the structure as necessary to accommodate Tenant's equipment shall be made by Landlord at Tenant's expense. B-9 Cuts, curbs and openings including any structural support and steel, shall be provided and performed by a contractor designated by Landlord at Landlord's expense. In addition, all cant strips, base furnishings and other work necessary to complete the permanent weather proofing of Landlord's roof as a result of roof cuts or openings required by Tenant shall be performed by a contractor designed by Landlord at Landlord's expense. N. ELECTRICAL. 1. All interior distribution panels, lighting panels, power panels, conduits, outlet boxes, switches, outlets and wires within the Premises shall be Tenant Work. Tenant shall provide electric conduit and boxes in the concrete floor slab, ceiling and walls, including all electrical service panels, pull boxes and equipment. Landlord will provide all work outlined in Section I.1.e of this Work Letter. 2. All electrical fixtures, including lighting fixtures and equipment, and installation thereof shall be Tenant Work. Lighting systems (except security and emergency lighting) must be controlled by lighting contractors. 3. All conduit for necessary for telephone wires within the Premises shall be Tenant Work. 4. Wiring connections to Tenant's equipment within the Premises shall be Tenant Work. O. POINT OF SALES SYSTEMS. 1. The Tenant will install a POS system that is fully compatible with the Landlord's system. The Landlord will supply the Tenant with compatibility criteria and make the criteria part of this Work Letter. The Landlord will stub a POS conduit into each demised premise. P. TEMPORARY SERVICES. Any temporary services required by Tenant during its construction period, including heat, water or electrical service shall be secured from Landlord or Landlord's contractor, as the case may be, at Tenant's sole cost and expense. Q. SUBSEQUENT REPAIRS AND ALTERATIONS. B-10 Landlord reserves the right to require changes in Tenant's Work when necessary by reason of code requirements. R. DOORS AND EXITING REQUIREMENTS. 1. Tenant will be responsible for adherence to exiting codes. 2. Tenant will maintain a clear exiting path through the stockroom to Tenant's rear door for those Premises that contain a rear door. S. CONSTRUCTION ACTIVITIES. 1. If the Tenant requires any roof penetrations in addition to those already provided for in this lease then the Landlord will provide such penetrations at the Tenant's expense. 2. Any additional structural support necessitated by Tenant's mezzanines and/or equipment, fixtures or inventory shall be provided by Tenant at Tenant's expense and approved by Landlord. 3. If Tenant will not open by the date the Hotel opens for business and such date is after the Commencement Date, Tenant shall be responsible for the installation and expense of the temporary storefront or barricade shielding the interior of the Premises from the Hotel as well as for the removal and cost thereof after opening for business. If Tenant is under construction prior to the date of Hotel is open for business, such temporary storefront shall be installed at least three (3) days prior to such opening date. 4. All construction activities on site must be coordinated directly with Mr. Randy Keiper, Superintendent for Marnell Corrao Associates (MCA). General site rules to be observed are: a. Normal construction work hours are 6:00 A.M to 2:30 P.M. b. All construction workers on site must belong to trade unions. Those from outside the Las Vegas area must check in with the local unions to comply with their regulations. All employees on site must receive a badge from MCA to enter the site. c. Tenant contractors must schedule all deliveries with Randy Kuiper, Marnell Corrao's Project Superintendent. Tenant contractors must provide their own forklifts and cranes for offloading. B-11 d. Tenant contractors may use MCA man hoists free of charge during normal working hours. e. Tenant contractors may schedule the use of the material hoist after normal working hours. Extra cost of operators and mechanics will be shared by all users. f. All employee parking must be off site. g. No space is available for offices for Tenant contractors on site, except within their own spaces. Landlord will make conduit available to Tenant as soon as it is installed in the permanent structure. h. Temporary power and water is available to Tenant spaces. Tenant electrical subcontractor may have to pull wire to Tenant space. i. Cutting of holes through existing walls or slabs for equipment access requires Landlord's written approval beforehand. Structural members must be analyzed by structural engineer at Tenant's expense. j. A common trash container will be located on site to be used by all Tenant contractors. Tenants will share the cost of trash removal based on a fair square footage formula. k. Tenants will provide their own portable toilets on site. Contacts should be made with "Mr. Potty" to simplify maintenance and reduce costs. l. All construction work performed within the Tenant's demised premise, after it has been turned over to the Tenant, must be coordinated with Terry Higgins or his designated agent. Whenever possible, Landlord or its Agent, will provide prior notification to the Tenant or its Agent. Whenever possible, both parties must schedule the work to take place at a time that is mutually agreeable. B-12 EX-21 5 EXHIBIT 21 EXHIBIT 21 Subsidiaries of the Registrant
Jurisdiction of Subsidiary Incorporation ---------- ------------- Columbus Cafe Corp. New York SSWB Restaurants, Inc. New York MEB Emporium Corp. New York MEB Dining 18, Inc. New York MEB On First, Inc. New York Conis Realty Corp. New York Ernie's Hackensack, Inc. New Jersey La Femme Noire, Inc. New York Ark 27th Street, Inc. New York Ark Seventh Avenue South Corp. New York Ark Rio Corp. New York Ark Operating Corp. New York Ark Sub-One Corp. New York Ark 474 Corp. New York Ark Twenty-Ninth Street Corp. New York Ark Boston Corp. Massachusetts Ark Union Station, Inc. District of Columbia Ark D.C. Kiosk, Inc. District of Columbia Ark Potomac Corporation District of Columbia Washington Parties & Events Related Industries, Inc. District of Columbia Aroc and Ark Corporation New York Ark Bryant Park Corp. New York Ark of the Seaport, Inc. New York Ark Parties, Inc. New York Tysons America Corp. Virginia Ark JC Corp. Florida Ark Oxnard Corp. California Ark California Restaurants Corp. California Ark JMR Corp. New York Ark Fifth Avenue Corp. New York Ark Islamorada Corp. Florida KRA Holdings, Inc. New York La Femme Noire D.C. Incorporated District of Columbia Ark Cafeteria Corp. New Jersey Las Vegas Steakhouse Corp. Nevada Las Vegas America Corp. Nevada Las Vegas Festival Food Corp. Nevada Ark WFC Corp. New York Ark Las Vegas Restaurant Corp. Nevada Ark Fulton Street Corp. New York
EX-23 6 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Form S-8 Registration Statement No. 33-48217 and Registration Statement No. 33-87724 of Ark Restaurants Corp. of our report dated November 20, 1998, appearing in this Annual Report on Form 10-K of Ark Restaurants Corp. for the year ended October 3, 1998. DELIOTTE & TOUCHE LLP New York, New York December 18, 1998 EX-27 7 EXHIBIT 27
5 The schedule contains summary financial information extracted from the consolidated balance sheet of Ark Restaurants Corp. and its subsidiaries as of October 3, 1998, and the related consolidated statement of operations, and is qualified in its entirety by reference to such financial statements. 12-MOS OCT-3-1998 SEP-28-1997 OCT-3-1998 1,023,046 0 2,507,307 0 1,950,146 7,295,851 41,075,766 15,833,403 43,102,179 8,015,194 5,393,072 0 0 51,879 29,010,261 43,102,179 117,398,453 117,398,453 31,265,702 73,630,650 6,052,435 0 0 7,680,882 3,068,741 4,612,141 0 0 0 4,612,141 1.21 1.20 -----END PRIVACY-ENHANCED MESSAGE-----