MANAGEMENT AGREEMENT
THIS
MANAGEMENT AGREEMENT (sometimes hereafter referred to as the “Agreement”), made
this 10th
day of
November, 2008 by and between: OCEANS CASINO CRUISES, Inc. (including its
subsidiaries, “Owner”) and NEVADA GOLD & CASINOS, INC.
(“Manager”).
RECITATIONS:
A. The
Owner
is the owner and/or operator of various vessels (the “Vessels”) which are used
in the conduct of a “cruise-to-nowhere” gaming business (the “Business”) in the
states of Florida and South Carolina.
B. The
Manager and the personnel of Manager are experienced in the management of
operations of the type and nature described of the Business. Manager has
also
served as consultant to the Business, pursuant to a Consulting Agreement
dated
November 3, 2008 (the “Consulting Agreement”).
C. The
Owner
represents that as of the date hereof:
|
(i)
|
It
has all requisite capacity, power and authority to enter into this
Agreement and to perform all of the obligations hereunder. This
Agreement
constitutes the legal valid and binding obligation of Owner enforceable
against Owner.
|
|
(ii)
|
The
execution of this Agreement will not directly or indirectly (with
or
without notice or lapse of time): contravene, conflict with or
result in a
violation of any provision of the Articles of Organization or Operating
Agreement of Owner; contravene, conflict with or result in a violation
of,
or give any governmental body or other person the right to challenge
the
performance by Manager of this Agreement. Owner is not required
to give
any notice to or obtain any consent from any person in connection
with the
execution of this Agreement.
|
| (iii) |
It
has all approvals from appropriate governmental authorities
to operate the
business and Owner knows of no facts that might prevent Manager
from
immediately performing its duties and obligations hereunder
and securing
appropriate approvals and/or licenses, if any, for itself and
its
personnel to operate and manage the business on behalf of
Owner.
|
D. The
Manager represents that as of the date hereof:
|
(i)
|
It
has all requisite capacity, power and authority to enter into this
Agreement and to perform all of the obligations hereunder. This
Agreement
constitutes the legal valid and binding obligation of Manager enforceable
against Manager.
|
| (ii) |
The
execution of this Agreement will not directly or indirectly (with
or
without notice or lapse of time): contravene, conflict with or
result in a
violation of any provision of the Articles of Organization or Operating
Agreement of Manager, contravene, conflict with or result in a
violation
of, or give any governmental body or other person the right to
challenge
the performance by Manager of this Agreement. Manager is not required
to
give any notice to or obtain any consent from any person in connection
with the execution of this Agreement. Manager’s representations in this
subparagraph (ii), as they related to any laws or regulations applicable
to Owner and Owner’s Business and not to Manager or Manager’s business,
are limited to the best of Manager’s
knowledge.
|
| (iii) |
To
the extent such approvals relate to Manager or Manager’s business, and to
the best of Manager’s knowledge with respect to Owner and Owner’s
Business, Manager has all approvals from government authorities
to manage
the Business. Manager knows of no facts that might prevent it from
immediately performing its duties and obligations hereunder, or,
except as
such may be necessary, to securing any necessary or appropriate
approvals
and/or licenses, if any, for itself and its personnel to operate
and
manage the business on behalf of Owner.
|
Owner
acknowledges that Manger is relying on the representations of Owner as an
inducement to entering into this Agreement. Manager acknowledges, however,
that
the representations herein are representation solely of Owner in its corporate
capacity, and that Manager shall have no right or claims by reason of such
representation against any of the individuals who executed this agreement,
or
any officer or director of Owner.
NOW,
THEREFORE, in consideration of the mutual covenants, promises and undertakings
of the parties hereafter set forth and for other good and valuable
considerations, the receipt and sufficiency of which are acknowledged by
the
parties, it is agreed:
| 1. |
THE
ENGAGEMENT:
|
Upon
and
subject to the above recitations and the terms and conditions hereafter set
forth, the Owner does hereby engage and retain the Manager and the Manager
does
hereby agree to be engaged and retained by the Owner, to provide the services
in
the manner hereafter described.
| 2. |
TERM:
|
Unless
sooner
terminated in accordance with the terms hereof, this Agreement will terminate
on
December 31, 2010.
| 3. |
OPERATION OF THE BUSINESS:
|
The
following provisions shall govern certain of the duties and obligations of
the
Owner and the Manager:
| 3.1 |
General
Duties of Manager:
|
The
Manager shall consistent with and subject to the terms of this Agreement,
provide to and for the benefit of the Owner, as Owner’s Agent, all management
services which are necessary or appropriate for the operation of the Business
in
an effective and professional manner. Except as provided herein, the expenses
of
operation shall be borne by Owner based on the cash flows of the Business,
in
accordance with agreed Annual Plans. However, it is understood that the
compensation to Manager set forth in this Agreement is intended to compensate
Manager for the time and effort of Manager’s employees and overheads associated
therewith, and the Manager shall not be entitled to additional payment or
other
compensation with respect to those services except for such reasonable
out-of-pocket expenditures by Manager for which this Agreement expressly
provides for reimbursement.
2
Without
limiting the generality of the foregoing, the Manager is hereby authorized
to
and shall:
(a) Maximize
Patronage.
Use all
reasonable efforts, to maximize patronage of the Business.
(b) Marketing.
Develop
and update sales and marketing plans; implement and supervise sales and
marketing campaigns; develop tour packages; develop and implement player
rating
and development programs with respect to gaming activities; book entertainment
appropriate for this Business; and generally promote the Business and all
of its
facilities.
(c) Incentives
and Extensions of Credit to Promote Patronage.
Provide
complimentary amenities and extensions of credit to Business patrons in order
to
promote gaming activities at the Business in the exercise of its reasonable
business judgment, and in conjunction with player development programs. Manager
shall obtain from patrons receiving credit, to the extent permitted and in
accordance with any applicable Gaming Regulations, appropriate markers or
IOU’s
(hereafter all forms of credit including the foregoing being collectively
referred to as “Markers”) in accordance with overall credit policies established
from time to time in consultation with Owner.
(d) Senior
Management.
Owner
acknowledges that the Chief Executive Officer of Manager may devote time
to
other business and clients of Manager, consistent with the non-competition
provisions of this Agreement, and will remain an employee of Manager and
shall
not be an employee of Owner. Manager agrees, however, that subject to Paragraph
3.16, the Chief Executive Officer and other employees of Manager shall devote
such portion of their time to the Business as shall be necessary or appropriate
to maximize the revenue, profits, and value of the Business and to perform
the
obligations of Manager hereunder in accordance with the standards of this
Agreement.
(e) Employment
of Staff.
Subject
only to the limitations hereafter set forth, arrange, on behalf of Owner,
for
the employment, training, retraining, payment, supervision and discharge
of all
of the employees, subject to Owner’s direction all of whom shall be employees of
the Owner. Owner’s consent shall be obtained with respect to executive staffing
levels and the identity and compensation of executive employees. Employee
compensation for non-executive employment will be established by Manager.
Notwithstanding the foregoing, Owner shall have the final authority and
determination with respect to any labor negotiations and by virtue of its
participation in the preparation and approval of the Annual Plan, shall have
general authority over employee compensation. Employee compensation shall
generally conform with the estimates of the Annual Plan;
(f) Purchase
of Supplies and Other Items; Engage Professionals.
Manager
shall purchase the following items, generally in accordance with or as provided
by or referred to in the Annual Plan approved by Owner: food, beverages,
operating supplies, and other merchandise, gaming equipment, reservation
systems, security systems, telex equipment, and other mechanical and electronic
equipment and systems and all other items necessary for the proper operation
of
the Business. With the consent of the Owner, Manager may engage from time
to
time such advisors, consultants, or other professionals reasonably necessary,
to
promote the sound and efficient operation of the Business including but not
limited to accountants, financial advisors, real estate advisors, attorneys,
marketing consultants and such other professionals as appropriate.
(g) Maintenance.
Provide
for the maintenance and repair of the assets of the Business in accordance
with
reasonable standards.
3
(h) Refurbishing
of the Business Assets.
Make
available at its headquarters or such other location convenient to all parties,
such personnel which, in Manager’s reasonable judgment, are needed to review all
plans and specifications for major or minor alteration or refurbishing of
the
assets of the Business proposed by the Manager or Owner from time to time,
to
render advice regarding the design, selection, and scope of replacement of
furnishings and equipment, and to improve operations or to eliminate operational
problems.
(i) Other
Consulting Services.
Provide
the services of other employees of Manager, without cost to Owner except
for
such reimbursement of reasonable out-of-pocket expenses as is expressly set
forth in this Agreement, as shall be necessary or appropriate for the
fulfillment of Manager’s duties hereunder with respect to operation of the
Business;
(j) Comply
with Laws.
Cause
all such other things to be done in or about the Business as shall be necessary
to comply with any applicable Gaming Regulations, and all laws, regulations,
and
requirements of any Gaming Regulators, and of any other governmental authority
having jurisdiction over the use, maintenance or operation of the Business
or
its assets and in particular orders and any requirements of any local Board
of
Fire Underwriters or any other body which may exercise similar functions
(provided that the Manager shall have no obligation to so comply or to correct
any alleged defect unless the same is known to Manager or is specifically
called
to the attention of the Manager by the Owner or by any such governmental
authority);
(k) Utility
Services.
Arrange
for utility services, telephone, vermin extermination, security, trash removal
and other services necessary or reasonably required for the operation of
the
Business.
(l) Collection
of Revenue.
Use all
reasonable efforts to collect all charges, rents, Markers and other amounts
due
from Business guests, patrons, tenants, subtenants, suitable parties providing
services and concessionaires; cause notices to be served upon such guests,
patrons, tenants, subtenants, parties providing services and concessionaires
to
quit and surrender space occupied or used by them, where desirable or necessary;
ask for, demand, collect and give receipts for all charges and other amounts
which may at any time be due from any guest, patron, tenant, subtenant, parties
providing services or concessionaires; and, subject to the limitations hereafter
set forth, xxx for and initiate such appropriate legal proceedings in the
name
of the Business, and generally enforce Owner’s rights with respect to, any of
the foregoing;
(m) Legal
Actions.
Subject
to the limitations hereafter set forth, commence such legal actions or
proceedings concerning the Business as are necessary or reasonably required,
in
the opinion of the Manager, to preserve and protect the assets constituting
the
Business and to collect sums due on account of operation of the Business;
advise
the Owner of the commencement of any material legal action or proceeding
concerning the Business; and retain counsel, in connection with any action
or
proceeding commenced by or against Manager (in its role as such) or concerning
the Business;
(n) Concessions.
Grant
concessions for services customarily subject to concession in enterprises
similar to the Business if, in the Manager’s reasonable opinion, the granting of
such concessions is deemed necessary or desirable;
(o) Licenses.
Assist
the Owner in obtaining and maintaining such alcoholic beverage licenses and
gaming licenses, if or as may be required by law, or needed in order for
Owner
to own and operate through Manager such alcoholic beverage facilities and
gaming
facilities as shall be included in the Business;
4
(p) Accounting
and Financial Controls.
Establish necessary accounting systems and internal controls and operating
manuals and procedures as may be required by applicable gaming or other laws
and
regulations and/or helpful to the operation of the Business and render such
periodic financial reports and other reports with respect to operations of
the
Business from time to time as may be specifically required hereunder; cooperate
with and assist Owner’s firm of independent Certified Public Accountants (the
“Accountants”) to prepare and file such financial accounting reports as directed
by Owner or as may be required by any applicable Gaming Regulators or any
other
law.
(q) Consultation
with Owner.
Make
its staff and employees available to consult with and advise Owner at Owner’s
reasonable notice and request, concerning all policies and procedures affecting
the conduct of the Business, initiatives for improvement of the Business,
and to
consider suggestions with respect thereto made by the Owner;
(r) Assistance
with Sale Efforts.
As
requested by Owner, assist with respect to the marketing and sale of the
Business, including providing such information and assistance as may be required
with respect to the due diligence efforts of prospective purchasers;
(s) Insurance.
Advise
the Owner with respect to, and assist the Owner, in obtaining insurance coverage
and insurance policies hereafter described and referred to; and
(t) Other.
Upon
Owner’s request, take such other steps and undertake such other activity as is
customary for senior executives of an enterprise in order to maximize the
value
of the Business.
(u) Within
two weeks from the date hereof, Manager will submit an interim report to
the
Board of Directors of Owner setting forth a monthly preliminary 2009 profit
and
loss and cash flow statements, including the working capital and capital
expenditure needs of the business, cost reduction initiatives, together with
written assumption and its assessment of the financial condition, marketing
programs, gaming operations, personnel and operating expenses of the Business
and physical condition of the assets used in the conduct of the
Business.
| 3.2 |
Annual
Plan:
|
The
following provisions shall apply to the Annual Plan:
(a) Proposed
Annual Plan.
The
Manager shall submit to the Owner for Owner’s approval not later than December
15, 2008, a business plan for the balance of calendar year 2009, and at least
thirty (30) days prior to the beginning of each Fiscal Year thereafter, an
annual business plan for the Business (the “Annual Plan”), which shall include
for each Fiscal Year:
|
(i)
|
Financial
Statements:
projected profit and loss statements, balance sheets, and cash
flow
statements, each on a monthly basis generally consistent with Generally
Accepted Accounting Principles (“GAAP”);
and
|
|
(ii)
|
Receipts
& Expenditures:
a
budget of receipts and expenditures required for the operation
of the
Business pursuant to the terms of this Agreement, including rates
to be
charged and proposals for:
|
5
(A) expenditures
for payroll, including wages, relocation expenses, other remuneration, and
fringe benefits;
(B) food
and
beverage and other operating supplies;
(C) expenditures
for furnishings, fixtures and equipment;
(D) repair
and maintenance costs;
(E) expenditures
for revisions, alterations, rebuilding, replacements, additions and improvements
in and to the Business;
(F) expenditures
for advertising, marketing and public relations;
(G) fees
and
expenses for outside experts and consultants, including legal expenses, approved
by Owner; and
(H) other
operating expenditures payable by Owner under this Agreement.
|
(iii)
|
Assumptions.
Each Annual Plan shall also contain in narrative form, the assumptions
used as the basis of its
preparation.
|
|
(iv)
|
Debt
Service.
Each Annual Plan shall also contain a monthly budget for the amounts
to be
paid as debt service to Owner’s
Lender(s).
|
|
(v)
|
Reimburseable
Expenses.
Each Annual Plan shall also contain a monthly budget for the expenses
which are to be reimbursed to Manager under Paragraph 4.4 of this
Agreement.
|
|
(vi)
|
The
proposed EBITDA target for purposes of Paragraphs 4.2(a)(ii)(A)
and (B)
and 8.1(f) of this Agreement.
|
(b) Pro-Forma
as Estimates.
The
Owner acknowledges that the projections contained in each Annual Plan and
each
pro-forma and budgets submitted from time to time to the Owner by the Manager,
are mere estimates and are subject to and may be affected by changes in
financial, economic and other conditions and circumstances beyond the Manager’s
reasonable control and that the preparation and giving of such projections,
pro-formas or operating budgets shall never be construed as a guarantee,
warranty or representation by the Manager to the Owner that such projections,
or
pro-formas will, in fact, occur; or that any budget will be sufficient. In
the
event, however, that changes in conditions and circumstances require material
changes to the Annual Plan, such material changes shall be subject to Owner’s
consent. Notwithstanding the foregoing, budgeted estimates for expenses of
Manager reimbursable under Paragraph 4.4 of this Agreement shall not be exceeded
without Owner’s consent.
(c) Procedure
for Budget Approval.
The
Owner shall give its written approval or disapproval of the Annual Plan not
later than thirty (30) days after its receipt. If the Owner does not provide
its
written approval or disapproval of such Annual Plan within such thirty (30)
day
period, then the Owner shall be deemed to have approved such Annual Plan
as
submitted by the Manager.
6
| 3.3 |
Legal
Proceedings:
|
The
following provisions shall apply to any Legal proceedings affecting the
Business:
(a) Legal
Proceedings Brought on Behalf of Owner.
Legal
proceedings relating to the operation of the Business, such as collections,
enforcement of contracts and leases and proceedings against Business guests,
patrons, and tenants, may be instituted by the Manager subject to Owner’s
approval, utilizing counsel designated by the Manager and approved by the
Owner.
Manager shall furnish Owner with periodic status reports with respect to
such
proceedings.
(b) Defense
of Non-Extraordinary Proceedings.
Other
than insured claims where the liability carrier has the right to choose counsel,
Manager shall (unless otherwise directed by Owner) defend, through counsel
designated by Manager and approved by Owner, legal proceedings of a
non-extraordinary nature against Owner or Manager resulting from the operation
of the Business, such as guest claims for loss of property or injury to persons
and claims relating to employment or the application for employment at the
Business. Manager shall furnish Owner with periodic status reports with respect
to such proceedings.
(c) Defense
of Significant Proceedings.
The
defense of actions against the Business of a more significant nature (including,
without limitation, any aspect of any negligence claim against Owner or Manager
arising out of the operation of the Business and involving in excess of U.S.
Twenty Five Thousand Dollars ($25,000), as to which any insurance company
denies
coverage or reserves rights as to coverage) shall be coordinated with the
Owner
and designated counsel shall be subject to the Owner’s approval and Manager
shall furnish Owner with periodic status reports with respect thereto.
(d) Insurance.
All
claims against the Owner or the Manager arising out of the operation of the
Business which are covered in whole or in part by insurance, shall be forwarded
by the Manager to the appropriate insurance carrier or its agent for defense,
with copy to Owner.
(e) Coordinated
Defense.
In the
event that a suit is instituted against the Manager in connection with the
Business, in which the Owner is also named as a party defendant, the Owner
and
the Manager shall coordinate the defense of such suit. Nothing herein contained
shall be construed as preventing the Owner from joining with the Manager
in any
legal proceedings or any action on behalf of or against the Business, whether
of
an extraordinary or non-extraordinary nature. If a conflict of interest arises
between the legal position taken by Owner and Manager which the parties are
unable to waive or otherwise agree upon, the parties then may each engage
counsel of their own choosing, at their own respective expense.
7
| 3.4 |
Centralized
Purchasing and Related Services:
|
If
any
other hotels, casino hotels, restaurants, casinos, gaming facilities, or
related
facilities, operated by Manager or its affiliates maintain or adopt as
applicable, a centralized purchasing system whereby operating supplies, food,
equipment, consumable, computer services, insurance coverages under a group
plan, public relation services, sales and marketing services, group advertising,
reservation systems, or other items or services or programs are purchased
or
contracted for on behalf of the participants from suppliers or providers
designated by Manager, then the Manager, at Owner’s request, shall cause the
Business to participate in such centralized system, so long as Manager is
operating the Business, provided that the cost to the Business of such items,
services, or programs taking into account the quality of the items, services,
or
programs purchased or contracted for and the payment terms relating to such
items, services, or programs are more favorable to the Business than the
cost
which could be obtained by the Business from unaffiliated third parties.
The
suppliers of such items or providers of such programs or services under any
such
centralized system may be affiliated with Manager.
| 3.5 |
Emergency
Expenditures:
|
Whenever,
by reason of circumstances beyond the reasonable control of the Manager,
emergency expenditures are required to be made to insure that the professional
operating standards are maintained or to protect life, person, or property,
the
Manager may make emergency expenditures beyond the provisions of the Annual
Plan, provided that without the approval of the Owner, the expenditures for
any
one such occurrence shall not exceed U.S. $25,000, and that the aggregate
of
such expenditures shall not exceed U.S. $100,000 in any Fiscal
Year.
3.6
Bank
Accounts:
The
Manager shall maintain the existing bank accounts for the Business. With
Owner’s
approval, Manager may close bank accounts and open additional bank accounts,
provided that the current “lock-box” arrangements associated with Owner’s
accounts are maintained to the satisfaction of Owner’s Lender(s). The account(s)
used for general business operations (the “Business Operating Account”) shall
also be used for the deposit of funds, as set forth herein. Payroll and
payroll-related expenditures may be made from a Business Payroll
Account.
| 3.7 |
Deposits
and Transfers of Funds:
|
(a) General.
All
funds of any kind or nature received either by Manager or the Owner in
connection with the operation of all portions of the Business, received either
by Manager or the Owner in connection with the operation of the Business
in
connection with any gaming activities of any kind or nature with respect
to the
Business (hereafter “Business Operations”) shall be deposited in the Business
Operating Account. Payment of all expenses and other expenditures in respect
of
Business Operations shall be made from the Business Operating Account
respectively except for payroll and payroll related expenditures which may
be
made from a Business Payroll Account as applicable. Manager may transfer
from
the Business Operating Account to the Business Payroll Account, if any, such
monies as shall be required from time to time to satisfy the payroll obligations
as applicable to each area of operations. Subject to the requirements and
prohibitions of applicable law, in no event will any of the monies deposited
in
the Business Operating Account or the Business Payroll Account be commingled
with other funds. The funds in the Business Operating Account shall continue
to
be swept for the benefit of Owner’s Lender(s) in accordance with past practice
and reborrowings from Owner’s Lender(s) shall be deposited into the Business
Operating Account. The Manager may transfer from any of the Business Accounts
such monies which in Manager’s sole business judgment may be needed for any area
of operations to any of the other Business Accounts.
8
(b) Interest.
All
interest, if any, earned on any of such accounts, shall accrue to the benefit
of
the Owner. The Manager shall make available to the Owner, from time to time
when
reasonably requested by the Owner, all records with respect to all of the
above
accounts.
(c) Other
Accounts; Funds of Owner.
The
Manager shall open such other bank accounts with respect to the Business
as may
be agreed upon from time to time by the Owner and the Manager or as required
by
law. All funds in the Business Accounts and all other accounts relating to
the
Business maintained pursuant to this Agreement shall, at all times, be deemed
to
be the funds of Owner.
(d) Statements.
Manager
shall use its best efforts to provide to Owner a report of the cash receipts
of
the Business on a weekly basis or otherwise as soon as practicable. Manager
shall provide a monthly statement to Owner summarizing all activity in the
operating accounts and reconciling the balances within such operating accounts
with the monthly financial statements provided in accordance with Paragraph
3.8.
Such monthly statement shall also include a listing of each bank account
maintained pursuant to Paragraph 3.6, including its number and location,
and the
month-end cash balance thereof.
(e) Fidelity
Bonds.
All of
Manager’s employees who are authorized signatories on any of the accounts
described in this Paragraph 3.7 shall be bonded or otherwise insured as to
fidelity. The form and content of such bond or insurance shall be subject
to the
approval of the Owner. Owner and Manager shall both be named as obligees
or
insureds, as appropriate, under such bond or insurance policy and Manager
and
Owner shall both have the right to enforce the terms of any such bond or
insurance policy.
3.8
Financial
Statements:
In
addition to the statements and reports required hereunder, including under
Paragraph 3.7(d), the financial statements for the Business shall be prepared
and provided to Owner as follows:
(a) Profit
and Loss Statement.
Manager
shall prepare and deliver to the Owner within twenty (20) days after the
end of
each month, a profit and loss statement and cash flow statement, each prepared
in accordance with GAAP, showing the results of the operation of the Business
for the immediately preceding month and for the Fiscal Year including a
comparison with the Annual Plan, and a balance sheet as of the end of the
month.
Such statement shall be prepared from the books of account maintained by
the
Manager and shall be in form and substance reasonably satisfactory to the
Owner.
(b) Annual
Statement.
Not
later than sixty (60) days immediately following the end of each Fiscal Year,
the Manager shall cause to be prepared and delivered to the Owner reasonably
detailed audited financial statements for such Fiscal Year (the “Annual
Statements”), which shall consist of: (i) a balance sheet; (ii) a statement of
earnings and retained earnings; (iii) a statement of change in financial
position, and (iv) such other financial statements or reports as may be required
by any applicable Gaming Regulators. Such financial statements shall be prepared
by, and shall contain a certificate of, the Accountants, to the effect that,
subject to such acceptable qualifications as shall be contained therein,
such
financial statements fairly present the financial position, results of the
operations and changes in financial position of the Business for the Fiscal
Year
then ended, in conformity with generally accepted accounting principles applied
on a consistent basis. Since the Accountants shall be selected and designated
by
the Owner, the Manager shall not be responsible for any delays in the delivery
of the Annual Statements attributable to the Accountants, provided the
Accountants are timely provided (with copy to Owner) with an annual financial
statement prepared by Manager no later than thirty (30) days following the
end
of the applicable Fiscal Year.
9
| 3.9 |
Payment
of Excess Funds to Owner:
|
Upon
the
written request of the Owner, after payment of any obligations then due to
Owner’s Lender(s), the Manager shall pay to the Owner (or, if Owner so directs,
to Owner’s Lender(s)), all funds in the Business Operating Account in excess of
those reasonably required to meet all of the operating, capital, and other
financial requirements of the Business, including, without limitation, all
minimum working capital requirements imposed by law. Manager, at the request
of
Owner, shall establish such cash management procedures and accounts from
time to
time at institutions directed by Owner, for the deposit of such excess funds
of
Owner. All income derived therefrom shall accrue to Owner.
| 3.10 |
Books,
Records and Accounts:
|
Manager
shall keep full and adequate books of account and other records reflecting
the
results of operations of the Business on an accrual basis, in accordance
with
generally accepted accounting principles applied on a consistent basis. The
books of account and all other records relating to or reflecting the operation
of the Business shall be kept at the Business and shall be made available
to the
Owner and its representatives and any other supervisory or regulatory authority
having jurisdiction over the Owner or the Business, at all reasonable times,
for
examination, audit, inspection and transcription. All of such books and records
pertaining to the Business, including, without limitation, books of account,
guest records and front office records, shall at all times be the property
of
the Owner and shall not be removed from the Business by the Manager without
the
Owner’s consent. Upon any termination hereof, all such books and records shall
immediately be turned over to the Owner, so as to insure the orderly continuance
of the operation of the Business.
| 3.11 |
Payment
of Taxes:
|
Manager
shall pay or cause to be paid from the Business Operating Account(s),
before
they become delinquent, all taxes, withholding, assessments, excises, levies,
licenses and permit fees and other charges (including all penalties and interest
relating thereto), general and special, ordinary and extraordinary, foreseen
and
unforeseen, of any kind or nature whatsoever, which shall or may during the
term
of this Agreement be levied, assessed, charged and/or imposed by any public
or
quasi-public authority upon, or accrue or become due and payable out of or
on
account of, or become a lien on the Business and related facilities and other
improvements now or hereafter situated thereon or on the fixtures, furniture,
furnishings, equipment and other personal property serving the assets of
the
Business as applicable. Any taxes due from Manager with respect to the Base
Management Fee or Incentive Fee or any other distributions or payments to
Manager as described herein shall be for Manager’s account, and shall be payable
by Manager and not from the assets of the Business Operating Account(s).
| 3.12 |
Payment
of Mortgages:
|
Manager
shall pay or cause to be paid from the assets of the Business Operating
Account(s), all mortgages and other liens secured in whole or in part by
a lien
on the assets of the Business and/or on the furniture, furnishings, fixtures
and
equipment now or hereafter located within the Business or upon any related
facilities and other improvements now or hereafter situated within the Business,
or upon all property, real or personal, necessary for the operation of the
Business as applicable. Notwithstanding the foregoing, the Parties acknowledge
that the obligations from Owner to Owner’s Lender(s) is in default. Manager
shall seek to negotiate with Owner’s Lender(s) with respect to the manner in
which cash flow from the Business will be applied and the terms under which
reborrowings on the Lender(s)’ line of credit will be permitted, consistent with
the financial resources of the Business and the obligation to operate the
Business in an effective and professional manner, and will incorporate such
agreement into the monthly budget portion of the Annual Plan in accordance
with
Paragraph 3.2(a)(iv)] above.
10
| 3.13 |
Compliance
With Laws:
|
The
Manager shall not use the Business or any portion thereof, and the Manager
shall
use diligent efforts to see that others do not use the Business or any portion
thereof, for any use or purpose, in violation of any applicable Gaming
Regulations or of any other valid and applicable law or regulation of any
lawful
authority having jurisdiction over the Business, and in all respects, the
Manager shall use all reasonable efforts to cause the use and operation of
the
Business to comply with all valid and applicable laws and regulations of
all
governmental authorities with such jurisdiction. Notwithstanding anything
to the
contrary provided herein, this Agreement shall be deemed to include all
provisions required by any applicable gaming laws and regulations as modified
from time to time as if fully set forth herein. Notwithstanding the foregoing
and the other provisions of this Agreement, the parties acknowledge that
insofar
as the Business provides gaming outside of territorial waters, it is not
expected to be subject to Gaming Regulations or the jurisdictions of Gaming
Regulators, and the provisions herein related to Gaming Regulations and Gaming
Regulators, in each case if any, are intended as precautionary and not as
a
concession that any Gaming Regulations are applicable or that the Business
or
any part thereof is subject to the jurisdiction of Gaming
Regulators.
| 3.14 |
Physical
Plant and Property Maintenance:
|
The
following provisions shall apply to the Business physical plant, fixtures
and
personalty:
(a) Alterations,
Remodeling, Demolition.
The
Manager shall, subject to Owner approval in connection with the Annual Plan,
have the right to alter, remodel and/or demolish any improvements now or
hereafter situated upon or within the Business, or to replace or add to any
of
the furniture, furnishings, fixtures or equipment located within the
Business.
(b) Repairs,
Replacements, Maintenance.
The
Manager shall, as an expense of the Business from time to time, make such
expenditures for repairs and maintenance, for replacements, renewals and
additions to furniture, fixtures and equipment, and for minor capital
improvements (meaning those capital improvements other than structural repairs
and changes and extraordinary repairs to or replacement of furniture, fixtures
and equipment “F.F.& E.”), as may be necessary or required, in its
reasonable opinion, to keep the Business in professional operating condition
consistent with the financial resources of the Business and in accordance
with
the Annual Budget. No substantial changes shall be made in the Business’s
structure without the Owner’s consent, including decisions as to the
continuation or cessation of operations at particular locations. If any such
repairs or maintenance constitute corrective work for which the Owner has
received or is entitled to the benefit of the guarantee or warranty of any
builder, contractor or of any supplier of labor or material in connection
with
the construction of the Business or with respect to the furniture, fixtures
and
equipment installed therein, then Manager may invoke such guarantees or
warranties in either the Owner’s or the Manager’s name (on behalf of Owner) and
the Owner shall cooperate fully with Manager in the enforcement thereof.
The
Owner reserves the right to sell any of the furniture, fixtures or equipment
located in the Business from time to time, provided that the Owner substitutes
furniture, fixtures and equipment of like kind and utility.
11
| 3.15 |
Insurance:
|
The
following provisions shall apply to insurance coverages for the
Business:
(a) Types
of Coverages.
Manager
shall arrange, and pay or cause to be paid from the Business Operating
Account(s), at all times throughout the term, for the Business and related
facilities, insurance appropriate to the conduct of the Business, of the
types
and in the amounts of coverage hitherto maintained, subject to such
modifications as may be requested or approved by Owner, including approval
with
respect to the Annual Plan.
(b) General
Requirements as to Form of Policies.
In
addition to such requirements as may be applicable under any loan or other
agreement to which Owner may be party, Owner and Manager shall both be named
insureds in all policies maintained pursuant to this Agreement, as their
interests may appear, and each such policy shall contain a waiver by the
insurer
of the rights of recourse or subrogation by the insurer against the Owner
and
the Manager. All insurance shall be in such form and with such companies
as
shall be satisfactory to the Owner and Manager and shall comply with the
requirements of any mortgage encumbering the Business. Owner’s policies shall
specify that they are primary and if any other policies of insurance, including
policies maintained by Manager, are determined to apply to any claim, such
other
policy coverage shall be deemed to be in excess of Owner’s policies, as
applicable. The Owner shall provide to the Manager true copies of all such
insurance, not less than 30 days prior to the expiration of all prior
policies.
(c) Claim
Investigation.
The
Manager shall promptly investigate or cause to be investigated all accidents
and
claims for damage relating to the operation and maintenance of the Business
and
related facilities, and shall report to Owner any such incident which is
material, and the Manager shall investigate or cause to be investigated all
damage to or destruction of the Business or related facilities and shall
report
to the Owner any such incident which is material, together with the estimated
cost of repair thereof. In addition, the Manager shall prepare any and all
reports required by any insurance company as a result of any such
incident.
(d) Access
to Insurance Information.
Owner
shall at all times make available to Manager or Manager’s insurance agents or
insurance brokers all information relating to existing coverages, claims
histories as applicable, copies of policies, certificates, binders and the
like.
Owner further authorizes Manager, its insurance agents or brokers to obtain
such
information directly from Owner’s insurance agents, brokers, and insurance
carriers and hereby grants to Manager, its insurance agents or brokers full
access to all such information. This provision shall be self-operative and
will
not require any additional authorizations.
(e) Insurance
Coverage.
Owner
shall maintain customary insurance coverage which shall include general
liability and employment practices liability insurance, and shall immediately
include Manager and Manager’s employees as additional named insureds under all
such policies. Owner shall contribute up to $15,000 of the cost to include
Manager on the employment practices liability insurance through April, 2009
after which the cost of naming Manager on such policy will be submitted as
part
of the Annual Plan.
3.16 Subcontracted
Services:
The
engagement of Manager hereunder is based on skills and reputation of Manager,
and particularly of Xxxxxx Xxxxxxx, and Manager’s undertaking to devote
substantial time of Xxxxxx Xxxxxxx to this engagement. The parties acknowledge
that Xx. Xxxxxxx is anticipated to spend 20-30% of his overall time with
respect
to this engagement, but that such time estimate is a guideline to be followed
in
good faith rather than a rigid minimum or maximum time commitment, in that
the
precise time devoted by Xx. Xxxxxxx shall depend on the operational and other
needs of the Business. Subject to the foregoing, Manager may subcontract
or
separately contract some of the operational, consulting, technical and
management services to be performed by it in accordance with this Agreement
to
Manager’s affiliates, provided, however, that such contracting or subcontracting
shall be at no cost or expense to Owner, and provided further that Manager
shall
be responsible for all performance or failure of performance of Manager’s
affiliates to the same extent as if Manager had itself so performed or failed
to
perform.
12
3.17
Owner’s
Representative.
Owner
shall designate one or more individuals, each of whom shall act as Owner’s
representative for the purpose of providing Manager with such approvals on
behalf of Owner as shall be from time to time required hereunder. Manager
shall
be entitled to rely on the authority of such designated individuals, until
such
time as Manager receives notice on behalf of Owner that such representative
is
no longer authorized to act. At Owner’s request, one or more Owner’s
representative shall be named as additional signatories with respect to any
Bank
accounts. The initial Owner’s Representative shall be Xxx Xxxxxxx and Xxxxx
Xxxxxxxx, either of whom shall have apparent authority to act as Owner’s
representative with respect to approvals and consents hereunder. Manager
acknowledges that such individuals may be required to obtain approval from
Owner’s board of directors or other persons before providing any approval
hereunder, but Manager shall be entitled to rely on any approval that any
Owner’s representative in fact may provide.
| 4. |
MANAGER’S
FEES:
|
The
Owner
shall pay to the Manager the following fees, as compensation for the Manager’s
services to be rendered hereunder:
| 4.1 |
Fees
For Services Rendered By Manager:
|
For
services rendered by the Manager to the Owner rendered on and after the date
hereof for each Fiscal Year or fraction thereof during the term of the Agreement
or any extensions or renewals thereof, the Owner shall pay the Manager and
the
Manager shall accept from the Owner, an annual Management Fee (the “Management
Fee”) equal to the sum of the following:
| 4.2 |
Management
Fee:
|
(a) In
consideration for its services hereunder, Manager shall be entitled to receive
the following amounts:
|
(i)
|
a
Base Payment of $1,000,000 per annum, prorated for any partial
year; and
|
|
(ii)
|
an
Incentive Fee, equal to 25% of the amount by which Owner’s EBITDA shall
exceed the following amounts (the “Annual Hurdle”) in each of the Fiscal
Years of this Agreement
|
(A) Fiscal
Year 2009: $[TBD]; and
(B) Fiscal
Year 2010: $[TBD].
(C) No
Incentive Fee shall be payable with respect to the balance of Fiscal Year
2008.
The
parties agree that in connection with the preparation of the Annual Plan,
they
will negotiate in good faith with respect to the determination of the Annual
Hurdles designated as “TBD” above. The parties contemplate the Annual Hurdle
will be at an aspirational level of EBITDA, because the Incentive Fee is
intended to compensate Manager for its efforts to improve the Business beyond
such improvement as would be readily attainable by a manager without Manager’s
level of skill and experience.
13
(b) Definitions.
As used
herein, “Owner’s EBITDA” for any Fiscal Year shall mean, without duplication, an
amount equal to (a) consolidated net income of such Fiscal Year determined
in
accordance with GAAP, minus
(b) the
sum of (i) income tax credits, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain during such
period arising from the sale, exchange or other disposition of capital assets
by
such Person (including any fixed assets, whether tangible or intangible,
all
inventory sold in conjunction with the disposition of fixed assets and all
securities), and (v) any other non-cash gains that have been added in
determining consolidated net income, in each case to the extent included
in the
calculation of consolidated net income for such period in accordance with
GAAP,
but without duplication, plus
(c) the
sum of (i) any provision for income taxes, (ii) interest expense, (iii) loss
from extraordinary items for such period, (iv) any aggregate net loss during
such period arising from the sale, exchange or other disposition of capital
assets by such person, including (v) depreciation and amortization for such
period, and (v) amortized debt discount for such period.
|
(i)
|
For
purposes of this definition, the following items shall be excluded
from
EBITDA: (1) the income (or deficit) of any other Person accrued
prior to
the date it became a Subsidiary of, or was merged or consolidated
into,
Owner or its Subsidiaries; (2) the income (or deficit) of any other
Person
(other than a Subsidiary) in which Owner has an ownership interest,
except
to the extent any such income has actually been received by Owner
in the
form of cash dividends or distributions; (3) the undistributed
earnings of
any Subsidiary of Owner to the extent that the declaration or payment
of
dividends or similar distributions by such Subsidiary is not at
the time
permitted by the terms of any contractual obligation or requirement
of law
applicable to such Subsidiary; (4) any restoration to income of
any
contingency reserve, except to the extent that provision for such
reserve
was made out of income accrued during such period; (5) any write-up
of any
asset; (6) any net gain from the collection of the proceeds of
life
insurance policies; (7) any net gain arising from the acquisition
of any
securities, or the extinguishment, under GAAP, of any Indebtedness,
of
Owner; (8) in the case of a successor to Owner by consolidation
or merger
or as a transferee of its assets, any earnings of such successor
prior to
such consolidation, merger or transfer of assets; (9) any deferred
credit
representing the excess of equity in any Subsidiary of Owner at
the date
of acquisition of such Subsidiary over the cost to Owner; (10)
any other
“extraordinary item” of income or expense under GAAP; and (11) any income
or reduction in expense which results from there having been a
writedown
or other extraordinary item in a prior Agreement Year during the
term of
this Agreement.
|
|
(ii)
|
For
clarification, the following additional items shall not be included
as
revenues for purposes of EBITDA: (1) all taxes collected as direct
taxes
from guests or patrons of the Business or in respect of any business
conducted in the Business to be paid to duly constituted taxing
authorities having jurisdiction, such as local gaming taxes, or
withholding taxes assessed against gaming patrons’ winnings, if
applicable, sales taxes; (2) Tips and service charges collected
for
payment to employees; (3) Proceeds of sales of property, real and
personal, other than sales in the ordinary course of the Business;
and (4)
Proceeds of insurance for damage to property or condemnation awards.
|
14
(c) Agreement
Year.
“Fiscal
Year” shall coincide with and be identical with the calendar year for all
purposes.
| 4.3 |
Time
of Payment of Management Fee:
|
The
Base
Payment will be paid by the Owner to the Manager on the 15th
day of
each month for such month. The Owner hereby authorizes the Manager to pay
itself
the Base Payment, monthly, from any and all operating accounts, including,
but
not limited to the Business Operating Account(s). The Incentive Fee shall
be
payable from the Business Operating Account(s) within thirty (30) days of
the
delivery of the audited Financial Statements for the Fiscal Year as to which
such Incentive Fee is payable.
| 4.4 |
Reimbursement
for Costs and Expenses:
|
Manager
shall not be entitled to reimbursement of costs and expenses incurred in
connection with the operation and management of the Business, except as follows:
(a) Reimbursement
for Costs:
All
costs and expenses of any kind or nature related to the operation of the
Business shall be for the account of Owner, and shall be payable from the
Business Operating Account(s). All costs and expenses of any kind or nature
paid
or incurred by the Manager in the performance of its duties and obligations
under this Agreement, including Manager’s overhead and compensation of the Chief
Executive Officer and Chief Financial Officer, are intended to be compensated
by
and therefore deemed included in the Management Fees payable hereunder and
shall
be for the account of Manager. Notwithstanding the foregoing, Manager shall
be
entitled to reimbursement from Owner for: (i) reasonable travel expenses
of
employees of Manager, incurred for the benefit of Owner in the conduct of
the
Business except
for the Chief Executive Officer of Manager whose expenses to perform services
at
the corporate office of the Owner (as long as such office is located in Southern
Florida) shall be covered by the management fee to Manager;
and
(iii) any other expense which otherwise is the obligation of Owner hereunder
whose payment Manager has advanced, in its sole discretion, on Owner’s
behalf.
(b) Manager’s
Statements for Out-of-Pocket Costs.
Manager
shall be reimbursed from the Business Operating Account(s) for such reasonable
out-of-pocket costs and expenses paid or incurred by the Manager on behalf
of
the Owner for which Manager is entitled to reimbursement hereunder, subject
to
providing a statement of such expenses to Owner as least ten (10) days prior
to
such reimbursement.
| 5. |
Assignment:
|
| 5.1 |
By
Manager:
|
Manager
shall have no right to assign this Agreement or any interest herein, without
the
written consent of the Owner, except: (i) for an assignment in connection
with a
sale or transfer by Manager of all or substantially all of Manager’s business,
whether by way of direct sale, merger, consolidation or other similar
arrangement so long as the assignee/purchaser is qualified to perform the
services required of Manager herein and (ii) to any legal entity: (a) in
which
the present stockholders (or their parents or affiliates) collectively own
at
least 50% of the beneficial interest therein or have the right to receive
at
least 50% of the benefits thereof and distributions therefrom; or (b) which
is a
publicly traded company in which any of the present stockholders of the Manager
(or their parents or affiliates) collectively retain operating control, provided
in each instance that Xxxxxx Xxxxxxx shall continue to serve as the principal
representative of Manager and devotes the time to the Business contemplated
herein.
15
| 5.2 |
By
Owner:
|
(a) The
Owner
shall have the right to assign this Agreement upon a sale of substantially
all
of its assets, without the consent of the Manager, provided that:
|
(i)
|
the
assignee of the Owner’s interest assumes, in writing, the obligations of
the Owner hereunder; and
|
|
(ii)
|
written
notice of such assignment is given by the Owner to the Manager
within five
(5) business days after the
making of such assignment, along with an executed duplicate counterpart
of
the instrument of assignment pursuant to which the assignee shall
have
assumed the obligations of the Owner
hereunder.
|
(b) Change
of Control:
A
change of control of the interests in Owner shall not be deemed an assignment
hereunder, but this Agreement shall continue in full force and effect
notwithstanding any such change of control unless otherwise terminated in
accordance with the provisions of this Agreement.
| 5.3 |
Manager’s
Right to Terminate
|
Notwithstanding
the foregoing, it is agreed that the Manager shall have the right to terminate
this Agreement in the event of a change of control in favor of, or transfer
of
assets to, a Person whose ownership of the Business or the assets will be
contrary to law, or whose identity as a Person for which Manager is performing
services will, in the reasonable opinion of Manager, have an adverse impact
on
Manager’s ability to operate within the gaming industry.
| 6. |
Damage
and Destruction:
|
If
the
Business or any portion thereof shall be damaged or destroyed at any time
during
the term hereof by fire, casualty or other cause, to such an extent that
it
would be impossible, or impracticable, or commercially unsound, in Owner’s good
faith judgment, to repair the Business or to continue to operate the Business
facility as a Business, then the Owner may terminate this Agreement by giving
written notice of termination to the Manager, whereupon this Agreement shall
be
terminated and of no further force and effect, except with respect to the
duties, liabilities and obligations of the parties which arose or accrued
prior
to termination. Otherwise, this Agreement shall remain in full force and
effect
without any abatement or reduction in the fees payable to Manager and the
Owner
shall promptly rebuild the Business at its sole cost and expense.
Notwithstanding the foregoing, in the event that there is damage to the Business
and the Owner’s Lenders decline to make available insurance proceeds pledged to
them for the purpose of effective necessary repairs, then to the extent such
failure affects the earning capacity of the Business, Manager may propose
alternative EBITDA targets pursuant to Paragraphs 4.2(a)(ii)(A) and (B) and
8.1(f) of this Agreement reflective of the adverse effect on the earning
capacity of the Business. If, after good faith negotiation, the parties cannot
reach agreement as to such alternative EBITDA targets, either party may
terminate this Agreement without further obligation to the other.
16
| 7. |
Condemnation;
Change in Law:
|
If
the
entire Business shall be taken in eminent domain or constituted condemnation
proceedings or if such portion of the Business shall be taken in eminent
domain
or condemnation proceedings, or if there is a change in law affecting the
Business (including a change in law related to competitors of the Business)
such
that in the reasonable good faith judgment of the Owner, it is impossible,
impracticable, or commercially unsound to continue to operate the Business,
then, in either of such events, the Owner shall have the right to terminate
this
Agreement by giving written notice of such termination to the Manager and
upon
the giving of such notice, this Agreement shall be terminated and of no further
force and effect, except with respect to the duties, liabilities and obligations
of the parties which arose or accrued prior to termination. In the event
of
termination under this Paragraph 7, such termination shall be effective upon
the
date of taking or notice from Owner to Manager with respect to the change
in
law. The provisions of this Paragraph 7 with respect to termination shall
be
applicable if the Owner makes a conveyance in lieu of condemnation, in which
event the day of the execution and delivery of such conveyance shall be the
date
of termination. If this Agreement is not terminated in accordance with the
terms
of this Paragraph 7, then this Agreement shall remain in full force and effect
without any abatement or reduction in the fees payable to Manager and the
Manager, subject to Owner’s consent, shall promptly rebuild or restore the
Business from the proceeds of such condemnation.
| 8. |
Default:
|
| 8.1 |
Default
by Manager:
|
The
following events shall be deemed to be events of default by the Manager under
this Agreement:
(a) Non-Compliance
with Terms:
Manager
shall fail to comply, in any material respect, with any of the terms,
conditions, provisions or covenants of this Agreement to be complied with
by the
Manager and the Manager shall not cure such failure within thirty (30) days
after written notice thereof given by Owner to Manager, or, if such failure
is
not reasonably susceptible of being cured within said thirty (30) day period,
if
Manager shall fail to commence to cure such failure within said thirty (30)
day
period, or, having commenced, shall thereafter fail to complete the curing
of
such failure with reasonable diligence;
(b) Insolvency:
Manager
shall become insolvent, shall make a transfer in fraud of its creditors,
or
shall make an assignment for the benefit of creditors;
(c) Bankruptcy
Filing:
Manager
shall file a petition under any section or chapter of the United States
Bankruptcy Code, as amended, of the United States or any state thereof, or
if
Manager shall be adjudged bankrupt or insolvent in proceedings filed against
the
Manager thereunder;
(d) Appointment
of Receiver:
A
receiver or trustee shall be appointed for the Manager or for all or
substantially all of the assets of the Manager and such appointment is not
vacated or otherwise caused to be set aside within ninety (90) days from
the
occurrence thereof;
(e) Unavailability
of Xxxxxx Xxxxxxx.
Xxxxxx
Xxxxxxx ceases to perform the duties set forth in Paragraph 3.16 hereof;
or
(f) Non-attainment
of EBITDA.
The
EBITDA of the Business shall be less than the EBITDA amount agreed to in
the
Annual Plan for calendar year 2009.
17
8.2
Default
by Owner.
The
following events shall be deemed to be events of default by the Owner under
this
Agreement:
(a) Non-Compliance
with Terms:
Owner
shall fail to comply in any material respect with any other term, provision
or
covenant of this Agreement to be complied with or performed by the Owner,
and
shall not cure such failure within thirty (30) days after written notice,
thereof, from Manager to Owner, or, if such failure is not susceptible of
being
cured within said thirty (30) day period, if Owner shall fail to commence
to
cure such failure within said thirty (30) day period, or, having commenced,
shall, thereafter, fail to complete the curing of such failure with reasonable
diligence;
(b) Insolvency:
Owner
shall become insolvent, shall make a transfer in fraud of its creditors,
or
shall make an assignment for the benefit of the creditors;
(c) Bankruptcy
Filing:
Owner
shall file a petition under any bankruptcy law or similar law for a relief
of
debtor or if Owner shall be adjudged bankrupt or insolvent in proceedings
filed
against the Owner thereunder; or
(d) Appointment
of Receiver:
A
receiver or trustee shall be appointed for the Owner or for all or substantially
all of the assets of the Owner and such appointment is not vacated or otherwise
caused to be set aside within 90 days from the occurrence thereof.
| 8.3 |
Remedies
for Default:
|
Should
any event of default be committed by either party to this Agreement, the
other
party shall have the right to terminate this Agreement, and to enforce such
other rights and remedies on account of such default, both at law and in
equity,
as is provided, established or allowable under applicable law, provided,
however, that either party may terminate this Agreement without penalty if
the
parties are unable to agree upon the Annual Plan provided for in Paragraph
3.2
herein within 30 days after submission of such plan by Manger.
8.4
Optional
Termination.
In
addition, Owner shall have the right, at its option, to terminate this
Agreement:
(a)
in the
event of a sale of a majority of the interests of Owner or of substantially
all
of Owner’s assets; or
(b) in
Owner’s discretion, at any time.
| 8.5 |
Owner’s
Obligation upon Optional Termination:
|
Upon
termination of this Agreement pursuant to Paragraph 8.4, then Owner shall:
|
(i)
|
Reimburse
Manager for all unpaid expenses incurred prior to termination with
respect
to the Business which are reimbursable to Manager pursuant to Paragraph
4.4;
|
|
(ii)
|
Pay
Manager any Base Payment which accrued prior to the
termination;
|
|
(iii)
|
Pay
Manager any Incentive Fee which was due with respect to any Fiscal
Year
which concluded prior to the date of termination; and
|
|
(iv)
|
In
the event of a termination pursuant to Paragraph 8.4(b), to pay
Manager
the lesser of (x) 50% of the Base Payment which would have been
payable to
Manager from the date of termination through December 31, 2010
and (y)
$500,000.
|
18
| 8.6 |
Termination
by Reason of Irreconcilable Differences.
|
In
the
event the parties are unable to agree upon the Annual Plan tendered by Manager
under Paragraph 3.2(a) above within 30 days after submission by Manger then
either party shall have a right to terminate this Agreement without
penalty.
| 8.7 |
Mutual
Rights Upon Termination.
|
Upon
termination of this Agreement:
(a) Manager
may remove all of its proprietary materials including without limitation
its
operating manuals and systems, proprietary computer software and any materials
which may include Manager’s trade secrets and other methods of doing business.
In addition, Manager shall have the right to terminate or cause the termination
of the Business’s participation in any of the pooled programs described in
Paragraph 3.4, provided that such termination shall not take effect, unless
Owner otherwise requests, until the 61st
day
after the last day of management. Manager will cooperate with Owner as
appropriate to the circumstances, in effecting a smooth transition to Owner
or
successor operator.
(b) Manager
will return to Owner all property of Owner which may be in Manager’s possession,
including all documents which contain any proprietary or other financial
information of Owner and its operations.
(c) The
parties will use reasonable efforts to make available to one another such
information as either may require after termination, at the expense of the
party
requesting such information. Use of any such information shall be subject
to the
confidentiality provisions of Paragraph 10 below.
| 8.8 |
Non-Competition:
|
(a) Business
Non-Competition.
During
the period of this Agreement and for two years after the termination thereof,
Manager shall not engage, directly or indirectly, as principal or in a
management or advisory capacity with respect to any Gaming Business located
within a 75 mile radius of any location (not including the corporate office
location) in which Owner has conducted the Business, during the term of this
Agreement. During the period of this Agreement and for two years after the
termination thereof, Owner shall not act in a management or advisory capacity
with respect to any Gaming Business, except with respect to (i) the Business
which Owner currently owns, even after such Business may be sold to a third
party; and (ii) any other Gaming Business in which Owner has an ownership
or
other equity interest. As used herein, “Gaming Business” means an enterprise
which provides gaming opportunities and locations (such as casinos) to members
of the public.
19
(b) Employees.
During
the period of this Agreement and for two years after the termination thereof,
neither Manager nor Owner shall solicit for employment or employ any employee
of
the other, absent consent, which consent may be withheld in each Party’s sole
discretion, provided,
however,
that
any employee employed by Manager prior to the date hereof who is employed
by
Owner upon Manager’s recommendation may be solicited for employment or employed
by either Party.
| 9. |
Indemnification;
Limitation of Obligations
|
(a) Indemnification
by Owner.
The
Owner agrees to indemnify the Manager and to save and hold the Manager harmless
from and against any liability, obligation, suit, claim or demand, asserted
against, or incurred by the Manager (including, without limitation, reasonable
attorneys’ fees and expenses) as a result of, or arising from, or in connection
with, the organization, management, operation or maintenance of the Business
and
the performance of its duties under this Agreement to the fullest extent
permitted by law, except to the extent that any such liability arises from
Manager’s gross negligence or willful misconduct. In no event shall Owner make
any claim against Manager on account of any alleged errors of judgment made
in
good faith in connection with the performance by Manager of the obligations
and
duties set forth herein. Nor shall Owner object to any expenditure made by
Manager in good faith in connection with the performance of Manager’s
obligations hereunder unless such expenditure is specifically prohibited
by this
Agreement.
(b) Indemnification
by Manager.
The
Manager agrees to indemnify the Owner and its shareholders and to save and
hold
the Owner and its shareholders harmless from and against any liability,
obligation, suit, claim or demand, asserted against, or incurred by the Owner
or
such shareholders (including, without limitation, reasonable attorneys’ fees and
expenses) as a result of, or arising from, or in connection with, any gross
negligence or willful misconduct of Manager. In no event shall Manager make
any
claim against Owner except as set forth in this Agreement.
(c) No
Right Against Shareholders or Directors.
Manager
acknowledges that its rights under this Agreement are exclusively against
Owner,
and shall not give rise to any rights against Owner’s shareholders or directors.
| 10. |
Confidentiality
|
(a) Manager’s
Undertaking.
Manager
acknowledges that the information it receives regarding Owner and the Business
during the course of its performance of this Agreement is confidential, and
agrees to use such information solely for the purpose of enabling it to perform
its obligations under this Agreement and for no other purpose. Upon termination
of this Agreement, Manager shall return all documents and other material
containing Owner’s confidential information to Owner. Manager shall also cause
each of its employees to conform to the obligations of this Agreement with
respect to this Agreement as if they were parties thereto.
(b) Owner’s
Undertaking.
Owner
acknowledges that the information it receives regarding Manager’s processes and
procedures during the course of its performance of this Agreement is
confidential, and agrees to use such information solely for the purpose of
this
Agreement and for no other purpose. Upon termination of this Agreement, Manager
shall return all documents and other material containing Manager’s confidential
information to Owner. Owner shall also cause each of its employees to conform
to
the obligations of this Agreement with respect to this Agreement as if they
were
parties thereto.
| 11. |
Estoppel
Certificates:
|
Owner
and
Manager shall, at any time and from time to time upon not less than ten (10)
days prior written request by the other, execute, acknowledge and deliver
a
statement in writing certifying that:
|
(i)
|
This
Agreement is unmodified and in full force and effect (or, if modified,
that the same is in full force and effect, as modified, stating
the
modifications);
|
20
|
(ii)
|
The
date to which payments have been made under this Agreement;
and
|
|
(iii)
|
So
far as Owner or Manager, as the case may be, knows, no default
hereunder
on the part of the other party exists (except that if any such
default
does exist, the certifying party shall specify such default),
|
|
(iv)
|
it
being intended that any such statements delivered pursuant to this
Paragraph 11 may be relied upon by any prospective purchaser, assignee,
or
mortgagee of Owner’s interest in the Business, or of either party’s
interest in this Agreement.
|
| 12. |
Termination
of Consulting Agreement:
|
Manager
agrees that upon the effective date of this Agreement, the Consulting Agreement
shall automatically be terminated, that Manager shall not be entitled to
any
further payment under such Consulting Agreement except for amounts accrued
prior
to the date of such termination under this paragraph.
| 13. |
Notices:
|
Any
notice which may or is required to be given hereunder shall be in writing
including facsimile (“fax”) telex and telegraphic communications, and shall be
(as elected by the party giving the notice) hand delivered by messenger or
courier service, telecommunicated or mailed by registered or certified mail,
return receipt requested, in the mail, postage prepaid addressed to Owner
or
Manager, as the case may be, at the addresses set forth after their respective
names below, or at such different addresses as they shall have theretofore
advised the other in writing in accordance herewith.
|
If
intended for Owner:
Oceans
Casino Cruises, Inc.
000
X Xxxxx Xxxxx Xxxx.
Xxxxx
Xxxxx, Xx 00000
Attn:
Board of Directors
|
||
|
With
a copy at the same time to:
Orchard
Drive LLC
c/o
X.X. Xxxxx & Co., LP
000
Xxxxx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxxxxx Xxxxxxxx
Skylab
Road LLC
c/o
Fortress Investment Group
1345
Avenue of the Xxxxxxxx
00xx
Xxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxx Xxxxxxx
|
||
|
If
intended for Manager:
|
||
|
Nevada
Gold & Casinos, Inc.
00
Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxx,
Xxxxxxx, XX 00000
Attn:
Xxxxxx
X. Xxxxxxx
|
||
21
| 14. |
Approval
By Owner:
|
In
any
instance where the approval or consent of the Owner or Manager is required
or
permitted hereunder, such approval or consent shall be in writing such consent
or approval, except as otherwise specified in this Agreement, shall be in
Owner’s or Manager’s sole discretion, as applicable.
| 15. |
No
Waiver:
|
No
waiver
of any covenant, term or condition of this Agreement by either party shall
be
construed as a waiver of a subsequent breach of the same covenant, term or
condition. The consent or approval by either party to or of any act by the
other
party requiring such consent or approval shall not be deemed to waive or
render
unnecessary, consent to or approval of any subsequent similar act.
| 16. |
Choice
of Law; Attorneys Fees:
|
This
Agreement shall be governed and construed in accordance with the laws of
the
State of New York regardless of the places of its negotiation or execution
and
without regard to principles of conflicts of law. The parties acknowledge
that
there are substantial and not isolated connections with the State of New
York,
including the negotiation of this Agreement in New York, and that each of
them
is subject to the jurisdiction of the courts of such State pursuant to New
York’s Long Arm Statue.
Each
of
the parties submits to the exercise of personal jurisdiction over them in
the
State of New York in connection with any action or proceeding brought by
either
party relating to, arising from, or based on this Agreement, and each of
the
parties waives any objection to the exercise of personal jurisdiction over
each
of them in connection with any such action or proceeding.
The
parties agree that any litigation or court action of any kind relating to,
or
rising from, or based on this Agreement shall be filed in New York, New
York.
If
either
party shall institute legal proceedings against the other party based on
a cause
of action or arising from this Agreement, the non-prevailing party in such
proceeding shall pay the costs and expenses incurred by the prevailing party
in
such proceedings including reasonable attorneys’ fees and any and all costs and
fees incurred on appeal of any lower court decision.
22
| 17. |
Entire
Agreement; Modification:
|
No
employee, agent or representative of either party has the authority to bind
the
other party to any oral additions, modifications, representations or warranties
concerning this Agreement. This Agreement contains the entire agreement between
the parties with respect to its subject matter, and no agreement shall be
effective to change, modify or terminate this Agreement, in whole or in part,
unless such agreement is in writing and duly signed by the authorized
representative of the party against whom enforcement of such change,
modification or termination is sought. This Agreement shall not be construed
more strictly against one party than against the other merely by virtue of
the
fact that this Agreement may have been physically prepared by one of the
parties, or such party’s counsel, it being agreed that both parties and their
respective counsel have mutually participated in the negotiation and preparation
of this Agreement.
| 18. |
Descriptive
Headings:
|
The
descriptive headings set forth in this Agreement are inserted for convenience
and for reference only and do not in any way limit or amplify the terms and
provisions of this Agreement.
| 19. |
Successors
and Assigns:
|
The
terms, provisions and covenants contained in this Agreement shall apply to,
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and permitted
assigns; except as otherwise provided in this Agreement.
| 20. |
Force
Majeure:
|
The
terms
and conditions of this Agreement (with the exception of the obligation of
Owner
to pay or fund the amounts required by the terms of this Agreement, or the
terms
required for an approved Transfer or Transferee) shall be subject to Force
Majeure. Neither Owner nor Manager shall be considered in default in the
performance of its obligation hereunder, if such performance is prevented
or
delayed because of war, hostilities, revolution, civil commotion, strike,
lock-out, epidemic, fire, earthquake, hurricane, flood, or because of any
law,
order, proclamation, regulation, or ordinance of any governmental authority,
or
because of any act of God or any other cause whether of similar or dissimilar
nature beyond the reasonable control of the party affected.
| 21. |
Authorization:
|
Each
of
the parties hereto represents to the other party that it has full power and
authority to execute this Agreement and to be bound by and shall perform
in
accordance with the terms hereof. On request, each party shall furnish to
the
other evidence of such authority.
| 22. |
Counterparts:
|
Any
number of counterparts of this Agreement may be executed and delivered and
each
shall be considered an original and together they shall constitute one
agreement.
23
| 23. |
Severability:
|
If
any of
the provisions of this Agreement or its application shall be held by any
court,
regulatory agency, or other governmental authority having competent jurisdiction
over this Agreement, to be invalid, illegal, or unenforceable in any respect,
the parties shall forthwith cure such invalidity to the extent permitted
by law,
and notwithstanding the fact that such provisions may be held to be of no
force
and effect, the validity, legality, and enforceability of the remaining
provisions contained herein and any other application thereof shall not in
any
way be affected or impaired thereby. If any such provision or portion thereof
is
declared invalid, illegal, or unenforceable, the parties to this agreement
intend that, in lieu of the invalid, illegal, or unenforceable provision
or
portion thereof, there be added to this agreement a provision or portion
thereof
as similar in substance to such invalid, illegal, or unenforceable provision
or
portion thereof as may be possible so as to accomplish the purposes of such
invalid, illegal, or unenforceable provision or portion thereof.
IN
WITNESS WHEREOF, the Owner and the Manager have hereunto set their hands
and
seals on the day and year first above written.
Signed,
Sealed & Delivered
in
the
presence of:
|
OCEAN
CASINO CRUISES, INC.
|
NEVADA
GOLD & CASINOS, INC.
|
|
|
/s/
Xxxxxxx X. Xxxxx
|
/s/
Xxxxxx X. Xxxxxxx
|
|
|
By:
Xxxxxxx X. Xxxxx
Title:
Co-Chairman of the Board of Directors
|
By:
Xxxxxx X. Xxxxxxx
Title:
CEO
|
|
OCEAN
CASINO CRUISES, INC.
|
||
|
/s/
Xxxxxx Xxxxxxx
|
||
|
By:
Xxxxxx Xxxxxxx
Title:
Co-Chairman of the Board of Directors
|
||
24
