EXHIBIT 10.1
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. The
omissions have been indicated by asterisks ("*****"), and the omitted text has
been filed separately with the Securities and Exchange Commission.
EXECUTED AGREEMENT
AGREEMENT
This agreement ("Agreement") is made and entered into as of October
4, 2004 (the "Effective Date"), by and between PLAYBOY ENTERPRISES
INTERNATIONAL, INC., a Delaware corporation ("Playboy"), FIESTA PALMS LLC, a
Nevada limited liability company ("FPLLC") and N-M VENTURES II, LLC, a Nevada
limited liability company (the "Tenant"), Nine Group LLC, a Delaware limited
liability company ("Nine Group") who with FPLLC are members of Tenant (the
Tenant, together with members Nine Group and FPLLC, are referred to collectively
as "Palms").
WHEREAS, FPLLC is the owner of the Palms Casino Resort located at
4321 West Flamingo Road in Las Vegas, Nevada (the "Palms Resort"), N-M Ventures
LLC, a Nevada limited liability company is the lessee of the four venues known
as "N9NE Steakhouse" "ghostbar" "Skin Pool Lounge" "Rain Nightclub" (the
"Existing Venues") at the Palms Resort;
WHEREAS, FPLLC is the owner of a store within the Palms Resort
called the "Palms Store" and N-M Ventures LLC, a Nevada limited liability
company is the owner of a store at the Palms Resort called the "Stuff Store."
WHEREAS, the Tenant will be leasing from FPLLC up to three
additional venues ("New Venues") at the "New Tower" (as defined below) to be
built at the Palms Resort;
WHEREAS, Playboy is the owner of the "Playboy Marks" (as hereinafter
defined) and Palms recognizes and acknowledges that the Playboy Marks are
internationally well-known and recognized by the general public and are
associated in the public mind with Playboy and are designations in which Playboy
has acquired considerable and valuable goodwill; and
WHEREAS, Palms desires to obtain a license to use the Playboy Marks
at the Palms Resort including without limitation, the development and operation
of a Playboy branded lounge with a casino and a night club to be created at the
top two floors of the New Tower, a "Hugh Hefner Sky Villa" (as defined below)
and a "Playboy Store" (as defined below) on the ground level of the New Tower
(the Playboy Store, the Hugh Hefner Sky Villa, and the lounge with the casino
and the night club are referred to together as the "Project") in accordance with
the terms and conditions set forth in this Agreement and Playboy wishes to grant
such license.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
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1. DEFINITIONS.
In this Agreement and any exhibits, addenda or riders hereto, the
following terms shall have the following meanings: "Additional Playboy Venue"
means any Playboy themed or branded club, casino, lounge, restaurant, night
club, tavern, or hotel that is not within the "Playboy Elements" as defined
below.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in Las Vegas, Nevada are authorized by law to
close.
"Co-Branded Merchandise Sales" shall be defined as set forth in
Section 5(d).
"Failure to Open Termination Right" shall mean a right of
termination when pursuant to Section 2(b) below, the Project Opening Date for
the "Nightclub" and "Lounge" (as defined below) does not timely occur.
"Fiscal Quarter" shall mean a fiscal quarter which ends on March 31,
June 30, September 30 or December 31. The first Fiscal Quarter shall be the
period commencing on the date of Project Opening Date for the Nightclub and
Lounge and ending on the last day of the Fiscal Quarter in which the Project
Opening Date for the Nightclub and Lounge occurs. The last Fiscal Quarter shall
be the period commencing on the first day of the Fiscal Quarter in which the
expiration or earlier termination of the term hereof shall occur and ending on
the date of such expiration or termination.
"Force Majeure Event" shall mean an act of God, fire, explosion,
transportation contingencies, unusually severe weather, quarantine, restriction,
epidemic, natural catastrophe, war, acts of terrorism, civil disturbance, acts
of the government of any country or of any governmental agency or official
thereof or court order, beyond its reasonable control, that prevents the
performance by either party of an obligation hereunder for so long as the
excused party makes commercially reasonable efforts to minimize, if and to the
extent possible, the impact of such event.
*****
"Interest Rate" shall mean ***** per annum above the prime lending
rate announced, from time to time, by JPMorgan Chase Bank, N.A. in New York City
or, in the event that JPMorgan Chase Bank, N.A. shall no longer announce its
prime or base lending rate as aforesaid, ***** per annum above the prime rate
from time to time published in the "Money Rates" section of The Wall Street
Journal as being the "Prime Rate" (or, if more than one rate is published as the
Prime Rate, then the average of such rates).
"Nevada Marketing Event for Playboy" shall be as defined in Section
3 below.
"Nevada Licensing Authorities" shall mean the Nevada Gaming
Commission, the Nevada State Gaming Control Board, the Clark County Liquor and
Gaming Licensing Board and any other applicable governmental or administrative
state or local agency involved in the regulation of gaming and gaming activities
in the State of Nevada with jurisdiction over the Palms Resort.
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"Playboy Chips" shall mean gaming chips or tokens using any of the
Playboy Marks produced by or for Palms pursuant to the terms hereof. There are
three types of Playboy Chips. "Rack Playboy Gaming Chips" are those used by
FPLLC as rack or inventory chips for gaming at the Palms Resort. "Commemorative
Playboy Gaming Chips" are those produced and distributed for events involving
the Playboy Indicia and which can be used for gaming at the Palms Resort.
"Playboy Nongaming Chips" are those produced and distributed for souvenirs at
events involving the Playboy Indicia and which cannot be for gaming at the Palms
Resort and cannot be transferred or exchanged for money.
"Playboy Co-Branded Merchandise" shall mean merchandise marked with
both the Playboy Marks and either be logos or marks of the Nine Group, the
Tenant, FPLLC, Palms Resort, the Existing Venues or New Venues.
"Playboy Non-Element Revenue Event" shall mean any event at the
Palms Resort outside of the Playboy Elements that incorporates the Playboy
Indicia at which revenue outside the Playboy Elements are generated.
"Playboy Indicia" shall mean the Playboy Marks, Bunnies, Bunny
Costumes, and other symbols or indicia of source related to Playboy.
"Playboy Marks" shall mean the list of service marks and logos set
forth on Exhibit A attached hereto, as the same may be amended from time to time
by mutual written agreement of the parties hereto.
"Playboy Marketing Use" shall mean using the Playboy Indicia for
marketing or promoting the Project at all locations at the Palms Resort
including weekends and nights that are not part of a Playboy Non-Element Revenue
Event.
"Playboy Membership Incremental Revenue" *****
"Playboy-Only Merchandise" shall mean merchandise that carries only
the Playboy Marks and no other marks.
"Playboy Store Operating Expenses" *****
*****
"Playboy Store Net Profits" shall mean, as to any period, the
Playboy Store Revenues minus Playboy Store Operating Expenses.
"Project Opening Date for the Nightclub and Lounge" is the earlier
of the date either the Nightclub or the Lounge are opened to the public for
business.
"Project Opening Date for the Playboy Store" is when the Playboy
Store opens to the public for business.
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"Project Standard" shall mean a standard of design, construction,
maintenance, operation and management, as applicable, consistent with the
first-class standards employed at the Palms Resort as of the date of this
Agreement.
*****
2. THE PROJECT.
(a) New Tower Description. The Project will be included within a new
tower (the "New Tower") to be built by Palms at the Palms Resort.
The New Tower will (i) be not less than 25 floors above grade, (ii)
include not fewer than 250 guest rooms, (iii) be accessible via
enclosed corridors to the existing Palms Resort buildings, and (v)
be located at the Palms Resort property in the area designated on
Exhibit B attached hereto. Palms will consult with Playboy in
developing the Project, provided, however, that Palms shall retain
sole discretion with regard to all elements and decisions related to
the Project
(b) New Tower Construction. Construction of the New Tower will be
pursued diligently by FPLLC except for interruptions caused by a
Force Majeure Event. Unless interrupted by a Force Majeure Event, if
the Project Opening Date for the Nightclub and Lounge does not occur
by June 30, 2006, then either FPLLC or Playboy may terminate this
Agreement by giving a notice of termination to the other ("Failure
to Open Termination Right"). If the Project Opening Date for the
Nightclub and Lounge does not occur by June 30, 2006 because of a
Force Majeure Event, then the Failure to Open Termination Right
shall be deferred for a reasonable period (not to exceed 90 days) to
accommodate the delay caused by the Force Majeure Event. Termination
of this Agreement by exercise of the Failure to Open Termination
Right does not give rise to a claim for loss or damage. Subject to
compliance with the Project Standard, FPLLC will be solely
responsible (at FPLLC's sole expense) for all aspects of the design,
development, construction and finish of the New Tower, including,
without limitation, all permits, approvals and licenses.
(c) New Tower Signage. Playboy icon signage and Palms Resort signage
shall be installed on the east face of the New Tower (collectively,
the "New Tower Signage"). The design of the New Tower Signage shall
be as shown on Exhibit C attached hereto and by reference
incorporated herein.
(d) Playboy Elements. The Project will consist of the following Playboy
branded components (collectively, the "Playboy Elements") at the
Palms Resort. The floorplan of the Playboy Elements shall be as
shown on Exhibit D attached hereto and by reference incorporated
herein, and any material changes to the floorplan and structural
elements that materially changes the look and feel of the Playboy
Elements, or requires the closing of the Playboy Elements for three
(3) consecutive days after the Effective Date shall require the
consent of both parties and be reflected in a revised Exhibit D:
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(i) An exclusive high-end dance venue at the top floor of the New
Tower (the "Nightclub") linked by escalators and elevators to
a casino on the floor below the name of which will be "Moon."
(ii) A separate lounge with a casino of approximately 12,000 square
feet, immediately below the Nightclub, which shall be known by
the name or a name similar to "The Playboy Lounge and Casino"
(the "Lounge").
(iii) An approximately 750 square foot Playboy branded retail store
shall be located on the ground level of the New Tower (the
"Playboy Store").
(iv) A two-level approximately 10,000 square foot super villa (the
"Hugh Hefner Sky Villa") shall be located at the highest guest
floor in the New Tower which FPLLC will use its best efforts
(subject to health, safety and engineering constraints) to
feature indoor/outdoor pools.
(e) New Tower, Playboy Store and Project Management. Subject to the
Nevada Licensing Authorities, FPLLC will operate the gaming in the
casino immediately below the Nightclub, the Playboy Store, and the
Hugh Hefner Sky Villa and either Nine Group Management, Inc. or Nine
Group Management II, Inc. will operate the Nightclub and the Lounge
on behalf of Tenant. All management will be at a quality of
operation equal to or better than the Project Standard. FPLLC and
Playboy may mutually agree to form a new special purpose entity to
lease the Playboy Store area from FPLLC and to operate the Playboy
Store. In such event, reference to Playboy Store Revenues and
Playboy Store Operating Expenses will be references to the revenues
and operating expenses, respectively of such new special purpose
entity. References to Playboy Store Net Profits will be references
to the net profits of such new special purpose entity.
(f) Operating Covenants. *****.
3. GRANT OF LICENSE AND RELATED RIGHTS.
(a) Grant. Subject to the provisions of this Agreement, Playboy hereby
grants (and will cause its licensing subsidiaries to grant) to
Palms, and Palms hereby accepts, the right and license to use
publicly display, copy, reproduce and alter (subject to the
provisions of Paragraph 4(c) below) the Playboy Marks in connection
with the operation of the Playboy Elements and the Palms Resort and
in the marketing and promotion thereof, including without limitation
the right to produce or commission the production of the items
listed on Exhibit E and any Playboy Co-Branded Merchandise, provided
that Palms shall submit the first prototype of any such item to
Playboy for approval in accordance with Paragraph 4(c). *****. The
License is granted exclusively to Palms and not to any individual or
entity that holds an interest in Palms for use in connection with
business at the Palms Resort. Anything in this Paragraph 3(a) to the
contrary notwithstanding, Playboy will retain the right to use and
license third parties the right to use Playboy's
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trademarks and other intellectual properties on slot machines and
other gaming devices. *****.
(b) Warranty. Playboy warrants that: (i) it has the right to grant the
License hereunder; (ii) it directly or through a subsidiary owns the
Playboy Marks; and (iii) Palms may use the Playboy Marks as provided
hereunder free from any claim by third parties.
(c) Competition.
(i) During the term hereof, without prior written approval from
Playboy's General Counsel at the contact listed in Section 8
below, Palms shall not: (x) display, sell or permit to be sold
at the Playboy Elements any marks or names, or any merchandise
bearing or identified with the marks or names, of any of the
following persons or entities: ***** (the foregoing persons or
entities are collectively referred to as "Competitors"), (y)
use any Playboy Indicia at any events to sell any merchandise,
sponsored by or associated with any Competitor or (z) rename
an Existing Venue with a mark associated with any Competitor
at the Palms Resort.
(ii) Commencing on the Project Opening Date for the Nightclub and
Lounge, Playboy shall, for itself and its affiliates and
subsidiaries, book all "Nevada Marketing Events for Playboy"
at the Project or Palms Resort. Palms shall offer Playboy its
best competitive rate in connection with such bookings. If the
Project or Palms, using its best efforts, cannot accommodate
any such Nevada Marketing Events for Playboy, such Nevada
Marketing Events for Playboy may be conducted at one or more
other locations in Clark County, Nevada (the "Alternate
Location"), provided that if Playboy desires to book such
Nevada Marketing Event for Playboy at an Alternate Location
that is another hotel or casino in Las Vegas, then in such
case Palms shall have the right of approval over such
Alternate Location. A Nevada Marketing Event for Playboy is a
marketing or promotional events held by Playboy in the State
of Nevada, but it does not include the mere exhibiting at a
trade show, (for example at the Las Vegas Convention Center),
provided however that a party celebrating the exhibition at a
hotel or casino or restaurant or nightclub in Nevada would be
considered a Nevada Marketing Event for Playboy. Palms must
respond to Playboy's request to book a Nevada Marketing Event
for Playboy within ten (10) business days or it shall be
deemed that Palms cannot accommodate such request. From the
Effective Date until the Project Opening Date for the
Nightclub and Lounge, Playboy agrees that it shall not book
any Nevada Marketing Events for Playboy at the *****
(d) Co-branding and Sales at the Playboy Store. Subject to following the
approval procedures set forth in Paragraph 4(c), the license
includes the right to sell Playboy Co-Branded Merchandise at the
Stuff Store, the Palms Store, the Playboy
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Store and through any Palms online internet store (including,
without limitation the online internet store operated on the date of
this Agreement by the Nine Group), if any. The sale of Playboy-Only
Merchandise, shall be sold only at the Playboy Store and shall not
be sold at the Stuff Store, the Palms Store or any Palms online
internet store or any other retail sales outlet controlled by or
affiliated with Palms. For clarification, the Playboy Store shall
not be limited to selling Playboy-Only Merchandise or Playboy
Co-Branded Merchandise, and other merchandise may also be sold at
the Playboy Store. All Playboy-Only Merchandise and Playboy
Co-Branded Merchandise shall be sold by Palms at prices that are
competitive to the prices charged by other sellers of comparable
merchandise using a commercially reasonable standard. All sales of
Playboy Co-Branded Merchandise, including through an on line
internet store, are subject to the provisions herein, including
specifically 3(d), 4(c), 5(c), and 5(d).
(e) Playboy Chips. FPLLC shall have the right to produce or cause to be
produced Playboy Chips, the design of which shall be approved by
Playboy in accordance with Paragraph 4(c).
(f) Decor. Playboy may, subject to availability, provide Palms with
promotional and decor items to use in connection with the Project,
which will be provided at no cost to Palms, except that Palms will
pay the actual costs of shipping, insuring and securing such items.
All such items will remain the property of Playboy. Playboy will
also provide, without charge to Palms (except for actual
out-of-pocket reproduction costs), style sheets and camera-ready
artwork from which Palms may appropriately reproduce the Playboy
Marks pursuant to at its own expense. Palms may reject promotional
and decor items and return same to Playboy.
(g) Assignment / Change of Control. Without the approval of Playboy's
General Counsel at the contact information listed in Section 8
below, the License and all rights and duties hereunder with respect
to the License may only be assigned, sold or sublicensed to a person
who buys (or acquires through a foreclosure or trustees' sale) the
whole or substantially all of the assets of FPLLC or Tenant and who
obtains (or has a manager, receiver or supervisor obtain) all
required liquor or gaming licenses from the Nevada Licensing
Authorities to operate the business formerly operated by FPLLC or
Tenant, and agrees to be subject to the ongoing rights and
obligations of this Agreement (a "Change of Control"), ***** Without
the prior written approval of Playboy's General Counsel at the
contact information listed in Section 8 below, the License and all
rights and duties hereunder with respect to the License may not be
mortgaged or otherwise encumbered by FPLLC, Nine Group or Tenant.
Any attempt by any of Nine Group, FPLLC or Tenant to separately
assign, mortgage, sublicense or otherwise encumber this Agreement or
any of the rights and duties hereunder not in connection with a
Change of Control without the prior written consent from Playboy's
General Counsel at the contact information in Section 8 below (which
may be withheld in Playboy's sole and absolute discretion) shall
constitute a material event of default. Playboy hereby approves the
grant by Palms of a security interest in its rights under this
Agreement to secure Palms' obligations
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under a credit agreement and amendments, restatements, or
modifications thereto with Wells Fargo, N.A. (on its own behalf or
administrative agent for other lenders), the outstanding borrowings
of which shall be used for purposes which include, without
limitation, the financing, construction and operation of the New
Tower. Playboy will sign customary and reasonable estoppel
certificates or consents in connection with the foregoing, which
estoppel certificates or consents will not impair or alter any of
Playboy's rights under this Agreement.
(h) Pre-Opening Matters.
(i) Prior to the Project Opening Date for the Nightclub and
Lounge, (x) Palms shall host, at Palms' sole cost and expense,
a mutually agreed upon number of promotional events at the
Palms Resort to promote the Project and Playboy will cooperate
with Palms in connection with the production of such
promotional events and (y) Playboy and Palms will jointly host
a mutually agreed upon promotional event at Playboy Mansion
West to promote the Project and, in connection therewith,
Palms shall pay all of the actual out-of-pocket costs and
expenses, but not a fee just for the use of Playboy Mansion
West. For each of the promotional events promoting the
Project, Palms may produce and distribute to patrons and
guests Commemorative Playboy Gaming Chips or Playboy Nongaming
Chips. Palms will pay to Playboy a "Percentage Fee" (as
defined below) of ***** of the face amount of any
Commemorative Playboy Gaming Chips, within thirty (3)) days
following the date of any such promotional events. Palms is
not required to pay Playboy a Percentage Fee for Playboy
Nongaming Chips. All uses of the Playboy Marks at each such
promotional event will be strictly in accordance with the
terms hereof.
(ii) Pre-Opening Ads. *****
(iii) Announcement. Playboy and Palms will mutually agree on a
public announcement of the Project. Palms acknowledges that
the timing of such announcement may be affected by SEC rules
and disclosure requirements.
(i) Additional Playboy Covenants. During the term hereof, Playboy shall
provide Palms with the following:
(i) *****
(ii) *****
(iii) *****
(iv) subject to the provisions of Section 4(c), the right to use
the Playboy Indicia for a Playboy Marketing Use, provided such
uses will not, in any event, include references to
Competitors;
(v) *****
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(vi) from time to time during the Term of this Agreement, but in
any event no more frequently than ***** times per year, each
party shall send promotional materials, direct promotion
pieces and invitations for events that help promote the
Playboy Elements to its customer lists, magazine subscribers,
on-line subscribers, and celebrity mail list members, as
applicable. Written material to be mailed will be provided by
the party desiring the mailing and after mailing the other
party shall send a verified invoice for any postage, material
and labor costs incurred by the mailing party and the other
party shall have thirty (30) days within which to pay such
invoice.
(vii) Playboy and palms agree to work together during the Term of
this Agreement to maximize opportunities for the assets of
both parties, including Playboy's television networks,
magazine, and ancillary products, licensing and online
services. Playboy will cause any of its subsidiaries to
perform their respective obligations under this Agreement.
(j) Playboy to Offer Concierge Services. Playboy shall have the right to
offer concierge services through a company such as ***** that will
allow the purchasers of such services to receive preferential line
treatment for the Nightclub and Lounge (the "Concierge Services).
Playboy and Palms agree that the Concierge Services shall only
require the accommodation of a reasonable number of persons and
shall work like other similarly situated services.
4. APPROVAL AND CONTROL.
(a) *****
(b) *****
(c) *****
(d) Use and Goodwill. Palms shall reasonably conduct its business in
accordance with all applicable laws and not in a manner that
reflects adversely upon the good name of Playboy or the Playboy
Marks. Any goodwill arising out of Palms' use of the Playboy Marks
will inure solely to the benefit of Playboy. Palms shall use the
Playboy Marks to identify the Playboy Elements at the Palms Resort
and those personnel within the Palms Resort to be designated as
"Bunnies" and that any unauthorized use of the Playboy Marks will
constitute an infringement of the rights of Playboy.
(e) Playboy Bunnies. The Playboy Bunny is one of the most important
symbols of Playboy and maintenance of the quality and goodwill
associated with the symbol is central to the License. Consequently,
for the mutual benefit of both Palms and Playboy, all Bunnies
employed by Palms must conform to the high standards of personal
appearance and moral conduct which the Playboy Bunny symbol
represents and which may be determined from time to time by Playboy.
Upon notice to Palms, Playboy will have the right to interview and
observe Palms'
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Bunnies and ensure that the Bunnies conform to the high standards of
personal appearance established by Playboy. Palms obligates itself
to employ persons which Palms reasonably believes are of good moral
character and conduct as Bunnies who will not bring discredit to the
Playboy Bunny symbol or Playboy. It is the purpose of this Paragraph
4(e) to ensure that the value of the Bunny symbol will not be eroded
and to maintain uniformity in the appearance of the symbol. Palms
will employ a Bunny supervisor ("Bunny Mother") who is subject to
the ongoing reasonable approval of Playboy, for purposes of Bunny
training and maintaining conformity to reasonable standards set by
Playboy. Palms may ask the Bunny Mother to perform other management
and supervisory work appropriate to her level of training and
experience. Playboy will provide, at no cost to Palms, initial
orientation training of Palms' Bunnies and the Bunny Mother. Palms
will have complete control over all personnel policies and labor
relations at the Project and it is not the intent of this Paragraph
4(e) to affect or influence that control. In accordance with
Paragraph 4(c), Playboy will approve all Bunny uniforms.
(f) Separate Identity. Palms shall not use any of the Playboy Marks as
part of its corporate or other legal name. Palms shall not conduct
business with its suppliers, employees, government agencies or
others in the name of Playboy, or in any manner which suggests that
Palms is an affiliate of Playboy or that Palms is authorized to act
for or bind Playboy.
(g) No Contest of Playboy's Rights. Palms agrees that it will not,
during the term of this Agreement, or at any time thereafter,
directly or indirectly, contest or aid others in contesting the
validity of any of the Playboy Marks or the exclusive ownership and
rights to the use thereof by Playboy.
(h) Infringements. Palms will promptly notify Playboy of any
infringement of the Playboy Marks that directly interferes with the
Project or violates the rights granted to Palms hereunder. In the
event of such notice, Playboy shall take such legal action as is
reasonable and commercially practical under the circumstances. In
the event of any monetary recovery by Playboy in connection with the
enforcement of its rights as required herein, Playboy shall be
entitled to recoup its costs in obtaining such recovery or judgment
and the remainder, if any, shall be split equally between Playboy
and Palms. Palms will cooperate fully with Playboy in any such
action Playboy may decide to take. In no event shall Playboy be
responsible to Palms for any incidental or consequential damages,
such as lost profits, that may result from any such infringement.
(i) Complaints. Palms shall immediately notify Playboy of any complaint
or legal action asserted against it by reason of the use of any of
the Playboy Marks and Playboy shall defend or settle any such legal
action in any manner and on any terms it shall deem appropriate. Any
costs, including, but not limited to, awards of damages, amounts
paid in settlement, attorneys' fees, court costs and disbursements
incurred in defending or settling any such legal action and that may
be assessed against the Palms by reason of the use of the Playboy
Marks in
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accordance with the terms and conditions of this Agreement shall be
paid by Playboy. In no event shall Playboy be responsible to Palms
for any incidental or consequential damages, such as lost profits,
that may result from any such action.
(j) Intellectual Property Notices. Palms shall utilize such reasonable
trademark and copyright credit notices and such other consumer
notices or information as Playboy may request from time to time.
(k) Permutations. Playboy acknowledges and agrees that the marks
associated with the Existing Venues and the New Venues, along with
permutations of such marks, are the property of the Nine Group (the
"Nine Marks"). Playboy acknowledges and agrees that the marks and
permutations of marks associated with Palms Resort are owned or
licensed by FPLLC and are the property of FPLLC (the "Palms Marks").
Any goodwill arising out of the Palms' use of the Palms Marks or the
Nine Marks will inure solely to the benefit of Palms and/or Nine
Group respectively. Playboy acknowledges and agrees that the extant
Nine Marks and Palms Marks are not permutations of the Playboy Marks
and upon expiration or termination of this Agreement the owners of
the Palms Marks and Nine Marks are permitted to continued use of the
Palms Marks and Nine Marks so long as they do not incorporate any
Playboy Marks or permutations of the Playboy Marks. Palms shall not
during or after the term of this Agreement use or cause or authorize
to be used any words, device, design or symbol confusingly similar
to the Playboy Marks except as authorized by Playboy.
5. LICENSE FEES AND REPORTING.
In consideration of the rights to use the Playboy Marks at the Palms
Resort, Palms will pay Playboy the following by electronic transfer, which shall
be payable in arrears:
(a) Fixed Fee. Commencing on the Project Opening Date for the Nightclub
and Lounge and thereafter until termination (subject to Paragraph
6(e)) of this Agreement, *****
(b) Percentage Fees. Commencing on the Project Opening Date for the
Nightclub and Lounge and thereafter until termination (subject to
Paragraph 6(e)) of this Agreement, a percentage fee (the "Percentage
Fee") *****
(i) *****
(ii) *****
(iii) *****
(iv) *****
(v) *****
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(c) Monthly Statement. Commencing on the earlier of the Project Opening
Date for the Playboy Store or the date Palms commences selling
Playboy-Only Merchandise and/or Playboy Co-Branded Merchandise,
whether at the Palms Resort or online, and thereafter until
termination (subject to Paragraph 6(e)) of this Agreement, Palms
shall furnish or cause to be furnished to Playboy a monthly
statement of each calendar month's Shared Revenues with a
calculation of Percentage Fees within twenty-one (21) days after the
end of each calendar month. Such statements shall be in a form
mutually acceptable to Palms and Playboy and shall be certified by
an officer or responsible employee of either FPLLC or Tenant as an
accurate accounting of such amounts. Palms will accompany each such
statement with payment by electronic transfer to Playboy in an
amount equal to the Percentage Fee and Playboy Store Net Profits
calculated in accordance with Paragraph 5(b) hereof.
(d) Late Payments. If Palms fails to pay within ten (10) calendar days
when the same is due any fee payable hereunder, the unpaid amounts
shall bear interest at the Interest Rate, from the date the unpaid
amount was initially due, to and excluding the date of payment;
provided, however, that the interest provided for in this Paragraph
5(d) shall not in any way limit Playboy's right to declare Palms in
default of this Agreement for failure to pay an amount within ten
(10) calendar days when the same is due and pursue all rights and
remedies in connection therewith, including, without limitation, the
right to terminate this Agreement.
(e) Records. At the time of a sale or other transaction upon which a
Percentage Fee, Playboy Store Net Profits, Playboy-Only Merchandise
Net Profits or Co-Branded Merchandise Sales are payable hereunder,
Palms shall record the sale or other transaction in auditable point
of sale computer systems installed and operated by either FPLLC or
Tenant which are used for the recording of transactions to be
reported either to the Nevada Licensing Authorities or the
department of taxation of the State of Nevada. FPLLC and Tenant
shall maintain records on these existing point of sale computer
systems for the same period of time and in the same form as are
required by the Nevada Licensing Authorities and the department of
taxation of the State of Nevada, but in any case no less than three
(3) years after such records are created. Promptly, upon request,
FPLLC and Tenant will make copies of these records available at the
Palms Resort for two inspections in each calendar year by Playboy's
representatives who are engaged in inspecting and/or auditing Palms'
books and records as provided herein.
(f) Audits. Playboy, at any time within three (3) years after receipt of
any monthly statement required under this Section and upon not less
than fifteen (15) days' prior written notice to Palms, may cause two
audits in each calendar year to be made of Shared Revenues and all
of Palms' records and books necessary to audit such items. Palms
shall make all such books and records available for the audit at the
Palms Resort. A copy of the audit report shall be furnished by
Playboy to Palms regardless as to whether any additional Shared
Revenues are found to be due. If the audit discloses an underpayment
of Shared Revenues, Palms shall promptly pay to Playboy the amount
of the underpayment, with interest at the
12
Interest Rate, from the date the payment should have been made
through and including the date of payment. If the audit discloses an
underreporting of Shared Revenues in excess of *****of the reported
Shared Revenues, then Palms shall also immediately pay to Playboy
all reasonable costs and expenses incurred in performing the audit
and in collecting the underpayment. If the audit discloses an
overpayment of Percentage Fee or Playboy Store Net Profits, Palms
shall be entitled to a prompt refund from Playboy. Playboy shall be
permitted to audit Shared Revenues for any single year only once,
unless a subsequent audit discloses an irregularity in Palms'
reporting, in which event the foregoing limit shall not apply.
(g) Confidentiality. Playboy agrees that it shall use its reasonably
good faith efforts to not disclose to any third party the Shared
Revenues or the amount of Percentage Fees paid or payable by Palms;
provided, however, that (a) such information was not previously
disclosed by Palms to such third party or to the public generally,
and (b) nothing contained herein shall restrict Playboy from
disclosing such information (i) as may be required by law (including
any securities laws) or (ii) to its accountants, investment bankers,
attorneys or bona-fide prospective or current lenders, capital
providers or purchasers, provided that each of such recipients shall
be bound to the same non-disclosure provisions as are imposed upon
Playboy.
6. TERM AND TERMINATION.
(a) *****
(b) *****
(c) *****
(d) *****
(e) Effect Of Termination.
(i) Upon the expiration or earlier termination of this Agreement,
however caused, all rights and privileges of Palms hereunder
shall terminate and revert to Playboy, and Palms shall not
thereafter make any intentional use whatever of any of the
Playboy Marks or sell any Playboy-Only Merchandise or Playboy
Co-Branded Merchandise. Termination of the Agreement ends the
obligation by Palms to pay Fixed Fee and Percentage Fees,
except with regard to any Fixed Fee or Percentage Fees accrued
but not yet paid to Playboy as of the termination, and the
obligation by Playboy to provide any advertisements, banner,
direct mailings or access to Playboy Mansion West. Palms
shall, at its own expense, as soon as may reasonably be
accomplished remove and efface or destroy all references to
Playboy or to any of the Playboy Marks from any services,
products, materials, supplies and equipment of Palms and from
all business paper, stationery, signs, labels, packaging
material, advertising,
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or the like, used or maintained by Palms, including telephone
directory listings, as soon as may reasonably be accomplished,
and Palms shall not thereafter hold forth in any manner
whatsoever that Palms has or ever had any connection with
Playboy.
(ii) Palms acknowledges that its failure to promptly make
reasonable efforts to cease use of any of the Playboy Marks at
the termination of this Agreement will result in immediate and
irreparable damage to Playboy and to the rights of any
subsequent licensees. Palms acknowledges and admits that there
is no adequate remedy at law for such failure to cease such
use, and Palms agrees that in the event of such failure,
Playboy shall be entitled to equitable relief by way of
temporary and permanent injunctions and such other further
relief as any court with jurisdiction may deem just and
proper. Resort to any remedies referred to herein shall not be
construed as a waiver of any other rights and remedies to
which Playboy is entitled under this Agreement or otherwise.
7. INDEMNIFICATION AND INSURANCE.
(a) Indemnity to Palms. Playboy shall indemnify, defend and hold
harmless Palms, its subsidiaries and affiliates, their respective
shareholders, partners and members and the agents, managers,
officers, directors and employees of each from and against all
costs, claims, suits, losses, damages and expenses (including,
without limitation, reasonable attorneys' fees and litigation
expenses) arising out of the authorized use of the Playboy Marks on
or in connection with the Project. Playboy shall have the option to
settle or to undertake and conduct the defense of any such claim or
suit. Playboy shall not be entitled to settle any such claim or suit
on behalf of Palms unless Playboy is responsible for any payment to
be made by Palms and obtains a release of all claims against Palms
under any such settlement. Palms may, through counsel of Palms' own
choice and at its own expense, participate in any such claim or
suit, but in such event Playboy shall have sole and exclusive
control over such defense, and Playboy's decisions with respect
thereto shall govern and control. Palms expressly covenants that no
discussion by Palms whatsoever with any claimant or litigant, no
compromise or settlement by Palms of any claim or suit and no
negotiations by Palms with respect to any compromise or settlement
shall be had, made or entered into with out, in each instance, the
prior written approval of Playboy.
(b) Indemnity to Playboy. Except as provided in Section 7(a) above,
palms shall indemnify, defend and hold harmless Playboy, any parent
and subsidiaries and affiliates, shareholders, agents, officers,
directors and employees of each of the foregoing (hereinafter
collectively referred to as "Indemnitees") from and against all
costs, claims, suits, losses, damages and expenses (including,
without limitation, reasonable attorneys' fees and litigation
expenses) arising out of or in connection with: (i) the design,
construction, ownership, operation or management of the Palms Resort
(including, without limitation, the Project); (ii) Palms'
performance hereunder or any alleged action or failure to act
whatsoever
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by Palms; (iii) non-conformity to or non-compliance with any law
pertaining to the Palms Resort (including, without limitation, the
Project); or (iv) any breach by Palms of any of its representations
or warranties hereunder. Palms shall have the option to settle or to
undertake and conduct the defense of any such claim or suit. Playboy
may, through counsel of Playboy's own choice and at its own expense,
participate in any such claim or suit, but in such event Palms shall
have sole and exclusive control over such defense, and Palms'
decisions with respect thereto shall govern and control. Playboy
expressly covenants that no discussion by Playboy whatsoever with
any claimant or litigant, no compromise or settlement by Playboy of
any claim or suit and no negotiation by Playboy with respect to any
compromise or settlement shall be had, made or entered into without,
in each instance, the prior written approval of Palms.
(c) Limitation on Indemnity. In no event shall such indemnification in
(a) or (b) above include incidental or consequential damages, even
if the "Indemnifying Party" (as defined below) is aware of such
damages, including, but not limited to compensation or reimbursement
for loss of prospective profits, anticipated sales or other losses
occasioned by termination of the Agreement or any other reason.
(d) Indemnification Procedure. All claims for indemnification based on
or arising from a third party claim shall be asserted and resolved
as set forth in this Section. In the event that any claim or demand
by a third party for which one party (the "Indemnifying Party") may
be required to indemnify the other (the "Indemnified Party")
hereunder (a "Claim") is asserted against the Indemnified Party by a
third party, the Indemnified Party shall as promptly as practicable
following the Indemnified Party's receipt of notice of such Claim,
notify the Indemnifying Party in writing of such Claim, and such
notice shall specify (to the extent known) in reasonable detail the
amount of such claim and any relevant facts and circumstances
relating thereto (the "Demand"); provided, however, that any failure
to give such prompt notice or to provide any such facts and
circumstances shall not constitute a waiver of any rights of the
Indemnified Party, except to the extent that the rights of the
Indemnifying Party are actually prejudiced thereby.
(e) Contribution. In the event that a loss, liability, claim, damage or
expense is caused by more than one Indemnifying Party, each
Indemnifying Party whose actions or omissions shall have caused the
loss, liability, claim, damage or expense shall contribute to the
aggregate amount of any losses, liabilities, claims, damages and
expenses owed in such proportion as is appropriate to reflect their
relative fault in connection with the actions or omissions which
resulted in such losses, liabilities, claims, damages or expenses,
as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action or omission. The
Indemnifying Parties agree that it would not be just and equitable
if contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. The
aggregate amount of losses, liabilities, claims, damages and
expenses
15
shall be deemed to include any legal or other expenses reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding commenced or
threatened.
(f) Insurance. FPLLC shall obtain and maintain at substantially similar
levels throughout the Term, at its expense, all insurance required
by the first lien mortgage lender for the Palms Resort (including,
without limitation, the Project) and Tenant shall obtain and
maintain at its expense at substantially similar levels throughout
the Term all insurance required by the leases for the Existing
Venues and the New Venues, which insurance shall name Playboy as an
additional insured on the liability coverage and if Playboy has an
insurable interest in property at the Palms Resort as an additional
named assured on the property damage coverage. Palms shall provide
Playboy with a certificate of all relevant insurance policies
indicating coverage limits and deductibles on an aggregate and per
occurrence basis.
8. MISCELLANEOUS PROVISIONS.
(a) No Waiver. The waiver of any breach of any term, covenant or
condition of this Agreement by any of the parties hereto shall not
constitute a continuing waiver nor a waiver of any subsequent
breach, either of the same or any other term, covenant or condition
of this Agreement.
(b) Partial Invalidity. In the event that any portion of this Agreement
shall be unenforceable in whole or in part, said provision shall be
limited or curtailed to the extent necessary to bring it within the
requirement of present or future law, and this Agreement shall be
construed as if said provision had been incorporated herein as so
limited, or as if said provision has not been included herein, as
the case may be.
(c) Integration. This Agreement together with the exhibits annexed
hereto constitutes the entire agreement and understanding among the
parties upon the subject matter of this Agreement. Any prior
understandings and agreements between the parties regarding such
subject matter are merged herein and superseded hereby.
(d) License Relationship. The rights and powers herein granted to Palms
are those of a licensee only and is not intended to create any other
relationship. It is expressly understood and agreed that Playboy
shall not under any circumstances be liable to Palms for all or any
part of any losses Palms may sustain except for losses or damages
caused by a breach of this Agreement by Playboy. No party shall have
power to obligate or bind any of the others in any manner
whatsoever.
(e) Licenses. Palms will comply with all federal, state and local laws,
rules and regulations and Palms will be solely responsible for
obtaining and maintaining, at its own expense, any and all licenses,
permits and approvals (including governmental and all other
licenses, permits and approvals) necessary for the
16
operation of the Palms Resort, including, without limitation, the
Project. Except as provided in Paragraph 7(i) below, in the event
Palms is unable, for any reason, to obtain and maintain throughout
the term hereof all of such licenses, permits or approvals, such
inability will be an incurable default hereunder.
(f) *****
(g) Governing Law and Jurisdiction.
(i) This Agreement shall be governed and construed in accordance
with the laws of the State of Nevada applicable to contracts
to be made and performed entirely therein without giving
effect to the principles of conflicts of law thereof or of any
other jurisdiction.
(ii) Each of the parties hereto hereby expressly and irrevocably
submits to the nonexclusive personal jurisdiction of the
United States District Court for the District of Nevada and to
the jurisdiction of any other competent court of the State of
Nevada located in the County of Clark (collectively, the
"Nevada Courts"), preserving, however, all rights
of removal to such federal court under 28 U.S.C.
Section 1441, in connection with all disputes arising out of
or in connection with this Agreement or the transactions
contemplated hereby and agrees not to commence any litigation
relating thereto except in such courts. If the aforementioned
courts do not have subject matter jurisdiction, then the
proceeding shall be brought in any other state or federal
court located in the State of Nevada, preserving, however, all
rights or removal to such federal court under 28 U.S.C.
Section 1441. Each party hereby waives the right to any other
jurisdiction or venue for any litigation arising out of or in
connection with this Agreement or the transactions
contemplated hereby to which any of them may be entitled by
reason of its present or future domicile. Notwithstanding the
foregoing, each of the parties hereto agrees that each of the
other parties shall have the right to bring any action or
proceeding for enforcement of a judgment entered by the Nevada
Courts in any other court or jurisdiction.
(h) Notices. All notice, consents and other communications hereunder
shall be in writing and shall be deemed to have been given (a) when
delivered by hand or by Federal Express or similar overnight courier
or (b) when successfully transmitted by telecopier (with a
confirming copy of such communication to be sent as provided in
clauses (a) or (b) above) to the party for whom intended, at the
address or telecopier number for such party set forth below (or at
such other address or telecopier number for a party as shall be
specified by like notice):
If to Playboy, to:
Jim Griffiths
Senior Executive Vice President
17
Playboy Enterprises International, Inc.
2706 Media Center Drive
Los Angeles, California 90065
Fax No. 323 276 4505
With a copy to:
Howard Shapiro
General Counsel
Playboy Enterprises International, Inc.
680 North Lake Shore Drive
Chicago, Illinois 60611
Fax No. 312 266 2042
If to FPLLC:
Palms Casino Resort
4321 West Flamingo Road
Las Vegas, Nevada 89103
Attention: George J. Maloof, Jr.
Fax No. (702) 942-7001
With a copy to:
Mr. Thomas K. Land
Palms Casino Resort
4321 West Flamingo Road
Las Vegas, Nevada 89103
Fax No. (702) 942-7014
Mark H. Goldstein, Esq.
Lionel Sawyer & Collins
300 S. 4th Street
Las Vegas, NV 89101
Fax No. (702) 383-8845
If to the Tenant or Nine Group:
Nine Group, LLC
In care of: Palms Casino Resort
4321 West Flamingo Road
Las Vegas, Nevada 89103
Attention: Scott DeGraff
Fax No. (702) 933-5625
With a copy to:
Harold S. Dembo, Esq.
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Katz Randall Weinberg & Richmond
333 W Wacker Dr Ste 1800
Chicago, IL 60606
Fax No. 312-807-3903
(i) Suitability for the Nevada Licensing Authorities.
Playboy acknowledges and agrees that Palms and its affiliates are engaged in
businesses that are subject to or exist because of privileged licenses issued by
the Nevada Licensing Authorities. Playboy agrees to apply for and obtain any
licenses, approvals, findings of suitability or other clearance if so requested
or required by any Nevada Licensing Authority. If (i) Playboy fails to satisfy
any licensing requirement referred to above, or (ii) if any Nevada Licensing
Authority directs Palms to terminate its relationship with Playboy, or (iii) if
Palms reasonably determines that Palms' continued relationship with Playboy
could or does jeopardize Palms' privileged licenses, approvals or findings of
suitability, or (iv) if any such license, approval or finding of suitability is
threatened to be, or is, denied, curtailed, suspended or revoked by the Nevada
Licensing Authorities as a result of Palms' relationship with Playboy, Palms
may, notwithstanding the provisions of Section 6 hereof, terminate this
Agreement effective immediately upon written notice to Playboy stating the basis
for such termination.
(j) No Brokers. Playboy and Palms agree to indemnify and hold one
another harmless from and against any claim for any brokerage or
other commission or finders fee made by any other person or entity
claiming to have acted on the behalf of the indemnifying party by
reason of this Agreement.
(k) No Agency or Partnership. Palms does not, in any way or for any
purpose, become a partner, employer, principal, master, agent or
joint venturer of or with Playboy. Playboy does not, in any way or
for any purpose, become a partner, employer, principal, master,
agent or joint venturer of or with Palms.
19
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
PLAYBOY ENTERPRISES INTERNATIONAL, INC.
By: /s/ James F. Griffiths
-------------------------------------------------
James F. Griffiths
Title: Senior Executive Vice President
------------------------------------------------
FIESTA PALMS LLC
By: /s/ George J. Maloof, Jr.
-------------------------------------------------
George J. Maloof, Jr.
Title: Manager
------------------------------------------------
NINE GROUP LLC
By: /s/ Scott DeGraff
-------------------------------------------------
Scott DeGraff
Title: Manager
------------------------------------------------
N-M VENTURES II, LLC
By: /s/ Scott DeGraff
-------------------------------------------------
Scott DeGraff as Manager of Nine Group II, LLC
Title: Member
------------------------------------------------
20
EXHIBIT A
ATTACHED TO AND MADE A PART OF
THE TRADEMARK LICENSE AGREEMENT BETWEEN
PLAYBOY ENTERPRISES INTERNATIONAL, INC.
AND
FIESTA PALMS LLC and N-M VENTURES II, LLC
DATED AS OF October 4, 2004
PLAYBOY
RABBIT HEAD DESIGN
BUNNY
BUNNY COSTUME
PLAYBOY AFTER HOURS
21
Exhibit B
Drawing of New Tower Location
22
Exhibit B - Palms Casino and Resort - Site Plan - Page 1
23
Exhibit B - Casino Expansion Rendering - Palms - Page 2
24
Exhibit C
Design of the New Tower Signage
25
Exhibit C - Palms Casino and Resort - Elevation
26
Exhibit D
Playboy Elements Floorplan
27
Exhibit D - Furniture Floor Plan - Page 1
28
Exhibit D - Palms Casino and Resort - Gaming and Lounge - Page 2
29
EXHIBIT E
ITEMS THAT PALMS MAY PRODUCE, SUBJECT TO PLAYBOY APPROVAL OF
PROTOTYPE
Screen printed decorated glassware and etched glass shot glasses, double
old-fashion glasses, hi-ball glasses, martini glasses, beer mugs, beer steins,
pilsner glasses, champagne glasses, wine glasses, pint glasses, margarita
glasses, martini shakers, martini pitchers, margarita pitchers, champagne
buckets, ice buckets, coasters, stirrers, picks, napkins, matches and serving
trays. Bar accessories, specifically corkscrews, bottle openers, bottle
stoppers, bottle pourers, strainers, ice tongs, jiggers and wine glass charms.
30
EXHIBIT F
*****
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