EXHIBIT 10.7


 


GROUND LEASE


 


THIS GROUND
LEASE (the “Lease”) is made and entered into as this 10th day of March,
2004, by and between the Linda Jeanine Isola Present Interest Trust and/or
assignees (“Lessor”), and Speakeasy Gaming of Fremont, Inc., a Nevada
corporation (“Lessee”).


 


RECITALS


 


A.            Lessor is the owner of
the fee title to certain real property located in the City of Las Vegas, County
of Clark, State of Nevada, more particularly described on Exhibit “A”
hereto (the “Real Property”), upon which there are certain existing
structures, improvements and fixtures or upon which, pursuant to the terms
hereof, there may be future structures, improvements and fixtures installed in
the future (collectively, the “Improvements” and together with the Real
Property, the “Premises”; 
Lessee’s personal property and other trade fixtures, which shall include
Gaming devices as defined in NRS 463.0155, and which may be removed from the
Real Property without causing material damage (“Personal Property”),
shall not be included within the definition of “Improvements”);


 


B.            The Premises were
formerly leased by Lessor to Horseshoe Club Operating Company, a Nevada
corporation (“Horseshoe Club Operating Company”); and 


 


C.            Lessee is purchasing
and acquiring from the Horseshoe Club Operating Company that certain hotel and
casino commonly known as the Binion’s Horseshoe Hotel & Casino, located at
128 East Fremont Street, Las Vegas, Nevada 89101 (the “Hotel/Casino”),
which is partially situated on the Real Property. 


 


AGREEMENT


 


NOW,
THEREFORE, in consideration of the foregoing Recitals and the covenants and
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows: 


 


1.             TERMINATION AND
LEASE.


 


1.1           Effective Date of
Lease and Termination of Horseshoe Lease. 
The obligations and liabilities under the former lease to Horseshoe Club
Operating Company shall be and hereby are declared terminated as of the date
hereof (the “Effective Date”). 
Irrespective of the foregoing, this Lease shall be superior to any lien
or encumbrance of any lender to Lessee in connection with Lessee’s purchase of
the Hotel/Casino, if any.  Lessor hereby
represents and warrants to Lessee that Lessor has not granted any rights of
first refusal, options, or other rights in or to the Premises other than to
Lessee as set forth herein or as recorded in the real property records of Clark
County, Nevada.


 


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1.2           Lease.  In consideration of the Rent (as defined
below) and the conditions, limitations, covenants and agreements set forth
below, Lessor does hereby lease, demise and let unto Lessee and Lessee does
hereby take, hire and lease from Lessor the Premises, together with all rights,
privileges, easements, and appurtenances thereto except as otherwise provided
herein.


 


2.             TERM.


 


2.1           Term:  This Lease shall continue for a term (the “Term”)
of seventy (70) years, commencing on March 11, 2004 (the “Commencement Date”),
unless earlier terminated pursuant to the terms hereof (the “Expiration Date”);
provided, however, if the Commencement Date is not the first day of a calendar
month, the Term shall be for seventy (70) years plus the period between the
Commencement Date and the first day of the next succeeding month.  Upon determination of the Commencement Date,
Lessor and Lessee shall execute the Commencement Date Memorandum in the form of
Exhibit “B” attached hereto.  


 


2.2           Lease Year.  As used herein, “Lease Year” shall
mean each twelve (12) month period commencing on January 1 of each calendar
year during the Term and continuing through December 31 of that calendar
year; provided, however, in the event the Term commences on a date other than
January 1, the first Lease Year shall be that shorter period commencing on the
first day of the Term and continuing through the next occurring December 31;
provided further, however, the final Lease Year shall be that period commencing
on the last occurring January 1 during the Term and continuing through the
Expiration Date.


 


2.3           Holding-Over.  Should Lessee continue in possession of the
Premises after the Expiration Date, such holding-over shall create a tenancy
from month to month only, upon the same terms and conditions as are set forth
in this Lease, except that Rent for any month during any holdover period shall
be One Hundred Fifty Percent (150%) of the Rent due in the final month of the
Term.


 


3.             RENT.


 


3.1           Rent.  Lessee shall pay to Lessor as and for rent
the annual amount of Seventy-Two Thousand and 00/100 Dollars ($72,000.00) (the
“Initial Rent”, and as adjusted by the Rent Adjustment (as defined
below), the “Rent”).  Rent shall
be payable in twelve (12) equal payments per annum in the amount of Six
Thousand and 00/100 Dollars ($6,000.00) per installment, in advance without
set-off or demand, on the first business day of each month.  If Lessee shall fail to pay within ten (10)
days of when due any Rent, Additional Rent or any other amount or charge to be
paid as Additional Rent by Lessee hereunder, such unpaid amount shall be
subject to a late charge equal to five percent (5%) of such unpaid amount. In
addition, any such unpaid amount shall bear interest from the thirtieth (30th)
day after the due date thereof to the date of payment at the rate of interest
of five percent (5%) per annum above the prime rate of interest published in
the Wall Street Journal (or any successor publication of equal financial
reputation should the Wall Street Journal cease to be published). The foregoing
are not exclusive of Lessor’s rights due to Lessee’s default under this Lease
and the remedies therefore.


 


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3.2           Rent Adjustment.  On March 1, 2009 and every five (5)
years thereafter during the Term (each an “Adjustment Date”), the Rent in
effect immediately prior to the Adjustment Date shall be adjusted upward by the
greater of five percent (5%) or the increase (if any) in the National Consumer
Price Index for Urban Wage Earners and Clerical Workers for all items published
by the Bureau of Labor Statistics of the U.S. Department of Labor (the “Index”)
during the five (5) year period immediately preceding the Adjustment Date (the
“Adjustment Period”).  On each
Adjustment Date, the adjustment for the increase in the Index for the
Adjustment Period shall be computed by multiplying the Rent in effect
immediately prior to the Adjustment Date by a fraction, the numerator shall be
the Index number on the Adjustment Date and the denominator shall be the Index
Number on the date five (5) years prior to the Adjustment Date.  


 


3.3           Additional Rent.  If Lessor at any time, by reason of Lessee’s
default, pays any sum or does any act that requires the payment of any sum (“Additional
Rent”), the sum paid by Lessor shall be due immediately from Lessee to
Lessor at the time the sum is paid, and if paid at a later date shall bear
interest at a rate of rate of five percent (5%) per annum above the prime rate
of interest published in the Wall Street Journal (or any successor publication
of equal financial reputation should the Wall Street Journal cease to be
published) from the date the sum is paid by Lessor until Lessor is reimbursed
by Lessee.  


 


4.             CONSTRUCTION AND
ALTERATION.


 


4.1           Construction and
Alteration.  At any time and from
time-to-time during the first sixty-five (65) years of the Term, upon
reasonable notice to but without the consent of Lessor, Lessee may, but is not
obligated to, at its sole cost and expense, demolish the existing Improvements,
construct new Improvements and/or remove, replace, alter, relocate, reconstruct
or add to any existing Improvement or future Improvements in whole or in part
and to modify or change the contour or grade, or both, of the Real Property
(collectively, “Construction”). 
During the last five (5) years of the Term, all Construction having an
aggregate budget of in excess of One Hundred Thousand Dollars ($100,000.00)
shall require the prior written consent of Lessor, which shall not be
unreasonably withheld. All salvage from any Construction shall be the sole
property of Lessee.


 


4.2                           Compliance.  All Construction shall be undertaken in a
good and workmanlike manner in compliance with all Applicable Laws (as defined
below), including, without limitation, obtaining all permits, inspections and
approvals of all Governmental Authorities (as defined below) or other body
having jurisdiction in connection with any Construction.  As used herein, “Applicable Laws”
means, without limitation, any and all federal, state and local laws, statutes,
rules, regulations, codes, ordinances, plans, orders, judgments, decrees,
writs, injunctions, notices, decisions or demand letters issued, entered or
promulgated pursuant to any, federal, state or local law and applicable
hereunder, and “Governmental Authority” means any Federal, state,
municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
instrumentality, body, court, tribunal, arbitrator or arbitral body, including,
without limitation, the Nevada Gaming Authorities (as defined below).


 


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4.3           Offsite Improvements.  In connection with any Construction, Lessee
may install offsite improvements it deems necessary or which may be required by
Governmental Authorities, including, without limitation, curbs, gutters,
sidewalks and driveway approaches. 
Lessee may further install or cause to be installed all necessary
utility lines and facilities.


 


4.4           Lessor Deliveries.  To facilitate Construction, Lessor agrees
that within fifteen (15) calendar days after receipt of written request from
Lessee to do so, Lessor shall:


 


(a)           Execute and deliver any
instrument, release or other document that may be required by any equipment
supplier or vendor whereby Lessor waives and/or releases any rights it may have
or acquire with respect to any Personal Property, which shall definition shall
include equipment or trade fixtures Lessee or any sublessee may affix to the
Premises, and agreeing that the same do not constitute realty regardless of the
manner the same are attached to the Premises (so long as Lessee repairs the
Premises to substantially their former state, reasonable wear and tear
excepted);


 


(b)           Join in and execute any
and all documents of any nature whatsoever in connection with Lessee’s dealings
with assessment districts;


 


(c)           Join in and execute any
and all applications for permits, licenses or other authorizations or documents
required by any Governmental Authorities or other body claiming jurisdiction in
connection with any Construction;


 


(d)           Join in any reasonable
grants for easements for electric, telephone, gas, water, sewer and such other
public utilities and facilities as may be reasonably necessary in the use,
operation or management of the Premises; and


 


(e)           Execute any and all
grants and other documents necessary to effectuate dedications of portions of
the Premises for public use which dedications shall be required by any
Governmental Authorities or other body claiming jurisdiction in connection with
any Construction.


 


4.5           Prior Notice for
Non-Responsibility.  Prior to the
commencement of any Construction, Lessee shall notify Lessor not less than
thirty (30) calendar days in advance in order that Lessor may post and maintain
on the Premises and file any notices of non-responsibility provided for under
any Applicable Law and Lessor shall have the right to enter upon the Premises
to post such notices of non-responsibility. 
Lessee shall pay and discharge all expenses incurred by Lessee for the
services of mechanics or for the cost of goods and materials delivered by
materialmen, and agrees to save and hold Lessor harmless from any claims by
such mechanics or materialmen for labor or services performed or goods delivered
at the instance or request of Lessee. 
Lessee shall have the right to contest the validity or amount of any
asserted lien, claim, or demand, and in such case Lessee shall defend, at its
own expense, any such suits, and shall discharge and satisfy any judgments
taken on account of claims of lien filed by mechanics or materialmen for work
ordered by Lessee.


 


4.6           Title to
Improvements.  All Improvements (as
defined herein) are, as of the Commencement Date, owned by the Lessee.  Upon the expiration or earlier termination
of this Lease, however, all Improvements shall become the property of the
Lessor.  Notwithstanding the


 


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foregoing, the Lessee owns, and shall continue to own upon the
expiration or earlier termination of the Lease, all Personal Property (as
defined herein).


 


5.             CONDITION AND USE OF
PREMISES.


 


5.1           Condition of
Premises.  Lessee has had an
opportunity to inspect the physical condition of the Premises and accepts the
same “AS IS” without any representation or warranty as to their condition by
Lessor, and Lessee is not relying upon any such representation or warranty;
provided, however, notwithstanding the foregoing, Lessor represents and
warrants to Lessee that as of the Effective Date, Lessor has received no notice
from any Governmental Authority asserting any violation of, any cleanup laws or
other environmental laws with respect to the Premises.


 


5.2           Use of Premises.  Lessee shall have the right to use the
Premises for any lawful commercial use and in accordance with all Applicable
Laws.  Lessee may, upon reasonable
notice to but without consent of Lessor, enter into agreements regarding zoning
changes or conditional use permits, and Lessor shall, upon receipt of Lessee’s
request, join with Lessee in such applications or approvals, but without cost
or expense to Lessor.


 


5.3           [Intentionally Deleted]


 


6.             TAXES.


 


6.1           Taxes.  Lessee shall pay all federal, state, county,
city, school district and municipal taxes, all assessments, both general and
special, including all special charges, benefit assessments or judgments for
local improvements and all other taxes, assessments or charges of every kind or
nature which have been levied or which may be levied against or may become due
or payable in respect of (a) the Real Property and the Improvements, and
Personal Property owned by, used by, or to be used by Lessee in the operation
of the Hotel/Casino, (b) the operations of the Hotel/Casino, including, without
limitation, all sales taxes, food and beverage taxes and rent taxes, and (c)
Rent (collectively, a “Tax” or “Taxes”); provided, however,
nothing contained in this Article 6 shall in any manner obligate Lessee to pay
any inheritance, transfer, estate or succession tax or any income or other tax
or excise on Rents that may be imposed upon Lessor by reason of any existing or
hereinafter enacted Applicable Law. 
Such Taxes shall be paid by Lessee directly to the appropriate taxing or
collecting authority subject to Lessee’s right to contest taxes set forth in Section
6.3.  Taxes for the first and final
Lease Years shall be prorated to the Commencement Date and the Expiration Date.


 


6.2           Delivery of Accounts.  In the event any statements, assessments or
notifications for Taxes are delivered directly to Lessor, Lessor shall
immediately deliver same to Lessee upon receipt thereof, and thereafter, Lessor
shall cooperate with Lessee to have all such subsequent statements, assessments
or notifications delivered directly to Lessee. 
Lessee shall not be liable for any interest or penalties resulting from
late payment of any such statements, assessments or notifications in the event
Lessor fails to deliver same to Lessee not less than fifteen (15) calendar days
prior to a delinquency date provided that Lessor received the statement at
least twenty-five (25) days prior to the delinquency date.


 


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6.3           Validity Contest.


 


(a) Lessee may
contest the validity or amount of any Tax agreed to be paid by Lessee or any
assessed valuation of the Real Property, the Improvements and any future
Improvements located thereon during the Term and may thereupon defer the
payment of any Tax so long as the validity or amount thereof shall be contested
by Lessee and by appropriate proceedings without expense to Lessor.  Should Lessee be unsuccessful in any such
contest, such Taxes and any interest or penalties resulting therefrom shall be
discharged by Lessee, Lessee shall hold Lessor harmless from all costs and
expenses that may result from such contest. 
Lessor shall not be required to join in any proceeding or contest
brought by Lessee unless the provisions of any Applicable Law requires that the
proceeding or contest be brought by or in the name of Lessor or any owner of
the Premises, in which case Lessor shall join in the proceeding or contest or
permit it to be brought in Lessor’s name without any cost to Lessor.  Upon Lessee’s reasonable request, Lessor
shall agree to appoint Lessee as Lessor’s attorney-in-fact for the purpose of
conducting any such contest and for obtaining information and material
necessary for the conduct of such contest.


 


(b)  In the event Lessee is successful in
presenting such contest and the result of such contest reduces the amounts
payable under Section 6.1, then Lessee shall be entitled to a full benefit of
such contest via a credit for amounts payable hereunder.  Said credit shall be taken immediately and
applied against subsequent monthly payments to Lessor.


 


6.4           Assessment.   Provided that the repayment term of said assessment
is complete on or before the Expiration Date, Lessor agrees: (a) during the
Term to join in and permit an assessment to be imposed or levied against all or
any portion of the Real Property, the Improvements or any future Improvements
located thereon pursuant to any Applicable Laws and (b)  that if at any time during the Term any
Governmental Authority undertake to create an improvement or special assessment
district, the proposed boundaries of which shall include the Real Property,
Lessee shall be entitled to appear in any proceeding relating thereto and to
exercise all rights of the landowner to have the Real Property excluded from
such district, or to determine the degree of benefit to the Real Property
resulting therefrom.  Should an
assessment to be imposed or levied against all or any portion of the Real
Property, the Improvements or any future Improvements located thereon pursuant
to any Applicable Laws provide for a repayment term beyond the Expiration Date,
Lessor shall be entitled to object to the same and to appear in its own stead
and Lessee shall have no rights of approval or appearance in said proceedings
except to the extent said assessment would be imposed and payable during the
term.  In such event, Lessee should be
permitted to appear and the parties coordinate efforts to reduce said
assessment.  Should either party hereto
receive any notice or other information relating to any proposed creation of
such district, the proposed boundaries of which include the Real Property, such
party shall promptly advise the other party in writing of such receipt.  Lessor shall reasonably cooperate with
Lessee in any such proceeding in the event Lessee should so request, but
otherwise Lessor shall not oppose Lessee in any such proceeding.


 


7.             UTILITIES.


 


7.1           Payment of Utilities.  As of the Commencement Date, Lessee shall
promptly pay all charges for fuel, gas, light, power, water, sewage, garbage
disposal, trash, telephone and other


 


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utilities and costs of every nature incurred in connection with
Lessee’s use and possession of the Premises during the Term (the “Utilities”),
all of which shall be paid directly to the public utility or private company
supplying the same when due and without delinquency.  Lessee covenants to obtain and maintain the billing address for
all Utilities, during the Term, in its name. 
Lessor shall not be responsible for any loss, cost, damage, expense or
liability Lessee may sustain as a result of a change in character of the Utility
or as a result of any public or private company’s failure to supply or
reduction in any of Utility.


 


7.2           Delivery of Accounts.  In the event any statements, assessments or
notifications for Utilities are delivered directly to Lessor, Lessor shall immediately
deliver same to Lessee upon receipt thereof, and thereafter, Lessor shall
cooperate with Lessee to have all such subsequent statements, assessments or
notifications delivered directly to Lessee. 
Lessee shall not be liable for any interest or penalties resulting from
late payment of any such statements, assessments or notifications in the event
Lessor fails to deliver same to Lessee not less than fifteen (15) calendar days
prior to a delinquency date provided that Lessor received the statement at least
twenty-five (25) days prior to the delinquency date.


 


8.             INSURANCE.


 


8.1           Property Insurance.  Lessee shall, at all times during the Term
and at its own cost and expense, carry fire insurance and full extended
coverage protection upon the Premises, including, without limitation, all
Improvements and all of Lessee’s Personal Property in, on or about the
Premises.  Such insurance protection
shall cover losses in aggregate amounts of not less than one hundred percent
(100%) of the full insurable value thereof, with a full replacement cost rider,
endorsed and attached thereto.  Such
policy shall be payable to Lessee and any Lender (as defined below), as their
interests may appear, and the parties agree that all insurance proceeds when
and if collected according to the terms of any such insurance policy shall be
used to the extent necessary for the restoration or reconstruction of the
Improvements and Personal Property, all of such proceeds being pledged having
been dedicated by the parties for that purpose to the extent necessary
therefor; provided.


 


8.2           Liability Insurance.  Lessee shall, at all times during the Term
and at its own cost and expense, maintain in full force and effect, policies of
liability insurance under the terms of this Lease and Lessor shall be
indemnified and protected against any and all claims for injuries or damages,
suffered or alleged to have been suffered by any person or persons while in, on
or about the Premises and for property damage arising from any and all demands,
loss or liability and resulting at any time or times from the injury or death
of any person or persons or from damage to any and all property, however
arising, including, without limitation, food handling, with limits of liability
reasonably and generally held with respect to reasonably similar properties
located in the City of Las Vegas, Nevada. 
The insurance required to be provided by the provisions of this
Section 8.2 may be provided under the terms of any blanket liability
insurance policy carried by Lessee.


 


8.3           Automobile Insurance.  Lessee shall, at all times during the Term
and at its own expense, maintain in full force and effect, policies of
automobile liability insurance under the terms of this Lease and Lessor shall
be indemnified and protected against any and all claims for injuries or


 


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damages, suffered or alleged to have been suffered by an person or
persons by vehicles owned, non-owned, or hired for use during the Term by or on
behalf of Lessee with limits of liability reasonably and generally held with
respect to reasonably similar properties located in the City of Las Vegas,
Nevada.


 


8.4           Business
Interruption Insurance.  Lessee
shall, at all times during the Term and at its own expense, maintain in full
force and effect, a policy of business interruption insurance sufficient to pay
the Rent and all other sums due hereunder.


 


8.5           Insurance Policies –
General.


 


8.5.1        Cancellation.  Each policy of insurance required by this
Article 8 shall provide that the same may not be cancelled upon less than
thirty (30) calendar days’ prior written notice to Lessor.  Lessee shall direct Lessee’s insurance
carriers to send copies of any and all notification of pending cancellation of
insurance for any purpose whatsoever direct to the attention of Lessor at least
thirty (30) calendar days prior to cancellation.


 


8.5.2        Additional Insured.  Lessor shall be named as an additional
insured (and at Lessor’s option, any other persons, firms or corporations
designated by Lessor shall be additional named insureds provided there is no
additional cost or charge to Lessee) under each policy of insurance required
hereunder to the extent its interest may appear.


 


8.5.3        Subrogation.  Each policy of insurance required by this
Article 8 shall contain an express waiver of any and all right of subrogation
thereunder against Lessor, its agents, employees, servants or contractors.  All such policies shall be written as
primary policy and not contribution with or in excess of the coverage, if any,
that Lessor may carry.  Any provision of
this Lease notwithstanding, the amounts of all insurance required hereunder to
be paid by Lessee shall be not less than an amount sufficient to prevent Lessor
from becoming a co-insurer.


 


9.             DAMAGE, DESTRUCTION AND
CONDEMNATION.


 


9.1           Damage or
Destruction.


 


9.1.1        Fire
or Other Casualty.  If the Premises
shall be damaged by fire or other casualty insured against by Lessee’s fire and
extended coverage insurance policy covering the Premises, and the Premises can
be fully repaired, in Lessee’s commercially reasonable opinion, within three
hundred and sixty-five (365) days from the date of such damage, Lessee, at
Lessee’s expense, shall repair such damage; provided, however, Lessee shall
have no obligation: (a) to repair if such damage occurs during the last five
(5) years of the lease term (excluding any renewal option which is unexercised
at the date of such damage);  (b) to
repair if the Lessee’s lender does not allow the insurance proceeds to be used
for such purposes; or (c) to repair if the Premises cannot be fully repaired
within three hundred sixty-five (365) days from the date of such damage.  Except as otherwise provided herein, until
the repairs to the Premises are substantially completed, the monthly rent shall
abate pro-rata based on the part of the Premises which is unusable by Lessee to
the extent of any business interruption insurance proceeds paid in lieu thereof
to Lessor.  If Lessee decides not to
rebuild the


 


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Premises, Lessee may, at its option, cancel and terminate this Lease by
giving Lessor notice in writing, within sixty (60) days of the occurrence of
the event causing the damage, of its intention to cancel this Lease, whereupon
the term of this Lease shall terminate within thirty (30) days after such
notice is given and Lessee shall vacate the Premises and surrender the same to
Lessor.  Concurrently with the surrender
of the Premises, the Lessee shall pay to the Lessor an amount equal to twelve
(12) months rent.  In no event shall
Lessee be liable to Lessor except to the extent provided in this Section 9.1.1,
and without limiting the foregoing, Lessee shall not be responsible for
consequential damages or lost rental income.


 


9.2           Condemnation.  If the Real Property and/or any part thereof
shall be taken or condemned, for any public or quasi-public purpose or use by
any competent entity in appropriate proceedings, or by any right of eminent
domain, the Lessor and Lessee shall request that the Award shall be divided by
the presiding court between loss of value of (A) loss of value of the Lessee’s
possessory rights in and to the Real Property leased pursuant to this Lease
(the “Possessory Rights Value”), (B) loss of value of Lessee’s interest
in the Improvements (the “Improvement Value”),  and (C) loss of value of the Lessor’s fee interest in the Real
Property, as encumbered by the Lease and exclusive of Lessee’s Possessory
Rights Value pursuant to this Lease (the “Fee Value”).  If such taking or condemnation occurs at any
time during the first ten (10) Lease Years, Lessee shall be entitled to the
portion of such Award attributable to the Possessory Rights Value, and Lessor
shall be entitled to the portion of such Award attributable to the and
Improvement Value and the Fee Value.  If
such taking or condemnation occurs at any time after the first ten (10) Lease
Years, Lessee shall be entitled to the portion of such Award attributable to
the Possessory Rights Value and Improvement Value, and Lessor shall be entitled
to the portion of such Award attributable to the Fee Value.


 


10.           ASSIGNMENT, SUBLETTING
AND ENCUMBRANCES.


 


10.1         Assignment by Lessee.  Subject to the provisions of this Section
10.1, and provided there is then no uncured Event of Default, Lessee shall have
the right, at any time and from time to time after the Effective Date to
assign, sell or otherwise transfer its interest, in whole or in part, in this
Lease and the estate created by this Lease; provided, however, if such
assignment is to a purchaser of all of that real property more particularly
described on Exhibit ”C” hereto (“Block 15”), such
assignment shall be upon reasonable notice to but without the necessity of
consent of Lessor; provided further, however, if such assignment is to a
purchaser other than a purchaser of all of Block 15, such assignment shall be
upon the reasonable consent of Lessor, which consent shall not be unreasonably
withheld, delayed or conditioned. 
Lessee shall not be released from liability hereunder in the event of such
assignment, sale or other transfer without the prior written agreement of
Lessor releasing Lessee from such liability.


 


10.2         Subletting by Lessee.  Provided there is then no uncured Event of
Default, Lessee shall have the right, at its sole option, at any time and from
time to time after the Effective Date to sublet all or any part or parts of the
Premises and to assign, encumber, extend, or renew any sublease; provided,
however, Lessee shall ensure that such sublease entered into after the
Effective Date shall contain a provision requiring such sublessee, so long as
the terms of such sublease are recognized


 


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and honored, to attorn to Lessor if Lessee defaults under this Lease,
and if the sublessee is notified of Lessee’s default and instructed to make
sublessee’s rental payments to Lessor.


 


10.3         Assignment and Sale by
Lessor.  Assignment of this Lease or
sale of the Real Property by Lessor shall be freely permitted.  Lessor shall give Lessee reasonable notice
of said assignment or sale.


 


10.4         Encumbrances.


 


10.4.1      By Lessor.  At all times during the Term, Lessor shall
have the right to encumber or hypothecate to any mortgagee of any mortgage or
beneficiary of a deed of trust encumbering Lessor’s leasehold estate in this
Lease or Lessor’s fee interest in the Real Property.  If the interest of Lessor shall be acquired by any person (a “Purchaser”)
by reason of foreclosure of an encumbrance or deed in lieu thereof, and such
Purchaser succeeds to the interest of Lessor hereunder, Lessee hereby attorns
to such Purchaser as lessor and agrees to be bound to such Purchaser under all
provisions of this Lease for the balance of the Term.  Lessor agrees to execute such documents as may reasonably be
required by Lessee to be executed to affect such attornment, provided such
documents are acceptable in form and substance to Lessor, in the exercise of
its reasonable discretion. 
Notwithstanding the foregoing, Lessor shall not encumber the Real
Property unless such lender or beneficiary provides to Lessee a certificate of
non-disturbance in form and substance reasonably acceptable to Lessee’s counsel
agreeing that so long as Lessee pays the Rent, and otherwise complies with its
obligations hereunder, its leasehold estate and possession of the Real Property
shall not be affected by any default under the encumbrance placed upon the Real
Property by Lessor.  The foregoing shall
not be deemed to be an agreement by Lessor to subordinate its fee interest in
the Real Property.


 


10.4.2      By Lessee.  Without the necessity of the consent of
Lessor, Lessee shall have the right from time to time and at any time after the
Effective Date and during the Term to encumber or hypothecate to any mortgagee
of any mortgage or beneficiary of a deed of trust encumbering Lessee’s
leasehold estate in this Lease or Lessee’s leasehold interest in the Premises
(a “Lender”).  The execution and
delivery of an encumbrance shall not be deemed to constitute an assignment or
transfer of this Lease nor shall any Lender be deemed an assignee or transferee
of this Lease so as to require such Lender to assume the performance of any of
the covenants or agreements on the part of Lessee to be performed under this
Lease.  Promptly after execution and
delivery of an encumbrance, Lessee shall send to Lessor a copy of all relevant
documentation delivered in connection therewith.


 


10.4.3      Delivery of Additional
Documents.  Each of Lessor and
Lessee agrees that from time to time, if so requested by the other and if doing
so will not substantially and adversely affect its economic interests under
this Lease, it will cooperate with the other in providing documentation
concerning the terms of this Lease so as to meet the reasonable needs or
requirements of any lender which is considering furnishing or which has
furnished any of the financing referred to this Article 10; provided, however,
that nothing herein shall be construed as a requirement or agreement on the
part of either party that the Lease be amended..  Without limiting the foregoing, Lessee and Lessor shall, at any
time and from time to time during the Term and upon not less than fifteen (15)
calendar days’ prior request by the other party, execute, acknowledge and
deliver to the


 


10

















 


other an estoppel certificate in recordable form executed by an
authorized representative or officer of the requested party, stating that this
Lease is in full force and effect, unmodified and unamended (or stating the
modifications or amendments in effect), such defenses or offsets as are claimed
by the requested party, if any, the date to which all Rent has been paid, and
such other information concerning the Lease, the Premises and the requested
party as the requesting party or said designee may reasonably request, it being
intended that any such statement delivered pursuant to this Section 10.4.3 may
be relied upon by any prospective lender or assignee of any interest in the
Premises.  Failure to deliver such
estoppel certificate within thirty (30) calendar days shall be conclusive upon
the party failing to deliver that the provisions and statements set forth in
any proposed estoppel certificate delivered with the request are true and
correct in all respects.  Lessor may, in
its sole and absolute discretion, consent to subordinate its fee interest in
the Real Property.


 


11.           REPAIRS.


 


11.1         Repairs and
Maintenance.  During the Term,
Lessor shall not be required to maintain or make any repairs, or replacements
of any nature or description whatsoever to the Improvements.  Lessee hereby expressly waives the right to
make repairs at the expense of Lessor as provided for by any Applicable Law in
effect at the Effective Date or that may hereinafter be enacted.  Lessee shall not commit or permit waste to occur
to the Improvements.


 


11.2         Lessee’s Obligations.  Throughout the Term, Lessee shall, at
Lessee’s sole cost, maintain the Improvements in good and reasonable condition
and in accordance with all Applicable Laws, and shall make whatever repairs and
replacements are required to keep same in good and reasonable condition and as
required by such Applicable Laws. 
Lessee shall additionally maintain in good and reasonable condition all
sewers, electrical and plumbing facilities and conduits leading from and into
the Improvements, and shall perform ordinary maintenance on the interior
portions of the Improvements, including, without limitation, the painting,
electrical facilities, plumbing fixtures, floor drains, floor covering, light
fixtures, air conditioning and heating equipment, and plate glass.  Lessee shall not cause or permit any waste,
damage or injury to the Improvements, nor permit any nuisance thereon.


 


11.3         Right to Contest.  Lessee shall have the right to contest by
appropriate judicial or administrative proceedings, without cost to Lessor, the
validity or application of any Applicable Laws requiring that Lessee repair,
maintain, alter or replace the Improvements in whole or in part, and there
shall not be an Event of Default for Lessee for failing to do such work until a
reasonable time following final determination of such contest.


 


12.           INDEMNITY.


 


12.1         Indemnity by Lessee.  Lessee shall defend (with legal counsel of
Lessor’s choice) and hold Lessor harmless from all damages arising out of any
damage or injury to any person or property occurring, in, on, or about the
Premises during the Term, except that Lessor shall be liable to Lessee for
damages to Lessee, its Affiliates, heirs, legal representatives, successors,
assigns, agents, employees, servants, contractors, licensees and invitees
arising out of any damage or injury to any person or property occurring in, on,
or about the Premises resulting from the gross negligence or


 


11

















 


willful misconduct of Lessor or its agents, employees, servants,
contractors, assignees or other authorized representatives.  “Affiliate” means with respect to a
specified party, any other individual or entity who or which is
(a) directly or indirectly controlling, controlled by or under common
control with the specified party, or (b) any member, stockholder,
director, officer, manager, or comparable principal of, or relative or spouse
of, the specified party.  For purposes
of this definition, “control”, “controlling”, “controlled”
mean the right to exercise, directly or indirectly, more than ten percent (10%)
of the voting power of the stockholders, members or owners and, with respect to
any individual, partnership, trust or other entity or association, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled entity.


 


12.2         Joint Indemnity.  Without limiting the generality of each
party’s right to assert any claim against the other for breach of any of the
other’s representations, warranties or covenants contained in this Lease,
Lessor and Lessee indemnify and hold harmless the other, their respective
Affiliates, heirs, legal representatives, successors and assigns, from and
against any loss, damage, liability or expense, including, without limitation,
reasonable attorneys’ fees, arising from or in connection with any such party’s
misstatement, misrepresentation or breach of any representation, covenant or
warranty set forth in this Lease.


 


13.           DEFAULT.


 


13.1         Lessee’s Default.
In the event Lessee shall fail to perform any of the provisions contained
herein on Lessee’s part to be performed (each, an “Event of Default”),
Lessee shall not be deemed to be in breach or default hereunder unless Lessor
shall first have given Lessee:


 


13.1.1      in
the event of non-payment of any sums required to be paid hereunder other than
Rent (for which no notice shall be required) to Lessor or otherwise, not less
than twenty-five (25) calendar day’s notice and Lessee shall have twenty-five
(25) calendar days within which to remedy or cure any such alleged Event of
Default; or


 


13.1.2      except
as set forth in Section 13.1.1,  not
less than thirty (30) calendar days’ notice specifying the alleged Event of
Default, and Lessee shall have such periods of time within which to remedy or
cure any such alleged Event of Default.


 


If any Event of Default, other
than non-payment of Rent and other sums payable under this Lease, cannot
reasonably be cured within thirty (30) calendar days, the commencement of the
cure of such Event of Default within such thirty (30) calendar day period shall
be deemed to be a cure of such Event of Default; provided, however, such cure
is diligently prosecuted to completion. 
If any such Event of Default is not cured or remedied within the time
limits stated herein, Lessor may give to Lessee a notice of election to
terminate this Lease at the expiration of forty-five (45) calendar days from
the date of such notice.  Upon the expiration
of such forty-five (45) calendar day period, this Lease shall terminate and
Lessee will quit and surrender the Real Property to Lessor.  Lessor shall have all rights and remedies
available at law and in equity upon Lessee’s Default.


 


12

















 


13.2         Notice to Lender.


 


13.2.1      Notice of Breach or
Default.    Lessor shall deliver
notice of an Event of Default to any Lender at such address as such Lender may
have specified to Lessor. The time period for curing said default shall be
extended if such Lender notifies Lessor of its election to proceed with
reasonable diligence promptly to acquire possession of the Premises or to
foreclose its encumbrance or otherwise to extinguish Lessee’s interest in this
Lease and delivers to Lessor an instrument in writing duly executed and
acknowledged in which the Lender agrees that (a) during the period that such
Lender or a receiver of rents and profits appointed upon application of such
Lender shall be in possession of the Premises and/or during the pendency of any
such foreclosure or other proceedings and until the interest of Lessee in this
Lease shall terminate, as the case may be, it will pay or cause to be paid to
Lessor all Rent from time to time becoming due under this Lease, and (b) if
delivery of possession of the Premises shall be made to such Lender or such
receiver, whether voluntarily or pursuant to any foreclosure or other
proceedings or otherwise, such Lender shall, promptly following such delivery
of possession, perform such of the covenants and agreements herein contained on
Lessee’s part to be performed as Lessee shall have failed to perform to the
date of delivery of possession, and to perform all other covenants and
agreements Lessee shall have failed to perform promptly after extinguishment of
Lessee’s interest in this Lease.  The
foregoing shall be applicable only in the event that Lessee has provided Lessor
with the name and mailing address of any such Lender.


 


13.2.2      No Requirement of
Continuance.  Nothing contained in
this Lease shall be deemed to require any Lender to continue with any
foreclosure or other proceedings or, if such Lender or receiver shall acquire
possession of the Premises, to continue such possession, if the Event of
Default in respect of which Lessor shall have given a notice shall be
remedied.  If prior to any sale pursuant
to any proceeding brought to foreclose any encumbrance, or if prior to the date
on which Lessee’s interest in this Lease shall otherwise be extinguished, such
Event of Default shall have been remedied, then the obligation of the Lender
pursuant to the instrument referred to in Section 13.2.1 shall be null and void
and of no further effect.  Nothing in
this Lease shall affect the right of Lessor, upon the subsequent occurrence of
any Event of Default, to exercise any right or remedy reserved to Lessor,
subject, however, to the rights given to a Lender pursuant to the foregoing
provisions of this Section 13.2.2.


 


13.3         Lessor’s Default.  Lessor shall be in default of this Lease if
it fails or refuses to perform any provision of this Lease that it is obligated
to perform if the failure to perform is not cured within thirty (30) calendar
days after written notice of such default has been given by Lessee to Lessor.
If such default cannot reasonably be cured within the thirty (30) calendar
days, Lessor shall not be in default of this Lease if Lessor commences to cure
such default within the thirty (30) calendar day period and diligently and in
good faith continues to cure such default. 
Lessee, at any time after Lessor commits a default, can cure the default
at Lessor’s cost.  If Lessee at any
time, by reason of Lessor’s default, pays any sum or does any act that requires
the payment of any sum, the sum paid by Lessee shall be due immediately from
Lessor to Lessee at the time the sum is paid, and if paid at a later date shall
bear interest at a rate of five percent (5%) per annum above the prime rate of
interest published in the Wall Street Journal (or any successor publication of
equal financial


 


13

















 


reputation should the Wall Street Journal cease to be published) from
the date the sum is paid by Lessee until Lessee is reimbursed by Lessor.  Lessee shall have no right of setoff.


 


14.           RIGHT OF FIRST REFUSAL;
OPTIONS.


 


[Intentionally
Deleted]


 


15.           REPRESENTATIONS AND
WARRANTIES.


 


15.1         Lessor’s
Representations and Warranties.  In
addition to any other representations and warranties made by Lessor herein,
Lessor hereby represents and warrants to Lessee, which representations and
warranties are continuing in nature and shall survive throughout the Term, as
follows:


 


(a)           Lessor has full power
and authority to enter into this Lease. 
Each signatory on behalf of Lessor is duly authorized to execute this
Lease on behalf of Lessor;


 


(b)           This Lease and the
other instruments and documents contemplated hereby constitute the valid and
binding obligations of Lessor, enforceable in accordance with their respective
terms;


 


(c)           There are no pending,
nor to the actual knowledge of Lessor threatened, actions, suits or proceedings
before any court, administrative agency or arbitrator affecting Lessor or its
ability to comply with its obligations hereunder;


 


(d)           There are no pending,
nor to the actual knowledge of Lessor threatened, actions, suits or proceedings
before any court, administrative agency or arbitrator with respect to any
condemnation or taking, for public or private purposes, of any portion of the
Premises;


 


(e)           To the best of Lessor’s
knowledge, it is in compliance with all laws, regulations, licenses or permits,
the breach or violation of which would have a material adverse affect upon all
or any part of the Premises;


 


(f)            No consent, approval
or authorization is required from any third party, except any Governmental
Authorities, in order for Lessor to complete the transactions as provided for
herein; and


 


(g)           The Lessor, upon the
consummation of the transactions contemplated by Lessor and Lessee in
connection with the execution of this Lease, will be the record owner of fee
simple title to the Premises and no other person shall have any rights, title
or interest in and to the Premises, except rights arising under this Lease.


 


15.2         Lessee’s
Representations and Warranties.  In
addition to any other representations and warranties made by Lessee herein,
Lessee hereby represents and warrants to Lessor, which


 


14

















 


representations and warranties are continuing in nature and shall
survive throughout the Term, as follows:


 


(a)           Lessee is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has duly authorized the officer executing this Lease to
execute it on behalf of Lessee;


 


(b)           This Lease and the
other instruments and documents contemplated hereby constitute the valid and
binding obligations of Lessee, enforceable in accordance with their respective
terms;


 


(c)           There are no pending,
nor to the actual knowledge of Lessee threatened, actions, suits or proceedings
before any court, administrative agency or arbitrator affecting Lessee or its
ability to comply with its obligations hereunder;


 


(d)           No consent, approval or
authorization is required from any third party (except Governmental
Authorities) in order for Lessee to complete the transactions as provided for
herein.


 


16.           MISCELLANEOUS.


 


16.1         Quiet Enjoyment:  Lessee, upon paying the Rent and all other
charges provided for in this Lease and upon observing and keeping all of the
covenants, agreements, and provisions of this Lease on its part to be observed
and kept, shall lawfully and quietly hold, occupy, and enjoy the Premises
during the Term without hindrance or molestation by Lessor or any persons or
entities claiming under Lessor.


 


16.2         Waiver of Rights.  Failure to insist on compliance with any of
the agreements, obligations and covenants hereof shall not be deemed a waiver
of such agreements, obligations and covenants, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more time or times
be deemed a waiver or relinquishment of such rights or powers at any other time
or times.


 


16.3         Notices.  Any notice or other communication required
or permitted to be given by a party hereunder shall be in writing, and shall be
deemed to have been given by such party to the other party or parties (a) on
the date of personal delivery, (b) on the next business day following any
facsimile transmission to a party at its facsimile number set forth below;
provided, however, such delivery is concurrent with delivery pursuant to the
provisions of clauses (a) or (b) of this Section 16.7, or (c) three (3)
business days after being placed in the United States mail, as applicable,
registered or certified, postage prepaid addressed to the following addresses
(each of the parties shall be entitled to specify a different address by giving
notice as aforesaid):


 


	
  If to
  Lessor:

  	
   

  	
  4270 S.
  Decatur Blvd, Suite A10-A

  
	
   

  	
   

  	
  Las Vegas,
  NV 89103

  
	
   

  	
   

  	
  Facsimile:
  (702) 312-4404

  
	
   

  	
   

  	
  Attention:
  Brett Sellers, Trustee

  



 


15

















 


	
  With a copy
  to:

  	
   

  	
  Donald T.
  Polednak, Esq.

  
	
   

  	
   

  	
  Sylvester
  & Polednak, Ltd.

  
	
   

  	
   

  	
  3016 W.
  Charleston Boulevard, Suite 195

  
	
   

  	
   

  	
  Las Vegas,
  NV 89102

  
	
   

  	
   

  	
   

  
	
  If to
  Lessee:

  	
   

  	
  Speakeasy
  Gaming of Fremont, Inc.

  
	
   

  	
   

  	
  3227 Civic
  Center Drive

  
	
   

  	
   

  	
  Las Vegas,
  Nevada 89030

  
	
   

  	
   

  	
  Facsimile:
  (702) 399-4108

  
	
   

  	
   

  	
  Attention:
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Ruben &
  Aronson, LLP

  
	
   

  	
   

  	
  4800
  Montgomery Lane, Suite 150

  
	
   

  	
   

  	
  Bethesda,
  Maryland 20817

  
	
   

  	
   

  	
  Facsimile:
  (301) 951-9636

  
	
   

  	
   

  	
  Attention:
  Robert L. Ruben

  



 


16.4         Entire Agreement.  This Lease constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations, and discussions,
whether oral or written.


 


16.5         Severability.  If any part of this Lease is determined to
be void, invalid or unenforceable, such void, invalid, or unenforceable portion
shall be deemed to be separate and severable from the other portions of this
Lease, and the other portions shall be given full force and effect, as though
the void, invalid or unenforceable portions or provisions were never a part of
the Lease.


 


16.6         Amendment and
Modification.  No supplement,
modification, waiver or termination of this Lease shall be binding unless
executed in writing by the party to be bound. 
No waiver of any of the provisions of this Lease shall be deemed or
shall constitute a waiver of any other provisions (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.


 


16.7         Headings.  Article, Section or Subsection headings are
not to be considered part of this Lease and are included solely for convenience
and reference and shall not be held to define, construe, govern or limit the
meaning of any term or provision of this Lease.  References in this Lease to an Article, Section or Subsection
shall be reference to an Article, Section or Subsection of this Lease unless
otherwise stated or the context otherwise requires.


 


16.8         Governing
Law; Jurisdiction; Litigation.  This
Lease has been prepared, executed and delivered in, and shall be interpreted
under, the internal laws of the State of Nevada, without giving effect to its
conflict of law provisions.  Each of the
parties hereto irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Lease


 


16

















 


or the transactions contemplated hereby in (a) the courts of the State
of Nevada, Clark County, or (b) the United States District Court for the
District of Nevada, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit
or proceeding brought in any such court has been brought in an inconvenient forum.  In the event of litigation arising
hereunder, the prevailing party shall be entitled to recover from the
non-prevailing party its reasonable attorneys’ fees and expenses incurred in
connection with such litigation at all levels, including before the filing of
suit.  To the extent such waiver is
permitted by Applicable Laws, the parties hereto waive trial by jury in any
action or proceeding brought in connection with this Lease.


 


16.9         Interpretation.  This Lease is to be deemed to have been
prepared jointly by the parties hereto, and if any inconsistency or ambiguity
exists herein, it shall not be interpreted against either party but according
to the application of rules of the interpretation of contracts, if such an
uncertainty or ambiguity exists.  Each
party has had the availability of legal counsel with respect to its execution
of this Lease.


 


16.10       Third Parties.  Nothing in this Lease, expressed or implied,
is intended to confer upon any person other than the parties hereto any rights
or remedies under or by reason of this Lease.


 


16.11       Attorneys’ Fees.  In the event any party incurs legal fees or
other costs to enforce any of the terms of this Lease, to resolve any dispute
with respect to its provisions, or to obtain damages for breach thereof, whether
by prosecution or defense, the unsuccessful party to such action shall pay the
prevailing party’s reasonable expenses, including attorneys’ fees and costs,
incurred in such action.


 


16.12       Binding Effect.  This Lease and the agreements set forth herein
shall be binding upon the heirs, executors, successors and assigns of the
parties hereto.


 


16.13       Recording.  This Lease shall not be recorded by either party.  However, a Memorandum of Lease in
substantially the form of the attached Exhibit “D” may be recorded on or
after the Effective Date (“Memorandum of Lease”).  Irrespective of anything herein to the
contrary, should this Lease be lawfully terminated or expire, and in the event
that Lessee shall fail, neglect or refuse to execute and deliver any such
documents to be executed by it within ten (10) days after Lessor’s request,
Lessee hereby irrevocably appoints Lessor, its successors and assigns, the duly
authorized attorney-in-fact of Lessee to prepare, execute and deliver any and
all such documents for and on behalf of Lessee pertaining to the release of the
Memorandum of Lease.  Lessee agrees and
acknowledges that the foregoing power of attorney is coupled with an interest.


 


16.13       Brokers.  Lessee hereby represents and warrants that
the only broker or agent it has had dealings with in connection with this Lease
is CB Richard Ellis and covenants to pay, hold harmless and indemnify Lessor
from and against any and all cost, expense or liability for any compensation,
commissions and charges claimed by CB Richard Ellis with respect to this Lease
of the negotiation thereof.


 


17

















 


16.15       Counterparts.  This Lease may be executed in any number of
counterparts, each one of which so executed shall be deemed an original, and
all of which shall together constitute one and the same agreement.


 


IN WITNESS
WHEREOF, the parties hereto have executed this Lease as of the Effective Date.


 


	
   

  	
  “LESSOR”

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Linda
  Jeanine Isola Present Interest Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /S/ Brett K.
  Sellers

  	
   

  
	
   

  	
  By: Brett K.
  Sellers, Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  “LESSEE”

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Speakeasy
  Gaming of Fremont, Inc.,

  
	
   

  	
   a
  Nevada corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Roger M.
  Szepelak

  	
   

  
	
   

  	
  Name:

  	
  Roger M.
  Szepelak

  
	
   

  	
  Its:

  	
  Vice
  President and Chief Operating Officer

  
					



 


18