**EXHIBIT 10.15A**

 

**GROUND****LEASE**

 

This GROUND LEASE AGREEMENT (“Lease”) is made this               day of                       ,2005, by and between CLARK G. RUSSELL and JEAN M. RUSSELL, Trustees of “THECLARK AND JEAN RUSSELL FAMILY TRUST” (hereinafter called “Landlord”), andJACOBS ENTERTAINMENT, INC., a Delaware corporation (hereinafter called “Tenant”).

 

**WITNESSETH:**

 

**1.****                                     ****LEASED PREMISES****.**

 

A.**                                  **Leased Premises**. **Landlord is the ownerof certain real property situated in Carson City, State of Nevada, having astreet address of 2171 Highway 50 East, consisting of approximately 17.67acres, Assessor’s Parcel Number 8-152-15, more particularly described and shownon Exhibit “A”, attached hereto and incorporated herein (the “LeasedPremises”).  Landlord and Tenantacknowledge and agree that at the time of this Lease various buildings andother improvements exist on, under or above the Leased Premises, a schedule ofwhich is attached to this Lease as Exhibit “B”, attached hereto andincorporated herein (collectively, the “Improvements”).

 

B.                                     Lease.  Landlord leases to Tenant, andTenant leases from Landlord, the Leased Premises.

 

C.                                     As-Is.  Except as set out in thisLease to the contrary, Landlord disclaims any representations or warrantieswith respect to the Leased Premises and Tenant acknowledges that the LeasedPremises are leased to Tenant in an As-Is condition.

 

D.                                    Severance of Improvements. Landlord represents and warrants to Tenant that the Improvements are notpart of the Leased Premises and that legal title to such Improvements has beensevered from the legal title to the Leased Premises by virtue of that certainAffidavit of Conversion dated                      and filed of record in the                   recordsof              County, Nevada as Instrument No.             ,an unrecorded copy of which is attached hereto as Exhibit “C” andincorporated herein as if set out word for word.  Landlord and Tenant agree that upon recordingof the Affidavit of Conversion, a recorded copy of such document shall besubstituted in replacement of the unrecorded version.  Landlord furtherrepresents and warrants to Tenant that legal title to the Improvements isvested with Capital City Entertainment, Inc., a Nevada corporation. Landlord hereby disclaims any claim to title to the Improvements or to any lienrights in same.

 

E.                                    Adjacent Property.

 

(1)                                  Landlord represents to Tenant that Landlordbelieves in good faith that Landlord has the right, pursuant to a writtenagreement with the Nevada Department of Transportation (“NDOT”) to purchasethat certain seven (7) acre tract of land situated adjacent to the LeasedPremises (the “Adjacent Tract”), a depiction and legal description of which isattached hereto and incorporated herein as Exhibit “D”, as if setout word for word.

 

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(2)                                  Landlord agrees with Tenant that if theAdjacent Tract becomes available for purchase, Landlord will exercise its bestefforts to promptly consummate the purchase of the Adjacent Tract (and to promptlyand fully advise Tenant in writing as to the status of such efforts as well asthe time and date of the closing of such purchase).

 

(3)                                  Landlord and Tenant further agree that uponthe consummation of the purchase of the Adjacent Tract, such Adjacent Tractshall become part of the Leased Premises (and this Lease shall be amended bywritten agreement executed by Tenant and Landlord to reflect the addition ofthe Adjacent Tract to the Leased Premises).

 

(4)                                  Upon the addition of the Adjacent Tract to theLeased Premises, the Annual Rent defined and described in Section 4,below shall be increased by an amount determined as follows:

 

(i)                                     In the event the Adjacent Tract Option isexercised during the Initial Term, the Annual Rent shall be increased by the amountpaid actually by Landlord to NDOT as the purchase price for the Adjacent Tract(as evidenced by the Purchaser’s Settlement Statement or such other similarinstrument utilized by the title company at the closing of same) multiplied byan annualized “capitalization rate” of eight percent (8%)(By way ofillustration only:  assuming a purchase price of $2,000,000.00 and theannualized capitalization rate of 8%, the annual rent amount resulting from theformula set out in this subpart (bb) would be $160,000.00 [$2,000,000.00 x..08=$160,000.00]).

 

(ii)                                In the event the Adjacent Tract Option isexercised during either the First Extension Term or the Second Extension Term,the Annual Rent shall be increased pursuant to the same alternatives identifiedin subsection 1.E.(4)(i), above.

 

(iii)                             Notwithstanding the above, any amounts duefor Annual Rent in relation to the Adjacent Tract shall be prorated inaccordance with Section 4.D., below.

 

(iv)   Afterthe expiration of the Initial Term (or the expiration of the First ExtensionTerm, in the event the Adjacent Tract Option is exercised in such extensionterm), the Annual Rent shall be determined in accordance with Sections 4.B.and 4.C., as applicable.

 

**2.****                                     ****CONTROL OF LEASED PREMISES****.**

 

Tenant, during the Term of this Lease, shall haveexclusive control of the Leased Premises, and Landlord shall take no actionpertaining to the Leased Premises (including the construction of new, or thealteration of existing, structures on the Leased Premises) without the prior writtenconsent of Tenant subject to the provisions hereof which require or allowLandlord to take action with respect to the Leased Premises.

 

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**3.****                                     ****TERM****.**

 

A.                                   Initial Term.  Theinitial Term of this Lease shall commence on                                   ,and shall continue for ten (10) calendar years, having a termination dateof                           (the “Initial Term”).

 

B.                                     First Extension Term. Tenant shall have the exclusive, non-revocable right and option, atTenant’s sole election, to extend the Initial Term of this Lease (the “FirstExtension Right”) for an additional term of ten (10) years (the “FirstExtension Term”).  Tenant may exercisethe First Extension Right by giving notice to Landlord of its intention so todo at least six (6) months prior to the expiration of the InitialTerm.  The First Extension Term shall beupon all of the terms and conditions set out in this Lease.

 

C.                                     Second Extension Term. Tenant shall have the exclusive, non-revocable right and option, atTenant’s sole election, to extend the First Extension Term of this Lease (the “SecondExtension Right”) for an additional term of ten (10) years (the “SecondExtension Term”).  Tenant may exercisethe Second Extension Right by giving notice to Landlord of its intention so todo at least six (6) months prior to the expiration of the First ExtensionTerm.  The Second Extension Term shall beupon all of the terms and conditions set out in this Lease.

 

D.                                    Term Defined.  Forpurposes of this Lease, any reference to “Term” shall mean the Initial Term,the First Extension Term or the Second Extension Term, as the context requiresas determined by Tenant, in Tenant’s discretion.

 

**4.****                                     ****RENT****. **The annual rent to bepaid to Landlord by Tenant under the Lease (the “Annual Rent”) shall be asfollows:

 

A.                                 Initial Term. During the Initial Term, Tenant agrees to pay to Landlord as an AnnualRent for the use and occupancy of the Leased Premises, as follows:

 

(1)                                  Years 1-5:                                            $250,000.00 per year

 

(2)                                  Years 6-10:                                      $300,000.00 per year

 

B.                                     First Extension Term.  TheAnnual Rent to be paid to Landlord during the First Extension Term shall becalculated as follows:

 

(1)                                  Years 1-5:   The Annual Rent forYears 1-5 of the First Extension Term shall be the First Extension Term MAIValuation Rate.

 

(2)                                  Years 6-10:  The Annual Rent for Years 6-10 shall be calculated by takingthe amount of Annual Rent paid for Year 5 of the First Extension Termmultiplied by the CPI Escalation Factor existing on the first day of the sixthyear of the First Extension Term.

 

(3)                                  First Extension Term MAI Valuation RateDefined.  For purposes of this Lease, the term “FirstExtension Term MAI Valuation Rate” shall mean the ground lease rental rateagreed to by Landlord and Tenant, but if they cannot

 

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agree, then the fair market value ground lease ratefor the Leased Premises (based on the fair market value of the Leased Premisesand rental rates for ground leases in Carson City, Nevada) as determined by anAppraisal Team, selected as set forth in Section 31.F. Thevaluation appraisal described in this Section 4.B.(3) shall bein writing and shall be conducted and prepared in accordance with MAI standardsand methodologies and be based on a valuation date which is not more than 60days prior to the commencement of the First Extension Term.   Suchvaluation appraisal shall exclude the value of all Improvements (as well as anyadditions to the Improvements as may have been constructed on the LeasedPremises after the commencement date of this Lease and shall further excludethe value of any existing lease on the Leased Premises, including this Lease,or extension rights to this Lease, such that it is appraised as unencumberedreal property).

 

C.                                   Second Extension Term.  The Annual Rent to be paid toLandlord during the Second Extension Term shall be calculated as follows:

 

(1)                                  Years 1-5: The Annual Rent for Years 1-5 of the Second Extension Term shallbe the Second Extension Term MAI Valuation Rate.

 

(2)                                  Years 6-10: The Annual Rent for Years 6-10 shall be calculated by taking theamount of Annual Rent paid for Year 5 of the Second Extension Term multipliedby the CPI Escalation Factor existing on the first day of the sixth year of theSecond Extension Term.

 

(3)                                  Second Extension Term MAI Valuation RateDefined.  For purposes of this Lease, the term “SecondExtension Term MAI Valuation Rate” shall mean the ground lease rental rateagreed to by Landlord and Tenant, but if they cannot agree, then the fairmarket value ground lease rate of the Leased Premises (based on the fair marketvalue of the Leased Premises and rental rates for ground leases in Carson City,Nevada) as determined by an Appraisal Team, selected as set forth in Section 31.F.The valuation appraisal described in this Section 4.C.(3) shallbe in writing and shall be conducted and prepared in accordance with MAIstandards and methodologies and be based on a valuation date which is not morethan 60 days prior to the commencement of the Second ExtensionTerm.   Such valuation appraisal shall exclude the value of allImprovements (as well as any additions to the Improvements as may have beenconstructed on the Leased Premises after the commencement date of this Leaseand shall further exclude the value of any existing lease on the LeasedPremises, including this Lease, or extension rights to this Lease, such that itis appraised as unencumbered real property).

 

D.                                    Monthly Payment.  TheAnnual Rent described above is to be paid in equal monthly installments inadvance on the first day of each and every calendar month of the Term.  The Annual Rent for any other portion of theTerm which is less than twelve (12) months shall be the proration of the AnnualRent above which the number of months in such portion of the Term bears totwelve (12).

 

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E.                                      Late Payment.  If,during the Term or any extension thereof, any annual calendar time period,Tenant fails to pay the Annual Rent on or before the tenth (10th) ofthe month, then such payments shall bear interest from the first of the monthof the lesser of the prime lending rate of U.S. Bank, plus one percent (1%) orthe highest rate allowed by the law of the State of Nevada.

 

F.                                      Payments Location.  Payments of Annual Rental shall be made toLandlord at the address specified in Section 14 hereof, or at suchother place as Landlord may from time to time in writing direct (not less thanthirty (30) days in advance of the date of the address change effective date).

 

G.                                     No Security Deposit. Lessee shall not be obligated to pay asecurity deposit in connection with this Lease.

 

H.                                    No Set Off.  Annual Rent, and all othersums payable hereunder to or on behalf of Landlord shall be paid (except aspermitted herein otherwise or by applicable law) without notice or demand andwithout set-off, counterclaim, abatement, suspension, deduction or defense.

 

I.                                         CPI Escalation Factor.  Forpurposes of this Lease, the term “CPI Escalation Factor” shall mean thatpercentage increase in the Consumer Price Index (“CPI”) established for theWest Region of the United States of America for the relevant immediatelypreceding twelve (12) month time period as provided by the United States Bureauof Labor Statistics.

 

**5.****                                     ****TRIPLE NET LEASE****. **Landlord and Tenantagree****that this Lease is a triple net leaseas to the Leased Premises and except as specifically referred herein, Landlordis not obligated to expend any funds in connection with the operation of theLeased Premises.

 

**6.****                                     ****FIXTURES; EQUIPMENT****.**

 

A.                                   Tenant Equipment. Tenant at its own expense shall provide, install and maintain all tradefixtures, furniture and equipment (collectively such furniture, fixtures andequipment, the “Equipment) reasonably required in Tenant’s sole discretion toenable it to conduct its business on the Leased Premises.  Such Equipment shall remain the property ofTenant and Tenant may remove same at any time prior to the expiration orearlier termination of the Term (and Tenant shall remove same within thirty(30) days of the expiration or earlier termination of this Lease).

 

B.                                     Repair of Leased Premises. Tenant shall repair at its own expense any damage to the Leased Premisescaused by the removal of such Equipment.

 

C.                                     Disclaimer.  Landlord hereby expresslydisclaims and waives any rights (whether by Landlord’s lien laws or lawsconcerning fixtures or otherwise) to the Equipment.

 

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**7.****                                     ****USE OF PREMISES****.**

 

Tenant may use the Leased Premises for any lawfulpurpose, and in particular (but not limited to), the purpose of operating ahotel, motel, casino, restaurant, bowling center and R.V. park.  Tenant shall conduct its business insofar asthe same relates to Tenant’s use and occupancy of the Leased Premises in alawful manner and in compliance with all governmental laws, rules, regulationsand orders applicable to the business of Tenant.  Landlord agrees to promptly execute anddeliver to Tenant, upon Tenant’s request, any and all forms and documents, andto assist and cooperate with Tenant at Tenant’s expense, to comply with theprovisions of this Section 7.

 

**8.****                                     ****PAYMENT OF TAXES****.**

 

A.                                   Leased Premises. Tenant agrees that it shall pay before delinquency any real propertytaxes and special assessments for public improvements levied or assessedagainst the Leased Premises and payable during the Term.  Such taxes which are to be paid by Tenantshall be prorated with respect to any taxes levied for a fiscal tax yearextending beyond the end of the Term such that Tenant shall pay only suchportion of taxes as the portion of the fiscal tax year preceding the end of theTerm bears to the entire fiscal tax year.

 

B.                                     Exclusions.  Nothing contained in thisLease shall require Tenant to pay any franchise, corporate, estate, inheritance,succession, stamp, transfer, use, income or excess profits tax of Landlord.

 

C.                                     Special Assessments.  Inthe event any additional tax or any special assessment is levied or assessedagainst the Leased Premises, which such additional tax or special assessmentbecomes due and payable in whole or in part during the Term, Tenant shall payin a timely manner such part of the tax or assessment that becomes due andpayable during the Term.

 

D.                                    Tenant’s Property. Tenant shall also pay before delinquency any and all taxes andassessments levied or assessed, and becoming payable during the Term, againstTenant’s property located upon the Leased Premises.

 

E.                                      Contest.  Notwithstanding any provisionin this Section 8 to the contrary, Tenant may contest any tax orassessment referenced in this Section 8, provided that such contestis at no expense to Landlord and any late charges or penalties imposed (on suchtax amounts due to Tenant’s failure to timely pay same) are paid byTenant.  Landlord agrees to promptlyexecute and deliver to Tenant, upon Tenant’s request, any and all forms anddocuments, and to assist and cooperate with Tenant, at Tenant’s expense, tocomply with the provisions in Tenant’s reasonable discretion of this Subsection 8.E.  During such contests, Tenant shall take allsteps appropriate, including payment under protest, to prevent foreclosure andpublic sale or other divesting of Landlord’s title by reason of nonpayment oftaxes.  In any event, Tenant shall payall taxes prior to the issuance of any execution therefore by the applicablejurisdiction unless adequate provisions have been made for the bonding ofsame.  In the event that a written noticeof tax sale is given by the applicable taxing authority, Landlord, upon five (5) daysadvance written notice to Tenant, shall have the right to pay all past duetaxes and any penalties.  Tenant shallpay to Landlord all costs incurred in good faith of any such performance byLandlord within thirty (30) days of Tenant’s receipt of a written invoice supportedby reasonable evidence

 

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as to such amounts.  Tenant’s failure to timely pay such amountsto Landlord shall constitute a default.

 

F.                                      Delivery of Tax Receipt. During the Term of this Lease, Tenant shall provide Landlord with a copyof its paid tax receipt within forty-five (45) days of the date of Tenant’sreceipt of a written request from Landlord of same.

 

**9.****                                     ****INSURANCE AND INDEMNIFICATION****.**

 

A.                                   Indemnity.  Tenant, with respect to itsuse and occupancy of the Leased Premises, agrees to defend, assume legalliability for, indemnify, and hold free and harmless Landlord, its agents,servants, employees, officers, and directors, from any and all loss, damages,liability, cost, or expenses (including, but not limited to, attorneys’ fees,reasonable investigative and discovery costs and court costs) and all othersums which Landlord, its agents, servants, employees, officers, and directorsmay reasonably pay or become obligated to pay on account of any, all, and everydemand, claim, assertion of liability, or action directly caused by the act oromission of Tenant (but not as to claims and liability arising out of thenegligent or willful conduct of Landlord or its agents), its agents, servantsor employees, whether such claim, demand, assertion of liability or action befor damages or injury to person or property, including the property ofLandlord, or death of any person, made by any person, group, or organization,whether employed by either of the parties hereto or otherwise.

 

B.                                     General Liability Insurance. Tenant agrees that it shall, at its owncost and expense, at all times during the term of this Lease, maintain in forcea policy or policies of insurance written by one or more responsible insurancecarriers, legally qualified to issue such insurance in the State of Nevadawhich shall insure against liability for injury to and/or death of and/ordamage to property of any person or persons, with a combined single policylimit of not less than TWO MILLION DOLLARS ($2,000,000.00).  Such policy or policies shall provide, amongother things, that it or they specifically recognize and insure the liabilityassumed by Tenant pursuant to Section 9.A. hereof.

 

C.                                     Workers Compensation Insurance. Tenant agrees to maintain and keep in force, during the Term, allemployees’ compensation insurance required under applicable worker’scompensation acts, currently referred to in the State of Nevada as StateIndustrial Insurance.

 

D.                                    Evidence.  Within ten (10) days ofLandlord’s written request, Tenant shall deliver the certificates of insuranceevidencing the existence in force of the policies of insurance referenced in Section 9.B.,above.  Each of such certificates shallprovide that such insurance shall not be canceled or materially amended unlessthe insurer shall give thirty (30) days prior written notice of suchcancellation or amendment to the party designated on such certificate as theholder thereof, which shall include notice to Landlord.

 

E.                                      Self-Insurance Option. Notwithstanding anything to the contrary contained in this Lease, Tenantshall have the right to self insure as to State Industrial Insurance underChapter 616, on meeting the requirements set forth herein.

 

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**10.****                              ****CONDEMNATION****.**

 

A.                                   Leased Premises. Subject to the rights of Tenant hereinafter set forth in this Section 10,Tenant hereby irrevocably assigns to Landlord any award or payment to whichTenant may be or become entitled by reason of any taking of the Leased Premisesor any part thereof, in or by condemnation or eminent domain proceedingspursuant to any law, general or special. Landlord shall be entitled to participate in any such proceedings atLandlord’s expense.

 

B.                                     Tenant Property. Notwithstanding anything herein to the contrary, Tenant shall have theright to pursue a claim with and retain any award from the condemning authorityor entity for damage to or loss of Tenant’s leasehold estate in the LeasedPremises as well as for any other separate damages that Tenant may suffer inrelation to the Improvements or the Equipment.

 

C.                                     Governmental Action.  Inthe event of the temporary requisition of the use or occupancy of the LeasedPremises or any part thereof, by any governmental authority, civil or military,Tenant shall retain any award or payment therefore, whether the same shall bepaid or payable in respect of Tenant’s leasehold interest, the Improvements,the Equipment or otherwise; provided, however, that Tenant shall continue topay Annual Rent, and any other sums payable by Tenant hereunder during theperiod of such temporary requisition.

 

D.                                    Right of Termination. Notwithstanding the provisions of Section 10.B., if all ofthe Leased Premises (or so much thereof as to render the Leased Premisesunsuitable for Tenant’s business use, to be determined by Tenant in its solediscretion) be taken or appropriated by some public authority or privatecorporation having the power of eminent domain, or if the Leased Premises beconveyed by the Landlord or its successors-in-interest for the purpose ofavoiding proceedings in appropriation, this Lease shall terminate as of thedate of such appropriation or conveyance with the same force and effect as ifsuch date had been originally set forth herein as the expiration date of theTerm.  Upon such event, Landlord shallrebate to Tenant the amount of Annual Rent paid under this Lease relating tothe time period after such date of termination.

 

E.                                      Partial Taking.  Ifonly a portion of the Leased Premises be taken or appropriated by eminentdomain proceedings and if the Leased Premises are still suitable for Tenant’sbusiness use, to be determined by Tenant in its sole discretion, after suchtaking, this Lease shall terminate as to that portion of the Leased Premises sotaken but shall remain in full force and effect as to the remainder of theLeased Premises.  Upon such event, thefuture rentals to be paid by the Tenant shall be equitably abated in the ratiothat the value of the Leased Premises taken bears to the value of the whole ofthe Leased Premises.

 

F.                                      Restriction Obligation.  Tothe extent possible, any amounts awarded shall be used by Landlord to fullyrestore the Leased Premises to its former condition, with excess fundsbelonging to the Landlord.

 

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G.                                     Consent Required.  Forthe purpose of this Lease, all amounts payable pursuant to any agreement with acondemning authority which agreement has been made in settlement of or underthreat of any condemnation, or other eminent domain proceeding affecting theLeased Premises shall be deemed to constitute an award made in such proceeding;provided, however, that no such agreement shall be made with any condemningauthority by either Landlord or Tenant without the written consent of theother.

 

**11.****                              ****UTILITIES, ETC****.**

 

Tenant shall pay during the Term all electrical,water, gas, telephone and other public or private utility charges in connectionwith its occupancy and use of the Leased Premises, including all businesslicenses and similar permit fees.

 

**12.****                              ****COVENANTS AGAINST LIENS****.**

 

A.                                   Discharge; Reimbursement. Except for any indebtedness imposed on Tenant’s leasehold interest inthe Leased Premises by Tenant’s lenders pursuant to Section 35,below (the “Tenant Lender Liens”), Tenant covenants and agrees that it shallnot, during the Term, suffer or permit any lien to be attached to or upon theLeased Premises or any part thereof by reason of any act or omission on thepart of Tenant, and hereby agrees to save and hold harmless Landlord from oragainst any such lien or claim of lien. In the event that any such lien (other than the Tenant Lender Liens)does so attach, and is not released within ninety (90) days after notice to Tenantthereof, or if Tenant has not indemnified Landlord against any such lien withinsuch ninety (90) day period, Landlord, in its sole discretion, may pay anddischarge the same and relieve the Leased Premises therefrom. Tenant agrees torepay and reimburse Landlord for the amount so paid by Landlord within thirty(30) days of Tenant’s receipt of a notice for such charges supported bydetailed evidence of such expenditures.

 

B.                                     Good Faith Contest. Notwithstanding the above, Tenant may in good faith contest anymechanics, laborers’, materialmen’s or other liens filed or established againstthe Leased Premises, and in such event may permit the items so contested toremain undischarged and unsatisfied during the period of such contest and anyappeal therefrom.  Upon suchcircumstances, Landlord shall not have the rights set out in Section 12.A.,above, unless by nonpayment of any such items the interest of Landlord will bematerially and imminently endangered or the Leased Premises or any part thereofwill be subject to imminent material loss or forfeiture, in which event Tenantshall promptly pay and cause to be satisfied and discharged all such unpaiditems or secure such payment by posting a bond, in form reasonably satisfactoryto Landlord, with the Landlord.  Landlordwill cooperate fully with the Tenant in any such contest provided that Tenantshall fully and promptly reimburse Landlord for all reasonable costs incurredby Landlord in that regard.  Tenant shallhold Landlord whole and harmless from any loss, cost or expenses Landlord mayreasonably incur related to any such contest.

 

C.                                     Landlord Representation.  Landlord hereby represents andwarrants to Tenant that the Leased Premises are free from all liens,encumbrances, claims, impediments to title, encroachments, developmentrestrictions (other than zoning and gaming laws), restrictive covenants,special taxing districts or the like.  Landlord hereby further representsand warrants to Tenant that the Leased Premises are free from any other matterwhich may impair or restrict Tenant’s business operations or the expansion of,or the construction of additions to, the

 

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Improvements and that theLeased Premises are situated within a zoning and gaming district which iscompatible with the use designations set out in Section 7, above.

 

**13.****                              ****ASSIGNMENT AND SUBLETTING****.**

 

A.                                   General.  Tenant shall have the right toassign or sublet the Leased Premises, or any part thereof, without consent fromLandlord, provided that no such assignment or subletting shall relieve Tenantfrom any of its obligations as Tenant hereunder (unless Landlord agreesotherwise in writing).  Tenant shall beentitled to retain all proceeds (whether in the form of rent or recoupments orotherwise) generated from such sublease or assignment.  Every such assignment or sublease shallrecite that it is and shall be subject and subordinate to the provisions ofthis Lease, and the termination or cancellation of this Lease shall constitutea termination and cancellation of every such assignment or sublease (subject tothe Lender rights, described in Section 35, below).

 

B.                                     Assignment To Affiliate. Notwithstanding anything herein to the contrary, Tenant shall have theright to assign this Lease to an Affiliate of Tenant’s election and upon such assignment,Tenant shall be released from the duties and obligations of this Lease.  For purposes of this Lease, the term “Affiliate”shall mean any person, partnership, joint venture, corporation or other form ofenterprise, domestic or foreign, including but not limited to subsidiarieswhether one or more, that directly or indirectly, control, are controlled by,or are under common control with or have an ownership interest in, with or ofTenant.

 

**14.****                              ****NOTICES****.**

 

All notices, demands, requests, elections, approvals,disapprovals, consents or other communications which this Agreementcontemplates, or requires or permits either party to give to the other, shallbe in writing and shall be personally delivered or sent by certified mailreturn receipt requested, postage prepaid, or by telecopy or by Federal Expressor similar delivery service addressed to the respective parties as follows:

 
| Landlord: |   | CLARK G.  RUSSELL, Trustee                           |
|-----------|--------|------------------------------------------------------|
|      |   | JEAN M. RUSSELL,  Trustee                            |
|      |   | “The Clark and  Jean Russell Family Trust” |
|      |   | P.O. Box  1966                                  |
|      |   | Carson City,  Nevada 89702                           |
|      |   |                                                 |
|      |   |                                                 |
| Tenant:   |   | JACOBS  ENTERTAINMENT, INC.                          |
|      |   |                                                 |
|      |   | 17301  West Colfax Avenue                            |
|      |   | Suite 250                                       |
|      |   | Golden,  Colorado 80401                              |
|      |   | Attention:  Stephen R. Roark, CFO                    |
|      |   | (303)  215-5201                                      |
|      |   | (303)  215-5219 facsimile                            |

 

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| With  A Copy To: |   | Jones &  Keller, P.C.             |
|------------------|--------|--------------------------------------------|
|             |   | 1625  Broadway, 16th Floor                 |
|             |   | Denver,  Colorado 80202                    |
|             |   | Attention: Samuel  E. Wing, Esq. |
|             |   | (303)  573-1600                            |
|             |   | (303)  893-6506 (facsimile)                |

 

orto such other address as either party may from time to time designate by noticeto the other given in accordance with this Section 14.  Notice shall be deemed to have been givenupon receipt thereof in the case of personal delivery or delivery service, orthree (3) days after deposit in the U.S. mail in the case of mailing.

 

**15.****                              ****RIGHT TO INSPECT****.**

 

During the Term, Landlord hereby reserves the rightfor itself or its duly authorized agents and representatives upon forty-eight(48) hours advance written notice to Tenant to enter upon the Leased Premisesduring regular business hours of Tenant for the purpose of inspecting the sameand of showing the same to any prospective purchaser. Notwithstanding theabove, Landlord shall not have the right to enter into any of the Improvementssituated on the Leased Premises.

 

**16.****                              ****MAINTENANCE****.**

 

Tenant shall, at its own expense, maintain theentire Leased Premises in good condition and repair, and at the end of the Termor sooner termination of this Lease, (whether by operation of law, for failureto comply with the provisions hereof, or otherwise), Tenant shall deliver upthe Leased Premises in the same order, condition, and repair as when receivedby Tenant; provided, however, Tenant shall not be obligated to restorediminution in condition caused by: (i) ordinary wear and tear; or (ii) elementsand damages due to casualty or condemnation; or (iii) the construction ofadditional buildings, structures or other improvements over, upon or under theLeased Premises; or (iv) the demolition or alteration of existingbuildings, structures, or other improvements over, upon or under the LeasedPremises.

 

**17.****                              ****DEFAULT****.**

 

A.                                 Tenant Default.

 

(1)                                  Should Tenant default in the performance ofany covenant or agreement herein, and such default continues for sixty (60)days after receipt by Tenant of written notice thereof from Landlord(specifying the nature of such default and the remedy for same), or if thedefault of Tenant is of a type which is not reasonably possible to cure within sixty(60) days, if Tenant has not commenced to cure such default within the sixty(60) day period and does not thereafter diligently prosecute the curing of suchdefault to completion, Landlord may, so long as such default continues, asLandlord’s exclusive remedy, either: (i) waive such default; or (ii) acceleratethe Annual Rent due under the remainder of the then current Term by writtennotice to Tenant (which written notice shall specify the amount to be paid toLandlord); (iii) terminate this

 

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Lease (subject to the TenantLender Rights set out in Section 17.C. and Section 35below, and the rights of Tenant pursuant to the provisions of subsection A.(3),below).

 

(2)                                  Notwithstanding the above, in the eventTenant’s default is for failure to pay Annual Rent, such default must be curedwithin thirty (30) days after Tenant’s receipt of written notice from Landlordspecifying each breach (and the cure for same).

 

(3)                                  In the event that Landlord elects toterminate this Lease in accordance with subsection A. above,Tenant, at Tenant’s election and notwithstanding Landlord’s election toterminate this Lease,   shall have the right to exercise the Optiondescribed in Section 31 below, provided such Option is exercised byTenant within thirty (30) days of the date Tenant receives written notice fromLandlord of its election to terminate this Lease.

 

(4)                                  In the event that Landlord elects toterminate this Lease in accordance with subsection A. above (and inthe event Tenant has not exercised the Option described in Section 31below), Landlord shall take possession of the Leased Premises and title to allimprovements existing thereon shall pass to Landlord.  Notwithstanding the immediately precedingsentence, Landlord’s right to take possession of the Leased Premises and totake title to the improvements existing thereon shall be expressly subject andsubordinate to the Tenant Lender Rights set out in Section 35below.

 

B.                                     Landlord Default. Should Landlord default in the performanceof any covenant or agreement herein, and such default continues for thirty (30)days after receipt by Landlord of written notice thereof from Tenant specifyingsuch breach and the cure for same (except as otherwise provided herein) or ifthe default of Landlord is of a type which is not reasonably possible to curewithin a thirty (30) day period and does not thereafter diligently prosecutethe curing of such default to completion (except as otherwise provided herein),Tenant shall have the right to pursue all rights and remedies which are availableat law or in equity.

 

C.                                     Tenant Lender Rights.  Notwithstanding anything in this Section 17to the contrary, all rights of Landlord set out in this Section 17(in addition to all other provisions of this Lease) shall be expressly subjectand subordinate to the Tenant Lender Rights set out in Section 35,below.

 

**18.****                              ****SIGNS****.**

 

A.                                   Tenant Signage. Tenant shall have the right to install, erect and maintain upon theLeased Premises all signs necessary or appropriate to the conduct of itsbusiness.  Tenant shall not install,erect, or maintain any sign in violation of any applicable law, ordinance, oruse permit of any governmental authority. Tenant may remove (but shall not berequired to remove) such signage at any time during such Term. Within thirty(30) days after such expiration or termination of this Lease, Tenant, at itsexpense, shall remove such signage.

 

B.                                     Landlord Signage. Landlord shall not install, erect or maintain any signs on the LeasedPremises during the Term, except that, unless this Lease shall have previouslybeen extended or renewed, Landlord may erect a “For Sale” or “To Rent” signduring the last two (2) months of the applicable Term; provided, however,that such sign shall not obstruct any sign of Tenant or interfere unreasonablywith the conduct of Tenant’s business.

 

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**19.****                              ****LANDLORD LIEN RESTRICTION****.**

 

Landlord shall not at any time during the Termcreate or suffer to be created any lien or encumbrance upon or affecting theLeased Premises or any portion thereof, except taxes and other liens created byoperation of law upon the Leased Premises (which, except as to taxes requiredhereby to be paid by Tenant, Landlord shall pay and discharge beforedelinquency).

 

**20.****                              ****HOLDING OVER****.**

 

If Tenant continues to occupy the Leased Premisesafter the expiration of the Term and Landlord elects to accept Annual Rent,thereafter, a monthly tenancy terminable by either party on one month’s noticeshall be created, which shall be upon the same rental, terms and conditions asthose herein specified.

 

**21.****                              ****SUCCESSORS IN INTEREST****.**

 

Each and all of the covenants, agreements,obligations, conditions and provisions of this Lease shall inure to the benefitof and shall bind the successors and assigns of the respective parties hereto.

 

**22.****                              ****RECORDING MEMORANDUM OF LEASE****.**

 

Upon execution of this Lease, Landlord shallexecute, cause to be notarized, and deliver to Tenant that certain Memorandumof Lease, in form and substance as set out on Exhibit “E”, attachedhereto and incorporated herein.  Tenantshall have the right to cause the recording of such Memorandum of Lease in thepublic records of the State of Nevada. Upon the termination or other expiration of this Lease, Tenant agrees todeliver within twenty (20) days of Landlord’s request a quitclaim of itsinterest in such Lease.

 

**23.****                              ****REMEDIES ARE CUMULATIVE****.**

 

Unless expressly provided otherwise herein, remediesconferred by this Lease upon the respective parties are not intended to beexclusive, but are cumulative and in addition to remedies otherwise afforded bylaw.

 

**24.****                              ****QUIET POSSESSION****.**

 

Landlord covenants that Landlord is seized of theLeased Premises and has full right to make this Lease, and that so long asTenant is not in default hereunder, Tenant shall have quiet, peaceful andexclusive possession thereof as against any adverse claim of any party whetherclaiming by, through or under Landlord or otherwise.  During the Term, Landlord shall not have theright to construct any improvements or make any alterations to any Improvementsand/or structure on, under or above the Leased Premises.

 

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**25.****                              ****ALTERATION OR EXPANSION****.**

 

Tenant shall have the right during the Term and uponits sole and absolute discretion to cause alterations, expansions, additions ordemolitions to the existing Improvements (whether structural or non-structural)without the obligation or necessity of securing Landlord’s consent.  Tenant shall have the right during the Termand upon its sole and absolute discretion to construct new buildings,structures or infrastructure on, under or above the Leased Premises (whetherstructural or non-structural) subject to the consent of Landlord, which consentshall not be unreasonably withheld, conditioned or delayed.  Notwithstanding the immediately precedingsentence, Tenant shall not be required to obtain Landlord’s consent for suchnew construction unless such new construction would cause a material diminutionin the value of the Leased Premises, in the reasonable commercial judgment ofthe Appraisal Team described in Section 31.F., below.  All such construction, alterations,demolitions and expansions described in the immediately preceding sentence(whether new construction, construction to existing structures or otherwise)shall be deemed to constitute part of the Improvements.

 

**26.****                              ****INVESTMENT CREDIT****.**

 

Landlord shall have the right or interest in anyinvestment credits allowed by any law, as to the Leased Premises.  Tenant shall have the right or interest in anyinvestment credits allowed by any law, as to any Improvements or any additionsor expansion to same.

 

**27.****                              ****GRANTING OF EASEMENTS****.**

 

A.                                   Tenant Rights. Tenant shall have the right from time to time during the Term to enterinto agreements with various parties (including but not limited to utilityproviders creating easements, licenses, rights of way or the like) as same maybe appropriate for Tenant’s ownership, operation, alteration, demolition orconstruction of new buildings, structures and infrastructure comprising theImprovements.  To the extent suchagreements materially affect the Leased Premises, Tenant shall seek writtenconsent of Landlord for same, which consent shall not be unreasonably withheld,conditioned or delayed.

 

B.                                     Landlord Obligation. Landlord agrees from time to time during the Term at the request ofTenant, without additional consideration and upon condition that Tenant shallsubmit satisfactory documentation to Landlord that the easements, licenses,rights of way, or other rights and privileges so requested will not adverselyaffect the utilization of the Leased Premises or the valuation thereof: (i) togrant easements, licenses, rights of way (and other rights and privileges inthe nature of easements) of such nature, extent and duration (includingperpetual) as Tenant may request; (ii) to release existing easements andappurtenances which are for the benefit of the Leased Premises; and (iii) toexecute and deliver any instrument necessary or appropriate to confirm suchgrants or releases to any person; in each of the foregoing instances (i), (ii) and(iii), the same to be without consideration, but only upon receipt by Landlordof and delivery of (x) a certificate of the President or a Vice President ofTenant stating (A) that such grant or release is not detrimental to theproper conduct of the business of Tenant on the Leased Premises, (B) thatsuch grant or release does not materially impair the effective use of theLeased Premises for its intended purposes or materially and adversely affectits value; (y) a duly authorized undertaking of Tenant, in form and substancesatisfactory to Landlord, to the effect that Tenant will remain obligatedhereunder to the same extent as if such grant or release had not been made; and(z)

 

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such instruments,certificates (including evidence of authority) and opinions as Landlord mayreasonably request.

 

**28.****                              ****GENERAL CONDITIONS****.**

 

A.                                   Time of Essence.  Timeis of the essence of this Lease.

 

B.                                     Waiver.  No waiver of any breach of thecovenants, agreements, obligations and conditions of this Lease to be kept orperformed by either party hereto shall be construed to be a waiver of anysucceeding breach of the same or any other covenant agreement, obligation,condition or provision hereof.

 

C.                                     Commissions.  Landlord shall be solelyresponsible for the payment of any commissions in relation to the leasingtransaction represented by this Lease (and shall further indemnify, defend andhold Tenant harmless from any claims of commissions by any other party).

 

D.                                    Further Acts. Landlord and Tenant agree to undertake such further acts and execute anddeliver such further documents in order to effectuate the purpose and intent ofthis Lease.

 

**29.****                              ****HAZARDOUS SUBSTANCES****.**

 

A.                                   Restrictions On Hazardous Materials. Tenant covenants, represents, and warrants that Tenant’s use of theLeased Premises do not and will not involve the use, storage, generation, ordisposal of Hazardous Materials (as defined herein), and that Tenant shall notcause or permit any Hazardous Materials to be brought, used, stored, generated,or disposed on or about the Leased Premises by Tenant, in compliance with alllaws, including, without limitation, Environmental Laws (as defined herein).

 

B.                                     Tenant Indemnification. Tenant shall indemnify, defend and hold harmless Landlord, its officers,directors, owners, employees, agents, successors and assigns (collectively, the “Landlord Indemnitees”) fromand against any and all losses, damages, claims, judgments, liabilities,enforcement actions, remedial actions, fines, penalties, taxes, fees, costs andexpenses (including, without limitation, attorneys= fees, consultants’ fees, laboratory costs,and expert fees) which arise during the Term as a result of any breach byTenant of the obligations set forth in this Section 29.  Subject to the provisions of this Section 29,Tenant shall promptly take, at its sole expense, all actions necessary toinvestigate, clean up, remediate, and remove any Hazardous Materials which cometo be located in, on, under, or about the Leased Premises due to Tenant’s (orits agents) use of or activities on or about the Leased Premises. Within sixty(60) days after the expiration of the Term or the earlier termination of thisLease (subject to the Tenant Lender Rights set out in Section 35,below), Tenant shall restore the Leased Premises to the condition existingprior to the introduction of such Hazardous Materials to the LeasedPremises.  Tenant shall comply with allapplicable Environmental Laws (as defined herein) and the requirements ofgovernmental authorities in undertaking such actions.  No consent of Landlord to the presence ofHazardous Materials or Tenant’s compliance with Environmental Laws (as definedherein) shall relieve Tenant of its indemnification obligations hereunder.

 

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C.                                     Landlord Indemnification. Landlord shall indemnify, defend and hold harmless Tenant, its officers,directors, owners, managers, employees, agents, successors and assigns (collectively, the “Tenant Indemnitees”) from andagainst any and all losses, damages, claims, judgments, liabilities,enforcement actions, remedial actions, fines, penalties, taxes, fees, costs andexpenses (including, without limitation, attorneys= fees, consultants’ fees, laboratory costs,and expert fees) which arise during the Term as a result of any breach byLandlord of the obligations set forth in this Section 29.  Subject to the provisions of this Section 29,Landlord shall promptly take, at its sole expense, all actions necessary toinvestigate, clean up, remediate, and remove any Hazardous Materials which cometo be located in, on, under, or about the Leased Premises due to Landlord’s (orits agents) use of or activities on or about the Leased Premises, and Landlordshall restore the Leased Premises, and any other properties (including theImprovements), to the condition existing prior to the introduction of suchHazardous Materials to the Leased Premises. Landlord shall comply with all applicable Environmental Laws (as definedherein) and the requirements of governmental authorities in undertaking suchactions.  Landlord shall obtain Landlord’sprior written approval of such actions and of any consultants or contractors tobe used by Landlord in connection therewith. No consent of Tenant to the presence of Hazardous Materials or Landlord’s(or its agents) compliance with Environmental Laws (as defined herein) shallrelieve Landlord of its indemnification obligations hereunder.

 

D.                                    Representations and Warranties of Landlord.

 

(1)**                                 **Uses.**** Landlord represents and warrantsto Tenant, after due inquiry and investigation, that the Leased Premises havenot been used by previous owners and/or operators, Landlord, or any tenant of Landlordto generate, manufacture, refine, transport, treat, store, handle, or disposeof Hazardous Materials.

 

(2)**                                 **Storage. Landlord represents and warrants to Tenant, after due inquiry andinvestigation, that the Leased Premises have not contained, nor do the LeasedPremises now contain, either asbestos, PCB, toxic materials or HazardousMaterials.

 

(3)**                                 **Governmental orPrivate Action**.** Landlord represents and warrants to Tenant,after due inquiry and investigation, that Landlord has not received a summons,citation, directive, letter or other communication, written or oral, from anyagency or Department of the State of Nevada or the U.S. Government or any otherpublic agency or entity or any private agency or entity concerning anyintentional or unintentional action or omission on Landlord’s part:  (i) concerning any release or dischargeof any Hazardous Materials on, under, above or adjacent to the Leased Premises;or (ii) any alleged violation of any Environmental Laws; or (iii) thereleasing, spilling, leaking, pumping, pouring, emitting, emptying, or dumpingof Hazardous Materials into waters or onto lands of the State of Nevada, orinto waters or onto lands outside the jurisdiction of the State of Nevada.  Landlord further represents and warrants toTenant that there is no litigation pending or threatened with respect to theLeased Premises concerning any Hazardous Materials or the violation of anyEnvironmental Laws.

 

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E.**                                     **Definition.  Asused herein, “Hazardous Materials” shall mean and include all hazardousand toxic substances, waste or other materials, any pollutants or contaminantsas defined in Section 101 (14) of the Comprehensive Environmental ResponseCompensation and Liability Act, as amended, 42 U.S.C. Section 9601 (14)(including, without limitation, asbestos and raw materials which includehazardous constituents), or other similar substances, or materials which areincluded under or regulated by any local, state, or federal law, rule, or regulationpertaining to environmental regulation, contamination or clean-up, including,without limitation, “CERCLA”, “RCRA”, “SARA”, or state superlien orenvironmental clean-up statutes (all such laws, rules and regulationsbeing referred to collectively as “Environmental Laws”).  Any other terms mentioned in this Section 29which are defined in state or federal statutes and/or regulations promulgatedin relation thereto shall have the meaning subscribed to such terms in suchstatutes and regulations.

 

F.                                      Reports.  Attached to this Lease as Exhibit “F”and incorporated herein by reference are all reports and correspondence whichLandlord has received as of the date of this Lease regarding any environmentalstatus of the Leased Premises or of any alleged violation of any EnvironmentalLaws.  Landlord further agrees topromptly disclose to Tenant (but in any event within five (5) days ofLandlord’s receipt) of any other reports, correspondence, claims, documents,pleadings or the like as to any alleged violation of any Environmental Laws orof the environmental status of the Leased Premises, which come into Landlord’spossession, custody or control after the commencement of this Lease.

 

**30.****                              ****TENANT’S PREFERENTIAL RIGHT TOPURCHASE****.**

 

A.                                   Preferential Right. Tenant, during the Term, shall have the prior right to buy the whole orany part of the Leased Premises if Landlord receives from a third party anacceptable bona fide offer to buy, or if Landlord offers to sell such LeasedPremises in a general offering or solicitation for the sale of same (a “GeneralSolicitation”).

 

B.                                     Offer Notice; Procedure. Landlord shall within three (3) days of receipt of an offer for thesale of the Leased Premises or of a General Solicitation (either, an “Offer”)(and not less than ten (10) days prior to the execution of any contractfor the sale of same) give Tenant written notice of such Offer, together with acopy thereof. Tenant shall have thirty (30) business days from the receipt ofsuch Offer to notify Landlord that it will or will not buy such Leased Premisesat the terms of the Offer, or at such lesser terms as Landlord and Tenant mayagree upon (the “Refusal Right”).  IfTenant fails to notify Landlord of its intent to purchase within such thirty(30) business day time period, Landlord shall have the right to consummate suchsale but only to the party identified in the Offer and only upon the strictterms set out in such Offer.  If Tenantnotifies Landlord within such thirty (30) business day period that Tenant haselected to exercise the Refusal Right and to purchase the Leased Premisespursuant to the Offer, Tenant shall have ninety (90) days after the date ofTenant’s notice to Landlord (of its election to so purchase the LeasedPremises) within which to consummate the purchase of the Leased Premises on theterms stated in the Offer (or such other terms as may be agreed to by Landlordand Tenant).

 

C.                                     Sale Requirement.  Inthe event Tenant elects not to exercise the Refusal Right and if Landlord sellssuch Leased Premises to a third person, such sale shall be made subject to allof the terms and provisions of this Lease.

 

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D.                                    Nominee.  The rights of Tenant underthis Section 30 may be exercised by a nominee which Tenant maydesignate and whose financial responsibility Tenant hereby guarantees.  Furthermore, Tenant’s preferential right topurchase shall not apply to a transfer to a lender pursuant to foreclosureproceedings.

 

**31.****                              ****OPTION TO PURCHASE****.**

 

A.                                   Grant of Exclusive Option.  For the independent consideration of$10.00 and other valuable consideration of (which Landlord acknowledgesreceipt), Landlord hereby grants to Tenant the exclusive, non-revocable rightand option (the “Option”) to purchase the Leased Premises (including theAdjacent Tract) pursuant to the purchase price and terms described below.

 

B.                                     Purchase Price.  The purchase price for the LeasedPremises (the “Purchase Price”) shall be equal to the fair market value ofthe Leased Premises (as of the date which is not more than thirty (30) daysfrom the Exercise Notice, defined below), as such value is determined by awritten appraisal conducted and prepared in accordance with MAI standards (the “ValuationAppraisal”) by an appraisal team (the “Appraisal Team”) duly licensed by theState of Nevada.  Such Appraisal Teamshall be selected in accordance with the procedures set out in Section 31.F.,below.   Such Valuation Appraisal shall exclude the value of theImprovements (as well as any additions to the Improvements as may have beenconstructed on the Leased Premises after the commencement date of this Leaseand shall further exclude any other improvements made to the Leased Premises byTenant or any third party), and shall be made without regard to any existinglease on the Leased Premises or extension rights to the Lease, such that it isappraised as unencumbered real property.

 

C.                                     Exercise.  The Option may be exercised by Tenant pursuant to any of thefollowing notice provisions (each, an “Exercise Notice”):

 

(1)                                  By written notice to Landlord by Tenant atany time during the time period commencing with the day after the last dayof the Initial Term and ending sixty (60) days thereafter; or

 

(2)                                  By written notice to Landlord by Tenant atany time during the time period commencing with the day after the last day ofeach calendar year within the First Extension Term and ending thirty (30)days thereafter; or

 

(3)                                  By written notice to Landlord by Tenant atany time during the time period commencing with the day after the last day ofeach calendar year within the Second Extension Term and ending thirty(30) days thereafter.

 

D.                                    Real Estate Contract.    Within twenty (20)days of Tenant’s delivery of the applicable Exercise Notice, Landlord andTenant shall execute and deliver a Real Estate Purchase Contract containingsuch terms as are acceptable to Tenant and as are customary for commercial realestate transactions of like nature and price in the Carson City, Nevada area.

 

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E.                                      Memorandum of Option. Upon execution of this Lease, Landlordshall execute, cause to be notarized and deliver to Tenant that certainMemorandum of Option, in form and substance as set out on Exhibit “G”,attached hereto and incorporated herein. Tenant shall have the right to cause the recording of such Memorandum ofOption in the public records of the State of Nevada.  Upon the termination or other expiration ofthis Option, Tenant agrees to deliver within twenty (20) days of Landlord’srequest a quitclaim of its interest in such Option.

 

F.                                      Appraisal Team Selection.

 

(1)                                  The Appraisal Team shall be comprised ofthree (3) MAI appraisers duly licensed in the State of Nevada.

 

(2)                                  Within five (5) days of an ExerciseNotice, Landlord and Tenant shall designate in writing to each other theirrespective selection of an appraiser to participate on the AppraisalTeam (collectively, the “Designated Appraisers”and singularly, a “DesignatedAppraiser”).  If either Landlord or Tenant shall fail to timelynotify the other as to the selection of their respective Designated Appraiser,then the party who timely selected their Designated Appraiser shall have theright to select the remaining Desginated Appraiser on behalf of the non-timelyparty.

 

(3)                                  Within three (3) days of the selectionof the Designated Appraisers, such Designated Appraisers shall act in goodfaith to select a third appraiser to participate on the Appraisal Team (the “FinalAppraiser”).  In the event that the Designated Appraisers cannot agree onthe selection of the Final Appraiser, then the selection of such FinalAppraiser shall be determined by Tenant, upon good faith consultation withLandlord (but with the ultimate decision as to same to reside with Tenant).

 

(4)                                  The determination of the Appraisal Team as tothe Valuation Appraisal shall be final, conclusive and binding (without rightof appeal or initiation of legal action).

 

**32.****                              ****APPLICABLE LAW****.**

 

This Lease shall be subject to the laws of the Stateof Nevada and it is agreed that if any word, phrase, clause, sentence, article,provision or paragraph of this Lease is or shall be held invalid or unlawfulunder the laws of the State of Nevada for any reason, the same shall be deemedsevered from the remainder hereof, and stricken therefrom, and shall in no wayaffect or impair the validity of this Lease or of any portion thereof, and thisLease shall otherwise remain in full force and effect.

 

**33.****                              ****ENTIRE AGREEMENT/SUBTITLES****.**

 

A.                                   Entire Agreement.  ThisLease contains the entire agreement of the parties, and no modificationsthereof or statement or representation in connection therewith shall beeffective or binding upon either party unless the same is reduced to writingsigned by Landlord and Tenant, and attached hereto.

 

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B.                                     Headings; Captions.  Thedescriptive headings of the Lease are inserted for convenience only and shallnot control or affect the meaning or construction of any provisions hereto.

 

**34.****                              ****ATTORNEYS FEES****.**

 

In the event either Landlord or Tenant brings a suitagainst the other in connection with this Lease, either for the collection ofmoney or for the breach of the terms of this Lease, then the prevailing partyin any such action shall be entitled to its reasonable attorney’s fees and costsas part of its recovery.

 

**35.**                               **TENANT LENDER RIGHTS**.

 

A.                                   Tenant’s Right to Encumber. Tenant may encumber all or any portion of its interest in this Lease andthe leasehold estate created by this Lease by a deed of trust, mortgage orother security instrument (collectively, a “Leasehold Mortgage”), provided thatsuch Leasehold Mortgage, shall be a lien only on Tenant’s interest inand to this Lease and the leasehold estate created hereby.  For purposes of this Section 35,the holder of a Leasehold Mortgage or anyone claiming by or through or undersuch holder shall be referred to as a “Leasehold Mortgagee”.

 

B.                                     Rights of Leasehold Mortgagee.

 

(1)                                  Rights of Enforcement.  ALeasehold Mortgagee may enforce its rights under its Leasehold Mortgage andacquire title to the Tenant’s leasehold estate in the Leased Premises in anylawful manner, and upon foreclosure under the Leasehold Mortgage and theissuance of evidence of title, take possession of the Leased Premises, subject,however, to all of the terms, provisions and conditions of this Lease.  During such time as a Leasehold Mortgagee orany successor in interest is the owner and holder of the leasehold estatecreated under this Lease, whether by foreclosure or otherwise, such interestsso acquired shall be subject to all of the terms, covenants and provisions ofthis Lease.

 

(2)**                                 **Notice of Default**. **Landlord shalldeliver to such Leasehold Mortgagee a copy of each notice of default under thisLease (a “Lease Default”) given by Landlord to Tenant (a “Landlord Notice”)concurrently with and whenever any such Landlord Notice shall thereafter begiven by Landlord to Tenant, addressed to such Leasehold Mortgagee at itsaddress last furnished to Landlord.  Nosuch Landlord Notice shall be deemed to have been duly given unless and until acopy thereof has been delivered to such Leasehold Mortgagee.

 

(3)                                  Landlord Covenants.** **Landlord agrees that it willnot:  (i) accept the surrender ofthe Leased Premises by Tenant prior to the termination of the Lease, or (ii) consentto the modification of any material term of this Lease or the termination ofthis Lease by Tenant, without prior written notice to the Leasehold Mortgageein each instance.  Landlord furtheragrees that it will not seek to terminate this Lease by reason of any act oromission of Tenant until Landlord has given to the Leasehold Mortgagee a

 

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copy of the Landlord Noticewith respect to the Lease Default upon which the proposed termination is based.

 

(4)                                  Additional Required Notices To LeaseholdMortgagee.** **After the expirationof all applicable notice and grace periods set forth in this Lease with respectto any such default, Landlord shall give written notice to the LeaseholdMortgagee (“Mortgagee Notice”) of the failure of Tenant to cure such LeaseDefault.  The Mortgagee Notice shall besent by certified mail, return receipt requested, or by a nationally recognizedcommercial overnight delivery service, to the address set forth in theLeasehold Mortgage (or such other address as may hereafter be designated inwriting to Landlord by the Leasehold Mortgagee).  Landlord shall not declare or assert atermination of this Lease by reason of any such Lease Default until a “reasonableperiod of time” (as defined below) shall have elapsed following the receipt ofthe Mortgagee Notice, during which period the Leasehold Mortgagee shall havethe right, but shall not be obligated, to remedy such Lease Default.  Landlord hereby agrees to accept performanceby any such Leasehold Mortgagee of any covenant, condition or agreement onTenant’s part to be performed hereunder with the same force and effect asthough performed by Tenant.

 

(5)**                                 **Reasonable Period of Time Defined**. **As used in Section 35.B.(4),above, “a reasonable period of time” shall be: (i) thirty (30) days if such Lease Default can be remedied duringsuch thirty (30) day period, or (ii) if such Lease Default cannot beremedied during such thirty (30) day period, then such period of time as isnecessary to remedy such Lease Default (not to exceed, however, one hundred onehundred eighty (180) days), provided that the Leasehold Mortgagee has commencedto cure such Lease Default or to foreclose the lien of its Leasehold Mortgagewithin such initial thirty (30) day period and continues to diligentlyprosecute same to completion.

 

(6)**                                 **Time Extension**. **The time for the Leasehold Mortgagee to cureany Lease Default by Tenant that reasonably requires the Leasehold Mortgagee bein possession of the Leased Premises to do so, or the time for a LeaseholdMortgagee to obtain Tenant’s interest in this Lease in order to elect to enterinto a new lease with Landlord as provided in Section 35.B.(7) below,shall be deemed extended to include the period of time required by suchLeasehold Mortgagee to obtain such possession or obtain Tenant’s interest inthis Lease (by foreclosure or otherwise) with due diligence; provided, however,as a condition precedent:  (i) suchLeasehold Mortgagee shall have delivered to Landlord its written commitment tocure all outstanding Lease Defaults reasonably requiring possession of theLease Premises; and (ii) during such period all other obligations ofTenant under this Lease are being duly performed by such Leasehold Mortgagee.

 

(7)                                  New Lease Covenants.** **If this Lease is terminated forany reason, including, but not limited to, a termination following a LeaseholdMortgagee’s failure to cure a Lease Default as permitted in this Section 35,or the rejection or disaffirmance of this Lease pursuant to bankruptcy laws orother laws affecting creditors’ rights, Landlord will enter into a new lease ofthe Leased Premises with the Leasehold Mortgagee, or any party designated bythe Leasehold Mortgagee within thirty (30) days after the request of theLeasehold Mortgagee.  The new lease shallbe effective as of the date of termination,

 

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rejection or disaffirmanceof this Lease and shall be upon the same terms, covenants and provisions as arecontained in this Lease, including the amount of the Annual Rent and other sumsdue from Tenant hereunder.  In order toobtain a new lease, a Leasehold Mortgagee must make a written request toLandlord for the new lease within (30) days after the Leasehold Mortgagee isnotified of the effective date of termination, rejection or disaffirmance ofthe Lease, as the case may be, in which event no further action shall be takenby Landlord pending the execution and delivery thereof.  In addition, prior to making written requestto Landlord for the new lease, the Leasehold Mortgagee must cure all LeaseDefaults that can be cured by the payment of money and pay to Landlord all rentand other sums that would have been due and payable by Tenant under this Leasebut for the rejection, disaffirmance or termination.  Further, the Leasehold Mortgagee shallpromptly reimburse Landlord for its reasonable costs and expenses (includingattorneys fees) incurred in connection with such termination, rejection or dissaffirmanceas the case may be.  If the LeaseholdMortgagee or the party so designated by the Leasehold Mortgagee shall haveentered into a new lease with Landlord pursuant this Section 35.B.(7),then any Lease Default that cannot be cured by the payment of money shall bedeemed cured.  To the extent Landlord isable, Landlord shall assure that any new lease made pursuant hereto shall besenior and superior to any other encumbrances on the Leased Premises.  The Leasehold Mortgagee’s right under this Section 35.B.(7) arein addition to and not limited by such Leasehold Mortgagee’s right to cureunder Section 35.B.(4) and (5), above.  The provisions of this Section 35.B.(7) area separate and independent contract made by Landlord and each LeaseholdMortgagee.  From the effective date oftermination, rejection or disaffirmance of this Lease to the date of executionand delivery of such new lease or the expiration of the period during which aLeasehold Mortgagee may make a request, such Leasehold Mortgagee may, uponpayment of any rent and any other sums as may be due from Tenant, use, occupyand enjoy the leasehold estate created by this Lease without hindrance byLandlord.

 

(8)                                  Benefit.** **Theprovisions of this Section 35 are for the benefit of each LeaseholdMortgagee and may be relied upon and shall be enforceable by each LeaseholdMortgagee.  Neither a Leasehold Mortgageenor any other holder or owner of the indebtedness secured by a leaseholdmortgage or otherwise shall be liable with respect to the terms, covenants,agreements or obligations of Tenant contained in this Lease, unless and untilsuch Leasehold Mortgagee or that holder or owner acquires the interest ofTenant hereunder.

 

(9)                                  Estoppel.  Landlord agrees to promptly(but in any event within seven (7) days of Tenant’s or Leashold Mortgagee’srequest for same) execute, have notarized and deliver to Tenant and LeaseholdMortgagee an estoppel certificate (the “Estoppel Certificate”) in such from,substance, scope and application as may be requested by LeaseholdMortgagee.  Such Estoppel Certificateshall state, but not be limited to, a representation and covenant of Landlordthat:  (i) the Lease is in fullforce and effect; (ii) there exists no condition of default of eitherLandlord or Tenant under the Lease or if such condition of default does exist,a statement from Landlord specifying the nature of such default including thesums due from or action necessary of the defaulting party in order to curesame; and (iii) such other items as the Leasehold Mortgagee may require.

 

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**IN WITNESS WHEREOF**, the Landlord and Tenant hereunto set their hands and seals as of thedate above.

 
| ** ** | **LANDLORD:**                                            |
|------------|----------------------------------------------------------|
|       |                                                     |
|       | THE CLARK AND  JEAN RUSSELL  FAMILY TRUST                |
|       |                                                     |
|       |                                                     |
|       |                                                     |   |
|       | Clark  G. Russell, Trustee                               |
|       |                                                     |
|       |                                                     |
|       |                                                     |   |
|       | Jean  M. Russell, Trustee                                |
|       |                                                     |
|       |                                                     |
|       | **TENANT:**                                              |
|       |                                                     |
|       | JACOBS  ENTERTAINMENT, INC.,  a Delaware corporation     |
|       | And/Or  Assigns                                          |
|       |                                                     |
|       |                                                     |
|       | By:                                                      |   |   |
|       | Printed  Name: Stephen R. Roark                          |
|       | Title:  President  and Chief Financial Officer |
|            |                                                          |  |  |

 

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