**Exhibit 10.57**

 

**MANAGEMENT AGREEMENT**

 

**BY AND BETWEEN**

 

**GAMING ENTERTAINMENT (DELAWARE), L.L.C.**

 

**AND**

 

**HARRINGTON RACEWAY, INC.**

 

 

**JANUARY 31, 1996**

 

----

 

**TABLE OF CONTENTS**

 
| **ARTICLE 1  DEFINITIONS**                                     |
|----------------------------------------------------------------|
|                                                           |
| Definitions                                                    |
|                                                           |   |
| **ARTICLE 2  EXCLUSIVITY**                                     |
|                                                           |   |
| 2.1                                                            | Exclusivity |
|                                                           |   |
| **ARTICLE 3  TERM**                                            |
|                                                           |   |
| 3.1                                                            | Term |
|                                                           |   |
| **ARTICLE 4  DUTY AND AUTHORITY OF GED**                       |
|                                                           |   |
| 4.1                                                            | GED’s Duties in Connection with Operation |
| 4.2                                                            | No  Liability |
| 4.3                                                            | Marketing and Advertising |
| 4.4                                                            | Busing  Programs |
| 4.5                                                            | Contracting |
| 4.6                                                            | Internal Control Systems |
|                                                           |   |
| **ARTICLE 5  EMPLOYMENT PRACTICES & DELEGATION OF DUTIES** |
|                                                           |   |
| 5.1                                                            | GED Responsibility |
| 5.2                                                            | Employee Policies |
| 5.3                                                            | Management Employees |
| 5.4                                                            | Off-Site Employees |
| 5.5                                                            | No GED Officer/Director Salaries |
| 5.6                                                            | Employee Background Checks |
| 5.7                                                            | Local Hiring Preference |
| 5.8                                                            | Delegation of Duties |
|                                                           |   |
| **ARTICLE 6  ACCOUNTING AND CASH MANAGEMENT**                  |
|                                                           |   |
| 6.1                                                            | Depository Accounts |
| 6.2                                                            | Deposits to Depository Accounts |
| 6.3                                                            | Disbursement  Accounts |
| 6.4                                                            | No  Cash Disbursements |
| 6.5                                                            | Reserve Funds and  Petty Cash Fund |
| 6.6                                                            | Transfers Between Accounts |
| 6.7                                                            | Disbursement of  Management Fees |
| 6.8                                                            | Nature of  Accounts |
| 6.9                                                            | Payment of Fees and  Disbursements |
| 6.10                                                           | Operative Dates |

 

i

----

 
| 6.11                                                            | Financial  Statements                                  |
|-----------------------------------------------------------------|--------------------------------------------------------|
| 6.12                                                            | Books of Account                                       |
|                                                            |                                                   |
| **ARTICLE 7  MANAGEMENT FEES**                                  |
|                                                            |
| 7.1                                                             | Base  Management Fees                                  |
| 7.2                                                             | Deferral of Base  Management Fee                       |
| 7.3                                                             | Target Bonus                                           |
| 7.4                                                             | Annual  Reconciliation                                 |
| 7.5                                                             | Off-Site Employees, Travel and Out-of-Pocket  Expenses |
| 7.6                                                             | Start-Up Advances                                      |
| 7.7                                                             | Continuing  Advances                                   |
|                                                            |                                                   |
| **ARTICLE 8  INSURANCE**                                        |
|                                                            |                                                   |
| 8.1                                                             | Obligation  to Insure                                  |
| 8.2                                                             | Construction  Period                                   |
| 8.3                                                             | Insurance  Minimums                                    |
|                                                            |                                                   |
| **ARTICLE 9  LIENS AND ENCUMBRANCES**                           |
|                                                            |                                                   |
| 9.1                                                             | Sale, Transfers, Mortgages and Liens by HRI            |
| 9.2                                                             | Sale, Transfers, Mortgages and Liens by GED            |
|                                                            |                                                   |
| **ARTICLE  10  DAMAGE, CONDEMNATION OR IMPOSSIBILITY**          |
|                                                            |                                                   |
| 10.1                                                            | Generally                                              |
| 10.2                                                            | Release  and Forgiveness                               |
|                                                            |                                                   |
| **ARTICLE 11  TRADE NAMES, MARKS AND CONFIDENTIAL INFORMATION** |
|                                                            |                                                   |
| 11.1                                                            | Project Name                                           |
| 11.2                                                            | Trade Names, Trade Marks and Service Marks             |
| 11.3                                                            | GED Marks                                              |
| 11.4                                                            | Confidential Information                               |
| 11.5                                                            | Proprietary Information  of GED                        |
| 11.6                                                            | Employment  Solicitation Restriction Upon Termination  |
|                                                            |                                                   |
| **ARTICLE 12  REPRESENTATIONS AND WARRANTIES**                  |
|                                                            |                                                   |
| 12.1                                                            | Representations  and Warranties of HRI                 |
| 12.2                                                            | Representations  and Warranties of GED                 |

 

ii

----

 
| **ARTICLE 13  ADDITIONAL, COVENANTS OF HRI AND GED** |
|------------------------------------------------------|
|                                                 |   |
| 13.1                                                 | Avoidance of Breach of Representations,  Warranties, Etc. |
| 13.2                                                 | Taxes and Other  Liabilities |
| 13.3                                                 | Certain Notices |
| 13.4                                                 | Other Agreements |
| 13.5                                                 | Comply with Laws |
| 13.6                                                 | File Reports |
| 13.7                                                 | Further  Assurances |
| 13.8                                                 | Future Acts |
| 13.9                                                 | No Amendments |
| 13.10                                                | No  Damage to Property |
| 13.11                                                | Notice of  Defaults |
| 13.12                                                | Litigation |
| 13.13                                                | Records |
|                                                 |   |
| **ARTICLE 14  OTHER CONDITIONS**                     |
|                                                 |   |
| 14.1                                                 | Other Conditions |
|                                                 |   |
| **ARTICLE 15  TERMINATION; DEFAULT; REMEDIES**       |
|                                                 |   |
| 15.1                                                 | Termination |
| 15.2                                                 | Notice  and Cure Periods |
| 15.3                                                 | Remedies |
| 15.4                                                 | Conclusion  of Term |
|                                                 |   |
| **ARTICLE 16  ARBITRATION AND ENFORCEMENT**          |
|                                                 |   |
| 16.1                                                 | Arbitration |
| 16.2                                                 | Judicial Enforcement  of Arbitration |
| 16.3                                                 | Trial  By Jury; Venue |
| 16.4                                                 | Legal Fees |
|                                                 |   |
| **ARTICLE 17  INDEMNIFICATION**                      |
|                                                 |   |
| 17.1                                                 |   |
| 17.2                                                 |   |
|                                                 |   |
| **ARTICLE 18  MISCELLANEOUS**                        |
|                                                 |   |
| 18.1                                                 | Successors  and Assigns |
| 18.2                                                 | Entire Agreement |
| 18.3                                                 | Amendments |
| 18.4                                                 | Notices |
| 18.5                                                 | Expenses |

 

iii

----

 
| 18.6                     | Waiver                   |
|--------------------------|--------------------------|
| 18.7                     | Severability             |
| 18.8                     | Construction  Generally  |
| 18.9                     | Titles  and Headings     |
| 18.10                    | Choice of Law            |
| 18.11                    | Counterparts             |
| 18.12                    | Time  is of the Essence  |
| 18.13                    | No Partnership           |
| 18.14                    | Termination              |
| 18.15                    | Recording                |
| 18.16                    | Exhibits                 |
| 18.17                    | Curative Moneys Expended |
|                     |                     |
| **ARTICLE 19  GUARANTY** |
|                     |
| 19.1                     | Guaranty                 |

 

iv

----

 

**MANAGEMENT AGREEMENT**

 

**THIS MANAGEMENT AGREEMENT** (this“Agreement”) is made this 31st day of January, 1996 by and Between **HARRINGTON RACEWAY, INC.** (“HRI”) having asits address P.O. Box 28, Harrington, Delaware 19952 and **GAMING ENTERTAINMENT (DELAWARE), L.L.C.**(“GED”) having as its address 55 Technology Way, West Greenwich, Rhode Island02817.  Terms used herein and nototherwise defined shall have the meanings as set forth in Article I.

 

**WITNESSETH:**

 

**WHEREAS,** HRI undera lease (“the DSF/HRI Lease”) between HRI, as tenant, and Delaware State Fair,Inc. (“DSF”), as landlord, currently leases certain Property from DSF for thepurpose of conducting live harness horse racing; and

 

**WHEREAS,** theGeneral Assembly of the State of Delaware enacted the Horse Racing DevelopmentAct (the “Act”) which permits HRI to serve as the lottery agent with respect toVideo Lottery Machines placed on and operated at the Property;

 

**WHEREAS,** HRIdesires to operate Video Lottery Machines to the fullest extent allowed by law;

 

**WHEREAS,** GED hassubleased from HRI certain portions of the Property (the “GED Premises”) andintends to improve the GED Premises to include facilities (“the EntertainmentCenter”) to, interalia, house the Video Lottery Machines; and

 

**WHEREAS,** by meansof that certain Sublease and Leaseback Agreement executed coincident herewithbetween HRI and GED, GED has leased back the Entertainment Center and RelatedImprovements to HRI to allow HRI to operate Video Lottery Machines at theEntertainment Center in compliance with the Act and to conduct other related CommercialActivities; and

 

**WHEREAS,** DSF andGED entered into a Nondisturbance Agreement dated as of January 31, 1996,with respect to the DSF/HRI Lease and related matters; and

 

**WHEREAS,** inaccordance with the terms and conditions of this Agreement, HRI has retainedthe services of GED to manage the operation of the Entertainment Center and theother Commercial Activities; and

 

**WHEREAS,** all ofthe aforesaid enumerated documents, together with such other documents,agreements and instruments as the parties from time to time deem necessary tofurther effectuate the operation of the Entertainment Center and the otherCommercial Activities on the terms and conditions set forth herein or therein

 

1

----

 

arecollectively hereinafter referred to as the “Transaction Documents”; and

 

**WHEREAS,** except asotherwise provided in this Agreement, all fees and expenses relating tooperation of the Entertainment Center and Related Improvements (including,without limitation, the fees and reimbursements due GED from time to time underthe terms of this Agreement) are to be paid solely from the revenues generatedby the Entertainment Center and Related Improvements (the intention being thatneither HRI nor DSF shall be subject to any liability in the event theEntertainment Center and Related Improvements do not generate sufficientrevenues to pay Management Fees, Operating Expenses or other paymentsassociated with the operation of the Entertainment Center and RelatedImprovements; and

 

**WHEREAS,** each ofthe Transaction Documents are each being executed in consideration of theexecution of the other Transaction Documents.

 

**NOW, THEREFORE,** inconsideration of the mutual covenants and promises contained herein, and forother good and valuable consideration, the receipt, validity and sufficiency ofwhich are hereby acknowledged, HRI and GED hereby agree as follows:

 

**ARTICLE 1DEFINITIONS**

 

The following terms used in this Agreementshall, unless the context requires, have the meanings specified in this ArticleI.  Any defined term used in thisdocument which is not defined herein but which is defined in the HRI/GEDSublease and Leaseback Agreement or the DSF/HRI Lease shall have the meaningascribed to it therein.

 

**“Act”** means theHorse Racing Redevelopment Act enacted by the General Assembly of the State ofDelaware.

 

**“Affiliate”** means anyperson or entity which directly or indirectly controls a party, or which iscontrolled by or is under common control with such specified person.  The term **“control”**means the possession, directly or indirectly, of the power to direct or causethe direction of the management and policies of a person or entity, whetherthrough the ownership of voting securities, by contract or otherwise.

 

**“Agent Commission”** means allamounts which the Operator is entitled to be paid by the Delaware State Lotteryas a commission pursuant to the Act for serving as a video lottery agentthereunder.

 

**“Bank Accounts”** means thebank accounts established by HRI and/or GED pursuant to this Agreement for theoperation of the

 

2

----

 

EntertainmentCenter and the Related Improvements including, without limitation, theDepository Accounts, the Disbursement Account, the Cash Contingency ReserveFund and the Petty Cash Fund.

 

**“Base Management Fee”** means themanagement fee calculated and payable to GED pursuant to Section 7.1.

 

**“Cash Contingency ReserveFund”** means the fund established pursuant to Section 6.5.

 

**“Commencement Date”** means theearlier of:  (i) the date on whichVideo Lottery Machines become operational at the Entertainment Center Premises,or (ii) 12 months from the date hereof. In the event HRI and GED determine to open a temporary facility prior tothe date a permanent facility is completed and open to the public (i) forpurposes of calculating the Term set forth in Section 3.1, the CommencementDate shall be deemed to have occurred on the date Video Lottery Machines maybecome operational at the permanent facility, which date shall not be earlierthan the date on which the permanent facility is completed and open to thepublic and (ii) for purposes of all other Sections of this Agreement, theCommencement Date shall be deemed to have occurred on the date which GED giveswritten notice to HRI that Video Lottery Machines may become operational at thetemporary facility.

 

**“Commercial Activities”** means anycommercial activity conducted within or in connection with the operation of,the Entertainment Center, including, without limitation, gaming activities,other commercial activities and the rental or leasing of space within theEntertainment Center or any improvements therein or any portion thereof.

 

**“Common Areas”** means allportions of the Property made available by HRI for use in connection with theoperation of the Entertainment Center and the other Commercial Activities, suchportions to include, without limitation, driveways, entrances and exits,service corridors, alleys, sign frontage and parking areas made available byHRI to the aforesaid operation.

 

**“Default”**or**“Event of Default”** shall have the meaningas set forth in Article 15.

 

**“Depository Accounts”** means theseparate bank accounts established pursuant to Section 6.1 into which allreceipts from Commercial Activities and Agent Commissions shall be deposited.

 

**“Disbursement Accounts”** means thebank accounts established pursuant to Section 6.3.

** **

**“DSF/HRI Lease”** means theLease Agreement entered into between DSF, as lessor, and HRI, as lessee,involving the larger premises of which the Property is a part.

 

3

----

 

**“Enterprise Name”** shallhave the meaning ascribed to it in Section 11.1.

 

**“Entertainment Center”** meansthose certain facilities intended to house the Video Lottery Machines and conductCommercial Activities, including related parking areas, all to be accessed andserviced by means of rights of way and easements with respect to the Propertyand reasonably necessary to the operation of the Entertainment Center andRelated Improvements (all of the same being more particularly described by Exhibit“A”).

 

**“Furniture, Fixtures andEquipment”** means the furniture, fixtures and equipment described in Exhibit“E” attached hereto and made a part hereof.

 

**“GED Premises”** shallmean those premises more particularly identified by Exhibit “B”.

 

**“Gross Revenues”** means allrevenues, rental income (other than rental payments under the DSF/HRI Lease orthe Sublease and Leaseback Agreement), sales or other income derived from goodssold, services performed or Commercial Activities conducted in connection withthe Entertainment Center and the Related Improvements, including, withoutlimitation, Gross Win derived from Video Lottery Machines operated within theEntertainment Center, other income and sales derived from gaming and vendingequipment, sales of food, beverages, non-food merchandise, OTB Revenue, revenuederived on the GED Premises from programs conducted by and/or with the consentof, and/or at the direction of GED and all other revenues, rental income, salesor other income derived from operation of the Entertainment Center and theRelated Improvements, net of payments of, and accruals for, payments ofwinnings to players, and prior to deduction for expenses of any kind or natureincluding, without limitation, (i) gaming taxes, (ii) payments to the DelawareState Lottery for Video Lottery Machines and services, and (iii) statutorypurse supplements payable from Video Lottery Machines.

 

**“Gross Win”** means theamount remaining after payment of, and accrual for, prizes to players.

 

**“Improvements”** means theimprovements to be constructed by GED at the Entertainment Center in accordancewith the Plans.

 

**“Initial Installment Date”** means thefirst day of the first calendar month following the Commencement Date.

 

**“Interest Rate”** shallmean the prime rate of interest as announced in the Wall Street Journal on thelast business day of the preceding calendar month plus one percent (1%);provided, however, that if a Default has occurred and is continuing, then interestshall accrue at a rate of the lesser of (i) the maximum

 

4

----

 

lawfulrate of interest permitted by law, or (ii) prime plus four percent (4%).

 

**“Lease/LeasebackAgreement”** shall mean that certain agreement between GED and HRIreferenced in the fifth recital to this Agreement.

 

**“Management Fees”** mean theBase Management Fees and Target Bonus payable to GED pursuant to thisAgreement.

 

**“Net OperatingProfit”**means Gross Revenues less Operating Expenses.

 

**“Operating Expenses”** means allexpenses incurred by or at the direction of GED, subject to the prior consentof HRI or within the parameters hereafter established by mutual agreement ofHRI and GED, in connection with the operation of the Entertainment Center andRelated Improvements and/or the other Commercial Activities, including, withoutlimitation, the expenses of GED in performing GED’s duties under thisAgreement, the cost of goods sold and materials and supplies used in respect ofthe Commercial Activities, administration, salaries, wages, training,employment taxes and benefit programs for persons employed to conduct theCommercial Activities (including the general manager), license fees assessed,and gross receipts taxes, sales taxes, or excise taxes in connection with theoperation of the Entertainment Center and Related Improvements including thoseincurred by the parties in connection with the Entertainment Center and RelatedImprovements, police and security services, utility services (including heat,power, light, sewer, water, garbage removal, maintenance, telephone and airconditioning), ordinary remodeling, repairs and maintenance, insurance costsrelated to the Entertainment Center and Related Improvements, property taxesrelating only to the Entertainment Center and Related Improvements, bonding,advertising, marketing and promotional expenses (including without limitation,costs relating to busing or other customer transportation and complementaryservices or goods given to customers), accounting fees, legal and otherprofessional fees, travel expenses for the officers and directors of GEDincurred in connection with performance of this Agreement, uninsured judgments,fines and penalties rendered against any business conducted by GED at the EntertainmentCenter (and not the result of willful misconduct or gross negligence on thepart of GED or others acting under or through GED), payments of fees in lieu oftaxes, payments to or charges by, the City of Harrington, the County of Kent,the State of Delaware or the United States including, without limitation,(i) gaming taxes payable to the State of Delaware, (ii) payments tothe Delaware State Lottery for Video Lottery Machines and services, and(iii) statutory purse supplements payable from the net win of VideoLottery Machines pursuant to the Act, or any other expenses designated asOperating Expenses upon the mutual agreement of the parties, butspecifically excluding the following:

 

5

----

 

debtservice, payments or distributions of any kind to DSF or HRI, Base ManagementFees, Lease/Leaseback Agreement payments, Target Bonuses, depreciation,property, income, excise or other taxes payable to Federal, State and localgovernments (other than those specifically set forth above as an expense),expenses associated with operation, and up-keep and maintenance of the horseracing or any other facility and Common Areas, except to the extent that suchexpenses for operations, up-keep and maintenance of the Common Areas aredirectly attributable or necessary for the operation of the EntertainmentCenter and Related Improvements, in which case such expenses shall be deemedOperating Expenses.

 

**“OTB Revenue”** meansoff-track betting lease payments derived from simulcasting on the Property.

 

**“Petty Cash Fund”** means thefund established pursuant to Section 6.5.

 

**“Plans”** means theplans to be prepared by GED for the construction and/or improvement of theEntertainment Center and related facilities.

 

**“Property”** means thereal property together with all buildings, structures, fixtures andimprovements located thereon or thereunder or to be located thereon orthereunder, in Kent County, Delaware, leased by HRI from DSF and commonly knownas the Delaware State Fairgrounds, together with such other parcels, rights ofway and easements acquired or leased by HRI or otherwise available to HRI toenhance the businesses operated by HRI from time to time on the Delaware StateFairgrounds all as more particularly described on Exhibit “C” hereto.

 

**“Related Improvements”** meanthose improvements constructed and to be constructed or installed on the GEDPremises and/or Common Areas outside the boundaries of the Entertainment Centerfor the benefit of the GED Premises, including, without limitation,improvements to the infrastructure, access ways and roadways, parking areas,signage, drainage, utility lines and landscaping.

 

**“Rental payments”** means allrental payments to be made pursuant to the Lease/Leaseback Agreement.

 

**“Target Bonus”** means anybonus paid to GED pursuant to Section 7.3.

 

**“Transfer”** means anysale, pledge, assignment, mortgage, encumbrance, security interest, consensuallien, hypothecation, transfer or divestiture, the effect of which is to grantto another an interest in the Entertainment Center or any asset related to theoperation of the Entertainment Center either directly or indirectly, includingany interest taken as security and including any change in the legal orequitable title of the Entertainment

 

6

----

 

Center or in the beneficial ownership of the Entertainment Centerwhether or not of record and whether or not for consideration.

 

**“Video LotteryMachines”**mean any gaming machine, device and/or associated equipment authorized byDelaware law.

 

**ARTICLE 2EXCLUSIVITY**

 

**2.1          Exclusivity.** Unless GED shall have previously agreed in writing and except asmay relate to live harness racing or Delaware State Fair activities currentlyconducted on the Property, HRI shall neither lease or sublease any portion ofthe Property to anyone other than GED to operate, nor itself operate or retainthe business services of any manager or agent other than GED to operate anygaming activities on the Property, nor acquire any interest in, or conduct, anyother gaming enterprise on, or within 100 miles of the Property.

 

**ARTICLE 3TERM**

 

**3.1          Term.**  This Agreement shall be effective for a term(“the Term”) commencing on the date of final execution and continuing until theearlier of:  (i) fifteen (15) yearsfrom the Initial Installment Date; (ii) the expiration of the Act (unlessthe Act is extended or replaced by a substantially similar Act within one (1)year following expiration of the same, in which event the Act shall not bedeemed to have expired for purposes of this provision); or(iii) termination of this Agreement as otherwise hereinafter provided.

** **

**ARTICLE 4DUTY AND AUTHORITY OF GED**

 

**4.1          GED’s Duties in Connection withOperation.** HRI hereby grants GED the exclusive right, onbehalf of HRI, to manage and operate the day-to-day operation, management andmaintenance of the Entertainment Center and Related Improvements.  GEDshalluse its reasonable best efforts to perform GED’s duties in connection with thisAgreement including the following (the cost of which shall constitute OperatingExpenses):

 

(a)           Tocollect, deposit and maintain all Gross Revenues received in connection withoperation of the Entertainment Center and Related Improvements in suchdesignated agency accounts as GED shall determine and HRI approve (whichapproval shall not be unreasonably withheld) in accordance with Article VI.

 

(b)           Toundertake, directly or through third party providers, for the generaladministration, management and operation of the Entertainment Center and RelatedImprovements (including,

 

7

----

 

without limitation, providing for (i) water, heat, light and otherutility services, (ii) recurring services such as**trash removal,pest extermination, decorating, gardening, laundry, telephone service, snowremoval and any other customary and commercially reasonable contracts orservices (all such contracts being cancelable upon no more than thirty (30)days prior notice to the vendor, unless GED determines that cost savings justifya longer term), (iii) purchases herein contemplated using reasonable bestefforts to obtain provisions in such contracts and purchases which arebeneficial to the operation of the Entertainment Center and RelatedImprovements, (iv) marketing and promotional programs or services,(v) personnel services, (vi) accounting, bookkeeping and cashmanagement services, and (vii) security). GED shall not contract, directly or indirectly, with any Affiliate ofGED, unless GED shall first obtain the written consent of HRI.

 

(c)           Toterminate contracts and recover possession of property and to otherwise enforceall the rights of any party with respect to any contract or dispute related tothe Entertainment Center and Related Improvements, and to institute and prosecutelegal actions against third parties and to determine when to settle, compromiseand/or release any such actions or suits.

 

(d)           Tomaintain the Entertainment Center, the Related Improvements and the CommonAreas (to the extent necessary or appropriate for the operation of theEntertainment Center, the Related Improvements and the Common Areas) in a goodstate of repair and condition, and to cause to be made such ordinary repairs,alterations and improvements to the Entertainment Center and Related Improvements,including the purchase of and payment for such maintenance and repairs and suchsupplies and equipment as are reasonably necessary with respect thereto.

 

(e)           Tocause replacement or substitution of equipment, furnishings, fixtures and thelike comprising the Entertainment Center and Related Improvements as the sameare damaged, destroyed or become obsolete or as otherwise necessary in the bestinterests of the Entertainment Center and Related Improvements.  With the consent of HRI (which consent shallnot be unreasonably withheld) GED may, as GED determines necessary ordesirable, make such further alterations, improvements and changes to theEntertainment Center and Related Improvements including any existing landscape,building or other structure, and make construct, repair or replace anycomponent of the Related Improvements. All work undertaken by or through GED shall be completed in a timely,good and workmanlike manner.  GED shallhave the right to enter onto the Property as reasonably necessary to facilitateany of the foregoing and the same shall include the making of all purchases,and in general, doing and performing all acts and things, including theexecution of contracts, incident to such replacement or substitution.

 

8

----

 

(f)            Toobtain and keep current all licenses and permits required for GED to performGED’s obligations hereunder.

 

(g)           Todisburse or remit, as permitted by this Agreement, out of the DisbursementAccount, in the order of priority set forth herein and, if not set forthherein, in such manner and priority as GED (with HRI’s consent, which shall notbe unreasonably withheld) shall determine, all Operating Expenses and SoftCosts incurred in the operation, management and maintenance of theEntertainment Center, and/or the Related Improvements, including, withoutlimitation:

 

(i)            Expense reimbursements payable toGED as provided by Article 6 and all other sums, costs, fees and expensespayable to GED as provided herein;

 

(ii)           Repairs, decorating costs andalterations as GED may determine are reasonable (subject to such parameters asare hereafter established by the parties) in connection with the operation,management and maintenance of the Entertainment Center and Related Improvements;

 

(iii)          Employee costs as set forth more fullyin Article 5, including payroll, payroll taxes, workers compensation,unemployment insurance, medical insurance and employer’s liability insurancepremiums at limits no less than those required by law, employer’s non-ownedauto liability insurance premiums and fidelity bond coverage for on-sitepersonnel engaged in cash management activities;

 

(iv)          Reasonable legal costs, soft costs,and expenses incurred by GED and HRI in connection with the TransactionDocuments;

 

(v)           Paymentsdue GED or HRI under anyTransaction Document; and

 

(vi)          Such other Operating Expenses as GEDmay determine are reasonable (subject to such parameters as are hereaftermutually established by the parties) and necessary for proper operation of theEntertainment Center and Related Improvements.

 

(h)           Toremit to the taxing authority levying any taxes, assessments or levies from theDisbursement Account, amounts sufficient to pay real estate taxes and othercharges, assessments or levies of whatever kind or nature imposed upon oragainst the Entertainment Center or Related Improvements.

 

(i)            Toremit from the Disbursement Accounts to any insurance carrier(s) selected byGED and approved by HRI, or to remit to HRI amounts sufficient to purchaseinsurance to protect

 

9

----

 

theinterests of HRI, GED and, as the case may be, DSF, in connection with theEntertainment Center and Related Improvements.

 

(j)            Toretain all books and records for at least four (4) years following expirationor termination of GED’s duties pursuant to this Agreement and to furnish, atany time or times, copies thereof to HRI or HRI’s designee, as HRI reasonablydirects (the cost of doing so being an Operating Expense).

 

(k)           Topromptly notifyHRI and DSF, in writing, of any personal injury, property damage or other claim(including a claim of unlawful or discriminatory acts in connection with theoperation of the Entertainment Center) occurring on, or claimed by any party onor with respect to, the Entertainment Center or the Related Improvements, andto promptly forward to HRI and DSF any summons, subpoena or other like legaldocument served upon GED relating to actual or alleged potential liability ofHRI, DSF or GED (whether or not in connection with the Entertainment Center orthe Related Improvements, or the operation of the foregoing).

 

(1)           Touse all reasonable efforts to prevent violations of, and otherwise comply with,the provisions of any laws, ordinances or regulations applicable to useand occupancy of the Entertainment Center and the Related Improvements.

 

(m)          Toprovide financial and advisory services to HRI, as HRI may reasonably requestfrom time to time, in respect of the activities conducted pursuant to this Agreement(including services related to financial reporting, obtaining and maintaininglicenses, obtaining and maintaining insurance policies, and coordinating andresolving eminent domain or condemnation proceedings and insurance claims).

 

(n)           Toprovide appropriate security for the operation of the Entertainment Center andRelated Improvements.  Any securityofficer whom GED retains or contracts for shall be bonded and insured in anamount reasonably satisfactory to HRI (it being agreed that such amount shallbe commensurate with such officer’s enforcement duties and obligations).

 

**4.2          No Liability.**  GED assumes no liability whatsoever for anyacts or omissions of DSF, HRI or any previous owners of the Property or anyprevious management or other agent of either. Except as otherwise provided for herein, GED assumes no liability forviolations currently existing with respect to applicable laws or regulations,including without limitation, laws or regulations relating to health, taxes orthe environment or hereafter with respect to any environmental laws orregulations and HRI agrees to indemnify and hold GED harmless from and againstany and all claims, fines, costs, fees and expenses arising in respectthereof.  GED shall promptly notify DSFand HRI in writing of any such violation discovered by GED but the failure toso notify shall not

 

10

----

 

be awaiver of GED’s rights hereunder. Within five (5) days after receipt of notice of such occurrence fromGED, HRI shall undertake or cause others to undertake all actions required tocorrect or comply with any applicable codes, statutes, ordinances, law orregulations.  Notwithstanding anythingin the foregoing to the contrary, GED shall be responsible for all violationsof applicable laws as a direct result of any act or omissions by GED or othersacting under or through GED and shall indemnify and hold HRI and DSF harmlessfrom and against any and all claims, fines, costs, fees and expenses(including, without limitation, all court and arbitration costs and allreasonable attorneys fees paid by or chargeable to HRI) arising in respect tomatters encompassed by the foregoing indemnity obligation of GED.

 

**4.3          Marketingand Advertising.  **GED shalladvertise and promote the operations of Entertainment Center and may do so incoordination with the sales and marketing programs of GED**and other gaming establishments managedby GED or its Affiliates.  All suchsales and marketing programs shall be conducted in compliance with Delaware lawand the rules and regulations promulgated thereunder.  GED may participate in sales and promotional campaigns andactivities involving complimentary food, beverage, shows, chips and tokens.  GED shall have the right, to an extentcommensurate with the prospective benefit accruing therefrom to the operationsof the Entertainment Center, to use and to be reimbursed for the reasonablecost of marketing and advertising services of the employees of GED and itsAffiliates not located at the Property.

 

**4.4          BusingPrograms.**  GED shall assess the feasibility ofdevelopment and utilization of busing programs designed to promote theEntertainment Center in a cost effective manner.  The costs of any such program which is implemented may be sharedamong HRI and the operations of the Entertainment Center, as determined bymutual agreement of GED and HRI.

 

**4.5          Contracting.**  Inentering into contracts for the supply of goods and services related to theoperations of the Entertainment Center and Related Improvements, GED shall givepreference to local businesses if GED determines that such businesses cansupply goods and services at a competitive quality, cost, or time ofperformance and/or in a manner or upon other terms acceptable to GED.

 

**4.6          InternalControl Systems.**  GED shall develop and install controls (the“Internal Control Systems”) for the monitoring of all funds generated inconnection with the operations of the Entertainment Center and RelatedImprovements as required by the Act in order to minimize the opportunity forloss of proceeds from such operations and to comply with applicable law.  HRI, as HRI elects, shall have the right, atanytime and from time to time, to review the operation and results of all InternalControl Systems.  As part of the InternalControl Systems, GED shall install a**closed

 

11

----

 

circuittelevision system to monitor cash handling activities of the EntertainmentCenter and Related Improvements and HRI shall have full access to that systemand its records.

 

**ARTICLE 5EMPLOYMENT PRACTICES & DELEGATION OF DUTIES**

 

**5.1          GEDResponsibility.**  GED shall have exclusive responsibility andauthority for selecting, controlling and discharging employees who performservices in connection with the performance of GED’s responsibilities underthis Agreement involving the Entertainment Center and RelatedImprovements.  Unless prohibited by theAct, all such employees will be GED’s employees.

 

**5.2          Employee Policies.**  As soon as reasonably practicable, GED shall prepare a draft ofpersonnel policies and procedures (the “Employee Policies”), including a jobclassification system with salary levels and scales.  The Employee Policies shall include a grievance procedure inorder to establish fair and uniform standards for the employees of theEntertainment Center.  GED shall submitthe Employee Policies to HRI for prior approval and such approval shall not beunreasonably withheld.  The EmployeePolicies shall be administered by GED and the grievance procedure shall beadministered by a Grievance Committee established by GED.  All such Employee Policies shall comply withapplicable law.

 

**5.3          ManagementEmployees.**  It is anticipated that GED shall initiallyhire persons holding the following job titles in connection with the operationof the Entertainment Center and Related Improvements:  General Manager, Chief Accounting Officer, Director ofConstruction, Director of Operations, Director of Marketing and Director of HumanResources.  Nothing contained herein isintended to limit GED’s right to expand, consolidate or eliminate any of thesepositions as reasonably necessary to operate the Entertainment Center andRelated Improvements.  GED also shall beauthorized to employ such employees directly and to be reimbursed, as anOperating Expense, for all costs and expenses reasonably incurred incident tosuch employment.

 

**5.4          Off-Site Employees.** In performing its obligations hereunder, GEDshall have the right to use employees of GED and affiliated companies (“Off-siteEmployees”) and to allocate and charge as Operating Expenses the actual costsand expenses reasonably incurred with respect to such Off-Site Employees(including reasonable gross salaries, bonuses, benefits, additional pay orseverance pay plus all related federal and state payroll taxes, insurance andworker’s compensation) to the extent such employee’s services are necessary inthe performance of GED’s obligations hereunder.

 

12

----

 

**5.5          NoGED Officer/Director Salaries.** Operating Expenses shall not include the compensation of any officer ordirector of GED, DSF or HRI, except for expense reimbursements as permitted bythis Agreement.

 

**5.6          EmployeeBackground Checks.**  A background investigation, in compliancewith applicable law, shall be conducted, as soon as reasonably practicable, byGED with respect to each applicant selected for employment.  All costs associated with such backgroundinvestigations shall constitute an Operating Expense.

 

**5.7          LocalHiring Preference.**  GED shall, to the extent permitted byapplicable law, give preference in recruiting, training and employment topersons residing in the vicinity of the Property.  GED shall provide training programs for all employees asnecessary and the costs of such training shall be an Operating Expense.  Final determination of the qualification ofall persons for employment shall be made by GED.

 

**5.8          Delegationof Duties.**  GED may, with the prior consent of HRI(which consent shall not be unreasonably withheld), subcontract the duties tobe performed by GED pursuant to this Agreement to such third parties as GED mayfrom time to time determine and sublease space within the Entertainment Centerto concessionaires or such other third parties.  No subcontract of GED’s duties or sublease of space shall relieveGED of GED’s obligations under this Agreement.

 

**ARTICLE 6ACCOUNTING AND CASH MANAGEMENT**

 

**6.1          DepositoryAccounts.**  HRI shall select a bank or banks(collectively, the “Bank”) which shall receive deposits and maintain the fundsgenerated by operation of the Entertainment Center and Related Improvements andshall establish a custodial account (“the Custodial Account”) into which allAgent Commissions shall be deposited in a timely manner.  HRI shall not make withdrawals from suchaccount and shall cause all account balances to be electronically transferrednot less than weekly to such operating accounts established with the Bank asGED deems appropriate to administer the activities conducted on the Property (theseaccounts are collectively referred to as the “Depository Accounts”).  All such accounts may be subaccounts of amaster depository account.

 

**6.2          Depositsto Depository Accounts.**  All Gross Revenues and other proceeds arisingfrom the operation of the Entertainment Center and Related Improvements shallbe deposited at least once daily (or at such other frequency as HRI and GEDshall mutually establish in writing) by GED into the Custodial Accountestablished by HRI pursuant to Section 6.1 and, for this purpose, GED mayobtain a bonded transportation service to effect the safe

 

13

----

 

transportationof the receipts to the Bank.  The costof such transportation service shall be an Operating Expense.

 

**6.3          DisbursementAccounts.**  GED shall establish one or more DisbursementAccounts with the Bank and, consistent with and pursuant to this Agreement,have responsibility and authority to make all payments and disbursementsauthorized by this Agreement.  Except asset forth below, all disbursements shall be made by check or wire transfer and,in the case of disbursements in excess of $5,000, shall be made by check orwire transfer bearing two signatures or verified by two persons who areemployees of GED, one being an accounting officer employed in connection withthe operation of the Entertainment Center and one being the general manageremployed in connection with the operations of Entertainment

Center.

 

**6.4          No CashDisbursements.**  GED shall not make any disbursements ofcurrency or coin from the Disbursement Accounts except for the payment of cashprizes and expenditures from the Cash Contingency Reserve Fund and Petty CashFund described below and except as otherwise set forth in this Agreement.  Except as otherwise set forth herein, allother payments or disbursements by GED shall be made by check drawn or wiretransfer against a Bank Account signed or authorized in the manner provided inSection 6.3.

 

**6.5          ReserveFunds and Petty Cash Fund.** GED shall establish, using funds deposited into the DepositoryAccounts, and shall maintain for the benefit of the Entertainment Centeroperations, a Cash Contingency Reserve Fund, a Cash Prize Reserve Fund and aPetty Cash Fund, each in an amount determined by GED and reasonable toaccommodate the purpose of such accounts. The Cash Contingency Reserve Fund shall be used to make transfers asnecessary to the Disbursement Account and the Cash Prize Reserve Fund.  The Cash Prize Reserve Fund shall beestablished to pay prizes to players of the Video Lottery Machines.  The Petty Cash Fund shall be used formiscellaneous small expenditures relating to the operations of theEntertainment Center and Related Improvements and shall be maintained at theEntertainment Center under the control of the general manager.

 

**6.6          TransfersBetween Accounts.**  GED shall have the authority to cause thetransfer of funds from the Depository Accounts to the Disbursement Accounts inorder to maintain balances in the Disbursement Accounts to pay Operating Expenses,Management Fees, Rental Payments, to service outstanding indebtedness, to makeappropriate disbursements to HRI, and to pay all fees and reimbursementspayable to GED pursuant to this Agreement. Subject to Section 6.3, GED is authorized to make any transfersauthorized by this Agreement by check or by wire, in GED’s discretion.  GED also may provide for payments by meansof automatic withdrawal; however, arrangements in this regard shall require theprior reasonable written approval of HRI.

 

14

----

 

**6.7          Disbursement of Management Fees. **On or before thefifteenth (15th) day of each calendar month after the Initial Installment Date,GED is authorized by HRI to pay itself the Management Fees from the DisbursementAccounts and to pay other fees and expenses payable to GED pursuant to thisAgreement.

 

**6.8          Nature ofAccounts.**  All Bank Accounts established pursuant tothis Article 6 shall be agency accounts maintained by GED on behalf ofHRI.  GED may, in GED’s sole discretion,establish depository accounts with the Bank as depository institution whereinthe Bank, as the named depository, shall hold and disburse fees and expensespayable pursuant to this Agreement and distributions to HRI as provided hereinpursuant to depository instructions established by GED.  In the event GED determines to establishsuch depository accounts, HRI agrees to execute suchdepository or other agreements as are necessary to effectuate the intent ofthis Section 6.8.

 

**6.9          Payment of Fees and Disbursements. **The Gross Revenues shall bedealt with as follows:

 

(a)           Atleast once a day GED shall deposit all Gross Revenues and othermonetary proceeds arising from the operation of the Entertainment Center andRelated Improvements into the Custodial Account established in accordance withSection 6.1.

 

(b)           Eachday GED shall transfer all of the Gross Win to the State Lottery Fund inaccordance with the Act.  The DelawareState Lottery Board shall withdraw such amounts from such proceeds as necessaryto pay on behalf of HRI in accordance with the Act (i) gaming taxes,(ii) payments to the Delaware State Lottery for Video Lottery Machines,and (iii) statutory purse supplements payable from Video Lottery Machinesand such other sums as required by the Act incident to the operation of theEntertainment Center.  The partiesanticipate that the State Lottery Fund then will remit to HRI the net proceeds,after making deductions in accordance with the Act.

 

(c)           HRIshall, within one (1) business day of receipt of the net proceeds from theState Lottery Fund, deliver such net proceeds to GED.  GED shall use all net proceeds from the foregoing to first payOperating Expenses as and when they arise. The remaining funds (the Net Operating Profit) shall be disbursed fromthe Disbursement Accounts on or prior to the tenth (10th) day of each month forthe scheduled items, in the priority listed, set forth below to the extent thesame are due, payable and earned:

 

(i)            Topay GED anyaccrued and unpaid Interest Payments, and Base Rent Preference Payments;

 

15

----

 

(ii)           Topay Base Management Fees, Target Bonuses and reimbursable costs and expensespayable pursuant to this Agreement including advances made for Operating Costspursuant to section 7.6(b) and advances made pursuant to section 18.5 (first toamounts due and owing from prior periods and then to amounts due and owing forthe current period);

 

(iii)          Topay one third (1/3) of the Monthly Land Rental;

 

(iv)          Toestablish the CashContingency Reserve in such amounts as GED may determine;

 

(v)           Toestablish the PettyCash Fund in such amounts as GED may determine;

 

(vi)          Toprepay Base RentPreference Payments in inverse order of maturity until the Outstanding Rental PreferencePayment Balance has been reduced to the following amounts: (i) on or priorto the first anniversary of the Commencement Date - sixty percent (60%) of theOutstanding Rental Preference Payment Balance as of the Commencement Date;(ii) on or prior to the second anniversary of the Commencement Date -twenty percent (20%) of the Outstanding Rental Preference Payment Balance as ofthe Commencement Date; and (iii) on or prior to the third anniversary ofthe Commencement Date - payment in full;

 

(vii)         Tomake payments,as follows: (i) eighty percent (80%) of such remaining funds to prepay theOutstanding Rental Preference Payment Balance, until the same is satisfied; and(ii) twenty percent (20%) of such remaining funds to pay HRI the balanceof the Monthly Land Rental (or, upon satisfaction of the same, as the case maybe) to be applied otherwise by HRI as HRI shall determine;

 

(viii)        Subject toreimbursement to GED of all advances theretofore made by GED to HRI pursuant toSection 7.7 of this Agreement, to distribute all remaining Net OperatingProfits, if any, to HRI.

 

**6.10        OperativeDates.**  For purposes of this Article 6, the firstyear of operations shall begin on the Commencement Date and will end onDecember 31 of that calendar year.  Eachsubsequent fiscal year will correspond to each full calendar year for theremainder of the Term hereof (except that, if the Term expires or is otherwiseterminated other than on December 31 of a calendar year, the effectivedate of such expiration or termination shall conclude the then current fiscalyear).

 

**6.11        Financial****Statements****.**  GED shall prepare and provide to HRI on a monthly, quarterly andannual basis, financial statements,

 

16

----

 

includingbalance sheets, income and expense statements setting forth in reasonabledetail all Gross Revenues, Operating Expenses and Net Operating Profit,statements of changes in cash position and any other schedules as may bereasonably requested from time to time by HRI. Monthly financial statements shall be provided to HRI within thirty (30)days following the end of each month. After the first full year of operations the financial statements shallbe prepared to reflect comparative results. The parties hereto shall select a nationally recognized independentcertified public accounting firm to perform an annual audit of the books andrecords of the operations of the Entertainment Center and Related Improvementsand of all contracts for supplies, services or concessions which comprise theOperating Expenses.  The cost of suchaudits shall be an Operating Expense. HRI also shall have the right, at its sole cost and expense, to performspecial or independent audits of all financial records of GED as HRIelects.  Audits of the financialstatements of GED may be provided to all applicable federal and state reportingagencies, as required by law, and may be used by GED for reporting purposesunder federal and state securities laws, if required.

 

**6.12        Books ofAccount.**  GED shall maintain the books and recordsrequired hereunder in accordance with the accounting practices of GED (providedthat the same are in conformity with generally accepted accounting principles)consistently applied and shall adopt and follow the fiscal accounting periodsutilized by GED in its normal course of business (i.e. a fiscal quarter andfiscal year).  Such books of accountshall be maintained at a location at the Entertainment Center and at such otherlocations as may be determined by GED. Duly authorized agents of HRI shall have access to the daily operationsof the Entertainment Center and shall have the right to inspect, examine, andcopy all such books and supporting business records as HRI reasonablyrequests.  Nothing contained herein isintended to restrict GED’s right to utilize centralized accounting services forthe Entertainment Center.  The books ofaccount shall reflect detailed day-to-day operations of the EntertainmentCenter and Related Improvements and shall utilize accounting systems and procedureswhich, at a minimum: (i) include a system of internal accounting controls;(ii) permit preparation of financial statements in accordance withgenerally accepted accounting principles; (iii) be susceptible to audit;(iv) permit the calculation and payment of Base Management Fees, TargetBonuses and expense reimbursements in accordance with the terms of thisAgreement and all other sums due GED pursuant to the Transaction Documents; and(v) provide for the allocation of Operating Expenses allowed pursuant tothis Agreement.

 

**ARTICLE 7MANAGEMENT FEES**

 

**7.1          BaseManagement Fees.** Inconsideration for the services rendered pursuant to this Agreement, GED shallbe entitled to the

 

17

----

 

followingBase Management Fees to be paid in accordance with Section 6.9:

 

(1)           Threepercent (3.0%) of the first Four Hundred Sixteen Thousand Six Hundred Sixty Sixand 00/100 Dollars ($416,666.00) of any Gross Revenues generated bythe operations of the Entertainment Center and Related Improvements during anycalendar month; plus

 

(2)           Three and one-half percent (3.5%) of anyGross Revenues between Four Hundred Sixteen Thousand Six Hundred Sixty Six and00/100 Dollars ($416,666.00) and Eight Hundred Thirty Three Thousand Three HundredThirty Three and 00/100 Dollars ($833,333.00) generated by the operations ofEntertainment Center and Related Improvements during any calendar month; plus

 

(3)           Four percent (4.0%) of any GrossRevenues exceeding Eight Hundred Thirty Three Thousand Three Hundred ThirtyThree and 00/100 Dollars ($833,333.00) generated by the operations of theEntertainment Center and Related Improvements during any calendar month.

 

**7.2          Deferralof Base Management Fee.**  The Base Management Fee shall be deferredand not paid in any month in which the Net Operating Profit is less than OneHundred Twenty Five Thousand and 00/100 Dollars ($125,000.00).  Base Management Fees which are deferredpursuant to this Section 7.2 shall be paid in the next month in which there isNet Operating Profit after payment of obligations having priority pursuant toSection 6.9(c).

 

**7.3          Target Bonus.**  In addition to the Base Management Fee, GEDshall be paid the following Target Bonuses:

 

(1)           Tenpercent (10%) of any Net Operating Profit between One Hundred Twenty FiveThousand and 00/100 Dollars ($125,000.00) and Four Hundred Sixteen Thousand SixHundred Sixty Six and 00/100 Dollars ($416,666.00) generated by the operationsof Entertainment Center and Related Improvements during any calendar month,plus

 

(2)           Twelveand one-half percent (12.5%) of any Net Operating Profit between Four HundredSixteen Thousand Six Hundred Sixty Six and 00/100 Dollars ($416,666.00) andEight Hundred Thirty Three Thousand Three Hundred Thirty Three and 00/100Dollars ($833,333.00) generated by the operations of the Entertainment Centerand Related Improvements during any calendar month, plus

 

(3)           Fifteenpercent (15.0%) of any Net Operating Profit exceeding Eight Hundred ThirtyThree Thousand Three Hundred

 

18

----

 

ThirtyThree and 00/100 Dollars ($833,333.00) during any calendar month.

 

The Target Bonus shall be calculatedat the end of each calendar month for which this Agreement is effective andshall be paid in accordance with Section 6.9.

 

**7.4          AnnualReconciliation.**  Within ninety (90) days after the end ofeach calendar year during the term hereof, GED shall furnish to HRI a writtenstatement setting forth the amounts paid pursuant to this Agreement, includingthe Base Management Fee, Target Bonus, payments actually made for theapplicable year under the Lease/Leaseback Agreement, the Net Operating Profitfor that year, and the Base Management Fee, Target Bonus, Lease/Leasebackpayment payable for that year when calculated on an annualized basis.  To the extent that GED has not actuallyreceived the Base Management Fee and Target Bonus payments due for theparticular calendar year when calculated on an annualized basis, or any othercharges due for that year, HRI, to the extent HRI has received funds underSection 6.9(c)(vii) and (viii) shall pay to GED the deficiency at the time theannual statement is due together with interest, at the Interest Rate, accruingfrom the date of such deficient payment. To the extent that the total Management Fees actually paid in theapplicable year exceed the Management Fees payable on an annualized basis, orother charges actually due that year, such excess first shall be paid to GED(together with interest thereon accruing at the Interest Rate from the date ofany such excess) to the extent of accrued but unpaid amounts due GED under thisAgreement for prior years (with priority being given to the earliest such yearand, within that year, to amounts owed when classified pursuant to Section6.9(c)).

 

**7.5          Off-SiteEmployees, Travel and Out-of-Pocket Expenses. **GED shall be reimbursed for all of thereasonable and actual costs incurred by GED with respect to services performedby Off-Site Employees as set forth in Section 5.4, and for all reasonabletravel and out-of-pocket expenses of GED’s directors, officers, employees oragents reasonably incurred in the performance of this Agreement.  Such reimbursement shall be in addition toall other fees, expenses or costs which are reimbursable or payable pursuant tothis Agreement or the other Transaction Documents.  Unless otherwise specified herein or therein, all such expensesshall be capitalized or charged as Operating Expenses of the EntertainmentCenter consistent with generally accepted accounting principles.  Such fees, expenses or costs shall becalculated and paid to GED on a monthly basis.

 

**7.6          Start-UpAdvances.**

 

(a)           Allinitial Soft Costs associated with planning, constructing and developing theEntertainment Center and Related Improvements, including all costs and expensesincurred by GED in

 

19

----

 

furtherancethereof, shall be charged as a cost of developing the Entertainment Center.

 

(b)           Thereafter,payment by GED of all costs, fees and expenses provided for herein areconditioned upon the existence of sufficient Gross Revenues to enable GED topay all such costs, fees and expenses. If Gross Revenues are not sufficient to pay all costs, fees and expensesrequired to operate the Entertainment Center, GED may advance funds to pay suchcosts, fees and expenses.  GED shall bepaid or reimbursed with interest in accordance with Section 6.9 and from thenext available Gross Revenues, for money paid or property or servicescontributed or advanced by GED pursuant to this Agreement or the otherTransaction Documents.  Interest shallbe calculated at the Interest Rate.

 

**7.7          Continuing Advances.**  Annually during the Term, GED shall advance to HRI the sum of OneHundred Fifty Thousand and 00/100 Dollars ($150,000.00) toward the costsincurred by HRI incident to conducting live harness racing activities on theHarness Racing Premises.  Such aggregateannual advance shall be disbursed to HRI in nine (9) weekly installments, thefirst such installment - in the amount of Thirty Thousand and 00/100 Dollars($30,000.00) - being payable to HRI on or before noon, local time, on Friday ofthe first racing week-end after Labor Day, and subsequent installments - eachin the amount of Fifteen Thousand and 00/100 Dollars ($15,000.00) - beingpayable to HRI on or before noon, local time, on Friday of each succeedingweek.

 

**ARTICLE 8INSURANCE**

 

**8.1          Obligationto Insure.**  HRI, directly or through DSF, shall beobligated to insure the Property including the Entertainment Center and RelatedImprovements in such amounts as may be required by this Agreement.  The cost of insurance in respect of theEntertainment Center and Related Improvements shall be an Operating Expense andshall be paid from or reimbursed from the Disbursement Account.  The cost of insurance covering all otherareas of the Property shall not be an Operating Expense or otherwise chargeableto GED.  All such insurance policiesshall name GED as an additional loss payee during the term of this Agreement.

 

**8.2          ConstructionPeriod.**  During the course of new construction orsubstantial remodeling on the GED Premises, GED shall obtain builders riskinsurance, on an “all risk” basis (including collapse) and on a non-reportingform, for the full replacement value covering the interests of HRI and GED inall work incorporated into the GED Premises, all material and equipment on orabout the GED Premises or environs, and all new construction and remodeling inrespect of the Entertainment Center and Related Improvements.  All material and equipment in any off-sitestorage

 

20

----

 

locationintended for permanent use in the Entertainment Center or the RelatedImprovements, or incident to the construction thereof, shall be insured on an“all risk” basis as soon as the same are delivered to such off-sitelocations.  The cost of the insurancerequired pursuant to this Section shall be an Operating Expense.

 

**8.3          InsuranceMinimums.**  The insurance obtained pursuant to Section8.1 shall meet at least the following minimum types and amounts of insurance(which may be included under a blanket insurance policy if all other termshereof are satisfied), in addition to such other coverages as HRI and GED shallmutually determine:

 

(a)           Insuranceagainst loss, damage or destruction by fire and other casualty, includingtheft, vandalism and malicious mischief, flood (if the GED Premisesare in a location designated by the Federal Secretary of Housing and UrbanDevelopment as a flood hazard area), earthquakes (if the GED Premises are in anarea subject to destructive earthquakes within recorded history), boilerexplosion (if there is any boiler upon the GED Premises), sprinkler damage, allmatters covered by a standard extended coverage endorsement and such otherrisks as GED may require, insuring the GED Premises, the equipment and allimprovements thereon for not less than their full insurable replacement cost.

 

(b)           Comprehensivepublic liability and property damage insurance, including a products liabilityclause and pollution legal liability insurance, covering bodilyinjury liability, property damage liability, automobile bodily injury andproperty damage liability, and tank leakage for sudden and accidental as wellas gradual occurrences (to the extent that such insurance can be obtained atnon-prohibitive rates), including, without limitation, any liability arisingout of the ownership, maintenance, repair, condition or operation of theProperty or adjoining ways, streets or sidewalks and insurance insuring againstliability arising from the sale of liquor, beer or wine on the GEDPremises.  Such insurance policy orpolicies referred to in these subparagraphs (a) and  (b) shall contain a“severability of interest” clause or endorsement which precludes the insurerfrom denying the claim as a result of the negligence or other acts of theother, shall be in amounts of not less than $10,000,000 per personal injury andoccurrence with respect to any insured liability, whether for personal injuryor property damage, or such higher limits as HRI and GED mutually establishfrom time to time, and shall be in form and substance satisfactory to HRI andto GED.

 

(c)           Workmen’scompensation,employer’s liability and such other insurance as may be necessary to complywith applicable laws.

 

(d)           Fidelitybonds coveringall officers, employees and other persons handling funds in connection with theoperations of

 

21

----

 

theEntertainment Center and Related Improvements against all losses, including alllosses, including theft, embezzlement and fraud, in an amount of not less than$100,000.

 

(e)           Rent,loss orbusiness interruption insurance, upon completion of the Entertainment Center,covering the exposures referred to above, in the amount of not less than$5,000,000 plus the fees payable pursuant to the Agreement.

 

(f)            Allinsurance policiesrequired to be obtained by either HRI or GED hereunder shall:

 

(i)            Providefor a**waiver of subrogation bythe insurer as to claims against GED or HRI, as the case may be, or theirrespective employees and agents;

 

(ii)           Providethat such insurances cannot be unreasonably canceled, invalidated or suspendedon account of the conduct of HRI,**GED,or their respective officers, directors, employees or agents;

 

(iii)          Provide that any “no other insurance” clause in theinsurance policy shall exclude any policies of insurance maintained by eitherHRI or GED, as the case may be, and that the insurance policy shall not bebrought into contribution with insurance maintained by HRI or GED, as the casemay be;

 

(iv)          Providethat the policy of insurance shall not be terminated, canceled or substantiallymodified without at least thirty (30) days prior written notice to HRI, GED andany lender covered by any standard mortgage clause endorsement in effect;

 

(v)           Providethat the insurer shall not have the option to restore the GED Premises if HRIor GED elects to terminate this Agreement in accordance with the terms hereof;

 

(vi)          Beissued by insurance companies having a rating in Best’s Insurance Guide ofClass VI or better and a minimum credit rating of A- or better at the time ofissuance and any renewal; and

 

(vii)         Provide that HRI or GED, whichever is not the policy ownerunder such insurance, be designated as an additional named insured and losspayee as the interests of HRI or GED, as the case may be, may appear.

 

HRI shall provide or cause others toprovide to GED certification of insurance or copies of insurance policiesmaintained by HRI, directly or through others, evidencing that insurancesatisfying the requirements of this Agreement is in

 

22

----

 

effect atall times.  Otherwise, GED may, uponwritten notification to HRI, directly undertake to obtain any or all suchinsurance required of HRI by this Article, and HRI shall reimburse GED forinsurance required on all areas of the GED Premises other than those areasoccupied by the Entertainment Center and Related Improvements.

 

GED shall provide or cause others toprovide to HRI certification of insurance or copies of insurance policiesmaintained by GED, directly or through others, evidencing that insurancesatisfying the requirements of this Agreement is in effect at all times.  Otherwise, HRI may, upon writtennotification to GED, directly undertake to obtain any or all such insurancerequired of GED by this Article, and GED shall reimburse HRI for the cost toHRI of the same as an Operating Expense.

 

**ARTICLE 9LIENS AND ENCUMBRANCES**

 

**9.1          Sale, Transfers,Mortgages and Liens by HRI.** HRI shall not transfer HRI’s rights under this Agreement or in theEntertainment Center or any asset related thereto or any interest of HRItherein or hereto whether voluntarily, involuntarily, or by operation of law,unless:  (a) GED shall have previouslyconsented thereto in writing; or (b) if such Transfer involves a pledge,mortgage, encumbrance, security interest, consensual lien or hypothecation, theparty in whose favor such interest is created enters into an agreement with GEDproviding that for so long as GED performs in accordance with the terms of thisAgreement, such party shall recognize the rights of GED and take no action todisturb the interests of GED hereunder, in each case in form and substancesatisfactory to GED; or (c) if such Transfer involves a sale, assignment,transfer or divestment of any of HRI’s interest hereunder, in each case in formand substance satisfactory to GED, the purchaser, assignee, transferee orrecipient of such interest enters into an agreement with GED providing thatsuch assignee shall take no action which would interfere with the rights of GEDhereunder.  A consent of GED to any oneTransfer shall not be deemed a consent to or waiver of GED’s right to conditionany future Transfer upon GED’s consent to the same.

 

**9.2          Sale, Transfers,Mortgages and Liens by GED.** GED shall not Transfer GED’s rights hereunder, in whole or in part,without HRI’s prior written consent (which consent HRI may not unreasonablywithhold) and any purported Transfer by GED, without the prior consent of HRI,shall be null and void and without legal effect.  A consent of HRI to any one Transfer shall not be deemed aconsent to or waiver of HRI’s right to condition any future Transfer upon HRI’sconsent to the same.

 

23

----

 

**ARTICLE 10DA****MAGE, CONDEMNATION OR IMPOSSIBILITY**

 

**10.1        Generally.**  If*,*during the term of this Agreement, theEntertainment Center or the Related Improvements are damaged or destroyed, inwhole or in part, by fire, war, or other casualty, or by an Act of God, ortaken by condemnation or sold under threat of condemnation, or if the operationof Video Lottery Machines at the Entertainment Center is prohibited as a resultof legislation (including failure to extend or reenact the Act) or decision ofa court of competent jurisdiction, GED shall have the right either:  To terminate this Agreement or, in thecontext of a casualty or condemnation, to utilize or cause HRI to utilize anyinsurance for condemnation proceeds to restore or replace the EntertainmentCenter and Related Improvements and to reopen the operations of the same.  If GED elects to reconstruct theEntertainment Center and if the insurance proceeds or condemnation awards areinsufficient to reconstruct the Entertainment Center and Related Improvements,GED may, in GED’s sole discretion, supply such additional funds as arenecessary to reconstruct the Entertainment Center and Related Improvements asprovided in the Lease/Leaseback Agreement. If the insurance proceeds are not used to repair the EntertainmentCenter, HRI and GED shall jointly adjust and settle any and all claims for suchinsurance proceeds or condemnation awards, and such proceeds or awards shall beapplied first to resolve all obligations under the Lease/Leaseback, second, topay any accrued but unpaid Management Fees; third, to repay any other moniesextended by, or payable to, GED pursuant to this Agreement; fourth to repay anyother loans obtained by GED in connection with the Entertainment Center; and,fifth, to repay any applicable termination fee to GED.  Any remaining amounts shall be paid over toHRI.

 

If, within one (1) year after a period ofcessation of operation of Video Lottery Machines at the Entertainment Centerpursuant to Section 10.1 or a default by HRI, the re-commencement of operationof Video Lottery Machines becomes possible, the period of such cessation shallnot be deemed to have been part of the Term and the date of expiration of theTerm shall be extended by the number of days of such cessation period.

 

**10.2        Releaseand Forgiveness.**  Until all amounts due to GED under theLease/Leaseback are repaid in full, GED shall have the right to determinewhether and to what extent the Entertainment Center is economically viable andthe highest and best use of the Entertainment Center.  In order to maintain economic viability of the EntertainmentCenter, GED shall have the right, with the prior consent of HRI (which consentshall not be unreasonably withheld) and subject to the terms of the DSF/HRILease and the terms of the Lease/Leaseback, to determine the size and scope of(i) the Entertainment Center and (ii) the business conducted by or onany portion of the Entertainment Center. In the event GED reasonably determines that all or any portion of theEntertainment Center is

 

24

----

 

noteconomically viable or cannot otherwise determine a highest and best use of theEntertainment Center, GED may, upon forty-five (45) days prior written noticeto HRI, terminate GED’s prospective obligations under this Agreement firstaccruing after the effective date of such termination.

 

**ARTICLE 11TRADE****NAMES, MARKS AND CONFIDENTIAL INFORMATION**

 

**11.1        Project Name.** The Entertainment Center shall be operated under the name Delaware StateFair Entertainment Center or such other business name as the parties may agree(the “Enterprise Name”).

 

**11.2        Trade Names, TradeMarks and Service Marks.** Prior to the Commencement Date, the parties shall determine thetrade names, trade marks and service marks (“the “Marks”) to be used inconnection with the operation of the Entertainment Center and from time to timeduring the Term, GED agrees to erect and install, and HRI agrees to allow orcause others to allow, GED, subject to HRI’s consent which shall not beunreasonably withheld, to install, in accordance with local codes andregulations, all signs GED deems necessary in, on or about the Property(including, without limitation, signs bearing one or more of the Marks) tofacilitate the operation of the Entertainment Center and RelatedImprovements.  The costs of purchasing,leasing, transporting, constructing, maintaining and installing any such signsand systems shall constitute an Operating Expense.  To the extent the Marks are not GED Marks (as determined pursuantto the terms of Section 11.3), ownership of the Marks shall, for all purposes,belong exclusively to HRI.

 

**11.3        GED Marks.**  HRI agrees, subject to HRI’s ownershiprights in the Marks referenced in Section 11.2, to recognize the exclusiveownership of GED or its Affiliates in and to all of GED’s or such Affiliates’respective service marks, trademarks, copyrights, trade names, patents orsimilar rights or registrations now or hereafter held or applied for inconnection therewith (collectively, the “GED Marks”).  HRI hereby disclaims any right or interest in the GED Marksregardless of any legal protection afforded thereto and acknowledges that theGED Marks may not be used in connection with the Entertainment Center withoutthe prior consent of GED and that GED shall have sole discretion to determinewhich of GED Marks shall be so used. HRI covenants that, in the event of termination, cancellation or expirationof this Agreement, whether as a result of a default by GED or otherwise, HRIshall not hold itself out as, or continue operation of the Entertainment Centeras a facility managed by GED nor shall HRI utilize any GED Marks or any variantthereof in the operation of the Entertainment Center.  HRI further agrees that GED may, on reasonable terms establishedby HRI, thereafter enter the GED Premises and remove all signs, furnishings,printed material, emblems, slogans or other

 

25

----

 

distinguishingcharacteristics which are now or hereafter may be connected or identified withGED or which carry any GED Mark.  HRIfurther agrees that HRI shall not, without the prior written consent of GED,use the GED Marks or GED name or any variation thereof, directly or indirect,in connection with (a) a private or public sale of securities or othercomparable means of financing, or (b) press releases or other publiccommunications.

 

**11.4        ConfidentialInformation.** HRIand GED each agree that any information received concerning the other partyhereto during the performance of this Agreement, regarding such other party’sorganization, financial matters, marketing plans or other information of apropriety nature, shall be treated by both parties in full confidence and shallnot be disclosed to any third party other than the Delaware State LotteryCommission, any other gaming commission which has jurisdiction over eitherparty, the Securities and Exchange Commission, the NASD or as otherwiseexpressly required by the laws or regulations of any legal authority havingjurisdiction, direct or indirect, over any party hereto.  HRI acknowledges that certain of GED’sAffiliates are publicly traded companies, that certain gaming licenses arecurrently issued to and held by GED or its Affiliates, and that GED or itsAffiliates may, in the future, apply for additional gaming licenses.  Accordingly, GED is subject to certain lawsor regulations, which may require GED to disclose private or otherwiseconfidential information about HRI or the operations of the EntertainmentCenter.  HRI hereby consents to suchdisclosure as long as the same, in each instance, is approved, in advance andin writing, by HRI, the Delaware State Lottery Commission and everygovernmental authority having jurisdiction over HRI in the context of HRIoperations with respect to which disclosure by GED is proposed.  HRI further agrees to refrain from anyaction which may affect the licenses issued to GED or its Affiliates byjurisdictions other than Delaware.

 

**11.5        ProprietaryInformation of GED.**  HRI agrees that GED has the sole andexclusive right, title and ownership to (i) certain proprietaryinformation, techniques and methods of administration, management and operationof gaming enterprises; (ii) certain proprietary information, techniquesand methods of training employees; and (iii) certain proprietary businessplans, projections and marketing, advertising and promotion plans, strategies,and systems, all of which will or have been developed and/or acquired throughthe expenditure of time, money and effort and which GED and its Affiliatesmaintain as confidential and as a trade secret(s) (collectively, the“Proprietary Information”).  HRI shallmaintain the confidentiality of such Proprietary Information and, upontermination of this Agreement, shall return the same to GED (including, withoutlimitation, documents, notes, memoranda, lists, computer programs and anysummaries of such Proprietary Information) to the extent the same then remainsin HRI’s possession, custody or control.

 

26

----

 

**11.6        Employment Solicitation RestrictionUpon Termination.** HRIagrees that HRI, without GED’s prior written approval, shall not solicit at anytime during the Term of this Agreement the employment of GED’s employees or anyindividuals employed at the Entertainment Center.  HRI further agrees, absent a GED default, that HRI shall notemploy GED’s management personnel within twelve (12) months immediatelyfollowing expiration of this Agreement.

 

**ARTICLE 12REPRESENTATIONS****AND WARRANTIES**

 

**12.1        Representations and Warranties ofHRI.** As an inducement to GED to execute thisAgreement, HRI represents, warrants and covenants to GED the truth and accuracyof the matters set forth in this Section 12.1.

 

(a)           DueOrganization.  HRI is duly formed andvalidly existing in good standing as a corporation in the State of Delaware.

 

(b)           Authority.  HRI has full power and authority under itsCertificate of Incorporation, by-laws, the Act or otherwise to execute, deliverand perform HRI’s obligations the Transaction Documents and HRI’s execution ofthe same has been duly authorized.

 

(c)           Licenses,Permits and Authorizations.  To the bestof HRI’s knowledge and belief, all certificates, permits, licenses, approvalsand other authorizations of any other government bodies or authorities(including all permits, licenses and approvals required by the GamingRegulations) currently available to HRI and necessary for HRI’s execution,delivery and performance of this Agreement or any of the other TransactionDocuments have been obtained and are in full force and effect.  HRI further agrees that HRI shall use bestefforts to obtain any and all of the foregoing not currently available to HRIbut necessary to fulfill HRI’s obligations under the Transaction Documents.

 

(d)           NoConflict.  To the best of HRI’sknowledge and belief, the execution, delivery and performance of this Agreementwill not result in a material breach of or constitute a default under anymortgage, deed of trust, lease, loan or credit agreement, or any otheragreement to which HRI is a party or by which HRI or any of HRI’s assets may bebound or affected, nor will the execution of, delivery of and performance ofthis Agreement and the other Transaction Documents conflict with, or result ina material breach of, any present order, rule or regulation applicable to HRI.

 

(e)           Titleto Property.  HRI holds good andmarketable leasehold title to the Property, free and clear of all liens, claimsand encumbrances.

 

27

----

 

(f)            GoodStanding.  HRIis not in material violation of its Certificate ofIncorporation, bylaws or other organization documents and, to the best of HRI’s knowledge and belief, isnot in default under or in breach of, or know of the occurrence of any eventwhich, with the giving of notice or the lapse of time or both, would constitutea default under or breach of, any term or condition of any agreement orinstrument to which HRI is a party or by which any HRI assets are bound.

 

(g)           Litigation.  Except as otherwise disclosed to GED inwriting, there are no judgments filed, or actions, suits, investigations orproceedings pending or, to the knowledge of HRI, threatened, against oraffecting HRI, at law or in equity, which would have a material adverse effecton the business, assets, financial condition, of HRI (including, withoutlimitation, HRI’s operation of the Entertainment Center).

 

(h)           Violations. HRI has no knowledge of any violations or notices of violations of anyfederal or state law or municipal ordinance or order or requirement of thestate of Delaware or any municipal or department or other governmentalauthority having, or claiming to have jurisdiction over the GED Premises whichin any way relate to or affect the GED Premises and, to the best of HRI’sknowledge, HRI is in compliance with all Gaming Regulations now in effect.

 

(i)            Hazardous Wastes. Except as otherwisedisclosed to GED in writing: (i) In respect of the GED Premises, HRI hasneither used nor permitted the use of, and shall not use or permit the use of,whether directly or through contractors, agents or tenants and to the best ofHRI’s knowledge, the GED Premises have not at any time been used forgenerating, transporting, treating, storing, manufacturing, emitting, ordisposing of any dangerous, toxic or hazardous pollutants, chemicals, wastes orsubstances as defined in any Environment Law (“Hazardous Materials”).  (ii) Neither HRI nor the GED Premiseshas been the subject of any investigation or report, which in any way pertainto Hazardous Materials.  (iii) Inconnection with the proposed Entertainment Center, HRI, to the best of HRI’sknowledge, has not violated nor is currently violating any Environmental Lawand the GED Premises are not listed in the United States EnvironmentalProtection Agency’s National Priorities List of Hazardous Waste Sites nor anyother list, schedule, log, inventory or record of Hazardous Materials orhazardous waste sites, whether maintained by the United States Government orany state or local agency, nor do the existing improvements on the GED Premisescontain any formaldehyde, urea or asbestos. (iv) To the best of HRI’s knowledge and belief, no asbestos orasbestos-containing materials have been installed, used, incorporated into ordisposed of on the GED Premises in violation of any Environmental Laws or whichin their current state are in violation of any Environmental Laws and nopolychlorinated biphenyls (“PCBs”) are located on the GED Premises in the formof

 

28

----

 

electricaltransformers, cooling oils or any other device or form which, in their currentstate, are in violation of any Environmental Laws.  (v) To the best of HRI’s knowledge and belief, nounderground storage tanks are presently located or were located on the GEDPremises and subsequently removed or filled, except those tanks which HRI hasdisclosed in writing to GED (by size, location, age and substance containedtherein, whether in existence, removed or filled).  (vi) Likewise, to the best of HRI’s knowledge and belief, nodump, sanitary landfill or gasoline service station is or was located on theGED Premises nor are the GED Premises located in a 100-year flood plain, asdetermined by the Federal Emergency Management Agency (“FEMA”) or the FederalInsurance Administration (“FIA”).

 

HRI agrees to indemnify and reimburse GED,its successors and assigns, for any breach of these representations andwarranties and from any loss, damage, expense or cost arising out of orincurred by GED which is the result of a breach of, misstatement of ormisrepresentation of the above covenants, representations and warranties, orfor any loss, damage, expense or cost sustained as a result of there beinglocated on the GED Premises any dangerous, toxic or hazardous pollutants,chemicals, wastes or substances, or any formaldehyde, urea or asbestos,together with reasonable attorneys’ fees incurred in connection with thedefense of any action against GED arising out of the above.  These covenants, representations, warrantiesand indemnities shall be deemed continuing covenants, representations,warranties and indemnities running with the land for the benefit of GED, andany successors and assigns of GED notwithstanding the termination of thisAgreement.

 

(j)            DSF/HRILease.  A true and complete copy of theDSF/HRI Lease is attached hereto as Exhibit “D” and such lease is ingood standing and free from default. HRI hereby agrees not to surrender, terminate, alter or amend theDSF/HRI Lease without the prior written consent of GED.

 

(k)           Authorizationand Enforceability.  This Agreement hasbeen duly authorized, executed and delivered by HRI and is the legal, valid andbinding obligation of HRI, enforceable against HRI in accordance with the termsset forth herein, subject to all legal and equitable rights, remedies, anddefenses available to HRI.

 

**12.2        Representations and Warranties ofGED.**  As an inducement to HRI to execute thisAgreement, GED represents, warrants and covenants to HRI the truth and accuracyof the matters set forth in this Section 12.2.

 

(a)           DueOrganization.  GED is duly formed and validly existing ingood standing as a limited liability company in the State of Delaware.

 

29

----

 

(b)           Authority ofGED.  GED has full power and authorityunder its Certificate of Formation, Limited Liability Company Agreement andotherwise to execute, deliver and perform its obligations under this Agreement.

 

(c)           Authorization andEnforceability.  This Agreement has beenduly authorized, executed and delivered by GED and is the legal, valid andbinding obligation of GED, enforceable against GED in accordance with the termsset forth herein, subject to all legal and equitable rights, remedies, anddefenses available to GED.

 

(d)           Licenses,Permits and Authorizations.  To the bestof GED’s knowledge and belief, all certificates, permits, licenses, approvalsand other authorizations which are necessary for the execution, delivery andperformance of this Agreement by GED have been obtained and are in full forceand effect or good faith efforts shall be used to obtain the same asappropriate.

 

(e)           NoConflict.  To the best of GED’s knowledge and belief,execution of, delivery of and performance of this Agreement shall not result ina breach of or constitute a default under any mortgage, deed of trust, lease,loan or credit agreement, or any other agreement to which GED is a party or bywhich GED may be bound or affected, nor shall the execution of, delivery of andperformance of this Agreement conflict with or result in a breach of anypresent order, rule or regulation applicable to GED.

 

(f)            GoodStanding.  GED is not in materialviolation of its Certificate of Formation, Limited Liability Company Agreement,bylaws or other organizational documents and is not in default under or inbreach of, or knows of the occurrence of, any event which, with the giving ofnotice or the lapse of time or both, would constitute a default under or breachof, any term or condition of any agreement or instrument to which GED is aparty or by which GED’s assets is bound or which would have a material adverseeffect upon GED or GED’s assets.

 

**ARTICLE 13ADDITIONAL****COVENANTS OF HRI AND GED**

 

As an inducementto the execution of this Agreement and the other Transaction Documents, theparties hereby covenant and agree that, so long as this Agreement is in forceand effect:

 

**13.1       ****Avoidance****of Breach of Representations, Warranties, Etc.**

** **

(a)           HRIshall not take or suffer any action which will cause the HRI representations,warranties, covenants and agreements contained herein or in the otherTransaction Documents to be untrue in any material respect and shall inform GEDof any material change to information previously provided by HRI to GED.

 

30

----

 

(b)           GED shall not take or suffer anyaction which will cause the GED representations, warranties, covenants andagreements contained herein or in the other Transaction Documents to be untruein any material respect and shall inform HRI of any material change toinformation previously provided by GED to HRI.

 

**13.2        Taxes and Other Liabilities.**

 

(a)           To the extent that the fundsoriginating from the operations of the Entertainment Center and RelatedImprovements are within the control of HRI under the terms of this Agreement,HRI shall pay and discharge, before the same become delinquent and beforepenalties accrue thereon, all taxes, assessments and governmental charges uponor against HRI or the GED Premises or the operation of Video Lottery Machines;provided however, that taxes and assessments made against the EntertainmentCenter or Related Improvements shall be paid or reimbursed as an OperatingExpense.

 

(b)           To the extent that the fundsoriginating from the operations of the Entertainment Center and RelatedImprovements are within the control of GED under the terms of this Agreement,GED shall pay and discharge, before the same become delinquent and beforepenalties accrue thereon, all taxes, assessments and governmental charges uponor against GED or the GED Premises, the operation of Video Lottery Machines;provided however, that taxes and assessments made against the EntertainmentCenter or Related Improvements shall be paid or reimbursed as an OperatingExpense.

 

**13.3        Certain Notices.**

 

(a)           HRI shall promptly notify GED of theoccurrence of any event or condition which, if not remedied, could result in amaterial adverse change in the financial condition of HRI.  HRI shall furnish to GED as soon as possibleand in any event within seven (7) days after HRI has obtained actual knowledgeof the occurrence of an Event of Default, or an event which with the giving ofnotice or lapse of time or both would constitute an Event of Default, which iscontinuing on the date of such statement, a statement signed by HRI settingforth details of such Event of Default or event and the action which HRI hastaken, is taking or proposes to take to correct the same.

 

(b)           GED shall promptly notify HRI of theoccurrence of any event or condition which, if not remedied, could result in amaterial adverse change in the financial condition of GED.  GED shall furnish to HRI as soon as possibleand in any event within seven (7) days after GED has obtained actual knowledgeof the occurrence of an Event of Default, or an event which with the giving ofnotice or lapse of time or both would constitute an Event of Default, which iscontinuing on the date of such statement, a statement signed by GED setting forthdetails of such Event of

 

31

----

 

Default or event and theaction which GED has taken, is taking or proposes to take to correct the same.

** **

**13.4        Other Agreements.**

 

(a)           As reasonablyrequested by GED, HRI shall execute, deliver and perform under such additionalagreements, contracts, powers of attorney, permits, licenses and otherdocuments and instruments and otherwise hereafter participate as reasonablynecessary to facilitate the operation and improvement of the EntertainmentCenter and Related Improvements (including, but not limited to, assistance toGED in obtaining necessary permits).  Inaddition, HRI agrees at all times during the term of this Agreement to conductharness racing activities in accordance with applicable law so as to permit HRIto conduct gaming activities under the Act and at all times to complymaterially with all of the provisions of this Agreement and the otherTransaction Documents.

 

(b)         As reasonably requested by HRI, GEDshall execute, deliver and perform under such additional agreements, contracts,powers of attorney, permits, licenses and other documents and instruments andotherwise hereafter participate as reasonably necessary to facilitate theoperation and improvement of the Entertainment Center and Related Improvements(including, but not limited to, assistance to HRI in obtaining necessarypermits).  GED agrees at all times tocomply materially with all of the provisions of this Agreement and the otherTransaction Documents.

 

**13.5        Comply with Laws.**

 

(a)           HRI shall comply with all applicablelaws, ordinances, orders and regulations and shall deliver to GED copies of,and comply with, all notices of violations of law, ordinances, orders,regulations or the like that are issued by, filed by or served by, anygovernmental authority having (or claiming to have) jurisdiction over HRI orthe GED Premises.  HRI shall usereasonable efforts to obtain any necessary licenses and remain licensed andshall assist GED or such third persons as GED may determine to become licensedand shall assist GED or such third persons as GED may determine to becomelicensed and shall take such other reasonable action as necessary to conductgaming on the GED Premises to the fullest extent authorized by Delaware law andin a manner which will maximize Gross Revenues, and/or Net OperatingProfits.  HRI shall not take any actionwhich materially interferes with the operation of the Entertainment Center orRelated Improvements or with the conduct of gaming at the Property whetherpursuant to the Act, this Agreement, the other Transaction Documents orotherwise.

 

(b)           GED shall comply with all applicablelaws, ordinances,**orders andregulations and shall deliver to HRI copies of, and comply with, all notices ofviolations of law, ordinances,

 

32

----

 

orders,regulations or the like that are issued by, filed by or served by, anygovernmental authority having (or claiming to have) jurisdiction over GED orthe GED Premises.  GED shall usereasonable efforts to obtain any necessary licenses and remain licensed andshall assist HRI or such third persons as HRI may determine to become licensedand shall assist HRI or such third persons as HRI may determine to becomelicensed and shall take such other reasonable action as necessary to performunder the terms of this Agreement to the fullest extent authorized by Delawarelaw and in a manner which will maximize Gross Revenues, and/or Net OperatingProfits.  GED shall not take any actionwhich materially interferes with the operation of the Entertainment Center orRelated Improvements or with the conduct of gaming at the Property whetherpursuant to the Act, this Agreement, the other Transaction Documents orotherwise.

 

**13.6        File Reports.**

 

(a)           HRI shall promptlyand timely file any and all filings, reports, certificates and applications andobtain any and all approvals of governmental agencies which GED reasonablydetermines necessary or appropriate for HRI to enter into and perform thisAgreement and the other Transaction Documents.

 

(b)           GED shall promptlyand timely file any and all filings, reports, certificates and applications andobtain any and all approvals of governmental agencies which HRI reasonablydetermines necessary or appropriate for GED to enter into and perform thisAgreement and the other Transaction Documents.

 

**13.7        Further Assurances.**

 

(a)           HRI shall executeand deliver from time to time, promptly after any reasonable request thereforby GED, any and all instruments, agreements and documents necessary and shalltake such other action as GED may, from time to time, reasonably deem necessaryor desirable to accomplish the intent of this Agreement and the otherTransaction Documents.  It is theunderstanding and intention of the parties that operation of the EntertainmentCenter shall conform to and comply with all applicable gaming statutes in theState of Delaware, including the Act. The parties agree to execute such additional amendments or agreements toconform to any requirements of Delaware law as GED may determine.  Except as otherwise set forth in the DSF/HRILease and the Sublease and Leaseback Agreement, HRI has made no agreements withany third party which would adversely affect the operation of the EntertainmentCenter.

 

(b)           GED shall executeand deliver from time to time, promptly after any reasonable request thereforby HRI, any and all instruments, agreements and documents necessary and shalltake such other action as HRI may, from time to time, reasonably deem

 

33

----

 

necessary or desirable to accomplish theintent of this Agreement and the other Transaction Documents.  It is the understanding and intention of theparties that management of the Entertainment Center shall conform to and complywith all applicable gaming statutes in the State of Delaware, including theAct.  The parties agree to execute suchadditional amendments or agreements to conform to any requirements of Delawarelaw as HRI may determine.  Except asotherwise set forth in the DSF/HRI Lease and the Sublease and LeasebackAgreement, GED has made no agreements with any third party which wouldadversely affect the operation of the Entertainment Center.

** **

**13.8        Future Acts.**

 

(a)           HRI shall not, without the priorwritten consent of the GED, take any action which will or would be likely toadversely affect the operation of the Entertainment Center, the ability of GEDto perform hereunder and/or GED’s rights under this Agreement or the otherTransaction Documents.  HRI also shalldefend and maintain HRI’s title interest, to the extent thereof (followingfinal execution of the Transaction Documents) to the GED Premises, theEntertainment Center and the other Improvements.

 

(b)           GED shall not, without the priorwritten consent of the HRI, take any action which will or would be likely toadversely affect the operation of the Entertainment Center, the ability of HRIto perform hereunder and/or HRI’s rights under this Agreement or the otherTransaction Documents.  GED also shalldefend and maintain GED’s title interest, to the present extent thereof(following final execution of the Transaction Documents) to the GED Premises,the Entertainment Center and the other Improvements.

** **

**13.9        No Amendments.**

 

(a)           HRI shall not knowing consent oracquiesce in any amendment of any Transaction Document or take any actionaffecting the rights or obligations between the parties and shall not act oragree to knowingly waive or affect any such rights except in each case with theprior written consent of GED.

 

(b)           GED shall not knowing consent oracquiesce in any amendment of any Transaction Document or take any actionaffecting the rights or obligations between the parties and shall not act oragree to knowingly waive or affect any such rights except in each case with theprior written consent of HRI.

** **

**13.10      No Damage to Property.**

 

(a)           HRI shall not willfully ornegligently take any action or fail to take any action, the result of which isto impair the structural integrity, operating efficiency, economic value or

 

34

----

 

aesthetic quality of the Entertainment Centeror the Related Improvements.

 

(b)           GED shall not willfully ornegligently take any action or fail to take any action, the result of which isto impair the structural integrity, operating efficiency, economic value oraesthetic quality of the Entertainment Center or the Related Improvements.

 

**13.11      Notice of Defaults.**

 

(a)           HRI shall provide GED with promptwritten notice of any material default or violation of any agreement to whichHRI is a party and as to which HRI has notice, including any mortgage orsecurity agreement encumbering any real or personal property of HRI.

 

(b)           GED shall provide HRI with promptwritten notice of any material default or violation of any agreement to whichGED is a party and as to which GED has notice, including any mortgage orsecurity agreement encumbering any real or personal property of GED.

 

**13.12     ****Litigation.**

 

(a)           HRI shall provide GED with notice ofany pending, threatened or contemplated action, suit or proceeding before or byany court or any federal, state or local governmental authority or agency whichmay have jurisdiction over HRI, or to which the GED Premises may be subject,which may result in any material adverse change in the condition (financial orotherwise), business or prospects of the transactions proposed herein or mightmaterially adversely affect any of the property or assets to be constructed ormanaged in connection with this Agreement.

 

(b)           GED shall provide HRI with notice ofany pending, threatened or contemplated action, suit or proceeding before or byany court or any federal, state or local governmental authority or agency whichmay have jurisdiction over GED, or to which the GED Premises may be subject,which may result in any material adverse change in the condition (financial orotherwise), business or prospects of the transactions proposed herein or mightmaterially adversely affect any of the property or assets to be constructed ormanaged in connection with this Agreement.

 

**13.13      Records.**  GEDshall, in a manner acceptable to HRI and in compliance with the GamingRegulations, set up and maintain accurate and complete books, accounts andrecords pertaining to the operation, of the Entertainment Center and RelatedImprovements.  Such records shall bekept and maintained according to generally acceptable accounting principles andpractices applied on a basis consistent with prior periods.  HRI or its designated

 

35

----

 

representativesshall have access to such books, accounts and records at all reasonable times.

 

**ARTICLE 14**

**OTHER CONDITIONS**

 

**14.1**        The parties each agree to use bestefforts to satisfy the following conditions within the respective time framesdesignated:

 

(a)           Respective counselfor HRI and for GED shall deliver opinion letters, in form and substancesatisfactory to counsel for the recipient party, within sixty (60) days afterthe date hereof.

 

(b)           HRI and GED shalldeliver to one another their respective organizational documents within sixty(60) days after the date hereof.

 

(c)           HRI shall furnish toGED, within sixty (60) days after the date hereof, evidence satisfactory to GEDthat DSF holds good, marketable and insurable fee simple title to the Propertyand that HRI holds a good, marketable and insurable leasehold estate to HRI’sinterest in the Property (including proof of the existence of appurtenanteasements to serve the Entertainment Center as GED may require), free of anylien or encumbrance subject only to such exceptions as may be approved inwriting by GED.

 

(d)           Within thirty (30)days after the completion of the construction of the Improvements, each partyshall receive evidence satisfactory to such party that the Entertainment Centerand Related Improvements, as well as the intended operation thereof, complywith applicable zoning ordinances, building codes, environmental laws, GamingRegulations, developmental and subdivision regulations, any applicablerestrictive covenants, and other ordinances, laws and regulations.

 

(e)           Within three (3)months after the date hereof, each party shall have approved the Plans andreceived satisfactory evidence that the Plans, including any modificationsthereof, have been approved by all requisite governmental authorities prior tocommencement of any work pursuant thereto and that all such approvals are infull force and effect.

 

(f)            Each party, withinthirty (30) days after completion of the Improvements and Related Improvements,shall receive an “as-built” survey, prepared by a registered land surveyor orengineer, of the Entertainment Center and the Common Areas or such othersatisfactory assurances of title and use of the Entertainment Center, theRelated Improvements and Common Areas as may be acceptable to such party.  All surveys required hereunder shall containa certificate in favor of, and be in a form and substance

 

36

----

 

satisfactory to, each party (the costs of obtainingsuch surveys and assurances of title to be an Operating Expense).

 

(g)           Within one hundred twenty (120) daysafter the date hereof, each party shall receive satisfactory evidence that allpermits required in order to construct the Improvements within the budgetestablished by GED shall be available when necessary.

 

(h)           Within thirty (30) days after finalcompletion of the Improvements and Related Improvements, each party shall havereceived satisfactory evidence that all permits, including, without limitation,occupancy permits, required by any governmental authority to authorize theoccupancy and use of the Improvements and the Related Improvements, ascontemplated by this Agreement, have been issued.

 

(i)            Within thirty (30) days aftercompletion of the Improvements and Related Improvements, HRI shall receive allnecessary licenses and take all other necessary action to comply with theGaming Regulations and to permit the conduct of gaming permitted by the Act tothe fullest extent permitted by law.

 

**ARTICLE 15**

**TERMINATION; DEFAULT; REMEDIES**

 

**15.1        Termination.**

 

(a)           This Agreement may be terminated uponthe mutual written consent of the parties upon such terms and conditions as theparties may agree in writing.

 

(b)           GED may terminate this Agreement on forty-five(45) days prior written notice if, in its reasonable opinion, Video LotteryMachines cannot be operated at the Entertainment Center in a manner which willprovide an acceptable return to GED.  Inthe event that GED terminates this Agreement pursuant to this Section 15.1(b),GED shall remain liable for all expenses related to the operation of theEntertainment Center and Related Improvements for which GED has committed priorto the effective date of termination.

 

(c)           For purposes of this Agreement, theoccurrence of any one or more of the following shall constitute a Default or anEvent of Default under this Agreement:

 

(i)            Failure to Pay WhenDue.  The failure to pay any sums when due hereunder or under theother Transaction Documentsexcept when such failure is the result of the Entertainment Center failing togenerate sufficient Gross Revenuesto make such payment.

 

37

----

 

(ii)           Breach ofAgreements.  The material breach (andfailure to cure after notice) of any term or condition of this Agreement or anyother Transaction Document.

 

(iii)          Bankruptcy orInsolvency.  The bankruptcy orinsolvency of either party hereto which involves any of the following:

 

(A)          A party, admits inwriting, such party’s inability to pay its debts when due, or makes anassignment for the benefit of creditors; or a party hereto, applies for orconsents to the appointment of any receiver, trustee or similar officer for aparty hereto to cover all or any portion of such party’s assets; or a partyhereto institutes (by petition, application, answer, consent or otherwise) anybankruptcy, insolvency, reorganization, arrangement or readjustment or debts,dissolution, liquidation or similar proceedings relating to such party underthe laws of any jurisdiction;

 

(B)           If a receiver,trustee or similar officer is appointed for a party hereto, and for all or anyportion of the assets of such party without the application or consent of theother party hereto, and such appointment continues undischarged for a period offifteen (15) days (whether or not consecutive); or any bankruptcy, insolvency,reorganization, arrangement, readjustment of debt, dissolution, liquidation orsimilar proceedings is instituted (by petition, application or otherwise)against such debtor party hereto and remains undismissed for a period offifteen (15) days (whether or not consecutive); or

 

(C)           If any governmentalauthority, or any court takes possession of any substantial part of theEntertainment Center or Related Improvements or assumes control over, theaffairs or operations of, or a receiver or trustee is appointed over, all orany substantial part of, or a writ or order of attachment or garnishment isissued or made against the Entertainment Center or Related Improvements, andany such writ or order of attachment or garnishment remains undischarged for aperiod of fifteen (15) days,

 

(iv)          Representation orWarranty.  Any representation orwarranty made by a party hereto in connection with this Agreement or any otherTransaction Document is materially false or, although true when made, becomesmaterially false.

 

(v)           Injunction.  An order or decree shall be entered in anycourt of competent jurisdiction enjoining or restraining the consummation ofthe transactions contemplated

 

38

----

 

by this Agreement or anyother Transaction Document, which order or decree is not vacated within sixty(60) days after such order is entered.

(vi)          Wrongful Acts.  If any officer, director, employee or agentof GED, or HRI is convicted of, or commits any act which constitutes (a) fraud,embezzlement, misappropriation, dishonesty or breach of trust, or (b) a felonyor any action involving moral turpitude, provided however, a breach pursuant tothis Section shall be deemed cured when GED or HRI terminates any such personwithin ten (10) days after receipt of notice of the conviction.

 

(vii)         GamingRegulations.  HRI shall violate any termor provision of the Gaming Regulations or the Gaming Regulations are amended,repealed or are no longer in existence, the effect of which impairs thecontinued operation of the Entertainment Center; provided, however, that suchviolation shall not be an Event of Default by HRI if such violation is a directresult of a violation of such Gaming Regulations by GED.

 

(viii)        Litigation.  Any suit shall be filed against either partywhich, if adversely determined, could impair the ability of that party toperform each and every one of such party’s obligations under and by virtue ofthis Agreement and the other Transaction Documents.

 

**15.2        Notice and Cure Periods.**  Except for defaults involvingEvents of Default described in Section 15.1(c)(iii), any default is curable andshall be deemed cured, if the defaulting party cures such default within thirty(30) days after receipt of notice of default; provided, however, that if adefault cannot reasonably be cured within thirty (30) days, the party allegedto have defaulted shall have an additional period of thirty (30) days to curethe default if the party alleged to have defaulted immediately commencedefforts to cure such default and diligently continued such cure efforts tocompletion.  The discontinuance orcorrection of a breach shall constitute a cure thereof.  Breach of an obligation to pay money shallgive rise to an Event of Default upon the expiration of any applicable cureperiod referenced in this Article 15.

 

**15.3        Remedies.**

** **

(a)           Upon the occurrence of an Event ofDefault with respect to HRI, GED, as GED’s exclusive alternative remedies forbreach of this Agreement, may either: (i) terminate this Agreement; (ii) petition a court of competentjurisdiction for an injunction to cause the Owner and/or HRI, as the case maybe, to take or refrain from taking any and all such action as shall benecessary or appropriate to cure such Event of Default; or (iii)

 

39

----

 

require HRI to pay to GED, until the earlierof:  (A) the Outstanding RentalPreference Payment Balance shall have been repaid in full or (B) fifteen (15)years after the Commencement Date, any and all net revenues received by HRIwhich are in any way related to the Entertainment Center Premises.  For the purposes of this Section, the term“revenues” shall include, but not be limited to, all rentals, royalties,licenses or other payments with respect to the use of the Entertainment CenterPremises or any revenues received as a result of a Transfer of any interest inthe Entertainment Center Premises and the term “net revenues” shall meanrevenues net of all expenses directly attributable to revenues.  With respect to the remedies granted by thisSection, HRI hereby acknowledges that GED will, by virtue of the limitation ofliability of HRI hereunder and the limitation of GED’s remedies for an Event ofDefault, have insufficient monetary remedies for the breach of covenants andconditions of HRI contained in this Agreement. As a result, HRI hereby acknowledges that GED shall be entitled, if HRIdefaults with respect to HRI’s obligations under this Agreement, to petitionfor and receive such injunctive relief as a court of competent jurisdictionshall deem appropriate.  HRI herebyfurther irrevocably agrees, upon the occurrence of an Event of Defaultattributable to HRI, to take no such action which shall in any way contestGED’s right to such injunctive relief.

 

(b)           In the event GED properly terminatesoperation of the Entertainment Center in accordance with the terms of thisAgreement, GED shall be entitled to the return of the Furniture, Fixtures andEquipment (or any replacements thereof by GED during the Term).  Provided, however, HRI shall receive creditagainst any Outstanding Rental Preference Balance for the then fair market valueof the Furniture, Fixtures and Equipment returned to GED.  If the parties cannot agree upon the thenfair market value of the Furniture, Fixtures and Equipment, the then fairmarket value shall be determined by arbitration as provided for herein and the Furniture,Fixtures and Equipment shall not be removed from the Entertainment CenterPremises until the then fair market value is so determined.

 

(c)           Subject to the provisions of thisAgreement, all rights and remedies of the parties provided for in thisAgreement are cumulative and shall be in addition to any and all of the rightsand remedies available under any other Transaction Document.  No exercise by either party of any right orremedy shall in any way constitute a cure or a waiver of any Event of Defaulthereunder, or invalidate any action pursuant to any notice of default, orprejudice such party in the exercise of any other available right orremedy.  No failure on the part ofeither party to exercise, and no delay in exercising, any right or remedy shalloperate as a waiver or otherwise preclude enforcement of any of such party’srights or remedies, nor shall any single or partial exercise of any right orremedy preclude any further exercise thereof or of any other right orremedy.  An election to pursue specificperformance

 

40

----

 

of this Agreement or otherequitable remedies or to require payments as set forth in 15.3(a)(iii) aboveshall not preclude GED from providing notice of termination pursuant toSubsection 15.3(a)(i) of this Section.  GED shall in no event be entitled, directly or indirectly, by wayof an action for damages or otherwise*,*toobtain a judgment or other lien against the Property (or any portion orcomponent thereof).

 

(d)           Upon the occurrenceof an Event of Default, GED, may, but shall not be required to perform anyfurther services under this Agreement. In the event GED properly discontinues operation of the EntertainmentCenter in accordance with the terms of this Agreement, GED shall not be subjectto any liability of any nature whatsoever relating to the EntertainmentCenter.  Each party hereby agrees toexecute all documents and take such other action as the other party may requestto enforce such other party’s rights under this Agreement.

 

(e)           All remedies shallsurvive termination of this Agreement.

 

**15.4        Conclusion of Term.** Upon expiration or earlier termination of the Term or the termination ofthis Agreement, in addition to other rights under this Agreement:

 

(a)           Transition.  If termination occurs at any time other thanupon the conclusion of its Term, GED shall, within a reasonable period of notless than sixty (60) days, transition management of the Entertainment Center toHRI or HRI’s designee.  In addition,funds in any Bank accounts described in Article VI shall be used(i) first, to pay all current and accrued Operating Expenses,(ii) second, to pay amounts then due GED under the Lease/Leaseback,(iii) third, to pay accrued but unpaid Management Fees; and(iv) fourth, to pay or reimburse GED for other sums due under thisAgreement or any other Transaction Document.

 

(b)           Undistributed NetOperating Profits.  With respect to netOperating Profits which have accrued but have not been distributed under thisAgreement on conclusion of the Term, GED shall receive the same Base ManagementFee and Target Bonus which GED would have received had the distributionoccurred during the Term.

 

**ARTICLE 16**

**ARBITRATION AND ENFORCEMENT**

 

**16.1        Arbitration.** All controversies or claims arising out of or relating to this Agreementor the any other document entered into in connection with the transactioncontemplated herein, whether sounding in contract, tort or otherwise, shall beadjudicated exclusively by binding arbitration conducted in accordance with theCommercial Arbitration Rules of the American

 

41

----

 

Arbitration Association (the“AAA”) then in effect.  Thearbitration hearing shall take place in Dover, Delaware or such other place asthe parties may agree.  In such anarbitration proceeding, each party shall appoint an arbitrator within ten (10)days of receipt of demand for arbitration and the two arbitrators shallmutually appoint a third arbitrator within ten (10) days of theirappointment.  If either party fails orrefuses to appoint an arbitrator within such ten (10) day period, thearbitrator appointed by the other party shall be the sole arbitrator.  If the two arbitrators are unable to agreeon the appointment of a third arbitrator within ten (10) days, the thirdarbitrator shall be appointed by the AAA. All arbitrators appointed pursuant to this Section 16.1 shall beexperienced and knowledgeable in gaming generally.  The decision of a majority of the members of the arbitrationpanel (or a single arbitrator, as the case may be due to a default inappointment) shall be final, binding and unappealable.

 

**16.2*       *Judicial Enforcement of Arbitration.**  Ifjudicial proceedings are brought to compel arbitration or enforce bindingarbitration as set forth in the Commercial Arbitration Rules of the AmericanArbitration Association to enforce the obligations of the parties under thisAgreement or the other Transaction Documents, such proceedings shall be broughtin any court of competent jurisdiction with preference for a United States DistrictCourt.  This Agreement may be enforcedas set forth in this Section and in Section 16.1.

 

**16.3        Trial by Jury; Venue.**  EACH PARTY HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURYIN ANY ACTION WITH REGARD TO OR ARISING UNDER THIS AGREEMENT.  IN THE EVENT ANY PARTY COMMENCES ANY ACTIONIN ANOTHER JURISDICTION OR VENUE EXCEPT TO ENFORCE AN ARBITRATION AWARD SUCHCASE SHALL BE DISMISSED WITH PREJUDICE.

 

**16.4        Legal Fees.**  Except as otherwise set forth herein, GED and HRI each agree topay their respective attorneys’ fees and legal expenses incurred in connectionwith negotiation of this Agreement.  Theprevailing party in any litigation or arbitration commenced as a result of thisAgreement or the other Transaction Documents shall be entitled to receive fromthe nonprevailing party, as directed by the judge or arbitrator as the case maybe, payment of reasonable legal fees and other expenses incurred by theprevailing party as a result of such proceeding.

 

**ARTICLE 17**

**INDEMNIFICATION**

** **

**17.1**        HRI shall and hereby agrees to,indemnify and save GED, its legal representatives, members, employees,successors and assigns harmless from and against any and all claims, fees,charges, actions, expenses, liabilities, damages or losses whatsoeverincluding, without limitation, reasonable attorney’s

 

42

----

 

fees, arisingfrom any wrongful acts or omissions of HRI or any of the agents orrepresentatives of HRI in connection with this Agreement.  The indemnities and obligations hereinprovided shall continue in full force and effect notwithstanding thetermination of this Agreement.  HRIshall give GED prompt written notice of any matter with respect to which GED isentitled to indemnification hereunder.

 

**17.2****       **GEDshall, and hereby agrees to, indemnify and save HRI, its legal representatives,successors and assigns harmless from and against any and all claims, fees,charges, actions, expenses, liabilities, damages or losses whatsoeverincluding, without limitation, reasonable attorney’s fees, arising from anywrongful acts or omissions of GED or any of GED’s agents or representatives inconnection with this Agreement.  Theindemnities and obligations herein provided shall continue in full force andeffect notwithstanding the termination of this Agreement.  GED shall give HRI prompt written notice ofany matter with respect to which HRI is entitled to indemnification hereunder.

 

**ARTICLE 18**

**MISCELLANEOUS**

 

**18.1        Successors and Assigns.**

 

(a)           GED may assign thisAgreement and/or the other Transaction Documents or any of GED’s rightshereunder or thereunder without the prior consent of HRI, but in all events, nosuch assignment shall relieve GED or the Guarantors hereinafter identified andsignatory to this Agreement of liability for performance of GED’s obligationshereunder or thereunder unless HRI otherwise agrees in writing.  Subject to the foregoing, the terms andprovisions of this Agreement and all of the other Transaction Documents shallbe binding upon and inure to the benefit of GED and HRI as well as theirrespective permitted successors and assigns.

 

(b)           “Assign” forpurposes of this Section 18.1, shall mean any sale, pledge, assignment,mortgage, encumbrance, security interest, consensual lien, hypothecation,transfer or divestiture, the effect of which is to grant to another an interestin GED’s rights (or attempt to transfer GED’s rights) under this Agreement orto impose upon another (or attempt to impose upon another) GED’s obligationshereunder, either directly or indirectly, and shall include, withoutlimitation, any change in the identify of GED by way of merger or otherwise.

 

**18.2        Entire Agreement. **This Agreement and the other TransactionDocuments, constitute the entire agreement between the parties and there are noother representations, warranties or agreements except as herein provided.

 

43

----

 

**18.3        Amendments. **This Agreement may not be amended or modifiedin any manner nor may any provision be waived without the written consent ofboth parties hereto.

 

**18.4        Notices. **Any notice, request, demand or othercommunication permitted or required hereunder shall be in writing, shall begiven to all other parties hereto, and shall be deemed duly given (i) onthe day of delivery if hand delivered by courier or otherwise, (ii) on thesecond business day after mailing if sent via overnight mail, or(iii) three business days after the post marked date if mailed postageprepaid, certified or registered, addressed to the address of a party set forthbelow.

 

Rejectionor other refusal to accept or the inability to deliver because of changedaddress for which no notice was given shall be deemed to be receipt of thenotice sent.  By giving to the otherparties hereto at least ten (10) days’ notice thereof, any party hereto shallhave the right from time to time and at any time during the term of thisAgreement to change such party’s address and shall have the right to specify assuch party’s address any other address in the United States of America.

 

Eachnotice to GED shall be address as follows:

 

GamingEntertainment (Delaware), L.L.C.

55Technology Way

WestGreenwich, RI 02817

Attn:  Chairman, GTECH Corporation

 

Withcopies to:

 

MaryV.  Brennan, Esq.

GamingEntertainment (Delaware), L.L.C.

74900Highway 111, Suite 125

IndianWells, California 92210; and

 

Officeof General Counsel

GTECHCorporation

55Technology Way

WestGreenwich, RI 02817

 

Eachnotice to GTECH, Guarantor, shall be addressed as follows:

 

GTECHCorporation

55Technology Way

WestGreenwich, RI 02817

Attn:  Chairman, GTECH Corporation

 

44

----

 

Withcopies to:

 

MaryV.  Brennan, Esq.

GamingEntertainment (Delaware), L.L.C.

74900Highway 111, Suite 125

IndianWells, California 92210; and

 

Officeof General Counsel

GTECHCorporation

55Technology Way

WestGreenwich, RI 02817

 

Eachnotice to FHR, Guarantor, shall be addressed as follows:

 

FullHouse Resorts

c/oDeadwood Gulch Resort

Highway85 South

DeadwoodGulch, SD 57732

 

Witha copy to;

 

PaulBerkowitz, Esq.

Greenberg,Traurig

1221Brickell Ave.

Miami,FL 33131

 

Eachnotice to HRI shall be addressed as follows:

 

HarringtonRaceway, Inc.

P.O.Box 28

Harrington,DE 19952

Attn:  President

 

Witha copy to:

 

CraigA.  Karsnitz, Esquire

E.Scott Bradley, Esquire

110W. Pine Street

P.O.Box 594

Georgetown,DE 19947

 

**18.5        Expenses. **If the Related Improvements extend beyond thefoot print of the Entertainment Center, HRI agrees to pay, or otherwise toprovide for payment, to GED a pro rata portion of the cost of such RelatedImprovements to the extent HRI or other tenants of the Property (other thantenants acting under or through GED) will benefit from such improvements.  To the extent GED or the EntertainmentCenter provides services or programs which the DSF, HRI and/or other tenants ofthe Property (other than tenants acting under or through GED) will benefit, HRIagrees to pay, or to cause others to reimburse the operations of theEntertainment Center a portion of such expenditure commensurate with the extentto which

 

45

----

 

DSF, HRI or such other tenantscan reasonably be expected to benefit from such services or programs.  To the extent that GED has and will continue(with the prior written approval of HRI) to advance sums prior to theCommencement Date, including, without limitation, a $150,000 advance foroperating costs not related to the Entertainment Center and $25,000 to beadvanced for legal services related to structuring the transactions set forthherein, HRI agrees that all such expenditures and/or disbursements shall beOperating Expenses or shall be considered an advance under Section 3.5 of theSubLease and Leaseback Agreement.

 

**18.6        Waiver. **Waiverof any matter shall not be deemed a waiver of the same or any other matter onany future occasion.  No failure ordelay on the part of any party in the exercise of any power, right or privilegehereunder shall operate as a waiver thereof, nor shall any single or partialexercise of any such power, right or privilege preclude other or furtherexercise thereof or of any other rights, powers or privileges.

 

**18.7        Severability. **Theprovisions of this Agreement are severable. If any provision in this Agreement is found invalid, illegal or unenforceable,such provision shall be severable from the remainder of this Agreement and thevalidity, legality and enforceability of the remaining provisions shall not inanyway be affected or impaired thereby. Any unenforceable provisions may be reformed in accordance with thedispute resolution provisions set forth in this Agreement.

 

**18.8        Construction Generally. **This Agreement is along-term commercial agreement between sophisticated parties which has beenentered into by the parties in reliance upon the economic and legal bargainscontained herein.  This Agreement shallbe interpreted and construed in a fair and impartial manner without regard towhich party prepared the instruments, the relative bargaining powers of theparties or the domicile of any party.

 

**18.9        Titles and Headings.  **The various headings used in thisAgreement are inserted for convenience only and shall not in any way affect themeaning or construction of this Agreement or any provision hereof.

 

**18.10      Choice of Law. **ThisAgreement and the rights and obligations of the parties hereto shall begoverned by the internal laws of the State of Delaware.

 

**18.11      Counterparts. **ThisAgreement may be executed in any number of counterparts, each of which shall bedeemed an original, but all such counterparts together shall constitute but oneagreement.

 

**18.12      Time is of the Essence. **Time is of theessence of this Agreement and each and very provision hereof.

 

46

----

 

**18.13      No Partnership. **No term ofthis Agreement is intended, nor shall the same be deemed or construed*,*to create a partnership between or amongthe Operator or the Owner, to make them joint venturers, nor to make GED in anyway responsible for the debts or losses of the Operator and/or the Owner.

 

**18.14      Termination. **Upon termination of this Agreement, whetherresulting from expiration of the Term or otherwise, the only financialobligation of HRI to GED shall be that obligation, if any, arising pursuant toSection 15.3(a) of this Agreement; and, such termination shall not terminatethe respective obligations of the parties pursuant to Article 17 hereof, whichshall survive until all such obligations are satisfied.

 

**18.15     Recording. **Theparties hereto agree that neither party shall record this Agreement or, withoutthe prior written consent of the other party hereto, any other documentreferencing this Agreement, in the real property records where the Property islocated and, further agree that, if either party (“the recording party”) shall doso, the other party hereto (“the other party”) shall be entitled, at any timewhile this Agreement or such other document remains of record, to terminatethis Agreement effective on or after such recordation date (as established bythe other party in such other party’s notice to the recording party effected inaccordance with Section 18.4).

 

**18.16     Exhibits. **AllExhibits identified in this Agreement are incorporated herein by reference.

 

**18.17     Curative Moneys Expended. **Under the DSF/GED Nondisturbance Agreement, GED has the right, but notthe obligation, to cure defaults by HRI under the DSF/HRI Lease.  Any moneys expended by GED with respect tosuch curative actions shall be offset and deducted from any payment obligationsof GED to HRI under Section 6.9 hereof; provided, however, that any amountsdeducted by GED pursuant to Section 5.16 of the Sublease may not be againdeducted pursuant to this provision.

 

**ARTICLE 19GUARANTY**

 

**19.1****       **Guarantorshereby guarantee, jointly and severally, the payment of all amounts or paymentsdue HRI under or pursuant to this Agreement and all other provisions of thisinstrument, together with all financial obligations of GED under or pursuant tothe Sublease and Leaseback, and the performance of every covenant on the partof GED to be performed under the terms of the Sublease and Leaseback as well asevery covenant on the part of GED to be performed under the terms of thisAgreement.

 

47

----

 

**IN WITNESS WHEREOF,**HRI and GED, and the undersigned Guarantorshave caused this Agreement to be executed and delivered under their respectiveseals as of the date first above written.

 
| ATTEST:                  |   | **HARRINGTON RACEWAY, INC.**                                             |
|--------------------------|--------|--------------------------------------------------------------------------|
|                     |   |                                                                     |
| /s/ Dennis  S. Hazzard   |   | BY:                                                                      | /s/ Jack  Walls |  (SEAL) |
| Secretary                |   |
|                     |   |
|                     |   | **GAMING ENTERTAINMENT (DELAWARE),  L.L.C.,**by its Members, as follows: |
|                     |   |
|                     |   |
| ATTEST:                  |   | **GTECH GAMING SUBSIDIARY  2 CORPORATION**                               |
|                     |   |
|                     |   |
| /s/ Michael  C. Lightman |   | BY:                                                                      | /s/ John E.  Taylor |  (SEAL) |
|                     |   | Name:                                                                    | John E.  Taylor |
|                     |   | Title:                                                                   | Assistant to  the Chairman |
|                     |   |
|                     |   |
| ATTEST:                  |   | **FULL HOUSE SUBSIDIARY, INC.**                                          |
|                     |   |
|                     |   |
| /s/ William  P. McComas  |   | BY:                                                                      | /s/ Allen  Paulson |  (SEAL) |
|                     |   | Name:                                                                    | Allen  Paulson |
|                     |   | Title:                                                                   | Chairman |
|                     |   |
|                     |   |
| ATTEST:                  |   | **FULL HOUSE JOINT VENTURE SUBSIDIARY,  INC.**                           |
|                     |   |
|                     |   |
| /s/ William  P. McComas  |   | BY:                                                                      | /s/ Allen  Paulson |  (SEAL) |
|                     |   | Name:                                                                    | Allen  Paulson |
|                     |   | Title:                                                                   | Chairman |
|                          |        |                                                                          |  |  |  |

 

**[JOINDER PAGE FOLLOWS]**

** **
| ATTEST:                  |   | **GTECH GAMING SUBSIDIARY  1 CORPORATION** |
|--------------------------|--------|--------------------------------------------|
|                     |   |
|                     |   |
| /s/ Michael  C. Lightman |   | BY:                                        | /s/ John E.  Taylor |  (SEAL) |
|                     |   | Name:                                      | John E.  Taylor |
|                     |   | Title:                                     | Assistant to  the Chairman |
|                          |        |                                            |  |  |  |

 

COUNTERPART 2 OF 8 COUNTERPARTS

 

48

----

 

**Joinder**

 

Theundersigned, in consideration of the benefits accruing to each of the same byreason of the transaction documented by this Agreement (the receipt andsufficiency of such consideration being hereby acknowledged by each of theundersigned), join in the execution of this Agreement to confirm the respectiveobligations of the undersigned, as guarantors, pursuant to the terms of Article19 hereof.

 

**GUARANTORS**

 
| ATTEST:                |   | **FULL HOUSE RESORTS, INC.** |
|------------------------|--------|------------------------------|
|                   |   |
|                   |   |
| /s/ William  P McComas |   | BY:                          | /s/ Allen  Paulson |  (SEAL) |
|                   |   | Name:                        | Allen  Paulson |
|                   |   | Title:                       | Chairman |
|                        |        |                              |  |  |  |

 
| ATTEST:                  |   | **GTECH CORPORATION** |
|--------------------------|--------|-----------------------|
|                     |   |
|                     |   |
| /s/ Michael  C. Lightman |   | BY:                   | /s/ John E.  Taylor |  (SEAL) |
|                     |   | Name:                 | John E.  Taylor |
|                     |   | Title:                | Assistant to  the Chairman |
|                          |        |                       |  |  |  |

 

COUNTERPART 2 OF 8 COUNTERPARTS

 

49

----