Exhibit
10.7


 


MANAGEMENT AGREEMENT


 


among


 


NIKKI BEACH LAS VEGAS LLC


 


(OPERATOR)


 


and


 


TROPICANA LAS VEGAS, INC.


 


(OWNER)


 


and


 


PENROD MANAGEMENT GROUP INC.


 


GUARANTOR


 

















 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Matters relating to the Construction of the Nikki Beach
  Club

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Retention of Operator; Duties

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Restrictions Regarding the Operation of the Nikki Beach
  Club

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Pre-Opening Services

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Compliance with Law; Governing Documents

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Standard of Care

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Standards

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Staff

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Dedicated Corporate Personnel

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Bank Accounts

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Financial Affairs

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  No Partnership

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  Statements

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  Insurance to be maintained by Owner

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  Insurance to be maintained by Operator

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  No Broker’s or Finder’s Fees

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  Covenants and Representations of Operator and Guarantor

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  Cooperation

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  Liquor License; Compliance with Liquor Laws

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
   

  	
  Trade Name

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  Payments

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
   

  	
  Management Fee; Reimbursement of payroll expenses for
  Dedicated Corporate Personnel

  	
  24

  



 


i

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
   

  	
  Term

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
   

  	
  Restrictive Covenant

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
   

  	
  Events of Default; Termination

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
   

  	
  Indemnity

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
   

  	
  Confidentiality

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  29.

  	
   

  	
  Consent

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  30.

  	
   

  	
  Binding Effect; Assignment; No Third Party Beneficiaries

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  31.

  	
   

  	
  Notices

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  32.

  	
   

  	
  Entire Agreement

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  33.

  	
   

  	
  Venue of Litigation; Construction of Agreement

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  34.

  	
   

  	
  Legal and Professional Fees

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  35.

  	
   

  	
  Press Release

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  36.

  	
   

  	
  Amendment of Agreement

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  37.

  	
   

  	
  Invalidity of Provisions

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  38.

  	
   

  	
  Periods of Time

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  39.

  	
   

  	
  Mortgage and Subordination

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  40.

  	
   

  	
  Estoppel

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  41.

  	
   

  	
  Counterparts

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  42.

  	
   

  	
  Applicable Law

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  43.

  	
   

  	
  Survival

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  44.

  	
   

  	
  Gaming and Regulatory Compliance

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  45.

  	
   

  	
  Guaranty

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  46.

  	
   

  	
  Force Majeure

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  47.

  	
   

  	
  Condemnation

  	
  39

  



 


ii

















 


TABLE OF
CONTENTS


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  
	
  Exhibit A:  Construction Budget

  	
   

  
	
   

  	
   

  
	
  Exhibit B:  Dedicated Corporate Personnel

  	
   

  
	
   

  	
   

  
	
  Exhibit C:  Premises

  	
   

  
	
   

  	
   

  
	
  Exhibit D:  Pre-Opening Business Plan

  	
   

  
	
   

  	
   

  
	
  Exhibit E:  Standards

  	
   

  
	
   

  	
   

  
	
  Exhibit F:  Lease Terms

  	
   

  
	
   

  	
   

  
	
  Exhibit G:  Draft Annual Operations Budget

  	
   

  
	
   

  	
   

  
	
  Exhibit H:  Build Out Schedule

  	
   

  



 


iii














 


MANAGEMENT AGREEMENT


 


THIS MANAGEMENT AGREEMENT (this “Agreement”)
dated as of the 14th day of April, 2010 (the “Effective Date”), between
TROPICANA LAS VEGAS, INC., a Nevada corporation with offices at 3801 Las Vegas
Boulevard, South, Las Vegas, Nevada 89109 
(“Owner”), NIKKI BEACH LAS VEGAS LLC, a Nevada Limited Liability
Company with offices at c/o Penrod Management Group, Inc., One Ocean
Drive, Miami Beach, Florida 33139 (“Operator”), and PENROD MANAGEMENT
GROUP INC., a Florida corporation with offices at 2800 Biscayne Blvd. Suite 600
Miami FL 33137 (“Guarantor”).


 


WITNESSETH:


 


WHEREAS, Owner is the owner of a
casino hotel resort, currently commonly known as “Tropicana Las Vegas” (the “Hotel”)
located at 3801 Las Vegas Boulevard, South, Las Vegas, Nevada 89109;


 


WHEREAS, Owner desires to construct
the Nikki Beach Club (as defined below) at the Premises (as defined below) to
be managed and operated by Operator on terms and conditions hereinafter set
forth;


 


WHEREAS, Operator, together with
its Affiliates, is knowledgeable and experienced in the management and
operation of restaurants, night clubs and beach clubs, and desires to manage
and operate the Nikki Beach Club at the Premises on the terms and conditions
hereinafter set forth;


 


WHEREAS, the obligations of Operator
under this Agreement will be guaranteed by Guarantor as set forth herein.


 


NOW, THEREFORE, in consideration of the
promises and the mutual agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Owner, Operator and Guarantor agree as follows:


 


1.             Definitions.  For the purposes of this Agreement, the
following terms shall have the following meanings:


 


“Affiliate”
shall mean (i) any Person directly or indirectly controlling, controlled
by or under common control with another Person; (ii) a Person owning or
controlling more than fifty percent (50%) or more of the outstanding voting
securities of such other Person; and (iii) any member of such Person’s
immediate family.  For purposes hereof,
the term “control” shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
entity;


 


“Agreement”
shall have the meaning given to such term in the preamble to this Agreement;


 


“Annual
Operations Budget” shall have the meaning given to such term in Paragraph
4(g);


 


1

















 


“Authorized
Recipients” shall mean, with respect to any Person, the shareholders,
partners, members, trustees, beneficiaries, directors, officers, employees,
agents, representatives, legal counsel, accountants and lenders of such Person
or its Affiliates;


 


“Bankruptcy”
shall mean the occurrence of any of the following events in respect of any Person:  (i) the granting of relief against such
Person in an involuntary case under the Federal Bankruptcy Code which is not
removed within one hundred twenty (120) days, or in any such involuntary case,
the approval of the petition by such Person as properly filed, or the admission
by such Person of material allegations contained in the petition, or (ii) the
execution by such Person of a general assignment for the benefit of creditors,
or (iii) the commencement of a voluntary case under the Federal Bankruptcy
Code by such Person which is not dismissed within 120 days or (iv) the
appointment of a receiver for such Person or for all or a substantial part of
the assets of such Person and such receivership proceedings are not removed
within one hundred (120) days after the receiver’s appointment, or (v) in
the case of a Person which is a corporation, joint venture, partnership or
other business entity, the commencement by such Person of liquidation,
dissolution or winding-up proceedings, or the commencement against any such
Person of a proceeding to liquidate, wind-up or dissolve such Person, which
proceeding is not dismissed within one hundred twenty (120) days;


 


“Business
Day” shall mean a day other than a Saturday, Sunday or a day on which
banking institutions in Nevada are authorized or required by law to close;


 


“Cafe
Nikki” shall mean a pool-side restaurant;


 


“Club
Nikki” shall mean a night club and bar;


 


“Club
Nikki Construction Loan” shall have the meaning given to such term in
Paragraph 2(e);


 


“Confidential
Information” shall mean information relating to a party’s business that
derives value, actual or potential, from not being generally known to others,
and any documents and information specifically designated by a party orally or
in writing as confidential or which, by its nature, would reasonably be
understood to be confidential or proprietary;


 


“Construction Budget” shall mean the budget for
the construction of the Nikki Beach Club, allocated among Club Nikki, Nikki
Beach and Café Nikki, and attached hereto as Exhibit  A;


 


“Dedicated
Corporate Personnel” shall mean the personnel of Operator or any of its
Affiliates approved by Owner and identified on Exhibit B hereto who
fill the positions identified in Exhibit B, are employed and
dedicated to the Nikki Beach Club in connection with the services provided by
Operator under this Agreement, and their replacements as approved by
Owner.  Owner and Operator may amend Exhibit B
from time to time to reflect changes in accordance with Paragraph 10 in the
hiring of such individuals;


 


“Effective
Date” shall have the meaning given to such term in the preamble to this
Agreement;


 


“Extension
Term” shall have the meaning given to such term in Paragraph 24;


 


2

















 


“Final
Statement” shall have the meaning given to such term in Paragraph 23;


 


“Fiscal
Year” shall mean (i) with respect to the first Fiscal Year, a period
beginning on the Opening Date and ending on December 31st of such year and (ii) with respect to any
subsequent period, the twelve (12) month period beginning on January 1st and ending on December 31st (or such earlier date that this Agreement is
terminated);


 


“Force
Majeure” shall mean any of the following events, regardless of where it
occurs or its duration: acts of nature without the interference of any human
agency (including hurricanes, typhoons, tsunamis, tidal waves, tornadoes,
cyclones, other severe storms, winds, lightning, floods, earthquakes, volcanic
eruptions, fires, explosions, disease, or epidemics); fires and explosions
caused wholly or in part by human agency; acts of war or armed conflict; riots
or other civil commotion; terrorism (including hijacking, sabotage, chemical or
biological events, nuclear events, disease-related events, bombing, murder,
assault and kidnapping), or the threat thereof; strikes or similar labor
disturbances or other industrial disturbances of a general nature (that are not
specific to the Hotel); embargoes or blockades; shortage of critical materials,
supplies or transportation; and any action or inaction of Governmental
Authorities (including the imposition of restrictions on room rates or wages or
other material aspects of operation; restrictions on financial, transportation
or information distribution systems; or the revocation or refusal to grant
licenses or permits, where such revocation or refusal is not due to the fault
of the Party whose performance is to be excused for reasons of the
Extraordinary Event; delays or work stoppages due to government furloughs
or similar work reduction programs), delays or work stoppages due to the
contractors or subcontractors engaged for the performance of construction
activities, and any delays in the issuance of permits or obtaining of
inspections by the relevant Governmental Authorities; and any other events
beyond the reasonable control of Owner or Operator (financial inability
excepted);


 


“Furniture
and Equipment” shall mean all furniture, furnishings, decorations, and
equipment necessary for the efficient operation of the Nikki Beach Club;


 


“Gaming
Control Act” shall mean all relevant provisions of the Nevada Revised
Statutes regulating the gaming operations of the Hotel, Owner or its
Affiliates, as the same may be amended from time to time, and any statute(s) hereafter
enacted in replacement thereof and the regulations, if any, promulgated from
time to time pursuant thereto;


 


“Gaming
Regulator” shall mean any Governmental Agency having jurisdiction over the
Hotel or Owner or any of Owner’s Affiliates and any successor or successors
thereto;


 


“Governing
Documents” shall mean any declaration, master or sub-community declaration,
declaration of covenants, conditions and restrictions, reciprocal easement
agreement, rules and regulations or similar documents, including any
building management statements, constitutions, articles and bylaws governing
the development, construction, ownership, maintenance, use or operation of the
Premises or the Hotel, as applicable;


 


“Governmental
Agency” shall mean any governmental agency or quasi-governmental authority,
board, bureau, commission, department, instrumentality, or public body, court,
or administrative tribunal, including, without limitation, the Gaming
Regulators;


 


3

















 


“Gross
Sales” shall mean all receipts or revenues of the Nikki Beach Club from all
sources of any kind (subject to the limitations set forth in this Agreement),
including, without limitation, the sale of food and beverage and other
merchandise permitted under the terms of this Agreement, computed on an accrual
basis, excluding only: (i) sales taxes and/or live entertainment
taxes collected from customers from receipts which are included in Gross Sales,
(ii) credit card fees charged by credit card companies with respect to all
receipts which are included in Gross Sales including room charges (which shall
not be included as an Operating Expense), (iii) gratuities paid to the
Staff (or paid to Operator or the Hotel and paid by Operator or the Hotel, as
the case may be, to the Staff) by patrons with respect to functions which
generate Gross Sales, (iv) amounts collected by Operator from patrons for
the account of, and for direct payment to, unrelated third parties providing
services specifically for a patron’s function which generate Gross Sales, such
as flowers, music and entertainment, (v) proceeds paid as a result of an
insurable loss (unless paid for the loss or interruption of business and
representing payment for damage for loss of income and profits of the Nikki
Beach Club which are intended to generate Gross Sales), (vi) proceeds of
condemnation and eminent domain awards, (vii) any gaming revenue even if
such gaming revenue is a result of gaming activities taking place at the Nikki
Beach Club; and (viii) any revenue derived by third parties even if such
revenue is a result of activities taking place at the Nikki Beach Club (e.g.,
spa activities).  In addition, Gross
Sales shall be reduced by the amount of any loss on uncollectible accounts and
by the amount of over-rings, refunds, rebates, discounts and credits given,
paid or returned by Operator in the course of obtaining Gross Sales or in
connection with credit card transactions occurring with respect to obtaining
Gross Sales.  In addition to receipts from
transactions occurring at the Nikki Beach Club, Gross Sales shall include,
without limitation and to the extent permitted under this Agreement, all
receipts for food and beverage delivered from the Nikki Beach Club in
satisfaction of orders therefore received away from the Nikki Beach Club and
receipts for food and beverage delivered away from the Nikki Beach Club in
satisfaction of orders received at the Nikki Beach Club and receipts for food
and beverage and permitted merchandise delivered away from the Nikki Beach Club
in satisfaction of orders received away from the Nikki Beach Club but sold,
transferred or solicited with reference to the Nikki Beach Club;


 


“Guaranteed
Obligations” shall have the meaning given to such term in Paragraph 45(a);


 


“Guarantor”
shall have the meaning given to such term in the preamble to this Agreement;


 


“Health
District” shall have the meaning given to such term in Paragraph 3(i);


 


“Hotel”
shall have the meaning given to such term in the recitals to this Agreement;


 


“Initial
Term” shall have the meaning given to such term in Paragraph 24;


 


“Law”
shall mean any statute, ordinance, promulgation, law, treaty, rule, regulation,
code, judicial precedent or order, including, without limitation, the Gaming
Control Act, of any court or any governmental or regulatory entity, or other
power, department, agency, authority, or officer whether foreign, federal,
state, local, or any subdivision thereof, including, without limitation, any
Gaming Regulator;


 


4

















 


“Losses”
shall mean any and all liabilities, obligations, losses, damages, penalties,
claims, actions, suits, costs, expenses and disbursements of a Person not
reimbursed by insurance, including, without limitation, all reasonable
attorneys’ fees and all other reasonable professional or consultants’ expenses
incurred in investigating, preparing for, serving as a witness in, or defending
against any action or proceeding, whether actually commenced or threatened, but
excluding consequential or incidental damages;


 


“Management
Fee” shall have the meaning given to such term in Paragraph 23(a);


 


“Monthly
Statement” shall have the meaning given to such term in Paragraph 14(a)(1);


 


“Net
Income” shall mean Gross Sales except as otherwise specifically provided
herein, less all of the costs and expenses reasonably incurred by Owner with
respect to the ownership and operation of the Nikki Beach Club (all such costs
and expenses being collectively referred to as the “Operating Expenses”),
but without deduction for income taxes (except as set forth below).  Said Operating Expenses shall include,
without limitation and without duplication, the following costs and expenses of
Owner:


 


(1)           cost of food;


 


(2)           cost of beverage;


 


(3)           Payroll Expenses, the cost of payroll
service, and the reimbursements made to the Operator for the salary and benefit
expenses of the Dedicated Corporate Personnel as reflected on Exhibit B;


 


(4)           advertising and promotion expenses;


 


(5)           cost of decorations;


 


(6)           dues and subscriptions;


 


(7)           cost of flowers;


 


(8)           cost of cleaning and sanitation;


 


(9)           cost of all utilities, including
without limitation water, gas and electricity, based upon separate meters for
the Nikki Beach Club, or if separate metering is not feasible, then based upon
allocations of such on a fair and consistent basis utilities are delivered by
Owner in its reasonable discretion;


 


(10)         all costs of procuring and maintaining
all forms of insurance related to the Nikki Beach Club or otherwise required
pursuant to Paragraph 15, and the costs of any deductibles paid by Owner in
connection with insured losses;


 


(11)         reasonable out-of-pocket legal,
accounting and professional fees and expenses for services not covered by
Paragraph 34;


 


5

















 


(12)         cost of business licenses and permits;


 


(13)         cost of uniforms, linen and laundry;


 


(14)         cost of maintenance, repairs, and
refurbishment;


 


(15)         cost of menus;


 


(16)         cost of office expenses and supplies;


 


(17)         cost of Operating Supplies;


 


(18)         cost of security services, including
without limitation surveillance services;


 


(19)         cost of service contracts for the Nikki
Beach Club;


 


(20)         out-of-pocket cost of local and long
distance telephone calls;


 


(21)         sales taxes not otherwise included in
another component of Operating Expenses;


 


(22)         cost of communications including,
without limitation, telephones, printing, stationary and postage;


 


(23)         cost of employee relations, meals,
training and transportation, with employee meals being charged at the rate of
$9.00 per employee per day for meals in the employee dining room, such rate to
be adjusted annually through the Term in accordance with the Consumer Price
Index;


 


(24)         cash losses, including cash shortages,
and theft;


 


(25)         cost, if any, of restaurant support
functions including, but not limited to, bakery, pastry shop, garden manager,
butcher, main kitchen, service bar and bar porters, stewards, cashiers and
restaurant reservations, all of which labor and material costs will be charged
at Owner’s actual cost therefor;


 


(26)         Pre-Opening Expenses;


 


(27)         amortization and depreciation of
capital expenditures and capital improvements;


 


(28)         cost of outside entertainment; and


 


(29)         operating loss carry forward — if
during any given month, the Net Income should result in a net operating loss,
such net operating loss shall be carried forward to future months to reduce any
Net Income until such time as the entire net operating loss carry forward has
been fully offset against future Net Income.


 


6

















 


Operator
acknowledges that in light of the integrated nature of the Nikki Beach Club and
the Hotel, certain of Owner’s costs of management, operation, and maintenance
of the Nikki Beach Club may properly be allocable to one or more of the other
operations of the Hotel in addition to Nikki Beach Club (the “Shared
Expenses”).  Notwithstanding the
foregoing, and in order to streamline both the operations of Nikki Beach Club
and the calculation of Net Income, it is the intention of the Owner, in
connection with the Payroll Expenses associated with the Staff, to maximize the
use of dedicated Staff to the Nikki Beach Club and to minimize the creation of
Shared  Expenses resulting from the
allocation of Staff to Nikki Beach Club and to other operations of the
Hotel.  Wherever possible, Owner shall
designate specific employees to be dedicated exclusively to the Nikki Beach
Club in providing the following support services: cleaning, accounting,
purchasing, human resources, marketing and facilities maintenance.  If any employees are not providing services
exclusively for the Nikki Beach Club, then the cost of such employees will be
prorated by Owner in good faith between Nikki Beach Club and non-Nikki Beach
Club activities.  ;


 


“Nikki
Beach” shall mean a beach club;


 


“Nikki
Beach Club” shall mean Cafe Nikki, Nikki Beach and Club Nikki;


 


“Opening
Date” shall mean the first date the Nikki Beach Club (other than Club
Nikki) is opened to the public for business on a normal operating basis, as
determined by Owner in its reasonable discretion (but excluding dry runs and
opening parties);


 


“Operating
Expenses” shall have the meaning given to such term in the definition of
Net Income;


 


“Operating
Supplies” shall mean china, glassware, linens, silverware, utensils, pots,
pans, and similar items of personal property, as well as paper products,
inventories, and other items commonly referred to as consumable items (other
than food and beverage) necessary for the efficient operation of the Nikki
Beach Club;


 


“Operator”
shall have the meaning given to such term in the preamble to this Agreement;


 


“Operator
Event of Default” shall have the meaning given to such term in Paragraph
26(a);


 


“Operator
Group” shall have the meaning set forth in Paragraph 44(a);


 


“Operator
Indemnified Person(s)” shall have the meaning given to such term in
Paragraph 27(c);


 


“Operator’s
Representative” shall mean Jack Penrod;


 


“OSHA
Enforcement Agency” shall have the meaning given to such term in Paragraph
3(j);


 


“Owner”
shall have the meaning given to such term in the preamble to this Agreement;


 


7














 


“Owner Event of Default” shall have the meaning
given to such term in Paragraph 26(b);


 


“Owner
Indemnified Person(s)” shall have the meaning given to such term in
Paragraph 27(a);


 


“Payroll
Expenses” shall mean all expenses associated with the compensation of the
Staff, including, without limitation, gross salary, overtime expenses, social
security taxes, unemployment insurance and expenses associated with the
maintenance of employee benefit plans, if any;


 


“Person”
shall mean any individual, partnership, corporation, association or other
entity, including, without limitation, any Governmental Agency, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person where the context so permits;


 


“Plans
and Specifications” shall mean (a) all site plans, grading plans,
construction drawings, surveys, materials, specifications, architectural plans
and drawings, elevations, construction models, engineering plans and drawings,
and all other plans, drawings, studies or reports of any nature related to the
construction of the Nikki Beach Club and (b) the specifications for the
Furniture and Equipment and the Operating Supplies in connection with the
furnishing, equipping and decorating of the Nikki Beach Club;


 


“Preliminary
Plans and Specifications” shall mean the Plans and Specifications to be
submitted by Owner and reviewed by Operator with respect to any restoration in
accordance with Paragraph 15(a);


 


“Premises”
shall mean the areas designated for each component of the Nikki Beach Club
within the Hotel as depicted on Exhibit C attached hereto;


 


“Pre-Opening
Business Plan” shall mean the Pre-Opening Business Plan attached to this
Agreement as Exhibit D, which includes therein a budget for all
costs and expenses presently anticipated to be incurred in connection with the
implementation of such Pre-Opening Business Plan;


 


“Pre-Opening
Expenses” shall mean all of the expenses incurred by Owner prior to the
Opening Date in accordance with this Agreement, whether or not reflected in the
Pre-Opening Business Plan, including all out-of-pocket expenses, including,
without limitation, expenses of business entertainment, salary compensation,
benefits and reimbursable expenses and any related taxes for Staff incurred
from the Effective Date and prior to the Opening Date, the cost of recruitment
and training and related expenses for all Staff, the cost of pre-opening sales,
marketing, advertising, promotion and publicity, the cost of obtaining all
necessary licenses and permits for the Nikki Beach Club required to be obtained
by Owner or the Staff, including, without limitation, the reasonable fees of
lawyers and other consultants incident thereto and the costs of such licensing
or other qualification;


 


“Pre-Opening
Services” shall mean the services to be provided by Operator, in
consultation with Owner and in accordance with the Pre-Opening Business Plan,
prior to the Opening Date which shall include, but shall not be limited to, the
following:  (i) subject to the


 


8

















 


provisions
of Paragraph 9, the recruitment, selection, hiring and training of Staff, (ii) jointly
with Owner, the preparation of a pre-opening campaign (including pre-opening
marketing, pre-opening publicity and a grand opening party), (iii) subject
to Paragraph 20, the procurement all licenses, permits, approvals and other
instruments necessary to be obtained by Operator or Operator’s Dedicated
Corporate Personnel for the management and operation of the Nikki Beach Club, (iv) the
preparation and submission of purchase orders to Owner for the purchase of
initial Operating Supplies, food, beverage and flowers and other decorations,
and (v) all other items necessary for the proper opening of the Nikki
Beach Club as set forth in the Pre-Opening Business Plan;


 


“Remedy”
shall have the meaning given to such term in Paragraph 45(c);


 


“Reserve
Fund Contribution” shall mean a percentage of Net Income to be mutually
agreed upon by Owner and Operator as part of the Annual Operations Budget; provided,
however, (i) in no event shall such percentage exceed ten percent (10%) of
Net Income, (ii) the Reserve Fund Contribution for the prior Fiscal Year
shall be as set forth in the Annual Operations Budget attached as an exhibit
hereto, provided to the extent the first Fiscal Year is less than twelve (12)
calendar months, the Reserve Fund Contribution shall be prorated; and (iii) in
the event that Owner and Operator, despite their reasonable good faith efforts,
are unable to agree upon the Reserve Fund Contribution for any Fiscal Year, the
percentage set forth in the prior year’s Annual Operations Budget shall govern;


 


“Service
Marks” shall have the meaning given to such term in Paragraph 21;


 


“Shared
Expenses” shall have the meaning given to such term in the definition of
Net Income;


 


“Staff”
shall mean all individuals employed by Owner and working at, or providing
services to, the Nikki Beach Club at any time during the Term, including,
without limitation, managers, cashiers, chefs, cooks and other kitchen workers,
bartenders, waiters, buspersons, dishwashers, janitors, entertainers, hosts,
doorpersons, captains and such other personnel as shall be appropriate in
connection with the operation of the Nikki Beach Club.  Wherever possible, Owner shall designate
dedicated support function employees including, without limitation, cleaning,
accounting, purchasing, human resources, marketing and facilities maintenance
employees, that will be assigned exclusively to Nikki Beach Club, which
dedicated support function employees shall be considered Staff and any costs
associated with such employees shall be Payroll Expenses.  In addition, Owner shall have the right to
allocate the services and time of any Staff (including such support function
employees) between the Nikki Beach Club and other components of the Hotel,
although Owner agrees to endeavor to keep Staff whose time is allocated between
Nikki Beach Club and the Hotel to a minimum. 
The Shared Expenses of such Staff including, without limitation, the
compensation and termination costs, if any, shall be allocated to the Nikki
Beach Club and the other relevant components of the Hotel on a fair and
consistent basis as determined by Owner in good faith and consistent with the
requirements set forth within the definition of “Net Income.”  For the sake of clarity, Staff does not
include Dedicated Corporate Personnel, and Dedicated Corporate Personnel are
not considered Staff under this Agreement;


 


9

















 


“Standards”
shall mean the requirements, standards, policies and programs for the
development, design, construction, equipping, furnishing, decoration, operation
and appearance of the Nikki Beach Club attached hereto as Exhibit E;


 


“Substantially
Complete” shall mean that the construction of the Nikki Beach Club, has
been completed in all material respects, and the Furniture and Equipment shall
have been installed and shall be operational in all material respects, as
determined by Owner in its reasonable discretion, so as to permit Operator to
conduct such Staff training and other pre-opening operations as it deems
reasonably necessary, and a temporary Certificate of Occupancy has been issued
by the relevant building authority;


 


“Substantially
Destroyed” shall mean damage by fire or other casualty to the Nikki Beach
Club that results in more than twenty percent (20%) of the area of the Nikki
Beach Club being rendered unusable and 
the restoration of which, in Owner’s reasonable judgment, would take
more than six (6) months after the occurrence to complete;


 


“Term”
shall have the meaning given to such term in Paragraph 24;


 


“Territory”
shall mean Clark County, Nevada including, without limitation, Las Vegas, but
excluding the Hotel; and


 


“Trade
Name” shall have the meaning given to such term in Paragraph 21.


 


“Year
to Date Statements” shall have the meaning given to such term in Paragraph
14(a)(2).


 


2.             Matters
relating to the Construction of the Nikki Beach Club


 


(a)           Construction Budget for the Nikki Beach Club.  Owner and Operator have jointly developed and
agreed upon the Construction Budget for the construction of the Nikki Beach
Club.  The purpose of the Construction
Budget is to set a not to exceed sum that Owner shall be responsible for in
connection with the construction of the Nikki Beach Club.  Nothing herein shall require Owner to spend
the amounts set forth in the Construction Budget if the Owner is able to
construct, or cause the construction of, the Nikki Beach Club consistent with
the Plans and Specifications for an amount less than that set forth in the  Construction Budget.


 


(b)        Design of the Nikki Beach Club.  Owner has engaged a designer for the
preparation of the Plans and Specifications for the Nikki Beach Club at Owner’s
sole cost and expense.  Owner and
Operator shall both participate in the preparation and development of the Plans
and Specifications at Owner’s expense and in accordance with the Construction
Budget.  The Plans and Specifications
shall receive direct input on behalf of Operator from Operator’s Representative.  Operator’s Representative shall be personally
present at all major design meetings as requested by Owner until the completion
of the Plans and Specifications.  The
Plans and Specifications shall be mutually approved by Owner and Operator, provided
that no Plans and Specifications shall be approved that exceed the Construction
Budget.  Once the Plans and
Specifications are approved, neither party may make any changes to the Plans
and Specifications without the other party’s consent; provided, however, Owner
may


 


10

















 


make further changes to the Plans and Specifications which, in the
aggregate, do not substantially alter the Plans and Specifications, but are
necessary to meet problems that may arise during the period of constructing,
furnishing and equipping Cafe Nikki and Nikki Beach.


 


(c)           Construction of the Nikki Beach Club.  Owner shall be responsible for engaging all
necessary contractors for the construction of the Nikki Beach Club.  Operator’s Representative shall make himself
available to Owner on an as-needed basis throughout the construction phase of
the Nikki Beach Club to ensure that the construction is completed in accordance
with the Plans and Specifications and in conformance with the Standards.  Subject to compliance with applicable law,
Operator shall have the right to (i) make visits to the construction site
and/or to the offices of Owner or its architects, engineers, designers,
contractors, manufacturers or other persons involved in the Nikki Beach Club,
and (ii) maintain one or more representatives on-site throughout the
construction of the Nikki Beach Club. 
All communications by Operator with third-party consultants (including,
without limitation, the general contractor or any sub-contractors) shall be
coordinated with Owner.  Any change
orders issued during the construction process must be agreed to by Owner.


 


(d)           Furnishing the Nikki Beach Club.  Owner shall, at its sole cost and expense,
furnish, equip and decorate the Nikki Beach Club in accordance with the Plans
and Specifications and the Construction Budget.


 


(e)            Financing for the Construction of Club Nikki.  Notwithstanding anything herein to the
contrary, Owner shall finance the full cost of constructing, furnishing,
equipping and decorating Club Nikki with debt (the “Club Nikki Construction
Loan”).


 


(f)            Property of Owner; Opening Date.  Owner and Operator acknowledge that all the
Furniture and Equipment and all other personal property located in the Nikki
Beach Club is and shall remain the exclusive property of Owner.  The parties shall cooperate and endeavor to
open the Nikki Beach Club no later than April 2011.


 


3.             Retention
of Operator; Duties.  Owner hereby engages Operator, and Operator
agrees to provide services, for (i) the planning and design of the Nikki
Beach Club, (ii) the Pre-Opening Services, and (iii) the operation
and management of the Nikki Beach Club for the account of, and on behalf of,
Owner.  Operator shall have, subject to
the provisions of this Agreement, decision-making authority in the day-to-day
operation, direction, management and supervision of the Nikki Beach Club in
consultation with Owner.  Operator agrees
to operate the Nikki Beach Club in accordance with the Standards and the Annual
Operations Budget.  Operator’s authority
and obligations shall consist of the following:


 


(a)           providing proper supervision of the Staff, and making
recommendations to Owner respecting the size of the Staff, and respecting the
compensation, promotion and/or discharge of members of the Staff;


 


(b)           creation of menus and the pricing of menu items (which
pricing shall be aspirational but accessible) and the setting of the dress
codes for the Nikki Beach Club, all


 


11

















 


of which shall be approved by Owner, acting in good
faith, prior to being implemented by Operator;


 


(c)           subject to Owner’s good faith approval, the entertainment
genre and selection of entertainment;


 


(d)           in conjunction with Owner, the maintenance and repair of
the Nikki Beach Club, and in furtherance of the foregoing, Operator shall
promptly notify Owner of any refurbishing or replacement of Furniture and
Equipment and Operating Supplies that are, in the reasonable opinion of
Operator, required to operate the Nikki Beach Club in accordance with this
Agreement, and Owner shall not unreasonably refuse to refurbish or replace such
Furniture and Equipment and Operating Supplies which are so required;


 


(e)           Operator shall advise Owner on an as-needed basis of any
alterations, additions or improvements to the Nikki Beach Club which Operator
reasonably believes are necessary in order to permit it to operate the Nikki
Beach Club in accordance with this Agreement; and Owner shall consider in good
faith such alterations, additions or improvements which are so recommended;


 


(f)            submit purchase orders to Owner for the purchase of such
food, beverage and flowers and other decorations as shall be necessary for the
operation of the Nikki Beach Club in accordance with this Agreement; provided,
that, notwithstanding the foregoing, in the event that there is a specific
brand of liquor or food item that Owner is unable to obtain for Operator, then
Operator may purchase the same for the Nikki Beach Club and be reimbursed for
the same by Owner at Operator’s actual, documented cost, and such cost shall be
included in the calculation of “Operating Expenses”;


 


(g)           obtain, to the extent necessary to be in the name of
Operator, and assist Owner in applying for and maintaining, to the extent
necessary to be in the name of Owner, all licenses and permits required in
connection with the ownership, management and operation of the Nikki Beach Club
and take all actions necessary to maintain such licenses and permits throughout
the Term, including, without limitation, making and filing all required
regulatory reports pertaining to the Nikki Beach Club; provided, however, that
each of Operator and Owner shall file such reports pertaining to itself and
provided further that any matters that impact on Owner’s gaming, liquor or
other licenses shall be governed by Owner;


 


(h)           take such actions as are in Operator’s reasonable judgment
necessary or proper to address any emergency which might arise; provided,
however, Operator shall, immediately after the occurrence of the emergency,
notify Owner of the nature of the emergency and the steps taken by Operator to
address it;


 


(i)            operate the Nikki Beach Club in compliance with the Clark
County Health District (“Health District”) codes, standards and/or rules relative
to the sanitary operation of restaurants. 
As a result of Health District inspections, the Health District issues
ratings of A (with A being the highest — restaurants with the least
violations), B, C, D and F (with F being the lowest) (each a “rating”).  Owner and Operator hereby agree that each
component


 


12

















 


of the Nikki Beach Club (i.e., Cafe Nikki, Club
Nikki and Nikki Beach) must each meet all of the Health District’s codes,
standards and/or rules and operate in the safest, most sanitary way
possible.  As a result, Owner and
Operator agree that an A rating is necessary for each component of the Nikki
Beach Club to be operating in accordance with this Agreement.  Therefore, if any component of the Nikki
Beach Club is downgraded below an A rating, Operator shall have seventy-two
(72) hours from the time of such downgrading to correct each violation to the
satisfaction of Owner and request the Health District to re-inspect the
applicable component of the Nikki Beach Club. 
Such request shall be addressed to the Health District and shall be in
writing, and Operator shall forthwith provide a copy of such request to
Owner.  If the Health District
re-inspects the applicable component of the Nikki Beach Club, but, following
such re-inspection, does not reinstate an A rating or if Operator fails to
correct each violation to the satisfaction of Owner, Owner shall have the
right, but not the obligation, to correct such violation; provided, however, if
any component of the Nikki Beach Club is downgraded below an A rating more than
twice during any consecutive six (6) month period (whether or not the
rating is in any such case reinstated to an A but excluding any downgrade which
is later rescinded by the Health District as opposed to the reinstatement of an
A rating), Operator shall be deemed to have caused a material breach of, and to
be in default under, this Agreement.  In
that event, Owner may, in its sole discretion, and in addition to any other
rights and remedies it may have hereunder, terminate this Agreement;


 


(j)            immediately notify Owner in writing each time that any
component of the Nikki Beach Club is inspected by, or Operator receives a
citation, notice of violation or citation, or inquiry, from the Nevada Industrial
Relations Division or the United States Department of Occupational Safety and
Health (each an “OSHA Enforcement Agency”).  In addition, Operator shall forthwith provide
to Owner copies of any and all correspondence, violations, citations, documents
or other information received from, sent to, or in connection with, the Nikki
Beach Club and an OSHA Enforcement Agency. 
In the event Operator is cited or notified by an OSHA Enforcement Agency
of a violation of any Law enforced by an OSHA Enforcement Agency including, but
not limited to, the Occupational Safety and Health Act, and without limiting
any other provision of this Agreement, Operator shall promptly (but in no event
later than the time allowed by the OSHA Enforcement Agency) assist Owner in
responding to the citation or violation in writing and assist in the correction
of the violation(s) in question to the satisfaction of the OSHA
Enforcement Agency.  All notices,
documentation and information to be provided by Operator to Owner pursuant to
this subsection shall be sent to Owner at the address set forth in Paragraph
31;


 


(k)           take all such actions to comply with the terms of all
Governing Documents applicable to the Hotel (as such terms are provided to
Operator);


 


(l)            take all such actions within Operator’s reasonable
control to comply with all Laws with respect to the operation of the Nikki
Beach Club or the Hotel, as applicable, including without limitation complying
with the provisions of Paragraph 44(c) hereof, and the terms of all
insurance policies applicable to the Nikki Beach Club or the Hotel, as
applicable; and


 


13

















 


(m)          carry out all other phases of promotion and publicity
relating to the Nikki Beach Club, subject to the prior consultation with Owner,
each of Owner and Operator acting in good faith.


 


Notwithstanding
the foregoing, Operator shall not without the prior written approval of Owner,
exercised in its sole and absolute discretion: 
(i) cause or permit the Nikki Beach Club to sell, offer to sell, or
deliver or assist others in selling, offering to sell or delivering, food or
beverage away from the Nikki Beach Club in satisfaction of orders received at
or away from the Nikki Beach Club including, without limitation, the catering
of any events at any location other than at the Nikki Beach Club or (ii) except
as may be permitted under Section 25 cause or permit the Nikki Beach Club
to sell, offer to sell or deliver any merchandise of any kind, whether or not
bearing the name of the Nikki Beach Club, and whether to be sold at the Nikki
Beach Club or away from the Nikki Beach Club. 
To the extent that Operator desires to sell retail merchandise within
the Hotel, it may only do so by entering into a lease for retail space at the
Hotel and not within the Premises.  If
Operator does desire to lease retail space at the Hotel during the Term, and
retail space is at that time available at the Hotel that would be conducive for
a retail outlet to be merchandised in the manner contemplated by Operator, in Owner’s
good faith judgment, then Operator and Owner shall enter into good faith
negotiations for a lease for retail space at the Hotel upon such terms and
conditions as may be agreed to by Owner and Operator, and including the terms
set forth on Exhibit  F. 
Nothing herein shall be construed as a right of first offer or a right
of first refusal to have any space at the Hotel.


 


4.             Restrictions Regarding the
Operation of the Nikki Beach Club.


 


(a)           Operator shall direct the operation of the Nikki Beach
Club and all its activities in accordance with this Agreement and the Annual
Operations Budget.


 


(b)           Operator shall (i) not charge Hotel guests for the
use of the pool during daylight hours and (ii) give priority access and/or
complimentary access to Hotel guests where a fee is charged for admission, at
Owner’s direction.


 


(c)           Subject to closure for repairs, inventory, property damage
or Force Majeure, and subject to adjustments to hours of operation as a result
of customer demand, Operator agrees to have the Nikki Beach Club open for
business during all days and hours as may be set by Owner in consultation with
Operator.


 


(d)           All admission fees, food and beverages offered on a
discounted or complimentary basis to Owner’s executives, employees, customers
or Hotel guests, as determined by Owner, shall be billed to Owner and included
in receipts for the purposes of calculating Gross Sales and Net Income subject
to the following discounts (for quarters prior to the fourth quarter of a
Fiscal Year, the amounts to be billed, for purposes of determining the discount
to be applied, shall be annualized):


 


	
   

  	
  Amount
  Billed Per Fiscal Year

  	
   

  	
  Applicable Discount from $1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $0
  - $500,000

  	
   

  	
  20

  	
  %

  	
   

  
	
   

  	
  $500,001
  - $750,000

  	
   

  	
  25

  	
  %

  	
   

  
	
   

  	
  Over $750,000

  	
   

  	
  30

  	
  %

  	
   

  



 


14

















 


(e)           Hotel guests shall be entitled to preferred access to the
Nikki Beach Club, at Owner’s direction.


 


(f)            All admission fees, food and beverages offered on a
discounted or complimentary basis to Operator’s executives, employees,  customers participating in any
Operator-sponsored club, membership or frequent guest program, or Hotel guests,
as determined by Operator, shall be billed to Operator and included in receipts
for the purposes of calculating Gross Sales and Net Income subject to the
following discounts (for quarters prior to the fourth quarter of a Fiscal Year,
the amounts to be billed, for purposes of determining the discount to be
applied, shall be annualized):


 


	
   

  	
  Amount Billed Per Fiscal Year

  	
   

  	
  Applicable
  Discount from $1

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $0
  - $500,000

  	
   

  	
  20

  	
  %

  	
   

  
	
   

  	
  $500,001
  - $750,000

  	
   

  	
  25

  	
  %

  	
   

  
	
   

  	
  Over $750,000

  	
   

  	
  30

  	
  %

  	
   

  



 


(g)           In order to assist Owner in anticipating its financial
obligations for the operation of the Nikki Beach Club, Operator has prepared
and delivered to Owner, for Owner’s approval, an annual operations forecast
budget setting forth a detailed, line-item estimate of the Gross Sales and
Operating Expenses, the Reserve Fund Contribution, and a specific marketing
plan for the Nikki Beach Club (the “Annual Operations Budget”).  A copy of the draft Annual Operations Budget
for the first Fiscal Year is attached as Exhibit G hereto.  Thereafter, Operator shall prepare and
deliver to Owner, for Owner’s approval, an Annual Operations Budget not less
than ninety (90) days prior to the commencement of each Fiscal Year.  Except with respect to the first Fiscal Year,
the preparation of the Annual Operations Budget shall be based on the actual
results of the prior year, as well as possible occurrences which Operator
believes may impact the marketing and/or operation of the Nikki Beach Club or
cause changes from the previous year’s results, reasonable predictions for the
future, and such other information and assumptions as shall be reasonable under
the circumstances.  If, at any time during
the first nine (9) months of a Fiscal Year, Operator becomes aware of any
event or fact that should cause it to reasonably believe that the Annual
Operations Budget for such Fiscal Year is no longer accurate in any material
respect, it shall promptly advise Owner and prepare and provide Owner with a
revised Annual Operations Budget for Owner’s approval.


 


(h)           Owner shall review the proposed Annual Operations Budget
and shall provide Operator with any objections to such proposed Annual
Operations Budget in writing, in reasonable detail, within thirty (30) days
after receipt of the proposed Annual Operations Budget from Operator.  Owner shall be deemed to have approved that
portion of any proposed Annual Operations Budget to which Owner has not
objected in writing within such time period. 
If Owner objects to any portion of the proposed Annual Operations
Budget, Owner and Operator shall meet and discuss such objections, and then
Operator shall submit written revisions to the proposed Annual Operations
Budget after such discussion.  Owner and
Operator shall use reasonable good faith efforts to reach an agreement on the
Annual Operations Budget prior to January 1 of the applicable Fiscal


 


15

















 


Year.  Under
no circumstance shall Owner ever be required to accept or approve an Annual
Operations Budget that reflects a loss.


 


(i)            Provided that the Annual Operations Budget is prepared in
good faith, Owner acknowledges that the Annual Operations Budget is for
informational and planning purposes and that Operator shall not be deemed to be
in breach of this Agreement or otherwise incur any liability to Owner for an
inaccurate budget (whether it was inaccurate at the time it was prepared or
became inaccurate as a result of the occurrence of subsequent events).


 


5.             Pre-Opening Services.


 


(a)           Operator shall submit for Owner’s review and consideration
the Pre-Opening Business Plan.  Owner and
Operator agree to act in accordance with the Pre-Opening Business Plan, as
modified in good faith by Owner.


 


(b)           Provided that the Pre-Opening Business Plan is prepared in
good faith, Owner acknowledges that the Pre-Opening Business Plan is for
informational and planning purposes and that Operator shall not be deemed to be
in breach of this Agreement or otherwise incur any liability to Owner for an
inaccurate budget therein (whether it was inaccurate at the time it was
prepared or became inaccurate as a result of the occurrence of subsequent
events).


 


6.             Compliance with Law; Governing
Documents.  Operator
shall operate the Nikki Beach Club and otherwise perform its obligations
hereunder in compliance with applicable Law and the Governing Documents. Owner
shall perform its obligations hereunder in compliance with applicable Law and
the Governing Documents.


 


7.             Standard of Care.  Operator shall, in fulfilling its duties and
obligations under this Agreement, act in a manner consistent with an
appropriate standard of care, efficiency, quality and diligence typically
exercised by first-class companies performing similar types of services and
consistent with the fiduciary relationship of trust and confidence between
Operator and Owner, which evidences such Operator’s good faith and fair dealing
and the application of its reasonable business judgment in the best interest of
the Nikki Beach Club and the Hotel, as applicable.


 


8.             Standards.  Operator shall at all times perform its
obligations under this Agreement, and operate the Nikki Beach Club, in
accordance with the Standards.  The
Standards may be amended from time to time only upon the written consent of
Owner, which may be given or withheld in Owner’s sole and absolute discretion.


 


9.             Staff.


 


(a)           All Staff shall be employees of Owner; provided, however,
that Payroll Expenses shall be an Operating Expense.


 


(b)           Operator and Owner shall jointly recruit and screen all
Staff necessary or advisable for the operation of the Nikki Beach Club, but
Owner shall have the sole power and authority to appoint and hire, and to
discipline, transfer, relocate, replace, terminate and


 


16

















 


dismiss any such Staff, in consultation with
Operator to the extent legally permissible. 
Operator shall train, and through its Dedicated Corporate Personnel,
supervise, instruct and direct all Staff on behalf of Owner.  All Staff will be required to meet Owner’s
and Operator’s respective standards, including but not limited to auditions,
pre-employment drug testing and background checks, and to comply with all
applicable Laws.  Owner agrees to
consider in good faith any and all reasonable requests from Operator respecting
the termination of any Staff unless such termination violates any applicable
Law or would constitute wrongful termination under any Law or otherwise result
in Owner being liable for damages.  Owner
shall terminate any Staff whose dismissal is required by any Governmental
Agency or who has violated the internal rules and regulations of Owner
applicable to Owner’s (or any of its Affiliates’) employees and the violation
of which requires termination, and Owner shall promptly terminate (or relieve
of duties relating to  the Nikki Beach
Club) any Staff as a result of material and repetitive complaints from Nikki
Beach Club guests which in Operator’s reasonable judgment, remain uncured.


 


(c)           Notwithstanding anything to
the contrary contained herein, Operator acknowledges that Owner is and/or may
become party to one or more collective bargaining agreements during the Term,
and Operator agrees to respect all requirements and limitations imposed upon
the employer under such collective bargaining agreements.  Owner shall have the sole and exclusive
authority to negotiate with any labor unions that are certified as or otherwise
recognized as exclusive bargaining representatives of the Staff.


 


10.          Dedicated Corporate Personnel.


 


(a)           Operator agrees that all Dedicated Corporate
Personnel shall be the most experienced personnel that Operator has from all
its locations.  Owner shall have the
right to approve the candidates selected by Operator as Dedicated Corporate
Personnel prior to their appointment or hiring and shall be entitled to approve
all expenses associated with the compensation of the Dedicated Corporate
Personnel, including, without limitation, gross salary, overtime expenses, social
security taxes, unemployment insurance and expenses associated with the
maintenance of employee benefit plans, if any, all of which approvals shall not
be unreasonably withheld.  All Dedicated
Corporate Personnel will be required to meet Owner’s and Operator’s respective
standards, including  but not limited to
auditions, pre-employment drug testing and background checks.  The individuals presently suggested by
Operator to fill the positions of the Dedicated Corporate Personnel are as set
forth on Exhibit B.  Operator
acknowledges that Owner has not yet had the opportunity to conduct the
necessary background checks on such Dedicated Corporate Personnel, and reserves
its right to object to any individual who does not pass such screening.  Operator may not terminate any Dedicated
Corporate Personnel without obtaining Owner’s prior approval, which approval
shall not be unreasonably withheld. 
Operator shall not have the right, without Owner’s prior written
approval, to allocate the services and time of any Dedicated Corporate
Personnel between the Nikki Beach Club and (i) other locations (including
locations under development) managed by Operator or its Affiliates, and/or (ii) local,
regional or central office(s); provided, however that notwithstanding the foregoing,
for those Dedicated Corporate Personnel whose full-time positions are seasonal,
such Dedicated Corporate Personnel may be transferred to other locations
managed by Operator or its Affiliates during the off-season.  Subject to any limitations imposed pursuant
to


 


17

















 


Section 44 hereof, Owner shall make four
offices available for use by Operator’s Dedicated Corporate Personnel.


 


(b)           All Dedicated Corporate Personnel shall be employees of
the Operator; provided, however that the salary and benefits expenses of the
Dedicated Corporate Personnel, including any statutory workers’ compensation
insurance that must be maintained by Operator pursuant to Paragraph 16(f) shall
be an Operating Expense and shall be reimbursed by Owner to Operator as set
forth in Paragraph 23(c) of this Agreement.


 


11.          Bank Accounts.  Owner shall establish and administer all bank
accounts for the Nikki Beach Club in the name of Owner and Owner shall have
exclusive control over all bank accounts. 
The bank accounts may include but are not limited to:  (a) account(s) for the purposes of
depositing all funds received in the operation of the Nikki Beach Club and
paying all Operating Expenses; (b) an interest-bearing account into which
the Reserve Fund Contributions shall be deposited; and (c) such other
accounts as Owner deems necessary or desirable. 
Dedicated Corporate Personnel shall have access to petty cash from the
Owner provided that such Dedicated Corporate Personnel submit appropriate
receipts and other related documentation.


 


12.          Financial Affairs.  Owner shall be responsible for funding the
operation of the Nikki Beach Club, including, without limitation, the payment
of all expenses of constructing, opening, operating, furnishing, supplying,
marketing, maintaining and repairing of the Nikki Beach Club, in accordance
with the provisions of this Agreement.


 


13.          No Partnership.  Nothing in this Agreement shall constitute or
be construed  to be or create a
partnership or joint venture between Owner and Operator, or be construed to be
or create a lease or sublease by Operator of the Nikki Beach Club.  Notwithstanding anything to the contrary
contained herein, Operator does not have any right, power or authority to
contract for any services or products on behalf of Owner, and Operator has no
right, power or authority to act in the name of Owner or to otherwise legally
bind or obligate Owner to any other party whatsoever.  All contracts that may be required to be
entered into in connection with the construction or operation of Nikki Beach
shall be in the name of Owner (or its Affiliates), and shall be entered into
directly by Owner (or its Affiliates).


 


14.          Statements.


 


(a)           Owner shall prepare and deliver to Operator the following
statements of operation, and Operator shall cooperate with and assist Owner as
may be reasonably necessary in the preparation of all such statements:


 


(1)           within thirty (30) days after the end of each month,
monthly unaudited operating statements for the Nikki Beach Club (the “Monthly
Statements”); and


 


(2)           within thirty (30) days after the end of each month, year
to date unaudited operating statements for the Nikki Beach Club (the “Year
to Date Statements”).


 


18














 


Each
such Monthly Statement and Year to Date Statement shall set forth the Gross
Sales and Net Income of the Nikki Beach Club, if any, for the applicable period
in such detail as is necessary to calculate the Management Fee payable to
Operator pursuant to Paragraph 23.


 


(b)           Operator shall have the right to examine all of the books
and records (including computer print-outs) for the Nikki Beach Club during
normal business hours upon reasonable prior written notice, at the Operator’s
sole cost and expense.  Operator shall
further have the right to have an audit (including a physical inventory)
conducted (upon seven (7) days’ prior written notice to Owner) on the
Final Statement within ninety (90) days of receipt of such statement, by an
independent auditor selected by Operator, in order to verify the amount and
computation of the Management Fee payable to Operator pursuant to Paragraph 23.


 


15.          Insurance to be maintained by Owner.


 


(a)           All Risk. 
During the Term of this Agreement, Owner shall provide, maintain and pay
for all risk property and casualty damage insurance on the Nikki Beach Club and
the contents thereof.  Proceeds received
as a result of claims made in respect of any such insurance shall be used for
the restoration of the property damaged (or as otherwise determined by the
mutual agreement of Operator and Owner) and Owner shall restore any property
damaged as promptly as practicable to substantially the same condition which
existed prior to such damage provided that the proceeds of insurance are sufficient
for such purpose; provided, further, that Owner need not restore the Nikki
Beach Club if the Nikki Beach Club is Substantially Destroyed.  In the event that the Nikki Beach Club is
Substantially Destroyed or that there are insufficient funds available for
necessary restoration, then Owner may elect to terminate this Agreement by
providing written notice thereof to Operator, in which event this Agreement
shall terminate thirty (30) days following such notice.  In the event Owner elects or is required to
restore the Nikki Beach Club, Owner shall submit to Operator for its review
Preliminary Plans and Specifications within ninety (90) days of the date of the
damage.  Operator shall promptly review
such Preliminary Plans and Specifications and submit to Owner any comments
thereon within fifteen (15) days after receipt thereof and Owner shall submit
to Operator revised Preliminary Plans and Specifications within thirty (30)
days after receiving such comments from Operator.  The revised Preliminary Plans and
Specifications shall contain such of Operator’s comments as Owner shall
approve; provided, however, with respect to those comments of Operator which
are consistent with restoring the Nikki Beach Club to the condition that exists
as of the Opening Date, Owner may not unreasonably withhold, condition or delay
its approval.  Such revised Preliminary
Plans and Specifications containing such revisions approved by Owner shall be
annexed hereto as Exhibit . 
In the event that such Preliminary Plans and Specifications are not
prepared within one hundred eighty (180) days after the date the Nikki Beach
Club has been damaged, either party, upon thirty (30) days’ written notice, may
terminate this Agreement.


 


(b)           Liability. 
During the term of this Agreement, Owner shall provide, maintain and pay
for, general public liability insurance, liquor law liability insurance and
fire legal liability insurance, for bodily injury, death or damage to persons
or property, in such amounts as are reasonably determined by Owner.  All insurance shall be provided by an 


 


19

















 


insurance company with a current A.M. Best
Company rating of A:VII or higher and all liability insurance shall provide
that Operator is named as additional insureds thereunder and all such insurance
shall further provide for at least thirty (30) days’ prior written notice to
Operator of the cancellation or material modification thereof.  Owner shall provide Operator with duplicate
copies of all insurance policies.


 


(c)           At all times while this Agreement is in force, Owner
shall, as an Operating Expense, carry and maintain insurance policies that
provide coverage for claims arising out of the operation of the Nikki Beach
Club of the following types and of not less than the following amounts in a
company or companies with a current A.M. Best Company rating of A:VII or
higher:


 


(1)           Commercial general liability insurance covering all
operations of the Nikki Beach Club (including products/completed operations and
personal injury) and covering all equipment used in the performance of any work
under this Agreement (whether owned, rented or borrowed) with combined single
limits of at least One Million Dollars ($1,000,000.00) per occurrence and a Two
Million Dollar ($2,000,000) general aggregate for property damage (including
that of Owner) and bodily injury (including death),


 


(2)           Auto liability in the amount of not less than One Million
Dollars ($1,000,000) combined single limit per accident.  The policy shall cover loss due to bodily
injury or death of any person, or property damage arising out of the ownership,
maintenance, operation or use of any motor vehicle whether owned, non-owned,
hired or leased,


 


(3)           Umbrella or excess liability insurance in an amount of not
less than Two Million Dollars ($2,000,000) per occurrence, and


 


(4)           Employment practices liability in the amount of not less
than One Million Dollars ($1,000,000).


 


(d)           All insurance policies required pursuant to subparagraph (c) above
shall name Operator, as an additional insured; include contractual liability
coverage for the indemnity provisions contained in this Agreement; and contain
a broad form property damage endorsement. 
The coverage under all such policies shall be primary without regard to
any insurance carried and maintained by Operator.  Operator is responsible for and required to
remedy all damage or loss to any property, including property of Owner, caused
in whole or in part by the Operator, Operator’s subcontractor or anyone
employed, directed or supervised by Operator, reasonable wear and tear excepted
and to the extent not covered by Owner’s insurance.


 


(e)           Owner shall also maintain statutory workers’ compensation
insurance in accordance with applicable Law and employers’ liability insurance,
with limits of at least One Million Dollars ($1,000,000.00) each accident or
illness covering all Staff.


 


16.          Insurance to be maintained by
Operator.


 


(a)           Commercial general liability insurance covering all
operations of the Nikki Beach Club (including products/completed operations and
personal injury) and covering all 


 


20

















 


equipment used in the performance of any work under
this Agreement (whether owned, rented or borrowed) with combined single limits
of at least One Million Dollars ($1,000,000.00) per occurrence and a Two
Million Dollar ($2,000,000) general aggregate for property damage (including
that of Operator) and bodily injury (including death),


 


(b)           Auto liability in the amount of not less than One Million
Dollars ($1,000,000) combined single limit per accident.  The policy shall cover loss due to bodily
injury or death of any person, or property damage arising out of the ownership,
maintenance, operation or use of any motor vehicle whether owned, non-owned,
hired or leased,


 


(c)           Umbrella or excess liability insurance in an amount of not
less than Five Million Dollars ($5,000,000) per occurrence, and


 


(d)           Employment practices liability in the amount of not less
than One Million Dollars ($1,000,000).


 


(e)           All insurance policies required pursuant to subparagraph (b) above
shall name Owner, as an additional insured; include contractual liability
coverage for the indemnity provisions contained in this Agreement; and contain
a broad form property damage endorsement. 
The coverage under all such policies shall be primary without regard to
any insurance carried and maintained by Owner. 
Owner is responsible for and required to remedy all damage or loss to
any property, including property of Operator, caused in whole or in part by the
Owner, Owner’s subcontractor or anyone employed, directed or supervised by
Owner, reasonable wear and tear excepted and to the extent not covered by
Operator’s insurance.


 


(f)            Operator shall also maintain statutory workers’
compensation insurance in accordance with applicable Law and employers’
liability insurance, with limits of at least One Million Dollars
($1,000,000.00) each accident or illness covering all Dedicated Corporate
Personnel.


 


21

















 


17.          No Broker’s or Finder’s Fees.  Owner covenants and represents to Operator
that Owner has not taken and will not, during the Term, take any action which
would cause Operator to have any obligation or liability to any Person for
finders’ fees, brokerage fees, agents’ commissions or like payments in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.  Operator covenants and represents to Owner
that Operator has not taken and will not, during the Term, take any action
which would cause Owner to have any obligation or liability to any Person for
finders’ fees, brokerage fees, agents’ commissions or like payments in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.


 


18.          Covenants and Representations of
Operator and Guarantor.  Operator and Guarantor, jointly and
severally, make the following covenants and representations to Owner, which
covenants and representations shall, unless otherwise stated herein, continue
to be true during the Term of this Agreement:


 


(a)           Operator and Guarantor have no reason to believe that
Operator, including specifically Operator’s Representative, will be unable to
assist in the concept and  design of the
Nikki Beach Club, or be unable to operate and manage the business of the Nikki
Beach Club as contemplated under this Agreement, including, without limitation,
no reason to believe that Operator will not receive all necessary approvals of
Government Agencies (to the extent required);


 


(b)           Operator and Guarantor agree that the reasonable
availability and services of Operator’s Representative are a material
inducement for Owner to enter into this Agreement;


 


(c)           Operator holds (or will hold prior to the Opening Date),
to the extent required under applicable Law, all necessary permits and licenses
to operate and manage the Nikki Beach Club in accordance with this Agreement;


 


(d)           Neither Operator, Guarantor nor any of their respective
Affiliates, nor the shareholders, trustees, beneficiaries, directors, officers,
employees or agents of any of the foregoing, (a) is in violation of any
Gaming Control Act, or otherwise have assets or interests that are subject to
restrictions under the Gaming Control Act, or (b) would cause Owner or any
of its Affiliates to be in violation of the Gaming Control Act, or subject any
of its assets or interests to any fines, penalties, sanction, confiscation or
similar liability or action under the Gaming Control Act;


 


(e)           Operator and Guarantor acknowledge and agree that Owner
may permit, in its reasonable discretion, other activities, including by way of
example, gaming or the provision of spa services, to take place at the Premises
(provided, that, with respect to spa services such services shall not require
dedicated space within the Premises that precludes Operator from simultaneously
providing its services) and Operator will not interfere with such other
activities; and


 


22

















 


(f)            Operator has the full right and authority to use the
Trade Names and Service Marks in connection with the operation of the Nikki
Beach Club free of any claim from any 
other person.


 


(g)           Operator and Guarantor shall, throughout the Term, protect
and defend the Trade Names and Service Marks, and operate their other
businesses so that the Trade Names and Service Marks do not become associated
generally with a level or quality of service or product that is inconsistent
with the Standards.


 


19.          Cooperation.  Owner and Operator agree to cooperate with
each other in matters related to this Agreement in order to carry out the terms
and transactions contemplated thereby.


 


20.          Liquor License; Compliance with
Liquor Laws  In addition
to Owner, Operator shall obtain and maintain throughout the Term all necessary
liquor licenses to authorize the sale of alcoholic beverages in the Nikki Beach
Club in accordance with applicable Law. 
Without limiting the foregoing, Operator shall take all necessary steps
to ensure that no liquor is served to minors in violation of Applicable Law,
and shall indemnify and hold Owner harmless from and against any and all
liability, loss, cost damage and/or expense, including without limitation
reasonable attorneys’ fees and costs, in the event that there is any violation
of liquor Laws.


 


21.          Trade Name.  Operator and Guarantor, jointly and
severally, covenant with and represent to Owner that:  (i) Operator has the right to use the
trade names “Nikki Beach Club,” “Nikki Beach,” “Cafe Nikki” and “Club Nikki”
(collectively, the “Trade Name”), and (ii) Operator has the right to use
all service marks and other intellectual property associated with the Trade
Name (“Service Marks”) in connection with the Nikki Beach Club.  Operator, at its sole cost and expense, shall
take all steps necessary to register and secure the Trade Name and Service
Marks and to defend the use of the Trade Name and Service Marks from use by
third parties.  Operator shall indemnify
and hold Owner harmless from any and all claims, damages and/or liability
arising from or relating to the use of the Trade Name and Service Marks,
including but not limited to all costs as might be incurred in the alteration
or changing of the Trade Name or Service Marks in any manner whatsoever.  Operator promptly shall notify Owner of any
unauthorized attempt to use the Trade Name or Service Marks, including any
colorable variation of the Trade Name or Service Marks, or any legal action
instituted against Operator with respect to any such rights.  Owner acknowledges the rights of Operator in
the Trade Name and Service Marks and agrees not to make any use of or acquire
or develop any rights in any of the Trade Name or Service Marks; provided,
however, the Operator hereby grants Owner a non-exclusive, non-transferable,
non-assignable, non-sublicensable royalty free license during the Term (and for
a period of six (6) months thereafter in the event of the expiration or
termination of this Agreement) to display and use the Trade Name and Service Marks
in all advertising, promotional materials, broadcasts, signs and slogans for
the Hotel and the Nikki Beach Club.  All
rights of Owner to have the Trade Name and Service Marks used in connection
with the Nikki Beach Club shall terminate immediately upon the expiration of
the royalty free license and Owner shall remove all exterior and interior
signage bearing any of the Trade Names, and cease using all Operating Supplies
bearing any of the Trade Names.  This
Paragraph 21 shall survive the expiration or termination of this
Agreement.  Owner acknowledges the rights
of Operator and its Affiliates in and to the Trade Names and Service Marks and
agrees that (a) Operator may use and grant to others the right to use any
Trade Names or Service Marks, except as expressly provided otherwise in this
Agreement; (b) the restrictions and limitations with respect to Owner’s
use of the 


 


23

















 


Trade
Names and Service Marks under this Agreement apply to all forms and formats, including
print, video, electronic and other media (including Identifiers), and all other
identifications and elements used in commerce; (c) all goodwill associated
with the Trade Names and Service Marks are the property of the Operator and its
Affiliates and shall inure directly and exclusively to the benefit of Operator
and its Affiliates.  Owner acknowledges
and agrees that no default by Operator under this Agreement, or the expiration
or termination of this Agreement, shall confer on Owner or any Person claiming
by or through Owner, any right or remedy to use any of the Trade Names or
Service Marks, in the Operation of the Property or otherwise.  Owner shall use the Trade Names and Service
Marks in a manner consistent in terms of quality and use with Operator’s use of
such Trade Names and Service Marks. 
Owner will provide to Operator samples of all uses of the Trade Names
and Service Marks for Operator’s approval, such approval not to be unreasonably
withheld and to be deemed given if Operator has not made reasonable objections
known within five (5) days following request for approval.


 


22.          Payments.  All payments required hereunder shall be by
check drawn on a bank with offices for the conduct of general banking business
in Las Vegas, Nevada or at the option of Owner, by electronic funds transfer
between banks in the United States of America.


 


23.          Management Fee; Reimbursement of
payroll expenses for Dedicated Corporate Personnel.


 


(a)           Owner agrees to pay, and Operator agrees to accept, as
full payment for all services hereunder, a management fee equal to: fifty
percent (50%) of Net Income minus fifty percent (50%) of the Reserve Fund
Contribution (the “Management Fee”). 
Notwithstanding anything herein to the contrary, until such time as the
Club Nikki Construction Loan (including all interest and fees related thereto)
has been fully repaid from the Net Income otherwise attributable to Club Nikki,
Operator shall not receive any distributions attributable to Club Nikki.


 


(b)           The Management Fee shall be calculated monthly and,
commencing with the month immediately following the month in which there is Net
Income, shall be paid by Owner to Operator based on the Net Income for the
previous month (subject to the repayment of the Club Nikki Construction Loan as
described in subsection (a) above) within thirty (30) days following the
generation by Owner of the Monthly Statement. 
Within ninety days (90) days following the end of each Fiscal Year,
Owner shall deliver to Operator an updated Year to Date Statement for the prior
Fiscal Year (the “Final Statement”) which shall set forth the Net Income
and the Management Fee based thereon.  In
the event the Final Statement reflects a Management Fee in excess of the
Management Fee actually paid during such prior fiscal year, Owner shall pay to
Operator within ten (10) days following the delivery of such Final
Statement, the amount of such difference, and in the event the Final Statement
reflects a Management Fee that is less than the Management Fee actually paid
during such prior fiscal year, Operator shall pay such difference to Owner
within ten (10) days following the receipt of such Final Statement, in
each case without interest.


 


24

















 


(c)           In addition to the Management Fee, Owner agrees to
reimburse Operator weekly for the salaries and benefits attributable to the
Dedicated Corporate Personnel, as more particularly set forth in Exhibit B



 


24.          Term.


 


(a)           The “Term” of this Agreement shall consist of an “Initial
Term” and the “Extension Term(s).” 
The “Initial Term” shall begin on the Effective Date and shall
continue until 11:59 p.m. (local time at the Nikki Beach Club) on the
tenth (10th) anniversary
of the Opening Date.  Thereafter, this
Agreement may be renewed on the same terms and conditions for each of two (2) successive
periods of five (5) years each (“Extension Term(s)”) to be
exercised upon the written notice of Owner, in its sole and absolute
discretion, at least ninety (90) days prior to the expiration of the Initial Term
or the then current Extension Term, as the case may be.  Whether or not this Agreement is terminated,
as between Owner and Operator, all Plans and Specifications shall be the sole
property of Owner throughout the Term and thereafter.


 


(b)           Termination of Agreement upon Demolition of
Improvements.  Owner shall have the
right to terminate this Agreement upon ninety (90) days’ prior written notice
to Operator, and without any further liability to Operator, if Owner elects, at
any time following the Effective Date, to demolish the Hotel.


 


(c)           Effects of Termination of Agreement.  Upon the expiration or termination of this
Agreement, Operator shall peacefully vacate and surrender the Premises to
Owner, and shall deliver to Owner any and all keys, locks and safe
combinations, reservation lists, ledgers, budgets, accounting books and
records, correspondence, memoranda, schedules, lists, contracts, agreements and
other documents as are reasonably necessary to permit continued and
uninterrupted operation of the Nikki Beach Club regardless of where such items
are located.  Operator shall cooperate in
all reasonable ways in the transition of the operation and management to Owner
or Owner’s new operator to effect an orderly and expeditious transition of
management functions, with as little hindrance to the operation of the Nikki
Beach Club as reasonably practicable. 
Within thirty (30) days following the expiration or termination of this
Agreement, Operator shall render a full accounting to Owner (including all
statements and reports in the forms herein required) for the final month ending
on the date of expiration or termination. 
Within thirty (30) days following the expiration or termination of this
Agreement, Operator shall cause to be prepared and delivered to Owner a Final
Statement for the final Fiscal Year, containing the reports and other items and
prepared on the same basis as under Paragraph 14(a).


 


25.          Restrictive Covenant.  Operator agrees that during the Term, neither
Operator nor Operator’s Representative or any Affiliate of Operator’s or of
Operator’s Representative will, without the consent of Owner, directly or
indirectly either (a) own, operate, develop, promote or consult with any
bar, restaurant, beach club, nightclub, hotel or other hospitality facility
located within the Territory, (b) be financially involved with any bar,
restaurant, beach club, nightclub, hotel or other hospitality facility located
within the Territory, (c) utilize the Trade Names or Service Marks within
the Territory, or (d) otherwise engage in the business of developing,
sponsoring or promoting parties. 
Ownership of less than five percent (5%) of the issued and outstanding
shares of 


 


25

















 


a
publicly held corporation or entity, whose shares or interests are publicly
traded, shall not be deemed a violation of this Paragraph 25.  Notwithstanding the foregoing, Operator and
its Affiliates shall not be prohibited from owning and operating one or more
retail stores within Clark County, Nevada so long as such retail store(s) have
therein a prominent display promoting the Nikki Beach Club (and any retail) at
the Hotel.


 


26.          Events of Default; Termination.


 


(a)           The following actions or events shall constitute an “Operator
Event of Default” under this Agreement:


 


(1)           the failure of Operator to maintain the quality of the
Trade Names and Services Marks (i.e., the deterioration of the brand) and such
failure continues for a period of thirty (30) days after notice thereof from
Owner to Operator specifying in detail the nature of such failure;


 


(2)           the failure of Operator to maintain the Standards at the
Nikki Beach Club and such failure continues for a period of thirty (30) days
after notice thereof from Owner to Operator specifying in detail the nature of
such failure;


 


(3)           the Net Income of the Nikki Beach Club does not, meet or
exceed Ten Million Dollars ($10,000,000) for any Fiscal Year, commencing in the
Fiscal Year 2012, subject to the Fiscal Year being adjusted to account for
unforeseen closures resulting from Force Majeure, such sum to be increased
annually by five percent (5%) of the prior year’s amount;


 


(4)           written notification from a Government Agency that leads
Owner (after affording Operator and Operator’s Representative notice thereof and
a reasonable opportunity to cure the condition which gave rise to such
notification if such condition is, in the reasonable opinion of Owner,
susceptible of cure within a reasonable period), to reasonably believe that
termination of this Agreement is necessary or advisable so that neither Owner,
its parent companies nor any Affiliate of either shall be or become in
violation of applicable Law or have any of its business licenses (including,
without limitation, those issued by any Gaming Regulator) curtailed,
restricted, suspended or revoked;


 


(5)           if Operator shall fail, in any material respect, in the
performance of or compliance with any of the material covenants, agreements,
terms or conditions contained in this Agreement and such failure continues for
a period of thirty (30) days after notice thereof from Owner to Operator
specifying in detail the nature of such failure;


 


(6)           conviction of Operator, or Operator’s Representative of
any felony, criminal fraud, criminal embezzlement or a crime involving dishonesty;


 


(7)           conviction of Operator, or Operator’s Representative of
embezzlement;


 


(8)           if Operator becomes the subject of a Bankruptcy; or


 


26

















 


(9)           if at any time during the Term, Operator is found unsuitable
to receive revenue from liquor sales by the applicable Government Agency
(provided that a finding of suitability is required under Applicable Law).


 


(b)           The following actions or events shall constitute an “Owner
Event of Default” under this Agreement:


 


1) Owner’s refusal to permit Operator to operate
Nikki Beach Club in accordance with the Standards and such refusal continues
for ninety (90) days after notice thereof from Operator to Owner, specifying in
detail such refusal and the reasonable steps necessary to correct the operation
and satisfy the Standards.


 


2) Owner’s failure to substantially complete the
master plan renovation that is anticipated to cost approximately $150 million,
and to maintain the property and service levels that are established after the
renovation is complete, and such failure continues for (90) days after notice
thereof from Operator to Owner specifying in detail such failure and the
reasonable steps necessary to restore such service levels;


 


3) if Owner falls out of compliance with the build
out schedule attached hereto as Exhibit H, as such dates are
adjusted for Force Majeure (as specified in Paragraph 46) or any delay caused
by Operator, in which case the dates set forth above shall be extended by a
period of time equal to the number of days attributable to such delay; or


 


4) if Owner shall fail to provide funding for agreed
upon expenses and such failure continues for a period of thirty (30) days after
notice thereof from Operator to Owner specifying in detail the nature of such
failure.


 


(c)           If an Operator Event of Default occurs, Owner shall have
the right to exercise against Operator any rights and remedies available to
Owner at law or in equity.  In addition,
Owner shall have the right to terminate this Agreement by reason of the
occurrence of an Operator Event of Default, in which event Operator shall cease
performing management functions hereunder and comply with the provisions of
Paragraph 24(c)hereunder.


 


(d)           If an Owner Event of Default occurs, Operator shall have
the right to exercise against Owner any rights and remedies available to
Operator at law or in equity; provided, however, that with respect to Paragraph
26(b) (1) or (2), Operator’s sole right and remedy shall be to
terminate this Agreement.


 


(e)           If termination of this Agreement is an available remedy,
such remedy may be exercised by the non-defaulting party only by irrevocable
and unconditional notice to the defaulting party, in which case the termination
shall be effective as of the date specified in the notice of termination, which
in the case of termination by Operator shall not be less than sixty (60) days
after the date such notice is received; provided, that upon termination by
Operator, Owner, may, by a notice sent within thirty (30) days of receipt of such
notice of 


 


27

















 


termination, elect to change the effective date of
such termination to a date that is forty-five (45) days after the date of the
notice delivered by Operator.


 


(f)            In the event that Owner terminates this Agreement
pursuant to the provisions of this Paragraph 26, upon payment by Owner of all
sums due to Operator for the period prior to the termination of this Agreement,
Owner shall be released from all liability to Operator thereafter arising under
this Agreement, except for the liability, if any, under Paragraph 27(b) below,
which provision shall survive such termination for the respective periods set
forth therein.


 


(g)           In the event that Operator terminates this Agreement
pursuant to the provisions of this Paragraph 26, upon payment by Operator of
all sums due to Owner for the period prior to the termination of this
Agreement, Operator shall be released from all liability to Owner thereafter
arising under this Agreement, except for the liability, if any, under
Paragraphs 26, and 27(a), which provisions shall survive such termination for
the respective periods set forth therein.


 


(h)           The provisions of this Paragraph 26 shall survive the
termination of this Agreement.


 


27.          Indemnity.


 


(a)           Operator hereby covenants and agrees to indemnify, save,
and defend, at Operator’s sole cost and expense, and hold harmless, Owner,
Owner’s Affiliates, and the officers, directors, agents, employees, legal
representatives and shareholders of Owner and Owner’s Affiliates and the
successors and assigns of each of the foregoing (all of such Persons being
collectively referred to herein as the “Owner Indemnified Person(s)” and
each such reference to such term shall refer jointly and severally to each such
Person) from and against the full amount of any and all Losses, which may be
asserted against any Owner Indemnified Person, arising from, in respect of, as
a consequence of, or in connection with any of the following:  (A) the management, operation or
maintenance of the Nikki Beach Club to the extent caused by the negligent act,
intentional misconduct or fraud of Operator or any Person acting under the
control or direction of Operator in performing such acts; and (B) any
breach or nonfulfillment, in any material respect, of the material
representations, warranties, covenants or agreements made by Operator in this
Agreement.


 


(b)           Owner, at Operator’s expense if and to the extent not
covered by insurance or if Operator does not undertake the defense of such
action, suit or proceeding in a timely manner, may defend such action, suit or
proceeding or cause the same to be defended by counsel designated by Owner,
subject to the reasonable approval of Operator, which approval shall not be
unreasonably withheld, conditioned or delayed. Subject to subsection (c) hereof,
Operator’s duty to indemnify Owner and Owner’s Affiliates shall survive the
termination of this Agreement and shall apply to any event or occurrence
arising before or after the execution or termination, as the case may be, of
this Agreement.


 


28

















 


(c)           Owner hereby covenants and agrees to indemnify, save, and
defend, at Owner’s sole cost and expense, and hold harmless, Operator and the
officers, directors, agents, employees, legal representatives and shareholders
of Operator and the successors and assigns of each of the foregoing (all of
such Persons being collectively referred to herein as the “Operator
Indemnified Person(s)” and each such reference to such term shall refer
jointly and severally to each such Person) from and against the full amount of
any and all Losses, which may be asserted against any Operator Indemnified
Person, arising from, in respect of, as a consequence of, or in connection with
any breach or nonfulfillment, in any material respect, of the material
representations, warranties, covenants or agreements made by Owner in this
Agreement.


 


(d)           Operator, at Owner’s expense if and to the extent not
covered by insurance  if Owner does not
undertake the defense of such action, suit or proceeding in a timely manner,
may defend such action, suit or proceeding or cause the same to be defended by
counsel designated by Operator, subject to the reasonable approval of Owner,
which approval shall not be unreasonably withheld, conditioned or delayed.  Subject to subsection (c) hereof, Owner’s
duty to indemnify Operator and Operator’s Affiliates shall survive the
termination of this Agreement and shall apply to any event or occurrence
arising before or after the execution or termination, as the case may be, of
this Agreement.


 


(e)           The provisions of this Paragraph 27 shall survive the
termination of this Agreement for the applicable statute of limitations for
which a claim may be made against the Owner or Operator, as applicable, except
that with respect to any claim asserted under this Paragraph 27 within such
period, the provisions of this Paragraph 27 shall survive until such claim is
finally resolved.


 


28.          Confidentiality.  The parties acknowledge that they will provide
certain Confidential Information to the other in connection with the operation
of the Nikki Beach Club, and that such Confidential Information is proprietary,
and includes trade secrets.  Accordingly,
during the Term and thereafter: (a) neither party shall use the
Confidential Information of the other party in any other business or activity,
and each party acknowledges that such use would be an unfair method of
competition; (b) each party shall maintain the confidentiality of, and
shall not disclose to any third Person (including the media), any Confidential
Information or the terms of this Agreement, except to its Authorized
Recipients, but only on a “need to know” basis and only during the Term; (c) except
as authorized by a party in writing, neither party shall make copies of any
portion of the Confidential Information disclosed to such party in written,
electronic or other form; and (d) each party shall make every effort to
ensure that none of its Authorized Recipients uses, discloses or copies any Confidential
Information or discloses any terms of this Agreement.  Notwithstanding the foregoing, the
restrictions on the use and disclosure of Confidential Information shall not
apply to information or techniques which are or become generally known in the industry
(other than through disclosure by the other party), or to the extent such
disclosure is required under applicable Laws. 
Each party acknowledges that the disclosure or unauthorized use of
information in violation of this Agreement will cause irreparable injury to the
other party and/or its Affiliates, for which monetary damages would not provide
an adequate remedy.  This Paragraph shall
survive the expiration or termination of this Agreement.


 


29














 


29.          Consent.  Except as otherwise expressly provided
herein, whenever either party has called upon the other to execute and deliver
a consent or approval in accordance with the terms of this Agreement, such
consent or approval shall be in writing. 
In the event that either party refuses to give its consent or approval
to any request by the other, such refusing party shall indicate by notice to
the other the reason for such refusal and the actions, if any, required to be
taken by the other party which the refusing party deems necessary to enable it
to grant such consent or approval.


 


30.          Binding Effect; Assignment; No
Third Party Beneficiaries.


 


(a)           This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that this Agreement shall not be assigned or subcontracted by either
party without the prior consent of the other and in the case of Operator’s
desire to assign this Agreement, the granting or withholding of the case by
Owner shall be within its sole and absolute discretion; and provided further
that no assignment of this Agreement shall be effective unless and until the
assignee has agreed, in writing, to be bound by all of the terms and conditions
hereof.  No assignment shall release the
assignor from its obligations under this Agreement and the assignor shall
remain liable for the performance of this Agreement by its assignee or any
subsequent assignee.  Notwithstanding the
foregoing, (i) Owner shall assign this Agreement to any Affiliate or to
any purchaser or other acquirer of the Hotel, and (ii) Operator may assign
this Agreement to any Affiliate provided that Operator provides to Owner a
written acknowledgement  and consent to
such assignment from Guarantor whereby Guarantor recognizes the continuing
effectiveness of its Guaranty notwithstanding any such assignment.


 


(b)           Except for the provisions of Paragraph 27 relating to
indemnified parties and Paragraph 45 relating to the Guarantor, nothing
contained in this Agreement is intended to or shall:  (i) confer any benefit or rights to, or (ii) create
any claim in favor of, or (iii) obligate either Owner, Operator or
Guarantor to, any Person who is not a party to this Agreement.  Unless specifically provided for and so
designated in this Agreement, there are no third-party beneficiaries with
respect to the terms hereof.


 


31.          Notices.  Notices and other communications required or
permitted to be given hereunder shall be in writing and shall be delivered
personally, or by recognized overnight courier or by certified or registered
mail, postage prepaid, return receipt requested, or by facsimile, addressed as
follows, or if notice of a different address has been given, to such different
address:


 


	
  To
  Owner:

  	
  TROPICANA
  LAS VEGAS, INC.

  
	
   

  	
  Attention:

  	
  Joanne
  M. Beckett

  	
   

  
	
   

  	
  Telephone:

  	
  (702)
  739-3530

  	
   

  
	
   

  	
  Telecopier:

  	
  (702)
  739-2584

  	
   

  
	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  
	
   

  	
  Telecopier:

  	
   

  	
   

  



 


30

















 


	
  To
  Operator:

  	
  PENROD
  MANAGEMENT GROUP, INC.

  
	
   

  	
  Attention:

  	
  L.H.Steven
  Savola

  	
   

  
	
   

  	
  Telephone:

  	
  (786)
  515-1136

  	
   

  
	
   

  	
  Telecopier:

  	
   

  	
   

  
	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  
	
   

  	
  Telecopier:

  	
   

  	
   

  



 


All
notices personally delivered or sent by overnight courier shall be deemed
received on the date of delivery. 
Notices sent by facsimile transmission shall be deemed received by the
addressee upon the transmitter’s receipt of acknowledgement of receipt from the
offices of such addressee provided that a properly addressed hard copy is
deposited in the mail at a U.S. post office with sufficient postage within
forty-eight (48) hours of transmission. 
All notices forwarded by registered or certified mail shall be deemed
received on a date five (5) days immediately following date of deposit in
the mail.  Notwithstanding anything to
the contrary herein, the return receipt indicating the date upon which all
notices were received shall be prima facie evidence that such notices were
received on the date on the return receipt.


 


32.          Entire Agreement.  This Agreement, including the Exhibits
referred to herein, constitutes the entire agreement between the parties hereto
relating to the subject matter hereof and supersedes all prior agreements and
understandings, written or oral, among the parties relating to this subject matter.  This Agreement is to be interpreted and
construed solely on the basis of those terms and provisions as are contained in
the final form and format of this Agreement, as executed and delivered by the
parties hereto; it being understood that this Agreement in such final form and
format also supersedes all prior drafts or earlier versions of this Agreement,
and any notes or memoranda concerning or relating to this Agreement, and that
no assumptions, inferences or presumptions shall be drawn or derived from or
may be predicated upon any changes, omissions, deletions or additions from or
to any prior drafts or earlier versions of this Agreement and no warranty,
representation, promise, inducement or statement of intention relating to the
transaction contemplated hereby has been made by any party or related Person
that is not set forth in this Agreement and none is relied upon.


 


33.          Venue of Litigation; Construction
of Agreement.  The parties
consent to the exclusive jurisdiction of the Federal and state courts located
in Clark County, Nevada over any action brought to enforce or interpret this
Agreement or any Exhibit, instrument or document delivered pursuant to this
Agreement.  The prevailing party in any
litigation shall be entitled, in addition to any other relief granted by a
court, to reasonable attorneys’ fees and costs of litigation.  Should any provision of this Agreement or any
Exhibit, instrument or document delivered pursuant to this Agreement require
judicial interpretation, it is agreed that the court interpreting or
considering such provision shall not apply the presumption that the terms
hereof shall be more strictly construed against a party by reason of the rule or
conclusion that a document should be construed more strictly against the party who
itself or through its agent prepared the same. 
It is agreed and stipulated that all parties hereto have participated
equally in the preparation of this Agreement and that legal counsel was
consulted by each party before the execution of this Agreement.  Titles to Paragraphs are 


 


31

















 


inserted
solely for convenience and shall not be utilized in interpreting this
Agreement.  In this Agreement, whenever
the context so requires, the masculine gender includes the feminine and/or
neuter, the singular number includes the plural and vice versa.  The captions preceding the text of Paragraphs
are included only for convenience of reference and shall be disregarded in the
construction and interpretation of this Agreement.  The terms “hereby,” “herein,” “hereof,” “hereto”
and “hereunder” refer to this Agreement.


 


34.          Legal and Professional Fees.  Owner and Operator shall each pay its own
legal, accounting and professional expenses incurred in connection with
entering into this Agreement.


 


35.          Press Release.  Owner may from time to time be required, or
otherwise elect, to issue press releases in connection with the transactions
contemplated hereby.  Owner agrees to
consult with Operator with respect to any press release related to the Nikki
Beach Club or the transactions contemplated hereby prior to its release.  Operator agrees to consult with Owner with
respect to any press release regarding the Nikki Beach Club or the transactions
contemplated hereby prior to its release.


 


36.          Amendment of Agreement.  This Agreement may be amended, superseded or
canceled, and any of the terms hereof may be waived, only by a written
agreement signed by both parties hereto and specifically referring to this
Agreement and that specifically states that it amends, supersedes or cancels
this Agreement or waives any of the terms hereof, executed by all parties
hereto (or, in the case of a waiver, by the party waiving compliance).  Failure of any party to insist upon strict
observance of or compliance with any of the terms hereof in one or more
instances shall not be deemed to be a waiver of its rights to insist upon such
observance or compliance in the future, or upon observance of, or compliance
with other terms hereof.


 


37.          Invalidity of Provisions.  In case of any one or more of the provisions
contained in this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby and the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute for such invalid and unenforceable provision in light of
the tenor of this Agreement, and, upon so agreeing, shall incorporate such substitute
provision in this Agreement. 
Notwithstanding the foregoing, if the courts of any one or more
jurisdictions shall hold all or any part of the provisions of Paragraph 25 of
this Agreement unenforceable by reason of the breadth or scope thereof or otherwise,
it is the intention of the parties that such determination shall not bar or in
any way affect their right to relief in the courts of any other jurisdictions
as to failure to observe such provisions in such other jurisdiction, the above
provisions as they relate to each jurisdiction being, for this purpose,
severable into diverse and independent provisions.  If any of the provisions contained in
Paragraph 25 of this Agreement is held to be unenforceable because of the
duration of such provision or the geographical area or the scope of business
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration, geographical area and scope of
business covered by such provision and in its reduced form said provision shall
then be enforceable.


 


38.          Periods
of Time.  Whenever
any determination is to be made or action is to be taken on a date specified in
this Agreement, if such date falls on a day that is not a Business Day, then
that date will be extended to the next day which is a Business Day.


 


32

















 


39.          Mortgage and Subordination.  Owner shall have the absolute and
unrestricted right from time to time in its sole and absolute discretion to
encumber all of the assets that comprise Nikki Beach Club or the Hotel or any
part thereof, and to assign all of Owner’s right, title and interest in and to
the Nikki Beach Club or the Hotel or any part thereof as security for any
mortgage and/or financing instrument. 
Operator agrees that this Agreement shall in all respects be and is
hereby made subordinate and inferior to the liens, security interest and/or
terms of any such mortgage and to the promissory note (or other evidence of
repayment obligation) and other indebtedness now secured or hereafter to be
secured thereby and to all other instruments evidencing or securing or to
evidence or secure said indebtedness, and all amendments, modifications,
supplements, consolidations, extensions and revisions of such note and other
instruments.  In furtherance of the
foregoing, Operator shall, within ten (10) days after receipt of written
notice from Owner or any mortgagee and/or lender of Owner, execute, acknowledge
and deliver any and all documents (including, without limitation, a
subordination agreement and/or an estoppels certificate, allowing any such
mortgagee and/or lender to terminate Operator’s duties and obligations under
this Agreement upon foreclosure) requested by Owner and/or any mortgagee and/or
lender under any financing instrument that subordinates or evidences the
subordination of this Agreement and Operator’s rights thereunder to any such
mortgage and/or financing instrument.


 


40.          Estoppel.  Operator agrees to furnish to Owner and any
mortgagee of Owner, from time to time no later than ten (10) days after
written request therefore, an estoppel certificate certifying to Owner and any
such mortgagee, to the extent true, (a) that this Agreement is in full
force and effect; (b) that all amounts due and owing under this Agreement
or otherwise have been paid in full through the last scheduled date of payment;
(c) that no modifications or amendments of this Agreement have been made,
except as may be disclosed as an attachment to the estoppel certificate or this
Agreement; (d) that no default or event of default has occurred or is
continuing under this Agreement; and (e) such other matters as may be
reasonably requested or are by their terms considered to be a typical market
request in such context.


 


41.          Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.


 


42.          Applicable Law.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Nevada,
excluding the conflict-of-laws provisions thereof.


 


43.          Survival.  The covenants contained in this Agreement
which, by their terms, require their performance after the expiration or
termination of this Agreement shall be enforceable notwithstanding the
expiration or other termination of this Agreement.


 


44.          Gaming
and Regulatory Compliance


 


(a)           Privileged License. 
Operator acknowledges that Owner, its parent company, 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 Owner, Operator, its
principals, agents, employees, contractors and Affiliates (the “Operator Group”),
shall obtain any license, qualification, clearance or the like which shall be 


 


33

















 


requested or required of any of them by Owner or any
regulatory authority having jurisdiction over Owner or any parent company,
subsidiary or Affiliate of Owner.  If the
Operator Group fails to satisfy such requirement or if Owner or any parent
company, subsidiary or Affiliate of Owner is directed to cease doing business
with any member of the Operator Group, or if Owner shall determine in good
faith, in Owner’s reasonable judgment, that any member of the Operator Group (a) is
or might be engaged in, or is about to be engaged in, any activity or
activities, or (b) was or is involved in any relationship, either of which
could or does jeopardize Owner’s business or licenses, or those of a parent
company, subsidiary or Affiliate, or if any such license is threatened to be,
or is, denied, curtailed, subject to disciplinary measures, subject to
disciplinary investigation, suspended or revoked, and Operator does not cause
said objectionable item to be corrected or objectionable person to be removed
from the Operator Group within fifteen (15) days from Owner’s written notice or
otherwise does not resolve said issues to the satisfaction of any such
regulatory authorities on or before any deadline set by such regulatory
authority, then following such notice or deadline, and in addition to any other
rights set forth in Section 26 of this Agreement, this Agreement may be
immediately terminated by Owner and Owner shall thereafter have no liability to
Operator or any member of the Operator Group for any loss, costs, expense, loss
of anticipated profits, direct damages, indirect damages, consequential
damages, punitive damages, or other damages or liability of any nature
whatsoever whether based on contract, tort or any other theories of liability.


 


(b)           Regulatory Compliance Programs.  Operator and each of its directors, officers
and equity holders, and any Affiliates thereof, shall comply with the
regulatory compliance programs of Owner and its Affiliates.  Upon any finding by Owner or any of its
Affiliates of the unsuitability based on regulatory compliance issues of any of
Operator’s directors, officers, or equity holders, Operator shall immediately
terminate its relationship with such unsuitable person.  If Operator timely terminates any such
relationship, then Owner shall not terminate this Agreement pursuant to Section 44(a) above.  During the Term, Operator shall use its best
efforts to promptly comply with all requests for information, documentation and
assurances from Owner or any of its Affiliates relating to matters of
compliance with laws and if Operator fails to do so, after written notice and a
reasonable time to comply, Owner shall have the immediate right to terminate
this Agreement and Owner shall thereafter have no liability to Operator or any
member of the Operator Group for any loss, costs, expense, loss of anticipated
profits, direct damages, indirect damages, consequential damages, punitive
damages, or other damages or liability of any nature whatsoever whether based
on contract, tort or any other theories of liability.


 


(c)           Reporting. 
Operator shall use Operator’s best efforts to comply with all Laws.  Upon written notice to Operator of any
suspected violation of any Laws occurring at Operator’s operations or flowing
from Operator’s operations, Operator shall investigate and provide Owner with a
written report regarding whether the suspected violations occurred, and if so
what actions Operator has taken to remedy the violation and what actions
Operator has taken to prevent future violations.


 


(d)           Operating Controls. 
In connection with Owner’s privileged license with the State of Nevada,
Owner is committed to ensure that Owner’s actions, and those of Operator and
their respective guests and invitees do not act as a detriment to the
development of 


 


34

















 


gaming industry or reflect discredit upon Owner, the
State of Nevada or the gaming industry in general. Accordingly, and
notwithstanding anything contained in this Agreement to the contrary and in
addition to all other obligations of Operator in this Agreement, Owner
specifically requires of Operator as follows:


 


(1)           Operator shall draft, institute and enforce an operational
policy which shall ensure Operator conducts its business in a lawful manner
appropriate for a first class operation and consistent with the regulatory
compliance programs of Owner to include, without limitation, implementation of
a “zero tolerance” policy and Operator shall use Operator’s best efforts to
address and prevent: (i) over consumption of alcoholic beverages; (ii) underage
patronage or underage alcoholic beverage consumption;  (iii) possession, use or sale of illegal
substances; (iv) prostitution; (v) assaults by Operator employees,
guests or invitees either within the Premises, as well as (vi) to address
and prevent improper cash handling or reporting activities by Dedicated
Corporate Personnel.  Operator shall
submit such operational policy to Owner for Owner’s review and approval within
three (3) days of any request by Owner.


 


(2)           In addition to other records requirements set forth in
this Agreement, Operator shall keep accurate books and records with respect to
compliance with all Laws relative to, and otherwise implement those controls
appropriate for, the operations of Operator’s businesses and the employment of
the Dedicated Corporate Personnel including, without limitation, payroll
records, tip reporting, pooling and distribution records, register bank
reconciliations, TAM card compliance and violations of its operational policy.


 


(3)           Operator shall coordinate all aspects of its operations
with Owner management and staff to ensure compliance with Owner’s regulatory
compliance programs to include, without limitation, coordination of Operator’s
security program with Owner’s security program (including the use of Las Vegas
Metropolitan Police) for implementing appropriate handling of guests and
invitees within the Premises and in Premises transition areas into the Hotel.


 


(4)           In furtherance of the foregoing, Owner specifically
reserves the following rights (but not the obligation), that may be exercised
by Owner or Owner’s agents, at all times and without notice, to:


 


(i)                                     enter upon the
Premises to inspect Operator’s operations; and


 


(ii)                                  enter upon the
Premises to inspect Operator’s books, records and any other documentation of
any kind or nature whatsoever; and


 


(iii)                               interview any
Operator employee, guest or invitee deemed necessary by Owner in Owner’s
discretion to ensure compliance with this Section or any other operational
obligations of Operator under this Agreement or to ensure compliance with all
federal, state, county and city laws, 


 


35

















 


ordinances and regulations relative to operations of Operator’s
businesses and the employment of the Dedicated Corporate Personnel; and


 


(iv)                              at Operator’
cost, to post Owner’s employees or other designees (which may, at Owner’s
option, include Owner requiring Operator to post Las Vegas Metropolitan Police
Officers) within the Premises in such amounts and in such locations as Owner
shall determine to ensure compliance with this Section 44 or any other
operational obligations of Operator under this Agreement or to otherwise ensure
compliance with all Laws relative the operations of Operator’s businesses and
the employment of the Dedicated Corporate Personnel; and


 


(v)                                 at Operator’s
cost, and in addition to the training set forth in other sections of this
Agreement, require Operator to attend and complete (including Operator’s
employees, agents and servants) Owner directed training programs concerning the
obligations of this Section 44.


 


(e)           Failure for Operator to permit the immediate inspections
set forth in this Section 44 shall be a material breach of this Agreement
and may subject the Agreement to immediate termination upon Owner’s notice and
Owner shall have no liability to Operator or any member of the Operator Group
for any loss, costs, expense, loss of anticipated profits, direct damages,
indirect damages, consequential damages, punitive damages, or other damages or
liability of any nature whatsoever whether based on contract, tort or any other
theories of liability.


 


45.          Guaranty.


 


(a)           Guarantor hereby irrevocably and unconditionally
guarantees to Owner and its successors and assigns the payment and performance
of any and all obligations, performances, indemnities, liabilities and
undertakings as and when the same shall be required to be performed, discharged
or become due or payable by or on behalf of Operator or any Affiliate of
Operator in accordance with the terms of this Agreement (collectively, the “Guaranteed
Obligations”) to the end and intent that Guarantor shall be liable to Owner
at all times and to the same extent and tenor as Operator hereunder for
the  payment and performance of any and
all obligations, performances, indemnities, liabilities and undertakings.  In addition, Guarantor agrees to be bound by
the provisions set forth in Paragraph 25. 
No single claim or cause of action with respect to the Guaranteed
Obligations shall satisfy or release Guarantor from the Guaranteed Obligations,
and this guaranty shall continue in full force and effect until completion of
Operator’s obligations. Guarantor and Owner acknowledge and agree that this
guaranty constitutes a material and continuing inducement of Owner to enter
into this Agreement and Guarantor and Owner further agree that the provisions
of this Paragraph 45 are subject to the other rights and 


 


36

















 


remedies of Owner and the Operator pursuant to the
provisions of this Agreement. 
Notwithstanding anything herein to the contrary, this guaranty shall
terminate upon the satisfaction of all obligations of Operator or any Affiliate
of Operator.  In addition, this guaranty
may be assigned by Guarantor in connection with a sale or transfer of all or
substantially all the assets of Guarantor; provided that such assignee has
sufficient net worth to fulfill its obligations under this Agreement in its
capacity as Guarantor.


 


(b)           The guaranty set forth in this Paragraph 45 is a guaranty
of payment and performance and not of collection, is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future,
including Guaranteed Obligations arising or accruing after Bankruptcy of
Guarantor.  The liability of Guarantor
under this Paragraph 45 shall be direct and immediate and not conditional or contingent
on the pursuit of any remedies against Operator or any other person or
entity.  If there is a failure in the
payment or performance of the Guaranteed Obligations, Owner may enforce its
rights, powers and remedies hereunder, in any order, without demand or notice
of any kind, and without exercising any rights or remedies against Operator or
any other person or entity, and all such rights, powers and remedies available
to Owner shall be nonexclusive and cumulative of all other available rights, powers
and remedies until all Guaranteed Obligations are satisfied.  Guarantor waives and releases any right of
subrogation against Operator or any other person or entity, and waives any
rights to enforce any remedy which Guarantor may have against Operator.  This Paragraph 45 shall continue to be
effective or shall automatically be revived, reinstated, and restored, as the
case may be, if at any time any payment or performance of any Guaranteed
Obligations is avoided, rescinded or rendered ineffective or must otherwise be
paid, returned or restored by Owner or any other person pursuant to state or
federal law, in connection with or as the result of the Bankruptcy of Guarantor
or Operator, all as though such payment or performance had not occurred or been
tendered or made, as the case may be. 
Guarantor shall have no authority to revoke the guaranty pursuant to
this Paragraph45, but if any such revocation shall be deemed to have occurred
by operation of law or otherwise, the provisions of this Paragraph 45 shall
continue to apply notwithstanding such revocation.


 


(c)           The obligations of Guarantor pursuant to the guaranty in
this Paragraph 45 are independent of the obligations of Operator or any other
person.  Owner may bring action against
Guarantor without bringing action against Operator or any other person and
otherwise independently of any other right, power or remedy (each, a “Remedy”)
that may be available to Owner at any time. 
Guarantor waives any right to require Owner at any time to proceed
against Operator or any other person, or otherwise enforce, proceed against or
pursue any other Remedy in Owner’s power.


 


(d)           Guarantor waives any defense to the enforcement of the
guaranty in this Paragraph 45 arising by reason of:   (i) any present or future Law affecting
any Remedy of the Owner; (ii) any discharge or releases of any other
guarantor or any impairment or suspension of any Remedy of Owner, whether
resulting from any act or omission of Owner or any other person or by operation
of law or otherwise; (iii) the lack of authority or any Bankruptcy of
Operator or any disability or other defense of Operator; (iv) any other
action by Owner, whether authorized by this Paragraph 45 or otherwise, or any
omission by Owner or other failure of Owner to pursue, or any delay in
pursuing, any other Remedy in 


 


37

















 


Owner’s power; (v) all benefits of any statute
of limitations affecting Guarantor’s liability under or the enforcement of the
guaranty in this Paragraph 45; (vi) all setoffs and counterclaims; (vii) 
promptness, diligence, presentment, demand for performance and protest; (viii) 
notice of nonperformance, default, acceleration, protest or dishonor; (ix) the
absence, impairment or loss of any right of reimbursement, contribution or
subrogation or any other right or remedy of Guarantor against Operator; or (x) any
modification of the Guaranteed Obligations.


 


(e)           Guarantor hereby acknowledges that (a) the
obligations undertaken by Guarantor pursuant to the guaranty in this Paragraph
45 are complex in nature; and (b) numerous possible defenses to the
enforceability of these obligations may presently exist and/or may arise
hereafter; and (c) as part of the Owner’s consideration for entering into
the Agreement, Owner has specifically bargained for the waiver and
relinquishment by Guarantor of all such defenses; and (d) Guarantor has
had the opportunity to seek and receive legal advice from skilled legal counsel
in the area of financial transactions of the type contemplated herein.  Given all of the above, Guarantor does hereby
represent and confirm to the Owner that Guarantor is fully informed regarding,
and that Guarantor does thoroughly understand: (i) the nature of all such
possible defenses; (ii) the circumstances under which such defenses may
arise; (iii) the benefits which such defenses might confer upon Guarantor;
and (iv) the legal consequences to Guarantor of waiving such
defenses.  Guarantor acknowledges that
Guarantor makes the guaranty in this Paragraph 45 with the intent that such
guaranty and all of the informed waivers herein shall each and all be fully
enforceable by the Owner.


 


(f)            In the event that Guarantor should breach or fail to
timely perform any provisions of this Agreement, Guarantor shall, within
fifteen (15) Business Days of demand by Owner, pay Owner all reasonable
out-of-pocket costs and expenses (including court costs and reasonable
attorneys’ fees) actually incurred by Owner in the enforcement hereof.  The covenants contained in this Paragraph 45
shall survive the payment and performance of the Guaranteed Obligations.


 


(g)           Guarantor waives any right to object to any renewal,
extension, increase, modification, alteration or rearrangement of all or any
part of the Guaranteed Obligations.  No
failure to exercise, and no delay in exercising, on the part of Owner, any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right.  The rights
of Owner hereunder shall be in addition to all other rights provided by
law.  No modification or waiver of any
provision of this Agreement, nor consent to departure therefrom, shall be
effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. 
No notice or demand given in any case shall constitute a waiver of the
right to take other action in the same, similar or other instances without such
notice or demand.


 


46.          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 


 


38

















 


days
on or during which such party is prevented from, or is unreasonably interfered
with, the doing or completion of such act, matter or thing because of Force
Majeure.


 


47.          Condemnation.  In the event of total or partial condemnation
or taking of the Hotel, which includes the Nikki Beach Club, through use of
eminent domain, in any eminent domain proceeding, or action filed by or against
Owner relating to the condemning governmental agency or condemning authority,
Operator shall be entitled to pursue its own claim for recovery against the
governmental agency or condemning authority for the value of the its contract
rights hereunder.


 


[signature page to follow]


 


39

















 


IN WITNESS WHEREOF, Owner and Operator hereto
have duly executed this Management Agreement as of the Effective Date.


 


	
   

  	
  OWNER:

  
	
   

  	
   

  
	
   

  	
  TROPICANA LAS VEGAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Joanne M. Beckett

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Joanne
  M. Beckett

  
	
   

  	
  Title:

  	
  Vice
  President & General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  OPERATOR:

  
	
   

  	
   

  
	
   

  	
  NIKKI BEACH LAS VEGAS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jack Penrod

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Jack
  Penrod

  
	
   

  	
  Name:

  	
  Penrod
  Management Group, Inc.

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  PENROD
  MANAGEMENT GROUP INC.

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jack Penrod

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Jack
  Penrod

  
	
   

  	
  Title:

  	
  President

  
				



 


40