Exhibit 10.12


 


CASINO SUBLEASE AGREEMENT


 


between


 


HOTSPUR CASINOS NEVADA, INC.,


 


a Nevada Corporation


 


and


 


RAMPART RESORT MANAGEMENT, LLC


 


a Nevada Limited Liability Company


 

















 


TABLE OF
CONTENTS


 


	
  Article I —

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Article II —

  	
  PREMISES AND OTHER AREAS; TERM

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Lease of Premises

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.2

  	
   

  	
  Common Areas

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.3

  	
   

  	
  Reciprocal Rights

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.4

  	
   

  	
  Signs

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.5

  	
   

  	
  Casino Intellectual Property and Patron Information

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.6

  	
   

  	
  Required Resort Hotel Amenities and Facilities

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.7

  	
   

  	
  Non-Compete Covenants

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.8

  	
   

  	
  Tenant’s Operating Covenant

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.9

  	
   

  	
  Landlord’s Termination Option

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.10

  	
   

  	
  Tenant’s Termination Option

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.11

  	
   

  	
  Mortgagee’s Termination Option

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.12

  	
   

  	
  Exclusivity Provisions

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Article III —

  	
  RENT; TENANT OBLIGATIONS

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Base Rent

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.2

  	
   

  	
  Fair Market Rent

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.3

  	
   

  	
  Calculation of Fair Market Rent

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.4

  	
   

  	
  Payment of Base Rent and Additional Rent

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.5

  	
   

  	
  Percentage Rent

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.6

  	
   

  	
  Right to Audit Tenant’s Books and Records

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.7

  	
   

  	
  Additional Third Party Tenant Obligations

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.8

  	
   

  	
  Lease Deposit

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.9

  	
   

  	
  Casino Personal Property

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.10

  	
   

  	
  Personal Property Reimbursement Payments

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.11

  	
   

  	
  Payment of Adjusted Operating Cash Flow

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IV —

  	
  OPERATING COSTS; LANDLORD’S OBLIGATIONS

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Operating Costs and Property Taxes

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.2

  	
   

  	
  Method of Allocation

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.3

  	
   

  	
  Billing and Payment

  	
  25

  



 


i

















 


	
  Section 4.4

  	
   

  	
  Definition – Operating Costs

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.5

  	
   

  	
  Review of Prime Landlord and Landlord’s Books and
  Records

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.6

  	
   

  	
  Landlord’s Obligations

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.7

  	
   

  	
  Landlord Default

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Article V —

  	
  USE AND OPERATION OF PREMISES

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Casino Use

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.2

  	
   

  	
  Surveillance Room and Security

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.3

  	
   

  	
  Telephones; Switchboard

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.4

  	
   

  	
  Use of Other Property Facilities

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.5

  	
   

  	
  Operating Supplies

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.6

  	
   

  	
  Permits and Licenses; Gaming Laws

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.7

  	
   

  	
  Casino Mortgages and Transition Procedures

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.8

  	
   

  	
  Tenant’s Initial and Subsequent Capital Investments

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.9

  	
   

  	
  Tenant’s Capital Expense Reserve; Etc

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.10

  	
   

  	
  Current Licensor Standards

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.11

  	
   

  	
  Valet Parking

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.12

  	
   

  	
  Compliance with Licensor Standards

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.13

  	
   

  	
  Casino Functions

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.14

  	
   

  	
  WARN Act Liability

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VI —

  	
  CONDITION OF PREMISES, ALTERATIONS AND REPAIRS

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  As-Is Condition

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.2

  	
   

  	
  Maintenance and Cleaning Obligations

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.3

  	
   

  	
  Alterations

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.4

  	
   

  	
  Conditions of Work

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.5

  	
   

  	
  Inspection of Work

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.6

  	
   

  	
  End of Term

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VII —

  	
  INSURANCE

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Landlord Insurance

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.2

  	
   

  	
  Tenant’s Insurance

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.3

  	
   

  	
  Policy Requirements

  	
  42

  



 


ii

















 


	
  Section 7.4

  	
   

  	
  Additional Insurance Terms

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  Article VIII —

  	
  DAMAGE OR DESTRUCTION AND CONDEMNATION

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  Damage and Destruction

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.2

  	
   

  	
  Condemnation

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Article IX —

  	
  ASSIGNMENT AND SUBLETTING

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Transfers

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.2

  	
   

  	
  Notice of Transfer; Further Consent

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.3

  	
   

  	
  Subleases

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.4

  	
   

  	
  Landlord Acts

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.5

  	
   

  	
  Assignment of Sublease(s)

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.6

  	
   

  	
  Bankruptcy Provisions

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.7

  	
   

  	
  Bankruptcy of Assignee

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.8

  	
   

  	
  Survival

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  Article X —

  	
  LANDLORD’S RIGHT TO SELL, ETC., SUBORDINATION

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1

  	
   

  	
  Mortgages

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.2

  	
   

  	
  Subordination

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.3

  	
   

  	
  Tenant Obligations

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XI —

  	
  OBLIGATIONS OF TENANT; INDEMNIFICATION OF LANDLORD

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1

  	
   

  	
  Compliance with Laws; Licensor Standards, Etc

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.2

  	
   

  	
  Notice

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.3

  	
   

  	
  Indemnity

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.4

  	
   

  	
  Discharge of Liens

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.5

  	
   

  	
  Liability for Liens

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.6

  	
   

  	
  Gaming Authority Complaints

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.7

  	
   

  	
  Waiver of Subrogation

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.8

  	
   

  	
  Consequential Damages

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.9

  	
   

  	
  Casino Entertainment Tax

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XII —

  	
  DEFAULT BY TENANT; REMEDIES

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1

  	
   

  	
  Defaults

  	
  56

  



 


iii

















 


	
  Section 12.2

  	
   

  	
  Remedies

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.3

  	
   

  	
  Certain Default Obligations

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.4

  	
   

  	
  Landlord’s Lien

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.5

  	
   

  	
  Legal Actions

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.6

  	
   

  	
  Legal Fees

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.7

  	
   

  	
  Landlord Performance

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.8

  	
   

  	
  Interest on Past Due Rent

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XIII —

  	
  NO WAIVER

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.1

  	
   

  	
  No Waiver

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.2

  	
   

  	
  No Exclusive Remedies

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XIV —

  	
  ESTOPPEL CERTIFICATES

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.1

  	
   

  	
  From Tenant

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.2

  	
   

  	
  From Landlord

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XV —

  	
  QUIET ENJOYMENT

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XVI —

  	
  SURRENDER

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 16.1

  	
   

  	
  End of Term

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 16.2

  	
   

  	
  Holding Over

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XVII —

  	
  ACCESS

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 17.1

  	
   

  	
  Landlord Access

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 17.2

  	
   

  	
  Landlord Work

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XVIII —

  	
  ENVIRONMENTAL MATTERS

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.1

  	
   

  	
  Restricted Use

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.2

  	
   

  	
  Notice

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.3

  	
   

  	
  Landlord Rights

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.4

  	
   

  	
  Remedial Actions

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.5

  	
   

  	
  Indemnity

  	
  66

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.6

  	
   

  	
  Remedial Work

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.7

  	
   

  	
  Landlord Studies

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XIX —

  	
  FINANCIAL STATEMENTS

  	
  68

  
	
   

  	
   

  	
   

  	
   

  
	
  Article XX —

  	
  LIMITATION OF LIABILITY

  	
  69

  



 


iv

















 


	
  Article XXI —

  	
  MISCELLANEOUS PROVISIONS

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.1

  	
   

  	
  Waiver of Jury Trial

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.2

  	
   

  	
  Certain Additional Definitions

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.3

  	
   

  	
  Construction of Lease

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.4

  	
   

  	
  Notices

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.5

  	
   

  	
  No Brokers

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.6

  	
   

  	
  Memorandum of Lease

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.7

  	
   

  	
  Time; Force Majeure

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.8

  	
   

  	
  Waiver of Default

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.9

  	
   

  	
  Attorneys’ Fees

  	
  71

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.10

  	
   

  	
  Hold Harmless

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.11

  	
   

  	
  Sublease, Subordination and Attornment

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.12

  	
   

  	
  Counterparts and Facsimile Signatures

  	
  72

  



 


v

















 


This CASINO
SUBLEASE AGREEMENT (this “Lease”)
is made and entered into as April 1, 2002 by and between HOTSPUR CASINOS NEVADA, INC., a Nevada
corporation (“Landlord”) and RAMPART
RESORT MANAGEMENT, LLC, a Nevada limited liability company (“Tenant”),
who, for good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, agree as follows:


 


ARTICLE I —  DEFINITIONS


 


In addition to
any capitalized terms defined elsewhere in this Lease, the following terms
shall have the definitions set forth below:


 


“Adjusted
Operating Cash Flow” is a term that is used in this
Lease only for the purpose of determining the priority of the use of finds by
Tenant as described in Section 3.11 and means, with respect to a given
Lease Year, (a) gross revenue from the Casino Business for such Lease Year,
less, without duplication (b) all ordinary and necessary operating (non-capital)
expenses incurred by Tenant for the operation of the Casino Business
(calculated in accordance with GAAP), including, but not limited to, any Base
Rent, Fair Market Rent, Percentage Rent, and Additional Rent payable to
Landlord, Tenant’s Operating Cost Obligation, and the Tenant Management Fee;
(c) Tenant’s Approved Capital Expenditures; and (d) payments made by Tenant
with respect to Casino Personal Property Additions Capital Leases.


 


“Adjusted
Operating Cash Flow Statement” is defined in Section
3 .11.


 


“Affiliate”
shall mean, with respect to any corporation,
partnership, limited liability company or other business entity, another
corporation, partnership, limited liability company or other entity business
which directly or indirectly, controls or is controlled by or is under common
control with the former corporation, partnership, limited liability company, or
other business entity. For the purposes of this definition, “control”
(including “controlling”, “controlled by” and “under common control with”) as
used with respect to any corporation, partnership, limited liability company or
other business entity, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such corporation, partnership, limited liability company or other business
entity, whether through the ownership of voting securities, partnership interests,
by contract or otherwise.


 


“Alterations”
is defined in Section 6.3.


 


“Approved
Capital Expenditures” means expenditures made by
Tenant pursuant to the terms of Section 5.9 for the purpose of funding
capital improvements to the Premises or Casino Personal Property Additions and,
if permitted by the Gaming Laws, approved by Landlord.


 


“Arbitration
Commencement Date” is defined in Subsection 3.3(a).


 


“Audit
Period” is defined in Section 4.5.


 


“Bankruptcy
Code” means the provisions of 11 U.S.C. Section 101 et
seq. or any statute of similar purpose or nature as more particularly set forth
in Section 9.6.


 


“Base
Rent” is defined in Section 3.1.


 


1

















 


“Buildings”
means (a) the Casino and the Casino Back-of-the-House
Areas, (b) the hotel consisting of approximately 461 guest rooms and 80 suites
together with an approximately 40,000 square foot spa and fitness facility,
approximately 50,000 square feet of conference and banquet center, meeting rooms,
restaurants and associated facilities, (c) an approximately 60,000 square foot
shopping arcade, (d) building equipment and (e) other improvements now or
hereafter erected on the Land. A site plan of the Land showing the Buildings is
attached hereto as Exhibit “A-2” and incorporated herein by this
reference.


 


“Business
Day” means any day other than a Saturday, a Sunday or
a day on which banking institutions in Las Vegas, Nevada, are authorized by law
to close.


 


“Capital
Expense Reserve” is defined in Section 5.9.


 


“Casino”
means the casino building on the Land consisting of
approximately 50,000 square feet, which is an integral part of the Buildings on
the Land and is connected to them by various corridors and internal and
external entries. The approximate location and boundaries of the Casino are
shown on the site plan attached hereto as Exhibit “A-3” and incorporated
herein by this reference. Exhibit “A-3” also shows the location of the
existing restaurants and bars which form a part of the Casino and the
anticipated future location of restaurants and other facilities which will form
part of the Casino in the future. The Casino includes the Casino Public Common
Areas, but excludes the Casino Back-of-the-House Areas.


 


“Casino
Back-of-the-House Areas” means those areas other than
the Casino within or outside of the Buildings used or required to be used by
managers, employees and/or business invitees of Tenant in connection with the
ownership, operation, or management of the Casino Business, as currently configured
or as the same may be reconfigured by or with the approval of Landlord from
time to time during the Term. The current location and configuration of the
Casino Back-of-the-House Areas is shown on Exhibit “A-4” attached hereto
and includes, without limitation, all service entrances, service corridors,
storage rooms, “hard” and “soft” count rooms and casino cages, service kitchens
and/or bars, administrative offices, employee lounges and break rooms
exclusively serving the Casino (if any), and the Surveillance Room.


 


“Casino
Business” means the ownership and/or operation of the
gaming casino business within the Casino and Casino Back-of-the-House Areas and
all ancillary food and beverage outlets, entertainment offerings, marketing and
promotional programs and events, and related activities as operated or offered
at the Casino in connection with such business, as the same may be modified
from time to time during the Term.


 


“Casino
Cash” means the items specified in Exhibit “5.7”,
including, but not limited to the following items:  (i) the amount of any and all cash or cash
equivalents, if any, in slot machines or other Gaming Equipment; (ii) the
amount of cash located in hard and soft count rooms and casino cages in the
Casino or Casino Back-of-the-House Areas; (iii) the amount of any cash, cash
equivalents or certificates of deposits posted to cover liability under the
Casino race book and sports pool operation; (iv) any other cash or cash
equivalents which remain on the Premises or are transferred for the benefit of
Tenant on or about the Commencement Date.


 


2

















 


“Casino
Entertainment Laws” means NRS 463.4001 through NRS
463.406 and associated Regulation 13, and any successor statutes and
regulations


 


“Casino
Entertainment Tax” means the tax, imposed by and
further described in the Casino Entertainment Laws.


 


“Casino
FF&E” means the furniture, furnishings, fixtures
and equipment at the time in question situated on or about the Casino or the
Casino Back-of-the-House Areas, whether owned or leased, excluding, however,
the Gaming Equipment, but including, without limitation, all surveillance
equipment (including, without limitation, video recorders, tapes, cameras,
cable, and wiring) on or about the Buildings and all additions, replacements
and substitutions therefor. A schedule of the Casino FF&E existing as of
the date of this Lease will be prepared by Tenant, as provided in Section 3.9,
and will be attached hereto and incorporated herein by this reference as Exhibit
“A-5”.


 


“Casino
Hotel Rooms” is defined in Section 5.4.


 


“Casino
Intellectual Property and Patron Information” means
any and all right, title and interest of Landlord in or to any tangible or
intangible intellectual property, trade marks and names, service marks and
names, copyrights, internet domain names, telephone numbers, computer programs
and software, computer lists, electronic or other data or files, records,
reports or other similar property related to or used in connection with the
operation or management of the Casino, the Casino Back-of-the-House Areas, or
the Casino Business prior to the Commencement Date, including, without
limitation, casino customer or patron names, credit history, gaming history,
complimentaries issued and redeemed, accumulated slot club points and premiums
earned and redeemed, and all such similar information or data, whether stored
or maintained electronically, mechanically, manually, or otherwise related to
customers or patrons of the Casino prior to the Commencement Date; excluding,
however, any telephone numbers, computer lists, files or other information
owned, acquired or maintained by Landlord in connection with the operation of’
the Hotel. A schedule of Casino Intellectual Property and Patron Information
known to Landlord is attached hereto and incorporated herein by this reference
as Exhibit “A-6”.


 


“Casino
Name” shall mean the Rampart Casino at the Resort at
Summerlin.


 


“Casino
Name License Agreement” is defined in Subsection
2.5(b).


 


“Casino
NOI” means the EBITDA of the Casino Business after
deducting the following extraordinary expenses: (a) payments made to Landlord
with respect to Landlord’s Personal Property Investment; (b) payments made to
Tenant with respect to Tenant’s Initial Capital Investment and Tenant’s
Subsequent Capital Investment under Subsection 3.11(a)(iii) and (c)
payments made by Tenant from EBITDA (and not from the Capital Expense Reserve)
for Approved Capital Expenditures pursuant to Section 5.9. An
illustrative example of the calculation of Casino NOT is attached hereto as Exhibit
“A-7”.


 


“Casino
Personal Property” means all of the following as of
the Commencement Date: (i) the Casino FF&E and all other machinery,
appliances, equipment, furniture, fixtures, tangible and intangible personal
property and contractual rights of every kind or nature located in or on,


 


3

















 


or attached to, or used or to
be used in connection with the Casino, and/or the Casino Back-of-the-House
Areas and all other trade fixtures which constitute all of the tangible and
intangible personal property assets and contractual rights related to or used
in connection with the Casino, the Casino Back-of-the-House Areas or the Casino
Business; (ii) all Operating Supplies; (iii) all building materials and goods
procured for use or in connection with the foregoing; and (iv) all Gaming
Equipment; including Participating Gaming Equipment.


 


“Casino
Personal Property Additions” means any additions to
and all substitutions, and replacements of Casino Personal Property and the
Casino Personal Property Additions.


 


“Casino
Personal Property Additions Capital Leases” means
capital leases entered into by Tenant for the acquisition of Casino Personal
Property Additions.


 


“Casino
Personal Property Mortgage” is defined in Section
3.9 and means the perfected first security interest in all of the Tenant’s
right, title and interest in the Gaming Equipment that will be granted by
Tenant to the Mortgagee pursuant to a restatement and amendment of certain existing
security documents as described in Section 5.7.


 


“Casino
Public Common Areas” means all areas of the Casino,
which are ancillary to, and open to the public for the use, and enjoyment of,
the Casino, including, but not limited to all lobbies, stairways, elevators,
elevator lobbies, corridors, restrooms, and similar public facilities.


 


“Casino
Standards” means a casino that is of equal or better
quality to that of the Hard Rock Café Casino, 4456 Paradise Road, Las Vegas,
Nevada 89109, as of the Commencement Date.


 


“Casino
Transition Procedures” is defined in Section 5.7
and Exhibit “5.7.”


 


“Closing
Date” means November 20, 2001, the date on which Prime
Landlord acquired the Resort from the Patch Lease Tenant.


 


“Commencement
Date” shall mean the first day of the first calendar
month following the date that all Gaming Authorities approve this Lease, the
Prime Lease and Tenant’s nonrestricted gaming license for the Casino and the
Casino Back-of-the-House Areas. The estimated Commencement Date is April 1, 2002.
When the Commencement Date is known, the Parties will enter into a supplemental
letter that confirms the Commencement Date.


 


“Common
Areas” means all areas, improvements and equipment
within the Buildings and the Land other than Casino Public Common Areas that
are open to the general public and made available or designated from time to
time by Prime Landlord or reasonably necessary for the common, non-exclusive
use and enjoyment of, or benefit by Prime Landlord, and all lessees of all or
any part of the Land, and their employees, customers, invitees, business
invitees and others on or about the Land in connection with any permitted use
under this Lease and not devoted to or for Prime Landlord’s or any one lessee’s
exclusive use and which shall include, without limitation, all driveways,
sidewalks, parking areas, parking structures, landscaped areas, lobbies,
stairways, elevators, elevator lobbies, loading and delivery areas, service
entrances, corridors (excluding guest room corridors in the Hotel), restrooms,
common use interior and exterior signs, if any, and similar public facilities.


 


4

















 


“Common
Area Survey” shall have the meaning specified in Section
2.3.


 


“Current
Licensor Standards” shall have the meaning specified
in Section 5.10.


 


“Customary
Hazardous Substances” is defined in Section 18.1.


 


“Default
Rate” means five percent (5%) over the base rate
announced from time to time by Citibank, N.A. in New York, New York, as such
base rate may be adjusted and announced from time to time, or if unavailable,
the parties shall use the prime reference rate of any New York regional bank
selected by Prime Landlord.


 


“Deficiency”
is defined in Subsection 12.3(c).


 


“Deposit
Agreement” is defined in Subsection 5.8(a).


 


“EBITDA”
means earnings before deductions for interest, taxes,
depreciation and amortization, as determined under GAAP.


 


“Eminent
Domain” is defined in Subsection 8.2(a).


 


“Employee
Common Areas” means all areas of the Buildings and the
Land other than Casino Public Common Areas and Common Areas, not open to the general
public, reserved for the non-exclusive use of employees or management personnel
of Prime Landlord, Landlord, Tenant and other lessees of all or any part of the
Resort, and which shall include, without limitation, the employee cafeteria,
employee parking areas, employee break rooms, etc. as designated and/or
reconfigured by Prime Landlord from time to time during the Term.


 


“Environmental
Claims” is defined in Section 18.3.


 


“Environmental
Laws” is defined in Section 18.7.


 


“Exclusivity
Provisions” is defined in Section 2.12.


 


“Exhibits”
means the exhibits to this Lease which are described
in the List of Exhibits on the page following the signature page of this Lease,
each of which is attached to this Lease and incorporated herein by this
reference and “Exhibit” means one of the
Exhibits.


 


“Fair
Market Rent” is defined in Section 3.3.


 


“GAAP”
means generally accepted accounting principles,
consistently applied.


 


“Gaming
Authorities” means, collectively, the Nevada State
Gaming Control Board, Nevada Gaming Commission, the City of Las Vegas, and any
other governmental agency or entity with jurisdiction over Prime Landlord,
Landlord, Tenant and/or the Casino Business in accordance with applicable
Gaming Laws.


 


“Gaming
Equipment” means, collectively, all gaming devices as
that term is defined in Nevada Revised Statutes (“NRS”)
463.0155, games as that term is defined in NRS 463.0152 and associated
equipment as that term is defined in NRS 463.0136 existing at the Resort on the
date 


 


5

















 


of this Lease, including any
Participating Gaming Equipment, and any replacements and substitutions
therefor, but excluding any additions thereto. Exhibit “A-5” will include
a schedule of the Gaming Equipment.


 


“Gaming
Laws” mean, collectively, the Nevada Gaming Control
Act and the regulations promulgated thereunder as well as any other Laws
applicable to Prime Landlord, Landlord, Tenant, or Tenant’s gaming operations
within the Premises.


 


“Hamada
Lease” is defined in Section 2.12.


 


“Hazardous
Substances” is defined in Section 18.7.


 


“Hotel”
means (a) two (2) hotel buildings consisting of
approximately 461 guest rooms and 80 suites; (b) an approximately 40,000 square
foot spa and fitness facility; and (c) an approximately 50,000 square feet of
conference and banquet center, meeting rooms, restaurants and associated
facilities, all located on the Land, the approximate location and boundaries of
which are shown on the site plan attached hereto as Exhibit “A-2” and
incorporated herein by this reference. The Hotel does not include the Casino,
the Casino Back-of-the-House Areas, the Common Areas or the Employee Common
Areas.


 


“Hotel
Name” means the JW Marriott Las Vegas Resort, Spa
& Golf at the Resort at Summerlin.


 


“Hotel
Operator” means the Person which contracts with Prime
Landlord for the operation of the Hotel and the Resort (other than the Casino
and the Casino Back-of-the-House Areas) and if there is no such Person, Hotel Operator
means Prime Landlord.


 


“Hughes”
means Howard Hughes Properties, Inc.


 


“Improvements”
means the Buildings and other improvements now or hereafter
erected on the Land.


 


“Inspector”
is defined in Section 6.5.


 


“Land”
means that certain real property owned in fee simple
by Prime Landlord and described on Exhibit “A-1” attached hereto and
incorporated herein by this reference.


 


“Landlord”
means Hotspur Casinos Nevada, Inc. and its successors
and assigns.


 


“Landlord
Claims” is defined in Subsection 11.3(a).


 


“Landlord
Guarantor” shall mean Hotspur Investment Holdings Inc.


 


“Landlord
Indemnified Parties” is defined in Subsection
11.3(a).


 


“Landlord’s
Personal Property Investment” is defined in Section
3.10.


 


“Landlord’s
Rent Notice” is defined in Subsection 3.3(a).


 


6

















 


“Laws”
means all laws, ordinances, statutes, rules,
regulations, court decisions, and administrative rulings now or hereafter
promulgated, and all revisions, modifications, amendments, repeals, and other
changes thereof and thereto.


 


“Lease”
means this Sublease and the Exhibits hereto,
which are incorporated herein by this reference.


 


“Lease
Deposit” means the security deposit under this Lease,
which described in Section 3.8.


 


“Lease
Expenses” means all rent, reimbursement and other
amounts paid by Tenant to Landlord under this Lease.


 


“Lease
Termination Fee” is defined in Section 2.9.


 


“Lease
Year” means each period of twelve (12) consecutive
calendar months during the Term, beginning April 1st and ending
March 31st.


 


“Letter
of Credit” is defined in Subsection 3.8(b).


 


“License
Agreement” means any franchise agreement, license
agreement, or other similar agreement now or hereafter entered into between
Prime Landlord and any reputable, nationally recognized hotel or resort
company, which provides for the affiliation of the Hotel with such company.


 


“Licensor”
means the reputable, nationally recognized hotel or
resort company, which is the licensor or franchisor under any License
Agreement.


 


“Licensor
Standards” mean the Current Licensor Standards for
operation and maintenance of the Resort, as amended from time to time by the
Licensor and imposed upon the Resort pursuant to the terms of the License
Agreement.


 


“Marriott”
means Marriott International.


 


“Material
Violation of Gaming Laws” means a violation of the
Gaming Laws, which if not remedied could result in suspension or revocation of
the gaming license of the Person violating such Gaming Laws.


 


“Mendenhall”
is defined in Section 9.1.


 


“Millennium”
is defined in Section 9.1.


 


“Mortgagee”
means the holder of any security interest, mortgage or
deed of trust (collectively, a “Mortgage”)
made or given by Prime Landlord encumbering Prime Landlord’s interest in all or
any part of the Resort.


 


“NRS”
means Nevada Revised Statutes.


 


“Operating
Costs” are defined in Section 4.4.


 


7

















 


“Operating
Cost Consultants” is defined in Subsection 4.2(c).


 


“Operating
Supplies” means all consumable items used in or
reasonably required in connection with the operation of the Casino Business,
including, without limitation, food and beverages, accounting and
administrative forms, and video tapes and other surveillance supplies.


 


“Participating
Gaming Equipment” means Gaming Equipment that is
leased or utilized by Tenant on a participation basis with a licensed operator
of an inter-casino linked system or operator of a slot machine route such as
Megabucks, Wheel of Fortune or Monopoly.


 


“Parties”
means Landlord and Tenant and “Party”
refers to either of them.


 


“Patch
Lease” means that certain Gaming Property lease dated
as of November 20, 2001, wherein Prime Landlord is landlord and the Patch Lease
Tenant is tenant pursuant to which the Patch Lease Tenant has retained title to
the Gaming Equipment pending the Commencement Date and pursuant to which the Patch
Lease Tenant is operating the Casino.


 


“Patch
Lease Tenant” means The Resort at Summerlin Limited
Partnership, a Nevada limited partnership.


 


“Percentage
Rent” is defined in Section 3.5.


 


“Percentage
Rent Statement” is defined in Section 3.5.


 


“Person”
or  “person” means
a natural person, a partnership, a corporation, a limited liability company, a
trust and/or any other form of business association or entity.


 


“Personal
Property Reimbursement Payments” means payments made
by Tenant to Landlord pursuant to the terms of Section 3.10.


 


“Permitted
Users” is defined in Section 2.2.


 


“Premises”
means the Casino and the Casino Back-of-the-House
Areas, but does not include the Casino Personal Property.


 


“Prime
Landlord” means Hotspur Resorts Nevada, Inc., its
successors and assigns.


 


“Prime
Lease” means that certain lease of even date with this
Lease, wherein Prime Landlord is landlord, and Landlord is tenant, including,
but not limited to, all renewals, extensions, modifications and amendments
thereof.


 


“Promotional
Fee” is defined in Subsection 2.6(e).


 


“Property
Facilities” is defined in Section 5.4.


 


“Property
Taxes” means all real property taxes, ad valorem taxes
in the nature of real property taxes, assessments and impositions charged by
any government agency or entity with jurisdiction, including, but not limited
to, any entity with jurisdiction under any covenants, conditions or restrictions
that affect the Land.


 


8

















 


“Purchase
Agreement” means that certain Exchange Agreement dated
as of September 6, 2001 between Prime Landlord, as transferee, and The Resort
at Summerlin, Inc. and The Resort at Summerlin Limited Partnership, as
transferors.


 


“Remaining
Property” means that portion of the Resort that is not
the Hotel or the Casino or the Casino Back-of-the-House Areas, and includes the
Common Areas and the Employee Common Areas.


 


“Remedial
Work” is defined in Section 18.6.


 


“Rent”
is defined in Section 3.4.


 


“Rent
Adjustment Date” is defined in Section 3.2.


 


“Required
Bar” is defined in Subsection 2.6(a).


 


“Required
Food Facility” is defined in Subsection 2.6(a).


 


“Required
Food Facility Location” is defined in Subsection
2.6(c).


 


“Required
Hotel Rooms” is defined in Subsection 2.6(a).


 


“Required
Miscellaneous Facilities” is defined in Subsection
2.6(a).


 


“Resort”
means the Land and Improvements, including the Hotel,
the Casino, the Casino Back-of-the-House Areas, and the Remaining Property.


 


“Resort
Name” means The Resort at Summerlin, the name of the
resort hotel and casino operated on the Land as of the Commencement Date.


 


“Spiedini
Lease” is defined in Section 2.12.


 


“Sublease”
is defined in Section 9.3.


 


“Subtenant”
is defined in Section 9.3.


 


“Summerlin
CC&Rs” means those certain covenants, conditions, restrictions
and agreements filed in the official real estate records of Clark County, Nevada
under in Book 960815 as Document 01189, in Book 970521 as Document No. 01087,
and in Book 960815 as document 01190.


 


“Surveillance
Room” means that portion of the Premises more
particularly shown on Exhibit “A-4”, which shall serve as a management
and control center for Tenant’s security services.


 


“Tenant”
means Rampart Resort Management, LLC.


 


“Tenant
Claims” is defined in Subsection 11.3(b).


 


9

















 


“Tenant
Indemnified Parties” is defined in Subsection
11.3(b).


 


“Tenant
Investment Gaming Equipment” is defined in Subsection
5.9(b).


 


“Tenant
Management Fees” means management fees equal to Two
Million Dollars ($2,000,000) per annum, which are paid or payable by Tenant to
an Affiliate of Tenant for the Management of the Casino Business.


 


“Tenant
Promotions” is defined in Subsection 2.6(e).


 


“Tenant’s
Actual Operating Cost Statement” is defined in Section
4.3.


 


“Tenant’s
Base Year Operating Costs” is defined in Subsection
4.2(b).


 


“Tenant’s
Gaming Equipment Investment” is defined in Subsection
5.9(b).


 


“Tenant’s
Initial Capital Investment” is defined in Subsection
5.8(a).


 


“Tenant Invitees” is defined in Section 5.4.


 


“Tenant’s
Operating Cost Estimate” is defined in Section 4.3.


 


“Tenant’s Operating Cost Obligation” is defined in Section
4.1.


 


“Tenant’s Rent Notice” is defined in Subsection 3.3(a).


 


“Tenant’s Share” is defined in Section 4.4.


 


“Tenant’s
Subsequent Capital Investments” is defined in Subsection
5.8(b).


 


“Term”
means the term of this Lease, which shall commence on
the Commencement Date and shall expire at 11:59 p.m. on the last day of the
calendar month proceeding the tenth (10th) anniversary of the
Commencement Date.


 


“Transfer”
is defined in Section 9.1.


 


“Transferee”
is defined in Section 2.11.


 


“Work”
is defined in Section 6.4.


 


ARTICLE II —  PREMISES AND OTHER AREAS; TERM


 


Section 2.1            Lease of Premises


 


(a)           For
the Term, Landlord, in consideration of the rents herein reserved and of the
terms, provisions, covenants and agreements on the part of Tenant to be kept,
observed and performed, does hereby lease, license, assign, transfer and demise
the Premises solely and exclusively unto Tenant, and Tenant does hereby hire
and take the Premises from Landlord. The Premises are shown on Exhibit “A-3.”


 


10

















 


(b)           Tenant
shall have and is hereby granted the sole and exclusive right to operate the
Casino Business and the Gaming Equipment on or about the Land and within the
Resort and neither Prime Landlord, Landlord, nor any other lessee, licensee,
manager, operator or any other party under contract with Prime Landlord or
Landlord or on or about the Resort with Prime Landlord’s or Landlord’s
permission or at Prime Landlord’s or Landlord’s sufferance shall have any right
to operate a Casino Business or any Gaming Equipment. Landlord shall cause
Prime Landlord to include a corresponding prohibition of any such use in any
contract, lease, license, agreement or other document or instrument pursuant to
which Prime Landlord grants, permits, covenants, or otherwise agrees to the use
or enjoyment of any other part of the Resort by any third party. Without
limiting the generality of the foregoing, Landlord expressly acknowledges that
NRS 463.245 provides that a gaming license may not be issued to any person if
the issuance would result in more than one licensed operation at a single
establishment. Nothing contained in this Lease shall prohibit or restrict
Tenant from contracting with third parties to provide gaming services to Tenant
and its Casino Business in accordance with all applicable Gaming Laws,
including, without limitation, race book and sports pool services, inter-casino
linked systems, Participating Gaming Equipment and similar gaming-related
services.


 


(c)           The
parties expressly agree and acknowledge that the Premises include, without
limitation, the following food and beverage outlets currently installed in the
Casino: the “Round Bar,” “Addisons,” the
sports book bar, and the north and south service bars, all of which are shown
on Exhibit “A-3”. The Premises will also include the Required Food
Facility that Tenant will install in the future as provided in Subsection
2.6(a). Landlord acknowledges that such food and beverage outlets are an
integral part of the Casino Business, and that during the Term Tenant shall have
the sole and exclusive right to operate said food and beverage outlets in the
Casino and to retain any and all revenues and earnings therefrom and to suffer
any and all losses resulting therefrom. The parties also acknowledge that the
Premises may (but shall not be required to) include other food and beverage
outlets installed by Tenant in the Casino from time to time during the Term.


 


Section 2.2            Common
Areas


 


(a)           During
the Term, Landlord hereby grants to Tenant a non-exclusive, irrevocable right
and license to use the Common Areas and the Employee Common Areas in common
with Landlord, Prime Landlord, and its other lessees and licensees and, as
applicable, the respective employees, customers, invitees, business invitees,
contractors, agents, and others on or about the Land in connection with any use
or activity permitted hereunder (collectively, “Permitted
Users”) of Landlord, Prime Landlord, and its other lessees and
licensees. Prime Landlord shall have the right to promulgate reasonable rules
and regulations with respect to such use, provided that the same are non-discriminatory
among all lessees of Prime Landlord and shall have exclusive control over and
the exclusive right to manage the Common Areas and Employee Common Areas. Tenant
shall have no dominion or control over the Common Areas or the Employee Common
Areas. Prime Landlord shall have the right to make reasonable alterations,
expansions, contractions, relocations and other adjustments to the Common Areas
and Employee Common Areas from time to time as Prime Landlord deems reasonable
or appropriate, and no alteration or diminution thereof shall be deemed a
constructive or actual eviction of Tenant or entitle Tenant to compensation or
a reduction or abatement of Rent. In exercising control over and managing the
Common Areas and Employee Common Areas, Prime Landlord shall act


 


11

















 


reasonably and in a manner that
does not unreasonably interfere with or have a material adverse impact upon
Tenant’s use of the Common Areas or Employee Common Areas.


 


(b)           During
the Term, Landlord hereby reserves and Tenant hereby grants to Prime Landlord,
Landlord, and their Permitted Users an irrevocable, non-exclusive right and
license to use the Casino Public Common Areas in common with Tenant and Tenant’s
Permitted Users. Notwithstanding any other provision of this Lease, Tenant
shall not interfere in any manner whatsoever with ingress to and egress from
the various interior and exterior parts of the Resort through the Casino Public
Common Areas by Prime Landlord, Landlord or any of their Permitted Users. Further,
in exercising control over the Casino Public Common Areas, Tenant shall act
reasonably and in a manner that does not unreasonably interfere with or have a
material adverse effect upon Prime Landlord’s or Landlord’s use of the Casino
Public Common Areas.


 


Section 2.3            Reciprocal
Rights


 


During the
Term, Landlord and Tenant hereby grant to each other and their Permitted Users
irrevocable, reciprocal rights of pedestrian access, ingress and egress through
the Common Areas and Casino Public Common Areas. Similarly, during the Term
Landlord and Tenant hereby grant to each other and their Permitted Users
irrevocable, reciprocal rights of vehicular access, ingress and egress with
respect to the vehicular drives, driveways and parking lots of the Resort. Nothing
contained in this Section 2.3 shall limit Prime Landlord’s, Landlord’s
or Tenant’s rights to temporarily close or partition such common areas in the
course of any maintenance, repairs, replacements, alterations, or other similar
activities contemplated under this Lease; provided, however, that Prime
Landlord’s rights under Subsection 2.2(b) shall govern over any
conflicting provisions of this Section 2.3; and provided further that in
exercising such rights Prime Landlord, Landlord, and Tenant shall each act
reasonably and in a manner that does not unreasonably interfere with or have a
material adverse impact upon the operations of the Resort. Any lease, license
or similar agreement with any third party to portions of the Resort shall
include similar reciprocal rights of access, ingress and egress between
adjacent common areas for the benefit of all Permitted Users. If a Mortgagee
requires it, Landlord shall cause a survey of the Common Areas, Employee Common
Areas, and Casino Public Common Areas to be prepared by a professional engineer
chosen by Landlord (the “Common Area Survey”).
When the Common Area Survey is completed, Prime Landlord and Landlord will
enter into a mutually acceptable amendment of the Prime Lease, and Landlord and
Tenant will enter into a mutually acceptable amendment to this Lease, which
shall establish specific licenses and easements shown on the Common Area Survey
in favor of Prime Landlord, Landlord, Tenant and the Permitted Users in lieu of
the general licenses and easements specified in Sections 2.2 and 2.3
this Lease. The Common Area Survey shall be subject to the reasonable approval
of Prime Landlord, Landlord, and Tenant. Landlord will cause Prime Landlord to
pay all reasonable costs of preparing the Common Area Survey and the amendment
of this Lease contemplated by this Section 2.3.


 


Section 2.4            Signs


 


At its sole
cost and expense, Tenant shall have the right to install such interior signs in
the Premises as Tenant may reasonably determine from time to time, provided
that each such sign is in full compliance with the standards for Tenant’s use
of the Premises that are set forth in


 


12

















 


Section 5.1
and otherwise in this Lease, any applicable Licensor Standards, laws, Summerlin
CC&Rs, and the Casino Name License Agreement, Tenant shall also have the
right to install such temporary and permanent exterior signs as Landlord may
reasonably approve from time to time, provided that each such exterior sign is
in compliance with this Lease, any applicable laws, Licensor Standards,
Summerlin CC&Rs, and the Casino Name License Agreement. All such exterior
signs that are for the exclusive use of Tenant shall be considered part of the
Premises. Tenant shall pay all costs of such exterior signs that are for Tenant’s
exclusive use, including, but not limited to, the costs to obtain any required
permits and authorizations for such signs, the costs of erecting and
maintaining such signs, and the costs of operating, repairing and replacing
such signs. If any exterior sign is shared with Prime Landlord, Landlord or
other lessees, as part of the Operating Costs, Tenant shall pay its equitable
share of all costs of such shared signs, including, but not limited to, the
costs to obtain any required permits and authorizations for such shared signs,
the costs of erecting and maintaining such shared signs, and the costs of
operating, maintaining, repairing, and replacing such shared signs. Landlord
and Tenant acknowledge and agree that Licensor may be Marriott and it is highly
likely that Marriott will not permit the name “Marriott” to be used in
connection with the Casino or the Casino Back-of-the-House Areas in any manner whatsoever
because Marriott is not associated at this time with any casino operation in
North America. Landlord and Tenant will use reasonable commercial efforts to
obtain such approvals from Marriott (if any are required) to install
commercially effective exterior signage for the Casino. Similarly, Landlord and
Tenant acknowledge and agree that the Resort is located in Summerlin and that
the Summerlin CC&Rs impose restrictions upon exterior signage in Summerlin.
Landlord and Tenant will use reasonable commercial efforts to obtain approvals
from the appropriate party under the Summerlin CC&Rs to install
commercially effective signage for the Casino.


 


Section 2.5            Casino
Intellectual Property and Patron Information


 


(a)           Landlord
hereby grants to Tenant an exclusive, irrevocable license for the Term to use
the Casino Intellectual Property and Patron Information in connection with
Tenant’s use, operation or management of the Casino, the Casino Back-of-the-House
Areas and the Casino Business. Notwithstanding any other provision of this
Lease, during the Term Tenant shall not use the Casino Intellectual Property
and Patron Information with respect to any business except the Casino Business.
Landlord shall deliver any and all tangible personal property in its possession
or control relating to or necessary for the use of the Casino Intellectual
Property and Patron Information to Tenant on the Commencement Date. Tenant
acknowledges that Landlord is assigning its right to the Casino Intellectual
Property and Patron Information on an “As-Is, Where-Is” basis, and Landlord
makes no representation or warranty with respect to the quality, accuracy,
completeness or suitability of the Casino Intellectual Property and Patron
Information for any particular purpose. During the term of this Lease, Tenant
shall maintain ownership of the Casino Intellectual Property and Patron
Information and shall use reasonable commercial efforts to add to and enhance
the quantity and quality of the Casino Intellectual Property and Patron
Information with respect to the Casino. At the termination of this Lease, at no
cost to Landlord, but on an “As-Is, Where-Is” basis, Tenant shall assign to
Landlord or its designee all of the Tenant’s right, title, and interest in all
Casino Intellectual Property and Patron Information existing on the date of
termination of this Lease. Notwithstanding the assignment to Landlord, after
the termination of this Lease Tenant shall have an irrevocable license to use
the Casino Intellectual Property and Patron Information in any manner that is
not competitive with


 


13

















 


Landlord’s use thereof. For the
purposes of this Lease, Tenant’s use of the Casino Intellectual Property and
Patron Information shall be deemed not to be competitive with Landlord’s use
after the termination of this Lease if all of the following conditions are met
with respect to the Casino Intellectual Property and Patron Information: (i) it
is not be used, directly or indirectly, in connection with any gaming facility
within a 5-mile radius of the Resort; (ii) it is not used, directly or
indirectly, in any gaming facility that is not owned and/or controlled by
Tenant or its principals, William J. Paulos and William C. Wortman, and (iii)
except for its use in the manner authorized by foregoing clauses (i) and (ii),
it shall be keep strictly confidential by Tenant and its principals and shall
not be disseminated to or otherwise made available to any Person. Tenant
expressly agrees and acknowledges that any default with respect to the
foregoing agreements may have a material, adverse effect on the financial
success of the operation of the Hotel and Casino. Tenant further agrees that
the money damages that Landlord may suffer as a result of any breach by Tenant
or its principals under this Subsection 2.5(a) may not be an adequate
remedy. Accordingly, Landlord shall have the right to specifically enforce the
restrictive covenants under this Subsection 2.5(a) by injunctive or
other equitable relief. The provisions of this Subsection 2.5(a) shall
survive the expiration or termination of this Lease.


 


(b)           Tenant
shall operate the Casino, the Casino Back-of-the-House Areas and Casino
Business under the Casino Name. Any changes to the Casino Name shall be subject
to the prior written approval of Landlord, Hughes, and Licensor, if required
under the License Agreement. Any and all costs and expenses with respect to the
Casino Name or any change thereof shall be paid by Tenant. Attached to this
Lease as Exhibit 2.5(b) is a copy of the License Agreement that Prime
Landlord is entering into with Hughes (“Casino
Name License Agreement”). Tenant shall fully comply with the terms
of the Casino Name License Agreement that relate to the Casino Name. It shall
be a material default under this Lease if Tenant fails to fully comply with
such terms within fifteen (15) days after written notice from Landlord.


 


Section 2.6            Required
Resort Hotel Amenities and Facilities


 


(a)           Landlord
expressly acknowledges that pursuant to NRS 463.1605, the Nevada Gaming
Commission may not approve a nonrestricted gaming license for an establishment
that is not a “resort hotel,” and that pursuant to NRS 463.01865, in addition
to a gaming area, a “resort hotel” must have (i) more than two hundred (200)
rooms available for sleeping accommodations (the “Required Hotel Rooms”), (ii) at least one bar with permanent
seating capacity for more than thirty (30) patrons that serves alcoholic
beverages sold by the drink for consumption on the premises (the “Required Bar”), and (iii) at least one
restaurant with permanent seating capacity for more than sixty (60) patrons that
is open to the public twenty-four (24) hours each day and seven (7) days each
week (the “Required Food Facility”).
Landlord further acknowledges that there may be local gaming laws, local zoning
ordinances, codes and regulations (including use permits), recorded covenants,
conditions and restrictions encumbering the Land, and other applicable laws or
encumbrances, that require the Casino Business to offer certain other non-gaming
amenities and facilities (the “Required
Miscellaneous Facilities”). The Premises include the Required Bar,
but not the Required Hotel Rooms or the Required Food Facility. Landlord and
Tenant are not aware of any Required Miscellaneous Facilities for the Casino or
the Casino Back-of-the-House Areas.


 


14

















 


(b)           During
the Term, Landlord will cause Prime Landlord to operate, offer, and keep open
for business the Required Hotel Rooms. Until the date that Tenant completes and
opens a Required Food Facility within the Premises, Landlord will cause Prime
Landlord to operate, offer, and keep open for business the Required Food
Facility and permit Tenant and its Permitted Users to use the Required Food
Facility in common with all other Permitted Users of the Resort. The Required
Food Facility that Landlord will cause Prime Landlord to operate will be a
combination of the Ceres Restaurant, which shall be open daily from 6:30 a.m.
to 10:00 p.m. and the Irish Pub Restaurant, which shall be open daily from
10:00 p.m. to 6:30 a.m. Neither of these facilities shall be part of the
Premises. The Ceres Restaurant and the Irish Pub Restaurant are shown on Exhibit
“A-3.”  The menu for the Irish Pub
Restaurant has been changed to include breakfast offerings. Landlord shall have
no obligation to cause Prime Landlord to operate a Required Food Facility after
Tenant opens its Required Food Facility.


 


(c)           At
Tenant’s sole cost and expense, Tenant shall construct, equip and open for
business a Required Food Facility within the Premises as soon as practicably
possible after the date of this Lease, but no later than June 30, 2002. The
Required Food Facility will be located in the area shown on Exhibit “A-3.”
(the “Required Food Facility Location”). Landlord will make the part of the
Required Food Facility Location that is colored red on Exhibit “A-3”
available to Tenant on the Commencement Date and shall make the balance of the
Required Food Facility Location available to Tenant from time to time as it is
vacated by current tenants. Landlord and Tenant acknowledge that as of the date
of this Lease, all such current tenants have vacated their spaces, except
Occhiali, Inc. Landlord will deliver the space currently occupied by Occhiali,
Inc. as soon as possible after the date of this Lease. Landlord has sent a
relocation notice to Occhiali, Inc. and will diligently pursue the relocation
of Occhiali, Inc. or the termination of the lease with Occhiali, Inc.


 


(d)           Intentionally
Left Blank.


 


(e)           Tenant
acknowledges that pursuant to the Patch Lease, Prime Landlord permitted the
Patch Lease Tenant to spend a monthly promotional fee in the amount of One
Hundred Thousand Dollars ($100,000) on the first day of January, February, and
March, 2002. On the Commencement Date Landlord will pay One Hundred Thousand
Dollars ($100,000) to Tenant (the “Promotional Fee”). Tenant shall use the
Promotional Fee for special promotions of the Casino for the month of April
2002 (“Tenant Promotions”). The Tenant Promotions are fully described in Exhibit
2.6(e). Tenant represents and warrants to Landlord that Tenant shall cause
the Tenant Promotions to be conducted at the times and in the manner described
in Exhibit 2.6(e).


 


Section 2.7            Non-Compete
Covenants


 


During the
Term, neither Tenant nor any parent or subsidiary entity, nor any entity
controlled by or under common control with Tenant, nor any member, manager,
shareholder, partner, director or officer of Tenant or any of the foregoing
entities shall own, lease, manage or operate any nonrestricted gaming casino nor
have any ownership or equity interest greater than five percent (5%) in any
nonrestricted gaming casino within a five-mile radius of the Land, unless such
participation is consented to by Prime Landlord and Landlord in writing, in
their sole and absolute discretion. Tenant expressly agrees and acknowledges
that any such competitive


 


15

















 


casino may have a material,
adverse effect on the financial success of the operation of the Hotel and
Casino. Tenant further agrees that the money damages that Prime Landlord and
Landlord may suffer as a result of Tenant’s default under this Section 2.7
may not be an adequate remedy. Accordingly, Prime Landlord and Landlord shall
have the right to specifically enforce the restrictive covenants under this Section
2.7 by injunctive or other equitable relief.


 


Section 2.8            Tenant’s
Operating Covenant


 


Tenant shall
commence operations of the Casino Business in the Premises on the Commencement
Date, and shall continuously operate the Casino Business on the entire Premises
without interruption, twenty four (24) hours per day, each day of the year
throughout the Term. The covenant set forth in this Section 2.8
constitutes material, bargained for consideration for Landlord’s agreement to
enter into this Lease, and the parties acknowledge that no adequate remedy at
law may exist for breach of the foregoing covenant. Therefore, in the event of
a breach of this Section 2.8 Landlord shall have the right, at Landlord’s
option, in addition to Landlord’s remedies for a default by Tenant hereunder,
to obtain an order for specific performance of the foregoing covenant.


 


Section 2.9            Landlord’s
Termination Option


 


Landlord shall
have the right to terminate this Lease upon the sale of the Resort to a bona
fide third party purchaser that is not an Affiliate of Prime Landlord or
Landlord upon sixty (60) days prior written notice to Tenant, provided that
upon termination of this Lease, Landlord shall pay to Tenant a “Lease Termination Fee” equal to the sum of
the following amounts: (a) Two Million Dollars ($2,000,000); plus (b) the
unreturned balance, if any, of Tenant’s Initial Capital Investment and Tenant’s
Subsequent Capital Investment; plus (c) an amount equal to the Casino NOI for
those months, if any, during the last full 12 months prior to the date of
termination for which no Percentage Rent was payable, but either Base Rent or
Fair Market Rent was payable; plus (d) an amount equal to fifty percent (50%)
of the Casino NOI for those months, if any, during the last full 12 months
prior to the date of termination for which Percentage Rent was payable. The
rights of Landlord under this Section 2.9 shall inure to the benefit of
any successor to Landlord, including, without limitation, any lender of Landlord.


 


Section 2.10         Tenant’s
Termination Option


 


If the Resort
is sold, but Landlord does not exercise its Lease termination option specified
in Section 2.9, Tenant shall have the option to terminate this Lease
effective on the date of closing of the sale of the Resort by written notice to
Landlord no later than ten (10) Business Days after Tenant receives written
notice from Landlord that Prime Landlord intends to sell the Resort, but
Landlord does not intend to exercise its option to terminate this Lease pursuant
to Section 2.9. Landlord’s notice to Tenant shall include a description
and resume of the potential purchaser, references, and such additional non-confidential
information as Landlord may have with respect to the potential purchaser and
its principals. Tenant’s right to terminate shall be effective only if the sale
of the Resort closes and only if Tenant is not in default under this Lease at
any time between the date that Tenant receives Landlord’s notice and the date
of closing of the sale of the Resort. Tenant shall not be entitled to a Lease
Termination Fee if Tenant elects to terminate pursuant to this Section 2.10.
If Tenant is obligated to pay Base Rent and Percentage


 


16

















 


Rent under this Lease at the
time of the sale and this Lease is not terminated, Tenant shall pay Fair Market
Rent in lieu of Base Rent and Percentage Rent until the potential purchaser is
licensed or is found suitable. Thereafter, Tenant shall pay Base Rent and
Percentage Rent in lieu of Fair Market Rent.


 


Section 2.11         Mortgagee’s
Termination Option


 


If Prime
Landlord defaults under a Mortgage and the Mortgagee and/or its designee or any
other transferee (the “Transferee”)
obtains title to the Property by Judicial or nonjudicial foreclosure or deed in
lieu of foreclosure or by any other means, such Transferee shall have the right
to terminate this Lease by providing written notice to Tenant no less than
thirty (30) days prior to the date of termination of this Lease. In such event,
Landlord Guarantor shall pay to the Tenant the Lease Termination Fee. In no
event will such Transferee have any obligation to pay Tenant the Lease
Termination Fee. Exhibit 2.11 is a form of Guaranty that Landlord
Guarantor shall provide to Tenant to guarantee payment to Tenant of the Lease
Termination Fee pursuant to this Section 2.11.


 


Section 2.12         Exclusivity
Provisions


 


Tenant
acknowledges that Prime Landlord is a party to a lease dated November 10, 1998
with Hamada Resort, Inc. (the “Hamada Lease”),
which was rejected in a bankruptcy proceeding Section 6.8 of the Hamada
Lease prohibits the Prime Landlord from leasing to another restaurant tenant at
the Resort that has Asian Foods as its primary menu items. Similarly, Tenant
acknowledges that Prime Landlord is a party to a lease dated November 2, 1998
with Spiedini, Inc. (the “Spiedini Lease”),
which was rejected in a bankruptcy proceeding. Section 6.8 of the Spiedini
Lease prohibits the Prime Landlord from leasing to another restaurant tenant at
the Resort that has Italian Food as its primary menu items. The foregoing
restrictions in the Hamada Lease and the Spiedini Lease are referred to as the “Exclusivity Provisions.”  Section 6.8 of the Hamada Lease and Section
6.8 of the Spiedini Lease are set forth in Exhibit “2.12.” Tenant agrees
to comply with the Exclusivity Provisions and any new exclusivity provisions
that Prime Landlord may enter into with tenants of the Resort after the date of
this Lease; provided that Landlord shall cause Prime Landlord not to enter into
any new exclusivity provisions that would prevent Tenant from operating a
Required Food Facility and/or buffet. Notwithstanding any other provision of
this Lease, Landlord shall cause Prime Landlord not to enter into any lease
after the date of this Lease for any part of the Resort that restricts Tenant’s
ability to operate any of the following: (a) a fine dining restaurant; (b) a
steak house; or (c) a coffee shop, buffet or general purpose restaurant that
offers a varied menu.


 


ARTICLE III —  RENT; TENANT OBLIGATIONS


 


Section 3.1            Base Rent


 


Tenant shall
pay to Landlord as Base Rent for the Premises during the Term the sums set
forth in this Section 3.1 (as the same may be adjusted, if applicable,
pursuant to Section 3.2 hereof “Base Rent”). Base
Rent shall be payable in equal monthly installments on the first day of each
calendar month at the following rates:


 


(a)           Base
Rent for the first Lease Year shall be Four Million Dollars ($4,000,000).


 


17

















 


(b)           Commencing
on the first day of the second (2nd) Lease Year, and continuing on
the first day of each Lease Year through the seventh (7th) Lease
Year, Base Rent shall increase by Three Hundred Thousand Dollars ($300,000) per
annum.


 


(c)           Base
Rent for the eighth (8th), ninth (9th), and tenth (10th)
Lease Years shall equal Six Million Dollars ($6,000,000) per Lease Year.


 


Section 3.2            Fair Market
Rent


 


If for any
reason Landlord does not obtain a nonrestricted gaming license or is not found
suitable by the Nevada Gaming Commission, Base Rent shall be increased or
decreased on the first day of the third (3rd) fifth (5th),
seventh (7th) and ninth (9th) Lease Years (each a “Rent Adjustment Date”) to the Fair Market
Rent for the two year period following the Rent Adjustment Date. In no event
shall the Fair Market Rent for any Lease Year be less than the Base Rent that
would have applied in such Lease Year under Section 3.1, or greater than
the sum of such Base Rent plus an amount equal to the Percentage Rent that would
have applied if Landlord had obtained a gaming license or had been found
suitable. If the Fair Market Rent adjustment to Base Rent pursuant to Section
3.2 comes into effect and Landlord thereafter obtains a nonrestricted
gaming license or is found suitable, from the first day of the first calendar
month following the date that Landlord obtains its gaming license or is found
suitable, and for so long as such license or finding of suitability remains in
effect, instead of paying Fair Market Rent, Tenant shall pay the Base Rent plus
Percentage Rent. If such license or finding of suitability becomes inapplicable
for any reason, during the period of inapplicability, Tenant shall pay Fair
Market Rent. Landlord covenants and agrees to use its reasonable commercial
efforts to apply for and obtain a nonrestricted gaming license or a finding of
suitability from the Nevada Gaming Commission as soon as possible following the
Commencement Date. Whenever Tenant is paying Base Rent as adjusted based upon
Fair Market Rent pursuant to this Section 3.2, references in this Lease
to “Base Rent” shall be deemed to mean Fair Market Rent.


 


Section 3.3            Calculation
of Fair Market Rent


 


For purposes
of this Lease, the term “Fair Market Rent” means
the annual Base Rent that a willing licensed tenant would pay to a willing
unlicensed landlord for comparable premises to the Premises based upon the
gross revenue generated by the Casino Business in the Premises for the Lease
Year immediately preceding the Rent Adjustment Date, less the expense of
capital leases for Casino Personal Property Additions during such Lease Year. Fair
Market Rent shall be calculated as follows:


 


(a)           Landlord
shall advise Tenant in writing of Landlord’s determination of Fair Market Rent
which shall include Landlord’s calculation of Fair Market Rent and any
supporting documentation, such as studies or appraisals (“Landlord’s Rent Notice”) no less than
sixty (60) days prior to each Rent Adjustment Date. Within fifteen (15)
Business Days following receipt of Landlord’s Rent Notice, Tenant shall notify
Landlord in writing (“Tenant’s Rent Notice”)
whether Tenant accepts Landlord’s determination of Fair Market Rent. If Tenant
disagrees with Landlord’s determination of Fair Market Rent, Tenant’s Rent
Notice shall set forth Tenant’s calculation of Fair Market Rent and any
supporting documentation, such as studies or appraisals. If Tenant fails to
give Tenant’s Rent Notice to Landlord within such period of fifteen (15)


 


18

















 


Business Days, then Tenant
shall be deemed to have accepted Landlord’s Rent Notice. If Tenant does not
accept Landlord’s determination of Fair Market Rent, and Tenant has given
Tenant’s Rent Notice in a timely fashion, the parties (or their designated
representatives) shall promptly meet and attempt to agree on Fair Market Rent. If
the parties have not agreed on Fair Market Rent within thirty (30) days after
Tenant receives Landlord’s Rent Notice, the parties shall submit the matter to
arbitration in accordance with the terms of this Section. The first Business
Day after the thirtieth (30th) day following Tenant’s receipt of
Landlord’s Rent Notice is referred to in this Lease as the “Arbitration
Commencement Date”.


 


(b)           The
arbitration will be conducted by three (3) qualified business appraisers who
have been active over the ten (10) year period ending on the Arbitration
Commencement Date in the appraisal of Casino businesses in greater Las Vegas,
Nevada. Tenant will select one appraiser, Landlord will select one appraiser,
and the two appraisers so chosen will select the third appraiser. If the two
appraisers chosen by the parties do not agree on a third appraiser within ten
(10) days after the date the second appraiser has been appointed, the third
appraiser will be appointed by the Las Vegas office of the American Arbitration
Association upon the application of either party. Each party shall select its
appraiser within ten (10) days following the Arbitration Commencement Date. If
either party fails to select its appraiser within such ten (10) day period, and
the other party timely selects its appraiser, then the appraiser selected by
the other party shall be the sole arbitrator for determining Fair Market Rent.


 


(c)           Within
thirty (30) days after the selection of the third appraiser (or if only one
appraiser is to render the decision as provided in Subsection (b) above,
within thirty (30) days after the last day of the above-referenced ten (10) day
period), the appraiser(s) shall determine the Fair Market Rent. If more than
one appraiser has been appointed, each appraiser shall determine the Fair
Market Rent. The average of the two appraisals that are closest in value shall
be the Fair Market Rent.


 


(d)           This
Section is an agreement to arbitrate as such is defined in Chapter 38 of the
Nevada Revised Statutes; as the same may be amended from time to time,
provided, however, that: (i) Sections 38.075, 38.085 and 38.095 and 38.145(1)(d)
and any successor sections of such Chapter are hereby waived to the extent
permitted by applicable law; and (ii) the time periods contained in Sections
38.145(2) and 38.155(1) and any successor sections of such Chapter are hereby
shortened to thirty (30) days to the extent permitted by applicable law. The
arbitration shall be performed in Clark County, Nevada. To the extent permitted
by applicable law, Landlord and Tenant each consent to the procedure herein set
forth and waive any rights (including any right to a hearing, representation by
attorney at such hearing, or any rights with respect to witnesses, cross-examination,
subpoenas, and depositions) they may have or conflicting provisions of the
Nevada Uniform Arbitration Act, Nev. Rev. Stat. Subsection 38.015 et seq., as
the same may be amended from time to time.


 


(e)           If
the determination of Fair Market Rent pursuant to this Section 3.3 is
not made before the beginning of the Lease Year to which it applies, Tenant
shall continue to pay rent in the same amount that it was obligated to pay
during the prior Lease Year until the determination is made. Within ten (10)
days of the date that the determination of Fair Market Rent is made, Tenant
shall pay any deficiency to Landlord or Landlord shall refund any overpayment
to Tenant, as appropriate.


 


19

















 


Section 3.4            Payment of
Base Rent and Additional Rent


 


Base Rent
shall be payable in equal monthly installments in advance on the first day of
each and every month during the Term, without previous demand therefore and
without offset or deduction of any kind whatsoever, other than as expressly
provided for herein. In addition to Base Rent, Tenant shall pay to Landlord
Additional Rent as and when specified elsewhere in this Lease, but if not
specified, then within ten (10) days following demand from Landlord. Base Rent
and Additional Rent for partial calendar months shall be prorated on a daily
basis (based on a thirty-day month and the actual number of days elapsed). All
Base Rent and Additional Rent payable by Tenant under this Lease is
collectively referred as “Rent” and
shall be made payable to Landlord and sent to Landlord’s at such address as
provided by Landlord in writing, from time to time.


 


Section 3.5            Percentage
Rent


 


If Landlord
obtains a nonrestricted gaming license from or is found suitable by the Nevada
Gaming Commission, then for the period commencing on the first day of the
calendar month following the issuance of such license or such finding of
suitability and continuing for so long as the license or finding of suitability
is in effect, as Additional Rent, Tenant shall pay Landlord Percentage Rent in
accordance with the terms of this Section 3.5. For purposes of this
Lease, “Percentage Rent” for each Lease Year
shall be equal to fifty percent (50%) of the Casino NOI for the Lease Year or
portion thereof for which such license or finding of suitability is in effect. Percentage
Rent for each Lease Year shall be due and payable no later than thirty (30)
days following the end of such Lease Year or the termination date of this Lease.
Each payment of Percentage Rent shall be accompanied by a statement setting
forth in reasonable detail Tenant’s calculation of Casino NOI and Percentage
Rent payable for the Lease Year, certified as correct by Tenant’s chief
financial officer (the “Percentage Rent Statement”).
In addition, Tenant shall provide Landlord with an audited financial statement
for the Lease Year, including a confirmation of the calculation of the Percentage
Rent, no later than one hundred twenty (120) days following the end of such
Lease Year. Within one hundred twenty (120) days following the termination of
this Lease, Tenant shall provide Landlord with an audited financial statement
covering the period from the end of the prior Lease Year to the termination
date of this Lease. The provisions of this Section 3.5 shall survive the
expiration or earlier termination of this Lease.


 


Section 3.6            Right to
Audit Tenant’s Books and Records


 


Landlord shall
have the right to review Tenant’s books and records pertaining to Percentage
Rent for the preceding Lease Year by giving Tenant written notice within six
(6) months after receiving Tenant’s audited financial statements and the
Percentage Rent Statement for the applicable Lease Year from Tenant pursuant to
Section 3.5. If in Landlord’s opinion such review discloses an error in
Tenant’s calculation of Percentage Rent, Landlord may cause an audit of Tenant’s
books and records that will be conducted by an independent certified public
accountant designated by Landlord. If any audit or review of Tenant’s books and
records discloses errors or discrepancies in the calculation of Percentage
Rent, Landlord shall provide Tenant with a written report specifying with
reasonable detail the alleged errors and discrepancies. Upon the completion of
any audit of Tenant’s books and records pursuant to this


 


20

















 


Section, Landlord will provide
(or cause its auditor to provide) Tenant with a true and correct copy of the audit
report and all supporting information used by the auditor in compiling its
report. If any such audit discloses Tenant overpaid Percentage Rent for any
Lease Year, the amount of the overpayment shall be credited against the Base
Rent and Additional Rent next coming due under this Lease, or if the results of
the credit are not disclosed until the Lease Term has expired, Landlord shall
pay Tenant the amount of the overpayment within thirty (30) days after the
results of the audit have been disclosed to both parties. If any such audit
discloses Tenant underpaid Percentage Rent during any Lease Year, Tenant shall
pay Landlord the amount of the underpayment within thirty (30) days after the
results of the audit have been disclosed to both parties. Landlord shall pay
all costs and expenses of the audit; however, if the audit shows Tenant
understated Percentage Rent by more than two percent (2%) of the actual amount
payable by Tenant, Tenant shall reimburse Landlord for the reasonable costs and
expenses of the audit. The provisions of this Section 3.6 shall survive
the expiration or earlier termination of this Lease.


 


Section 3.7            Additional Third
Party Tenant Obligations


 


In addition to
Rent and Additional Rent, Tenant shall pay directly, to the third party or
governmental entity or agency to which such payment is due, on or before the
same shall become delinquent or give any rights or remedies to any such third
party, entity or agency to lien or otherwise enforce a lien on the Land or all
or any part of the Premises, the following: (i) all personal property taxes payable
with respect to any personal property, fixtures, or trade fixtures located on
or about the Premises or used by Tenant in connection with the Casino Business
and not taxed as real property as part of the improvements owned by Landlord;
(ii) all income taxes, sales taxes, use taxes and other taxes payable in
connection with the Casino Business, including, without limitation, any gaming
taxes payable with respect to any gaming activities within the Premises; (iii)
any casino entertainment tax payable with respect to any entertainment offered
by Tenant within the Premises; (iv) all amounts due and payable under any
equipment leases permitted hereunder that are entered into by Tenant and any
third party with respect to any personal property after the date of this Lease.


 


Section 3.8            Lease
Deposit


 


Concurrently
with the execution of this Lease, Tenant shall deposit with Landlord a security
deposit (the “Lease Deposit”),
which shall be in the form of an irrevocable, clean, unconditional letter of
credit (the “Letter of Credit”) in
the amount of One Million Dollars ($1,000,000). The Letter of Credit shall be
issued by a national banking association or other issuer acceptable to
Landlord, in its sole discretion. The Letter of Credit shall be issued for the
benefit of Landlord and/or the Mortgagee in such form as to enable the
beneficiary, at its option, to draw the same, in whole or in part, from time to
time on demand as permitted pursuant to this Section. Prior to any bankruptcy
filing by or against Tenant, the Letter of Credit shall be drawable by the
beneficiary upon notarized certification that Tenant is in default and has not cured
the default within the applicable cure period, if any, provided for in this
Lease. After any bankruptcy filing by or against Tenant, the Letter of Credit
shall be drawable by the beneficiary, without notice of default to Tenant, upon
notarized certification that Tenant has failed to pay Base Rent when due, or
failed to pay Additional Rent within five (5) days of its due date, or failed
to perform any other obligation of Tenant under this Lease within thirty (30)
days of its due date. Tenant shall cause the Letter of Credit to be renewed
annually for the second Lease


 


21

















 


Year and for subsequent Lease
Years through the ninth Lease Year at least sixty (60) days prior to its then-existing
expiration date and renewed for a period of fifteen (15) months no later than
sixty (60) days prior to the commencement of the tenth Lease Year. A failure to
timely renew the Letter of Credit shall be a material default under this Lease
and shall be grounds for Landlord to draw the entire Letter of Credit and
terminate this Lease. The beneficiary of the Letter of Credit shall have the
right to assign the Letter of Credit to any Person determined by the
beneficiary from time to time. The Letter of Credit shall be in substantially
the form attached to this Lease as Exhibit “3.8”. The Letter of Credit
shall secure the full and timely performance of all of Tenant’s obligations
under this Lease. Landlord may apply the Letter of Credit against its damages
and sue Tenant for any deficiency. If any amount is drawn under the Letter of
Credit, Tenant shall cause the issuer to restore the Letter of Credit to its
original amount, One Million Dollars ($1,000,000), no later than ten (10)
Business Days following the date of such withdrawal. If Tenant is not in
default at termination of this Lease, the Letter of Credit shall be returned to
Tenant within ten (10) Business Days after the termination of this Lease and
payment by Tenant of any amounts owing under Section 3.11 and any
outstanding billings by Landlord for Tenant’s Operating Cost Obligations and
other sums, if any, payable by Tenant hereunder.


 


Section 3.9            Casino
Personal Property


 


On the
Commencement Date, Landlord shall transfer or cause the Patch Lease Tenant to
transfer to Tenant all Casino Personal Property that Landlord received pursuant
to the Purchase Agreement. No later than ninety (90) days after the Commencement
Date, Tenant shall cause an inventory to be prepared of the Casino Personal
Property. Landlord and Tenant shall each sign the inventory and attach it to
this Lease as Exhibit “A-5”. Tenant shall update the inventory from time
to time, but no less frequently than bi-annually. On the Commencement Date,
Landlord shall cause Prime Landlord to convey title to the Casino Personal
Property, excluding the Gaming Equipment, to Tenant and shall cause the Patch
Lease Tenant to convey title to the Gaming Equipment to Tenant. Tenant accepts
the Casino Personal Property in the physical condition existing on the
Commencement Date, As-Is – Where-Is. Landlord represents and warrants to Tenant
that the Casino Personal Property meets any applicable Licensor Standards on the
Commencement Date. On the Commencement Date, Tenant shall execute and deliver
to the Mortgagee a security agreement and financing statements in form and
content reasonably acceptable to the Mortgagee whereby Tenant grants to the
Mortgagee a blanket first priority security interest in all of Tenant’s right,
title and interest in the Gaming Equipment (the “Casino Personal Property
Mortgage”). The Casino Personal Property Mortgage shall provide that the
Mortgagee shall release ten percent (10%) of the Gaming Equipment from the
Casino Personal Property Mortgage for each Three Hundred Thousand Dollars
($300,000) payment of the Personal Property Reimbursement Payment. The Mortgagee
shall release its security interest in the Casino Personal Property, excluding
the Gaming Equipment, when the Casino Personal Property Mortgage is granted by
Tenant.


 


Section 3.10         Personal
Property Reimbursement Payments


 


Landlord and
Tenant agree that for purposes of this Agreement, the value of the Casino
Personal Property paid for by Landlord on behalf of Tenant is Ten Million
Dollars ($10,000,000) (“Landlord’s Personal
Property Investment”). Tenant covenants and agrees to reimburse


 


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Landlord for Landlord’s
Personal Property Investment out of Adjusted Operating Cash Flow pursuant to
the terms of Section 3.11 below.


 


Section 3.11         Payment of
Adjusted Operating Cash Flow


 


(a)           Within
thirty (30) days following the end of each Lease Year and the termination date
of this Lease, Tenant shall calculate Adjusted Operating Cash Flow for such
Lease Year, and shall furnish to Landlord a written statement setting forth in
reasonable detail its calculation of Adjusted Operating Cash Flow, certified as
correct by Tenant’s chief financial officer (the “Adjusted Operating Cash Flow Statement”), and accompanied by
the payment of any amounts due or owing to Landlord pursuant to this Section
3.11. In addition, Tenant shall provide Landlord with an audited financial statement
for such Lease Year (or partial Lease Year), including a confirmation of the
calculation of the Adjusted Operating Cash Flow, no later than one hundred
twenty (120) days following the end of such Lease Year or the termination date
of this Lease, as applicable. Tenant shall apply adjusted Operating Cash Flow
as follows:


 


(i)                                     First,
to Tenant in payment of any accrued but unpaid Tenant Management Fees;


 


(ii)                                  Next,
to Tenant to the extent of any Personal Property Reimbursement payment paid by
Tenant to the Mortgagee pursuant to Section 3.9.


 


(iii)                               Next,
to Landlord and Tenant in proportion to their respective then-existing
investments (Landlord’s Personal Property Investment, on the one hand, and the
aggregate of Tenant’s Initial Capital Investment and Tenant’s Subsequent
Capital Investment, on the other hand) that have not been repaid in
reimbursement thereof until each has been repaid in full;


 


(iv)                              Then
equally to Landlord and Tenant.


 


(b)           Notwithstanding
the foregoing, Tenant shall not be required to make payments under Subsections
3.11(a) (ii), (iii) or (iv) above in the first Lease Year if and to the
extent that Tenant uses the excess Adjusted Operating Cash Flow to make
additional capital improvements to the Casino and/or the Casino Back-of-the-House
Areas, for marketing expenses for the benefit of the Casino Business, to
replace or upgrade existing Casino Personal Property, or for such other purpose
as may be reasonably agreed to between Landlord and Tenant. Tenant must
reinvest such amounts within a reasonable time following the end of the first
Lease Year (not to exceed 180 days). Any Adjusted Operating Cash Flow not
applied under this Subsection (b) shall be applied in accordance with Subsection
(a) above. Landlord shall have the right to review Tenant’s books and
records pertaining to the calculation of Adjusted Operating Cash Flow under the
procedure set forth in Section 3.6 by giving Tenant written notice
within six (6) months after receiving the statement for the applicable Lease
Year or partial Lease Year and the audited financial statement relating to such
statement.


 


(c)           At
the end of the Term or upon sooner termination of this Lease, Tenant shall
calculate Adjusted Operating Cash Flow within fifteen (15) Business Days of the
date of termination of this Lease and shall make the payments specified in Subsection
3.11(a) no later


 


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than twenty (20) Business Days
after the date of termination of this Lease. The provisions of this Section
3.11 shall survive the expiration or sooner termination of this Lease.


 


ARTICLE IV —  OPERATING COSTS; LANDLORD’S OBLIGATIONS


 


Section 4.1            Operating
Costs and Property Taxes


 


As Additional
Rent, commencing on the Commencement Date, Tenant shall pay to Landlord the
following amounts incurred or paid by Prime Landlord or Landlord for the
benefit of Tenant during any Lease Year (collectively, “Tenant’s Operating Cost Obligation”): (a)
Property Taxes and Operating Costs that are allocable to the Casino and the
Casino Back-of-the-House Areas; but not the Hotel or the Remaining Property and
(b) Property Taxes and Operating Costs for the Remaining Property that are
appropriately allocable to the Casino and the Casino Back-of-the-House Areas. Property
Taxes and Operating Costs that are allocable to the Casino and the Casino Back-of-the-House
Areas, but not the Hotel or the Remaining Property, and Property Taxes and
Operating Costs with respect to the Remaining Property that are appropriately
allocable to the Casino and the Casino Back-of-the-House Areas shall be
determined by the Operating Cost Consultants. The Operating Cost Consultants
shall also determine the absolute amounts of and the applicable percentages of
the Property Taxes and Operating Costs appropriately allocated to the Casino
and the Casino Back-of-the-House Areas, and not the Hotel or the Remaining
Property, and appropriately allocated to the Casino and the Casino Back-of-the-House
Areas on account of the Remaining Property.


 


Section 4.2            Method of
Allocation


 


(a)           Subject
to the terms of Section 4.1, All Operating Costs and Property Taxes
incurred by Prime Landlord or Landlord with respect to the Resort shall be
allocated by Landlord among the Hotel, the Casino and the Casino Back-of-the-House
Areas, and the Remaining Property in compliance with the terms of this Section
4.2.


 


(b)           Tenant’s
Operating Cost Obligations shall be payable in equal monthly installments, in
arrears, on the first day of each calendar month beginning with the second
calendar month following the Commencement Date. Until the actual amount of
Tenant’s Operating Cost Obligations is determined by the Operating Cost
Consultants, Tenant shall pay on an estimated basis as if the actual amount
were Two Million Two Hundred Fifty Thousand Dollars ($2,250,000). From first
day of the first calendar month after the Operating Consultants determine the
actual amount of Tenant’s Operating Cost Obligations for Lease Year 1 (the “Tenant’s Base Year Operating Costs”),
Tenant shall pay its obligation based upon Tenant’s Base Year Operating Costs. If
at such time Tenant has overpaid, Landlord shall refund the overpayment within
ten (10) Business Days. Likewise, if Tenant has underpaid, Tenant shall pay the
underpayment to Landlord within ten (10) Business Days. For each Lease Year
after Lease Year 1, Tenant’s Operating Cost Obligation shall be determined
utilizing the percentages determined by the Operating Cost Consultants.


 


(c)           As
soon as practicably possible after the date this Lease is executed and Tenant
has delivered the Letter of Credit to Landlord, Prime Landlord, Landlord,, and
Tenant shall engage one or more qualified consultants selected by Prime Landlord
and approved by Landlord


 


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and Tenant, each acting
reasonably (the “Operating Cost Consultants”)
to determine Tenant’s Base Year Operating Costs. Landlord and Tenant shall each
pay fifty percent (50%) of the fees and expenses of the Operating Cost
Consultants and each of them shall reasonably approve the contracts, including
work statements, for the Operating Cost Consultants. The Operating Cost
Consultants shall conduct a thorough review of the Resort operations and shall
determine an equitable allocation of Operating Costs and Property Taxes to the
Casino and the Casino Back-of-the-House Areas, and not the Hotel or the
Remaining Property and to the Casino and the Casino Back-of-the-House Areas on
account of the Remaining Property; provided that in no event shall Tenant’s
Base Year Operating Costs be less than One Million Five Hundred Thousand Dollars
($1,500,000) or more than Three Million Dollars ($3,000,000). The Operating
Cost Consultants shall use their best efforts to determine a fair and equitable
allocation of Operating Costs for the Casino and the Casino Back-of-the-House
Areas and a fair and equitable allocation to the Casino and the Casino Back-of-the-House
Areas of Operating Costs for the Remaining Property. To assist in determining
an equitable allocation of Operating Costs, Landlord, may, but shall not be
required to, install “check meters” throughout the Resort to monitor
consumption of utilities. Landlord and Tenant will each pay fifty percent (50%)
of the cost of installing such check meters. To the extent reasonably
practicable, electricity, gas, sewer, and water serving the Casino and the
Casino Back-of-the-House Areas shall be separately metered and, if possible,
shall be billed directly to the Tenant by the utility provider. Prime Landlord,
Landlord and Tenant shall cooperate fully with the Operating Cost Consultants and
shall provide access to books, records and other information that the Operating
Cost Consultants deem reasonably necessary in order to complete their
determinations.


 


(d)           Beginning
in Lease Year 3 and every second Lease Year thereafter, either party may
request in writing to the other that Operating Cost Consultants be appointed in
accordance with the provisions of Subsection 4.2(c) to review and amend,
if necessary, the then-existing determination of Tenant’s Operating Cost
Obligation. A party that makes such a request shall do so prior to the end of
the sixth month of the Lease Year and the review and adjustment shall be
completed as soon as practicably possible after the date that the Operating
Cost Consultants are appointed. The determination of the Operating Cost
Consultants shall be applied retroactively to such Lease Year. After such
determination, if Tenant has overpaid, Landlord shall refund the overpayment
within ten (10) Business Days. Likewise, if Tenant has underpaid, Tenant shall
pay the underpayment to Landlord within ten (10) Business Days.


 


Section 4.3            Billing and
Payment


 


No less than
ninety (90) days prior to the beginning of Lease Year 2 and each subsequent
Lease Year, Landlord will provide Tenant Landlord’s written estimate in
commercially reasonable detail of Tenant’s Operating Cost Obligation for the
coming Lease Year (collectively, the “Tenant’s
Operating Cost Estimate”). Tenant shall pay the amount set forth in
Tenant’s Operating Cost Estimate, in arrears, in equal monthly installments,
without deduction or offset on the first day of each calendar month beginning
on the first day of the second calendar month of the Lease Year to which the
estimate applies and ending on first day of the first calendar month of the
following Lease Year. Tenant shall continue to pay its share of Operating Costs
and Property Taxes based upon the most recent Tenant’s Operating Cost Estimate
until Landlord provides a new estimate. Within sixty (60) days after the end of
each Lease Year and the termination date of this Lease, Landlord will provide
Tenant with a statement of Landlord’s


 


25

















 


calculations of the actual
amount of Tenant’s Operating Cost Obligation during such Lease Year or partial
Lease Year (the “Tenant’s Actual Operating
Cost Statement”). Within ten (10) Business Days after Tenant
receives Tenant’s Actual Operating Cost Statement, Landlord shall refund Tenant
any overpayment of Tenant’s Operating Cost Obligation for such Lease Year or
partial Lease Year, or Tenant shall pay Landlord any deficiency for such Lease
Year or partial Lease Year.


 


Section 4.4            Definition
– Operating Costs


 


As used in
this Article or elsewhere in this Lease “Operating
Costs” shall mean all expenses paid or incurred by Prime Landlord or
Landlord or charged to Prime Landlord or Landlord for maintaining, managing,
operating, repairing, replacing and administering the Casino and the Casino Back-of-the-House
Areas and the Remaining Property and any personal property used in conjunction
therewith throughout the Term of this Lease, including without limitation
water, sewer, electricity, heat, air conditioning, fuel, light, fire protection
and other utilities and services; supplies, janitorial and cleaning services;
window washing; garbage and refuse removal; security and information technology
services and systems; landscape maintenance and replacement; parking
maintenance and operations; compensation (including employment taxes and fringe
benefits) of all persons who perform duties in connection with the operation,
management, maintenance, repair and administration of the Casino and the Casino
Back-of-the-House Areas and the Remaining Property; capital expense reserves
required under the terms of any agreement with the Mortgagee; insurance premiums
for all insurance carried by Prime Landlord or Landlord with respect to the
Casino and the Casino Back-of-the-House Areas and the Remaining Property;
licenses, permits and inspection fees; subsidies fees and other payments
required by public bodies; management fees; easement and license fees; legal
and accounting expenses and all other expenses or charges whether or not here
and above described which, in accordance with generally accepted accounting and
management practices, would be considered an expense of maintaining, managing,
operating, repairing, replacing and administering the Casino and the Casino Back-of-the-House
Areas and the Remaining Property, and administrative fees in an amount equal to
fifteen percent (15%) of the foregoing, excluding taxes, utilities, insurance
premiums and management fees; and excluding the following: (a) costs of any
special services rendered to Tenant for which a special charge is made; (b)
ground lease rental payments and debt service on mortgages or deeds of trust; (c)
depreciation or amortization expenses; (d) costs required to be capitalized in accordance
with generally accepted accounting practices, except Operating Costs shall
include the amortization of capital expenditures for alterations, additions,
replacements and improvements (1) designed with a reasonable probability of
improving the operating efficiency of the Casino and the Casino Back-of-the-House
Areas or the Remaining Property, (2) required to comply with governmental laws
or regulations (including amendments to existing laws and regulations) taking
effect after the completion of the initial construction of the Casino and the
Casino Back-of-the-House Areas and the Remaining Property, or (3) made for the
general benefit or convenience of the Casino and the Casino Back-of-the-House
Areas or the Remaining Property, treating such capital expenditure as being
amortized on a straight line basis, together with interest at the rate of ten
percent (10%) per annum, over the shorter of ten (10) years or the useful life
of such item; and (e) Operating Costs separately billed to and paid by
individual tenants.


 


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Section 4.5            Review of
Prime Landlord and Landlord’s Books and Records


 


(a)           So
long as Tenant is not then in default under this Lease, Tenant shall have the
right (no more frequently than once per calendar year) to review Prime Landlord’s
and Landlord’s books and records pertaining to Operating Costs and Property Taxes
for the preceding Lease Year by giving Prime Landlord and Landlord written
notice within six (6) months (the “Audit
Period”) after receiving Tenant’s Actual Operating Cost Statement
for the applicable Lease Year. Notwithstanding any other provision of this
Lease, if Tenant does not request a review of Prime Landlord’s and Landlord’s
books and records within the Audit Period or if Tenant requests a right to
review Prime Landlord’s and Landlord’s books and records within the Audit
Period but does not provide written notice of objection to Landlord within six
(6) months after the expiration of the Audit Period, Tenant shall be deemed to
have conclusively accepted Tenant’s Operating Cost Obligation for such Lease
Year, which shall no longer be subject to audit, inspection or objection by Tenant.
If, in compliance with this Section 4.5, Tenant sends written notice to
Landlord that, in Tenant’s opinion, such review discloses an error in Prime
Landlord’s and/or Landlord’s books and records with regard to the calculation of
Tenant’s Operating Cost Obligations, Tenant may cause an audit of Prime
Landlord’s and Landlord’s books and records which will be conducted by an
independent certified public accountant designated by Tenant and reasonably
acceptable to Landlord, who does not represent and is not employed by Prime
Landlord, Landlord or Tenant on any other matters, and is not in the business
of auditing or reviewing books and records of landlords on behalf of tenants on
a contingent fee basis. Nothing in this Section 4.5 is intended nor
shall be interpreted to relieve Tenant of its obligations to pay Tenant’s
Operating Cost Obligations during any review or audit of Prime Landlord’s and
Landlord’s books and records. The rights of Tenant under this Section 4.5
may not be exercised by or for the benefit of any subtenant of the Premises.


 


(b)           If
Tenant believes any audit or review of Prime Landlord’s and/or Landlord’s books
and records discloses errors or discrepancies in the amount of the Tenant’s
Operating Cost Obligations charged to Tenant by Landlord, Tenant shall provide
Landlord with a written report specifying with reasonable detail the alleged
errors and discrepancies. Upon the completion of any audit of Landlord’s books
and records pursuant to this Section, Tenant will provide (or cause its auditor
to provide) Landlord with a true and correct copy of the audit report and all
supporting information used by the auditor in compiling its report. If any such
audit discloses Tenant overpaid Tenant’s Operating Cost Obligations for any
calendar year, the amount of the overpayment shall be credited against the Base
Rent and Additional Rent next coming due under this Lease, or if the results of
the credit are not disclosed until the Lease Term has expired, Landlord shall
pay Tenant the amount of the overpayment within ten (10) Business Days after
the results of the audit have been disclosed to both parties. If any such audit
discloses that Tenant underpaid Tenant’s Operating Cost Obligations during any
calendar year, Tenant shall pay Landlord the amount of the underpayment within
ten (10) Business Days after the results of the audit have been disclosed to
both parties. Tenant shall pay all costs and expenses of the audit; however, if
the audit shows Landlord overstated Tenant’s Operating Cost Obligations for the
subject Lease Year by more than two percent (2%) of the actual amount payable
by Tenant, Landlord shall reimburse Tenant for the reasonable costs and
expenses of the audit.


 


(c)           Any
review or audit of Prime Landlord’s and/or Landlord’s books and records
pertaining to Operating Costs or Property Taxes shall occur at the office of
the Hotel manager


 


27

















 


and shall occur during the
normal business hours of the Hotel manager, unless otherwise agreed in writing
by Landlord. Tenant shall not disclose any information with respect to Prime
Landlord’s and/or Landlord’s books and records to any person without the prior
written consent of Landlord, in its sole discretion, unless Tenant is required
by law to disclose such information. Prime Landlord and/or Landlord, at its
option, may require that Tenant’s auditor execute a confidentiality agreement
incorporating the terms and conditions of this Subsection.


 


Section 4.6            Landlord’s
Obligations


 


Landlord shall
cause Prime Landlord to operate the Hotel as a first class four-star hotel in
compliance with any Licensor Standards. Landlord and Prime Landlord expect
Licensor to be Marriott, Starwood or a similar franchisor of hotels with a four-star
or better rating in North America. Initially, the Hotel shall be operated as a
JW Marriott. Except for Tenant’s express obligations under this Lease, and
subject to Tenant’s obligation to reimburse Landlord for Tenant’s Operating
Cost Obligation, Landlord shall cause Prime Landlord to be responsible for, and
to pay (or cause any other lessee, licensee, or third party contractor with
rights to use the Land or the Buildings to pay), at its or their sole cost and
expense, as applicable, any and all costs or expenses in connection with the
ownership, use, operation, management, maintenance, repair, replacement of the
Land and the Buildings, or otherwise incurred or payable in connection with the
Land and the Buildings (including the Premises), which shall include (i) all
real property taxes, ad valorem taxes in the nature of real property taxes,
documentary transfer taxes, assessments and impositions charged by any
government agency or entity with jurisdiction over the Land, the Buildings,
and/or the Improvements; (ii) all personal property taxes (except any payable
with respect to Casino Personal Property or Casino Personal Property Additions,
which shall be paid by Tenant) payable with respect to any personal property,
fixtures, trade fixtures or otherwise located on or about the Land or owned by
or used under an equipment lease by Prime Landlord or Landlord; (iii) all
amounts due or arising under any declaration of covenants, conditions and
restrictions and other matters of record encumbering the Land, except any such
amounts that relate to the Casino, the Casino Back-of-the-House Areas or the
Casino Business, which amounts shall be paid by Tenant (iv) all rents, charges,
duties, impositions, license and permit fees, charges and fees for utilities
and similar services provided to or available at the Land (including, without
limitation, electrical, gas, water, sanitary sewer, cable television,
telephone, cable and fiber optics, fire alarms and alarm monitoring, and
security systems); (v) the maintenance, repair, and replacement of all
Buildings and Improvements now or hereafter constructed on the Land, including,
without limitation, all capital improvements thereto and all ordinary expenses
in connection therewith (and which shall include, without limitation, the
maintenance, repair and replacement of all mechanical and electrical systems
and equipment, all heating, ventilating and air conditioning systems and
equipment, all electrical systems, and all supply and waste water systems,
including those servicing the Premises); (vi) all landscaping maintenance and
replacements, trash removal, and insect/pest remediation and control; (vii) all
costs and expenses incurred in connection with compliance with all Laws, except
costs and expenses relating to Gaming Laws applicable to Tenant, which Tenant
shall pay; (viii) the liability and casualty insurance that Landlord is
required to maintain or cause Prime Landlord to maintain under this Lease or
the Mortgage; and (ix) any other amounts that Prime Landlord is obligated to
pay or reserve under the Mortgage, including, without limitation, any capital
improvement reserves.


 


28

















 


Section 4.7            Landlord
Default


 


If Landlord
shall at any time be in default of any of its obligations or covenants under
this Lease, Tenant shall have the right to send written notice thereof to
Landlord, specifying the nature of such default. Landlord shall cure any
monetary default within thirty (30) days of receipt of such notice. With
respect to any non-monetary default, Landlord shall commence such cure promptly
upon receipt of such notice, shall use all commercially reasonable efforts to
cure such default, and shall complete such cure within thirty (30) days
following the delivery of such notice. However, if such cure is not capable of
completion within said thirty (30)-day period, Landlord shall have such
additional time as may be reasonably necessary to complete its performance so
long as Landlord proceeds in good faith and with diligence to prosecute such
cure to completion as soon as reasonably possible.


 


ARTICLE V —  USE AND OPERATION OF PREMISES


 


Section 5.1            Casino Use


 


Tenant shall use
and occupy the Premises only for the Casino Business, together with any
necessary, required or desirable related, ancillary, or adjunct use and any
other ordinary and customary use consistent with the nature and character of,
and compatible with, the Hotel Business. Tenant shall operate the Casino and
the Casino Back-of-the-House Areas at or above the Casino Standard at all times
during the Term. Tenant shall not create or suffer to exist any public or
private nuisance, hazardous or illegal condition or waste on or with respect to
the Premises. Tenant shall operate the Casino and the Casino Back-of-the-House
Areas and the Casino Business under the Casino Name in strict accordance with
the requirements of the Casino Name License Agreement and shall preserve the
Casino Name and all rights to use the Casino Name as the sole property of
Tenant and in good standing during the Term. Tenant shall transfer and assign
the Casino Name to Landlord at the expiration or sooner termination of this
Lease.


 


Section 5.2            Surveillance
Room and Security


 


As part of the
Premises, Tenant shall lease, use, operate, and control the Surveillance Room
and shall maintain, repair and replace when obsolete or beyond its useful life
all related equipment (including cameras, video tape recorders, monitors, and
tape copiers), and shall have access to all cameras, cables, conduits, wires,
and other equipment or fixtures outside the Surveillance Room related thereto. Tenant
shall provide certain surveillance services to Prime Landlord through the
Surveillance Room. Landlord shall cause Prime Landlord to reimburse Tenant for
the reasonable cost of any surveillance services provided by Tenant through the
Surveillance Room. Tenant shall employ, as casino employees, all security
officers on or about the Casino and the Casino Back-of-the-House Areas, and
shall schedule such employees for reasonable security coverage of the Casino
and the Casino Back-of-the-House Areas. Tenant shall also employ, as casino
employees, security officers reasonably approved by Prime Landlord, who shall
provide security services for the Hotel and the balance of the Resort. Prime
Landlord and Tenant shall agree upon the services and the cost of such services
and Prime Landlord shall pay Tenant the agreed cost of such services for the
Hotel and its share of the cost of such services for the balance of the Resort.
Prime Landlord may terminate security services provided by Tenant and provide
such services for the Hotel and the balance of the Resort itself or


 


29

















 


through third parties. In such
event, Tenant and Prime Landlord shall agree upon Tenant’s share of the cost of
such services for the balance of the Resort and Tenant shall pay Prime Landlord
the agreed cost of such services. Landlord and Tenant shall fully cooperate
with each other and with Prime Landlord and any Person providing security
services with respect to any part of the Resort.


 


Section 5.3            Telephones;
Switchboard


 


Landlord shall
cause Prime Landlord or the Hotel Operator to manage any common telephone
switchboard system servicing all of the Improvements, and shall promptly
forward all calls directed to Tenant or its employees to the appropriate
extension. Notwithstanding the foregoing to the contrary, Tenant shall at all
times have the right to obtain and maintain, at its own cost and expense, its
own telephone system and own telephone numbers. Tenant shall be responsible for
the actual cost of any outgoing telephone calls (including internet access and
other telecommunications lines) connected through any central
telecommunications facilities not separately servicing the Premises. Tenant
reserves the right to terminate telephone and switchboard services from Prime
Landlord and to provide such services itself.


 


Section 5.4            Use of
Other Property Facilities


 


Landlord
acknowledges that the use of other facilities and property amenities within the
Buildings and Improvements and on the Land by Tenant’s customers, guests,
invitees, and business invitees and all other patrons of the Casino Business,
together with Tenant’s officers or employees while hosting or accompanying such
persons (collectively, “Tenant Invitees”)
is critical and integral to the operation and success of the Casino Business. Such
facilities and property amenities (collectively, the “Property Facilities”) include, without limitation, the hotel,
restaurants, ballroom and meeting rooms, pool, spa, entertainment venues,
retail shops, self parking and valet parking, and all other public or quasi-public
facilities and property amenities on or about the Buildings, Improvements or
Land. In all cases, the price charged to Tenant or any Tenant Invitees for any
use of the Property Facilities shall not exceed the retail price charged to the
general public, and shall be discounted as more particularly set forth below. At
Tenant’s option, Tenant shall have the right to offer the Property Facilities,
or any of them, to its Tenant Invitees on a complimentary or further discounted
basis. In such case, Tenant shall be responsible for paying the price charged
for such use, or the difference between the price charged and the discounted
amount paid by the Tenant Invitees. At all times during the Term, Prime
Landlord, Landlord and Tenant shall mutually cooperate to develop internal
accounting and control procedures for Tenant’s booking of all use of the
Property Facilities by any Tenant Invitees and for the payment of such amounts
by Tenant to Prime Landlord, or directly to Prime Landlord’s subtenant,
licensee, third party manager, or other party responsible for operating any
applicable Property Facilities. Without limiting the generality of the
foregoing, the following procedures will apply to Hotel rooms, spa facilities
and food and beverage facilities. Landlord will cause the Hotel Operator to
make available to Tenant thirty (30) (or such greater number as may be agreed
to by the Hotel Operator from time to time) Hotel rooms per night (the “Casino Hotel Rooms”) at the lowest
published rate for the general public for each such night. Landlord and Tenant
shall mutually agree to the lowest published rate for each Lease Year prior to
the commencement of such Lease Year. Such published rates shall not include any
of the following Marriott rates: (a) the Employee Rate; (b) the Friends and
Family Rate; (c) the Business Rate; (d) the Hotel Excellence Program Rate;
(e) the Travel Industry Rate; (f) the Famtastic Rate;


 


30

















 


(g) the Entertainment
Program Rate; (h) the Quest Program Rate; (i) the VIP Athletic Program Rate;
(j) the AAA Rate; or (k) the AARP Rate. Tenant shall book the Casino Hotel
Rooms in coordination with the Hotel Operator and shall pay the Hotel Operator
the agreed rate for any Casino Hotel Rooms that are booked for such night or
are not released back to the Hotel Operator within seven (7) days of the
booking date for such Casino Hotel Rooms. Landlord shall also cause the Hotel
Operator to make spa services and Hotel food and beverage services available to
Tenant Invitees at a rate that is ninety percent (90%) of the rate available to
the general public for such services.


 


Section 5.5            Operating
Supplies


 


On the
Commencement Date, as part of the Casino Personal Property, Landlord shall
provide to Tenant the Operating Supplies at the Casino and the Casino Back-of-the-House
Areas, but not any gaming chips, tokens, dice, cards or similar items. Tenant
shall provide and maintain, at its expense, inventories of Operating Supplies
in an amount customary for the operation of the Casino and the Casino Back-of-the-House
Areas immediately prior to the purchase of the Resort by Prime Landlord. Subject
to compliance with any applicable Gaming Laws, at the termination of this Lease
Tenant shall deliver to Landlord or its designee, an inventory of Operating
Supplies in an amount not less than the average amount of Operating Supplies in
inventory at the Premises during the two full calendar years preceding such
termination. Notwithstanding the foregoing, Tenant shall not be required to
transfer any alcoholic beverages or Gaming Equipment to any Person other than a
duly licensed entity or to deliver any gaming chips, tokens, dice, cards, or
similar items with the name, logo or other identifying mark of Tenant’s Casino
or Casino Business.


 


Section 5.6            Permits and
Licenses; Gaming Laws


 


(a)           Provided
that Landlord causes Prime Landlord to offer the hotel rooms and restaurant
required in a resort hotel pursuant to NRS 463.01865, on or before the
Commencement Date, Tenant shall obtain, at its cost and expense, all necessary
permits, licenses and consents (i) from any or all Gaming Authorities required
for the “nonrestricted operation” of the Premises as a gaming casino under a “nonrestricted
license,” as said terms are defined in NRS 463.0177, and (ii) from any
regulatory agency or entity with jurisdiction required to sell alcohol at the
Premises. Tenant shall keep and maintain said permits, licenses and consents in
full force and effect throughout the Term. At all times during the Term, Tenant
shall comply with all Gaming Laws applicable to its use or occupancy of the
Premises and operation of the Casino Business.


 


(b)           Landlord
expressly acknowledges that, (i) pursuant to NRS 453.162(5)(a), NRS 453.165,
and NRS 453.167, the State Gaming Control Board and the Nevada Gaming
Commission may require a finding of suitability or the licensing of any person
who owns any interest in the premises of a licensed establishment or owns any
interest in real property used by a licensed establishment whether such person
leases the property directly to the licensee or through an intermediary; and
that (ii) pursuant to Regulation 3.020 promulgated under the Nevada Gaming
Control Act, the Commission or the Board may deem that premises are unsuitable
for the conduct of gaming operations by reason of ownership of any interest
whatsoever in such premises by a person who is unqualified or disqualified to
hold a gaming


 


31

















 


license, regardless of the
qualifications of the person who holds a license to operate gaming in or upon
such premises. Further, pursuant to said regulations, in all cases in which the
premises wherein or whereon the gaming operation for which a state gaming
license is sought are not wholly owned by the applicant, the applicant must
furnish to the Board a statement of the name and address of the owner or owners
of such premises, a copy of all agreements whereby the applicant is entitled to
possession of the premises, and such other information as the board may require.
At its sole expense, Landlord shall at all times cooperate with Tenant and
shall cause Prime Landlord at all times to cooperate with Tenant in respect of
all Gaming Laws applicable to Prime Landlord and Landlord, including, without
limitation, the foregoing Gaming Laws, and shall provide any information
required by any Gaming Authority with jurisdiction, including, but not limited
to, filing all required applications and paying all costs of any required
investigation, and shall cooperate with all such Gaming Authorities if called
forward for any finding of suitability that may be required under any
applicable Gaming Laws. If Prime Landlord or Landlord is found unsuitable, then
this Lease shall terminate upon receipt by Prime Landlord, Landlord, and Tenant
of notice of such action by the Nevada Gaming Commission, and the provisions of
Section 16.1 shall govern such termination of this Lease.


 


Section 5.7            Casino
Mortgages and Transition Procedures


 


Tenant shall
maintain in and about the Premises at all times during the Term, such kinds and
quantities of casino personal property, including, but not limited to, gaming
equipment and casino furniture, fixtures and equipment as is customary and
usual for the operation of a casino at the Casino Standard and compatible with
the Hotel Business. Landlord and Tenant acknowledge and agree that on the
Commencement Date, all of Tenant’s right, title, and interest in the Gaming
Equipment will be subject to a casino personal property mortgage granted to the
Mortgagee by the Patch Lease Tenant, and the Casino Personal Property,
excluding the Gaming Equipment, will be subject to a casino personal property
mortgage granted to the Mortgagee by the Prime Landlord. On the Commencement
Date, Tenant will grant the Casino Personal Property Mortgage to the Mortgagee
with respect to all of Tenant’s right, title, and interest in the Casino
Personal Property, which shall be a restatement and amendment of the casino
personal property mortgage previously granted to the Mortgagee by the Patch
Lease Tenant and the casino personal property mortgage previously granted to
the Mortgagee by the Prime Landlord with respect to the Casino Personal
Property, excluding the Gaming Equipment. Tenant shall execute any and all
documents reasonably required by the Mortgagee to grant the Casino Personal
Property Mortgage and to perfect the security interest of the Mortgagee in the
Casino Personal Property. The Casino Personal Property Mortgage shall
acknowledge and confirm that, except for industry standard non-recourse
exceptions to the extent of the value of the Casino Personal Property, Tenant
shall have no liability for payment of the loan secured by the Casino Personal
Property Mortgage. From time to time, the Casino Personal Property Mortgage
shall be released in accordance with the provisions of Section 3.9. During
the term of this Lease, Tenant shall keep the Casino Personal Property and the
Casino Personal Property Additions in good order, condition, and repair,
ordinary wear and tear excepted, and shall replace the same, as reasonably
necessary when the same become obsolete or in poor condition not reasonably
subject to further repairs, or when Tenant desires to replace the same in the
ordinary course of the Casino Business. Any such replacement shall be of
substantially comparable or better quality, but may not be suitable for the
same use or purpose as the Casino Personal Property or Casino Personal Property
Additions, if the same is obsolete or no longer consistent with the nature and
character


 


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of the Casino and the Casino Back-of-the-House
Areas at such time or Tenant’s business plan for the Casino Business at such
time, all as determined by Tenant in its reasonable discretion. At the
termination of this Lease, Tenant shall leave in place in the Casino and the
Casino Back-of-the-House Areas the Alterations to the Premises, all Casino
Personal Property and Casino Personal Property Additions, and all of Tenant’s
right, title and interest in and to the Alterations to the Premises, all Casino
Personal Property and Casino Personal Property Additions shall vest in Landlord
(or its licensed designee, if Landlord is not licensed at the termination of
this Lease) as of the termination of this Lease. Upon Landlord’s request,
Tenant shall promptly execute and deliver to Landlord such instruments as
Landlord may reasonably request to effectuate or confirm such vesting. On the
Commencement Date, Tenant shall pay Landlord the amount of the Casino Cash and
Landlord, Tenant and the Patch Lease Tenant shall implement the Casino
Transition Procedures described in Exhibit “5.7”. The parties agree that
Casino Personal Property that is released from the Casino Personal Property
Mortgage and Casino Personal Property Additions that are not subject to the
Casino Personal Property Mortgage shall not be subject to any lien or security
interest in favor of the Mortgagee.


 


Section 5.8            Tenant’s Initial
and Subsequent Capital Investments


 


(a)           Prior
to the Commencement Date, and as a condition to Landlord’s obligations under
this Lease, Tenant shall demonstrate to Landlord’s satisfaction that Tenant has
funds available in an amount acceptable to Landlord in cash or cash equivalents
set aside exclusively for investment in the Casino Business as provided under
this Section (“Tenant’s Initial Capital
Investment”). Tenant’s Initial Capital Investment shall be used for
(i) the Lease Deposit; (ii) purchasing the existing Casino Cash from the Patch
Lease Tenant and implementing the Casino Transition Procedures described in Exhibit
“5.7”; (iii) leveling the Casino floor and constructing and equipping the
Required Food Facility, pursuant to plans and specifications to be submitted to
and approved by Prime Landlord, Landlord and Mortgagee and, to the extent
required under the License Agreement, by Licensor, prior to the Commencement
Date pursuant to the provisions of Section 6.3; (iv) paying the
Mortgagee for the release of Casino Personal Property from the Mortgage as
described in Section 3.9; (v) other improvements to the Casino approved
in advance by Prime Landlord and Landlord; and (vi) capital lease payments to
acquire Casino Personal Property Additions pursuant to Casino Personal Property
Additions Capital Leases approved in advance by Landlord. Tenant covenants and
agrees to complete the construction of the Required Food Facility and open it for
business no later than June 30, 2002. On the Commencement Date, Tenant shall
cause Tenant’s Initial Capital Investment to be placed in an interest-bearing
reserve account pursuant to a Deposit Agreement in the form attached hereto as Exhibit
5.8 (“Deposit Agreement”) and pledged to
Landlord and/or Mortgagee for the fulfillment of Tenant’s obligations under
this Subsection 5.8(a). Tenant shall utilize Tenant’s Initial Capital
Investment for the purposes specified in this Subsection 5.8(a) during
the first Lease Year of the Term. Exhibit “5.8(a)” contains a
description of the improvements, the estimated costs of the improvements, and a
description of the other expenditures to be made by Tenant using Tenant’s
Initial Capital Investment. If Tenant does not use the entire amount placed in
the account (including interest), the remaining balance shall be the sole
property of Tenant and shall be released to Tenant upon demand after the
expenditures specified in this Subsection 5.8(a) are completed and
Tenant has demonstrated to Landlord’s reasonable satisfaction that no lien claims
against the Resort are outstanding with respect to the work performed by Tenant.
Tenant shall be entitled to reimbursement pursuant to Subsection 3.11(a)
for those amounts of Tenant’s Initial


 


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Capital Investment expended by
Tenant during the first Lease Year and for those amounts expended by Tenant
pursuant to Subsection 5.8(b). The amount of Tenant’s Initial Capital
Investment shall be subject to audit by Landlord for a period of six (6) months
following the completion of the improvements by Tenant.


 


(b)           Without
duplication with Tenant’s Initial Capital Investment, from time to time prior
to first day of the calendar month in which Landlord obtains a nonrestricted
gaming license or is found suitable by the Nevada Gaming Commission, Tenant
shall expend additional funds for capital lease payments to acquire Casino
Personal Property Additions pursuant to Casino Personal Property Additions
Capital Leases approved in advance by Landlord (“Tenant’s Subsequent Capital Investments”). Tenant shall be
entitled to reimbursement for Tenant’s Subsequent Capital Investments as
provided in Subsection 3.11(a). The Parties intend that such funds
expended by Tenant for Casino Personal Property Additions Capital Leases after
the first day of the calendar month in which Landlord obtains a nonrestricted
gaming license or is found suitable shall not be considered Tenant’s Subsequent
Capital Investments.


 


(c)           Tenant
agrees that it shall obtain Casino Personal Property Additions in a
commercially reasonable manner at competitive prices and on competitive terms. Tenant
shall not obtain Casino Personal Property Additions from an Affiliate of Tenant
or any owner or member of Tenant or from any party with a financial interest in
Tenant or any owner or member of Tenant. Tenant shall keep all Casino Personal
Property Additions Capital Leases in good standing during the Term of this
Lease.


 


Section 5.9            Tenant’s
Capital Expense Reserve; Etc.


 


(a)           In
addition to Tenant’s capital investment requirements under Section 5.8, Tenant
covenants and agrees to invest approximately One Million Dollars ($ 1,000,000)
per Lease Year in Approved Capital Expenditures. Prior to such expenditures,
Tenant shall submit to Landlord a list, in reasonable detail, setting forth the
proposed expenditures. Tenant shall maintain on its books and records a Capital
Expense Reserve Account that shows in reasonable detail the expenditures made
by Tenant for Approved Capital Expenditures during the current Lease Year and all
prior Lease Years. To the extent, if any, that the aggregate Approved Capital
Expenditures by Tenant are less than One Million Dollars ($1,000,000) per Lease
Year, Tenant shall keep cash on hand (the “Capital Expense Reserve”)
and available for such purpose; provided that the maximum Capital Expense
Reserve shall be Three Million Dollars ($3,000,000). Tenant shall draw upon the
Capital Expense Reserve from time to time throughout the Term for the purpose
of funding capital improvements to the Premises and Casino Personal Property
Additions. Approved Capital Expenditures and the expenditure of the Capital
Expense Reserve shall be subject to the reasonable approval of Landlord, to the
extent, if any, permitted by the Gaming Laws. Any Capital Expense Reserve that
is not expended during the Term shall be distributed in accordance with the
provisions of Section 3.11. In no event shall Tenant expend more than
One Million Dollars ($1,000,000) in any Lease Year for Approved Capital
Expenditures unless the source of funding in excess of One Million Dollars
($1,000,000) is the Capital Expense Reserve or Tenant’s own funds as specified
in Subsection 5.9(b) below.


 


(b)           Landlord
and Tenant agree that Tenant shall have the right to expend sums for Gaming
Equipment (“Tenant Investment Gaming
Equipment”) in excess of the Approved


 


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Capital Expenditures of One
Million Dollars ($1,000,000) and the Capital Expense Reserve without the prior
written consent of Landlord if such expenditures are made from Tenant’s own
funds (“Tenant’s Gaming Equipment Investment”)
that (i) are not derived from the Casino Business or (ii) are derived from
distributions to Tenant of profits from the Casino Business or Tenant’s
Management Fee or Tenant’s Initial Capital Investment. Before Tenant expends
funds for Tenant Investment Gaming Equipment, Tenant shall submit to Landlord a
list of the proposed Gaming Equipment and an explanation of Tenant’s reasons
for the proposed investment and shall seek Landlord’s reasonable approval of
the investment as an Approved Capital Expense or an expense from the Capital
Expense Reserve. If Landlord does not approve the investment as an Approved
Capital Expense or an expense from the Capital Expense Reserve, Tenant may make
the investment as Tenant’s Gaming Equipment Investment. In such event, the
Tenant Investment Gaming Equipment shall be the property of Tenant at the
expiration or sooner termination of this Lease and at such time Tenant shall
remove the Tenant Investment Gaming Equipment from the Premises and shall
repair any damage to the Premises resulting from such removal. This provision
shall govern over any conflicting provision of this Lease.


 


Section 5.10         Current
Licensor Standards


 


Landlord and
Tenant acknowledge that Marriott will require the following with respect to the
Casino and the Casino Back-of-the-House Areas (collectively, the “Current
Licensor Standards”): (a) the Casino and the Casino Back-of-the-House Areas
shall remain independent of the operation of the Hotel; (b) any commercial
transactions between the Casino and the Hotel shall be on an arms-length,
commercially reasonable basis; (c) the Casino Name shall not include the name
Marriott; (d) Tenant shall be not use any trademarks or trade names of Marriott
or its affiliates in the Casino and the Casino Back-of-the-House Areas, the
Casino marketing or advertising or for any other reason in connection with the
Casino and the Casino Back-of-the-House Areas; (e) except for the services
relating to Tenant’s Operating Cost Obligation, and otherwise as specifically
provided in this Lease, Landlord is not providing services to the Casino or the
Casino Business; (f) to the extent permitted by the Gaming Laws, if any, at the
election of Marriott, the Casino and the Casino Back-of-the-House Areas will be
subject to annual quality assurance reviews covering such areas as guest experience,
service delivery, maintenance and cleanliness and if the Casino and the Casino Back-of-the-House
Areas fail to achieve satisfactory scores on such quality assurance reviews,
Tenant shall take appropriate corrective actions; (g) the Casino and the Casino
Back-of-the-House Areas shall be operated in accordance with applicable Gaming
Laws; (h) the Casino and the Casino Back-of-the-House Areas shall comply with
Marriott Amenity Casino Requirements; and (i) there shall be no Gaming
Equipment in the Hotel. The Current Licensor Standards are set forth in Exhibit
“5.10.” Landlord and Tenant acknowledge and agree that Marriott is providing
no services to the Casino or the Casino Business.


 


Section 5.11         Valet Parking


 


Tenant shall
have the exclusive right to manage and operate the valet parking operations
adjacent to the entrance to the Casino. In connection therewith, Tenant shall
employ all valet parking attendants and managers at that location. Landlord or
the Hotel Operator shall manage and operate the valet parking operations
adjacent to the Hotel entrances. The parties shall mutually cooperate to
allocate available valet parking spaces to each such operation, based on


 


35

















 


public demand from time to time.
In connection therewith, Tenant shall have the right to park and keep
limousines, vans, shuttle buses, and other public transportation vehicles on a
reasonably designated area of the parking lots on the Land.


 


Section 5.12         Compliance
with Licensor Standards


 


Tenant
covenants and agrees that, during the Term Tenant shall strictly comply with
the Licensor Standards. Notwithstanding any other provision of this Lease,
Landlord represents and warrants to Tenant that on the Commencement Date, the
Premises comply with Current Licensor Standards. Tenant shall promptly comply
with all requirements as requested by Landlord or its Mortgagee, including but
not limited to (i) providing written confirmation of compliance with certain
Licensor Standards, (ii) submitting to periodic inspections of the Premises as
required by the Licensor Standards, and (iii) providing such other assurances
as may be required by the Licensor in order to confirm Tenant’s continued
compliance with the Licensor Standards. Tenant acknowledges that Landlord’s
compliance with the Licensor Standards pursuant to the terms of the License
Agreement are dependent upon compliance of the entire Resort with the Licensor
Standards, including, in a material part, Tenant’s compliance with respect to the
Casino and the Casino Back-of-the-House Areas. Tenant further acknowledges that
Tenant’s agreement to comply with the Licensor Standards is a material
consideration for Landlord’s agreement to enter into this Lease. Tenant
acknowledges and agrees that any failure to comply with the Licensor Standards
that is not cured within the applicable notice and cure periods of Section
12.2 of this Lease shall constitute an Event of Default under this Lease. Landlord
and Tenant agree that Landlord (and not Tenant) shall pay the cost of complying
with any change in Licensor Standards with respect to the Casino to the extent
that Licensor Standards exceed the Casino Standards.


 


Section 5.13         Casino
Functions


 


Landlord and
Tenant agree that Tenant shall be responsible for all interior cleaning,
maintenance and repair with respect to the Casino and the Casino Back-of-the-House
Areas (excluding the maintenance and repair of common systems such as the air
conditioning system, which shall be the obligation of the Landlord and paid for
as part of Tenant’s Operating Cost Obligation).


 


Section 5.14         WARN Act
Liability


 


Landlord and
Tenant agree that Tenant shall hire or cause to be hired, effective at and upon
Commencement Date, and will maintain or cause to be maintained (other than upon
good cause) for a period of at least ninety (90) days after Commencement Date,
the employment at the Casino and/or the Casino Back-of-the-House Areas, on
terms and conditions reasonably comparable to those in effect on the date
hereof, of a number of the Patch Tenant’s employees who were employees
immediately before the Commencement Date, which is not less than:  (i) sixty-eight percent (68%) of the
employees who were employed by the Patch Tenant as of the Commencement Date at
the Casino and/or the Casino Back-of-the-House Areas; plus (ii) the number of
employees discharged by the Patch Tenant (other than for good cause) during the
term of the Patch Lease. To the extent that Tenant fails to comply with any of
the foregoing covenants, Tenant agrees that it shall be responsible for the
payment of any and all costs,


 


36

















 


charges, penalties, compensation,
severance pay, and liabilities arising under the WARN Act and Tenant agrees to
indemnify, defend and hold Landlord harmless from and against any and all
claims, causes of action, judgments, damages, penalties and liabilities
asserted under the WARN Act whether against Landlord or Tenant, arising from
Tenant’s failure to comply with the foregoing covenants.


 


ARTICLE VI —  CONDITION OF PREMISES, ALTERATIONS AND
REPAIRS


 


Section 6.1            As-Is
Condition


 


Landlord and
Tenant acknowledge that Prime Landlord purchased fee title to the Land and
Improvements from a third party debtor in bankruptcy. In connection with Tenant’s
possession of the Premises, Tenant has examined the Premises, is familiar with
the physical condition, expenses, operation and maintenance, zoning, status of
title and use that may be made of the Premises and every other matter or thing
affecting or related to the Premises, and is leasing the same in the condition
existing on the Commencement Date. Tenant acknowledges and agrees that Landlord
has not made and does not make any representations or warranties whatsoever
with respect to the Premises or otherwise with respect to this Lease, express
or implied, including any warranty regarding the suitability of the Premises
for their intended commercial purposes. Tenant assumes all risks with respect
to all aspects of the Premises, physical and otherwise, including any apparent
or latent defects, and agrees that it is leasing the Premises in the condition
existing on the Commencement Date, “As-Is, Where-Is.”


 


Section 6.2            Maintenance
and Cleaning Obligations


 


In addition to
its obligations with respect to Common Area maintenance, repairs and
replacements, Landlord shall cause Prime Landlord to maintain and repair all
Improvements (including, without limitation, the Buildings) in order to keep
the same in good condition and repair, including all necessary or desirable
additions, alterations, improvements, replacements, renewals and substitutions.
Tenant shall provide custodial cleaning and other janitorial services to the
Premises on an ongoing basis throughout each day of the Term, including trash
removal and cleaning of ash trays as frequently as necessary, as well as heavy
duty deep carpet and other extensive cleaning on a periodic, but less frequent
basis, all as reasonably necessary to keep the same clean, neat, and sanitary
and in compliance with all Licensor Standards at all times. Tenant shall assign
a supervisor for such work who may be contacted by Prime Landlord’s authorized
representative or representatives at any time that Prime Landlord reasonably
believes additional work is necessary in order to comply with the Licensor Standards
or the terms of this Lease.


 


Section 6.3            Alterations


 


Tenant shall not
make any changes, alterations, additions or improvements (collectively, “Alterations”) in or to the Premises at a
cost of more than Fifty Thousand Dollars ($50,000) without Landlord’s prior
written consent, subject, however, in each case to all of the following:


 


(a)           No
Alteration shall be undertaken except after thirty (30) days’ prior notice to
Landlord, provided that no such notice shall be required with respect to any
Alteration made by Tenant on an emergency basis, in which case Tenant shall
notify Landlord of such emergency Alteration as soon as practicable.


 


37

















 


(b)           No
structural Alteration or Alteration to the exterior of any Building of any kind
whatsoever, whether costing more or less than Fifty Thousand Dollars ($50,000)
shall be undertaken without Landlord’s prior written consent.


 


(c)           Any
Alteration shall, when completed, be of such a character as not to reduce the
value, utility or useful life of the Premises below that immediately before
such Alteration, and shall meet the Casino Standards and Licensor Standards. If
Landlord has given its approval to any Alteration, it shall be presumed that
the Alteration does not reduce the value of the Premises absent a showing that
materials and/or construction techniques have been utilized in the actual
construction of the Alteration which are inferior in quality, composition or
performance to those described in the request for Landlord’s consent.


 


(d)           SKIPPED
IN ORIGINAL


 


(e)           Tenant
acknowledges that the written consent of any Mortgagee may be required before
the commencement of any work hereunder, except work permitted under Subsection
(a) above.


 


(f)            Landlord
shall have no obligation to grant its consent to any Alteration proposed by
Tenant which would reduce the value, utility or useful life of the Premises
below that immediately before such Alteration or which materially reduces the
square footage of the Buildings being altered or weakens, temporarily or
permanently, the structure of the Buildings being altered or any part thereof,
or enables Tenant to conduct activity inconsistent with Tenant’s permitted use
of the Premises under this Lease, or would violate or conflict with the
Licensor Standards. For purposes of this Subsection (e), a material
reduction shall be deemed to mean a reduction of 500 square feet or more.


 


Section 6.4            Conditions
of Work


 


Tenant agrees
that all Alterations, repairs, Restoration (hereinafter defined) and other work
which Tenant shall be required or permitted to do under the provisions of this
Lease (each hereinafter called the “Work”)
shall be (i) performed in a good, workmanlike manner, and in accordance with
all applicable Laws, and in accordance with plans and specifications therefor
which shall have been approved by Landlord (if such approval is required
hereunder), and (ii) commenced and completed promptly and, to the extent not
inconsistent with any term thereof, in accordance with all of the following
terms and conditions:


 


(a)           If
the Work shall involve any structural repair, structural Alterations, exterior
Alterations, Restoration or other structural Work, or if the Work involves
interior Improvements where the aggregate cost of the Work exceeds $25,000,
then the Work shall not be commenced until detailed plans and specifications (including
layout, architectural, mechanical and structural drawings), prepared by a
licensed architect reasonably satisfactory to Landlord shall have been
submitted to and approved by Landlord, which approval shall not be unreasonably
withheld or delayed.


 


(b)           No
Work involving structural repair, structural Alteration, Restoration nor other
structural work shall be undertaken except under the supervision of a licensed
architect or other appropriate design professional reasonably satisfactory to
Landlord.


 


38

















 


(c)           All
Work shall be commenced only after all required municipal and other
governmental permits, authorizations and approvals shall have been obtained by
Tenant, at its own cost and expense, and the originals or certified copies
thereof delivered to Landlord. Landlord will execute and/or will cause Prime
Landlord to execute, on Tenant’s written request, any documents necessary to be
signed by Prime Landlord and/or Landlord to obtain any such permits,
authorizations and approvals, provided that Tenant shall discharge any expense
or liability of Prime Landlord and Landlord in connection therewith.


 


(d)           The
Premises and Tenant’s leasehold estate therein shall at all times be kept free
from (i) liens for labor or materials supplied or claimed to have been supplied
to the Premises or Tenant, and (ii) chattel mortgages, conditional sales
contracts, title retention agreements; security interests and agreements, and
financing agreements and statements.


 


(e)           At
all times when any Work is in progress, Tenant shall maintain or cause to be
maintained with such companies and for such periods as Landlord may require (i)
worker’s compensation insurance covering all persons employed in connection
with the Work, in an amount at least equal to the minimum amount of such
insurance required by law (with a waiver of subrogation reasonably satisfactory
to Landlord); and (ii) for the protection of Prime Landlord, Landlord, Tenant
and any Mortgagee, (1) builder’s risk insurance, completed value form, covering
all physical loss, in an amount reasonable satisfactory to Landlord, and (2)
commercial general liability insurance against all hazards, with limits for bodily
injury or death to any one person, for bodily injury or death to any number of
persons in respect of any one accident or occurrence, and for property damage
in respect of one accident or occurrence in such amounts as Landlord may
require.


 


(f)            Upon
completion of any Work, Tenant, at Tenant’s expense, shall obtain certificates
of final approval of such Work required by any governmental or quasi-governmental
authority and shall furnish Landlord with copies thereof, together with “as-built”
plans and specifications for such Work.


 


(g)           Upon
completion of any Work, Tenant shall obtain unconditional, final lien waivers
and releases from all contractors, subcontractors or material suppliers
furnishing labor, materials or equipment to the Premises in connection with the
Work.


 


Section 6.5            Inspection
of Work


 


Following the
delivery of prior reasonable notice, any Work shall be subject to inspection at
any time and from time to time by Landlord, Prime Landlord, any architects
employed by Landlord and/or Prime Landlord, any Mortgagee, and the duly
authorized representatives of Landlord, Prime Landlord or any Mortgagee
(individually, an “Inspector”). If any Inspector shall be of the opinion, which
opinion shall not be unreasonable, that the Work is not being performed
substantially in accordance with the provisions of this Article VI or
the plans and specifications, or that any of the materials or workmanship are
not of good quality or are unsound or improper, unless Tenant reasonably
disputes such opinion, Tenant shall correct any such failure and shall replace
any unsound or improper materials or workmanship. Any disputes under this Article
VI with respect to the Work that the parties are not able to amicably
resolve


 


39

















 


shall be resolved by final and
binding arbitration in Las Vegas, Nevada under the Construction Industry
Arbitration Rules of the American Arbitration Association.


 


Section 6.6            End of Term


 


All Work
permanently installed in or upon the Premises by Tenant during the Term shall
become the property of Landlord and shall remain upon and be surrendered with
the Premises. Tenant shall have no obligation to remove or demolish any
fixtures, structures or other improvements that are installed on the Premises
on the Commencement Date. If Landlord is not required to consent to any Work,
such Work shall not be subject to removal at the expiration or earlier termination
of the Term. If Landlord is required to consent to any Work under this Lease,
Landlord’s consent thereto shall be deemed to include Landlord’s consent to
Tenant’s leaving of the Work in place at the end of the Term unless Landlord’s
prior consent to the Work specifies to the contrary, and Tenant shall not be
obligated to remove all or any part thereof.


 


ARTICLE VII —  INSURANCE


 


Section 7.1            Landlord
Insurance


 


Throughout the
Term, Landlord shall maintain or cause Prime Landlord to maintain in full force
and effect such insurance coverage as Landlord may reasonably determine, which
may include the following coverages: (i) Comprehensive General Liability
Insurance, including blanket contractual liability, in a commercially
reasonable amount to be determined by Landlord in its reasonable discretion;
and (ii) all-risk insurance covering the Improvements and all personal property
located at the Resort, except the Casino Personal Property; (iii) any insurance
required to be maintained and kept in place by any Mortgagee; and (iv) any
other insurance coverage reasonably required by Landlord.


 


Section 7.2            Tenant’s
Insurance


 


Throughout the
Term, Tenant, at its own cost and expense, shall provide and keep in force, for
the benefit of Prime Landlord, Landlord, Tenant and any Mortgagee, the
following insurance policies. Prime Landlord, Landlord and any Mortgagee shall
be named as additional insureds under the policies described in Subsections
(a), (b) (c), (e), (f) and (i), if appropriate, below. In addition, the
policies of insurance described in Subsections (b) and (c) below shall
contain a so-called New York standard non-contributing mortgagee clause in
favor of Mortgagee.


 


(a)           Comprehensive
general liability insurance against claims for personal injury, bodily injury,
death or property damage occurring upon, in or about the Premises on the so-called
“occurrence form, including fire, blanket contractual liability, broad form
premises and operations, products and completed operations on an “if any”
basis, independent contractors, blanket contractual liability for all legal
contracts and contractual liability for the indemnities by Tenant contained in Section
11.3 and otherwise in this Lease, and such gaming coverage and endorsements
as may be required by law or prudent business practice, excluding umbrella
coverage, in an amount not less than Five Million Dollars ($5,000,000) combined
single limit per occurrence or such lesser amount of One Million Dollars
($1,000,000) or more as may be available to Tenant and Five Million Dollars
($5,000,000) in the aggregate or such lesser amount


 


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of One Million Dollars
($1,000,000) or more as may be available to Tenant. Landlord and Tenant acknowledge
that on the Commencement Date Tenant shall have coverage in the amount of One
Million Dollars (S 1,000,000) combined single limit per occurrence and One
Million Dollars ($1,000,000) in the aggregate. Tenant shall increase the amount
of insurance coverage in both instances to such greater amounts as are
available to Tenant from time to time, not to exceed Five Million Dollars ($5,000,000).


 


(b)           All-risk
casualty insurance with extended coverages, including, but not limited to the
peril of earthquake, and flood and insurance covering all items included in
Tenant’s leasehold improvements and all heating, ventilating and air
conditioning maintained by Tenant, if any, all Casino Personal Property, Casino
Personal Property Additions and trade fixtures from time to time in, on or upon
the Premises, and all Alterations, additions or changes to the Premises made by
Tenant pursuant to the terms of this Lease, in an amount not less than one
hundred percent (100%) of their full replacement cost of such items from time
to time during the Term, providing protection against perils included within
the standard form of an “all risk” fire and casualty insurance policy. Any
policy proceeds from such insurance shall be held in trust by an insurance
trustee acceptable to Prime Landlord, Landlord, and if there is a Mortgage on
the Resort, the Mortgagee, for the repair, construction and restoration or
replacement of the property damaged or destroyed unless this Lease is
terminated under the terms of Section 8.1 of this Lease. Tenant shall
obtain terrorism insurance when such coverage is available at commercially
reasonable rates. Landlord and Tenant acknowledge and agree that such terrorism
insurance is not available on the Commencement Date at commercially reasonable
rates.


 


(c)           Business
income insurance covering risk of loss due to the occurrence of any of the
hazards covered by the insurance to be maintained by Prime Landlord or Landlord
hereunder, with coverage in a face amount of not less than the aggregate
amount, for a period of twenty four (24) months following the insured-against
peril, of 100% of all Rent to be paid by Tenant under this Lease; and


 


(d)           Worker’s
compensation insurance (including employers’ liability insurance), with a
waiver of subrogation reasonably satisfactory to Landlord, covering all persons
employed at the Premises by Tenant to the extent required by applicable Laws,
including, without limitation, during the course of work to the Premises.


 


(e)           At
all times during demolition or construction with respect to the Premises, owner’s
contingent or protective liability insurance and builder’s risk insurance in
form acceptable to Landlord.


 


(f)            Umbrella
liability insurance in addition to primary coverage in an amount not less than
Fifty Million Dollars ($50,000,000) per occurrence on terms consistent with the
primary public liability insurance mentioned above.


 


(g)           So-called
“dram shop” insurance or other liability insurance required in connection with
the sale of alcoholic beverages.


 


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(h)           Insurance
against employee dishonesty in an amount not less than Two Million Dollars
($2,000,000) from the Premises and with a deductible no greater than Fifty
Thousand Dollars ($50,000).


 


(i)            Such
other insurance coverage as may be required by any Mortgagee with respect to
the Premises or the Casino Business.


 


Section 7.3            Policy
Requirements


 


The party
obligated to obtain and maintain any insurance policy hereunder shall deliver
an original certificate of insurance (on Acord Form 27 or its equivalent in the
case of casualty and on insurance company letterhead in the case of liability
or in a form otherwise acceptable to Landlord) evidencing such insurance to the
other party prior to the Commencement Date, and thereafter, at least thirty
(30) days prior to the expiration of any such coverage or policy. All insurance
required to be maintained by Tenant hereunder shall be written by insurance
companies: (i) rated A-/X or better in “Best’s Insurance Guide” (or any
substitute guide acceptable to Landlord); (ii) authorized to do business in the
State of Nevada; and (iii) of recognized responsibility and which are
satisfactory to Landlord. Any deductible amounts under Tenant’s business
interruption coverage may not exceed two (2) days income. All certificates for
Tenant’s General Liability Insurance shall expressly provide that the coverage
evidenced thereby shall be primary and that any policies carried by Prime
Landlord or Landlord shall be excess and noncontributory with Tenant’s primary
insurance. All insurance policies described in this Article VII shall be
endorsed to provide Prime Landlord, Landlord and Tenant, as applicable, and in
any case, Mortgagee, with thirty (30) days’ notice of cancellation or change in
terms. If either party shall fail to procure the insurance required to be
maintained by it under this Article VII in a timely fashion or to
deliver such certificates to the other party, the other party may, at its option
upon written notice to the obligated party, procure the same for the account of
the obligated party. If Tenant is the obligated party, Tenant shall pay
Landlord the cost thereof as Additional Rent. If Landlord is the obligated
Party, and Landlord does not reimburse Tenant the cost thereof within thirty
(30) days after written demand by Tenant to Landlord, Tenant shall have the
right to offset and deduct the cost thereof from its next installment(s) of
Base Rent.


 


Section 7.4            Additional
Insurance Terms


 


Tenant shall
not violate, or permit to be violated, any of the conditions of any of the said
policies of insurance, and Tenant shall perform and satisfy the requirements of
the companies writing such policies so that companies of good standing,
reasonably satisfactory to Landlord, shall be willing to write and/or continue
such insurance. Tenant shall not carry separate or additional insurance
affecting the coverage described in this Article VII, concurrent in form
and contributing in the event of any loss or damage to the Premises with any
insurance required to be obtained by Prime Landlord or Landlord or Tenant under
this Lease, unless such separate or additional insurance shall comply with and
conform to all of the provisions and conditions of this Article. Tenant shall
promptly give notice to Landlord of such separate or additional insurance. The
parties expressly acknowledge that this Lease may not provide for insurance
coverage of Tenant’s personal property on or about the Premises, and Tenant
shall be entitled to insure the same in any amount that Tenant desires or deems
appropriate. The insurance required by this Lease, at the option of the
insuring party, may be effected by blanket and/or umbrella policies


 


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issued to the insuring party
covering the Premises and other properties owned or leased by the insuring
party, provided that the policies otherwise comply with the provisions of this
Lease and such policies and the certificates required hereunder specifically
allocate to the Premises the specified coverage required hereunder, without
possibility of reduction or coinsurance by reason of, or damage to, any other
premises named therein.


 


ARTICLE VIII —  DAMAGE OR DESTRUCTION AND CONDEMNATION


 


Section 8.1            Damage and
Destruction


 


(a)           Partial
Destruction. If the Premises are rendered partially untenantable by fire or
other insured casualty, and if the damage is repairable within ninety (90) days
of the occurrence, (with the repair work and preparations therefore to be
accomplished during regular working hours on regular work days), Landlord shall
or shall cause Prime Landlord to repair the Premises with due diligence,
provided there are sufficient insurance proceeds available to repair the damage.
Landlord shall or shall cause Prime Landlord also to repair the damage if there
are sufficient insurance proceeds available to repair the damage and the damage
is repairable within one hundred eighty (180) days if (i) the Gaming
Authorities agree to issue a new nonrestricted gaming license to Tenant for
continuation of this Lease after the completion of the restoration; (ii) the
Gaming Authorities agree to issue a new nonrestricted gaming license to
Landlord if Landlord had such a license prior to the damage or issue a new finding
of suitability to Landlord if Landlord had such a finding of suitability prior
to the damage; and (iii) the Gaming Authorities accept Prime Landlord as the
owner of the Casino. Notwithstanding the other provisions of this Subsection
8.1(a), if (i) thirty percent (30%) or more of the useable area of the
Buildings is destroyed or damaged, regardless of whether the Premises are
damaged, or (ii) more than thirty percent (30%) of the useable area of the
Premises is damaged or destroyed, or (iii) the Lease Term remaining after the
date of the damage or destruction is less than twelve (12) months, then
Landlord shall have the right to terminate this Lease as of the date of such
damage or destruction by giving notice to Tenant within thirty (30) days
thereafter of its election to so terminate this Lease. If Landlord elects to
terminate this Lease pursuant to this Subsection 8.1(a), at termination,
Landlord shall pay Tenant the Lease Termination Fee provided that Tenant has
delivered to Landlord any remaining Casino Personal Property and Casino Personal
Property Additions and all insurance proceeds relating to the damaged or
destroyed Casino Personal Property, Casino Personal Property Additions, and
Alterations to the Premises. Tenant shall deliver such items to Landlord free
and clear of liens, encumbrances, and defects of title, except any such matters
arising through Prime Landlord for the benefit of its Mortgagee and except for
Casino Personal Property Additions Capital Leases then outstanding. Notwithstanding
the foregoing, so long as Tenant is not in default under this Lease, Landlord
agrees not to terminate this Lease if Landlord rebuilds following partial
damage to the Premises.


 


(b)           Total
Destruction. If the Premises are completely destroyed by fire or other
casualty, or if they are damaged by uninsured casualty, or by insured casualty
to such an extent that the damage cannot be repaired within ninety (90) days of
the occurrence, Landlord shall have the option to restore or cause Prime
Landlord to restore the Premises or to terminate this Lease on thirty (30) days
written notice to Tenant, effective as of any date not more than sixty (60)
days after the occurrence. In such event, Landlord shall advise Tenant within
thirty (30) days after such casualty whether Landlord elects to restore the
Premises or to terminate this


 


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Lease. If Landlord elects to
restore the Premises, it shall or shall cause Prime Landlord to commence and
prosecute the restoration work with diligence. If the Premises are totally
damaged or destroyed, and Prime Landlord’s or Landlord’s restoration of the
Premises has not been completed within ninety (90) days after the damage or
destruction, Tenant shall have the right to terminate this Lease by written
notice given to Landlord within five (5) Business Days after the end of the
foregoing period of ninety (90) days. Notwithstanding the other provisions of
this Subsection 8.1(b), Landlord and Tenant agree that neither of them
will terminate this Lease pursuant to this Subsection 8.1(b) if all of
the following conditions are met within the period of ninety (90) days
following the destruction: (i) sufficient insurance proceeds are available to
rebuild the Premises; (ii) the Gaming Authorities agree to issue a new
nonrestricted gaming license to Tenant for continuation of this Lease after the
completion of the restoration; (iii) the Gaming Authorities agree to issue a
new unrestricted gaming license to Landlord if Landlord had such a license
prior to the destruction or issue a new finding of suitability to Landlord if
Landlord had such a finding of suitability prior to the destruction; and (iv)
the Gaming Authorities accept Prime Landlord as the owner of the Casino. If
Landlord or Tenant elects to terminate this Lease because of insured casualty
pursuant to this Subsection 8.1(b), at termination, Landlord shall pay
Tenant the Lease Termination Fee provided that Tenant has delivered to Landlord
any remaining Casino Personal Property and Casino Personal Property Additions
and all insurance proceeds relating to the damaged or destroyed Casino Personal
Property, Casino Personal Property Additions, and Alterations to the Premises. Tenant
shall deliver such items to Landlord free and clear of liens, encumbrances, and
defects of title, except any such matters arising through Prime Landlord for
the benefit of its Mortgagee and except for Casino Personal Property Additions
Capital Leases then outstanding. If this Lease is terminated because of
uninsured casualty, Landlord shall have no obligation to pay the Lease
Termination Fee to Tenant.


 


(c)           Tenant’s
Obligations; No Abatement or Termination. Following damage or destruction
as described in this Section 8.1, Tenant shall take all commercially
reasonable measures necessary and available under any applicable Gaming Laws to
preserve its gaming license. If Tenant is the insured party with respect to any
damaged or destroyed Casino Personal Property, Tenant shall apply any available
insurance proceeds to replace such personal property at any time that Landlord
restores or causes Prime Landlord to restore the Premises. As material
consideration to Landlord for its agreement to enter into this Lease, the
parties agree that except as otherwise provided to the contrary in Subsections
8.1(a) or 8.1(b), this Lease shall not terminate or be forfeited or be
affected in any manner by reason of damage to or total, substantial or partial
destruction of the Premises or any part thereof or by reason of the
untenantability of the same or any part thereof, for or due to any damage or
destruction of the Premises from any cause whatsoever, and, notwithstanding any
law or statute, present or future, Tenant waives any and all rights to quit or
surrender the Premises or any part thereof on account of any damage or
destruction of the Premises. Tenant expressly agrees that its obligations under
this Lease, including the payment of Rent payable by Tenant under this Lease,
shall continue as though the Premises had not been damaged or destroyed and
without abatement, suspension, diminution or reduction of any kind; provided,
however, that Tenant’s Rent under this Lease shall be abated to the extent (but
only to the extent) that Landlord actually receives rental loss insurance
payments in lieu of such Rent.


 


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Section 8.2            Condemnation


 


(a)           Taking.  If
all of the Premises are taken by Eminent Domain, this Lease shall terminate as
of the date Tenant is required to vacate the Premises and all Base Rent,
Additional Rent, and Percentage Rent (if applicable) shall be paid to that date.  The term “Eminent
Domain” shall include the taking or damaging of property by, through
or under any governmental or statutory authority, and any purchase or
acquisition in lieu thereof, whether the damaging or taking is by government or
any other person who under applicable law has the power to exercise the power
of condemnation or eminent domain.  If,
in the reasonable judgment of Landlord, a taking of any part of the Premises by
Eminent Domain renders the remainder thereof unusable for the business of
Tenant this Lease, at the option of either party, may be terminated by written
notice given to the other party not more than thirty (30) days after Landlord
gives Tenant written notice of the taking, and such termination shall be effective
as of the date when Tenant is required to vacate the portion of the Premises so
taken.  If this Lease is so terminated,
all Base Rent, Additional Rent, and Percentage Rent (if applicable) shall be
paid to the date of termination.  Whenever
any portion of the Premises is taken by Eminent Domain and this Lease is not
terminated, Landlord shall at its expense proceed with all reasonable dispatch
to restore, to the extent of available proceeds and to the extent it is
reasonably prudent to do so, the remainder of the Premises to the condition
they were in immediately prior to such taking, and Tenant shall at its expense
proceed with all reasonable dispatch to restore its personal property and all
improvements made by it to the Premises to the same condition they were in
immediately prior to such taking.  The
Base Rent payable hereunder shall be equitably reduced based on (i) the square
footage of the Premises so taken compared to the square footage of the entire
Premises, and (ii) the relative gross revenue from operations generated at such
time by the portion of the Premises taken compared to the gross revenue from
operations generated at such time by the remainder of the Premises.  If this Lease is terminated pursuant to this Subsection
8.2(a), Landlord shall pay Tenant the Lease Termination Fee provided that
Tenant has delivered to Landlord any Casino Personal Property and Casino
Personal Property Additions that are not taken and all condemnation proceeds
relating to the taken Casino Personal Property, the taken Casino Personal
Property Additions, any Alterations to the Premises and any and all damages
relating to the Casino Business and Tenant’s leasehold interest under this
Lease.  Tenant shall deliver such items
to Landlord free and clear of liens, encumbrances, and defects of title, except
any such matters arising through Prime Landlord for the benefit of its
Mortgagee and except for Casino Personal Property Additions Capital Leases then
outstanding.


 


(b)           Award.  Landlord
reserves all right to the entire damage award or payment for any taking by
Eminent Domain and Tenant waives all claims whatsoever against Landlord for
damages for termination of its leasehold interest in the Premises or for
interference with its business.  In
consideration of Landlord’s agreement to pay the Termination Fee to Tenant, as
provided in Subsection 8.2(a), Tenant hereby grants and assigns to
Landlord any right Tenant may now have or hereafter acquire to such damages and
agrees to execute and deliver such further instruments of assignment as
Landlord may from time to time request.


 


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ARTICLE IX —  ASSIGNMENT AND SUBLETTING


 


Section 9.1            Transfers


 


Except in
strict accordance with the provisions of this Article IX, Tenant shall
not and Tenant shall not permit any sale, assignment, mortgage, encumbrance or
other transfer, directly or indirectly (collectively, “Transfer”),
of all or any portion of Tenant’s interest in this Lease or the Premises
without Landlord’s prior written consent, which may be granted or withheld in
Landlord’s sole, absolute and unfettered discretion.  If Landlord grants its consent to a Transfer
pursuant hereto, after the effective date of such Transfer, Tenant shall remain
liable for all future obligations accruing under the Lease.  For purposes of this Lease, a “Transfer” shall include, if Tenant is a
corporation, any transfer of this Lease by merger, consolidation or
liquidation, or any direct or indirect change in the ownership of, or power to
vote more than twenty percent (20%) of Tenant’s voting stock; if Tenant is a
partnership, a change in any general partner or in voting or decision-making
control of the partnership; or if Tenant is a limited liability company, a
change in any of the members in or more than twenty percent (20%) of the voting
or decision-making of the company.  Notwithstanding
the foregoing, if Tenant is not in default under this Lease, Landlord shall
approve the assignment of this Lease to Millennium Management Group, L.L.C. (“Millennium”)
or Mendenhall Millennium L.L.C. (“Mendenhall”) or the wholly owned affiliate of
Millennium or Mendenhall after the transferee receives a nonrestricted gaming
license with respect to the Premises, provided that such entity is wholly owned
by and/or controlled by William J. Paulos and William C. Wortman; and provided
that Tenant and such entity execute and deliver to Landlord such documents as
Landlord or Landlord’s lender may reasonably require to confirm such matters as
either of them may reasonably require, including, but not limited to,
confirmation that such entity fully assumes all of the obligations under this
Lease and that Tenant shall remain liable under the Lease after the assignment.  Notwithstanding anything contained herein to
the contrary, Tenant shall have the right, without the consent of the Landlord,
the Prime Landlord or any Mortgagee, to mortgage or pledge the leasehold estate
and interest of Tenant under this Lease to any leasehold mortgagee (a “Leasehold
Mortgagee”) in conjunction with Tenant’s obligations as a guarantor with
respect to the notes offering to be issued by Mendenhall Millennium, LLC and
previously disclosed to Landlord, Prime Landlord and Mortgagee.  Any Leasehold Mortgagee or its successor or
assignee or designee may become the legal owner and holder of Tenant’s
leasehold estate by foreclosure of its leasehold mortgage or leasehold deed of
trust, as applicable, or as a result of foreclosure or otherwise, provided that
prior to becoming the legal owner and holder of Tenant’s leasehold estate, such
Leasehold Mortgagee or its successor or assignee or designee shall fully comply
with all applicable Gaming Laws, cure any outstanding defaults of Tenant under
this Lease, and fully comply with all terms of any Mortgage and this Lease, including,
without limitation, the foregoing provisions of this Section 9.1, which apply
to any transfer of Tenant’s interest in this Lease.  Landlord, upon serving Tenant any notice of
default pursuant to the provisions of Article XII hereof shall at the same time
serve a copy of such notice upon each Leasehold Mortgagee in the manner
contemplated in Section 21.4 hereof.  The
Leasehold Mortgagee shall have the right, but not the obligation, to cure or
cause to be remedied a default in the payment of Rent during three (3) days
following receipt of such notice and during a period of thirty (30) days for
any other default after its receipt of such notice.


 


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Section 9.2            Notice of
Transfer; Further Consent


 


In the event
of any Transfer, whether or not Landlord’s consent is required, Landlord shall
be given not less than thirty (30) days’ advance written notice of the proposed
effective date of such Transfer, which notice shall be delivered to Landlord
together with (i) either an executed counterpart or, if unavailable, a true and
complete copy of the proposed instrument(s) of the Transfer and (ii) such other
documents as Landlord may reasonably request. 
Any consent by Landlord under this Article IX shall apply only to
the specific transaction thereby authorized and shall not relieve Tenant from
the requirement of obtaining the prior written consent of Landlord to any
further Transfer of this Lease.  No
Transfer of all or a portion of this Lease shall release or relieve the
original named Tenant (or any previously approved transferee) from any
obligations of the Tenant hereunder, and the original named Tenant (or any
previously approved transferee) shall remain liable for the performance of all
obligations of Tenant hereunder.


 


Section 9.3            Subleases


 


Tenant shall
not sublease all or any portion of the Premises without obtaining Landlord’s
prior written consent which consent shall not be unreasonably withheld.  Landlord may attach such conditions to its
consent as Landlord, in its discretion, may require, including (without
limitation) payment to Landlord of all or a portion of the rent and other
consideration payable under the sublease and/or approval by Landlord of the
financial condition and operating experience of the Subtenant.  Tenant shall cause each subtenant (a “Subtenant”) permitted pursuant to this Article
IX to comply with its obligations under its respective sublease (the “Sublease”), and Tenant shall diligently
enforce all of its rights as the landlord thereunder in accordance with the
terms of such Sublease and this Lease.  The
fact that a violation or breach of any of the terms, provisions or conditions
of this Lease results from or is caused by an act or omission by any of the
Subtenants shall not relieve Tenant of Tenant’s obligation to cure the same.  Tenant shall take all necessary steps to
prevent any such violation or breach.


 


Section 9.4            Landlord
Acts


 


If this Lease
is assigned, or if the Premises or any part thereof is subleased or occupied by
anybody other than Tenant, Landlord may, after default by Tenant, collect Rent
from the assignee or Subtenants, and apply the net amount collected to the Rent
herein reserved, but no such assignment, sublease, occupancy or collection
shall be deemed a waiver of this covenant, or the acceptance of the assignee or
Subtenant as tenant, or a release of Tenant from the further performance by
Tenant of the terms, covenants, and conditions on the part of Tenant to be
observed or performed hereunder.  After
any assignment or subletting, Tenant’s liability hereunder shall continue
notwithstanding any subsequent modification or amendment hereof or the release
of any subsequent tenant hereunder from any liability, to all of which Tenant
hereby consents in advance.  The consent
by Landlord to any Transfer or Sublease shall not in any way be construed to
relieve Tenant from obtaining the express written consent of Landlord to any
further Transfer or Sublease.


 


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Section 9.5            Assignment
of Sublease(s)


 


To secure the
prompt and full payment by Tenant of the Rent and the faithful performance by
Tenant of all the other terms and conditions herein contained on its part to be
kept and performed, Tenant hereby assigns, transfers and sets over unto
Landlord, subject to the conditions hereinafter set forth, all of Tenant’s right,
title and interest in and to all Subleases and hereby confers upon Landlord,
its agents and representatives, a right of entry (subject to prior notice) in,
and sufficient possession of, the Premises to permit and insure the collection
by Landlord of the rentals and other sums payable under the Subleases, and
further agrees that the exercise of said right of entry and qualified
possession by Landlord shall not constitute an eviction of Tenant from the
Premises or any portion thereof and that should said right of entry and
possession be denied Landlord, its agent or representative, Landlord, in the
exercise of said right, may use all requisite force to gain and enjoy the same
without responsibility or liability to Tenant, its servants, employees, guests
or invitees, or any Person whomsoever; provided, however, that
such assignment shall become operative and effective only if (a) an Event of a
Default shall occur, or (b) this Lease and the Term shall be cancelled or
terminated pursuant to the terms, covenants and conditions hereof, or (c) there
occurs repossession under a dispossess warrant or other re-entry or
repossession by Landlord under the provisions hereof, or (d) a receiver for the
Premises is appointed pursuant to applicable Laws, and then only as to such of
the subleases that Landlord may elect to take over and assume.  At any time and from time to time within five
(5) days after Landlord’s written demand, Tenant promptly shall deliver to
Landlord a schedule of all Subleases, setting forth the names of all
Subtenants, with a photocopy of each of the Subleases.  Upon reasonable request of Landlord, Tenant
shall permit Landlord and its agents and representatives to inspect all
Subleases affecting the Premises.  Tenant
covenants that each Sublease shall provide that the Subtenant thereunder shall
be required from time to time, upon request of Landlord or Tenant, to execute,
acknowledge and deliver, to and for the benefit of Landlord and Mortgagee, an
estoppel certificate confirming with respect to such sublease the information
set forth in Section 14.1 hereof. 
Concurrently with the execution of this Lease, Tenant is executing and
delivering to Landlord an Assignment of Sublease(s) in the forms set forth in Exhibit
“9.5,” which Landlord shall place in the public records to document the
assignment of Sublease(s).


 


Section 9.6            Bankruptcy
Provisions


 


If Tenant
assumes this Lease and proposes to assign the same pursuant to the provisions
of Title 11 of the United States Code or any statute of similar purpose or
nature (the “Bankruptcy Code”) to
any person or entity who shall have made a bona fide offer to accept an
assignment of this Lease on terms acceptable to Tenant, then notice of such
proposed assignment shall be given to Landlord by Tenant no later than ten (10)
days after receipt of such offer by Tenant, but in any event no later than five
(5) days prior to the date that Tenant shall file any application or motion with
a court of competent jurisdiction for authority and approval to enter into such
assumption and assignment.  Such notice
shall set forth (a) the name and address of the assignee, (b) all of the terms
and conditions of such offer, and (c) the proposal for providing adequate
assurance of future performance by such person under the Lease, including,
without limitation, the assurance referred to in Section 365 of the Bankruptcy
Code.  Any person or entity to which this
Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be
deemed without further act or deed to have assumed all of the obligations
arising under this 


 


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Lease from and
after the date of such assignment.  Any
such assignee shall execute and deliver to Landlord upon demand an instrument
confirming such assumption.


 


Section 9.7            Bankruptcy
of Assignee


 


If, at any
time after Tenant may have assigned Tenant’s interest in this Lease, this Lease
shall be disaffirmed or rejected in any proceeding of the types described in Subsection
12.1(e) hereof, or in any similar proceeding, or in the event of
termination of this Lease by reason of any such proceeding or by reason of
lapse of time following notice of termination given pursuant to Article XII
based upon any of the events of default set forth in said Subsection 12.1(e),
Tenant, upon request of Landlord given within thirty (30) days next following
any such disaffirmance, rejection or termination (and actual notice thereof to
Landlord in the event of a disaffirmance or rejection or in the event of
termination other than by act of Landlord), shall (a) pay to Landlord all Base
Rent and Additional Rent due and owing by the assignee to Landlord under this
Lease to and including the date of such disaffirmance, rejection or
termination, and (b) as “tenant”, enter into a new lease with Landlord for a
term commencing on the effective date of such disaffirmance, rejection or
termination and ending on the expiration date of the Term, unless sooner terminated
as in such lease provided, at the same Base Rent and Additional Rent and upon
the then executory terms, covenants and conditions as are contained in this
Lease, except that (i) Tenant’s rights under the new lease shall be subject to
the possessory rights, if any, of the assignee under this Lease and the
possessory rights of any person claiming through or under such assignee or by virtue
of any statute or of any order of any court, (ii) such new lease shall require
all defaults existing under this Lease to be cured by Tenant with due
diligence, and (iii) such new lease shall require Tenant to pay all Base Rent
and Additional Rent reserved in this Lease which, had this Lease not been so
disaffirmed, rejected or terminated, would have accrued under the provisions of
this Lease after the date of such disaffirmance, rejection or termination with
respect to any period prior thereto.  If
Tenant shall default in its obligation to enter into said new lease for a
period of ten (10) days next following Landlord’s request therefor, then in
addition to all other rights and remedies by reason of such default, either at
law or in equity, Landlord shall have the same rights and remedies against
Tenant as if Tenant had entered into such new lease and such new lease had
thereafter been terminated as of the commencement date thereof by reason of
Tenant’s default thereunder.


 


Section 9.8            Survival


 


The provisions
of Sections 9.5 and 9.6 hereof shall survive the expiration or earlier
termination of this Lease.


 


ARTICLE X —  LANDLORD’S RIGHT TO SELL, ETC., SUBORDINATION


 


Section 10.1         Mortgages


 


Prime Landlord
shall have the right at any time and from time to time to place one or more
Mortgages on all or any part of the Resort, including all or any part of the
Premises, and to increase, renew, modify, consolidate, replace, and extend any
such Mortgage.  In no event shall Tenant
be required to pay any installment of principal or interest or other sums at
any time due under any Mortgage.


 


49

















 


Section 10.2         Subordination


 


This Lease
shall be subject and subordinate to all Mortgages in favor of any Mortgagee now
or hereinafter in effect and to all renewals, modifications, consolidations,
replacements and extensions of any such Mortgages.  This Section 10.2 shall be self-operative
and no further instrument of subordination shall be required to make the
interest of any Mortgagee superior to the interest of Tenant hereunder.  Notwithstanding the previous sentence,
however, Tenant shall, together with the Mortgagee, execute and deliver
promptly any certificate or agreement that Prime Landlord or Landlord may
reasonably request in confirmation of such subordination.  If, in connection with the financing of the
Resort, including all or any part of the Premises, any lending institution or
Landlord shall request reasonable modifications of this Lease that do not
increase the monetary obligations of Tenant under this Lease or materially
increase the other obligations of Tenant under this Lease or materially and
adversely affect the rights of Tenant under this Lease, Tenant shall make such
modifications.


 


Section 10.3         Tenant
Obligations


 


(a)           Provided that Tenant has received notice from Landlord or
a Mortgagee stating the name and address of such Mortgagee, Tenant shall give
to any Mortgagee copies of all notices given by Tenant of default by Landlord
under this Lease at the same time and in the same manner as, and whenever,
Tenant shall give any such notice of default to Landlord.  Any such Mortgagee shall have the right to
remedy any default under this Lease, or to cause any default of Landlord under
this Lease to be remedied, and for such purpose Tenant hereby grants such
Mortgagee such period of time as may be reasonable to enable such party to remedy,
or cause to be remedied, any such default in addition to the period given to
Landlord for remedying, or causing to be remedied, any such default.  Tenant shall accept performance by such
Mortgagee of any term, covenant, condition or agreement to be performed by
Landlord under the Lease with the same force and effect as though performed by
Landlord.  No default by Landlord under
the Lease shall exist or shall be deemed to exist (i) as long as such
Mortgagee, in good faith, shall have commenced to cure such default and shall
be prosecuting the same to completion with reasonable diligence, subject to
force majeure, or (ii) if possession of the Premises is required in order to
cure such default, or if such default is not susceptible of being cured by such
Mortgagee, as long as such Mortgagee, in good faith, shall have notified Tenant
that such Mortgagee intends to institute proceedings under the Mortgage, and,
thereafter, as long as such proceedings shall have been instituted within
thirty (30) days thereafter, and shall prosecute the same with reasonable diligence
and, after having obtained possession, prosecutes the cure to completion with
reasonable diligence.


 


(b)           In the event of the termination of the Lease by reason of
any default by Landlord hereunder or for any other reason whatsoever except the
expiration thereof, upon such Mortgagee’s written request, given within thirty
(30) days after any such termination, Tenant, within fifteen (15) days after
receipt of such request, shall execute and deliver to such Mortgagee or its
designee or nominee a new lease of the Premises for the remainder of the Term
of the Lease upon all of the terms, covenants and conditions of this Lease.


 


(c)           Upon the conveyance of the Property by reason of judicial
or nonjudicial foreclosure of the Mortgage or the acceptance of a deed in lieu
of foreclosure or otherwise, at the 


 


50

















 


option of Mortgagee or the transferee of the Property (the “Transferee”), this Lease shall not be terminated or
affected thereby, and this Lease shall continue in full force and effect as a
direct lease between the Transferee and Tenant upon all of the terms, covenants
and conditions set forth in this Lease, and in that event, Tenant agrees to
attorn to the Transferee and the Transferee shall accept such attornment,
provided, however, that Transferee shall not be (a) obligated to complete any
construction work required to be done by Landlord pursuant to the provisions of
this Lease or to reimburse Tenant for any construction work done by Tenant, (b)
liable (i) for Landlord’s failure to perform any of its obligations under this
Lease which have accrued prior to the date on which the Transferee shall become
the owner of the Property, or (ii) for any act or omission of Landlord, whether
prior to or after such foreclosure or sale, (c) required to make any repairs to
the Property or to the Premises required as a result of fire, or other casualty
or by reason of condemnation unless the Transferee shall be obligated under
this Lease to make such repairs and shall have received sufficient casualty
insurance proceeds or condemnation awards to finance the completion of such
repairs, (d) required to make any capital improvements to the Property or to
the Premises which Landlord may have agreed to make, but had not completed, or
to perform or provide any services not related to possession or quiet enjoyment
of the Premises, (e) subject to any offsets, defenses, abatements or
counterclaims which shall have accrued to Tenant against Landlord prior to the
date upon which the Transferee shall become the owner of the Property, (f) liable
for the return of rental security deposits, if any, paid by Tenant to Landlord
in accordance with this Lease unless such sums are actually received by the Transferee,
(g) bound by any payment of rents, additional rents or other sums which Tenant
may have paid more than one (1) month in advance unless (i) such sums are
actually received by the Transferee or (ii) such prepayment shall have been
expressly approved of by the Transferee, (h) bound to make any payment to
Tenant which was required under this Lease, or otherwise, to be made prior to
the time the Transferee succeeded to Landlord’s interest, (i) bound by any
agreement amending, modifying or terminating this Lease made without the
Transferee’s prior written consent prior to the time the Transferee succeeded
to Landlord’s interest or (j) bound by any assignment of this Lease or sublease
of the Premises, or any portion thereof, made prior to the time the Transferee
succeeded to Landlord’s interest other than if pursuant to the provisions of
this Lease.


 


(d)           Neither such Mortgagee nor its designee or nominee shall
become liable under this Lease unless and until such Mortgagee or its designee
or nominee becomes, and then only for so long as such Mortgagee or its designee
or nominee remains, the fee owner of the Premises.  Such Mortgagee shall have the right, without
Tenant’s consent, to foreclose the Mortgage or to accept a deed in lieu of foreclosure
of such Mortgage.


 


(e)           Landlord hereby notifies Tenant that as of the date of
this Lease the Mortgagee is HSBC Realty Credit Corporation (USA), as agent for
Lenders, having an address at 452 Fifth Avenue, New York, New York 10018,
Attention Andrew A. Daly, Vice President Real Estate Finance.


 


51

















 


ARTICLE XI —  OBLIGATIONS OF TENANT; INDEMNIFICATION OF

LANDLORD


 


Section 11.1         Compliance
with Laws; Licensor Standards, Etc.


 


Tenant shall
promptly comply with all Laws (including, without limitation, Gaming Laws)
applicable to Tenant’s use or occupation of the Premises (or any part thereof)
or Tenant’s operation of the Casino Business. 
Tenant shall also promptly comply with all Licensor Standards and the
Summerlin CC&Rs applicable to Tenant’s use or occupancy of the Premises (or
any part thereof), or operation of the Casino Business.


 


Section 11.2         Notice


 


Tenant agrees
to give Landlord notice of any law, ordinance, rule, regulation or requirement
enacted, passed, promulgated, made, issued or adopted by any of the
governmental departments or agencies or authorities hereinbefore mentioned of
which Tenant has actual notice affecting in a material adverse manner (i) the
Premises, (ii) Tenant’s use thereof or (iii) the financial condition of Tenant,
a copy of which is served upon or received by Tenant, or a copy of which is
posted on, or fastened or attached to the Premises, or otherwise brought to the
attention of Tenant, by mailing within five (5) Business Days after such
service, receipt, posting, fastening or attaching or after the same otherwise
comes to the attention of Tenant, a copy of each and every one thereof to
Landlord.  At the same time, Tenant will
inform Landlord as to any Work that Tenant proposes to do or take in order to
comply therewith.  Notwithstanding the
foregoing, however, if such Work would require any Alterations which would, in
Landlord’s opinion, reduce the value of the Premises or change the general
character, design or use of the Building or other improvements thereon, and if
Tenant does not desire to contest the same, Tenant shall, if Landlord so
requests, defer compliance therewith in order that Landlord may, if Landlord
wishes, contest or seek modification of or other relief with respect to such
matters, so long as Tenant is not put in violation of any applicable Laws, but
nothing herein shall relieve Tenant of the duty and obligation, at Tenant’s
expense, to comply with all applicable Laws, as the same may be so modified,
whenever Landlord shall so direct.


 


Section 11.3         Indemnity


 


(a)           Subject to the limitations specified in Section 11.8,
Tenant shall defend, indemnify and save harmless Prime Landlord, Landlord,
Mortgagee and their respective officers, directors, employees and agents
(collectively, “Landlord Indemnified Parties”),
from any and all liabilities, claims, causes of actions, suits, damages and
expenses (collectively, “Landlord Claims”)
arising from or in connection with the Tenant’s use of, or in connection with
any of Tenant’s activities of any kind upon or affecting the Premises during
the Term, provided that no Landlord Indemnified Party shall be indemnified from
any Landlord Claims arising out of its own acts of gross negligence or willful
misconduct.  Tenant shall also indemnify
and hold the Landlord Indemnified Parties harmless from all costs, expenses and
liabilities incurred, including actual, customary and reasonable attorney’s
fees and disbursements through and including appellate proceedings, in or in
connection with any of such Landlord Claims. 
If any action or proceeding shall be brought against any of the Landlord
Indemnified Parties by reason of any such Landlord Claims, Tenant, upon notice
from any of the Landlord Indemnified Parties, shall 


 


52

















 


resist and defend such action or proceeding, at its sole cost and
expense by counsel to be selected by Tenant but otherwise satisfactory to such
Landlord Indemnified Party in its reasonable discretion.  Tenant or its counsel shall keep each
Landlord Indemnified Party fully apprised at all times of the status of such
defense.  Notwithstanding the foregoing,
a Landlord Indemnified Party may retain its own attorneys to defend or assist
in defending any claim, action or proceeding involving potential liability in
excess of One Million Dollars ($1,000,000) unless such claim, action, or
proceeding is covered by insurance and the insurance carrier has confirmed in
writing both its obligation to defend such claim, action or proceeding and its
liability for any adverse judgment resulting therefrom, and Tenant shall pay
the actual, customary and reasonable fees and disbursements of such attorneys.  The provisions of this Subsection 11.3(a)
shall survive the expiration or earlier termination of this Lease.


 


(b)           Subject to the limitations set forth in Section 11.8,
Landlord shall defend, indemnify and save harmless Tenant and its members and
managers (collectively, “Tenant Indemnified
Parties”), from any and all liabilities, claims, causes of actions,
suits, damages and expenses (collectively, “Tenant Claims”)
arising from or in connection with the Landlord’s use of, or in connection with
any of Landlord’s activities of any kind upon or affecting the Premises during
the Term, provided that no Tenant Indemnified Party shall be indemnified from
any Tenant Claims arising out of its own gross negligence or willful
misconduct..  Landlord shall also
indemnify and hold the Tenant Indemnified Parties harmless from all costs,
expenses and liabilities incurred, including actual, customary and reasonable
attorney’s fees and disbursements through and including appellate proceedings,
in or in connection with any of such Tenant Claims.  If any action or proceeding shall be brought
against any of the Tenant Indemnified Parties by reason of any such Tenant
Claims, Landlord, upon notice from any of the Tenant Indemnified Parties, shall
resist and defend such action or proceeding, at its sole cost and expense by
counsel to be selected by Landlord but otherwise satisfactory to such Tenant
Indemnified Party in its reasonable discretion. 
Landlord or its counsel shall keep each Tenant Indemnified Party fully
apprised at all times of the status of such defense.  Notwithstanding the foregoing, a Tenant
Indemnified Party may retain its own attorneys to defend or assist in defending
any claim, action or proceeding involving potential liability in excess of One
Million Dollars ($1,000,000) unless such claim, action, or proceeding is
covered by insurance and the insurance carrier has confirmed in writing both
its obligation to defend such claim, action or proceeding and its liability for
any adverse judgment resulting therefrom, and Landlord shall pay the actual,
customary and reasonable fees and disbursements of such attorneys.  The provisions of this Subsection 11.3(b)
shall survive the expiration or earlier termination of this Lease.


 


Section 11.4         Discharge of
Liens


 


If at any time
prior to or during the Term (or within the statutory period thereafter if
attributable to Tenant), any mechanic’s or other lien or order for payment of
money, which shall have been either created by, caused (directly or indirectly)
by, or suffered against Tenant, shall be filed against the Premises or any part
thereof, Tenant, at its sole cost and expense, shall cause the same to be
discharged by payment, bonding or otherwise, within thirty (30) days after
Tenant receives notice of the filing thereof unless such lien or order is
contested by Tenant in good faith and Tenant provides sufficient security or
evidence of financial ability, in each case to the reasonable satisfaction of
Landlord, to pay the amount of such lien or order, and such contest by Tenant
is permitted by the terms of any Mortgage that affects the Resort or the
Premises, and 


 


53

















 


Tenant pays
all costs and performs all obligations required to fully comply with applicable
provisions of any such Mortgage.  Exhibit
“11.4” contains the provision in the existing Mortgage that governs the
contest of liens.  Tenant shall, upon
notice and request in writing by Landlord, defend for Landlord, at Tenant’s
sole cost and expense, any action or proceeding which may be brought on or for
the enforcement of any such lien or order for payment of money, and will pay
any damages and satisfy and discharge any judgment entered in such action or
proceeding and save harmless Landlord from any liability, claim or damage
resulting therefrom.  In default of
Tenant’s procuring the discharge of any such lien as aforesaid Landlord may,
without notice, and without prejudice to its other remedies hereunder, procure
the discharge thereof by bonding or payment or otherwise, and all cost and
expense which Landlord shall incur shall be paid by Tenant to Landlord as
Additional Rent forthwith.  The
provisions of this Section 11.4 shall survive the expiration or earlier
termination of this Lease.


 


Section 11.5         Liability for
Liens


 


Landlord shall
not under any circumstances be liable to pay for any work, labor or services
rendered or materials furnished to or for the account of Tenant upon or in
connection with the Premises, and no mechanic’s or other lien for such work,
labor or services or material furnished shall, under any circumstances, attach
to or affect the reversionary interest of Landlord in and to the Premises or
any alterations, repairs, or improvements to be erected or made thereon.  Nothing contained in this Lease shall be
deemed or construed in any way as constituting the request or consent of
Landlord, either express or implied, to any contractor, subcontractor, laborer
or materialman for the performance of any labor or the furnishing of any
materials for any specific improvement, alteration to or repair of the Premises
or any part thereof, nor as giving Tenant any right, power or authority to
contract for or permit the rendering of any services or the furnishing of any
materials on behalf of Landlord that would give rise to the filing of any lien
against the Premises.


 


Section 11.6         Gaming
Authority Complaints


 


Tenant shall
promptly provide Landlord with a true and complete copy of any complaint or
pleading served upon Tenant by any Gaming Authority that contains any prayer
for relief involving the appointment of a supervisor as to any aspect of Tenant’s
operation of the Premises or the revocation of any gaming or liquor license
held by Tenant.


 


Section 11.7         Waiver of
Subrogation


 


Prime
Landlord, Landlord and Tenant shall each waive any and all rights of recovery
against the other or against any officer, employee, agent or representative of
the other party, on account of loss or damage occasioned to a party or its
property or the property of third parties if the loss or damage could be
insured against.  Prime Landlord,
Landlord and Tenant shall, upon obtaining the policies of insurance required
under this Section 11.7, give notice to their insurance carriers of this
waiver of subrogation and insure that all property insurance policies
maintained by them contain a waiver of subrogation.


 


54

















 


Section 11.8         Consequential
Damages


 


Notwithstanding
any other provision of this Agreement, neither Prime Landlord nor Landlord
shall be liable to Tenant for any consequential damages to the business of
Tenant and Tenant shall not be liable to Prime Landlord or Landlord for any
consequential damages to the business of Prime Landlord or Landlord under this
Lease.


 


Section 11.9         Casino
Entertainment Tax


 


Landlord shall
cause Prime Landlord to perform such acts as may be reasonably required to allow
Tenant to comply with the Casino Entertainment Laws that are applicable from
time to time to the activities of Prime Landlord at the Resort.  Landlord acknowledges that the Casino
Entertainment Laws require Tenant to collect the Casino Entertainment Tax from
the Person affording the entertainment and to remit the Casino Entertainment
Tax to the Nevada Gaming Commission no later than the 24th day of each month
for the preceding month based upon the records of such Person.  Landlord shall cause Prime Landlord to (i)
properly account for and remit Casino Entertainment Tax to Tenant for Prime
Landlord’s activities at the Resort that are subject to the Casino
Entertainment Tax five (5) days or more before such remittances and payments
are due from Tenant to the Gaming Commission; (ii) maintain accurate and
detailed records of all receipts subject to the Casino Entertainment Tax for
admissions, food, merchandise and refreshment for no less than five (5) years
from the date of sale; (iii) fully cooperate with the Gaming Authorities in any
review or audit of Casino Entertainment Tax payable with respect to Prime
Landlord’s activities at the Resort; and (iv) except for deficiencies arising
out of Tenant’s failure to deliver to the Gaming Commission Casino Entertainment
Tax delivered to Tenant by Prime Landlord, indemnify and hold Tenant harmless
for any Casino Entertainment Tax deficiencies imposed by the Nevada Gaming
Commission with respect to Prime Landlord’s activities at the Resort.  Tenant acknowledges and agrees that Prime
Landlord shall make its remittances of the Casino Entertainment Tax payable to
the Gaming Commission and not to Tenant. 
Tenant shall (i) timely remit to the Gaming Commission Casino
Entertainment Tax delivered to Tenant by Prime Landlord; (ii) fully cooperate
with Prime Landlord and the Gaming Authorities in any review or audit of Casino
Entertainment Tax payable with respect to Prime Landlord’s activities at the
Resort; and (iii) shall indemnify and hold Prime Landlord harmless for any
Casino Entertainment Tax deficiencies arising out of Tenant’s failure to
deliver to the Gaming Commission Casino Entertainment Tax payments delivered to
Tenant by Prime Landlord.  Landlord shall
cause Prime Landlord to include a provision in Prime Landlord’s lease
agreements with each of its new tenants at the Resort and a provision in any
amendment to the existing leases at the Resort that requires each such tenant
to (i) properly account for and remit applicable Casino Entertainment Tax to
Tenant for activities of such tenant in its leased premises five (5) days or
more before such remittances and payments are due from Tenant to the Gaming
Commission; (ii) maintain accurate and detailed records of all receipts subject
to the Casino Entertainment Tax for admissions, food, merchandise and
refreshment for no less than five (5) years from the date of sale; (iii) fully
cooperate with the Gaming Authorities in any review or audit of Casino
Entertainment Tax payable with respect to such leased premises; and (iv) except
for deficiencies arising out of Tenant’s failure to deliver to the Gaming
Commission payments delivered by such tenant to Tenant, indemnify and hold
Tenant harmless for any Casino Entertainment Tax deficiencies imposed by the
Nevada Gaming Commission with respect to such tenant’s leased premises.  Tenant acknowledges and agrees each such
tenant of Prime 


 


55

















 


Landlord shall
make its remittances payable to the Gaming Commission and not to Tenant.  Tenant shall (i) timely rent to the Gaming
Commission the Casino Entertainment Tax delivered to Tenant by any tenant of
Prime Landlord; (ii) fully cooperate with each such tenant and the Gaming
Authorities in any review or audit of Casino Entertainment Tax payable with
respect to the leased premises of such tenant; and (iii) shall indemnify and hold
each such tenant harmless from any Casino Entertainment Tax deficiencies
arising out of Tenant’s failure to deliver to the Gaming Commission the Casino
Entertainment Tax payments delivered to Tenant by such tenant.  Tenant and Landlord acknowledge and agree
that, except for the Patch Lease, none of Prime Landlord’s leases at the Resort
that exist on the date of this Lease contain provisions relating to the Casino Entertainment
Tax.  Further, Tenant and Landlord
believe that no tenant under any such existing lease, except the Patch Tenant,
is engaged in activity to which the Casino Entertainment tax would apply.  Notwithstanding any other provision of this
Lease, Landlord and Tenant acknowledge that the activities of Landlord or
Landlord’s lessees at the Resort may not be subject to the Casino Entertainment
Tax because of the following facts: (a) Landlord and its lessee and Tenant
are not related parties; (b) the activities of Landlord and its lessees are not
within the control of Tenant; and (c) Tenant derives no income from the
activities of Landlord or its lessees.  Landlord
and Tenant shall fully cooperate with each other in an effort to obtain a
determination that the Casino Entertainment Tax does not apply to the
activities of Landlord and Landlord’s lessees at the Resort.


 


ARTICLE XII —  DEFAULT BY TENANT; REMEDIES


 


Section 12.1         Defaults


 


Each of the
following shall be deemed an event of default (an “Event of
Default”) and a breach of this Lease by Tenant:


 


(a)           If Tenant shall fail to pay any installment of Base Rent
within five (5) days of its due date under this Lease.


 


(b)           If Tenant shall fail to pay any Additional Rent required
to be paid by Tenant hereunder and such failure is not cured within five (5)
days (or such longer period as may be specified herein) after Landlord has
delivered written notice that the same was due and payable.


 


(c)           If Tenant shall fail to perform or observe of any of the
other agreements, conditions, covenants or terms that Tenant is obligated to
perform or observe under this Lease and such failure is not remedied within
thirty (30) days (or such different period as may be specified herein) after
written notice thereof has been delivered by Landlord (or, if such default is
of a nature that it cannot be completely remedied within said thirty (30) day
period (or such different period as may be specified herein), then if Tenant
does not agree in writing within such thirty (30) day period (or such different
period as may be specified herein) to cure the same, commence and thereafter
diligently prosecute the cure and complete the cure within a reasonable period
of time under the circumstances, not to exceed ninety (90) days, after such
original written notice of default by Landlord to Tenant).


 


56

















 


(d)           If Tenant shall sell, assign, mortgage, encumber, sublease
or transfer all or any of its interest in this Lease or the Premises or any
portion thereof without compliance with the provisions of this Lease applicable
thereto.


 


(e)           If (i) Tenant shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to Tenant or
seeking to adjudicate Tenant a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution, composition
or other relief with respect to Tenant or Tenant’s debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for
Tenant or for all or any substantial part of Tenant’s property; or (ii) Tenant
shall make a general assignment for the benefit of Tenant’s creditors; or (iii)
there shall be commenced against Tenant any case, proceeding or other action of
a nature referred to in clause (i) above or seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of Tenant’s property, which case, proceeding or other action
(A) results in the entry of an order for relief or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; or (iv) Tenant shall
take any action consenting to or approving of any of the acts set forth in
clause (i) or (ii) above; or (v) Tenant shall generally not, or shall be unable
to, pay Tenant’s debts as they become due or shall admit in writing Tenant’s
inability to pay Tenant’s debts.


 


(f)            If Tenant is a corporation and shall cease to exist as a
corporation in good standing in the state of its incorporation (unless Tenant
simultaneously becomes incorporated and in good standing in another state) or
if Tenant is a partnership or other entity and Tenant shall be dissolved or
otherwise liquidated, then if Tenant does not completely remedy such default
immediately (or if Tenant’s only knowledge of such default is by receipt of
written notice of such default, then within the ten (10) day period following
receipt of such written notice).


 


(g)           If Tenant fails or refuses to execute any subordination
agreement required pursuant to Article X or estoppel certificate
required pursuant to Article XIV within ten (10) Business Days after
Tenant’s receipt thereof


 


(h)           If Tenant’s liquor or gaming licenses are suspended or
revoked for a period of more than ten (10) consecutive days.


 


(i)            If Tenant receives notice of a Material Violation of
Gaming Laws from any of the applicable Gaming Authorities and fails to respond
to the violation or cure it within the time prescribed under said notice or
under applicable Gaming Laws.


 


Section 12.2         Remedies


 


(a)           If an Event of Default shall occur and be continuing
beyond any applicable cure periods following all required notices from
Landlord, Landlord, at any time thereafter, at its option, may give written
notice to Tenant stating that this Lease or (without terminating this Lease)
Tenant’s right to possess the Premises shall terminate on the date specified in
such notice, which date shall be not less than three (3) Business Days after
the giving of such notice, and all rights of Tenant under this Lease shall
terminate or (without terminating this Lease) Tenant’s 


 


57

















 


right to possess the Premises shall terminate as specified in such
notice (if such notice does not specify whether this Lease or Tenant’s right to
possess the Premises shall terminate, then Landlord shall be deemed to have
elected to terminate Tenant’s right to possess the Premises without terminating
this Lease) and Tenant immediately shall quit and surrender the Premises, which
termination shall not relieve Tenant from any liability then or thereafter
accruing hereunder.  If Landlord elects
to terminate Tenant’s right to possess the Premises, it may at any time
thereafter elect to terminate this Lease.


 


(b)           If an Event of Default described in Subsections 12.1(a)
or (b) hereof shall occur and be continuing, or this Lease or Tenant’s
right to possess the Premises shall be terminated as provided in Subsection
12 2(a) hereof, Landlord, upon five (5) days prior written notice, and
following receipt of a court order, (i) may re-enter and repossess the Premises
using such force for that purpose as may be necessary without being liable to
indictment, prosecution or damages therefor, or (ii) may dispossess Tenant by
summary proceedings or otherwise, which re-entry and repossession by Landlord
shall not relieve Tenant from any liability then or thereafter accruing hereunder,
except for Rent not yet due and payable.


 


Section 12.3         Certain
Default Obligations


 


If this Lease
or Tenant’s right to possess the Premises shall be terminated as provided in Subsection
12.2(a) hereof and/or Tenant shall be dispossessed by summary proceedings
or otherwise as provided in Subsection 12.2(b) hereof:


 


(a)           Tenant shall pay to Landlord all Rent payable under this
Lease by Tenant to Landlord to the date upon which this Lease or Tenant’s right
to possess the Premises shall have been terminated or to the date of re-entry
upon the Premises by Landlord, as the case may be.  Additionally, Tenant shall pay to Landlord all
reasonable costs incurred by Landlord (including court costs and reasonable
attorneys’ fees and expenses) in (i) obtaining possession of the Premises, (ii)
removing and storing Tenant’s or any other occupant’s property, (iii) repairing
any damage to the Premises, and (iv) performing any of Tenant’s unperformed
obligations.


 


(b)           If Tenant’s right to possess the Premises is terminated,
Landlord may repair the Premises in such manner as necessary to put the same in
the condition required upon the expiration of the Term, without relieving
Tenant of any liability under this Lease or otherwise affecting any such
liability, and/or let or relet the entirety of the Premises with one lease or
sublease for the whole or any part of the remainder of the Term or for a longer
period, in Landlord’s name or as agent of Tenant, and out of any rent and other
sums collected or received as a result of such reletting Landlord shall: (i)
first, pay to itself the reasonable costs and expenses of terminating this
Lease, re-entering, retaking, repossessing, repairing and/or reletting the
Premises, and actual and customary legal expenses and attorneys’ fees and disbursements
but expressly excluding any costs of altering the Premises, or any part thereof
and brokerage commissions or tenant improvement expenses or other expenses of
preparing the Premises for reletting (which Landlord expressly acknowledges
were not incurred when Tenant accepted delivery of possession of the Premises “as
is” without any obligation of Landlord to improve the same and without any
liability for any brokerage commissions payable by Landlord), and (ii) second,
pay to itself any balance remaining on account of the liability of Tenant to
Landlord.  Subject to Landlord’s
obligation to mitigate its damages through reasonable diligence, Landlord 


 


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shall not be responsible or liable for any failure to relet the
Premises or any part thereof, or for any failure to collect any rent due on any
such reletting, and, provided that Landlord has in good faith undertaken to
mitigate its damages through reasonable diligence, no such failure to relet or
to collect rent shall operate to relieve Tenant of any liability under this Lease
or to otherwise affect any such liability;


 


(c)           If Tenant’s right to possess the Premises is terminated,
Tenant shall be liable for and shall pay to Landlord, as damages, any deficiency
(referred to as “Deficiency”), between the Rent
reserved in this Lease for the period which otherwise would have constituted
the unexpired portion of the Term and the net amount, if any, of rents
collected under any reletting effected pursuant to the provisions of Subsection
12.3(b) hereof for any part of such period plus any amount that Tenant
proves Landlord could have mitigated through reasonable diligence, first
deducting from the rents collected under any such reletting all of the payments
to Landlord described in Subsection 12.3(b) hereof; any such Deficiency
shall be paid in installments by Tenant on the days specified in this Lease for
payment of installments of Rent, and Landlord shall be entitled to recover from
Tenant each Deficiency installment as the same shall arise, and no suit to
collect the amount of the Deficiency for any installment period shall prejudice
Landlord’s right to collect the Deficiency for any subsequent installment
period by a similar proceeding; and


 


(d)           If this Lease is terminated, Landlord shall be entitled to
recover from Tenant, and Tenant shall pay to Landlord a sum equal to the amount
by which the Rent reserved in this Lease for the period which otherwise would
have constituted the unexpired portion of the Term exceeds the actual rent due
under any replacement lease of the Premises for the same period, less any
amount that Tenant proves Landlord could have mitigated through reasonable
diligence, discounted to the present worth of such amounts at the rate of the
then applicable rate of interest on United States Treasury Securities having
terms to maturity most closely matching the unexpired portion of the Term.


 


Section 12.4         Landlord’s
Lien


 


The Rent
payable by Tenant hereunder and each and every installment thereof, and all
costs, actual, customary and reasonable attorneys’ fees and disbursements and
other expenses which may be incurred by Landlord in enforcing the provisions of
this Lease on account of any Event of Default shall be and they hereby are declared
to constitute a valid lien upon the interest of Tenant in this Lease and in the
Premises.


 


Section 12.5         Legal Actions


 


(a)           Suit or suits for the recovery of damages, or for a sum
equal to any installment or installments of Rent payable hereunder or any
Deficiencies or other sums payable by Tenant to Landlord pursuant to this Article
XII, may be brought by Landlord from time to time at Landlord’s election,
and nothing herein contained shall be deemed to require Landlord to await the
date whereon this Lease or the Term would have expired by limitation had there
been no Event of Default by Tenant and termination.


 


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(b)           Nothing contained in this Article XII shall limit
or prejudice the right of Landlord to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding an amount equal to the maximum allowed by a statute or rule of law
governing such proceeding and in effect at the time when such damages are to be
proved, whether or not such amount shall be greater than, equal to or less than
the amount of the damages referred to in any of the preceding Sections of this Article
XII.


 


(c)           No failure by Landlord to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof, and no
acceptance of full or partial Rent during the continuance of any such breach,
shall constitute a waiver of any such breach or of such covenant, agreement,
term or condition.  No covenant,
agreement, term or condition of this Lease to be performed or complied with by
Tenant, and no breach thereof, shall be waived, altered or modified except by a
written instrument executed by Landlord. 
No waiver of any breach shall affect or alter this Lease, but each and
every covenant, agreement, term and condition of this Lease shall continue in
full force and effect with respect to any other then existing or subsequent
breach thereof.


 


(d)           In the event of any Event of Default, provided that
Landlord has no adequate remedy at law, Landlord shall be entitled to seek a
decree compelling performance of any of the provisions hereof, and shall have
the right to invoke any rights and remedies allowed at law or in equity or by
statute or otherwise as though re-entry, summary proceedings, and other
remedies were not provided for in this Lease.


 


Section 12.6         Legal Fees


 


Provided that
Landlord is the prevailing party in any action to enforce any rights or remedies
under this Article XII, Tenant shall pay to Landlord all reasonable
costs and expenses, including, without limitation, actual, customary and
reasonable attorneys’ fees and disbursements, incurred by Landlord in enforcing
such rights and remedies and reasonably incurred as a direct result of any
Event of Default by Tenant.


 


Section 12.7         Landlord
Performance


 


If an Event of
Default shall occur and be continuing under this Lease, Landlord may (a) perform
the same for the account of Tenant and/or (b) make any expenditure or incur any
obligation for the payment of money in connection with any obligation owed by
Tenant to any third party, and all direct costs and expenses incurred by
Landlord in connection therewith shall be deemed to be Additional Rent hereunder
and shall be paid by Tenant to Landlord within ten (10) days after written
demand therefor, together with interest at the Default Rate.


 


Section 12.8         Interest on
Past Due Rent


 


If Tenant
shall fail to pay any installment of Base Rent when due or any Additional Rent
within ten (10) days after the date when such payment is due, Tenant shall pay
to Landlord, in addition to such installment of Base Rent or such Additional
Rent, as the case may be, interest on the amount unpaid at the Default Rate,
computed from the date such payment was due to and including the date of payment.


 


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ARTICLE XIII
—  NO WAIVER


 


Section 13.1         No Waiver


 


No receipt of
moneys by Landlord from Tenant after the termination or cancellation of this
Lease or Tenant’s right to possess the Premises shall reinstate, continue or
extend the term, or affect any notice theretofore given to Tenant, or operate
as a waiver of the right of Landlord to enforce the payment of Rent then due,
or thereafter falling due, or operate as a waiver of the right of Landlord to recover
possession of the Premises by proper suit, action, proceeding or remedy; it
being agreed that, after the service of notice to terminate or cancel this
Lease or Tenant’s right to possess the Premises, or the commencement of suit,
action or summary proceedings, or any other remedy, or after a final order or
judgment for the possession of the Premises, Landlord may demand, receive and
collect any moneys due, or thereafter falling due, without, in any manner
whatsoever, affecting such notice, proceeding, suit, action, order or judgment;
and any and all such moneys collected shall be deemed to be payments on account
of the use and occupation of the Premises or, at the election of Landlord, on
account of Tenant’s liability hereunder. 
The failure of Landlord or Tenant to enforce any agreement, condition,
covenant or term, by reason of its breach by Tenant or Landlord, as the case
may be, shall not be deemed to void, waive or affect the right of Landlord or Tenant
to enforce the same agreement, condition, covenant or term on the occasion of a
subsequent default or breach.


 


Section 13.2         No Exclusive
Remedies


 


The specific
remedies to which Landlord may resort under the terms of this Lease are cumulative
and are not intended to be exclusive of any other remedies or means of redress
to which Landlord may be lawfully entitled in case of any breach or threatened
breach by Tenant of any of the terms, covenants and conditions of this Lease.  The failure of Landlord or Tenant to insist
in any one or more cases upon the strict performance of any of the terms,
covenants and conditions of this Lease, or to exercise any right or remedy
herein contained, shall not be construed as a waiver or relinquishment for the
future performance of such terms, covenants and conditions.  The receipt by Landlord, or payment by
Tenant, of Rent with knowledge of the breach of any of such terms, covenants
and conditions shall not be deemed a waiver of such breach.  The acceptance of any check or payment
bearing or accompanied by any endorsement, legend or statements shall not, of
itself, constitute any change in or termination of this Lease.  No surrender of the Premises by Tenant (prior
to any termination of this Lease) shall be valid unless consented to in writing
by Landlord.  In addition to the other
remedies in this Lease provided, Landlord or Tenant shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation
of any of the terms, covenants and conditions of this Lease or to a decree
compelling performance of any of such terms, covenants and conditions.


 


ARTICLE XIV —  ESTOPPEL CERTIFICATES


 


Section 14.1         From Tenant


 


Tenant shall,
at any time and from time to time, upon not less than five (5) Business Days’
prior notice by Landlord execute, acknowledge and deliver to Landlord a
statement in writing certifying that this Lease is unmodified and in full force
and effect (or if there have been 


 


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any
modifications, that the Lease is in full force and effect as modified and stating
the modifications), the dates to which the Rent have been paid, and stating
whether or not Landlord is in default in keeping, observing or performing any
term, covenant, agreement, provision, condition or limitation contained in this
Lease and, if in default, specifying each such default, the Commencement Date
and Expiration Date for the current Term and any other matters reasonably
requested by Landlord.  Prime Landlord
and any other landlord or any prospective purchaser of the Premises or any
Mortgagee thereof or any assignee of any Mortgage upon the Premises may rely
upon such statement delivered pursuant to this Article XIV.


 


Section 14.2         From Landlord


 


Landlord
shall, at any time and from time to time upon not less than five (5) Business
Days’ prior notice by Tenant execute, acknowledge and deliver to Tenant a
statement in writing certifying that this Lease is unmodified and in full force
and effect (or if there have been any modifications, that the Lease is in full
force and effect as modified and stating the modifications), the dates to which
the Rent have been paid, and stating whether or not Tenant is in default in
keeping, observing or performing any term, covenant, agreement, provision,
condition or limitation contained in this Lease and, if in default, specifying
each such default, the Commencement Date and Expiration Date for the current
Term and any other matters reasonably requested by Tenant; it being intended
that any such statement delivered pursuant to this Article XIV may
be relied upon by Tenant or any permitted assignee of Tenant’s interest in the
Premises.


 


ARTICLE XV —  QUIET ENJOYMENT


 


Tenant, upon
payment of the Rents herein reserved and upon the due performance and
observance of all the covenants, conditions and agreements herein contained on
Tenant’s part to be performed and observed, shall and may at all times during
the Term peaceably and quietly have, hold and enjoy the Premises without any
manner of suit, trouble or hindrance of and from any person claiming by,
through or under Landlord, subject, nevertheless, to the terms and provisions
of this Lease.


 


ARTICLE XVI —  SURRENDER


 


Section 16.1         End of Term


 


Tenant shall,
on the last day of the Term, or upon the sooner termination of the Term
(whether such sooner termination is caused by a finding by the Nevada State
Gaming Commission that Landlord is unsuitable or for any other reason), quit
and surrender to Landlord the Premises vacant and in good order and condition,
reasonable wear and tear excepted.  Upon
the expiration or early termination of the Term, all Alterations to the
Premises and all Casino Personal Property and Casino Personal Property
Additions shall immediately vest in and become the property of Landlord or,
with respect to the Gaming Equipment, its designee if Landlord is not licensed
or has not been found suitable at the time that this Lease is terminated.  At such time, Tenant shall assign and convey
all Alterations to the Premises, the Casino Personal Property and the Casino
Personal Property Additions to Landlord or its designee.  Tenant shall deliver such items to Landlord
free and clear of liens, encumbrances, and defects of title, except 


 


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any such
matters arising through Prime Landlord for the benefit of its Mortgagee and
except for Casino Personal Property Additions Capital Leases then outstanding.  At such time, Casino Cash in the amount
purchased by Tenant from the Patch Lease Tenant on the Commencement Date and
any additional Casino Cash that was contributed to Casino Cash from cash flow
from operations while Percentage Rent was applicable to this Lease shall be
divided equally between Landlord and Tenant.  Any Casino Cash that was contributed by Tenant
from Tenant’s own funds and was not returned to Tenant as part of Tenant’s
Initial Capital Investment or any Casino Cash that was contributed to Casino
Cash when no Percentage Rent was applicable to this Lease shall be the sole
property of Tenant.  Tenant acknowledges
that, at Landlord’s election, the Casino Business shall not close upon the
expiration or earlier termination of this Lease, and Tenant shall cooperate with
Landlord, and take any and all steps which are necessary and appropriate, to
ensure the seamless turnover of the Casino Business upon termination.  In connection with such turnover, Landlord
and Tenant agree that the Casino Transition Procedures shall apply to the
turnover at the expiration or termination of this Lease.  Further, at no cost to Landlord, all of
Tenant’s right, title and interest in the Casino Name shall immediately vest in
Landlord, and Tenant shall execute and deliver to Landlord such documentation
to confirm such vesting as legal counsel for Landlord may reasonably require.  Landlord acknowledges that, prior to
operating any gaming at the Premises, Landlord must obtain all necessary gaming
licenses and approvals from the Gaming Authorities.  Upon the expiration or earlier termination of
the Term, all Base Rent, Additional Rent, Percentage Rent (if applicable), and
other items payable by Tenant under this Lease shall be apportioned to the date
of termination.  If this Lease is
terminated because Landlord is found unsuitable as provided in the last
sentence of Subsection 5.6(b), at termination, Landlord shall pay
Tenant the Lease Termination Fee provided that Tenant has delivered to Landlord
the Alterations to the Premises, the Casino Personal Property, and Casino
Personal Property Additions.  Tenant
shall deliver such items to Landlord free and clear of liens, encumbrances, and
defects of title, except any such matters arising through Prime Landlord for
the benefit of its Mortgagee and except for Casino Personal Property Additions
Capital Leases then outstanding.  Notwithstanding
any other provision of this Lease, at the end of the Term when Tenant delivers
such items to Landlord or its designee, Tenant shall have no obligation to
remove the Casino Personal Property Mortgage or any outstanding Casino Personal
Property Capital Leases from title to such items.


 


Section 16.2         Holding Over


 


Tenant
acknowledges that possession of the Premises must be surrendered to Landlord at
the expiration or sooner termination of the term of this Lease.  The parties recognize and agree that the
damage to Landlord resulting from any failure by Tenant to timely surrender
possession of the Premises as aforesaid will be extremely substantial, will
exceed the amount of the Rent theretofore payable hereunder, and will be impossible
to accurately measure.  Tenant therefore
agrees that if possession of the Premises is not surrendered to Landlord upon
the expiration or sooner termination of the term of this Lease, then Tenant
shall pay to Landlord, as liquidated damages for each month and for each
portion of any month during which Tenant holds over in the Premises after the
expiration or sooner termination of the term of this Lease, a sum equal to the
higher of (a) the then fair market rental value of the Premises, taking into account
the effect of all material factors reasonably relevant to such determination,
or (b) three (3) times the aggregate of the Base Rent and Additional Rent which
was payable under this Lease with respect to the last month of the term hereof.  Nothing herein contained shall be deemed to
permit Tenant 


 


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to retain
possession of the Premises after the expiration or sooner termination of the
term of this Lease.  If Tenant holds over
in possession after the expiration or termination of the term of the Lease,
such holding over shall not be deemed to extend the term or renew this Lease,
but the tenancy thereafter shall continue as a tenancy from month to month upon
the terms and conditions of this Lease at the Rent as herein increased.  Tenant hereby waives the benefit of any law
or statute in effect in the state where the Premises is located which would
contravene or limit the provisions set forth in this Section 16.2.  This provision shall survive the expiration
or earlier termination of this Lease.


 


ARTICLE XVII
—  ACCESS


 


Section 17.1         Landlord
Access


 


Subject to
applicable Gaming Laws with respect to access to restricted areas or requiring
any accompanying employee of Tenant, and subject to Tenant’s reasonable
security polices and procedures regarding access to casino cages and count
rooms and the surveillance room on the Premises, Landlord shall at all times
during the Term have the right and privilege to enter the Premises at
reasonable times during business hours, following reasonable notice from
Landlord and so long as Landlord uses its reasonable best efforts to not unduly
interfere with Tenant’s normal business operations, for the purpose of
inspecting the same or for the purpose of showing the same to prospective
purchasers or Mortgagees thereof, provided however, such inspections shall be
accompanied by a representative or employee of Tenant.  Landlord shall also have the right and
privilege at all times during the Term to post notices of nonresponsibility for
work performed by or on behalf of Tenant and, during the last one (1) year of
the Term, Landlord shall have the right and privilege following reasonable
notice from Landlord and so long as such entry does not unduly interfere with
Tenant’s normal business operations, to enter the Premises at reasonable times
during business hours for the purpose of exhibiting the same to prospective new
tenants.  In the event of an emergency, subject
to applicable Gaming Laws, Landlord shall contact Tenant’s security personnel
for immediate access to any part of the Premises deemed reasonably necessary.


 


Section 17.2         Landlord Work


 


Subject to
applicable Gaming Laws, Landlord shall at all times during the Term have the
right to enter the Premises or any part thereof, following reasonable notice
from Landlord and so long as Landlord uses its reasonable best efforts to not
unduly interfere with Tenant’s or any Subtenant’s normal business operations,
for the purpose of making such repairs or Alterations therein as Landlord is
required or obligated to make pursuant to this Lease or as Landlord deems
necessary or advisable following the failure of Tenant to make any such repairs
or Alterations beyond any applicable notice and cure period that Tenant is
obligated to make pursuant to this Lease, but such right of access shall not be
construed as obligating Landlord to make any repairs to or replacements to the
Premises or as obligating Landlord to make any inspection or examination of the
Buildings.


 


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ARTICLE XVIII
—  ENVIRONMENTAL MATTERS


 


Section 18.1         Restricted
Use


 


Except for
Hazardous Substances, if any, ordinarily and customarily used in connection
with the Casino Business (“Customary Hazardous
Substances”) used in compliance with all applicable Laws, Tenant
will not use, generate, manufacture, produce, store, release, discharge or
dispose of on, under, from or about the Premises or transport to or from the
Premises any Hazardous Substance (defined below) and will use its best efforts
not to allow or suffer any other person or entity to do so.  Except to the extent that any non-compliance
is caused by any act or omission of Tenant (which Tenant shall be responsible
for correcting), Landlord shall keep and maintain the Premises in compliance
with, and shall use its best efforts not to cause, permit or suffer the
Premises to be in violation of any Environmental Law (as defined below) as part
of Landlord’s maintenance, repair and replacement obligations under this Lease.


 


Section 18.2         Notice


 


Tenant shall
give prompt written notice to Landlord of the use, generation, manufacture,
production, storage, release, threatened release, discharge, or disposal of any
Hazardous Substance on, under, from or about the Premises by Tenant, except for
the use or storage of Customary Hazardous Substances.


 


Section 18.3         Landlord
Rights


 


Landlord shall
have the right, but not the obligation, to join and participate in, as a party
if it so elects, any legal proceedings or actions initiated with respect to the
Premises in connection with any Environmental Law.


 


Section 18.4         Remedial Actions


 


Without
Landlord’s prior written consent, which consent shall not be unreasonably
withheld or delayed, Tenant shall not take any remedial action, other than
pursuant to the plan developed in accordance with Section 18.6, in
response to the presence of any Hazardous Substance on, under, from or about
the Premises, nor enter into any settlement, consent or compromise which might,
in Landlord’s reasonable judgment, impair the value of Landlord’s interest in
the Premises; provided, however, that Landlord’s prior consent
shall not be necessary if the presence of Hazardous Substance on, under, from
or about the Premises either poses an immediate threat to the health, safety or
welfare of any individual or is of such a nature that an immediate remedial
response is necessary and it is not practical or possible to obtain Landlord’s
consent before taking such action.  In
such event Tenant shall notify Landlord as soon as practicable of any action so
taken.  Landlord agrees not to withhold
its consent, where such consent is required hereunder, if either (i) a
particular remedial action is ordered by a court or any agency of competent
jurisdiction, or (ii) Tenant establishes to the reasonable satisfaction of
Landlord that there is no reasonable alternative to such remedial action which
would result in less impairment of Landlord’s security hereunder.


 


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Section 18.5         Indemnity


 


Tenant shall protect,
indemnify and hold harmless Prime Landlord, Landlord and each Mortgagee, their
respective directors, officers, partners employees, agents, successors and
assigns from and against any and all claim, loss, damage, cost, expense,
liability, fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial action requirements, enforcement actions of any
kind (including, without limitation, attorneys’ fees and costs) directly or
indirectly arising out of or attributable to, in whole or in part, the breach
of any of the covenants, representations and warranties of this Article XVIII
or the use, generation, manufacture, production, storage, release, threatened
release, discharge, or disposal of a Hazardous Substance on, under, from or
about the Premises by Tenant (except for Customary Hazardous Substances), or
any other activity carried on or undertaken on or off the Premises during the
Term by Tenant or any of its employees, agents, contractors or subcontractors (“Environmental Claims”), but expressly excluding, in all
cases, any Environmental Claims arising out of or in connection with (i) any
acts or omissions of any party other than Tenant or its employees, agents,
contractors or subcontractors; (ii) any pre-existing Hazardous Substances on or
about the Premises prior to the Commencement Date; and (iii) all consequential
damages.  Subject to the foregoing
exceptions, such Environmental Claims shall include, without limitation, (i)
the costs of any required or necessary environmental assessments and/or audits,
any repair, cleanup or detoxification of the Premises and the preparation and
implementation of any closure, remedial or other required plans including,
without limitation:  (A) the costs of
removal or remedial action incurred by the United States Government or the
state in which the Premises are located, or response costs incurred by any
other person, or damages from injury to, destruction of, or loss of natural
resources, including the costs of assessing such injury, destruction or loss,
incurred pursuant any Environmental Law; (B) the clean-up costs, fines, damages
or penalties incurred pursuant to the provisions of applicable state law, and
(C) the cost and expenses of abatement, correction or clean-up, fines, damages,
response costs or penalties which arise from the provisions of any other
statute, state or federal; and (ii) liability for personal injury or property
damage, including damages assessed for the maintenance of the public or private
nuisance, response costs or for the carrying on of an abnormally dangerous
activity.


 


(a)           The foregoing indemnity shall further apply to any
residual contamination on, under, from or about the Premises, or affecting any
natural resources arising in connection with the use, generation,
manufacturing, production, handling, storage, transport, discharge or disposal
of any such Hazardous Substance by Tenant or its employees, agents, contractors
or subcontractors in breach of this Article XVIII.  This indemnity is intended to be operable under
42 U.S.C. Section 9607(e)(1), and any successor section thereof and shall
survive expiration or earlier termination of this Lease and any transfer of all
or a portion of the Premises by Tenant.


 


(b)           The foregoing indemnity shall in no manner be construed to
limit or adversely affect Landlord’s rights under this Article XVIII,
including, without limitation, Landlord’s rights to approve any Remedial Work
(as defined below) or the contractors and consulting engineers retained in
connection therewith.


 


(c)           The foregoing indemnity shall not apply to any
contamination of the Premises caused by any act or omission of Landlord or its
contractors, subcontractors, agents or employees 


 


66

















 


or any other lessee, licensee, or third party contractor of Landlord or
their contractors, subcontractors, agents or employees.


 


Section 18.6         Remedial Work


 


In the event
that any investigation, site monitoring, containment, cleanup, removal,
restoration or other remedial work of any kind or nature (the “Remedial Work”) is required by any applicable local, state
or federal law or regulation, any judicial order, or by any governmental entity
or person because of, or in connection with, the current or future presence,
suspected presence, release or suspected release of a Hazardous Substance in or
into the air, soil, groundwater, surface water or soil vapor at, on, about,
under or within the Premises (or any portion thereof), if such Remedial Work is
the obligation of Tenant pursuant to this Article XVIII, Tenant
shall within thirty (30) days after written demand for performance thereof by
Landlord (or such shorter period of time as may be required under any
applicable law, regulation, order or agreement), commence to perform, or cause
to be commenced, and thereafter diligently prosecute to completion within such
period of time as may be required under any applicable law, regulation, order
or agreement, all such Remedial Work at Tenant’s sole expense in accordance
with the requirements of any applicable governmental authority or Environmental
Law.  All such Remedial Work shall be
performed by one or more contractors, approved in advance in writing by
Landlord, which approval shall not be unreasonably withheld, and under the supervision
of a consulting engineer approved in advance in writing by Landlord.  All costs and expenses of such Remedial Work
shall be paid by Tenant, including, without limitation, the charges of such
contractor(s) and/or the consulting engineer, and Landlord’s actual, customary
and reasonable attorneys’ fees and costs incurred in connection with monitoring
or review of such Remedial Work.  In the
event Tenant shall fail to timely commence, or cause to be commenced, or fail
to complete any such required Remedial Work required to be undertaken by Tenant
within the time required above, Landlord may, but shall not be required to,
cause such Remedial Work to be performed and Tenant shall reimburse Landlord
for all reasonable costs and expenses thereof, or incurred in connection
therewith within thirty (30) days of Landlord’s delivery of written
documentation of the same.


 


Section 18.7         Landlord
Studies


 


Landlord shall
have the right, no more than once every other year, at Landlord’s sole cost and
expense, to engage an environmental consultant selected by Landlord in
consultation with Tenant, to review compliance by Tenant with all applicable
laws and standards existing at such time with respect to the practice relating
to contamination or hazardous waste methods, conditions and procedures and
Tenant’s development of a plan to identify, contain and remediate problems
caused by such Hazardous Substances.  The
foregoing sentence shall not be deemed to require an environmental compliance audit,
unless otherwise reasonably recommended pursuant to such review.  In the event that Landlord reasonably believes
that there may be a violation or threatened violation by Tenant of any
Environmental Law or a violation or threatened violation by Tenant of any
covenant under this Article XVIII, Landlord is authorized, but not
obligated, at its cost and expense, by itself, its agents, employees or workers
to enter at any reasonable time following reasonable notice, so long as
Landlord uses its reasonable best efforts to not unduly interfere with Tenant’s
normal conduct of business, upon any part of the Premises for the 


 


67

















 


purposes of
inspecting the same for Hazardous Substances and Tenant’s compliance with this Article
XVIII, and such inspections may include, without limitation, soil borings.


 


All costs and
expenses which are specified to be the obligation of Tenant under this Article
XVIII, but are paid by Landlord shall be immediately due and payable as
Additional Rent within ten (10) days after written demand and shall bear
interest at the Default Rate from the date of notice of such payment by
Landlord and the expiration of any grace period provided herein until repaid.


 


“Environmental
Laws” shall mean any federal, state or local law,
statute, ordinance or regulation pertaining to health, industrial hygiene,
hazardous waste or the environmental conditions on, under, from or about the
Premises, including, without limitation, the laws listed in the definition of
Hazardous Substances below.


 


“Hazardous
Substances” shall mean any element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as a “hazardous substance”, “hazardous waste”
or “hazardous material” under any federal, state or local statute, regulation
or ordinance applicable to a Real Property, as well as any amendments and
successors to such statutes and regulations, as may be enacted and promulgated
from time to time, including, without limitation, the following: (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (codified in
scattered sections of 26 U.S.C., 33 U.S.C., 42 U.S.C. and 42 U.S.C. § 9601 et seq.); (ii) the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.); (iii) the Hazardous Materials Transportation Act (49
U.S.C. § 1801 et seq.); (vi) the Toxic
Substances Control Act (15 U.S.C. § 2601 et
seq.); (v) the Clean Air Act (33 U.S.C. § 1251 et seq.); (vi) the Clean Air Act (42 U.S.C. § 7401 et seq.); (vii) the Safe Drinking Water Act
(21 U.S.C. § 349; 42 U.S.C. § 201 and § 300f et seq.); (viii) the National Environmental Policy Act of 1969 (42
U.S.C. § 3421); (ix) the Superfund Amendment and Reauthorization Act of
1986 (codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42
U.S.C.); (x) Title III of the Superfund Amendment and Reauthorization Act (40
U.S.C. § 1101 et seq.); (xi) Nevada Revised
Statutes (“NRS”) Sections 41.540 through 41.570;
(xii) NRS Chapter 445A; and (xiii) NRS Chapter 459.


 


All
representations and warranties contained in this Article XVIII shall
supersede any previous disclosures, written or oral, made by Tenant or its
agents to Landlord with respect to the Premises.  Landlord and any Mortgagee shall be entitled
to rely on the representations and warranties contained herein in pursuit of
its rights and remedies for a breach thereof without regard to any such
previous disclosures.


 


All
representations, warranties, covenants and indemnities of Tenant in this Article
XVIII first arising prior to the expiration or earlier termination of this
Lease shall continue to be binding upon Tenant, and its successors and assigns,
after the expiration or earlier termination of this Lease.


 


ARTICLE XIX —  FINANCIAL STATEMENTS


 


Tenant shall
furnish financial reports to Landlord as soon as available and in any event no
later than the 15th day of each calendar month for the prior
calendar month and no later than sixty 


 


68

















 


(60) days
after the end of each Lease Year for such Lease Year.  The monthly financial reports shall be in the
form reasonably agreed between Landlord and Tenant from time to time and
certified by the chief financial officer of Tenant and shall include the unaudited
balance sheet of Tenant as of the end of each calendar month, together with the
related statements of profit and loss and changes in financial position for
such period, setting forth in each case, in comparative form, the corresponding
figures for the same month in the preceding Lease Year.  The annual financial reports shall be in the
same form but based upon the Lease Year instead of the calendar month, but
shall be audited and prepared by an independent certified public accounting
firm of recognized standing.  All
financial reports furnished by Tenant to Landlord hereunder shall be prepared
in accordance with generally accepted accounting principles consistently
applied.  Landlord shall keep such
financial reports confidential, subject to its right to disclose such reports
to existing or prospective Mortgagees and to any governmental authority,
including the Securities and Exchange Commission.  In addition to the foregoing, unless
prohibited from doing so by the Gaming Laws, Tenant shall provide Landlord with
copies of all financial information and reports furnished to Gaming Authorities
as required under applicable Gaming Laws.


 


ARTICLE XX —  LIMITATION OF LIABILITY


 


INTENTIONALLY
LEFT BLANK.


 


ARTICLE XXI —  MISCELLANEOUS PROVISIONS


 


Section 21.1         Waiver of
Jury Trial


 


It is mutually
agreed by and between Landlord and Tenant that the respective parties shall and
they hereby do waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way connected with this Lease, Tenant’s use
or occupancy of the Premises, and/or any claim of injury or damage excluding
any claim for personal injury or property damage.


 


Section 21.2         Certain
Additional Definitions


 


(a)           The term “Landlord” as
used herein shall mean only the owner or the mortgagee in possession for the
time being of the Premises, so that in the event of any sale, transfer, or
conveyance of the Premises, the prior owner of the Premises, as the Landlord
under this Lease, shall be and hereby is entirely freed and relieved of all
agreements, covenants and obligations of Landlord thereafter accruing under
this Lease (but not freed from obligations arising prior to such conveyance
while such party owned or was in possession of the Premises), and it shall be
deemed and construed without further agreement between the parties or their
successors in interest or between the parties and the purchaser, transferee or
grantee at any such sale, transfer or conveyance that such purchaser,
transferee or grantee has assumed and agreed to carry out any and all
agreements, covenants and obligations of Landlord hereunder.


 


(b)           The term “Tenant” as
used herein shall mean the tenant named herein, and from and after any valid assignment
or transfer in whole of said Tenant’s interest under this Lease pursuant to the
provisions of Article IX, shall mean only the assignee or transferee
thereof; but the foregoing shall not release the assignor or transferor from
liability under this Lease.


 


69

















 


(c)           The
words “enter”, “re-enter”,
“entry” and “re-entry”
as used in this Lease shall not be restricted to their technical legal meaning.


 


(d)           The
use herein of the neuter pronoun in any reference to Landlord or Tenant shall
be deemed to include any individual Landlord or Tenant, and the use herein of
the words “successor and assigns” or “successors or assigns” of Landlord or Tenant shall be
deemed to include the heirs, executors, administrators, representatives and
assigns of any individual Landlord or Tenant.


 


Section 21.3         Construction
of Lease


 


(a)           The
article, section and other headings and section titles used in this Lease are
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope or intent of this Lease nor in any way affect this
Lease.


 


(b)           This
Lease shall be governed by and construed in accordance with the laws of the
State of Nevada, without resort to conflict of laws principles.


 


(c)           This
Lease contains the entire agreement between the parties and may not be extended,
renewed, terminated or otherwise modified in any manner except by an instrument
in writing executed by the party against whom enforcement of any such
modification is sought.


 


(d)           All
prior understandings and agreements between the parties and all prior working
drafts of this Lease are merged in this Lease, which alone expresses the
agreement of the parties.  The parties
agree that no inferences shall be drawn from matters deleted from any working
drafts of this Lease.


 


(e)           The
agreements, terms, covenants and conditions herein shall bind and inure to the
benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and, except as is otherwise provided herein, their
assigns.


 


(f)            If
any provision of this Lease shall be invalid or unenforceable, the remainder of
the provisions of this Lease shall not be affected thereby and each and every
provision of this Lease shall be enforceable to the fullest extent permitted by
law.


 


(g)           The
parties took equal part in drafting this Lease and no rule of construction that
would cause any of the terms hereof to be construed against the drafter shall
be applicable to the interpretation of this Lease.


 


Section 21.4         Notices


 


Notice
whenever provided for herein shall be in writing and shall be given either by
personal delivery, overnight express mail or by certified or registered mail,
return receipt requested, to Landlord at the address hereinabove set forth, and
to Tenant at the address hereinabove set forth, or to such other persons or at
such other addresses as may be designated from time to time by written notice
from either party to the other.  Notices
shall be deemed given (i) when delivered personally if delivered on a Business
Day (or if the same is not a Business Day, then the next Business Day after
delivery), (ii) three (3) Business Days after being sent by United States mail,



 


70

















 


registered or
certified mail, postage prepaid, return receipt requested or (iii) if delivery
is made by Federal Express or a similar, nationally recognized overnight
courier service for 9:00 a.m. delivery, then on the date of delivery (or if the
same is not a Business Day, then the next Business Day after delivery), if
properly sent and addressed in accordance with the terms of this Section
21.4.


 


Section 21.5         No
Brokers


 


Landlord and
Tenant each represent and warrant to the other party that such party has not
dealt with any real estate broker in connection with this Lease, and Landlord
and Tenant agree to indemnify the other party and save the other party harmless
from any and all claims for brokerage commissions by any other person, firm,
corporation or other entity claiming through such party to have brought about
this Lease transaction.  The provisions
of this Section 21.5 shall survive the expiration or earlier termination
of this Lease.


 


Section 21.6         Memorandum
of Lease


 


A memorandum
of this Lease as set forth on Exhibit “21.6” attached hereto and
incorporated herein by this reference shall be recorded.  The memorandum of lease shall incorporate the
basic terms and conditions hereof but shall delete any statement or mention of
the rental payments.


 


Section 21.7         Time;
Force Majeure


 


Time is of the
essence of each and every provision of this Lease.  The time within which either party hereto
shall be required to perform any act under this Lease, other than the payment
of money, shall be extended by a period of time equal to the number of days
during which performance of such act is delayed by strikes, lockouts, acts of
God, governmental restrictions, failure or inability to secure materials or
labor by reason of priority or similar regulation or order of any governmental
or regulatory body, enemy action, civil disturbance, fire, unavoidable
causalities or any other cause beyond the reasonable control of either party
hereto.


 


Section 21.8         Waiver
of Default


 


The waiver by
either party of any default in the performance by the other of any provision,
covenant or condition contained in this Lease shall not be construed to be a
waiver of any preceding or subsequent default of the same or any other
provision, covenant or condition contained herein.


 


Section 21.9         Attorneys’
Fees


 


If either
party shall file any action or bring any proceeding against the other party
arising out of this Lease or for the declaration of any rights hereunder, the
prevailing party therein shall be entitled to recover from the other party all
costs and expenses, including reasonable attorneys’ fees, incurred by the
prevailing party as such party is determined by a court, an arbitrator or by
settlement.  Such attorneys’ fees shall
be deemed to have accrued on the commencement of such action or proceeding and
shall be paid whether or not such action is prosecuted to judgment.


 


71

















 


Section 21.10       Hold
Harmless


 


If either
party (“Secondary Party”), without its fault, is
made a party to litigation instituted by or against the other party or by or
against any person holding under or through the other party (“Primary Party”), and if defense of such litigation is not undertaken
by any insurance carrier under its policy coverage obligations, the Primary
Party shall save and hold the Secondary Party harmless from any liability or
judgment rendered against the Secondary Party, or the Premises or any part
thereof, and shall pay to the Secondary Party all costs and expenses, including
reasonable attorneys’ fees, incurred by the Secondary Party in connection
therewith.


 


Section 21.11       Sublease,
Subordination and Attornment


 


(a)           Landlord
and Tenant acknowledge and agree that this Lease is a sublease and that
Landlord is leasing the Premises from Prime Landlord pursuant to the Prime
Lease.  The Prime Lease is Exhibit
21.11(a) to this Lease.  This Lease
and the rights of Tenant herein are subject and subordinate in all respects to
the Prime Lease.


 


(b)           Concurrently
with the execution of this Lease, Prime Landlord and Tenant are entering into a
Subordination, Attornment and Non-Disturbance Agreement in the form set forth
in Exhibit 21.11(b).


 


(c)           Landlord
shall cause Prime Landlord to fully perform all of its obligations under this
Lease and the Prime Lease.


 


(d)           In
each instance in this Lease where the consent, approval or cooperation of Prime
Landlord and Landlord are required, if Landlord provides such consent, approval
or cooperation, Landlord shall cause Prime Landlord to provide its consent,
approval or cooperation at same time that such consent, approval or cooperation
is provided by Landlord.  In each
instance in this Lease where notice to Landlord and Prime Landlord is required,
notice given to one of them shall be deemed notice to both of them.


 


Section 21.12       Counterparts
and Facsimile Signatures


 


This Lease may
be entered into in more than one counterpart, each of which shall be deemed an
original when executed, and which together shall constitute one and the same
Lease.  The Parties agree that facsimile
signatures shall be binding with respect to this Lease.


 


72

















 


IN WITNESS
WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the
date first set forth opposite their respective signatures below.


 


	
   

  	
  “Landlord”

  
	
   

  	
   

  
	
   

  	
  HOTSPUR CASINOS NEVADA, INC., 

  a Nevada corporation

  
	
   

  	
   

  
	
  Executed on April 1, 2002

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Thaddas L. Alston 

  	
   

  
	
   

  	
  Its: President, Thaddas L. Alston

  
	
   

  	
   

  
	
   

  	
  “Tenant”

  
	
   

  	
   

  
	
   

  	
  RAMPART RESORT MANAGEMENT, 

  LLC, 
a Nevada Limited Liability Company

  
	
   

  	
   

  
	
  Executed on April 1, 2002

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William J. Paulos 

  	
   

  
	
   

  	
  Its: Manager, William J. Paulos

  



 


73

















 


LIST OF EXHIBITS


 


	
  Exhibit A-1:

  	
   

  	
  Legal Description of Land

  
	
   

  	
   

  	
   

  
	
  Exhibit A-2:

  	
   

  	
  Site Plan of Hotel and Buildings

  
	
   

  	
   

  	
   

  
	
  Exhibit A-3:

  	
   

  	
  Site Plan of Casino, Required Food Facility

  
	
   

  	
   

  	
   

  
	
  Exhibit A-4:

  	
   

  	
  Casino Back-of-the-House Areas and Surveillance Room

  
	
   

  	
   

  	
   

  
	
  Exhibit A-5:

  	
   

  	
  Inventory of Casino FF&E and Casino Personal Property

  
	
   

  	
   

  	
   

  
	
  Exhibit A-6:

  	
   

  	
  Casino Intellectual Property and Patron Information

  
	
   

  	
   

  	
   

  
	
  Exhibit A-7:

  	
   

  	
  Illustration of Casino NOI Calculation

  
	
   

  	
   

  	
   

  
	
  Exhibit 2.5(b)

  	
   

  	
  Casino Name License Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit 2.6(e)

  	
   

  	
  Description of Promotional Activities

  
	
   

  	
   

  	
   

  
	
  Exhibit 2.11

  	
   

  	
  Form of Landlord Guarantor Guaranty

  
	
   

  	
   

  	
   

  
	
  Exhibit 2.12

  	
   

  	
  Exclusivity Provisions

  
	
   

  	
   

  	
   

  
	
  Exhibit 3.8:

  	
   

  	
  Form of Letter of Credit – Security Deposit

  
	
   

  	
   

  	
   

  
	
  Exhibit 5.7

  	
   

  	
  Transition Procedures – Casino Cash – Patch Lease and Guaranty

  
	
   

  	
   

  	
   

  
	
  Exhibit 5.8

  	
   

  	
  Deposit Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit 5.8(a)

  	
   

  	
  Description of Improvements and Costs – Tenant Initial Capital
  Investment

  
	
   

  	
   

  	
   

  
	
  Exhibit 5.10

  	
   

  	
  Current Licensor Standards

  
	
   

  	
   

  	
   

  
	
  Exhibit 9.5

  	
   

  	
  Assignment of Sublease(s)

  
	
   

  	
   

  	
   

  
	
  Exhibit 11.4

  	
   

  	
  Existing Mortgage Provision – Contest of Liens

  
	
   

  	
   

  	
   

  
	
  Exhibit 21.6:

  	
   

  	
  Memorandum of Lease

  
	
   

  	
   

  	
   

  
	
  Exhibit 21.11(a)

  	
   

  	
  Prime Lease

  
	
   

  	
   

  	
   

  
	
  Exhibit 21.11(b)

  	
   

  	
  Subordination, Attornment, and Nondisturbance Agreement

  



 


74

















 


	
  State of
  Nevada

  	
  )

  
	
   

  	
  ) ss

  
	
  County of
  Clark

  	
  )

  



 


The foregoing
instrument was acknowledged before me this 1 day of April, 2002, by Thaddas L.
Alston, President of Hotspur Casinos Nevada, Inc., a Nevada corporation.


 


 


	
   

  	
  Notary: 

  	
  /s/: Francine Mazzella

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Notarial Seal]

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
  Francine Mazzella

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary Public, Sate of Nevada

  
	
   

  	
   

  
	
   

  	
  My Commission Expires: 

  	
  1-24-06

  	
   

  
								



 


 


	
  State of
  Nevada

  	
  )

  
	
   

  	
  ) ss

  
	
  County of
  Clark

  	
  )

  



 


The foregoing
instrument was acknowledged before me this 1 day of April, 2002, by William J.
Paulos, Manager of Rampart Resort Management, LLC, a Nevada limited liability company.


 


	
   

  	
  Notary: 

  	
  /s/: Francine Mazzella

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [Notarial Seal]

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
  Francine Mazzella

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary Public, Sate of Nevada

  
	
   

  	
   

  
	
   

  	
  My Commission Expires: 

  	
  1-24-06

  	
   

  
								



 


75