INDUSTRIAL REAL ESTATE LEASE (NET)

BY AND BETWEEN

SRC SPENCER, LLC,
a Nevada limited liability company

“LANDLORD”

AND

GALAXY GAMING INC., a Nevada corporation

“TENANT”

“Spencer Street Facility” 

 

 

TABLE OF CONTENTS

1 Terms and Definitions 1 2 Premises 3 3 Term 3 4 Possession 3 5 Basic Rent 3 6
Additional Rent 4 7 Security Deposit 5 8 Use 6 9 Payments and Notices 6 10
Brokers 7 11 Holding Over 7 12 Taxes on Tenant’s Property 7 13 Condition of
Premises 8 14 Alterations 8 15 Condition, Repair, Replacement and Maintenance of
the Premises. 10 16 Liens 12 17 Entry by Landlord 12 18 Utilities 13 19
Indemnification 13 20 Hazardous Materials 14 21 Insurance. 17 22 Damage or
Destruction. 19 23 Eminent Domain 21 24 Bankruptcy 21 25 Defaults and Remedies
22 26 Assignment and Subletting 23 27 Quiet Enjoyment 25

 

 

 

28 Subordination 25 29 Estoppel Certificate 25 30 Rules and Regulations 26 31
Choice of Law 26 32 Successors and Assigns 26 33 Surrender of Premises 26 34
Professional Fees 26 35 Performance by Tenant 26 36 Mortgage and Senior Lessor
Protection 27 37 Definition of Landlord 27 38 Waiver 27 39 Identification of
Tenant 27 40 Parking and Transportation 28 41 Terms and Headings 28 42
Examination of Lease; Counterparts 28 43 Time 28 44 Prior Agreement; Amendments
28 45 Severability 28 46 Recording 28 47 Limitation on Liability 29 48 Riders 29
49 Signs 29 50 Modification for Lender 29 51 Accord and Satisfaction 29 52
Intentionally Omitted 29 53 Tenant as Corporation 29 54 No Partnership or Joint
Venture 30 55 Option to Extend 30

 

 

 

56 Signage 32 57 Option to Terminate Lease 33 58 Right of First Refusal to
Purchase 34 59 Tenant Improvements 34 60 Waiver of Jury Trial 36

 

 

 

LIST OF EXHIBITS

Exhibit

“A” Legal Description of Premises

“B” Sample Form of Tenant Estoppel Certificate

“C” Form of Disbursement Agreement

 

 

 

INDUSTRIAL REAL ESTATE LEASE (NET)

THIS INDUSTRIAL REAL ESTATE LEASE (NET) (the “Lease”) is made as of the 24th day
of February 2014, by and between Landlord and Tenant.

 

WITNESSETH:

1.                  Terms and Definitions.

For the purposes of this Lease, the following terms shall have the following
definitions and meanings:

(a)                 Landlord: SRC Spencer, LLC, a Nevada limited liability
company

(b)                 Landlord’s Address:

7912 West Sahara,
Las Vegas, NV 89117
Attn: Steven R. Campbell

 

(c)                 Tenant:

Galaxy Gaming Inc., a Nevada corporation

(d)                 Tenant’s Address:

Galaxy Gaming Inc.
6767 Spencer Street
Las Vegas, NV 89119
Telephone: (702) 939-3254
Facsimile: (702) 939-3255

Attn: General Counsel

 

(e)                 Premises Address: 6767 Spencer Street, Las Vegas, NV 89119.

(f)                  Premises: Those certain premises defined in Paragraph 2
herein below.

(g)                 Term: Commencement Date through Expiration Date, subject to
the terms of this Lease.

(h)                 Commencement Date: April 1, 2014

(i)                   Expiration Date: June 30, 2019.

(j)                  Basic Rent:

Period Basic Rent (Monthly) Commencement Date – 6/30/15 $16,996.70* 7/1/15 –
6/30/16 $17,725.13

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7/1/16 – 6/30/17 $18,453.56 7/1/17 – 6/30/18 $19,181.99 7/1/18 – 6/30/19
$19,910.42

*. Notwithstanding anything to the contrary contained in this Lease, provided
that Tenant is not then in default beyond any applicable notice or cure periods
under this Lease, Landlord hereby agrees to fully abate Tenant’s obligation to
pay Monthly Basic Rental for each of the first (1st), second (2nd), and third
(3rd) full calendar months of the initial Term During such abatement periods,
Tenant shall remain responsible for the payment of all of its other monetary
obligations under this Lease. However, in the event of a default by Tenant under
the terms of this Lease which results in early termination pursuant to the
provisions of Section 25 hereof, then as a part of the recovery set forth in
Section 25 hereof, Landlord shall be entitled to the recovery of the unamortized
Basic Rent that was previously abated under the provisions of this Section 1(j)
with such amortization calculated on a straight line basis over the initial
Term.

(k)                 Permitted Use: Corporate office, showroom and storage.

(l)                   Exhibits: “A” through “B” inclusive, which Exhibits are
attached to this Lease and are incorporated herein by this reference.

(m)               Initial Security Deposit: $23,000.00.

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2.                  Premises. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the parcel of real property legally described on Exhibit
“A”, and all improvements from time to time located thereon (the “Premises”).
The parties hereto agree that said letting and hiring is upon and subject to the
terms, covenants and conditions herein set forth and Tenant covenants as a
material part of the consideration for this Lease to keep and perform each and
all of said terms, covenants and conditions by it to be kept and performed and
that this Lease is made upon the condition of such performance.

3.                  Term. The Term of this Lease shall be for the period
designated in Subparagraph 1(g) commencing on the Commencement Date, and ending
on the Expiration Date, unless such Term shall be sooner terminated or extended
as hereinafter provided. Upon execution of this Lease by Tenant and Landlord,
Landlord will allow Tenant access to the Premises (the “Early Occupancy Date”)
in order to install Premises Improvements (subject to the terms of Section 59),
fixtures, furnishings and equipment and to otherwise prepare the Premises for
Tenant’s occupancy and for Tenant to conduct business; provided that such early
entry, use and occupancy shall be subject to all the provisions of this Lease as
though the Commencement Date had occurred other than the payment of Basic Rent,
including, without limitation, during such period of early entry and occupancy
Tenant shall pay all Additional Rent owing pursuant to this Lease, Tenant shall
pay for all services and utilities required to be paid by Tenant under this
Lease and Tenant shall comply with the insurance requirements of this Lease.
Said early possession shall not advance the Expiration Date.

4.                  Possession. Tenant acknowledges that the Premises are in
good condition and that it is accepting the Premises “As Is” aside from the
warranty as stated in section 15(a). Tenant acknowledges that neither Landlord
nor its agents or employees have made any representations or warranties as to
the suitability or fitness of the Premises for the conduct of Tenant’s business
or for any other purpose, nor has Landlord or its agents or employees agreed to
undertake any alterations or construct any tenant improvements to the Premises.

5.                  Basic Rent. Tenant agrees to pay Landlord as Basic Rent for
the Premises the Basic Rent designated in Subparagraph 1(j) in advance on the
first day of each and every calendar month during the Term, except that the
first full month’s Basic Rent owing for the fourth (4th) full calendar month of
the initial Term shall be paid upon the execution hereof. In the event the Term
of this Lease ends on a day other than the first day of a calendar month, then
the Basic Rent for such periods shall be prorated in the proportion that the
number of days this Lease is in effect during such periods bears to thirty (30),
and such rental shall be paid at the commencement of such periods. In addition
to said Basic Rent, Tenant agrees to pay the Additional Rent (as hereinafter
defined) as and when hereinafter provided in this Lease. Said Basic Rent shall
be paid to Landlord, without any prior demand therefor and without any deduction
or offset whatsoever, in lawful money of the United States of America, which
shall be legal tender at the time of payment, at the address of Landlord
designated in Subparagraph 1(b) or to such other person or at such other place
as Landlord may from time to time designate in writing.

6.                  Additional Rent. In addition to paying the Basic Rent as
provided in Article 5 of this Lease, Tenant shall pay any and all other amounts
payable by Tenant pursuant to the terms of this Lease, including, without
limitation, payments for repairs (collectively, the “Additional Rent”). The
Basic Rent and the Additional Rent are sometimes herein collectively referred to
as “Rent.” Without limitation on any other obligations of Tenant which survive
the expiration of the Term, the obligations of Tenant to pay Additional Rent
which accrues during the Term shall survive the expiration of the Term. Landlord
and Tenant acknowledge that it is their intent and agreement that this Lease be
a “TRIPLE NET” lease and that as such, the provisions contained in this Lease
are intended to pass on to Tenant or reimburse Landlord for all costs and
expenses associated with this Lease and the Premises, and Tenant’s operation
therefrom, including without limitation, all Real Property Taxes, expenses,
costs and amounts of every kind and nature which Landlord pays or accrues during
the Term (as the same may be extended) because of or in connection with the
ownership, management, maintenance, security, repair, replacement, renovation,
restoration or operation of the Premises, or any portion thereof, in accordance
with sound real estate management and accounting practices, consistently
applied. To the extent such costs and expenses payable by Tenant cannot be
charged directly to, and paid by, Tenant, such costs and expenses shall
initially be paid by Landlord and thereafter be reimbursed by Tenant. As used
herein, the term “Real Property Taxes” shall include any form of assessment,
license fee, license tax, business license fee, commercial rental tax, levy,
charge, penalty, tax or similar imposition

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imposed by any authority having the direct power to tax, including any city,
county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement or special assessment district thereof, as against
any legal or equitable interest of Landlord in the Premises to the extent
assessed and/or accruing after the Commencement Date, including, but not limited
to, the following:

(i) any tax on Landlord’s “right” to rent or “right” to other income from the
Premises or as against Landlord’s business of leasing the Premises to the extent
assessed and/or accruing after the Commencement Date;

 

(ii) any assessment, tax, fee, levy or charge in substitution, partially or
totally, of any assessment, tax, fee, levy or charge previously included within
the definition of Real Property Taxes, recognizing that Real Property Taxes
shall also include any governmental or private assessments or contributions
towards a governmental or private cost/sharing agreement for the purpose of
augmenting or improving the quality of services and amenities normally provided
by governmental agencies to the extent assessed and/or accruing after the
Commencement Date, and it is the intention of Tenant and Landlord that all such
new and increased assessments, taxes, fees, levies and charges be included
within the definition of Real Property Taxes for the purposes of this Lease,
including, without limitation, those calculated to increase tax increments to
governmental agencies or to pay for such services as fire protection, street,
sidewalk and road maintenance, refuse removal or other governmental services
which may have been formerly provided without charge to property owners or
occupants; any government or private assessment or contributions towards a
government or private/cost sharing agreement as stated in this section 6(ii)
shall be paid by the Landlord and then passed through to the to the Tenant as
additional rent after being prorated to the Lease term and amortized throughout
the remaining life of the lease.

 

(iii) any assessment, tax, fee, levy or charge allocable to or measured by the
area of the Premises or the Rent payable hereunder, including, without
limitation, any gross income tax or excise tax levied by the State, city or
federal government, or any political subdivision thereof, with respect to the
receipt of such Rent, or upon or with respect to the possession, leasing,
operating, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises, or any portion thereof to the extent assessed and/or
accruing after the Commencement Date;

 

(iv) any assessment, tax, fee, levy or charge upon this transaction or any
document to which Tenant is a party, creating or transferring an interest or an
estate in the Premises to the extent assessed and/or accruing after the
Commencement Date; or

 

(v) any assessment, fee, levy or charge by any governmental agency related to
any transportation plan, fund or system instituted within the geographic area of
which the Premises are a part to the extent assessed and/or accruing after the
Commencement Date.

 

Notwithstanding any provision of this Paragraph 6 to the contrary, Real Property
Taxes shall not include Landlord’s federal or state income, franchise,
inheritance or estate taxes.

Notwithstanding any provision of this Paragraph 6 to the contrary, any increases
in controllable operating expense (specifically excluding insurance premiums,
Real Property Taxes, costs of utilities and costs imposed upon the Premises by
any recorded CC&Rs and agreements recorded against the Premises) will be capped
at three (3%) percent annually, on a collective and not a per-item basis.

7.                  Security Deposit. Upon execution of this Lease, Tenant shall
deposit with Landlord a cash security deposit (the “Security Deposit”) in the
amount of the Initial Security Deposit. The Security Deposit shall be held by
Landlord without liability for interest and as security for the performance by
Tenant of Tenant’s covenants and obligations under this Lease, it being
expressly understood that the Security Deposit shall not be considered an
advance payment of rental or a measure of damages caused by Tenant in case of
default by Tenant. Landlord may commingle the Security Deposit with Landlord’s
other funds. Landlord may, from time to time, without prejudice to any other
remedy, use the Security Deposit to the extent necessary to make good any
arrearage of Rent or to satisfy any other covenant or obligation of Tenant
hereunder. Following any such application of the Security Deposit Tenant shall
pay to Landlord on demand the amount so applied in order to restore the Security

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Deposit to its original amount. If Tenant is not in default at the termination
of this Lease, the balance of the Security Deposit remaining after any such
application shall be returned by Landlord to Tenant. If Landlord transfers its
interest in the Premises during the Term of this Lease (including extensions),
Landlord may assign the Security Deposit to the transferee and thereafter shall
have no further liability for the return of such Security Deposit to Tenant.

8.                  Use. Tenant shall use the Premises for the use specified in
Subparagraph 1(k), and shall not use or permit the Premises to be used for any
other purpose. Tenant shall not use or occupy the Premises in violation of such
Rules and Regulations as Landlord may from time to time reasonably adopt for the
safety, care and cleanliness of the Premises or of any recorded covenants,
conditions and restrictions (“CC&Rs”) affecting the Premises or of any law or of
the Certificate of Occupancy issued for the Premises including, without
limitation, the Americans With Disabilities Act, 104 Stat. 327, 42 United States
Code § 12101, et. seq., as amended from time to time (the “ADA”), and shall,
upon five (5) days written notice from Landlord, discontinue any use of the
Premises which is in violation of any CC&Rs or is declared by any governmental
authority having jurisdiction to be a violation of any law or of said
Certificate of Occupancy. Tenant shall make such repairs or alterations to the
Premises as may be required to comply with the ADA during the Term, and as a
condition to effective vacation of the Premises. Tenant shall not install any
radio or television antenna, loudspeaker or other device on the roof or exterior
walls of the Premises. Tenant shall comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof. Tenant shall not do or permit to be done anything which will invalidate
or increase the cost of any fire, extended coverage or any other insurance
policy covering the Premises and/or property located therein and shall comply
with all rules, orders, regulations and requirements of the any applicable fire
rating bureau or any other organization performing a similar function. Tenant
shall promptly upon demand reimburse Landlord as Additional Rent for any
additional premium charged for such policy by reason of Tenant’s failure to
comply with the provisions of this Paragraph 8. Tenant shall not use or allow
the Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises and shall keep the Premises in first class repair and
appearance. Tenant shall not place a load upon the Premises exceeding the
average pounds of live load per square foot of floor area specified for the
Premises by Landlord’s architect, with the partitions to be considered part of
the live load. Landlord reserves the right to prescribe the weight and position
of all safes, files and heavy equipment which Tenant desires to place in the
Premises so as to distribute properly the weight thereof.

9.                  Payments and Notices.

(a)                 All Rents and other sums payable by Tenant to Landlord
hereunder shall be paid to Landlord at the address designated by Landlord in
Subparagraph 1(b) above or at such other places as Landlord may hereafter
designate in writing. Any notice required or permitted to be given hereunder
must be in writing and may be given by personal delivery or by mail, and if
given by mail shall be deemed sufficiently given if sent by registered or
certified mail addressed to Tenant at the address designated in Subparagraph
1(d) or to Landlord at both of the addressees designated in Subparagraph 1(b).
Either party may by written notice to the other specify a different address for
notice purposes. If more than one person or entity constitutes the “Tenant”
under this Lease, service of any notice upon any one of said person or entities
shall be deemed as service upon all of said persons or entities.

(b)                 Tenant acknowledges that the late payment by Tenant to
Landlord of any sums due under this Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impractical to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and note secured by any encumbrance
covering the Premises. Therefore, if any monthly installment of Basic Rent is
not received by Landlord by the date when due, or if Tenant fails to pay any
other sum of money due hereunder and such failure continues for ten (10) days
after notice thereof by Landlord, Tenant shall pay to Landlord, as Additional
Rent, the sum of five percent (5%) of the overdue amount as a late charge. Such
overdue amount shall also bear interest, as Additional Rent, at nine percent
(9%) per annum calculated, as appropriate, from the date either (a) the monthly
installment of Basic Rent is due, or (b) of receipt of said notice, until the
date of payment to Landlord. Landlord’s acceptance of any late charge or
interest shall not constitute a waiver of Tenant’s default with respect to the
overdue

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amount or prevent Landlord from exercising any of the other rights and remedies
available to Landlord under this Lease or any law now or hereafter in effect. If
the interest rate specified in this Lease is higher than the maximum rate
permitted by applicable law, such interest rate is hereby reduced to such
maximum interest rate permitted by applicable law.

10.              Brokers. Tenant represents and warrants to Landlord, that other
than MDL Group, no broker, leasing agent or finder has been engaged by it in
connection with any of the transactions contemplated by this Lease, or to its
knowledge is in anyway connected with any of such transactions. In the event of
any claims for brokers’ or finders’ fees or commissions in connection with the
negotiation, execution or consummation of this Lease other than MDL Group,
Tenant shall indemnify, save harmless and defend Landlord from and against such
claims.

11.              Holding Over. If Tenant holds over after the expiration or
earlier termination of the Term hereof without the express, written consent of
Landlord, Tenant shall become a tenant at sufferance only, at a rental rate
equal to one hundred and twenty-five percent (125%) of the Basic Rent which
would be applicable to the Premises upon the date of such expiration, and
otherwise subject to the terms, covenants and conditions herein specified, so
far as applicable. Acceptance by Landlord of rent after such expiration or
earlier termination shall not constitute a holdover hereunder or result in a
renewal. The foregoing provisions of this Paragraph 11 are in addition to and do
not affect Landlord’s right of re-entry or any rights of Landlord hereunder or
as otherwise provided by law. If Tenant fails to surrender the Premises upon the
expiration or earlier termination of this Lease despite demand to do so by
Landlord; Tenant shall indemnify and hold Landlord harmless from all loss or
liability, including without limitation, any claim made by any succeeding tenant
founded on or resulting from such failure to surrender.

12.              Taxes on Tenant’s Property. Tenant shall be liable for and
shall pay at least ten (10) days before delinquency, taxes levied against any
personal property or trade fixtures placed by Tenant in or about the Premises
whether prior to or after the Commencement Date. If an such taxes on Tenant’s
personal property or trade fixtures are levied against Landlord or Landlord’s
property or if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based
upon such increased assessments which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant, Tenant shall upon demand repay to Landlord the taxes levied against
Landlord, or the proportion of such taxes resulting from such increase in the
assessment, provided that in any such event, at Tenant’s sole cost and expense,
Tenant shall have the right, in the name of Landlord and with Landlord’s full
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of any such taxes so paid under protest, any amount so recovered to
belong to Tenant.

13.              Condition of Premises. Tenant acknowledges that neither
Landlord nor its agents or employees have made any representations or warranties
as to the compliance or lack of compliance of the Premises with applicable laws.

14.              Alterations(a)Tenant may, at any time and from time to time
during the Term of this Lease but subject to Landlord’s approval pursuant to
Subparagraph 14(b), at its sole cost and expense, make alterations, additions,
installations, substitutions, improvements and decorations (hereinafter
collectively called (“Changes”) in and to the Premises, excluding structural
changes, on the following conditions, and providing such Changes will not result
in a violation of or require a change in the Certificate of Occupant (or its
equivalent) applicable to the Premises:

(i)                   The outside appearance, character or use of the Premises
shall not be affected, and no Changes shall weaken or impair the structural
strength or, in the sole opinion of Landlord, lessen the value of the Premises
or create the potential for unusual expenses to be incurred upon the removal of
Changes and the restoration of the Premises upon the termination of this Lease.

(ii)                 The proper functioning of any of the mechanical,
electrical, sanitary and other service systems or installations of the Premises
(“Service Facilities”) shall not be adversely affected and there shall be no
construction which might interfere with Landlord’s free access to the Service
Facilities.

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(iii)                In performing the work involved in making such Changes,
Tenant shall be bound by and observe all of the conditions and covenants
contained in this Paragraph 14.

(iv)               All work shall be done at such times and in such manner as
Landlord from time to time may reasonably designate.

(v)                 Tenant shall not be permitted to install and make part of
the Premises any materials, fixtures or articles which are subject to liens,
conditional sales contracts or chattel mortgages.

(vi)               At the date upon which the Term of this Lease shall end, or
the date of any earlier termination of this Lease, Tenant shall on Landlord’s
written request restore the Premises to their condition prior to the making of
any Changes permitted by this Paragraph 14, reasonable wear and tear excepted.

(b)                 Before proceeding with any Change (exclusive of Changes to
items constituting Tenant’s personal property), Tenant shall submit to Landlord,
for Landlord’s written approval, plans and specifications, including any
applicable mechanical, electrical and plumbing drawings, for the work to be
done. Landlord’s approval shall not be unreasonably withheld. If Landlord shall
disapprove of any of Tenant’s plans, Tenant shall be advised of the reasons for
such disapproval. Landlord’s approval of the plans and specifications shall
create no responsibility or liability on the part of landlord for their
completeness, design sufficiency, or compliance with applicable laws or
regulations. Any Change for which approval has been received shall be performed
strictly in accordance with the approved plans and specifications, and no
amendments or additions to such plans and specifications shall be made without
the prior written consent of Landlord, which consent shall not be unreasonably
withheld. Following construction of the work, Tenant shall prepare or cause to
be prepared, at Tenant’s expense, a “record set” of as-built plans reflecting
the actual construction of the work.

(c)                 After Landlord’s written approval has been sent to Tenant,
Tenant shall enter into an agreement for the performance of the work to be done
pursuant to this Paragraph 14 with a contractor reasonably approved by Landlord.
However, the general contractor shall be required to retain Landlord’s
subcontractors for any HVAC, electrical and/or fire/life safety work, if the
Landlord’s subcontractors pricing is competitive in the marketplace after a
competitive bid process has been completed. All costs and expenses incurred in
Changes shall be paid by Tenant within seven (7) days after each billing by any
such contractor or contractors. Tenant’s contractors shall obtain on behalf of
Tenant and at Tenant’s sole cost and expense, (1) all necessary governmental
permits and certificates for the commencement and prosecution of Tenant’s
Changes and for final approval thereof upon completion, and (ii) a completion
and lien indemnity bond, or other surety, satisfactory to Landlord, for the
Changes, in accordance with NRS 108.2403. In the event Tenant shall request any
changes in the work to be performed after the submission of the plans referred
to in this Paragraph 14, such changes shall be subject to the same approvals and
notices as the Changes initially submitted by Tenant.

(d)                 All Changes and the performance thereof shall at all times
comply with (i) all laws, rules, orders, ordinances, directions, regulations and
requirements of all governmental authorities, agencies, offices, departments,
bureaus and boards having jurisdiction thereof, (ii) all rules, orders,
directions, regulations and requirements of any applicable fire rating bureau,
or of any similar insurance body or bodies, and (iii) all rules and regulations
of Landlord, and Tenant shall cause Changes to be performed in compliance
therewith and in good and first class workmanlike manner, using materials and
equipment at least equal in quality to the original installations of the
Premises. Changes shall be performed in such manner as not to delay or impose
any additional expense upon Landlord in construction, maintenance or operation
of the Premises, and shall be performed by contractors or mechanics approved by
Landlord pursuant to this Paragraph 14, who shall coordinate their work in
cooperation with any other work being performed by Landlord with respect to the
Premises. Throughout the performance of Changes, Tenant, at its expense, shall
carry, or cause to be carried, worker’s compensation insurance in statutory
limits, and general liability insurance for any occurrence in or about the
Premises, of which Landlord and its managing agent shall be named as additional
parties insured, in such limits as Landlord may reasonably prescribe. Such
policies shall comply with Paragraph 21(b) hereof.

(e)                 Tenant further covenants and agrees that any mechanic’s lien
filed against the Premises for work claimed to have been done for, or materials
claimed to have been furnished to Tenant, will be discharged by Tenant, by bond
or otherwise, within ten (10) days after the filing thereof, at the cost and
expense of Tenant. All

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alterations, decorations, additions or improvements upon the Premises, by either
party, including (without limiting the generality of the foregoing) all
wallcovering, built-in cabinet work, paneling and the like, shall, unless
Landlord elects otherwise, become the property of Landlord, and shall remain
upon, and be surrendered with the Premises, as a part thereof, at the end of the
Term hereof, except that Landlord may by written notice to Tenant, given at
least thirty (30) days prior to the end of the Term, require Tenant to remove
all partitions, counters, railings and the like installed by Tenant, and Tenant
shall repair any damage to the Premises arising from such removal or, at
Landlord’s option, shall pay to the Landlord all of Landlord’s costs of such
removal and repair, unless said work was signed off on by the Landlord at the
time the work was done and Landlord expressly agreed in writing that such work
need not be removed at the expiration of the Lease, in which case the work shall
be deemed approved and Tenant will not be required to remove the improvements or
pay the Landlord to remove the improvements at the expiration of the Lease.

(f)                  All articles of personal property and all business and
trade fixtures, machinery and equipment, furniture and movable partitions owned
by Tenant or installed by Tenant at its expense in the Premises shall be and
remain the property of Tenant and may be removed by Tenant at any time during
the lease Term provided Tenant is not in default hereunder, and provided further
that Tenant shall repair any damage caused by such removal. If Tenant shall fail
to remove all of its effects from said Premises upon termination of this Lease
for any cause whatsoever, Landlord may, at its option, remove the same in any
manner that Landlord shall choose, and store said effects without liability to
Tenant for loss thereof, and Tenant agrees to pay Landlord upon demand any and
all expenses incurred in such removal, including court costs and attorney’s fees
and storage charges on such effects for any length of time that the same shall
be in Landlord’s possession or Landlord may, at its option, without notice, sell
said effects, or any of the same, at private sale and without legal process, for
such price as Landlord may obtain and apply the proceeds of such sale to any
amounts due under this Lease from Tenant to Landlord and to the expense incident
to the removal and sale of said effects.

(g)                 Nothing contained in this Paragraph 14 shall be deemed to
relieve Tenant of any duty, obligation or liability with respect to making any
repair, replacement or improvement or complying with any laws, order or
requirement of any government or other authority and nothing contained in this
Paragraph 14 shall be deemed or construed to impose upon Landlord any
obligation, responsibility or liability whatsoever, for the care, supervision or
repair of the Premises or any part thereof other than as otherwise provided in
this Lease.

15.              Condition, Repair, Replacement and Maintenance of the Premises.

(a)                 Condition of the Premises. Landlord agrees to repair all
roof leaks in existence as of the date of this Lease and provide Lessee with
documentation that roof leaks have been repaired as well as replace any stained
ceiling tiles in existence as of the date of this Lease and replace and retack
roof insulation in warehouse where necessary as of the date of this Lease.
Landlord will warrant that all systems including plumbing, electrical, HVAC,
Swamp Coolers, electric gate, elevator, etc. are in good working order at
occupancy. Said Warranty will survive for the first six (6) months from
Commencement Date. All current maintenance contracts, to the extent in
Landlord’s possession, will be supplied by Landlord to Tenant upon its occupancy
of the Premises.

(b)                 Landlord’s Obligations. Landlord shall, as part of operating
costs reimbursable as Additional Rent pursuant to the terms of this Lease,
unless the repairs fall within the warranty and warranty period as stated in
section 15(a), (i) maintain, repair and replace the structural portions of the
Premises, including the foundation, floor/ceiling slabs, roof, curtain wall,
exterior glass, columns, beams, shafts, stairs, stairwells and elevator cabs and
common areas, and (ii) maintain, repair and replace the basic mechanical,
electrical, life safety, plumbing, sprinkler systems and heating, ventilating
and air-conditioning systems. To the extent that the foregoing operating costs
are capital expenditures, then such operating costs shall be amortized
(including interest on the unamortized cost) over the useful life of the
applicable item as Landlord shall reasonably determine using sound real estate
accounting principles consistently applied. To the extent that the foregoing
repair or replacement of any portion of the property after the warranty period
is not deemed to be a capital expense using sound real estate accounting
principles and the cost of said repair or replacement exceeds $2,500.00, then
the Landlord shall be responsible to paying for the repair or replacement and
shall bill back the Tenant monthly in even installments over the remainder of
the life of the Lease.

8

 

(c)                 Tenant’s Obligations.

(i)                   Tenant’s Maintenance. Except as expressly provided as
Landlord’s obligation in Section 15(b) of this Lease, Tenant shall keep the
Premises in good condition and repair (subject to normal wear and tear and
damage due to casualty resulting in termination of this Lease) and in compliance
with Landlord’s reasonable sustainability practices. All damage or injury to the
Premises resulting from the act or negligence of Tenant, its employees, agents
or visitors, guests, invitees or licensees or by the use of the Premises, shall
be promptly repaired by Tenant at its sole cost and expense (except to the
extent covered by insurance, to the satisfaction of Landlord; provided, however,
that for damage to the Premises as a result of casualty or for any repairs that
may impact the mechanical, electrical, plumbing, heating, ventilation or
air-conditioning systems of the Premises, Landlord shall have the right (but not
the obligation) to select the contractor and oversee all such repairs. Subject
to Section 15(b), Landlord may make any repairs which are not promptly made by
Tenant after Tenant’s receipt of written notice and the reasonable opportunity
of Tenant to make said repair within fifteen (15) business days from receipt of
said written notice, and charge Tenant for the cost thereof, which cost shall be
paid by Tenant within thirty (30) days from invoice from Landlord, unless stated
differently in sections 15(a)(b) above. Tenant shall be responsible for the
design and function of all non-standard improvements of the Premises, whether or
not installed by Landlord at Tenant’s request. Tenant waives all rights to make
repairs at the expense of Landlord, or to deduct the cost thereof from the rent.

(ii)                 Damage Caused by Tenant. Notwithstanding any contrary
provisions set forth in this Lease, any damage to the Premises, including, but
not limited to, the building or its systems, or the improvements, caused by
Tenant or a “Tenant Representative” (as defined below), shall be promptly
repaired or replaced to its former condition by Tenant, as required by Landlord,
at Tenant’s own expense. The term “Tenant Representative” shall mean any
shareholder, officer, director, member, partner, employee, agent, licensee,
assignee, sublessee or invitee of Tenant, or any third party other than
Landlord.

(iii)                Tenant to Keep Premises Clean. In addition to the
foregoing, and not in limitation of it, Tenant shall also, at Tenant’s own
expense, undertake all replacement of all plate glass and light bulbs,
fluorescent tubes and ballasts, and decorating, redecorating and cleaning of the
interior of the Premises, and shall keep and maintain the Premises in a clean
condition, free from debris, trash refuse, snow and ice.

(iv)               Tenant’s Negative Covenants. Tenant shall not injure, deface,
permit waste nor otherwise harm any part of the Premises, permit any nuisance at
the Premises, permit the emission of any objectionable noise or odor from the
Premises, place a load on the floor on the Premises exceeding the floor load per
square foot the floor was designed to carry, or install, operate or maintain any
electrical equipment in the Premises that shall not bear an underwriters
approval.

16.              Liens. Tenant shall not permit any mechanic’s, materialmen’s or
other liens to be filed against the real property of which the Premises form a
part nor against the Tenant’s leasehold interest in the Premises. Landlord shall
have the right at all reasonable times to post and keep posted on the Premises
any notices which it deems necessary for protection from such liens in
accordance with NRS 108.234. Pursuant to this section, Landlord or its
representative shall have the right to go upon and inspect the Premises at all
reasonable times, and shall have the right to post and keep posted thereon
notices as permitted or provided by law or which Landlord may deem to be proper
for the protection of Landlord’s interest in the Premises. If any such liens are
filed and are not discharged by Tenant by bond or otherwise within ten (10) days
after the filing thereof, Landlord may, without waiving its rights and remedies
based on such breach of Tenant and without releasing Tenant from any of its
obligations, cause such liens to be released by any means it shall deem proper,
including payment in satisfaction of the claim giving rise to such lien. Tenant
shall pay to Landlord at once, upon notice by Landlord, any sum paid by Landlord
to remove such liens, together with interest at fifteen percent (15%) per annum
from the date of such payment by Landlord. If the interest rate specified in
this Lease is higher than the maximum rate permitted by applicable law, such
interest rate is hereby reduced to such maximum interest rate permitted by
applicable law.

17.              Entry by Landlord. Landlord reserves and shall at any and all
times have the right to enter the Premises to inspect the same, to supply any
service to be provided by Landlord to Tenant hereunder, to submit said Premises
to prospective purchasers or, during the last nine (9) months of the Term of
this Lease, to prospective

9

 

tenants, to post notices of nonresponsibility, or to repair the Premises, all
without being deemed guilty of any eviction of Tenant and without abatement of
rent, and may, in order to carry out such purposes, erect scaffolding and other
necessary structures where reasonably required by the character of the work to
be performed, provided that the business of Tenant shall be interfered with as
little as is reasonably practicable. Tenant hereby waives any claim for damages
for any injury or inconvenience to or interference with Tenant’s business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby. For each of the aforesaid purposes, Landlord shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Tenant’s vaults and safe, and Landlord shall have
the means which Landlord may deem proper to open said doors in an emergency in
order to obtain entry to the Premises, and any entry to the Premises obtained by
Landlord by any of said means, or otherwise, shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or an eviction of Tenant from the Premises or any portion
thereof, and any damages caused on account thereof shall be paid by Tenant. It
is understood and agreed that no provision of this Lease shall be construed as
obligating Landlord to perform any repairs, alterations or decoration except as
otherwise expressly agreed herein to be performed by Landlord. Landlord shall
attempt in the exercise of its rights under this Paragraph 17 to minimize any
disturbance of Tenant’s use and possession of the Premises and to provide as
much notice to Tenant as may be reasonably possible, but no less than one (1)
business day, prior to any such exercise of Landlord’s rights under this
Paragraph 17.

18.              Utilities.

(a)                 Utilities. During the Term, Tenant shall provide in the
Premises at its own expense, water, gas, electricity, sewer, trash pickup and
disposal, and other necessary utilities and services, and Tenant shall make
payment directly to the entities providing such utilities and services.

(b)                 Interruption of Utilities. Tenant agrees that Landlord shall
not be liable for damages, by abatement of rent or otherwise, for failure,
delay, diminution or interruption of any utilities or services for any reason,
and such failure, delay, diminution or interruption shall never be deemed to
constitute an eviction or disturbance of Tenant’s use and possession of the
Premises or relieve Tenant from paying rent or performing any of its obligations
under this Lease. Furthermore, Landlord shall not be liable under any
circumstances for a loss of or injury to, property or for any injury to, or
interference with, Tenant’s business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to any
such failure, delay, diminution or interruption of such utilities or services.

19.              Indemnification. To the extent authorized and permitted by law
in Chapters 41 and 354 of the Nevada Revised Statutes, Tenant hereby agrees to
defend, indemnify and hold Landlord harmless against and from any and all claims
arising from Tenant’s use of the Premises or the conduct of its business or from
any activity, work, or thing done, permitted or suffered by Tenant, its agents,
contractors, employees or invitees in or about the Premises or elsewhere, and
hereby agrees to further indemnify and hold harmless Landlord against and from
any and all claims arising from any breach or default in the performance of any
obligation on Tenant’s part to be performed under the terms of this Lease, or
arising from any act, neglect, fault or omission of Tenant, or of its agents,
employees or invitees, and from and against all costs, attorneys’ fees, expenses
and liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding may be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord hereby
agrees to defend the same at Tenant’s expense by counsel approved in writing by
Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises from any cause whatsoever including, without limitation, loss of or
damage to any property by theft or otherwise, any injury or damage to person or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Premises or from
the pipes, appliances or plumbing works therein or from the roof, street or
sub-surface or from any other place or resulting from dampness or any other
patent or latent cause whatsoever. The foregoing shall not be construed as an
agreement by Tenant to indemnify Landlord against or from the negligence of
Landlord or its agents, servants, employees, customers, or invitees.

10

 

20.              Hazardous Materials.

(a)                 Reportable Uses Require Consent. The term “Hazardous
Substance” as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated or monitored by any
governmental authority, or (iii) a basis for potential liability of Landlord to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Tenant shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Landlord and compliance in a timely
manner (at Tenant’s sole cost and expense) with all Applicable Requirements (as
hereinafter defined). “Reportable Use” shall mean (i) the installation or use of
any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to belled with, any governmental authority, and (iii)
the presence in, on or about the Premises of a Hazardous Substance with respect
to which any Applicable Requirements require that a notice be given to persons
entering or occupying the Premises or neighboring properties. In addition,
Landlord may (but without any obligation to do so) condition its consent to any
Reportable Use of any Hazardous Substance by Tenant upon Tenant’s giving
Landlord such additional assurances as Landlord, in its reasonable discretion,
deems necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefor, including but
not limited to the installation (and, at Landlord’s option, removal on or before
Lease expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit.

(b)                 Duty to Inform Landlord. Tenant shall obtain Landlord’s
written consent, which consent shall be granted or withheld in Landlord’s sole
discretion, to the manufacturing, processing, distribution, using, producing,
treating, storing (above or below ground level), disposing of, or allowing to be
present, of any other Hazardous Substance in or about the Premises except for
those previously approved in writing by Landlord. In connection with each such
consent requested by Tenant, Tenant shall submit to Landlord a description,
including the composition, quantity and all other information requested by
Landlord concerning the proposed presence of any Hazardous Substance. Landlord’s
consent to the presence of any Hazardous Substance may be deemed given only by
inclusion of a description of the composition and quantity of the proposed
Hazardous Substance on Landlord’s written consent to the request. Landlord’s
consent to the presence of any Hazardous Substance at any time during the Term
or renewal thereof shall not waive the requirement of obtaining Landlord’s
consent to the subsequent presence of any other, or increased quantities of, any
Hazardous Substance in or about the Premises. If Tenant knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Landlord,
Tenant shall immediately give Landlord written notice thereof, together with a
copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Tenant shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system). If any
Hazardous Substance is present in or about the Premises, Landlord shall have the
right upon reasonable notice to Tenant to engage a consultant to inspect the
Premises and to review Tenant’s use of Hazardous Substances and all of Tenant’s
practices with respect to such Hazardous Substances. Tenant shall cooperate in
all respects with such inspections and reviews. All costs of such consultants
shall be reimbursed to Landlord within fifteen (15) days of written demand by
Landlord.

(c)                 Indemnification. Tenant shall indemnify, protect, defend and
hold Landlord, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys’ and
consultants’ fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Tenant or by anyone under Tenant’s control. Tenant’s
obligations hereunder shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Tenant, and the cost of investigation (including consultants’ and
attorneys’ fees and testing), removal, remediation, restoration and/or

11

 

abatement thereof, or of any contamination therein involved, and shall survive
the expiration or earlier termination of this Lease. No termination,
cancellation or release agreement entered into by Landlord and Tenant shall
release Tenant from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Landlord in writing at the time of
such agreement. Tenant’s indemnity obligations as provided herein shall include,
without in any way limiting the foregoing:

(i)                   All costs, expenses and attorneys’ fees incurred or
sustained by any party in making any investigation on account of any claim,
demand, loss, liability, cost, charge, suit, order, judgment or adjudication, in
prosecuting or defending any action brought in connection therewith, in
obtaining or seeking to obtain a release therefrom and in enforcing any of the
agreements herein contained;

(ii)                 Liability for clean up costs, fines, damages or penalties
incurred pursuant to the provisions of any Applicable Requirements;

(iii)                Liability for costs and expenses of abatement, correction
or clean-up, fires, damages, response costs or penalties which arise from the
provisions of any Applicable Requirements; and

(iv)               Liability for personal injury or Premises damage arising
under any statutory or common-law tort theory, including, without limitation,
damages assessed for the maintenance of a public or private nuisance, or for the
carrying on of an abnormally dangerous activity, and response costs.

(d)                 Tenant’s Compliance with Requirements. Tenant shall, at
Tenant’s sole cost and expense, fully, diligently and in a timely manner, comply
with all “Applicable Requirements,” which term is used in this Lease to mean all
laws, rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Landlord’s
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Tenant shall, within five (5) days after receipt of Landlord’s written
request, provide Landlord with copies of all documents and information,
including but not limited to permits, registrations, manifests, applications,
reports and certificates, evidencing Tenant’s compliance with any Applicable
Requirements specified by Landlord, and shall immediately upon receipt, notify
Landlord in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or
involving failure by Tenant or the Premises to comply with any Applicable
Requirements. Tenant shall provide Landlord annually on each anniversary date of
the Commencement Date a written certification, also signed by the manager of
operations of Tenant at the Premises, certifying that:

(i)                   Tenant’s business has been conducted in full compliance
with the Applicable Requirements;

(ii)                 All Hazardous Substances (if any) related to Tenant’s
business have been disclosed to Landlord or in said certificate:

(iii)                The method and frequency of off- site disposal of Hazardous
Substances from the Premises, as described in the certificate, comply with the
Applicable Requirements.

(e)                 Inspection; Compliance with Law. Landlord, Landlord’s
agents, employees, contractors and designated representatives, and any
mortgagees, shall have the right to enter the Premises, with proper notice of no
less than one (1) business day, at any time in the case of an emergency, and
otherwise at reasonable times, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Tenant with this Lease and all
Applicable Requirements, and Landlord shall be entitled to employ experts and/or
consultants in connection therewith to advise Landlord with respect to Tenant’s
activities, including but not limited to Tenant’s installation, operation, use,
monitoring, maintenance, or removal of any Hazardous Substance on or from the
Premises. The costs and expenses of any such inspections shall be paid by the
party requesting same, unless

12

 

a default of this Lease by Tenant or a violation of Applicable Requirements or a
contamination, caused or contributed to by Tenant, is found to exist or to be
imminent, or unless the inspection is requested or ordered by a governmental
authority as the result of any such existing or imminent violation or
contamination. In such case, Tenant shall upon request reimburse Landlord or
Landlord’s mortgagee, as the case may be, for the costs and expenses of such
inspections.

(f)                  Exit Assessment. If Landlord has reason to believe that
Tenant has caused, permitted or suffered the release of any Hazardous Substances
at the Premises in violation of applicable laws, then Landlord may require that
Tenant prepare an exit environmental assessment of the Premises in compliance
with ASTM Standard E1527-00 (the “Exit Assessment”), which shall not include any
subsurface testing unless warranted by the results of such assessment, in order
to establish the environmental condition of the Premises upon the expiration or
earlier termination of this Lease as a condition to Tenant’s effective vacation
of the Premises. The Exit Assessment shall be requested, if at all, not later
than 90 days prior to the expiration date of this Lease (as such date may be
extended) and shall be conducted not earlier than thirty (30) days prior to
Tenant’s vacation of the Premises. In the event the Exit Assessment reveals any
environmental contamination of the Premises, then Tenant shall promptly
remediate or remove such contamination in its entirety, which obligation of
Tenant shall survive the expiration or termination of this Lease. Tenant shall
maintain the results of the Exit Assessment in strict confidence and shall not,
without Landlord’s prior written consent which may be withheld in its sole
discretion, disclose the results thereof, or any portion thereof to any third
party, excepting Tenant’s directors, officers, employees, representatives and
consultants on a need-to-know basis, unless and only to the extent that Tenant
is compelled under applicable law to disclose all or any portion of such
assessment results. The Exit Assessment shall name the Landlord as an additional
addressee and client for purposes of Landlord’s ability to rely on the results
thereof and a copy shall be delivered to Landlord concurrently with the delivery
of the Exit Assessment to Tenant.

21.              Insurance.

(a)                 Tenant at its sole cost and expense shall, during the entire
Term hereof, obtain, maintain and keep in full force and effect, the following
insurance:

(i)                   Property insurance including fire, extended coverage,
vandalism malicious mischief and all risks coverage upon property of every
description and kind owned by Tenant and located in the Premises or for which
Tenant is legally liable or installed by or on behalf of Tenant including,
without limitation, leasehold improvements, alterations, furniture, fixtures and
any other personal property, in an amount not less than one hundred percent
(100%) of the full replacement cost thereof.

(ii)                 A policy of Comprehensive Liability insurance coverage to
include personal injury, broad form property damage, premises/operations,
owner’s protective coverage, blanket contractual liability, products and
completed operations liability and owned/non-owned auto liability, in limits not
less than Five Million Dollars ($5,000,000) inclusive. Such policy shall name
Landlord, Landlord’s managing agent and Landlord’s mortgagees as additional
insureds and shall contain the following provision:

“Such insurance as afforded by this policy for the benefit of Landlord shall be
primary as respects any claims, losses or liabilities arising out of the use of
the Premises by the Tenant or by Tenant’s operation and any insurance carried by
Landlord shall be excess and non-contributing. “

(iii)                Loss of income and extra expense insurance in such amounts
as will reimburse Tenant for direct or indirect loss of earnings attributable to
all perils commonly insured against by prudent tenants or attributable to
prevention of access to the Premises as a result of such perils.

(iv)               Any other form or forms of insurance as Tenant or Landlord or
the mortgagees of Landlord may reasonably require from time to time in form in
amounts and for insurance risks against which a prudent tenant would protect
itself.

(b)                 All policies shall be taken out with insurers acceptable to
Landlord and in form satisfactory from time to time to Landlord. Tenant agrees
that certificates of insurance on the Landlord’s standard

13

 

form, or, if required by Landlord or the mortgagees of Landlord, certified
copies of each such insurance policy, will be delivered to Landlord as soon as
practicable after the placing of the required insurance, but in no event later
than ten (10) days after Tenant takes possession of all or any part of the
Premises, including possession taken under Paragraph 4 hereof. All policies
shall contain an undertaking by the insurers to notify Landlord and the
mortgagees of Landlord in writing not less than thirty (30) days prior to any
material change, reduction in coverage, cancellation, or other termination
thereof.

(c)                 In the event of damage to or destruction of the Premises
entitling Landlord to terminate this Lease pursuant to Paragraph 22 hereof;
Tenant will immediately pay to Landlord all of Tenant’s insurance proceeds
relating to leasehold improvements and alterations (but not to Tenant’s trade
fixtures, equipment, furniture or other personal property) in the Improvements.

(d)                 Landlord covenants and agrees that throughout the Term, it
will insure the Premises (excluding any property with respect to which Tenant is
obligated to insure pursuant to the provisions of Subparagraph 21(a) above)
against damage by fire and standard extended coverage perils and public
liability insurance in such reasonable amounts with such reasonable deductibles
as would be carried by a prudent owner of a similar building in the Las Vegas,
Nevada office/warehouse space market. Landlord may, but shall not be obligated
to, take out and carry any other form or forms of insurance as it or the
mortgagees of Landlord may reasonably determine advisable at Landlord’s expense.
Tenant acknowledges that it has no right to receive any proceeds from any such
insurance policies carried by Landlord, although Landlord shall use such
proceeds in the repair and reconstruction of the Premises unless Landlord elects
to terminate this Lease pursuant to Paragraph 22. Landlord will not carry
insurance of any kind on Tenant’s furniture or furnishings or on any equipment
of Tenant under this Lease, and Landlord shall not be obligated to repair any
damage thereto or replace the same.

(e)                 Tenant shall promptly comply with all reasonable
requirements of the insurance authority or of any insurer now or hereafter in
effect relating to the Premises.

(f)                  If any insurance policy carried by Landlord, as provided by
Subparagraph 21(d) above, shall be canceled or cancellation shall be threatened
or the coverage thereunder reduced or threatened to be reduced, in any way by
reason of the use or occupation of the Premises or any part thereof by Tenant or
by any assignee or sub-tenant of Tenant or by anyone permitted by Tenant to be
upon the Premises and, if Tenant fails to remedy the condition giving rise to
cancellation, threatened cancellation or reduction of coverage within
forty-eight (48) hours after notice thereof. Landlord may, at its option enter
upon the Premises and attempt to remedy such condition and Tenant shall
forthwith pay the cost thereof to Landlord as Additional Rent. Landlord shall
not be liable for any damage or injury caused to any property of Tenant or of
others located in the Premises as a result of such entry. In the event that
Landlord shall be unable to remedy such condition, then Landlord shall have all
of the remedies provided for in this Lease in the event of a default by Tenant.
Notwithstanding the foregoing provisions of this Subparagraph 21(f), if Tenant
fails to remedy as aforesaid, Tenant shall be in default of its obligations
hereunder and Landlord shall have no obligation to attempt to remedy such
default.

(g)                 Any policy or policies of fire, extended coverage or similar
casualty insurance, which either party obtains in connection with the Premises
and the insurance required to be obtained by Tenant pursuant to the provisions
of Subparagraph 21(a)(iii) above shall include a clause or endorsement denying
the insurer any rights of subrogation against the other party to the extent
rights have been waived by the insured prior to the occurrence of injury or
loss. Landlord and Tenant waive any rights of recovery against the other for
injury or loss due to hazards covered by insurance containing such a waiver of
subrogation clause or endorsement to the extent of the injury or loss covered
thereby.

22.              Damage or Destruction.

(a)                 In the event the Premises are damaged by fire or other
perils covered by insurance required to be carried by Landlord under this Lease
to an extent not exceeding twenty-five percent (25%) of the full insurable value
thereof and if the damage thereto is such that the Premises may be repaired,
reconstructed or restored within a period of one hundred eighty (180) days from
the date Landlord learns of the necessity for repairs as a result of the damage
and said insurance proceeds are available and sufficient to cover the cost of
such repairs,

14

 

Landlord shall commence and proceed diligently with the work of repair,
reconstruction and restoration and this Lease shall continue in full force and
effect. If such work of repair, reconstruction and restoration is such as to
require a period longer than such one hundred eighty (180) day period or exceeds
twenty-five percent (25%) of the full insurable value thereof, or if said
insurance proceeds will not be sufficient to cover the cost of such repairs;
Landlord either may elect to so repair, reconstruct or restore the Premises and
this Lease shall continue in full force and effect or Landlord may elect not to
repair, reconstruct or restore the Premises and this Lease shall in such event
terminate. Under any of the conditions of this Subparagraph 22(a), Landlord
shall give written notice to Tenant of its intention within sixty (60) days from
the date Landlord learns of the necessity for repairs as a result of the damage.
Upon the occurrence of any damage to the Premises, Tenant shall assign to
Landlord (or to any party designated by Landlord) all insurance proceeds payable
to Tenant under Tenant’s insurance for the leasehold improvements and
alterations; provided, however, that if the cost of such repair by Landlord
exceeds the amount of insurance proceeds received by Landlord from Tenant’s
insurance carrier, as assigned by Tenant, the cost of such repairs shall be paid
by Tenant to Landlord prior to Landlord’s repair of the damage. In the event
Landlord elects not to restore the Premises, this Lease shall be deemed to have
terminated as of the date of such destruction.

(b)                 Upon any termination of this Lease under any of the
provisions of this Paragraph 22, the parties shall be released thereby without
further obligation to the other from the date possession of the Premises is
surrendered to Landlord except for items which have theretofore accrued and are
then unpaid.

(c)                 In the event of repair, reconstruction and restoration by
Landlord as herein provided, the Basic Rent provided to be paid under this Lease
shall be abated proportionately with the degree to which Tenant’s use of the
Premises is impaired during the period of such repair, reconstruction or
restoration. Tenant shall not be entitled to any compensation or damages for
loss in the use of the whole or any part of the Premises and/or any
inconvenience or annoyance occasioned by such damage, repair, reconstruction or
restoration.

(d)                 Tenant shall not be released from any of its obligations
under this Lease except to the extent and upon the conditions expressly stated
in this Paragraph 22.

(e)                 In the event that damage is due to any cause other than fire
or other peril covered by extended coverage insurance. Landlord may elect to
terminate this Lease.

(f)                  It is hereby understood that if Landlord is obligated to or
elects to repair or restore as herein provided. Landlord shall be obligated to
make repairs or restoration only of those portions of the Premises (i) which
were originally provided at Landlord’s expense or (ii) which were required to be
insured by Landlord hereunder or (iii) for which Landlord has received insurance
proceeds from insurance required to be carried by Tenant hereunder, and the
repair and restoration of all other items shall be the obligation of Tenant.

(g)                 Notwithstanding anything to the contrary contained in this
Paragraph 22, Landlord shall not have any obligations whatsoever to repair,
reconstruct or restore the Premises when the damage resulting from any casualty
covered under this Paragraph 22 occurs during the last twelve (12) months of the
Term of this Lease or any extension hereof.

(h)                 The provisions of this Lease, including this Paragraph 22,
constitute an express agreement between Landlord and Tenant with respect to any
and all damage to, or destruction of, all or any part of the Premises, and any
statute or regulation with respect to any rights or obligations concerning
damage or destruction in the absence of an express agreement between the
parties, and any other statute or regulation, now or hereafter in effect, shall
have no application to this Lease or any damage or destruction to all or any
part of the Premises.

(i)                   Tenant acknowledges that the rights of any lender holding
a mortgage or deed of trust against the Premises (“Secured Lender”) to any
insurance proceeds applicable to the Premises shall be superior to the rights of
Landlord and Tenant to such proceeds. Landlord agrees to use commercially
reasonable efforts to cause the Secured Lender to make such insurance proceeds
available to Landlord for reconstruction as contemplated in this Lease. If a
Secured Lender will not make such proceeds available for reconstruction, and
Landlord is unwilling to provide the sums necessary for reconstruction, then
Landlord may elect to terminate this Lease within thirty (30) days following
receipt of notice that such sums will not be made available for reconstruction.

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23.              Eminent Domain.

(a)                 In case the whole of the Premises, or such part thereof as
shall substantially interfere with Tenant’s use and occupancy thereof, shall be
taken for any public or quasi-public purpose by any lawful power or authority by
exercise of the right of appropriation, condemnation or eminent domain, or sold
to prevent such taking either party shall have the right to terminate this Lease
effective as of the date possession is required to be surrendered to said
authority. Tenant shall not assert any claim against Landlord or the taking
authority for any compensation because of such taking, and Landlord shall be
entitled to receive the entire amount of any award without deduction for any
estate or interest of Tenant, including but not limited to any award made to
Tenant pursuant to NRS 37.115. In the event the amount of property or the type
of estate taken shall not substantially interfere with the conduct of Tenant’s
business, Landlord shall be entitled to the entire amount of the award without
deduction for any estate or interest of Tenant, and Landlord at its option may
terminate this Lease. If Landlord does not so elect, Landlord shall promptly
proceed to restore the Premises to substantially their same condition prior to
such partial taking, and a proportionate allowance shall be made to Tenant for
the Basic Rent corresponding to the time during which, and to the part of the
Premises of which, Tenant shall be so deprived on account of such taking and
restoration. Nothing contained in this Paragraph shall be deemed to give
Landlord any interest in any award separately made to Tenant for the taking of
personal property and trade fixtures belonging to Tenant or for moving costs
incurred by Tenant in relocating Tenant’s business.

(b)                 In the event of taking of the Premises or any part thereof
for temporary use, (i) this Lease shall be and remain unaffected thereby and
rent shall not abate, and (ii) Tenant shall be entitled to receive for itself
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term, provided that if such taking
shall remain in force at the expiration or earlier termination of this Lease,
Tenant shall then pay to Landlord a sum equal to the reasonable cost of
performing Tenant’s obligations under Paragraph 33 with respect to surrender of
the Premises and upon such payment shall be excused from such obligations. For
purposes of this Subparagraph 23(b), a temporary taking shall be defined as a
taking for a period of two hundred seventy (270) days or less.

24.              Bankruptcy. If Tenant shall file a petition in bankruptcy under
federal bankruptcy law as then in effect, or if Tenant is adjudicated a bankrupt
in involuntary bankruptcy proceedings and such adjudication shall not have been
vacated within thirty (30) days from the date thereof, or if a receiver or
trustee be appointed of Tenant’s property and the order appointing such receiver
or trustee not be set aside or vacated within thirty (30) days after the entry
thereof, or if Tenant shall assign Tenant’s estate or effects for the benefit of
creditors, or if this Lease shall otherwise by operation of law pass to any
persons other than Tenant, then and in any such event Landlord may, if Landlord
so elects, with or without notice of such election and with or without entry or
action by Landlord, forthwith terminate this Lease, and notwithstanding any
other provisions of this Lease, Landlord, in addition to any and all rights and
remedies allowed by law or equity, shall upon such termination be entitled to
recover damages in the amount provided in Subparagraph 25(b) below and neither
Tenant nor any person claiming through or under Tenant or by virtue of any
statute or order of any court shall be entitled to possession of the Premises
but shall forthwith quit and surrender the Premises to Landlord. Nothing herein
contained shall limit or prejudice the right of Landlord to prove and obtain as
damages by reason of any such termination an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of damages recoverable under the
provisions of this Paragraph 24.

25.              Defaults and Remedies.

(a)                 The occurrence of any one or more of the following events
shall constitute a default hereunder by Tenant:

(i)                   The abandonment of the Premises by Tenant as determined
under NRS 118-C.

(ii)                 The failure by Tenant to make any payment of Basic Rent as
when due or any Additional Rent or any other payment required to be made by
Tenant hereunder; as and when due, where such failure shall continue for a
period of ten (10) days.

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(iii)                The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Subparagraph 25(a)(i) or (ii)
above, where such failure shall continue for a period of ten (10) days after
written notice thereof from Landlord to Tenant; provided, however, that any such
notice shall be in lieu of and not in addition to, any notice required under
applicable law; provided, further, that if the nature of Tenant’s default is
such that more than ten (10) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant shall commence such cure
within said ten (10) day period and thereafter diligently prosecute such cure to
completion, which completion shall occur not later than sixty (60) days from the
date of such notice from Landlord.

(iv)               (1) The making by Tenant of any general assignment for the
benefit of creditors; (2) the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within thirty (30) days); (3) the appointment of a
trustee or receiver to take possession of substantially all of Tenant’s assets
located at the Premises or of Tenant’s interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or (4) the attachment,
execution or other judicial seizure of substantially all of Tenant’s assets
located at the Premises or of Tenant’s interest in this Lease where such seizure
is not discharged within thirty (30) days.

(b)                 In the event of any such default by Tenant, in addition to
any other remedies available to Landlord at law or in equity, including, without
limitation, Landlord’s right to continue the Lease in effect after Tenant’s
breach and abandonment and recover rent as it becomes due, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder.
In the event that Landlord shall elect to so terminate this Lease then Landlord
may recover from Tenant:

(i)                   the worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus

(ii)                 the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus

(iii)                the worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus

(iv)               any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant’s failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.

As used in Subparagraphs 25(b)(i) and (ii) above, the “worth at the time of
award” is computed by allowing interest at nine percent (9%), or such lesser
amount as may then be the maximum lawful rate, per annum. As used in
Subparagraph 25(b)(iii) above, the “worth at the time of award” is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

(c)                 In the event of any such default by Tenant, Landlord shall
also have the right, with or without terminating this Lease, to re-enter the
Premises and remove all persons and property from the Premises; such property
may be removed and stored in a public warehouse or elsewhere at the cost of and
for the account of Tenant for such period of time as may be required by
applicable law after which time Landlord may dispose of such property in
accordance with applicable law. No re-entry or taking possession of the Premises
by Landlord pursuant to this Subparagraph 25(c) shall be construed as an
election to terminate this Lease unless a written notice of such intention be
given to Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction.

(d)                 All rights, options and remedies of Landlord contained in
this Lease shall be construed and held to be cumulative, and no one of them
shall be exclusive of the other, and Landlord shall have the right to

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pursue any one or all of such remedies or any other remedy or relief which may
be provided by law, whether or not stated in this Lease. No waiver of any
default of Tenant hereunder shall be implied from any acceptance by Landlord of
any rent or other payments due hereunder or any omission by Landlord to take any
action on account of such default if such default persists or is repeated, and
no express waiver shall affect defaults other than as specified in said waiver.
The consent or approval of Landlord to or of any act by Tenant requiring
Landlord’s consent or approval shall not be deemed to waive or render
unnecessary Landlord’s consent or approval to or of any subsequent similar acts
by Tenant.

26.              Assignment and Subletting. Tenant shall not voluntarily assign
or encumber its interest in this Lease or in the Premises, or sublease all or
any part of the Premises, or allow any other person or entity to occupy or use
all or any part of the Premises, without first obtaining Landlord’s prior
written consent, which may be granted or withheld in Landlord’s sole and
absolute discretion Any assignment, encumbrance or sublease without Landlord’s
prior written consent shall be voidable, at Landlord’s election, and shall
constitute a default. For purposes hereof, in the event Tenant is a partnership
or limited liability company, a withdrawal or change of partners or members, or
change of ownership of partners or members, owning more than a fifty percent
(50%) interest in the partnership or limited liability company, or if Tenant is
a corporation, any transfer of fifty percent (50%) or more of its stock, shall
constitute a voluntary assignment and shall be subject to these provisions. A
change of partners or members owning less than fifty percent (50%) interest in a
partnership or limited liability company, or a transfer of less than fifty
percent (50%) of a corporation’s stock, may also be deemed to constitute a
voluntary assignment subject to these provisions if it results in a change of
control of the partnership, limited liability company or corporation. No consent
to an assignment, encumbrance, or sublease shall constitute a further waiver of
the provisions of this Paragraph. Tenant shall notify Landlord in writing of
Tenant’s intent to assign this Lease, or encumber, or sublease Tenant’s interest
in the Premises, the name of the proposed assignee or sublessee, information
concerning the financial responsibility of the proposed assignee or sublessee
and the terms of the proposed assignment or subletting, and Landlord shall,
within fifteen (15) days of receipt of such written notice, and additional
information requested by Landlord concerning the proposed assignee’s or
sublessee’s financial responsibility, elect one of the following:

(a)                 Consent to such proposed assignment, encumbrance or
sublease;

(b)                 Refuse such consent in its sole discretion; or

(c)                 Elect to terminate this Lease in the case of an assignment
or a sublease of the entire Premises or in the case of a partial sublease,
terminate this Lease as to the portion of the Premises proposed to be sublet.

As a condition for granting its consent to any assignment, encumbrance or
sublease, Landlord may require that the assignee or sublessee remit directly to
Landlord, on a monthly basis, all monies due to Tenant by said assignee or
sublessee. In the event that Landlord shall consent to an assignment or sublease
under the provisions of this Paragraph 26, Tenant shall pay Landlord’s
reasonable processing costs and attorneys’ fees incurred in giving such consent.
If for any proposed assignment or sublease Tenant receives rent or other
consideration, whether cash or any other form whatsoever, either initially or
over the term of the assignment or sublease, in excess of the rent called for
hereunder, or, in case of the sublease of a portion of the Premises, in excess
of such rent fairly allocable to such portion, after appropriate adjustments to
assure that all other payments called for hereunder are taken into account,
Tenant shall pay to Landlord as additional rent hereunder fifty percent (50%) of
the excess value of each such payment of rent or other consideration received by
Tenant promptly after its receipt. Landlord’s waiver or consent to any
assignment or subletting shall not relieve Tenant from any obligation under this
Lease. If Tenant requests Landlord’s consent to any assignment of this Lease or
any subletting of all or a portion of the Premises, Landlord shall have the
right in its sole discretion, to be exercised by giving written notice to Tenant
within thirty (30) days of receipt by Landlord of the financial responsibility
information required by this Paragraph 26 to terminate this Lease in the case of
an assignment or a sublease of the entire Premises, or in the case of a partial
sublease, terminate this Lease as to the portion of the Premises proposed to be
sublet, effective as of the date Tenant proposes to assign this Lease or sublet
all or a portion of the Premises. Landlord’s right to terminate this Lease as to
all or a portion of the Premises on assignment or subletting shall not terminate
as a result of Landlord’s consent to the assignment of this Lease or the
subletting of all or a portion of the Premises, or Landlord’s failure to
exercise this right with respect to any assignment or subletting.

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27.              Quiet Enjoyment. Landlord covenants and agrees with Tenant that
upon Tenant paying the rent required under this Lease and paying all other
charges and performing all of the covenants and provisions aforesaid on Tenant’s
part to be observed and performed under this Lease, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises in accordance with this
Lease, free from any person claiming by, through or under Landlord.

28.              Subordination. Without the necessity of any additional document
being executed by Tenant for the purpose of effecting a subordination, and at
the election of Landlord or any mortgagee with a lien on the Premises or any
ground lessor with respect to the Premises, this Lease shall be subject and
subordinate at all times to: (a) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Premises or the land upon
which the Premises are situated or both, (b) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which the
Premises, land, ground leases or underlying leases, or Landlord’s interest or
estate in any of said items is specified as security, and any CC&Rs (as defined
in Paragraph 8) affecting the Premises. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such ground
leases or underlying leases or any such liens to this Lease. In the event that
any ground lease or underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Tenant shall if requested by the ground lessor, mortgagee or
beneficiary, as applicable, attorn to and become the Tenant of the successor in
interest to Landlord and in such event Tenant’s right to possession of the
Premises shall not be disturbed if Tenant is not in default and so long as
Tenant shall pay the rent and all other amounts required to be paid to Landlord
pursuant to the terms hereof and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its temps.
Tenant hereby waives its rights under any current or fixture law which gives or
purports to give Tenant any right to terminate or otherwise adversely affect
this Lease and the obligations of Tenant hereunder in the event of any such
foreclosure proceeding or sale. Tenant covenants and agrees to execute and
deliver, upon demand by Landlord and in the form requested by Landlord, any
additional documents evidencing Tenant’s agreement to attorn as set forth in
this Paragraph 28 and the priority or subordination of this Lease with respect
to any such CC&Rs, ground leases or underlying leases or the lien of any such
mortgage or deed of trust. Should Tenant fail to sign and return any such
documents within ten (10) business days of receipt, Tenant shall be in default
hereunder.

29.              Estoppel Certificate.

(a)                 Within ten (10) days following any written request which
Landlord may make from time to time, Tenant shall execute and deliver to
Landlord a statement, in a form substantially similar to the form of Exhibit “B”
attached hereto, certifying. (i) the Commencement Date of this Lease; (ii) the
fact that this Lease is unmodified and in full force and effect (or, if there
have been modifications hereto, that this Lease is in full force and effect, as
modified, and stating the date and nature of such modifications); (iii) the date
to which the rental and other sums payable under this Lease have been paid; (iv)
the fact that there are no current defaults under this Lease by either Landlord
or Tenant except as specified in Tenant’s statement; and (v) such other matters
requested by Landlord. Landlord and Tenant intend that any statement delivered
pursuant to this Paragraph 29 may be relied upon by any mortgagee, beneficiary,
purchaser or prospective purchaser of the Premises or any interest therein.

(b)                 Tenant’s failure to deliver such statement within such time
shall be conclusive upon Tenant (i) that this Lease is in full force and effect,
without modification except as may be represented in good faith by Landlord,
(ii) that there are no uncured defaults in Landlord’s performance, and (iii)
that not more than one (1) month’s rent has been paid in advance. Tenant’s
failure to deliver said statement to Landlord within ten (10) working days of
receipt shall constitute a default under this Lease.

30.              Rules and Regulations. Tenant shall faithfully observe and
comply with all reasonable rules and regulations from time to time put into
effect by Landlord as it deems reasonably necessary or appropriate in its sole
discretion (the “Rules and Regulations’).

31.              Choice of Law. This Lease shall be governed by and construed
pursuant to the laws of the State of Nevada.

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32.              Successors and Assigns. Except as otherwise provided in this
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.

33.              Surrender of Premises. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, operate as an assignment to it of any or all
subleases or subtenancies. Upon the expiration or termination of this Lease,
Tenant shall peaceably surrender the Premises and all alterations and additions
thereto broom-clean, in good order, repair and condition, reasonable wear and
tear excepted, and shall comply with the provisions of Subparagraphs 14(g). The
delivery of keys to any employee of Landlord or to Landlord’s agent or any
employee thereof shall not be sufficient to constitute a termination of this
Lease or a surrender of the Premises.

34.              Professional Fees.

(a)                 In the event that Landlord should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provisions of this Lease, or for any other relief
against Tenant hereunder, or should either party bring suit against the other
with respect to matters arising from or growing out of this Lease, then all
costs and expenses, including without limitation, professional fees such as
appraisers’, accountants’ and attorneys’ fees, incurred by the prevailing party
therein shall be paid by the other party, which obligation on the part of the
other party shall be deemed to have accrued on the date of the commencement of
such action and shall be enforceable whether or not the action is prosecuted to
judgment.

(b)                 Should Landlord be named as a defendant in any suit brought
against Tenant in connection with or arising out of Tenant’s occupancy
hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such
suit including without limitation, professional fees such as appraisers’,
accountants’ and attorneys’ fees.

35.              Performance by Tenant. All covenants and agreements to be
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant’s sole cost and expense and without any abatement of rent. In
the event Tenant shall fail to perform any covenant or agreement to be performed
by Tenant under any of the terms of this Lease, including, without limitation,
Tenant’s obligations under Paragraph 15 hereof. Landlord shall have the right to
perform such obligation of Tenant on Tenant’s behalf. In such event, Landlord
shall be entitled to receive, as Additional Rent, reimbursement of any sums so
expended on Tenant’s behalf, together with interest at nine percent (9%), or
such lesser amount as may then be the maximum lawful rate, per annum calculated
from the date of expenditure by Landlord to the date of reimbursement by Tenant.

36.              Mortgage and Senior Lessor Protection. No act or failure to act
on the part of Landlord which would entitle Tenant under the terms of this
Lease, or by law, to be relieved of Tenant’s obligations hereunder or to
terminate this Lease, shall result in a release of such obligations or a
termination of this Lease unless (a) Tenant has given notice by registered or
certified mail to any beneficiary of a deed of trust or mortgage covering the
Premises and to the lessor under any master or ground Lease covering the
Premises or any interest therein whose identity and address shall have been
furnished to Tenant, and (b) Tenant offers such beneficiary, mortgagee or Lessor
a reasonable opportunity to cure the default.

37.              Definition of Landlord. The term “Landlord” as used in this
Lease, so far as covenants or obligations on the part of Landlord are concerned,
shall be limited to mean and include only the owner or owners, at the time in
question, of the fee title to, or a lessee’s interest in a ground lease of the
Premises. In the event of any transfer, assignment or other conveyance or
transfers of any such title or interest. Landlord herein named (and in case of
any subsequent transfers or conveyances, the then grantor) shall be
automatically freed and relieved from and after the date of such transfer,
assignment or conveyance of all liability as respects the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed and, without further agreement, the transferee of
such title or interest shall be deemed to have assumed and agreed to observe and
perform any and all obligations of Landlord hereunder, during its ownership of
the Premises. Landlord may transfer its interest in the Premises without the
consent of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord’s part of any of the terms and conditions of this Lease.

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38.              Waiver. The failure of Landlord to seek redress for violation
of, or to insist upon strict performance of, any term covenant or condition of
this Lease or the Rules and Regulations shall not be deemed a waiver of such
violation or prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation, nor
shall any custom or practice which may become established between the parties in
the administration of the terms hereof be deemed a waiver of, or in any way
affect, the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord’s knowledge of
such preceding breach at the time of acceptance of such rent.

39.              Identification of Tenant. Unless the provisions of Paragraph 53
herein below are applicable to this Lease, if more than one entity executes this
Lease as Tenant, (a) each of them is jointly and severally liable for the
keeping observing and performing of all of the terms, covenants, conditions,
provisions and agreement of this Lease to be kept, observed and performed by
Tenant, and (b) the term “Tenant” as used in this Lease shall mean and include
each of them jointly and severally and the act of or notice from, or notice or
refund to, or the signature of any one or more of them, with respect to the
tenancy or this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the entities executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or so received
such notice or refund or so signed.

40.              Parking and Transportation. Tenant shall have the right to use
all parking areas located upon the Premises, subject to such parking rules and
regulations as Landlord deems reasonably necessary or appropriate for the
operation of said parking. Landlord may refuse to permit any person who violates
with unreasonable frequency the parking rules and regulations to park in the
parking areas, and any violation of the rules shall subject the car to removal.
Tenant agrees to use its best efforts to acquaint all employees and visitors
with the parking rules and regulations. Landlord shall have no responsibility
for damage to cars in the parking areas.

41.              Terms and Headings. The words “Landlord” and ‘“Tenant” as used
herein shall include the plural as well as the singular. Words used in any
gender include other genders. The Paragraph headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.

42.              Examination of Lease; Counterparts. Submission of this
instrument for examination or signature by Tenant does not constitute a
reservation of or option for Lease, and it is not effective as a Lease or
otherwise until execution by and delivery to both Landlord and Tenant. This
Lease may be executed in counterparts, each of which so executed shall,
irrespective of the date of its execution and delivery, be deemed an original,
and said counterparts together shall constitute one and the same instrument

43.              Time. Time is of the essence with respect to the performance of
every provision of this Lease in which time or performance is a factor.

44.              Prior Agreement; Amendments. This Lease contains all of the
agreements of the parties hereto with respect to any matter covered or mentioned
in this Lease, and no prior agreement or understanding, oral or written, express
or implied, pertaining to any such matter shall be effective for any purpose. No
provision of this Lease may be amended or added to except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
The parties acknowledge that all prior agreements, representations and
negotiations are deemed superseded by the execution of this Lease to the extent
they are not incorporated herein.

45.              Severability. Any provision of this Lease which shall prove to
be invalid, void or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.

46.              Recording. Neither Landlord nor Tenant shall record this Lease
nor a short form memorandum thereof without the consent of the other and if such
recording occurs, it shall be at the sole cost and expense of the party
requesting the recording, specifically including any documentary transfer taxes.

21

 

47.              Limitation on Liability. The obligations of Landlord under this
Lease do not constitute personal obligations of the individual partners,
directors, officers or shareholders of Landlord, and Tenant shall not seek
recourse against the individual partners, directors, officers or shareholders of
Landlord or any of their personal assets for satisfaction of any liability in
respect to this Lease. Any liability of Landlord under this Lease shall be
limited to Landlord’s interest in the Premises. Tenant hereby acknowledges and
agrees that (i) the Basic Rent does not include the cost of any security
measures for any portion of the Premises, (ii) that Landlord has no obligation
to provide any security measures, and to the extent permitted by law, and such
obligation imposed on Landlord by operation of law is waived by Tenant, (iii)
Landlord has made no representation to tenant regarding the safety or security
of the Premises, (iv) Tenant is solely responsible for providing any security
measures and devices that is required to protect Tenant and Tenant’s employees,
visitors and invitees from criminal or negligent acts of third parties, and (v)
any safety and security devices included in the Premises as delivered to Tenant,
while intended to deter crime and promote safety, may not in given instances
prevent theft or other criminal acts, or protect persons or property against
damage, loss or injury. The risk that any safety or security device previously
installed at the Premises by or for Landlord may not be effective, or may
malfunction or be circumvented, is hereby assumed by Tenant.

48.              Riders. Clauses, plats, exhibits and riders, if any, affixed to
this Lease are a part hereof.

49.              Signs. Tenant shall not place any sign within any area of the
Premises which is visible from outside the Premises without Landlord’s prior
written consent. Landlord shall have the right to remove any sign which has not
been previously approved in writing.

50.              Modification for Lender. If in connection with obtaining
construction, interim or permanent financing for the Premises, the lender shall
request reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder in any way and do not adversely affect the leasehold interest hereby
created or Tenant’s rights hereunder.

51.              Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the rent payment herein stipulated shall be
deemed to be other than on account of the rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction and Landlord may accept such check or
payment without prejudice to Landlord’s right to recover the balance of such
rent or pursue any other remedy provided in this Lease. Tenant agrees that each
of the foregoing covenants and agreements shall be applicable to any covenant or
agreement whether expressly contained in this Lease or imposed by any statute or
at common law.

52.              Intentionally Omitted.

53.              Tenant as Corporation. If Tenant executes this Lease as a
corporation or other business entity, then Tenant and the persons executing this
Lease on behalf of Tenant represent and warrant that the individuals executing
this Lease on Tenant’s behalf are duly authorized to execute and deliver this
Lease on its behalf and that this Lease is binding upon Tenant in accordance
with its temps.

54.              No Partnership or Joint Venture. Nothing in this Lease shall be
deemed to constitute Landlord and Tenant as partners or joint venturers. It is
the express intent of the parties hereto that their relationship with regard to
this Lease be and remain that of landlord and tenant.

55.                    Option to Extend.

(a) Extension Option. Provided that this Lease is in full force and effect and
no Event of Default, as hereinafter defined, has occurred and is continuing,
Tenant is granted the option to extend (“Extension Option”) the term of this
Lease for two (2) consecutive additional three year terms (each, hereinafter, an
“Extension Term”); provided, that Tenant gives Landlord written notice
(“Tenant’s Notice”) of the exercise of an option to extend no earlier than 270
days and no later than 180 days prior to the Expiration Date of this Lease or
expiration of

22

 

the first extension term. Upon Tenant’s exercise of such option, as herein
provided, this Lease shall be extended on the same terms and conditions of this
Lease, except as herein specifically provided and the parties or their
successors and assigns, as applicable, shall enter into a simple amendment
evidencing the Extension Term. The Extension Options are personal to Tenant and
may be exercised only by Tenant while Tenant occupies the entire the Property,
and may not be exercised by any transferee of Tenant, even if Landlord has
consented to the transfer, unless Landlord consents to the contrary in writing
at the time of such transfer. The Extension Options described in this Section 55
are Tenant’s only option to extend and the second Extension Option shall be void
and of no further force or effect in the event Tenant does not timely exercise
the first Extension Option or this Lease otherwise terminates.

 

(b) Effect of Exercise.

(i) Incorporation of Lease by Reference. All of the terms, covenants, and
conditions (including, without limitation, defined terms) contained in the Lease
shall be applicable to the Extension Term in the event of exercise by Tenant;
provided, however, that the Extension Term and the monthly rent shall be
modified as provided herein.

 

(ii) Rent. Subject to adjustment as hereafter provided, the monthly rent
effective as of the commencement date of the applicable Extension Term shall be
determined based upon the Prevailing Market Rent described below. The foregoing
notwithstanding, in no event shall the monthly rent be less than the monthly
rent applicable immediately prior to the applicable Extension Term.

 

(iii) Prevailing Market Rent. As used in this Lease, the phrase “Prevailing
Market Rate” means the amount that a landlord under no compulsion to lease the
Property, and a tenant under no compulsion to lease the Property, would agree
upon at arm’s length as monthly rent for the Property for the Extension Term, as
of the commencement of the Extension Term. The Prevailing Market Rate shall be
based upon non-sublease, non-encumbered, non-equity lease transactions recently
entered into for space in comparable properties in Las Vegas, Nevada
(“Comparison Leases”) and may include periodic increases. Rental rates payable
under Comparison Leases shall be adjusted to account for variations between this
Lease and the Comparison Leases with respect to: (i) the length of the Extension
Term compared to the lease term of the Comparison Leases; (ii) rental structure,
including additional rent, and taking into consideration any “base year” or
“expense stops”; (iii) the size of the Property compared to the size of the
property under the Comparison Leases; (iv) utility, location, floor levels,
views and efficiencies of the floor(s) of the Property compared to the property
under the Comparison Leases; (v) the age and quality of construction of the
improvements on the Property; and (vi) the value of existing leasehold
improvements to Tenant.

 

(c) Arbitration. If Tenant has timely exercised the option, Landlord shall
notify Tenant in writing (“Landlord’s Notice’) of the proposed new, monthly rent
determined by Landlord for the Extension Term no later than thirty (30) days
after Landlord’s receipt of Tenant’s Notice. Unless Tenant objects to the amount
determined by Landlord within fifteen (15) days after receipt of Landlord’s
Notice, the amount stated in Landlord’s Notice shall be the new monthly rent. If
Tenant objects to Landlord’s proposal, Landlord and Tenant shall attempt to
agree in good faith upon the Prevailing Market Rent. If Landlord and Tenant fail
to reach agreement within thirty (30) days following Tenant’s receipt of
Landlord’s Notice (the “Outside Agreement Date”), then each party shall make a
separate determination of the Prevailing Market Rent within five (5) business
days after the Outside Agreement Date, concurrently exchange such determinations
and such determinations shall be submitted to arbitration in accordance with
this Section. Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a real estate broker who shall have been active over the five (5)
year period ending on the date of such appointment in the leasing of commercial
retail properties in Las Vegas, Nevada area. The determination of the
arbitrators shall be limited solely to the issue of whether Landlord’s or
Tenant’s submitted Prevailing Market Rent is the closest to the actual
Prevailing Market Rent, as determined by the arbitrators taking into account the
requirements above (i.e., the arbitrators may only select Landlord’s or Tenant’s
determination and shall not be entitled to make a compromise determination).
Each such arbitrator shall be appointed within fifteen (15) business days after
the applicable Outside Agreement Date. The two (2) arbitrators so appointed
shall within five (5) days of the date of the appointment of the last appointed
arbitrator agree upon and appoint a third arbitrator who shall be qualified
under the same criteria set forth hereinabove for qualification of the initial
two (2) arbitrators. The three (3) arbitrators shall within five (5) days of the
appointment of the third arbitrator reach a decision as to whether the parties
shall use Landlord’s or Tenant’s submitted Prevailing Market Rent and shall
notify Landlord and Tenant

23

 

thereof. The decision of the majority of the three (3) arbitrators shall be
binding upon Landlord and Tenant. If either Landlord or Tenant fails to appoint
an arbitrator within fifteen (15) business days after the applicable Outside
Agreement Date, the arbitrator appointed by one of them shall reach a decision,
notify Landlord and Tenant thereof, and such arbitrator’s decision shall be
binding upon Landlord and Tenant. If the two (2) arbitrators fail to agree upon
and appoint a third arbitrator, or both parties fail to appoint an arbitrator,
then the appointment of the third arbitrator or any arbitrator shall be
dismissed and the Prevailing Market Rent to be decided shall be forthwith
submitted to arbitration under the provisions of the American Arbitration
Association (or any successor organization), or in the absence, failure, refusal
or inability of such organization to act, then either party may apply to the
presiding judge for the Clark County Superior Court, for the appointment of such
an appraiser, and the other party shall not raise any question as to the court’s
full power and jurisdiction to entertain the application and make the
appointment. The cost of the third arbitrator shall be split equally by Landlord
and Tenant, and Landlord and Tenant shall each be responsible for the fees and
costs of the arbitrator which it appoints. If the monthly rent shall not have
been determined by the commencement date of the Extension Term, then until it is
determined, Tenant shall pay monthly rent when due during the Extension Term
determined using Landlord’s proposed monthly rent, and when the actual adjusted
monthly rent is determined, Tenant shall pay to Landlord any additional rent due
for the months which have elapsed in the Extension Term, or Landlord shall
credit any excess payment for the elapsed months to the next monthly rent
becoming due.

56.              Signage. Tenant shall have the following signage rights during
the Term (and any Extension Term if exercised):

Tenant shall be entitled to install (i) one (1) sign identifying Tenant on the
Building between the first and second floors of the Building, and (ii) one (1)
monument sign identifying Tenant located outside the Building in the location
designated by Landlord in its reasonable discretion (collectively, the “Building
Signage”). The specifications and location of the Building Signage shall be
subject to the prior written approval of Landlord and shall be subject to
Tenant’s receipt of all required governmental permits and approvals, including
without limitation, any approvals or requirements of the City of Las Vegas, as
well as any conditions, requirements or restriction of record against the
Premises or the Building (collectively, the “Signage Approvals”) and shall be
subject to all applicable governmental laws and ordinances. Landlord does not
represent and warrant that such Signage Approvals will be obtainable and Tenant
shall be responsible for all aspects of obtaining same. The cost of installation
of the Building Signage and all other costs associated with such signage, shall
be the sole responsibility of Tenant. The Building Signage rights described
herein shall only be applicable to the current name of the Tenant, “Galaxy
Gaming, Inc.”, and may not be assigned or otherwise transferred, directly or
indirectly, by the Tenant to any other entity without Landlord’s prior written
consent, which consent may be withheld by Landlord in its sole and absolute
discretion. Landlord’s approval as to any such assignment or transfer of
Building Signage rights shall be separate and apart from Landlord’s approval
rights with respect to the assignment of Tenant’s other interests in this Lease.
Tenant acknowledges and agrees that the signage rights granted to Tenant in this
Section 56 are not exclusive and that Landlord may permit other tenants or third
parties to erect signage on or about the Building. In the event that at any time
during the Term or any Extension Term, if exercised, Tenant fails to lease or
occupy at least eighty percent (80%) of the rentable square feet of the
Premises, or otherwise defaults under the terms of this Lease (beyond any
applicable cure periods set forth herein), Tenant’s rights to the Building
Signage shall thereupon terminate. Upon any termination of the foregoing rights,
Landlord shall have the right to require the removal of the Building Signage in
accordance with Section 56(b) below.

a. Should the Building Signage require maintenance or repairs as determined in
Landlord’s reasonable judgment, Landlord shall have the right to provide written
notice thereof to Tenant and Tenant shall cause such repairs and/or maintenance
to be performed within thirty (30) days after receipt of such notice from
Landlord, at Tenant’s sole cost and expense. Upon the expiration or earlier
termination of the Lease, Tenant at Tenant’s sole cost and expense, shall cause
the Building Signage to be removed from the Building and shall cause the
Building to be restored to the condition existing prior to the placement of such
signage. If Tenant fails to perform maintenance and repairs or to remove such
signage and to restore the Building as provided above within thirty (30) days
following receipt of notice from Landlord, then Landlord may perform such work,
and all costs and expenses incurred by Landlord in so performing shall be
reimbursed by Tenant to Landlord within ten (10) days after Tenant’s receipt of
invoice therefor. The immediately preceding sentence shall survive the
expiration or earlier termination of the Lease.

24

 

b. Tenant shall not erect or maintain any other temporary or permanent sign on
or about the Premises or the Building without obtaining prior written approval
from Landlord, which may be granted or withheld in Landlord’s sole and absolute
discretion. Any request for approval of a sign shall be made in such detail as
Landlord shall reasonably request. All signs, whether erected by Landlord or
Tenant, shall conform to Landlord’s building standard signage and to all laws,
ordinances, rules, regulations, permits, covenants, conditions, restrictions,
and easements pertaining to signs. In the event of a violation of the foregoing
by Tenant, Landlord may remove same without any liability, and may charge the
expense incurred in such removal to Tenant. Tenant shall remove all approved
signs which it has erected upon the termination of the Lease and repair all
damage caused by such removal.

57.              Option to Terminate Lease. Provided that no default beyond any
applicable notice or cure periods has occurred under this Lease and no
circumstances exist which with the passage of time or the giving of notice or
both would ripen into a default, Tenant shall have a one time right to terminate
this Lease effective at the end of the thirty-sixth (36th) month of the Term
(the “Termination Date”). Tenant must deliver written notice of its intention to
terminate this Lease to Landlord at least six (6) months before the Termination
Date. In the event Tenant exercises said option to terminate, Tenant shall pay
Landlord a termination fee (the “Termination Fee”) in immediately available
funds equal to the sum of (i) all unamortized T.I. Allowance amounts, plus (ii)
all unamortized leasing commissions paid by Landlord with respect to this Lease,
plus (iii) all unamortized rental abatement amounts. The Termination Fee shall
be due and payable within five (5) business days after Landlord delivers a
notice to Tenant as to the amount thereof and the termination shall not be
effective unless Landlord receives the Termination Fee within such five (5)
business day period. The unamortized T.I Allowance amounts and leasing
commissions shall be determined by multiplying the total T.I. Allowance, leasing
commissions and rental abatement amounts actually incurred or abated by Landlord
by a fraction, (i) the numerator of which is the number of months remaining in
the initial Term after the Termination Date (i.e., 27), and (ii) the denominator
of which is the total number of months in the initial Term (i.e., 63). Landlord
and Tenant estimate that the Termination Fee will be approximately
_____________________Dollars ($______); however, both parties acknowledge and
agree that such amount is only an estimate and is subject to change. The rights
granted to Tenant hereunder are personal to Tenant and may only be exercised by
Tenant when Tenant is in possession of the entire Premises. Any assignment or
subletting by Tenant of the Lease or of all or a portion of the Premises (even
if such assignment or subletting does not require the consent of Landlord or is
approved by Landlord) terminates Tenant’s rights under this Section 57, unless
Landlord consents to the contrary in writing at the time of such assignment or
subletting. The acceptance by Landlord of the Termination Fee shall not be
deemed a waiver by Landlord of any claims by Landlord with respect to anything
other than Tenant’s early termination of this Lease.

25

 

58.              Right of First Refusal to Purchase. Landlord shall not at any
time during the initial thirty-six (36) months of the Term sell or convey or
agree to sell or convey all or any portion of the Premises without first having
complied with the requirements of this Section 58. Provided that no default has
occurred and is continuing, if Landlord shall receive a bona fide offer to
purchase all or any part of the Premises that Landlord desires to accept (the
“Offer”), Landlord shall provide a copy of such Offer to Tenant and Tenant shall
have five (5 business days after receipt of such Offer to elect to purchase all
or such portion of the Premises on the terms and conditions of the Offer. If
Tenant elects to so purchase such Property, Tenant shall give to Landlord
written notice thereof (“Acceptance Notice”) within said five-business day
period. If Tenant delivers an Acceptance Notice as provided herein, then
Landlord and Tenant shall, within thirty (30) days after such delivery, enter
into a mutually acceptable purchase and sale agreement pertaining to such
Property (or interests) (the “Purchase and Sale Agreement”), reflecting the
exact terms of the Offer and this Section 58. The parties agree to act
reasonably and cooperatively in negotiating, executing and delivering the
Purchase and Sale Agreement. In the event Tenant shall elect not to so purchase
such Property, Landlord may thereafter sell such Property to the person or
entity making such Offer without offering it to Tenant, Notwithstanding anything
to the contrary herein, the provisions of this Article 35 shall not apply to any
sale or conveyance of the Property in foreclosure sale (or similar proceeding)
of a bona-fide mortgage or deed of trust or to any conveyance in lieu of
foreclosure of such a mortgage or deed of trust. The rights granted to Tenant
hereunder are personal to Tenant and may only be exercised by Tenant when Tenant
is in possession of the entire Premises. Any assignment or subletting by Tenant
of the Lease or of all or a portion of the Premises (even if such assignment or
subletting does not require the consent of Landlord or is approved by Landlord)
terminates Tenant’s rights under this Section 58, unless Landlord consents to
the contrary in writing at the time of such assignment or subletting.

59.              Tenant Improvements. Provided that Tenant is not in default
under the Lease, Landlord shall contribute a maximum amount (“Tenant Finish
Allowance”) of $81,905.00 (i.e., $5 per rentable office square foot of the
Premises (i.e., 16,381 rsf)) to be used by Tenant for Tenant’s actual third
party out-of-pocket costs to related to the following improvements to the
Premises (the “Premises Improvements”):

(a) Flooring: Supply and install flooring. Remove and dispose of existing
flooring.

(b) Paint: Prepare all paintable surfaces for new paint. Paint such surfaces.
All paint will be water based and antimicrobial – mildew resistant.

(c) Such other items as are approved in writing by Landlord in its sole and
absolute discretion.

Tenant shall have the option, exercisable by written notice to Landlord on or
before August 1, 2014 to increase the amount of the Tenant Finish Allowance by
up to an additional amount of $150,000.00 (the “Additional Allowance”). If
Tenant exercises its right to increase the Tenant Finish Allowance, then all
references in this Lease to Tenant Finish Allowance shall mean and refer to the
Tenant Finish Allowance and Additional Allowance. If Tenant exercises such
option, monthly Basic Rent payable by Tenant throughout the initial Term shall
be increased by an amount sufficient to fully amortize such increase in the
Additional Allowance throughout said initial Term based upon equal monthly
payments of principal and interest, with interest imputed on the outstanding
principal balance at the rate of five and one-half percent (5.5%) per annum. In
no event shall Landlord be obligated to make disbursements pursuant to this
Lease in a total amount which exceeds the Tenant Finish Allowance and, if
applicable, the Additional Allowance. Tenant shall have the sole and absolute
responsibility for the payment of any excess of the cost of the Premises
Improvements over the amount of the Tenant Finish Allowance. Tenant shall select
the licensed architect and contractor for such work, subject to Landlord’s prior
written approval, which shall not be unreasonably withheld; provided that, in
any event, Tenant must contract with Landlord’s base building subcontractors for
any electrical, life safety, structural, heating, ventilation, and
air-conditioning work in the Premises, if the Landlord’s subcontractors pricing
is competitive in the marketplace after a competitive bid process has been
completed. Tenant shall deliver all plans and signage proposals related to the
Premises Improvements to Landlord for Landlord’s prior written approval.
Landlord’s review of the plans and signage proposals shall be for its sole
purpose and shall not imply Landlord’s review of the same, or obligate Landlord
to review the same, for quality, design, compliance with Requirements or other
like matters. The Premises Improvements shall be owned by the Landlord and shall
remain in the Premises upon any termination. The Premises Improvements shall
comply in all respects with the following: (i) the applicable laws, rules,
statutes, regulations and requirements, as applicable

26

 

according to the rulings of the controlling public official, agent or other
person; (ii) applicable standards of the American Insurance Association
(formerly, the National Board of Fire Underwriters) and the National Electrical
Code; and (iii) building material manufacturer’s specifications (collectively,
the “Requirements”). Landlord shall have the right to inspect the Premises
Improvements at all times; provided, however, that Landlord’s failure to inspect
the Premises Improvements shall in no event constitute a waiver of any of
Landlord’s rights hereunder nor shall Landlord’s inspection of the Premises
Improvements constitute Landlord’s approval of the same. Should Landlord
disapprove any portion of the Premises Improvements, Landlord shall notify
Tenant in writing of such disapproval and shall specify the items disapproved.
Any defects or deviations in, and/or disapproval by Landlord of, the Premises
Improvements shall be rectified by Tenant at no expense to Landlord.

Tenant shall cause the Premises Improvements to be completed in a timely and
workmanlike manner, in accordance with the plans and proposals approved by
Landlord. Tenant’s indemnity of Landlord as set forth in this Lease shall also
apply with respect to any and all costs, losses, damages, injuries and
liabilities related in any way to the construction of the Premises Improvements
and any act or omission of Tenant or Tenant’s employees, agents or contractors,
or anyone directly or indirectly employed by any of them, or in connection with
Tenant’s non payment of any amount arising out of the Premises Improvements. All
of Tenant’s agents or contractors shall carry worker’s compensation insurance
covering all of their respective employees, and shall also carry public
liability insurance, including property damage, all with limits, in form and
with companies as are required to be carried by Tenant as set forth in
Paragraph 14. Upon completion of the Premises Improvements and in any event
prior to December 31, 2014, Tenant shall furnish Landlord with (i) final
unconditional waivers of liens in such form as may be reasonably required by
Landlord and Landlord’s title insurance company from all parties performing
labor or supplying materials or services in connection with the Premises
Improvements showing that all of said parties have been compensated in full and
are waiving all liens in connection with the Premises and the Building; (ii)
temporary or permanent certificate of occupancy or equivalent as required by the
local government to occupy the Premises, if applicable; (iii) “as built”
drawings, if applicable; and (iv) a detailed breakdown of Tenant’s total
construction costs, including invoices for such costs, that is reasonably
acceptable to Landlord. Landlord and Tenant shall enter into a Disbursement
Agreement in the form attached hereto as Exhibit “C” (“Disbursement Agreement”)
with Nevada Construction Services and Tenant’s general contractor, which
Disbursement Agreement shall provide the terms and conditions for the payment of
costs of construction of the Premises Improvements. Tenant shall be responsible
for any alterations, additions or improvements required by Requirements to be
made by Landlord to or in the Premises or the Building as a result of Tenant’s
proposed alterations, additions, or improvements. Notwithstanding anything to
the contrary contained herein or in the Disbursement Agreement, in the event the
Tenant Finish Allowance has not been expended pursuant to the terms of this
Section 59, (i) Tenant shall not be entitled to a credit or other payment for
any unused portion of the Tenant Finish Allowance after December 31, 2014, and
(ii) all undistributed amounts deposited by Landlord pursuant to the
Disbursement Agreement shall be promptly returned to Landlord after December 31,
2014 in a manner directed by Landlord without the need for any further
instruction or consent of Tenant and the form of Disbursement Agreement attached
hereto as Exhibit “C” shall be modified to include a provision providing for
such return in a form acceptable to Landlord in its sole discretion.

60.              Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
LANDLORD AND TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY ARISING OUT OF
OR RELATED IN ANY MANNER WITH THE PREMISES (INCLUDING WITHOUT LIMITATION, ANY
ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT
THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THE
WAIVER OF RIGHT TO A TRIAL BY JURY WAS FREELY NEGOTIATED BY LANDLORD AND TENANT
WITH AND UPON THE ADVICE OF COMPETENT COUNSEL. THIS WAIVER IS A MATERIAL
INDUCEMENT FOR LANDLORD TO ENTER AND ACCEPT THIS LEASE.

[Remainder of Page Intentionally Blank; Signature Page Follows]

 

27

 

IN WITNESS WHEREOF, the parties have executed this Lease the day and year first
above written.

LANDLORD: TENANT:

SRC Spencer, LLC,
a Nevada limited liability company

 

 

By: /s/ Steven R. Campbell
Steven R. Campbell,
its managing member

GALAXY GAMING, INC.,
a Nevada corporation

By: _______________________
_______________________
[Print Name and Title]

 

28

 

EXHIBIT “A”

LEGAL DESCRIPTION OF PREMISES

Parcel 1:

A portion of Lot 1 of the Merger and Resubdivision of Spencer Airport Plaza III
as shown by map in Book 116, Page 81 of Plats, Official Records, situate in the
Northwest Quarter (NW¼) of Section 2, township 22 South, Range 61 East, M.D.M.,
Clark County, Nevada, more particularly described as follows:

Beginning at the most Northwesterly corner of Spencer Airport Plaza III as shown
by map thereof; thence South 89°22’11” East, along the Northerly line thereof,
251.35 feet to a boundary line angle point as shown on said map of Spencer
Airport Plaza III; thence North 00°20’47” West, along the Westerly line thereof,
15.07 feet; thence North 89°30’43” East, departing said Westerly line, 181.54
feet; thence South 00°29’17” East, 115.96 feet to a point on the Southerly line
as shown on said map of Spencer Airport Plaza III; thence North 89°22’11” West,
432.97 feet to a point on the Westerly line as shown on said map of Spencer
Airport Plaza III; thence North 00°29’17” West, along the Westerly line thereof,
97.34 feet to the point of beginning.

Parcel 2:

Together with a non-exclusive easement for vehicular and pedestrian ingress and
egress over upon and across areas designated as private drive on the Plan as set
forth in the Declaration of Covenants, Conditions and Restrictions recorded June
13, 2003 in Book 20030613 as Document No. 01699 and by First Amendment to the
Declaration of Covenants, Conditions and Restrictions recorded November 1, 2004
in Book 20041101 as Document no. 01633 of Official Records of Clark County,
Nevada.

29

 

EXHIBIT “B”

SAMPLE FORM OF ESTOPPEL CERTIFICATE

The undersigned, SRC Spencer, LLC (“Landlord”), with a mailing address c/o 7912
West Sahara, Las Vegas, NV 89117; Steven R. Campbell; and _____________
(“Tenant”), hereby certify to ___________________________, a _________________
as follows:

1.                   Attached hereto is a true, correct and complete copy of
that certain lease dated February __, 2014 between Landlord and Tenant (the
“Lease”), which demises premises located at 6767 Spencer Street, Las Vegas,
Nevada 89119. The Lease is now in full force and effect and has not been
amended, modified or supplemented, except as set forth in paragraph 4 below.

2.                   The term of the Lease commenced on _______________, 20__.

3.                   The term of the Lease shall expire on _______________,
20__.

4.                   The Lease has: (Initial one)

( ) not been amended, modified, supplemented, extended, renewed or assigned.

( ) been amended, modified, supplemented, extended, renewed or assigned by the
following described agreements, copies of which are attached hereto:
__________________
_____________________________________________________________________________.

5.                   Tenant has accepted and is now in possession of said
premises.

6.                   Tenant and Landlord acknowledge that the Lease will be
assigned to _________________________ and no modification, adjustment, revision
or cancellation of the lease or amendments thereto shall be effective unless
written consent by ___________________ is obtained; and that until further
notice, payments under the Lease may continue as heretofore.

7.                   The amount of fixed monthly rent is _______________ Dollars
($___________).

8.                   The amount of security deposits (if any) is ____________
Dollars ($_________). No other security deposits have been made.

9.                   Tenant is paying the full lease rental, which has been paid
in full as of the date hereof. No rent under the Lease has been more than thirty
(30) days in advance of its due date.

10.                All work required to be performed by Landlord under the Lease
has been completed.

11.                There are no defaults on the part of the Landlord or Tenant
under the Lease.

12.                Tenant has no defense as to its obligations under the Lease
and claims no set-off or counterclaim against Landlord.

13.                Tenant has no right to any concession (rental or otherwise)
or similar compensation in connection with renting the space it occupies except
as provided in the Lease.

All provisions of the Lease and amendments thereto (if any) referred to above
are hereby ratified.

The foregoing certification is made with the knowledge that
_______________________ is about to fund a loan to Landlord or purchase the
demised premises from Landlord, and that ___________________ is relying upon the
representations herein made in connection with such transaction.

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DATED: __________________, 20__.

LANDLORD: TENANT:

SRC Spencer, LLC,
a Nevada limited liability company

 

 

By: __________________________________
Steven R. Campbell, its managing member

GALAXY GAMING, INC.,
a Nevada corporation

By: _______________________
_______________________
[Print Name and Title]

.

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EXHIBIT “C”

FORM OF DISBURSEMENT AGREEMENT

(attached hereto)

 

 

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