Exhibit 10.23

 

THIRD AMENDMENT TO LEASE

 

THIS THIRD AMENDMENT TO LEASE (“Third Amendment”) is made and entered into this
24th day of December, 1987, by and between C.S.&Y. ASSOCIATES, a general
partnership, hereinafter referred to as “Lessor”, party of the first part, and
ELDORADO HOTEL ASSOCIATES, a Nevada limited partnership, hereinafter referred to
as “Lessee”, party of the second part.

 

R  E  C  I  T  A  L  S:

 

WHEREAS:

 

A.            Lessor is the owner of that certain real property situate in the
City of Reno, County of Washoe, State of Nevada, that is more particularly
described on that certain exhibit marked “Exhibit A”, affixed hereto and by this
reference incorporated herein and made a part hereof (hereinafter the “CS&Y
Parcel”). By Agreement dated July 21, 1972, Lessor and Lessee did enter into a
Lease Agreement under the terms of which the CS&Y Parcel was leased by Lessor to
Lessee for a term expiring June 30, 2027 (hereinafter the “Lease”). On or about
March 20, 1973, Lessor and Lessee executed an Addendum to the Lease (hereinafter
the “Addendum”).

 

B.            Subsequent to the execution of the Lease and the Addendum, Lessee
caused to be constructed on the CS&Y Parcel a hotel and casino facility known as
the “Eldorado Hotel and Casino”. Thereafter, Lessee acquired a parcel of real
property lying adjacent to the CS&Y Parcel as more particularly described on
that certain exhibit marked “Exhibit B”, affixed hereto and by this reference
incorporated herein and made a part hereof (hereinafter the “Shell Property”).
Lessee desired to expand the hotel/casino facility onto the Shell Property and
to make substantial improvements to both the CS&Y Parcel and the Shell Property.
By Amendment to Lease dated January 1, 1978 (hereinafter the “First Amendment”),
Lessor and Lessee amended the provisions of the Lease and Addendum concerning
the amount of rental to be paid during the term of the Lease, construction of
improvements and repairs, disposition of the CS&Y Parcel and Shell Property on
the termination of the Lease, subordination of the Lease to a first mortgage or
a first deed of trust encumbering the CS&Y Parcel and Shell Property and other
provisions as more particularly therein described.

 

C.            Subsequent to the First Amendment, Lessee acquired additional real
property lying adjacent to the CS&Y Parcel as more particularly described on
that certain exhibit marked “Exhibit C”, affixed hereto and by this reference
incorporated herein and made a part hereof (hereinafter the “Phase I Property”).
Lessee desired to construct additional hotel and casino facilities on the Phase
I Property and connect such facilities to the hotel/casino facilities then
existing on the CS&Y Parcel and Shell Property (hereinafter the “Phase I
Project”). By Amendment to Lease dated January 31, 1985 (hereinafter the
“SecondAmendment”), Lessor and Lessee further modified the terms of the Lease,
Addendum and First Amendment concerning

 

LAW OFFICES OF

 

HENDERSON & NELSON

 

164 HUBBARD WAY

 

SUITE B

 

RENO, NEVADA 89502

 

 

 

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the disposition of certain alley properties abandoned by the City of Reno, the
amount of rental to be paid by Lessee to Lessor during the term of the Lease,
and Lessee’s right to cause the CS&Y Parcel to be encumbered by a first mortgage
or deed of trust securing funds borrowed by Lessee.

 

D.            Lessee is the owner of certain real property lying between West
Street on the West, West Fourth Street on the South, and North Sierra Street on
the East, which is presently used by Lessee for additional parking for the
Eldorado Hotel and Casino (hereinafter the “Fourth Street Parking Property”).
The Fourth Street Parking Property is more particularly described on that
certain exhibit marked “Exhibit D”, affixed hereto and by this reference
incorporated herein and made a part hereof. In connection with the financing
procured by Lessee for the Phase I Project, Lessee was required by the lender to
encumber, for the purpose of securing such financing, the CS&Y Parcel, the Shell
Property, the Phase I Property and the Fourth Street Parking Property.

 

E.             Lessee has acquired fee title to all of the remaining property on
the city block upon which the CS&Y Parcel, Shell Property and Phase I Property
are situate, with the exception of the parcel of real property upon which the
Talley Ho Motel is situate for which parcel Lessee holds an option to purchase
which option Lessee intends to exercise prior to April 1, 1988. Upon the
exercise of such option, Lessee will be the owner of all of the real property
(except for the CS&Y Parcel) bounded by West Fourth Street to the North, North
Virginia Street to the East, West Plaza Street to the South, and North Sierra
Street to the West. The City block and real property therein contained so
bounded by West Fourth Street to the North, North Virginia Street to the East,
West Plaza Streetto the South, and North Sierra Street to the West (including
the CS&Y Parcel), shall hereinafter collectively be referred to as the “Eldorado
Block Property”.

 

F.              Lessee also owns that certain parcel of real property lying
across North Sierra Street from the Eldorado Block Property that is more
particularly described on that certain exhibit marked “Exhibit E”, affixed
hereto and by this reference incorporated herein and made a part hereof
(hereinafter the “Petricciani Property”).

 

G.            Lessee presently plans a further expansion of the Eldorado Hotel
and Casino on the Eldorado Block Property (hereinafter the “Phase II Project”)
whichis presently intended to consist generally of, subject to further
modification: (i) two subterranean levels of parking, (ii) additional casino
space and new motor entrance on the ground floor, (iii) two additional
restaurants, cocktail lounge, kitchen and support facilities, new registration
desk and lobby, and expansion of the convention facilities on the second floor,
(iv) food and beverage storage, additional kitchen and housekeeping support
facilities, and employee dining, kitchen and lounge on the third floor, and
(v) twenty-one (21) additional stories which will contain approximately 400
additional guest rooms and support facilities. The date upon which the City of
Reno issues the permanent Certificate of Occupancy for the use and occupancy

 

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of the Phase II Project by Lessee and the public shall hereinafter be referred
to as the “Phase II C of O Date”.

 

H.           Lessee also anticipates constructing a parking garage on the
Petricciani Property sometime in the future for the purpose of providing
additional parking for the hotel/casino facility (hereinafter the “Parking
Garage”).  Upon the completion of the Parking Garage, Lessee intends to cause
the Fourth Street Parking Property to be released from the deed of trust or
other security instruments securing repayment of the financing for the Phase I
Project or, if then applicable, securing repayment of the financing for the
Phase II Project.

 

I.                Throughout the term of the Lease thus far elapsed, the
continual expansions of the Eldorado Hotel and Casino have required amendments
concerning the rental which will be paid to Lessor and the terms upon which the
Lessee is entitled to encumber the CS&Y Parcel. These modifications to the Lease
are evidenced by the First Amendment and Second Amendment. It is Lessor’s and
Lessee’s intention to enter into this Third Amendment to Lease for the purpose
of amending the Lease in a manner that will provide the basis upon which Lessee
can pursue future expansions and other business endeavors including, but not
limited to, financing and constructing the Phase II Project and the Parking
Garage. It is the intention of Lessor and Lessee that the provisions contained
in this Third Amendment to Lease shall exclusively set forth the terms upon
which Lessee may require the Lessor to encumber the CS&Y Parcel to secure loans
and financing made by Lessee, and the additional consideration which will be
paid to Lessor in the form of rental payments and, under certain circumstances
as hereinafter set forth, a Subordination Fee for the subordination of the
Lessor’s position to such loans and financing.

 

NOW, THEREFORE, in consideration of the foregoing, and the other considerations
hereinafter set forth in this Third Amendment, Lessor and Lessee do hereby agree
as follows:

 

1.              The rental to be paid by Lessee to Lessor for the CS&Y Parcel
shall bepaid in the amounts and at the times set forth in paragraph 2 of the
Second Amendment until the Phase II C of O Date. Commencing on the Phase II C of
O Date, the following provision shall control the amount of rental to be paid
which provision shall supersede the provisions concerning rental during the term
of the Lease as contained in paragraphs 3(a), (b), and (c) of the Lease,
paragraph 1 of the First Amendment and paragraph 2 of the Second Amendment.

 

RENTAL DURING TERM OF LEASE:

 

(a)  Commencing on the Phase II C of O Date, and for the balance of the term of
the Lease, the rental for the CS&Y Parcel shall be either the amount provided
for in subparagraph (i), or subparagraph (ii) set forth below, whichever is
greater.

 

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(i)  There shall be a guaranteed minimum annual rent in the sum of Four Hundred
Thousand Dollars ($400,000) (hereinafter referred to as “Basic Rental”). This
Basic Rental shall not be subject to any adjustment based on the Consumer Price
Index or otherwise during the remaining term of this Lease.

 

(ii)  A sum equal to three percent (3%) of the Gross Gaming Revenues for the
first Six Million, Five Hundred Thousand Dollars ($6,500,000) of such Gross
Gaming Revenues, one percent (1%) of the Gross Gaming Revenues in excess of Six
Million Five Hundred Thousand Dollars ($6,500,000), up to Thirty-five Million
Dollars ($35,000,000),and one-half of one percent (.50%) of Gross Gaming
Revenues in excess of Thirty-five Million Dollars ($35,000,000), up to Fifty
Million Dollars ($50,000,000), and one-forth of one percent (.25%) of Gross
Gaming Revenues in excess of Fifty Million Dollars ($50,000,000) up to
Seventy-five Million Dollars ($75,000,000), and one-tenth of one percent (.1%)
of all Gross Gaming Revenues in excess of Seventy-five Million Dollars
($75,000,000). In addition to the foregoing, for a period of five (5) years
commencing January 1, 1985, Lessee shall pay an additional one-fourth of one
percent (.25%) of all Gross Gaming Revenues in excess of Thirty-five Million
Dollars ($35,000,000) up to Forty Million Dollars ($40,000,000). “Gross Gaming
Revenues” shall be defined as all gaming revenues received by Lessee from all
gaming operations on the Eldorado Block Property including future expansions
thereon that may be undertaken by Lessee, but shall not include, for example,
any gaming revenues realized by Lessee from the Fourth Street Parking Property
or any other gaming activities conducted by Lessee on any location other than
the Eldorado Block Property. Gross Gaming Revenues for the purposes of this
Third Amendment shall be computed as follows:

 

The total of all amounts received from gaming operations on the Eldorado Block
Property, as winnings, less the total of all amounts paid out, from gaming
operations on the Eldorado Block Property, as losses. In computing winnings, no
revenue shall be recognized on non-cash promotional items, or uncollected credit
play. In computing losses, no deductions shall be allowed

 

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for non-cash promotional payout or for the provision of anticipated payouts on
progressive slot machines. Additionally, a deduction will be allowed for
uncollected returned checks which were cashed for gaming purposes.

 

(b)                       The rental payments due under paragraph (a) above
shall be paid as follows:

 

(i)  The Basic Rental payable under subparagraph (a)(i) shall be payable in
monthly instalments in the amount of Thirty-Three Thousand Three Hundred Thirty
Three and 33/100 Dollars ($33,333.33).

 

(ii)  To the extent that the amount payable under subparagraph (a) (ii) above is
greater than the amount payable under subparagraph (a)(i) for any calendar year,
the difference shall be payable within ninety (90) days after the end of each
calendar year.

 

(c)                        Lessee shall make available for inspection by
Lessor’s duly authorized agent a copy of all gaming tax reports filed with the
State of Nevada for the purposes of determining Gross Gaming Revenues and copies
of the result of any audits of the gaming revenue by representatives of the
State of Nevada. In addition, the independent auditors of the Lessee shall
provide the Lessor written confirmation after the completion of their
examination of Lessee’s financial statements for each year, that their opinion
on the financial statements was unqualified, or if their opinion was qualified
in any respect related to the Gross Gaming Revenues, the independent auditors
shall provide the reasons for such qualification to the Lessor. The Lessor may,
at any time and at its own expense, obtain its own independent audit of the
Gross Gaming Revenues, provided that it does not interfere with the conduct of
normal business operations by the Lessee or the audits which are in progress by
the State of Nevada or the Lessee’s independent auditors.

 

2.              Paragraph 7 entitled “Improvements and Repairs” on pages 3, 4
and 5, and paragraph 29 entitled “Security” on page 19 of the Lease, paragraph 2
on pages 3, 4, and 5 of the First Amendment, and paragraph 4 on pages 4 and 5 of
the Second Amendment are hereby deleted in their entirety and the following
provisions shall fully amend, supersede and be substituted for such provisions:

 

IMPROVEMENTS, REPAIRS, SECURITY AND SUBORDINATION:

 

It is the intention of Lessee to construct the Phase II Project and other income

 

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producing improvements on the Eldorado Block Property, and the nature, extent
and use of such improvements, if made, shall be in the discretion of Lessee. All
improvements, alterations, additions, deletions, modifications and repairs to
the Eldorado Block Property shall be at the sole cost of Lessee and Lessee
agrees to pay for all labor and materials used, and said improvements shall be
the property of Lessee during the term of the Lease. All improvements on the
Eldorado Block Property shall be the property of Lessee during the term of the
Lease. On termination of the Lease, Lessor shall have an undivided two-thirds
(2/3) interest and Lessee shall have an undivided one-third (1/3) interest in
the total of all improvements then existing on the CS&Y Parcel and Shell
Property taken as a whole and considered as one entity without regard to the
physical characteristics of the improvements then existing on either the CS&Y
Parcel or the Shell Property when considered separately. Lessor shall have no
right, title or interest to any of the Eldorado Block Property (except for the
CS&Y Parcel) other than the right to receive rentals as provided in paragraph 1
hereinabove during the term of the Lease and upon termination of the Lease shall
have no right, title or interest in any of the Eldorado Block Property except
for the CS&Y Parcel and the Shell Property as provided hereinabove.

 

Improvements to the CS&Y Parcel shall not be removed therefrom, unless the same
shall be rebuilt or replaced with improvements of equal or greater value, or
unless the removal shall be for the economic betterment of the Eldorado Hotel
and Casino facility.

 

Lessee will comply at its sole expense with all requirements of public
authorities. The expenses of all repairs, alterations or improvements heretofore
or hereafter ordered by any public authority relative to the Eldorado Block
Property shall be the responsibility of Lessee and paid for by it. This covenant
shall apply not only to incidental repairs, alterations or improvements required
by public authorities, but also to those of substantial or structural nature. It
shall also apply to safety requirements by public authorities.

 

Lessee shall have the right to secure a loan or loans, from time to time during
the term of this Lease, by a first mortgage or first deed of trust encumbering
the Eldorado Block Property and such other property or properties owned by
Lessee which Lessee may elect, in its discretion, to so encumber. Such loan or
loans may be for any purpose in

 

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the sole and absolute discretion of Lessee and need not be for the purpose of
making improvements, alterations or construction on the CS&Y Parcel or any other
portion of the Eldorado Block Property. This Lease and the CS&Y Parcel and the
Shell Property shall be automatically subordinated to such first mortgage or
first deed of trust without any further act of Lessor and Lessor hereby consents
thereto so long as the aggregate principal amount secured by such first mortgage
or first deed of trust does not exceed the principal sum of Fifty Million
Dollars ($50,000,000). Lessee shall further have the right to secure a loan or
loans, from time to time during the term of this Lease, with an aggregate
principal amount in excess of Fifty Million Dollars ($50,000,000), secured by a
first mortgage or first deed of trust encumbering the Eldorado Block Property
and such other property or properties owned by Lessee which Lessee may elect, in
its discretion, to so encumber and the CS&Y Parcel and the Shell Property shall
be automatically subordinated to such first mortgage or first deed of trust
without any further act of Lessor and Lessor hereby consents thereto on the
following terms and conditions:

 

(a)  That Lessee shall have commenced or is about to commence construction of
the Phase II Project.

 

(b)  That the aggregate principal amount to which the Lease is subordinated as
provided hereinabove be limited to Seventy-Five Million Dollars ($75,000,000) or
sixty percent (60%) of the Fair Market Value of the Eldorado Block Property,
together with any other property or properties which Lessee in its sole
discretion encumbers as additional security for the loan or loans, whichever is
greater.  “Fair Market Value” as used herein shall mean the value which is
agreed upon by Lessor and Lessee as being the Fair Market Value of the Eldorado
Block Property, together with such other property or properties which Lessee may
encumber as additional security for the loan or loans.  If Lessor and Lessee are
unable to agree on the Fair Market Value, an M.A.I. designated appraiser shall
be mutually selected by Lessor and Lessee who shall appraise the Eldorado Block
Property together with such other property or properties to be encumbered by
Lessee as additional collateral for such financing.  The M.A.I. appraiser’s
determination of Fair Market Value shall be based upon the income method, market

 

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approach or replacement value, whichever is higher, and such determination shall
be deemed the Fair Market Value for the purposes of this provision and shall be
binding upon Lessor and Lessee.

 

(c) To the extent by which the financing to which the CS&Y Parcel and Shell
Property is subordinated exceeds the principal sum of $50,000,000, Lessee shall
pay to Lessor, in addition to the rental set forth in paragraph 1 herein- above,
an annual subordination fee (“Subordination Fee”) to be determined and paid as
follows:

 

Commencing on the Phase II C of O Date, Three Thousand, Five Hundred Dollars
($3,500) per annum, or prorata propor- tion thereof if for less than a full
calendar year, shall be paid for each One Million Dollars ($1,000,000), or
prorata proportion thereof (rounded to the nearest thousandth), by which the
outstanding balance of the principal owing on such financing exceeds
$50,000,000, which Subordination Fee shall be payable quarterly, in arrears,
based on the daily average of the unpaid principal balance (rounded to the
nearest thousandth) outstanding on such financing in excess of $50,000,000
during the preceding calendar quarterly period.

 

Lessor agrees to execute and deliver any such first mortgage or first deed of
trust or any other documents or instruments that may be required by a lender to
effectuate the subordination of this Lease and the encumbrance of the CS&Y
Parcel and the Shell Property as provided hereinabove. Such financing shall be
at a prevailing rate of interest, shall not extend beyond the term of the Lease
and shall be with a financial institution authorized to do business in the State
of Nevada or a group of recognized financial institutions for which a financial
institution authorized to do business in the State of Nevada is acting as lead
bank or agent bank for the purpose of providing funds for such financing. After
July 1, 2007, the automatic subordination as set forth hereinabove shall
continue so long as the repayment schedule of such financing is based upon an
amortization which will cause such financing to be fully paid by the expiration
date of the term of this Lease. All other subordinations, other than as provided
in this Third Amendment, will require the written approval of Lessor.

 

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3. Lessor consents that at such time as the Parking Garage is constructed on the
Petricciani Property that Lessee may procure the release of the Fourth Street
Parking Property from any first mortgage or first deed of trust or other
security documents that may also encumber the Eldorado Block Property.

 

4. All other terms and conditions of the Lease, Addendum, First Amendment and
Second Amendment, except as otherwise provided herein or inconsistent with the
terms and conditions set forth herein, shall remain in full force and effect.

 

IN WITNESS WHEREOF, Lessor and Lessee have caused this Third Amendment to be
executed as of the day and year first above written.

 

LESSOR:

 

LESSEE:

 

 

 

C.S.&Y. ASSOCIATES,

 

ELDORADO HOTEL ASSOCIATES

 

 

 

 

 

 

/s/ George L. Siri, Jr.

 

By:

Recreational Enterprises, Inc., a Nevada corporation,

George L. Siri, Jr.

 

 

 

 

 

 

 

 

/s/ Susan B. Siri

 

 

By

/s/ Donald L. Carano

Susan B. Siri

 

 

 

Donald L. Carano

 

 

 

 

 

 

/s/ George Yori

 

By:

Hotel-Casino Management, Inc., a Nevada corporation

George Yori

 

 

 

 

 

 

 

 

/s/ Genevieve Yori

 

 

By

/s/ Raymond J. Poncia, Jr.

Genevieve Yori

 

 

 

Raymond J. Poncia, Jr.

 

 

 

 

 

 

 

 

 

 

/s/ Lena M. Carano

 

 

 

 

Lena M. Carano, Executrix of the Estate of William Carano

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Lena M. Carano

 

 

 

 

Lena M. Carano

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Donald L. Carano

 

 

 

 

Donald L. Carano

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Donald L. Carano

 

 

 

 

Donald L. Carano, Trustee for the Sonja Carano Trust

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Mildred Carano Lewis

 

 

 

 

Mildred Carano Lewis

 

 

 

 

 

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STATE OF NEVADA

)

 

) SS

County of Washoe

)

 

On this 5th day of January, 1988, personally appeared before me, a Notary
Public, GEORGE L. SIRI, JR., known to me to be the person described in and who
acknowledged that he executed the foregoing instrument.

 

 

 

/s/ Christine L. Gerwin

 

Notary Public

 

 

 

[SEAL OF NOTARY PUBLIC APPEARS HERE]

 

STATE OF NEVADA

)

 

) SS

County of Washoe

)

 

On this 5th day of January, 1988, personally appeared before me, a Notary
Public, SUSAN B. SIRI, known to me to be the person described in and who
acknowledged that she executed the foregoing instrument.

 

 

/s/ Christine L. Gerwin

 

Notary Public

 

 

 

[SEAL OF NOTARY PUBLIC APPEARS HERE]

 

STATE OF NEVADA

)

 

) SS

County of Washoe

)

 

On this 5th day of January, 1988, personally appeared before me, a Notary
Public, GEORGE YORI, known to me to be the person described in and who
acknowledged that she executed the foregoing instrument.

 

 

/s/ Robert B. MacKay

 

Notary Public

 

 

 

[SEAL OF NOTARY PUBLIC APPEARS HERE]

 

STATE OF NEVADA

)

 

) SS

County of Washoe

)

 

On this 5th day of January, 1988, personally appeared before me, a Notary
Public, GENEVIEVE YORI, known to me to be the person described in and who
acknowledged that she executed the foregoing instrument.

 

 

/s/ Robert B. MacKay

 

Notary Public

 

 

 

[SEAL OF NOTARY PUBLIC APPEARS HERE]

 

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STATE OF NEVADA

)

 

) ss

County of Washoe

)

 

On this 28th day of December, 1987, personally appeared before me, a Notary
Public, LENA M. CARANO, known to me to be the person described in and who
acknowledged that she executed the foregoing instrument.

 

 

 

/s/ Robert B. MacKay

 

Notary Public

 

 

 

[NOTARY PUBLIC SEAL APPEARS HERE]

 

STATE OF NEVADA

)

 

) ss

County of Washoe

)

 

On this 24th day of December, 1987, personally appeared before me, a Notary
Public, DONALD L. CARANO, known to me to be the person described in and who
acknowledged that he executed the foregoing instrument.

 

 

 

/s/ Robert B. MacKay

 

Notary Public

 

 

 

[NOTARY PUBLIC SEAL APPEARS HERE]

 

STATE OF CALIFORNIA

)

 

) ss

County of Cortra Costa

)

 

On this 11th day of January, 1988, personally appeared before me, a Notary
Public, MILDRED CARANO LEWIS, known to me to be the person described in and who
acknowledged that she executed the foregoing instrument.

 

 

[NOTARY PUBLIC SEAL APPEARS HERE]

/s/ Eleanor M. Sinton

 

Notary Public

 

STATE OF

)

 

) ss

County of

)

 

On this 18th day of January, 1988, personally appeared before me, a Notary
Public, RAYMOND J. PONCIA, JR., known to me to be the person described in and
who acknowledged that he executed the foregoing instrument.

 

 

[NOTARY PUBLIC SEAL APPEARS HERE]

/s/ E. Kay Vierra

 

Notary Public

 

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