**Exhibit 10.31**

 

**PATENT RIGHTS AND ROYALTY AGREEMENT**

 

THIS AGREEMENT(“Agreement”) is entered into as of this 2nd day of January, 2002,by and between Archon Corporation (“Archon”), a Nevada corporation, and DavidG. Lowden (“Lowden”), an individual.

 

WHEREAS,Archon is a gaming licensee in the State of Nevada possessing expertise in thegaming business; and

 

WHEREAS,Lowden has conceived of a new product idea, known as the “Slot Table,” forincorporating a slot machine into a table game, and is the owner of PatentNumber 5,630,586 in the United States Patent Office for said game (entitled“Combined Slot Machine and Table Game Apparatus and Method of Play,” filedApril 16, 1996, and granted May 20, 1997); and

 

WHEREAS Archonand Lowden wish to enter into an agreement whereby Archon designs, develops,manufactures, markets, and conducts gaming operations for the purpose ofexploiting the Slot Table exclusively in all jurisdictions worldwide allowingsuch activities.

 

NOW THEREFORE,in consideration of the foregoing and the mutual covenants and conditionscontained herein, Archon and Lowden agree as follows:

 

**Article I – DEFINITIONS**

 

As used inthis Agreement, the terms given below shall have the indicated meanings:

 

1.1                                 “Agreement”means this Patent Rights and Royalty Agreement under which Lowden shall grantArchon exclusive rights to the Slot Table,

 

1.2                               “CommencementDate” means the date this Agreement is entered into as set forth above.

 

1.3                                 “IntellectualProperties” shall mean patents, copyrights, trademarks, trade names,service marks, ideas, designs concepts techniques, discoveries or improvementsincluding any and all devices and computer software, whether or not patentableand applications pending thereto.

 

1.4                                 “Parties”shall mean Archon and Lowden and their successors and assigns, and “Party”shall mean either one of them.

 

 

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1.5                                 “Licensing”shall mean governmental licensing in any agreed upon jurisdiction tomanufacture, sell, lease, otherwise distribute, or conduct operation of theSlot Table.

 

1.6                                 “LowdenPatent Rights” shall mean U.S. Patent Number 5,630,586 all continuations,continuations-in-part, foreign counterpart applications and divisions of suchapplication; all patents issuing from such applications, continuations,continuations-in-part, foreign counterpart applications and divisions; and allreissues, reexaminations, renewals or extensions of any of the foregoing.

 

1.7                                 “LicensedProduct Improvements” shall mean all improvements of the Slot Table made oracquired by Lowden (to the extent that any improvements are transferable)during the term of this Agreement, along with any Intellectual Propertiesarising from said Licensed Product Improvements.

 

**Article II – CERTAIN PROPRIETARYTECHNOLOGY RIGHTS**

 

2.1                                 Ownership**–** Except as otherwise providedin this Agreement, each party shall retain all rights to ownership, title orinterests to any proprietary information, any inventions and any IntellectualProperties independently developed (without any design or technological inputfrom the other Party) by them prior to the Commencement Date of this Agreementand during the term of this Agreement. All independently developed Intellectual Properties shall remain theproperty of the Party that developed it. It is expressly agreed that all new jointly developed (with input fromthe other Party) Intellectual Properties that are developed as a direct resultof this Agreement, shall be the jointly owned properties of the Parties.

 

**Article III –GRANT OF RIGHTS**

 

3.1                                 LowdenGrant – Lowden shall grant to Archon exclusive worldwide rights, withoutrestriction, to make, have made, market, distribute, sell, lease, otherwisedistribute, install, use, service, and otherwise commercially exploit theLowden Patent Rights.  Transfer orsublicensing of the Lowden Patent Rights by Archon is prohibited under theterms of this Agreement, except where Lowden has approved, in his solediscretion, such transfer or sublicensing by separate written agreement.

 

a.                                       ShouldArchon fail to make any new sales, leases, or other commercial arrangementswith respect to the Slot Tables for a 

 

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period ofninety (90) days, then upon written notice from Lowden, and upon failure ofArchon to cure within thirty (30) days following said written notice fromLowden, Lowden shall have the right to convert Archon’s rights to the LowdenPatent from an exclusive to a non-exclusive basis.

 

b.                                      Atany time during the one (1) year period following one (1) year from the date offinal approval of the Slot Table (as designed and constructed by Archon) by theNevada Gaming Control Commission, in the event that the number of Slot Tableson which Lowden is being paid royalty fees declines below twenty-five (25) orduring the remainder of this agreement declines below fifty (50), then Lowdenshall have the right to send a thirty (30) day written notice of termination ofthis Agreement to Archon.

 

3.2                                 Improvements**–** If Lowden develops any LicensedProduct Improvements during the term of this Agreement, and provided thisAgreement is still in force, the Licensed Product Improvements shall be madeavailable to Archon under the terms of this Agreement without additional feesdue and owing from Archon to Lowden.

 

3.3                                 ForeignPatent Filings**–** Lowden mayfile such additional U.S. Patent Applications and foreign applications relatingto the Slot Table and any improvements thereon as Lowden sees fit.  In the event that Lowden wishes to file anyforeign applications relating to the Slot Table, Lowden shall first notifyArchon of his intent to file at least thirty (30) days prior to filing.  During the thirty-day notice period Archonshall have the option to pay all the costs related to the filings, in whichcase the intellectual property rights acquired shall be subject to the termsand conditions of this Patent Royalty Agreement, the same as the rights to U.S.Patent Number 5,630,586.  In the eventthat Archon elects not to pay the costs, then the foreign rights acquired shallnot be subject to the terms of this Agreement. In either event, Lowden shall be the owner of the foreign rightsacquired.

 

3.4                                 PatentMaintenance Fees**–** Allmaintenance costs for issued Lowden Patent Rights shall be paid by Archonduring the term of the Agreement. Archon shall have the right to notify Lowden that it has no furtherinterest in any particular patent requiring prosecution or maintenancepayments, and Lowden may then elect to make the maintenance payments himself orabandon the patent.

 

3.5                                 Marking**–** Archon shall mark the LowdenPatent Number on all applicable Slot Table products.

 

3.6                                 Noticesof Patent Prosecution**–** Lowdenagrees to provide copies of all documents or correspondence sent to, orreceived from, the United States Patent Office or 

 

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any foreign Patent Office relating to the Lowden patent rights withinthirty (30) days of their mailing or receipt.

 

**Article IV – PATENT ROYALTIES**

 

4.1                                 PatentRoyalty Amounts**–** Asconsideration for the grant of exclusive rights to the Lowden Patent Rights,Archon will pay to Lowden Three Hundred Dollars ($300.00) per month for eachSlot Table placed in operation by Archon and Three Hundred Fifty Dollars($350.00) per month for each Slot Table placed in operation by Archon which islinked to, or utilizes, a progressive jackpot.

 

4.2                                 PatentRoyalty Payments**–** Archon willpay Patent Royalties to Lowden on a quarterly basis.  More particularly, Archon will make Patent Royalty paymentswithin thirty (30) days after the close of each calendar quarter, namely on orbefore January 30, April 30, July 30, and October 30 of the applicableyear.  Such payments will be for allPatent Royalties accrued for the immediately preceding quarter.  Unless otherwise instructed by Lowden, thesepayments will be made by check directly to Lowden at the following address:

 

David G. Lowden

3221 S. Torrey Pines

Las Vegas, NV 89146.

 

Simultaneouslywith the payment of Patent Royalties, Archon will provide a Patent Royaltyreport quantifying the Patent Royalty amounts accrued during the previousquarter explaining the basis for such payments.  If no Patent Royalties Fees are due to Lowden for a particularquarter, Archon will provide a report to Lowden so stating.

 

**Article V – LOWDEN’S OBLIGATIONS**

 

5.1                                 Consultation**–** During the term of thisAgreement, Lowden agrees to provide ongoing consulting services to Archonrelating to the Slot Table product and any Licensed Product Improvementsdeveloped by Lowden.

 

**Article VI – WARRANTIES**

 

6.1                                 LowdenWarranties**–** Lowden warrantsthat:

 

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(a)                                  heis the owner of United States Patent Number 5,630,586 and he has the legalauthority to grant exclusive rights to the patent to Archon.

 

(b)                                 hisgrant of the exclusive rights to Archon under the Lowden Patent Rights does notviolate the terms and conditions of any other agreements which Lowden hasentered into.

 

6.2                                 ArchonWarranties**–** Archon warrantsthat:

 

(a)                                  itis a corporation in good standing under the laws of the State of Nevada.

 

(b)                                 byentering into this Agreement, it is not violating the terms and conditions ofany other agreements which Archon has entered into.

 

(c)                                  itssignatory to this agreement has the authority to represent and bind Archon and,to the extent necessary, has obtained the approval of the Board of Directors ofArchon.

 

6.3                                 NOWARRANTY**–** EXCEPT ASSPECIFICALLY STATED IN ARTICLE VI, THE PARTIES MAKE NO EXPRESS OR IMPLIEDWARRANTY AS TO ANY MATTER WHATSOEVER, WHETHER TANGIBLE OR INTANGIBLE, DEVELOPEDUNDER THIS AGREEMENT, OR THE OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR APARTICULAR PURPOSE OF ANY INVENTION, TEST, OR PRODUCT.

 

**Article VII – CONFIDENTIALITY**

 

7.1                                 Definitionof “CONFIDENTIAL INFORMATION”**–**For the purposes of this Agreement “CONFIDENTIAL INFORMATION” means allproprietary concepts, designs, customer data bases, documents, information,processes, procedures, data, results, conclusions, know-how and the like(including knowledge of the terms of and actions taken pursuant to thisagreement) which is disclosed or submitted orally, in writing, or in othertangible form which is designated as CONFIDENTIAL INFORMATION to one party bythe other in connection with this agreement. Lowden and Archon shall have no obligation with respect to any portionof such CONFIDENTIAL INFORMATION which:

 

(a)                                  isor later becomes generally available to the public by use, publication or thelike, through no fault of the party receiving the CONFIDENTIAL INFORMATION; or

 

(b)                                 isobtained from a third party who had legal right to disclose the same to theparty; or

 

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(c)                                  isalready possessed by the party as evidenced by the party’s written records,predating receipt thereof from the other party; or

 

(d)                                 isindependently developed by the receiving party without reference to thedisclosed information.

 

7.2                                 Confidentiality**–** The Parties agree that duringthe term of and any subsequent extension of this Agreement and for a period ofthree (3) years thereafter CONFIDENTIAL INFORMATION, as defined in Section 7.1,to one party by the other shall not be disclosed to any third party or used forany purpose other than those purposes specifically set forth in this Agreement,without the prior written consent of the other party.  It is understood that Lowden and Archon shall have no obligationwith respect to any portion of such CONFIDENTIAL INFORMATION as described inSection 7.1 (a)-(d).

 

**Article VIII – TERM AND TERMINATION**

 

8.1                                 Term**–** The initial term of thisAgreement shall be for five (5) years, and shall be extended thereafterautomatically for additional two (2) year terms unless termination is effectedby Archon within thirty (30) days prior to the next succeeding renewal term, orterminated earlier as specified in this Agreement.

 

8.2                                 Terminationby Mutual Consent**–** Unlessotherwise agreed, this Agreement shall end on the date provided in Paragraph8.1.  Archon and Lowden may elect toterminate this Agreement, or portions thereof, by mutual written consent at anyearlier date, and such consent shall be effective when signed by authorizedsignatories of both Parties.

 

8.3                                 Terminationfor Cause**–** If either party atany time commits a material breach of any covenant or agreement containedherein, and fails to remedy any such breach within ninety (90) days afterreceiving notice thereof, which notice shall specify the manner in which theAgreement has been breached by the other Party, such Party may, at its optionand in addition to any other remedy that it might be entitled to, terminatethis Agreement by notice in writing which will be effective upon receipt.

 

8.4                                 Terminationfor Failure of Market Test**–**In the event that the Slot Table fails Archon’s market tests, or does not proveto be a successfully marketable product despite Archon’s test efforts to marketthe product, Archon shall be entitled to terminate this Agreement upon thirty(30) days written notice.

 

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**Article – IX – MISCELLANEOUS**

 

9.1                                 PublicRelations/Use of Name**–** EachParty shall have the right to publicize the existence of this Agreement and usethe name of the other Party with prior written consent of the other Party forthe furtherance of the interests of this agreement.  Each Party agrees to furnish each other with the exact text to beused in publicity regarding the Slot Table and for approval, which will not beunreasonably withheld, prior to use. Each Party agrees to promptly complete a review of the proposedpublicity and deliver a response thereto.

 

9.2                                 Notices**–** All notices pertaining to orrequired by this Agreement shall be in writing and shall be signed by anauthorized representative.  They shallbe delivered by hand or sent by certified mail, return receipt requested, withpostage prepaid, addressed as follows:

 

If to Lowden:

David G.Lowden

3221 S. TorreyPines

Las Vegas, NV89146

 

If to Archon:

Thomas K.Land, Senior Vice President & CFO

ArchonCorporation

3993 HowardHughes Parkway, Suite 630

Las Vegas, NV89109.

 

Either Partymay change the addressee or address by notice in writing given to the otherParty.

 

9.3                                 BestEfforts**–** Archon and Lowdenagree that each will use their best efforts to ensure the success of theexploitation of the Slot Table.

 

9.4                                 AuditingRights**–** Lowden shall have theright to seek an independent audit of the Archon financial and accountingrecords relating to the Slot Table.

 

9.5                                 DesignatedSuccessors**–** The terms andconditions contained in this Agreement shall be binding upon and shall inure tothe benefit of the Parties hereto and their lawful legal representatives andsuccessors and assigns.

 

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9.6                                 Enforceabilityof Provisions**–** If anycovenant, obligation or provision contained in this Agreement or theapplication thereof to any person or circumstance shall to any extent befound to be invalid or unenforceable, the remainder of this Agreement or theapplication of the offending provision to any other person or circumstance,shall not be affected thereby and each covenant, obligation and provision ofthis Agreement shall be separately valid and enforceable to the fullest extentpermitted by law.

 

9.7                                 EntireAgreement**–** This Agreementconstitutes the entire agreement between the Parties and supersedes all priorcontracts, agreements and undertakings relating to the subject matter of thisAgreement between the Parties.  Thereare no representations, warranties, collateral agreements or conditionsaffecting this transaction other than as expressed or referred to herein inwriting.

 

9.8                                 Headings**–** The headings herein containedare intended for convenience of reference only and shall not form a part hereofnor affect the interpretation of this Agreement.

 

9.9                                 Jurisdiction**–** This Agreement shall be governedby and interpreted in accordance with the laws in force in the State ofNevada.  The Parties, as well as any oftheir employees or representatives, irrevocably agree to the exclusivejurisdiction of the Courts of the state of Nevada (or such judicial district ofa court of the United states as shall include the same) for the determinationof all matters arising hereunder.

 

9.10                           Modification**–** None of the terms of thisAgreement may be waived or modified except by an express agreement in writingsigned by authorized signatories of each Party.  The failure or delay of either Party in enforcing any of itsrights under this Agreement shall not be deemed a continuing waiver or amodification by such Party of such right.

 

9.11                           Severability**–** Any term or provision of thisAgreement which is invalid or unenforceable in any jurisdiction shall, as tosuch jurisdiction, be ineffective to the extent of such invalidity orunenforceability without rendering invalid or unenforceable the remaining termsand provisions of this Agreement or affecting the validity or enforceability ofany of the terms or provisions of this Agreement in any other jurisdictions, itbeing intended that all rights and obligations of the parties hereunder shallbe enforceable to the fullest extent permitted by law.

 

9.12                           Interpretation**–** All defined terms herein includethe plural as well as the singular.  Allreferences in this Agreement to designated “Sections” or “Paragraphs” and othersubdivisions are to the designated Sections and Paragraphs and othersubdivisions of this Agreement.  Allreferences in 

 

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this Agreementto any party shall include all permitted transferees of such party.  This agreement shall not be construed for oragainst either party by reason of the authorship or alleged authorship of anyprovisions hereof or by reason of the status of the respective parties.  This Agreement shall be construed reasonablyto carry out its intent without presumption against or in favor of eitherparty.

 

9.13                           PublicDisclosure**–** Unless otherwiserequired by law, any public disclosure of the subject matter of this Agreementshall be approved by the parties hereto prior to release, provided that suchapproval shall not be unreasonably withheld or delayed.

 

IN WITNESSWHEREOF, the Parties have caused this Agreement to be executed by their dulyauthorized representatives as follows:

 
| LOWDEN          | ARCHON  CORPORATION |
|-----------------|---------------------|
|            |                |
| By:             |                |   | By: |   |
| David G. Lowden |                |
|            |                |
| Dated:          |                |   | Dated: |   |
|                 |                     |  |  |  |  |  |

 

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