Document:

Exhibit
10.16

 

MASTER
LEASE AGREEMENT

 

THIS MASTER LEASE AGREEMENT (“Lease” or “Agreement”) is made and entered into on by and between PDS GAMING CORPORATION - COLORADO, its
successors and assigns (“Lessor”)
and SOUTHWEST CASINO AND HOTEL CORP.
(“Lessee”).

 

RECITALS

 

WHEREAS, Lessor
desires to lease to Lessee, and Lessee desires to lease from Lessor in
accordance with the terms and conditions contained herein, certain equipment
more fully described in the Lease Schedule or Schedules, referred to herein as
a “Lease Schedule” or “Lease Schedules”, as may from time to time
be executed by Lessee.

 

NOW, THEREFORE, IN CONSIDERATION of
the mutual covenants and conditions set forth below and other good and valuable
consideration, the receipt and sufficiency of which all parties acknowledge, it
is agreed as follows:

 

AGREEMENT

 

1.                                       Recitals Incorporation. The recitals
set forth above are hereby incorporated into this Agreement as material parts
thereof and not simply as mere recitals.

 

2.                                     Parties.

 

2.1.                              The
Lessor is PDS GAMING CORPORATION - COLORADO,
a Minnesota corporation, whose
address is 6171 McLeod Drive, Las
Vegas, NV 89120-4048.

 

2.2.                              The
Lessee is SOUTHWEST HOTEL AND CASINO CORP., a
Minnesota corporation, whose address is 2001 Killebrew Drive,
Minneapolis, MN 55425. Lessee’s Tax I.D. Number is 41-1721968 and Lessee’s
Organizational I.D. Number is 71-208.  
Lessee’s location for the purposes of all Uniform Commercial Code
filings is the State of Minnesota.

 

3.                                       Lease. 
This Lease establishes the general terms and conditions by which
Lessor shall lease the equipment and other equipment described in each Lease
Schedule (the “Equipment”) to
Lessee. Each Lease Schedule shall be in the form provided by Lessor and shall
incorporate by reference the terms of this Lease. The Equipment is to be used
in connection with that business described as Gold Rush Casino and doing
business at 209 East Bennett Avenue, Cripple Creek, Colorado 80813-9609 (“Premises”).

 

4.                                       Term, Rent and Payment, Fees and Charges.

 

4.1.                              Term. The term of this Lease shall commence
on the date set forth in each Lease Schedule (the “Commencement Date”)
and continue as specified in such Lease Schedule (“Term”).

 

 

4.2.                              Rent and Payment. Lessee’s obligation to
pay rent for the Equipment shall commence on the Commencement Date and continue
for the Term. The Basic Rent, as set forth and defined in the Lease Schedules,
shall be payable in such amount and on such date as set forth in the Lease
Schedule. Any amounts payable by Lessee, other than Basic Rent, shall be deemed
Additional Charges. Additional Charges shall be due and payable in accordance
with the terms of the Lease Schedule or if not set forth therein, on the Basic
Rent payment date following the date upon which the aforesaid Additional
Charges accrue, or the last day of the Term, whichever is earlier. Lessee shall
make all payments at the address of Lessor set forth above or at such other
address as Lessor may designate in writing. As used herein, the term “Rent” shall mean all Basic Rent and
Additional Charges as described in the Lease Schedules.

 

4.3.                              Late Charge. If any Rent is not received by
Lessor or its assignees when due then a late charge on such Rent shall be due
and payable with such Rent in an amount equal to one and one-half percent
(1.5%) of the Capitalized Equipment Cost, as defined in the Lease Schedule, as
reimbursement for administrative costs and not as a penalty.

 

4.4.                              ACH. Lessee shall complete, execute and
deliver to Lessor an Authorization for Automatic Payment form, which authorizes
Lessor to initiate variable entries to Lessee’s checking or savings account at
a specified financial institution for the purpose of making payments to Lessor
as contemplated by this Lease and the Lease Schedules.

 

4.5.                              Documentation Costs. Lessee agrees to
reimburse Lessor for its documentation costs for each Lease Schedule in an
amount of not less than $2,500.00 per Lease Schedule, which shall be due and
payable on or before the Lease Schedule’s first payment of Basic Rent.

 

4.6.                              Other Expenses and Charges. In connection
with the closing of each transaction, Lessee also agrees to pay all of Lessor’s
out-of-pocket expenses (not to exceed $2,500.00 per Lease Schedule) in
connection with the closing of each transaction, including without limitation:
(i) any fees and costs of legal counsel utilized by Lessor (including in-house
counsel); and (ii) all other out-of-pocket expenses incurred by or on behalf of
Lessor.

 

4.7.                              Imposts. In addition to the monthly Basic
Rent due in each Lease Schedule, Lessee agrees to pay and indemnify Lessor for,
and hold Lessor harmless from and against all taxes, assessments, fees and
charges (hereinafter called “Imposts”)
together with any penalties, fines or
interest thereon levied and imposed by any governmental agency or unit (state,
local, federal, domestic or foreign), regardless of party assessed against: (i)
with respect to the Lease or any Lease Schedule; (ii) upon the Equipment, its
value or any interest of Lessor and/or Lessee therein; (iii) upon or on account
of any sale, rental purchase, ownership, possession, use, operation,
maintenance, delivery or return of the Equipment or value added thereto, other
than taxes imposed on or measured by the next income or capital of Lessor. The
amount of the Impost shall become Supplemental Rent to be paid by Lessee upon
Lessor’s demand. If any Impost relates to a period during the Term of a Lease
Schedule such Impost shall continue, notwithstanding the expiration or
termination of the Lease or the Lease Schedule, until all such Imposts are paid
in full by Lessee.

 

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4.8.                              Lessor’s Performance of Lessee’s Obligations.  If Lessee fails to comply with any
of its covenants or obligations herein, Lessor may, at its option, perform such
covenants or obligations on Lessee’s behalf without thereby waiving such
conditions or obligations or the failure to comply therewith and all sums
advanced by Lessor in connection therewith shall be repayable by Lessee as
Additional Charges. No such performance shall be deemed to relieve Lessee of
its obligations herein.

 

5.                                       Certificate of Delivery and Acceptance.
Lessee shall deliver to Lessor a Certificate of Delivery and Acceptance (“Certificate of Acceptance”) in the form
provided by the Lessor.

 

6.                                       Net Lease. This Lease including each
Lease Schedule is a net lease and Lessee’s obligation to pay all Rent due and
the rights of Lessor or its assignees in, and to, such Rent shall be absolute
and unconditional under all circumstances, notwithstanding: (i) any setoff,
abatement, reduction, counterclaim, recoupment, defense or other right which
Lessee may have against Lessor, its assignees, the manufacturer or seller of
any of the Equipment, or any other person for any reason whatsoever, including,
without limitation, any breach by Lessor of this Lease; (ii) any defect in
title, condition, operation, fitness for use, or any damage to or destruction
of and of the Equipment; (iii) any interruption or cessation of use or
possession of the Equipment for any reason whatsoever; or (iv) any insolvency,
bankruptcy, reorganization or similar proceedings instituted by or against
Lessee.

 

7.                                       Grant of Security Interest.

 

7.1.                              In
order to secure prompt payment of the Rent and all of the other amounts from
time to time outstanding under and with respect to this Lease and any Lease
Schedule, and the performance and observance by Lessee of all the agreements,
covenant and provisions thereof, Lessee hereby grants to Lessor a first
priority security interest in the Equipment (including, without limitation, all
inventory, fixtures or other property comprising the same) together with all
related software (embedded therein or otherwise) and general intangibles, all
additions, attachments, accessions thereto whether or not furnished by the supplier
of the Equipment, all subleases, chattel paper, and accounts, security deposits
relating thereto, and any and all substitutions, replacements or exchanges for
any such item of Equipment, in each case in which Lessee shall from time to
time acquire an interest, and any and all insurance and/or other proceeds of
the Equipment in and which a security interest is granted hereunder.

 

7.2.                              Lessee
hereby acknowledges and agrees that to the extent Lessor’s participation in any
purchase and lease of an item or items of the Equipment pursuant to this Lease
or any Lease Schedule constitutes a financing of the purchase of such item or
items of Equipment, Lessee’s repayment of the amounts of such financing shall
apply on a “first-in-first-out” basis so that the portions of the amount of
such financing used to purchase such item or items of Equipment shall be deemed
re-paid in the chronological order of the use of such amounts to purchase the
same.

 

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8.                                       Location, Use Maintenance, and Inspection.

 

8.1.                              Location, Use, Maintenance and Repairs.

 

8.1.1.                     Lessee
shall keep and use the Equipment on the Premises and shall not relocate or
remove any of the Equipment without the
prior, written consent of Lessor.

 

8.1.2.                     Lessee shall at all times and, at
its sole cost and expense, properly use and maintain the Equipment in good
operating condition, other than the normal wear and tear, and make all
necessary repairs, alterations and replacements thereto (collectively, “Repairs”), all of which shall immediately
become the property of Lessor and subject to this Lease.

 

8.1.3.                     Lessee shall
comply with manufacturer instructions relating to the Equipment; and any
applicable laws and governmental
regulations.

 

8.1.4.                     Lessee shall pay all costs and
expenses associated with removal and return of the Equipment.

 

8.2.                              Identification and Inspection.  Upon request by Lessor, Lessee shall mark
each Unit conspicuously with appropriate labels or tags furnished by Lessor and
maintain such markings through the Term to clearly disclose that said Unit is
being leased from Lessor. Subject to Lessee’s reasonable security requirements,
Lessee shall permit Lessor’s representatives to enter the Premises where any Unit is located to inspect
such Unit.

 

9.                                       Location, Property Rights, and Liens.

 

9.1.                              Personal Property. All of the Equipment is
personal property and Lessee shall not affix any of the Equipment to realty so
as to change its nature to a fixture or real property and agrees that all of
the Equipment shall remain personal property during the Term. The Equipment is,
and shall at all times remain removable from the Premises. Lessee agrees that
the Equipment is not essential to the Premises. Lessor expressly retains ownership and title to the Equipment.  Lessee hereby agrees that it shall be
responsible for all of Lessor’s obligations as required by the state gaming
laws and regulations regarding maintenance, use, possession and operation of
the Equipment. Lessee hereby authorizes, empowers, and grants a limited
power of attorney to Lessor to record and/or execute and file, on Lessee’s
behalf, any certificates, memorandums, statements, refiling, and continuations
thereof as Lessor deems reasonably necessary or advisable to preserve and
protect its interest hereunder.  The
parties intend to create a lease agreement and the relationship of lessor and
lessee between themselves. Nothing in this Lease shall be construed or
interpreted to create or imply the existence of a finance lease or installment
lease contract. Lessor makes no representation regarding the treatment of this
Lease, the Equipment or the payment of obligations under this Lease for
financial statement reporting or tax purposes.

 

9.2.                              Protection of Lessor’s Property Rights.
Lessor has the right to place on any part of the Equipment, a medallion or
other marker of suitable size stating in substance (i) that the Equipment
is the property of Lessor, and (ii) that Lessor, to protect its rights, has
filed or retains the right to file in appropriate government offices a UCC
Financing Statement 

 

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covering the
Equipment. Lessee hereby authorizes Lessor to
file any and all UCC-1 and/or UCC-3 statements and/or amendments thereto
related to this Lease, any Lease Schedule, and/or the Equipment without
Lessee’s authentication, to the extent permitted by applicable law.
If directed to do so by Lessor, Lessee will cooperate with Lessor in preparing
and filing such UCC statements and/or amendments thereto. Lessee hereby agrees
that by executing this Lease or any Lease Schedule that the same shall
constitute Lessee’s authorization for all UCC statements and/or amendments
thereto related to this Lease, any Lease Schedule and/or the Equipment.

 

9.3.                              Accessions. Lessee agrees that if any part
of the Equipment is physically attached to other personal property that the
Equipment shall not lose its identity and shall constitute an accession. Lessor
shall at all times herein retain its interests in the Equipment and such interest
shall continue to be perfected notwithstanding its becoming an accession.

 

9.4.                              Liens and Encumbrances. Unless otherwise
provided herein, Lessee shall not directly or indirectly create, incur or
suffer a mortgage, claim, lien, charge, encumbrance or the legal process of a
creditor of Lessee of any kind upon or against this Lease or any Unit. Lessee
shall at all times protect and defend, at its own cost and expense, the title
of Lessor from and against such mortgages, claims, liens, charges, encumbrances
and legal processes of creditors of Lessee and shall keep all the Equipment
free and clear from all such claims, liens and legal processes. If any such
lien or encumbrance is incurred, Lessee shall immediately notify Lessor and
shall take all actions required by Lessor to remove the same.

 

10.                               Return of Equipment.

 

10.1.                        Duty of Return. At the expiration of any
Term or upon termination of the Lease,  Lessee at its expense shall
return all of the Equipment to Lessor or its designee at the Lessor’s distribution
facility in Las Vegas, Nevada, in accordance with appropriate gaming laws and
regulations and the terms and conditions of the Lease Schedule. The Equipment
shall include all parts, accessories, attachments, etc. originally delivered to
Lessee and shall conform to all of the manufacturer’s specifications and gaming
laws and regulations with respect to normal function, capability, design and
condition less normal wear and tear. The terms “normal wear and tear” includes
minor scratches, dents, and chips to the exterior of the device and wear to the
interior components of the Equipment that is consistent with components of
comparably aged machines. Upon return of the Equipment, Lessee agrees to
reimburse Lessor for the full retail cost of the Equipment consisting of gaming
devices that is non-functioning or missing components including, but not
limited to, components at the following indicated reimbursement rate, (1) Door
$400.00; (ii) Validator head $550.00; (iii) Validator Can $245.00; (iv) Monitor
$250.00; (v) Circuit Board $420.00; (vi) Hopper $350.00; (vii) Glass panels
$300.00 each.

 

10.2.                        Failure to Return. If Lessee fails to
return the Equipment or any portion thereof, as provided above, within fourteen
(14) days following expiration of any Term or termination of the Lease, then
Lessee shall pay to Lessor an additional month’s Rent for each month, or any
portion thereof, that Lessee fails to comply with the terms of this return
provision, until all of the Equipment is returned, as provided herein.

 

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11.                                 Risk of Loss, Insurance.

 

11.1.                        Risk of Loss. Lessee shall bear the risk of
all loss or damage to any Unit or caused by any Unit during the period from the
time the Unit is shipped by Lessor or the Unit’s vendor until the time it is
returned as provided herein.

 

11.2.                        Equipment Replacement. If any part of the
Equipment is lost, stolen, destroyed, seized by governmental action or, in
Lessee’s opinion or Lessor’s opinion, damaged (“Event of Loss”), this Lease shall remain in full force and
effect without abatement of Rent and Lessee shall promptly replace such
Equipment at its sole expense with Equipment of equivalent value and utility,
and similar kind and in substantially the same condition as the replaced Equipment
immediately prior to the Event of Loss. Title to such replacement unit
immediately shall vest and remain in Lessor, and such Equipment shall be deemed
Equipment under this Lease and the applicable Lease Schedule. Upon such vesting
of title and provided Lessee is not in default under this Lease, Lessor shall
cause to be paid to Lessee or the vendor of the replacement unit any insurance
proceeds actually received by Lessor for the replacement Equipment. Lessee
shall promptly notify Lessor of any Event of Loss and shall provide Lessor with
and shall enter into, execute and deliver such documentation, as Lessor shall
request with respect to the replacement of any such Equipment.

 

11.3.                        Insurance.

 

11.3.1.               Lessee shall obtain
and maintain in full force and effect the following insurance: (i) all risk,
full replacement cost damage insurance on the Premises; (ii) commercial
general liability insurance; (iii) all risk, full replacement cost property
damage insurance on the Equipment (in no event less than the outstanding
balance of the obligations hereunder); and (iv) workers compensation insurance.
Such insurance shall: (i) name Lessor, its parents, subsidiaries, affiliates
and/or assignees, as additional insureds and as first loss payees as their
interests may appear (general liability and property only); (ii) provide a
waiver of subrogation to Lessor (workers compensation only); and (iii) provide
that the POLICY MAY NOT BE CANCELED OR MATERIALLY ALTERED WITHOUT THIRTY (30)
DAYS PRIOR WRITTEN NOTICE TO LESSOR.

 

11.3.2.               In the event the
Equipment includes automobiles, trucks, boats or other vehicles, Lessee shall
obtain and maintain in full force and effect commercial liability coverage in
an amount not less than $1,000,000.00 combined single limit. Such insurance
shall: (i) name Lessor, its parents, subsidiaries, affiliates and/or assignees,
as additional insureds and first loss payees as their interests may appear; and
(ii) provide that the policy may not be canceled or materially altered without
thirty (30) days prior written notice to Lessor.

 

11.3.3.               All such insurance
required herein shall be placed with companies having a rating of at least A,
Class XII or better by Bests rating service. Lessee shall maintain the
insurance throughout the contract period and furnish to Lessor until the
payment in full of any obligations herein, insurance certificates of a kind
satisfactory to Lessor showing the existence of the insurance required
hereunder and premium paid.

 

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12.                                 Lessor’s Purchase and Performance. Upon
receipt of a Lease Schedule executed and delivered by Lessee, Lessee shall bear
all responsibilities and perform all obligations of Lessor, which may arise as
a result of any document or agreement between Lessor and a vendor in connection
with the Equipment to be leased under said Lease Schedule, other than payment
of the purchase price.

 

13.                                 Taxes.

 

13.1.                        Taxes. Lessee agrees to report, file, pay
promptly when due to the appropriate taxing authority and indemnify, defend,
and hold Lessor harmless from and against any and all taxes (including gross
receipts), assessments, license fees and other federal, state or local
governmental charges of any kind or nature, together with any penalties,
interest or fines related thereto (collectively, “Taxes”) that pertain to the Equipment, its purchase, or this
Lease, except such Taxes based solely upon the net income of Lessor, including,
but not necessarily limited to all property, sales and/or use taxes levied or
assessed regardless of whether such taxes are levied or assessed against Lessor
or Lessee.

 

13.2. Lessor’s Filing of
Taxes.  Notwithstanding the foregoing, Lessor at its
election may report and file sales and/or use tax reports, which are filed and
paid periodically through the Term, and the amounts so due may be invoiced to
Lessee and payable as specified therein.

 

14.                                 Indemnification.  Except for the negligence of Lessor, its
employees or agents and assigns, Lessee hereby assumes liability for and agrees
to indemnity, defend, protect, save and hold harmless the Lessor, its agents,
employees, directors and assignees from and against any and all losses,
damages, injuries, claims, administration of claims, penalties, demands and all
expenses, legal or otherwise (including reasonable attorneys’ fees) of whatever
kind and nature arising from the purchase, ownership, use, condition, operation
or maintenance of the Equipment, or any agreement between Lessor and a vendor
(including purchase or sales orders), until the Equipment is returned to Lessor. Any claim, defense, setoff, or other
right of Lessee against any such indemnified party shall not in any way affect,
limit, or diminish Lessee’s indemnity obligations hereunder. Lessee shall
notify Lessor immediately as to any claim, suit, action, damage, or injury
related to the Equipment of which Lessee has actual or other notice and shall,
at its own cost and expense, defend any and all suits, including frivolous
suits and claims, which may be brought against Lessor, shall satisfy, pay and
discharge any and all judgments and fines that may be recovered against Lessor
in any such action or actions, provided, however, that Lessor shall give Lessee
written notice of any such claim or demand. Lessee agrees that its obligations
under this section shall survive the expiration or termination of this Lease.

 

15.                                 Representations and Warranties.  Lessee hereby represents and warrants to
Lessor that:

 

15.1.                        It
is an entity duly organized, validly existing and in good standing under the laws
of the state of its formation;

 

15.2.                        Lessee’s
true legal name is as set forth in this Agreement and that it shall not change
its name without thirty (30) days’
written notice to Lessor;

 

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15.3.                        It
has the power and authority to execute, deliver and perform this Agreement and
other instruments and documents required or contemplated herein;

 

15.4.                        The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary action on the part of Lessee, does not and will not require
the approval of any other interested parties of Lessee and does not and will
not contravene any Certificate or Articles of formation or internal bylaws or
agreement of Lessee, and does not constitute a default of any indenture,
contract, agreement, mortgage, deed of trust, document or instrument to which
Lessee is a party or by which Lessee is bound;

 

15.5.                        The
person(s) executing this Agreement on behalf of Lessee has or have been
properly authorized to execute the same;

 

15.6.                        Lessee
has obtained, maintains, and will maintain, on an active and current basis, all
licenses, permits, registrations, approvals and other authority as may be
required from any applicable federal, state, tribal and local governments and
agencies having jurisdiction over it and the subject matter of this Agreement;

 

15.7.                        There are no suits, actions,
proceedings or investigations pending or threatened or any basis therefore
which might materially or adversely affect the condition, business or prospects
of it or affect the ability of it to perform its obligations under this
Agreement or have a material adverse effect upon the financial condition of it
or the validity or enforceability of this Agreement;

 

15.8.                        Lessee is not currently the
subject of any pending or threatened bankruptcy or insolvency proceeding;

 

15.9.                        Lessee
is not presently insolvent and this Agreement will not render Lessee insolvent.
As used in this section, the term “insolvent” means that the sum total of all
of Lessee’s liabilities (whether secured or unsecured, contingent or fixed, or
liquidated or unliquidated) is in excess of the value of Lessee’s non-exempt
assets (i.e. all of the assets of the entity that are available to satisfy claims of creditors);

 

15.10.                  As
of the date hereof, its obligations under this Agreement are not subject to any
defense, setoff or counterclaim;

 

15.11.                  Lessee is not currently aware of any
event, condition, fact or circumstance, which, after the execution of this
Agreement, would prevent Lessee from having sufficient working capital to pay
all of Lessee’s debts as they become due;

 

15.12.                  This Agreement constitutes a valid
and legally binding agreement and is enforceable in accordance with its terms,
except to the extent that enforcement of any remedies may be limited by
applicable bankruptcy, insolvency, general principles of equity or other
similar laws affecting generally the enforcement of creditors remedies;

 

15.13.                  There
have been no amendments, modifications, waivers or releases with respect to
this Agreement or any provisions hereof
whether oral or written prior to execution hereof;

 

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15.14.                  The
Lessee’s state of formation and/or the location of the Premises will not be
changed without thirty (30) days’ prior written notice to Lessor; and

 

15.15.                  To the best of its knowledge and belief, no
further order, consent, approval, license, authorization or validation of, or
filing, recording or registration with, or exemption by, any governmental,
regulatory or public or tribal body or authority is required in connection with
the execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of this Agreement.

 

16.                                 Warranty, Disclaimers and Limitations of Liability.

 

16.1.                        Pre-owned Gaming Devices. Each pre-owned
gaming device supplied herein by Lessor, which is subject to this Lease or
Lease Schedule, if any, is leased “as is.” Notwithstanding anything to the
contrary contained herein, Lessor makes no representation or warranty of any
kind concerning any software included with the Equipment, including any
representation that the software is
approved for use in Lessee’s jurisdiction or is not subject to a rescission
notification issued by the original manufacturer. Lessor warrants that the new
gaming devices or Equipment subject to this Lease or Lease Schedule, if any,
will be mechanically sound and in good working order for a period of thirty
(30) days following delivery. Lessee’s sole and exclusive remedy in the event
of defect of a pre-owned gaming device is expressly limited to the restoration
of the device to good working condition by adjustment, repair or replacement of
defective parts, at Lessor’s election. There are no other warranties, express
or implied, including but not limited to, warranties of merchantability or
fitness for a particular purpose. No affirmation of fact, including, but not
limited to, statements regarding suitability for use or performance of such
Equipment shall be deemed to be a warranty of Lessor for any purpose. The
Lessee will bear the cost of returning any defective pre-owned gaming devices
to Lessor, including shipping and reasonable packaging. Lessor will bear the
cost of returning the repaired or replacement device to the Lessee, including
shipping and reasonable packaging. Repair of damage caused by the Lessee’s
negligence or intent, or damage caused by third parties is the responsibility
of the Lessee and shall in no event be the responsibility of Lessor.

 

16.2.                        New Gaming Devices or Equipment. Lessor makes no warranties,
express or implied, including, but not limited to, warranties of
merchantability or fitness for a particular purpose with regard to any new
gaming devices or equipment acquired by Lessor for lease to Lessee hereunder
from an Original Equipment Manufacturer or Supplier (“OEM”). 
No affirmation of fact, including but not limited to, statements
regarding suitability for use or performance of such Equipment shall be deemed
to be a warranty of Lessor for any purpose. 
All OEM warranties, if any, shall extend to Lessee, subject to the terms
and conditions of said OEM warranty and to the extent as it may apply to any
Equipment leased herein.

 

16.3.                        Disclaimer and Limitations of Liability. Notwithstanding anything herein to the
contrary, Lessor shall not be responsible or liable for any revenues foregone
by the Lessee, while any part of the Equipment is not functioning properly.
Lessor shall also not be responsible or liable for any losses, damages,
injuries, claims, penalties, demands and all expenses, legal or otherwise
(including reasonable attorneys’ fees) of whatever kind and nature arising from
any patron disputes involving such Equipment. 
The liability of Lessor and the OEM of any of the Equipment leased hereunder,
whether in contract, in tort, under warranty, in 

 

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negligence or otherwise,
shall not exceed the fair market value of the Equipment itself and under no
circumstances shall Lessor or the OEM of any of the Equipment be liable for
direct, special, indirect, or consequential damages. Neither Lessor nor any
manufacturer of any of the Equipment shall be liable in any respect for the
acceptance of counterfeit and/or fraudulent materials (i.e. tokens, coins,
bills, etc.) by the Equipment. Any unauthorized modification, alteration, or
revision of all or any portion of the Equipment shall cause the warranty
described above to be null and void. 
Lessor, its affiliates, subsidiaries, representatives, and agents make
no other warranty, express or implied. 
IN NO EVENT SHALL LESSOR BE LIABLE FOR DIRECT, INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, ARISING
OUT OF THIS LEASE OR ANY LEASE SCHEDULE REGARDLESS OF THE NATURE OF ANY CLAIM
MADE BY LESSEE.

 

17.                                 Assignment of Lease. Lessee
acknowledges and agrees that Lessor may assign, mortgage, or otherwise transfer
its interest thereunder and/or in the Equipment to others (“Assignees”) without any consent of Lessee,
provided however that Lessee shall be notified
of any assignment. Accordingly, Lessee and Lessor agree that upon such
assignment, Lessee (i) shall acknowledge such assignment in writing by
executing a Notice, Consent and Acknowledgment of Assignment furnished by Lessor;
(ii) shall promptly pay all Rent when due to the designated Assignees,
notwithstanding any defense, setoff, abatement, recoupment, reduction or
counterclaim whatsoever that Lessee may have against Lessor; (iii) shall not
permit the Lease or Lease Schedule so assigned to be amended or the terms
thereof waived without the prior written consent of the Assignees; (iv) shall
not require the Assignees to perform any obligations of Lessor under such Lease
Schedule; (v) shall not terminate or attempt to terminate the Lease or Lease
Schedule on account of any default by Lessor; and (vi) acknowledges that any
Assignee may reassign its rights and interest with the same force and effect as
the assignment described herein. Lessee shall not assign this Lease or any Lease
Schedule or assign its rights in or sublet the Equipment, or any interest
therein without Lessor’s and its Assignee’s prior written consent, which
consent shall not be unreasonably withheld.

 

18.                                 Financial Information, Further Assurances.

 

18.1.                        Financial Information. Lessee will provide
Lessor monthly financial statements within thirty (30) days of each calendar
month. Annual audited financial statements provided within one hundred twenty
(120) days of fiscal year-end. Throughout the Term, Lessee shall deliver to
Lessor copies of all current financial information of Lessee and any parent
entity of Lessee, which will reflect the financial condition and operations of
Lessee as well as such other information regarding Lessee reasonably requested
by Lessor or its Assignees.

 

18.2.                        Further Assurances. Lessee shall execute and deliver to
Lessor, such other documents, and take such further action as Lessor may
request to effectively carry out, the intent and purposes of this Lease and the
Lease Schedules. All documentation shall be in a form acceptable to Lessor and
its Assignees.

 

18.3.                        Lease Agreement.  If any
court of competent jurisdiction should determine that this Lease constitutes a
security arrangement as opposed to a true lease, the parties then agree that
this Lease shall constitute a security agreement within the meaning of the 

 

10

 

Uniform Commercial Code and that the Lessor shall be considered a
secured party under the provisions thereof and shall be entitled to all the
rights and remedies of a secured party. 
Lessee, as debtor, grants to Lessor, as secured party, a security
interest in the Equipment; provided nothing herein shall be construed nor shall
the inclusion of this paragraph be interpreted as derogating from the stated
intent and contractual understanding of the parties that this is a true lease.

 

19.                                 Default by Lessee.  Lessee shall be deemed in default under this
Agreement upon the occurrence of any one of the following events (“Event of Default”):

 

19.1.                        Failure
to make any payment due under this Agreement or any Lease Schedule by its due
date;

 

19.2.                        Lessee’s cancellation,
termination, alteration, or rescission of the Authorization for Automatic
Payment without the prior approval of Lessor;

 

19.3.                        Lessee’s rejection of any
authorized withdrawal, payment or entry permitted by the Authorization for
Automatic Payment;

 

19.4.                        Failure to perform any other
obligation under this Agreement or any Lease Schedule within thirty (30) days
after receipt of written notice of default and failure to cure; provided,
however, that no notice shall be required where a breach or threatened breach
would cause irreparable harm to Lessor and Lessor may immediately seek
equitable relief in a court of competent jurisdiction to enjoin such breach;

 

19.5.                        Lessee
shall fail to pay its debts as they become due, shall make an assignment for
the benefit of its creditors, shall admit in writing its inability to pay its
debts as they become due, shall file a petition under any chapter of the
Federal Bankruptcy Code or any similar
law, state or federal, now or hereafter existing, shall become “insolvent” as
that term is generally defined under the Federal Bankruptcy Code, shall in any
involuntary bankruptcy case commenced against it file an answer admitting
insolvency or inability to pay its debts as they become due, or shall fail to
obtain a dismissal of such case within one hundred twenty (120) days after its
commencement or convert the case from one chapter of the Federal Bankruptcy
Code to another chapter, or be the subject of an order for relief in such
bankruptcy case, or be adjudged a bankrupt or insolvent, or shall have a
custodian, trustee or receiver appointed for, or have any court take
jurisdiction of its property, or any part thereof, in any proceeding for the
purpose of reorganization, arrangement, dissolution or liquidation, and such
custodian, trustee or receiver shall not be discharged, or such jurisdiction
shall not be relinquished, vacated or stayed within sixty (60) days of the
appointment.

 

19.6.                        Lessee materially defaults under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced, any indebtedness of Lessee for money
borrowed, whether such indebtedness now exists or shall be created hereafter,
which material default (monetary or otherwise) is not cured within (30) days;

 

19.7.                        Lessee shall be dissolved,
liquidated or wound up or is enjoined, restrained, fails or is in any way
prevented from maintaining its existence as a going concern in good standing
(excepting, however, reorganizations, consolidations and/or mergers into or
with

 

11

 

affiliates owned by, owning or under common control of or with such entity
or into the parent of such entity, provided the succeeding organization assumes
and accepts such entity’s obligation hereunder);

 

19.8.                        Lessee
attempts to remove, sell, transfer, encumber, part with possession or sublet
any part of the Equipment without the prior
written consent of Lessor;

 

19.9.                        Any part
of the Equipment is lost, stolen or destroyed;

 

19.10.                  Any part of the Equipment is
attached, levied upon, encumbered, pledged, or seized under any judicial
process;

 

19.11.                  Any warranty or representation made
or furnished to Lessor by or on behalf of Lessee is false or misleading in any
material respect when made or furnished;

 

19.12.                  Failure of Lessee to maintain in full
force and effect the licenses, permits and certifications that may be required
under any applicable gaming laws for the operation of Lessee’s business;

 

19.13.                  The
revocation of any gaming license of Lessee;

 

19.14.                  The
denial of any gaming license application of Lessee;

 

19.15.                  Failure
of Lessee to comply with all gaming statutes and regulations;

 

19.16.                  Failure of Lessee to maintain the
insurance required by this Agreement; and/or

 

19.17.                  Any merger, consolidation, sale,
change in control or any transfer of a majority of Lessee’s business or assets.

 

20.                                 Lessor Remedies.

 

20.1.                        Lessee
acknowledges that the enforcement of this Agreement may require approval of
certain regulatory authorities and copies of all Default Notices, legal
proceedings, etc. will be forwarded to the appropriate agency as required by
state law or regulation. Lessee further acknowledges that upon any Event of
Default, and at any time thereafter, Lessor, may in addition to any and all
rights and remedies it may have at law or in equity, without notice to or
demand upon any party to this Agreement and at its sole option;

 

12

 

20.1.1.                      Declare all amounts remaining
unpaid under this Agreement immediately due and payable and interest shall
accrue on any outstanding balance due Lessor at a rate of 1.5% per month, which
is 18% per annum, until paid in full;

 

20.1.2.                      Proceed by appropriate court
action or other proceeding, either at law or in equity to enforce performance
by Lessee of any and all covenants of this Agreement;

 

20.1.3.                      Enter onto Lessee’s premises in
person or by agent and take possession of the Equipment;

 

20.1.4.                      Require Lessee to return the
Equipment, at Lessee’s expense, to a place designated by Lessor;

 

20.1.5.                      Render the Equipment unusable in
such manner as is reasonable under the circumstances and as may be allowed by
applicable law;

 

20.1.6.                      Dispose
of the Equipment, as Lessor in the good faith exercise of its discretion deems
necessary or appropriate;

 

20.1.7.                      Without demand, advertisement or
notice of any kind (except such notice as may be required under the Uniform
Commercial Code, if applicable, and all of which are, to the extent permitted
by law, hereby expressly waived), sell, resell, lease, re-lease or dispose of
the Equipment in any manner;

 

20.1.8.                      If
not already the property of Lessor, purchase the Equipment at public sale with
credit on any amounts owed;

 

20.1.9.                      If not already the property of
Lessor, purchase the Equipment at private sale for a price and on such terms as
is determined by an independent appraiser appointed by Lessor to be the price
and terms at which a willing seller would be ready to sell to an able buyer;

 

20.1.10.                Proceed immediately to exercise each
and all of the powers, rights, and privileges reserved or granted to Lessor
under this Agreement;

 

20.1.11.                Subject to applicable and appropriate
gaming laws, rules, laws and regulations, and required approvals, take
possession, sell and/or re-lease any unit of the Equipment as Lessor may
desire, in its sole discretion without demand or notice, wherever the same may
be located, without any court order or pre-taking hearing, any and all damages
occasioned by such retaking being specifically waived herein by Lessee;

 

20.1.12.                Take control of any and all proceeds to
which Lessee is entitled;

 

20.1.13.                Exercise any other remedies available
to a Lessor under the Uniform Commercial Code if applicable;

 

13

 

20.1.14.                Immediately seek equitable relief in a
court of competent jurisdiction to enjoin a breach of this Agreement where said
breach or threatened breach would cause irreparable harm to Lessor; and/or

 

20.1.15.                Exercise any other rights or remedies
provided or available to Lessor at law or in equity.

 

20.2.                        With
respect to any exercise by Lessor of its right to recover and/or  dispose of the Equipment under this Lease or
any Lease Schedule, Lessee acknowledges and agrees as follows: (i) Lessor shall
have no obligation, subject to the requirements of commercial reasonableness,
to clean-up or otherwise prepare the Equipment for disposition, (ii) Lessor may
comply with any applicable state or federal law requirements in connect on with
any disposition of the Equipment and any actions taken in connection therewith
shall not be deemed to have adversely affected the commercial reasonableness of
any disposition of such Equipment, (iii) If Lessor purchases any of the
Equipment at public or private sale, Lessor may pay for the same by crediting
some or all of Lessee’s obligations
under this Lease or any Lease Schedule.

 

20.3.                        No
waiver by Lessor, its affiliates, successors or assigns, of any default,
including, but not limited to, acceptance of late payment after the same is
due, shall operate as a waiver of any other default or of the same default on a
future occasion. In the Event of Default, Lessor shall be entitled to recover
all costs, expenses, losses, damages and legal costs (including reasonable
attorneys’ fees) incurred by Lessor in connection with the enforcement of
Lessor’s remedies. All rights and remedies of Lessor are cumulative and are in
addition to any other remedies provided for at law or in equity including the
Uniform Commercial Code, if applicable, and may, to the extent permitted by
law, be exercised concurrently or separately. 
A termination hereunder shall occur only upon written notice by Lessor
to Lessee and no repossession or other act by Lessor after default shall
relieve Lessee from any of its obligations to Lessor hereunder unless Lessor so
notifies Lessee in writing.

 

20.4.                        In the event of a default by
Lessee, Lessor may, at its option, declare this Agreement terminated without
further liability or obligation to the defaulting party.

 

21.                                 Compliance With Governmental Agencies.

 

21.1.                        All
services furnished hereunder shall comply with the requirements of all
governmental authorities having jurisdiction (the “Authorities”). The terms and conditions of the Lease or any
Lease Schedule shall be subject to the approval by the Authorities, if such
approval is so required. It is understood that, if at any time either prior to
or subsequent to the initial starting date of the Lease or any Lease Schedule,
the Authorities shall render a final determination either disapproving the
terms and conditions of the Lease or any Lease Schedule or denying the
application of Lessor for a gaming license, vendor registration or casino
service supplier, or if Lessor already has such a license, the qualifications
of Lessor that then, in either of such events, the Lease, or any lease schedule
shall be deemed terminated, as of the date of such disapproval or denial, as
though such date were the date originally fixed herein for the notice of termination of the Lease or any lease
schedule.

 

14

 

21.2.                        If
the Lease or any lease schedule is so terminated, then Lessee shall tender
payment to Lessor of (i) any amounts then due and owing under the Lease and any
lease schedule, including but not limited to such items as rent, late charges,
and taxes paid by or assessed upon Lessor, and (ii) the amount equal to the Termination
Value, as defined below, and Lessor shall transfer title to the Equipment to
Lessee and in that event the parties hereto shall have no further liability to
each other. Lessee agrees to comply with all requirements of every governmental
authority which has jurisdiction over the Lease or any lease schedule and over
Lessee. Termination Value shall be defined as the net present value of the
remaining rentals due, including the purchase option amount, discounted at the
original all-in yield, for each Lease Schedule.

 

22.                                 Waiver of Jury Trial.  The pasties hereby knowingly and
voluntarily waive their right to a jury trial on any claim or cause of action
based upon or arising out of directly or indirectly, this Lease or any Lease
Schedules, any dealings between the parties relating to the subject matter
hereof or thereof, and/or the relationship that is being established between
the parties. The scope of this waiver is intended to be all encompassing of any
and all disputes that may be filed in any court (including, without limitation,
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims). This waiver may not be modified orally, and the waiver
shall apply to any subsequent amendment, renewals, supplement or modifications
to this Lease. In the event of litigation, this Lease may be filed as a written
consent to a trial by the court.

 

23.                                 Miscellaneous.

 

23.1.                        Amendments or Modifications. This Lease
shall not be modified or amended except by an instrument in writing signed by
or on behalf of the parties hereto.

 

23.2.                        Binding Effect. This Lease shall be binding upon and inure to
the benefit of the parties and their respective, permitted successors, heirs,
executors, administrators, assigns, and all persons claiming by, through or
under them.

 

23.3.                        Captions, Headings and Titles. The captions, headings and
titles of the various sections of this Lease are for convenience only and are
not to be construed as confining or limiting in anyway the scope or intent of
the parties or the provisions hereof. Whenever the context requires or permits,
the singular shall include the plural, the plural shall include the singular
and the masculine, feminine and neuter shall be freely interchangeable.

 

23.4.                        Compliance With All Laws. The Lessee shall not to violate any
law or regulation including without limitation, any gaming law or regulation or
to engage in any act or omission which tends to bring discredit upon the gaming
industry or otherwise jeopardizes the other party’s ability to engage in
business with businesses licensed by any applicable regulatory authorities.
Lessor shall use its good faith judgment in determining whether any such
violation, act or omission of Lessee or its directors, officers or managers, if
any, places Lessor’s business or licenses at risk and upon such determination
Lessor shall have the right to immediately terminate this Lease or any Lease
Schedule without further liability to Lessee.

 

23.5.                        Reserved (Intentionally Omitted).

 

15

 

23.6.                        Confidentiality.

 

23.6.1.               Lessee shall not disclose information
relating to the operations of Lessor, its affiliates or subsidiaries, to
persons other than the management of Lessor or to those governmental or
regulatory authorities having competent jurisdiction over Lessor or its
business, unless Lessor shall have given prior written consent for the release
of such information. Lessor may require Lessee to execute a nondisclosure
agreement in connection with this Agreement and Lessee, if so requested by
Lessor, agrees to execute the same.

 

23.6.2.               Lessor
and its employees shall keep all statistical, financial, confidential, and/or
personal data requested, received, stored or viewed by Lessor in connection
with this Agreement in the strictest confidence. Lessor agrees not to divulge
to third parties, without the written consent of Lessee, any such information
unless: (i) the information is known to Lessor prior to obtaining the same;
(ii) the information is, at the time of disclosure by Lessor, then in the
public domain; (iii) the information is obtained by Lessor from a third party
who did not receive same, directly or indirectly from Lessee and who has no
obligation of secrecy with respect thereto; or (iv) the information is requested
by and divulged to a governmental or regulatory authority having competent
jurisdiction over Lessor or its business. Lessor further agrees that it will
not, without the prior written consent of Lessee, disclose to any third party
any information developed or obtained by Lessor in the performance of this
Agreement except to the extent that
such information falls within one of the categories described above.

 

23.7.                        Counterparts. This Lease may be executed in
as many counterparts as may be deemed necessary and convenient, and by the
different parties hereto on separate counterparts, each of which, when so
executed or otherwise authenticated, shall be deemed to be an original, but all
such counterparts together shall constitute but one and the same document.

 

23.8.                        Effective Only Upon Execution by Authorized Officer.
Neither this Lease nor any Lease Schedule shall be deemed to constitute an
offer or be binding upon Lessor until executed by Lessor’s authorized officer.
No representations made by any Lessor’s salespersons or anyone else shall be
binding unless incorporated herein in writing.

 

23.9.                        Entire Agreement. This Lease along with any
Lease Schedules and related instruments executed in connection therewith
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, promises,
negotiations, representations or understandings, whether written or oral,
between the parties hereto relating to the subject matter of this Lease or any
Lease Schedules. Any prior agreements, promises, negotiations, representations
or understandings, either oral or written, not expressly set forth in this
Lease, any Lease Schedule, or related instruments executed in connection
therewith shall no force or effect.

 

23.10.                  Further Assurances.
The parties further covenant and agree to do, execute and deliver, or cause to
be done, executed and delivered, and covenant and agree to use their best
efforts to cause their successors and assigns to do, execute and deliver, or
cause to be done, executed and delivered, all such further acts, transfers and
assurances, for implementing the intention of the parties under this Agreement,
as the parties reasonably shall request. The

 

16

 

parties agree to execute any additional
instruments or agreements necessary to carry out the intent of this Lease.

 

23.11.                  Governing Law. The substantive and procedural laws of the
State of Nevada shall govern the validity, construction, interpretation,
performance and enforcement of this Agreement and the parties agree to
jurisdiction in Nevada without reference to its conflict of laws provisions
regardless of the location of the Equipment. The parties also hereby agree that
any action and/or proceeding in connection with this Agreement shall only be
brought in the venue of Clark County, Nevada.

 

23.12.                  Governing
Law (Sovereign Nation Only). In the event that Lessee is an Indian
Tribe as defined by the Indian Gaming Regulatory Act, 25 U.S.C. §2701 et seq. or a sovereign nation, the parties
agree that the immediate section above shall be null and void and Lessee hereby
grants a limited waiver of its Sovereign Immunity, for the sole benefit of
Lessor, such waiver being limited to actions or claims by Lessor against
Lessee, or by Lessee against Lessor, which shall arise directly from, or are
related to, this Agreement.  Any action
brought by or against Lessor may be brought only in the United States District
Court most near Lessee’s primary place of business regardless of the location
of the Equipment. The law to be applied by said United States District Court in
any such action shall be the law of the State of Nevada, including the Uniform
Commercial Code, as adopted by the State of Nevada, without reference to any
Nevada choice of law provisions. Without in any way limiting the generality of
the foregoing Lessee expressly authorizes any governmental or other agency
authorities who have the right and duty under applicable law to take any and
all action authorized or ordered by any court, including without limitation,
entering the land of Lessee and repossessing the Equipment or otherwise giving
effect to any judgment entered.  It is
the intent of the parties that Lessor will be able to obtain possession of the Equipment
in accordance with the rights afforded it under applicable laws and/or any
court order.

 

23.13.                    Governmental
Regulations. Notwithstanding anything in this Lease or any Lease
Schedule to the contrary, in the event any federal, state, local or other
governmental body’s statutes, laws, rules, or regulations are
enacted/promulgated, the impact of which will materially impact the methods
and/or costs of Lessor under this Lease or any Lease Schedule, then, in that
event, Lessor, upon written notice to Lessee, may request a renegotiation of
this Lease or any Lease Schedule. Any modifications to this Lease or any Lease
Schedule resulting from such renegotiation shall become effective on the latest
date as permitted by the governmental body. In the event the parties are unable
to reach a satisfactory agreement during said renegotiations, Lessor shall have
the right to cancel the Lease or any Lease Schedule at anytime by not less than
sixty (60) days prior written notice to Lessee, whereupon the Lease and/or
Lease Schedule shall be null and void.

 

23.14.                  Independence of Parties. All persons hired
or employed by each party in the discharge of this Lease shall be considered
employees of that party and not of any other party to this Lease and shall be
solely and exclusively under the hiring or employing party’s direction and
control. Neither party nor any of its employees (i) shall be held or deemed in
any way to be an agent, employee or official of the other party, or (ii) shall
have the authority to bind the other party in any manner whatsoever. Each party
further agrees to have all persons employed by it properly covered by worker’s
compensation or employer’s liability insurance, as required by law

 

17

 

and to assume and
pay at its own cost all taxes and contributions required by an employer under
any and all unemployment insurance, old age pensions, and other applicable
so-called Social Security Act.

 

23.15.                  Intellectual Property Rights Not Conveyed.
Nothing in this Lease shall be construed as to grant or convey to Lessee any
right, title or interest in and to any intellectual property rights (including
software, patent, copyright and/or trademark) to any part of the Equipment.

 

23.16.                  Lease Irrevocable. This Lease is
irrevocable for the full Term hereof and the Rent shall not abate by reason of
termination of Lessee’s right of possession and/or the taking of possession by
the Lessor or for any other reason.

 

23.17.                  License
and Permits. Each party shall obtain and maintain on an active and
current basis, all licenses, permits, registrations, approvals and other
authority as may be required from any applicable federal, state, tribal and
local governments and agencies having jurisdiction over the subject matter of this
Lease and any Lease Schedule.

 

23.18.                  Multiple
Second Parties.  If more than
one Lessee is named in this Lease or a Lease Schedule the liability of each
shall be joint and several.

 

23.19.                  No Joint Venture, Partnership or Agency Relationship.
Neither this Lease nor any Lease Schedule shall create any joint venture or
partnership between the parties. Nothing contained in this Lease and any Lease
Schedule shall confer upon either party any proprietary interest in, or subject
a party to any liability for or in respect of the business, assets, profits,
losses or obligations of the other. Nothing herein contained shall be read or
construed so as to make the parties a partnership, nor shall anything contained
herein be read or construed in any way to restrict the freedom of either party
to conduct any business or activity whatsoever without any accountability to
the other party. Neither party shall be considered to be an agent or
representative of the other party or have any authority or power to act for or
undertake any obligation on behalf of the other party except as expressly
authorized by the other party in writing. Any such unauthorized representation
or action shall be considered a breach of this Lease and any Lease Schedule.

 

23.20.                  Nondiscrimination. Neither party shall discriminate against
any person on the basis of race, color, sex, national origin, disability age,
religion, handicapping condition (including AIDS or AIDS related conditions),
or any other class protected by United States federal law or regulation.

 

23.21.                  Non-Party Beneficiaries. Nothing herein,
whether express or implied shall be construed to give any person other than the
parties, and their successors and permitted assigns, any legal or equitable
right, remedy of claim under or in respect of this Lease and any Lease
Schedule; but this Lease and any Lease Schedule shall be held to be for the
sole and exclusive benefit of the parties, and their successors and assigns.

 

23.22.                  Notices. Except as otherwise required by
law, all notices required herein shall be in writing and sent by prepaid
certified mail or by courier, addressed to the party at the address of the
party specified herein or such other address designated in writing. Notices are

 

18

 

deemed to have
been received (i) on the fourth business day following posting thereof in the
U.S. Mail, properly addressed and postage prepaid, (ii) when received in any
medium if confirmed or receipted for in the manner customary in the medium
employed, or (iii) if acknowledged in any manner by the party to whom the
communication is directed.

 

23.23.                  Privileged Licenses.

 

23.23.1.                Lessee acknowledges that Lessor, its
parent company, subsidiaries and affiliates, are businesses that are or may be
subject to and exist because of privileged licenses issued by governmental
authorities. If requested to do so by Lessor, Lessee, and its agents, employees
and subcontractors, shall obtain any license, qualification, clearance or the
like which shall be requested or required of any of them by Lessor or any
regulatory authority having jurisdiction over Lessor or any parent company,
subsidiary or affiliate of Lessor.  If
Lessee, or its agents, employees, or subcontractors, fails to satisfy such
requirement or if Lessor or any parent company, subsidiary or affiliate of
Lessor is directed to cease business with Lessee or its agents, employees or
subcontractors by any such authority, or if Lessor shall in good faith
determine, in Lessor’s sole and exclusive judgment that Lessee, or any of its
agents, employees, subcontractors, or representatives (i) is or might be
engaged in, or is about to be engaged in, any activity or activities, or (ii)
was or is involved in any relationship, either of which could or does
jeopardize Lessor’s business or such licenses, or those of a parent company,
subsidiary or affiliate, or if any such license is threatened to be, or is,
denied, curtailed, suspended or revoked, this Lease and any Lease Schedule may
be immediately terminated by Lessor without further liability to Lessee.

 

23.23.2.                Lessee further acknowledges its
understanding that it is illegal for a denied gaming license applicant or a
revoked gaming licensee, or a business entity under such a person’s control, to
enter or attempt to enter into a contract with Lessor, its parent company,
subsidiaries or any affiliate, without the prior approval of the Nevada Gaming
Commission or other applicable gaming authorities. Lessee affirms that it is
not such a person or entity and that it is not under the control of such a
person; and agrees that this Lease and any Lease Schedule is subject to
immediate termination by Lessor, without further liability to Lessee, if Lessee
is or becomes such a person or entity or is under the control of such a person.

 

23.24.                  Pronouns. Masculine or feminine pronouns
shall be substituted for the neuter form and vice versa, and the plural shall
be substituted for the singular form and vice versa, in any place or places
herein in which the context requires such substitution or substitutions.

 

23.25.                  Regulatory Approvals. Certain transactions
contemplated by this Lease and any Lease Schedule may require the approval of
governmental regulatory authorities. Those transactions are entirely
conditional upon and subject to the prior approval of such authority. If the
transactions are not so approved, they shall be null and void ab initio. The parties shall cooperate
with one another and move promptly with due diligence and in good faith to
request any required or appropriate regulatory approvals. If the action or
inaction of any governmental regulatory authority renders the parties unable to
consummate any transaction contemplated by this Lease and any Lease Schedule
which thereby denies a party a material benefit contemplated by this Lease and
any Lease Schedule resulting in the unjust enrichment of the other party, the

 

19

 

parties shall
negotiate in good faith an amendment to this Lease and any Lease Schedule which
fairly compensates the party denied the benefit.

 

23.26.                  Riders.
In the event that any riders are attached hereto and made a part hereof and if
there is a conflict between the terms and provisions of any rider, including
any Lease Schedule and the terms and provisions herein, the terms and
provisions of the rider or Lease Schedule shall control to the extent of such
conflict.

 

23.27.                  Setoffs.
The monies owed by Lessee herein shall be paid in full when due
under the terms of this Lease and any Lease Schedule without right of setoff of
any monies owed by Lessor to Lessee under any other agreement or for any other
purpose.

 

23.28.                  Severability. Each term, covenant condition
or provision of this Lease and any Lease Schedule shall be viewed as separate
and distinct, and in the event that any such term, covenants, condition or
provision shall be held by a court of competent jurisdiction to be invalid, the
remaining provisions shall continue in full force and effect.

 

23.29.                  Subcontracting. Lessee shall not
subcontract any of its obligations herein, or any portion thereof, without
Lessor’s prior written consent. Consent by Lessor to any subcontracting of
Lessee’s obligations or responsibilities as set forth in this Lease and any
Lease Schedule shall not be deemed to create a contractual relationship between
Lessor and the subcontracting party.

 

23.30.                  Suitability.
Lessee understands and acknowledges that this Lease and any Lease
Schedule, at Lessor’s discretion, may be subject to Lessee and its principals
completing and submitting to Lessor a due diligence compliance questionnaire
(including an Authorization for the Release of Information) and being found
suitable by Lessor’s Compliance Committee. Notwithstanding any other provision
in this Lease and any Lease Schedule to the contrary, Lessor may terminate this
Lease and any Lease Schedule without further obligation or liability to Lessee
if, in the judgment of Lessor’s Compliance Committee, the relationship with
Lessee or its principals could subject Lessor to disciplinary action or cause
Lessor to lose or become unable to obtain or reinstate any federal, state
and/or foreign registration, license or approval material to Lessor’s business
or the business of any Lessor subsidiary.

 

23.31.                  Survival of Indemnities. All indemnities of Lessee shall
survive and continue in fill force and effect for events occurring prior to the
return of the Equipment to the Lessor, notwithstanding the expiration or
termination of the Term.

 

23.32.                  Time of Essence. Time
is of the essence of this Lease and any Lease Schedules. In the event the
provisions of this Lease or any Lease Schedule require any act to be done or to
be taken hereunder on a date which is a Saturday, Sunday or legal holiday, such
act or action shall be deemed to have been validly done or taken on the next
succeeding day which is not a Saturday, Sunday or legal holiday.

 

23.33.                  Waiver. The failure of any party to insist,
in any one or more instances, upon performance of any of the provisions of this
Lease or any Lease Schedule or to take advantage of any of its rights hereunder
shall not operate as a waiver thereof or preclude any other or further exercise
thereof or the exercise of any other right or power. Accordingly, the

 

20

 

acceptance of rent
by Lessor after it is due shall not be deemed to be a waiver of any breach by
Lessee of its obligations under this Lease or any Lease Schedule.

 

IN WITNESS WHEREOF,
the parties have caused this Agreement to be duly executed as of the date set
fort above.

 

	
  LESSEE:

  	
  LESSOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:  

  	
  /s/ Thomas E. Fox

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:  

  	
  Thomas E. Fox

  	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:  

  	
  Chief Financial Officer

  	
   

  	
  Its:

  	
   

  
									

 

21

 

LEASE
SCHEDULE NO. 1

(With
Options)

 

THIS LEASE SCHEDULE NO. 1 (“Leave Schedule”) is attached to and made a part of the
Master Lease Agreement (“Lease”)
between PDS GAMING CORPORATION - COLORADO,
its successors and assigns (“Lessor”),
and SOUTHWEST CASINO AND HOTEL CORP.
(“Lessee”), dated
_______________________.

 

1.                                         Definitions. Terms not otherwise defined in this Lease Schedule shall have the
meaning attributed to such terms in the Lease.

 

2.                                         Description of Equipment. The equipment listed on Attachment “A” to
this Lease Schedule (the “Equipment”) is added to the equipment leased under the
Lease and made subject to the provisions of the Lease. The capitalized cost of
the Equipment is $1,144,500.00 (“Capitalized Equipment Cost”).

 

3.                                         Commencement Date. The Commencement Date for the Equipment
leased under this Lease Schedule shall be the Acceptance Date set forth in the
Certificate of Delivery and Acceptance executed by Lessee in connection with
this Lease Schedule.

 

4.                                         Term.  The Term shall commence on the
Commencement Date and shall continue for thirty-six (36) consecutive months.
This Lease Schedule shall be non-cancelable for the duration of the Term or any
Renewal Term (defined below).

 

5.
                                    Basic Rent and Payments. The Basic Rent due each month during the
Term for the Equipment is as follows:

 

a.                                       The first payment of basic rent (not
including applicable taxes) under this Lease Schedule in an amount equal to
$34,874.35 (“Basic Rent”) shall he initially due and payable on the
Commencement Date (“First Payment Date”).

 

b.                                      The second payment of Basic Rent shall be due
and payable on the same calendar day of the subsequent month. All remaining
payments of Basic Rent shall be due and payable on the same calendar day of
each month for the remainder of the Term.

 

6.                                       Fees And Charges.

 

a.                                       Origination and Documentation Fee. Lessee agrees to pay to Lessor an Origination and Documentation Fee for
this Lease Schedule in an amount equal to $2,500.00, which shall be due and
payable on or before the First Payment Date.

 

b.                                      Imposts. In addition
to the monthly Basic Rent due as set forth above, Lessee agrees to pay and
indemnify Lessor for, and hold Lessor harmless from and against all taxes,
assessments, fees and charges (hereinafter called “Imposts”) together with any penalties, fines or
interest thereon levied and imposed by any governmental agency or unit (state,
local, federal, domestic or foreign), regardless of party assessed against (i)
with respect to the Lease or this Lease Schedule; (ii) upon the Equipment, its
value or any interest of Lessor and/or Lessee therein (iii) upon or on account
of any sale, rental, purchase, ownership, possession, use, operation,

 

22

 

maintenance, delivery or
return of the Equipment, or value added thereto, other than taxes imposed on or
measured by the next income or capital of Lessor. The amount of the Impost
shall become Supplemental Rent to be paid by Lessee upon Lessor’s demand. If
any Impost relates to a period during the Term (initial or renewed, if
applicable) (no matter when it is assessed) then Lessee’s liability for such
Impost shall continue, notwithstanding the expiration or termination of the
Lease or this Lease Schedule, until all such Imposts are paid in full by
Lessee.

 

7.                                       Security Deposit.  Due and payable on the Commencement Date, Lessee shall pay to Lessor, a
Security Deposit in an amount equal to one (1) month of the Basic Rent.  The Security Deposit will be held by the
Lessor for the Term of the Lease and will be, at Lessor’s sole discretion,
either (i) returned to Lessee upon satisfactory completion of the terms and
conditions of the Lease; or (ii) if Lessee has not been in default under the
Term (initial and/or renewed, if applicable) of the Lease or this Lease
Schedule, applied to Lessee’s final payment of Basic Rent.

 

8.                                       Options and Notice.

 

a.                                       If Lessee (i) has not been in default under
the Term (initial and/or renewed, if applicable) of the Lease or this Lease
Schedule, and (ii) has not had a materially adverse change in its financial
condition since the Commencement Date, Lessor grants Lessee the following
option(s):

 

(i)                                     Purchase Option: At
the expiration of the Term (initial or renewed, if applicable), Lessee may
purchase all but not less than all of the Equipment described in the Lease
Schedule for the fair market value in use of the Equipment as of the date of
expiration of the Term, to he equal to $197,000.00 (“Exercise Price”),
not to be considered a Bargain Purchase Option (the “Purchase Option”).

 

(ii)                                  Renewal Option One: At
the expiation of the Term, Lessee may renew the Lease Term for a period of
twelve (12) months (“Renewal Term”) in the form of an Operating Lease at the
then fair market rental as determined by Lessor in its sole discretion (“Renewal Option One”).

 

(iii)                               Renewal Option Two:
At the expiration of the Term, Lessee may renew the Lease Term for a period of
twelve (12) months (“Renewal Term”) in the form of a Capital Lease to $1.00
out, at $17,551.72 monthly payment, not to be considered a Bargain Purchase
Option (“Renewal Option Two”).

 

(iv)                              Upgrade Option:
After twelve (12) months from the Commencement Date, Lessee shall have the
right to replace or upgrade up to 50% of the 27 Bally Gaming Devices (at the
then fair market wholesale value) at anytime prior to the expiration of the
twenty-fourth (24th) month of this Lease Schedule (collectively, the
“Upgrade Option”) with new slot machines acceptable to Lessor (the “Replacement Equipment”)
in its sole discretion only if the following conditions are met to the
reasonable satisfaction of Lessor: (i) Lessee is not in default under the
Lease, (ii) there are no material changes to Lessee’s condition (financial,
business or otherwise), (iii) Lessee gives Lessor 90 days’ written notice of
the exercise of the Upgrade Option, (iv) Lessee agrees to lease the Replacement
Equipment from Lessor under a new Equipment lease schedule reflecting terms and
rental factor consistent with terms generally

 

23

 

available from Lessor at
that time, and (v) Lessee delivers the returned Equipment to Lessor in like new
condition, normal wear and tear excepted. Upon receipt of the returned
Equipment and execution of the appropriate documents evidencing the obligation
of the Lessee to lease the Replacement Equipment, Lessor shall reduce the Basic
Rent due under the Equipment Schedule based on the then established wholesale
value (as determined by Lessor) of the Equipment.

 

(v)                                 Option to Return Equipment: At the expiation of the Term (initial and/or renewed, if applicable),
Lessee may return the Equipment to Lessor at a facility designated by Lessor,
according to the terms of the Lease.  In
the event such an election is made, the Lessor shall, within thirty (30) days
from the equipment return, obtain three (3) valid and legitimate Wholesale Bids
(which may include bids directly from Lessee, if any) from independent third
parties, for the sale and purchase of the equipment.  Lessee shall become obligated to Lessor for
the deficiency between the highest bid and the Exercise Price (“Deficiency Clause”)
(the “Return Option”).

 

b.                                      Unless otherwise specified above, Lessee must
give written notice of the exercise of any option 120 days prior to the
expiration of a term. If written notice of exercise of any Purchase Option or
Renewal Option is not received within a notification period as specified
herein, the applicable term shall be automatically renewed for an additional 120 days at the most recent Basic Rent as set forth under the Lease Schedule (the
“Automatic Renewal Term”). 
Upon timely receipt of such notice of exercise, receipt of the payment
of all Rent due under the Lease and payment of the Exercise Price, Lessor will,
with exercise of the Purchase Option, execute and deliver to Lessee a Bill of
Sale for the Equipment described in the Lease Schedule. Upon failure of the
Lessor to so deliver a Bill of Sale, this Option shall then constitute a
conveyance of the Equipment in accordance herewith. Payment in full of the
Exercise Price shall be due and payable on or before the expiration of the Term,
Renewal Term or Automatic Renewal Term. If Lessee has not been in default under
the terms of the Lease at the expiration of the Term, Renewal Term or Automatic
Renewal Term, Lessee may, upon 120 days advance
written notice, notify
Lessor of its decision to terminate the Lease Schedule and, thereupon Lessee
shall, at Lessee’s expense, return the Equipment to Lessor at a facility
designated by Lessor, according to the terms of the Lease. Lessee shall in all
respects remain obligated under the Lease for payment of Rent, care,
maintenance, delivery, use and insurance of the Equipment until Lessor inspects
and accepts the Equipment.  In the event
it shall at any time be determined that by reason of the options hereby given
or otherwise that the lease of the Equipment to which the Purchase Option or
the Renewal Option applies was in fact a sale to the Lessee of the Equipment,
the Lessee agrees that neither it nor its successors or assigns has or will
have any claim or cause of action against Lessor, its successors or assigns,
for any reason for loss sustained by virtue of such determination.

 

c.                                       Lessee
acknowledges that the Equipment sold by Lessor under the Purchase Option is
being sold in an “as is, where is” condition. Lessor makes, and will make, no
representations or warranties regarding the Equipment, its suitability for
Lessee’s purpose, or its compliance with any laws.  Lessee hereby assumes all liability for the
Equipment and agrees to indemnify Lessor per the terms of the Lease for any
claims whatsoever arising out of the purchase of the Equipment.

 

24

 

9.                                       UCC Filings.  Lessee hereby authorizes Lessor to file any
and all UCC-1 and/or UCC-3 statements and/or amendments thereto related to this
Lease Schedule or the Equipment without Lessee’s authentication, to the extent
permitted by applicable law.

 

10.                                 Incorporation of Lease.  All
of the provisions of the Lease are incorporated by reference herein as if set
forth fully herein.

 

 

	
  Dated:

  	
  12/30/03

  	
   

  

 

 

	
  LESSEE:

  	
  LESSOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:  

  	
  /s/ Thomas E. Fox

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:  

  	
  Thomas E. Fox

  	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:  

  	
  Chief Financial Officer

  	
   

  	
  Its:

  	
   

  
									

 

25Exhibit 10.19

 

INDEMNIFICATION AGREEMENT

 

Southwest Casino Corporation (“Company”) and
                              
(“Indemnitee”) enter into this
Indemnification Agreement (the “Agreement”)
effective                     ,
200  .

 

WHEREAS, prudent
persons may be reluctant to serve as directors or officers of the Company
unless such persons are provided with adequate protection through insurance or
adequate indemnification against inordinate risks of claims and actions against
them arising out of their service to and activities on behalf of the Company;
and

 

WHEREAS, the Board
of Directors of the Company has determined that the inability to attract and
retain such persons is detrimental to the best interests of the Company; and

 

WHEREAS, it is
reasonable, prudent and necessary for the Company to obligate itself by
contract to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified; and

 

WHEREAS, Indemnitee
is willing to serve, continue to serve and to take on additional service for or
on behalf of the Company on the condition that Indemnitee be so indemnified;

 

NOW, THEREFORE, in
consideration of the premises and the covenants contained herein, the Company
and Indemnitee do hereby covenant and agree as follows:

 

ARTICLE I

DEFINITIONS

 

For purposes of this Agreement the following terms shall have the
meaning given here:

 

1.1                                 “Board”
shall mean the Board of Directors of the Company.

 

1.2                                 “Change
of Control” shall mean any of the following events:

 

(a)                                  Unless approved by
the affirmative vote of at least two-thirds (2/3) of those members of the Board
who are in office immediately prior to the event(s) and who are not employees
of the Company:

 

(1)                                  the merger or
consolidation of the Company with, or the sale of all or substantially all of
the assets of the Company to, any person or entity or group of associated
persons or entities; or

 

(2)                                  the direct or
indirect beneficial ownership in the aggregate of securities of the Company
representing thirty-three and one-third percent (33-1/3%) or more of the total
combined voting power of the Company’s then issued and outstanding securities
by any person or entity, or group of associated

 

1

 

persons or entities acting in concert, not affiliated (within the
meaning of the Securities Act of 1933) with the Company as of the date of this
Agreement; or

 

(3)                                  the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company.

 

(b)                                 A change in the
composition of the Board at any time during any consecutive twenty-four (24)
month period such that the “Continuity Directors”
cease for any reason to constitute at least a seventy percent (70%) majority of
the Board.  For purposes of this clause
(b), “Continuity Directors” means those
members of the Board who either:

 

(1)                                  were directors at the
beginning of such consecutive twenty-four (24) month period; or

 

(2)                                  were elected by, or
on the nomination or recommendation of, at least a majority of the
then-existing Board.

 

1.3                                 “Corporate
Status” describes the status of a person who is or was a director, officer,
employee, agent or fiduciary of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person is or was serving at the express written request of the
Company.

 

1.4                                 “Disinterested
Director” means a director of the Company who is not and was not a party to
the Proceeding in respect of which indemnification is sought by Indemnitee.

 

1.5                                 “Enterprise”
shall mean the Company and any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise of which Indemnitee is or was
serving at the express written request of the Company as a director, officer,
employee, agent or fiduciary.

 

1.6                                 “Expenses”
shall include all reasonable attorneys’ fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in a Proceeding.

 

1.7                                 “Good
Faith” shall mean Indemnitee having acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal Proceeding, having had no
reasonable cause to believe Indemnitee’s conduct was unlawful.

 

1.8                                 “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced
in matters of corporation law and neither presently is, nor in the past five
years has been, retained to represent: 
(i) the Company or Indemnitee in any matter material to either such

 

2

 

party, or (ii) any other party to the Proceeding giving rise to a claim
for indemnification hereunder. 
Notwithstanding the foregoing, the term
“Independent Counsel” shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee’s rights under this Agreement.

 

1.9                                 “Proceeding”
includes any action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other actual, threatened or
completed proceeding whether civil, criminal, administrative or investigative,
other than one initiated by Indemnitee. 
For purposes of the foregoing sentence, a
“Proceeding” shall not be deemed to have been initiated by
Indemnitee where Indemnitee seeks pursuant to Article VIII of this
Agreement to enforce Indemnitee’s rights under this Agreement.

 

ARTICLE II

TERM OF AGREEMENT

 

This Agreement shall continue until and terminate upon the later
of:  (a) 10 years after the date that
Indemnitee shall have ceased to serve as a director, officer, employee, agent
or fiduciary of the Company or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which Indemnitee
served at the express written request of the Company; or (b) the final
termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any proceeding commenced by Indemnitee pursuant to Article VIII of this Agreement
relating thereto.

 

ARTICLE III

SERVICES BY INDEMNITEE, NOTICE OF PROCEEDINGS

 

3.1                                 Services.  Indemnitee agrees to serve as a director
and/or an officer of the Company. 
Indemnitee may at any time and for any reason resign from such position
(subject to any other contractual obligation or any obligation imposed by
operation of law).

 

3.2                                 Notice
of Proceeding.  Indemnitee agrees to
notify the Company promptly, in writing, upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder.

 

ARTICLE IV

INDEMNIFICATION

 

4.1                                 In
General.  In connection with any
Proceeding, the Company shall indemnify, and advance Expenses to Indemnitee as
provided in this Agreement and to the fullest extent permitted by applicable
law in effect on the date hereof and to such greater extent as applicable law
may thereafter from time to time permit.

 

3

 

4.2                                 Proceedings
Other Than Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of
indemnification provided in this Section 4.2 if, by reason of Indemnitee’s
Corporate Status, Indemnitee is, or is threatened to be made, a party to any
Proceeding, other than a Proceeding by or in the right of the Company.  Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection
with such Proceeding or any claim, issue or matter therein, if Indemnitee acted
in Good Faith.

 

4.3                                 Proceedings
by or in the Right of the Company. 
Indemnitee shall be entitled to the rights of indemnification provided
in this Section 4.3 if, by reason of Indemnitee’s Corporate Status,
Indemnitee is, or is threatened to be made, a party to any Proceeding brought
by or in the right of the Company to procure a judgment in its favor.  Indemnitee shall be indemnified against
Expenses, judgments, penalties, and amounts paid in settlement, actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with
such Proceeding if Indemnitee acted in Good Faith.  Notwithstanding the foregoing, no such
indemnification shall be made in respect of any claim, issue or matter in such
Proceeding as to which Indemnitee shall have been adjudged to be liable to the
Company if applicable law prohibits such indemnification; provided,
however, that, if applicable law so permits,
indemnification shall nevertheless be made by the Company in such event if and
only to the extent that the court in which such Proceeding shall have been
brought or is pending, or other court of competent jurisdiction shall
determine.

 

4.4                                 Indemnification
of a Party Who Is Wholly or Partly Successful.  Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s
Corporate Status, a party to and is successful, on the merits or otherwise, in
any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted
by law, against all Expenses, judgments, penalties, fines, and amounts paid in
settlement, actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection therewith.  If
Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee to the
maximum extent permitted by law, against all Expenses, judgments, penalties,
fines, and amounts paid in settlement, actually and reasonably incurred by
Indemnitee or on Indemnitee’s behalf in connection with each successfully
resolved claim, issue or matter.  For
purposes of this Section 4.4 and without limitation, the termination of
any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter, so long as there has been no finding (either adjudicated or pursuant to
Article VI) that Indemnitee did not act in Good Faith.

 

4.5                                 Indemnification
for Expenses of a Witness. 
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness in
any Proceeding, Indemnitee shall be indemnified against all Expenses actually
and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection
therewith.

 

4

 

ARTICLE V

ADVANCEMENT OF EXPENSES

 

Notwithstanding any provision to the contrary in Article VI, the
Company shall advance all reasonable Expenses which, by reason of Indemnitee’s
Corporate Status, were incurred by or on behalf of Indemnitee in connection
with any Proceeding, within twenty days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances,
whether prior to or after final disposition of such Proceeding.  Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or be preceded
or accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses if it shall ultimately be determined that Indemnitee is not entitled
to be indemnified against such Expenses. 
Any advance and undertakings to repay pursuant to this Article V
shall be unsecured and interest free.

 

ARTICLE VI

PROCEDURES FOR DETERMINATION OF

ENTITLEMENT TO INDEMNIFICATION

 

6.1                                 Initial
Request.  To obtain indemnification
under this Agreement, Indemnitee shall submit to the Company a written request,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification.  The Secretary of the Company shall promptly
advise the Board in writing that Indemnitee has requested indemnification.

 

6.2                                 Method
of Determination.  A determination
(if required by applicable law) with respect to Indemnitee’s entitlement to
indemnification shall be made as follows:

 

(a)                                  if a Change in
Control has occurred, unless Indemnitee shall request in writing that such
determination be made in accordance with clause (b) of this Section 6.2,
the determination shall be made by Independent Counsel in a written opinion to
the Board, a copy of which shall be delivered to Indemnitee;

 

(b)                                 if a Change of Control
has not occurred, and subject to Section 6.5, the determination shall be
made by the Board by a majority vote of a quorum consisting of Disinterested
Directors.  In the event that a quorum of
the Board consisting of Disinterested Directors is not obtainable or, even if
obtainable, such quorum of Disinterested Directors so directs, the
determination shall be made by Independent Counsel in a written opinion to the
Board, a copy of which shall be delivered to Indemnitee.

 

6.3                                 Selection,
Payment, Discharge, of Independent Counsel. 
In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 6.2 of this Agreement,
the Independent Counsel shall be selected, paid, and discharged in the
following manner:

 

5

 

(a)                                  If a Change of Control
has not occurred, the Independent Counsel shall be selected by the Board, and
the Company shall give written notice to Indemnitee advising Indemnitee of the
identity of the Independent Counsel so selected.

 

(b)                                 If a Change of Control
has occurred, the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that such selection be made by the Board, in which
event clause (a) of this section shall apply), and Indemnitee shall give
written notice to the Company advising it of the identity of the Independent
Counsel so selected.

 

(c)                                  Following the initial
selection described in clauses (a) and (b) of this Section 6.3, Indemnitee
or the Company, as the case may be, may, within 7 days after such written
notice of selection has been given, deliver to the other party a written
objection to such selection.  Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of “Independent Counsel”
as defined in Section 1.9 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion.  Absent a proper and timely objection, the
person so selected shall act as Independent Counsel.  If such written objection is made, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until a court has determined that such objection is without merit.

 

(d)                                 Either the Company or
Indemnitee may petition the District Court of the State of Minnesota or other
court of competent jurisdiction if the parties have been unable to agree on the
selection of Independent Counsel within 20 days after submission by Indemnitee
of a written request for indemnification pursuant to Section 6.1 of this
Agreement.  Such petition may request a
determination whether an objection to the party’s selection is without merit
and/or seek the appointment as Independent Counsel of a person selected by the
Court or by such other person as the Court shall designate.  A person so appointed shall act as Independent
Counsel under Section 6.2 of this Agreement.

 

(e)                                  The Company shall pay
any and all reasonable fees and expenses of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to this Agreement,
and the Company shall pay all reasonable fees and expenses incident to the
procedures of this Section 6.3, regardless of the manner in which such
Independent Counsel was selected or appointed.

 

(f)                                    Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 8.1(c)
of this Agreement, Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).

 

6.4                                 Cooperation.  Indemnitee shall cooperate with the person,
persons or entity making the determination with respect to Indemnitee’s
entitlement to indemnification under this Agreement, including providing to
such person, persons or entity upon reasonable advance

 

6

 

request any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination.  Any costs or expenses (including attorneys’
fees and disbursements) incurred by Indemnitee in so cooperating with the
person, persons or entity making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.

 

6.5                                 Payment.  If it is determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination.

 

ARTICLE VII

PRESUMPTIONS AND EFFECT OF CERTAIN
PROCEEDINGS

 

7.1                                 Burden
of Proof.  In making a determination
with respect to entitlement to indemnification hereunder, the person or persons
or entity making such determination shall presume that Indemnitee is entitled
to indemnification under this Agreement if Indemnitee has submitted a request
for indemnification in accordance with Section 6.1 of this Agreement, and
the Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption.

 

7.2                                 Effect
of Other Proceedings.  The
termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not (except as otherwise expressly provided in this
Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in Good
Faith.

 

7.3                                 Reliance
as Safe Harbor.  For purposes of any
determination of Good Faith, Indemnitee shall be deemed to have acted in Good
Faith if Indemnitee’s action is based on the records or books of account of the
Company, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise.  The provisions of this
Section 7.3 shall not be deemed to be exclusive or to limit in any way the
other circumstances in which the Indemnitee may be deemed to have met the applicable
standard of conduct set forth in this Agreement.

 

7.4                                 Actions
of Others.  The knowledge and/or
actions, or failure to act, of any director, officer, agent or employee of the
Enterprise shall not be imputed to Indemnitee for purposes of determining the
right to indemnification under this Agreement.

 

7

 

ARTICLE VIII

REMEDIES OF INDEMNITEE

 

8.1                                 Application.  This Article VIII shall apply in the
event of a Dispute.  For purposes of this
Article, “Dispute” shall mean any of the
following events:

 

(a)                                  a determination is
made pursuant to Article VI of this Agreement that Indemnitee is not
entitled to indemnification under this Agreement;

 

(b)                                 advancement of
Expenses is not timely made pursuant to Article V of this Agreement;

 

(c)                                  the determination of
entitlement to be made pursuant to Section 6.2 of this Agreement has not
been made within 90 days after receipt by the Company of the request for
indemnification;

 

(d)                                 payment of
indemnification is not made pursuant to Section 4.5 of this Agreement
within ten (10) days after receipt by the Company of a written request
therefor; or

 

(e)                                  payment of
indemnification is not made within ten (10) days after a determination has been
made that Indemnitee is entitled to indemnification or such determination is
deemed to have been made pursuant to Article VI of this Agreement.

 

8.2                                 Adjudication.  In the event of a Dispute, Indemnitee shall
be entitled to an adjudication in an appropriate court of the State of
Minnesota, or in any other court of competent jurisdiction, or Indemnitee’s
entitlement to such indemnification or advancement of Expenses.  Alternatively, Indemnitee, at Indemnitee’s
option, may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association.  Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180 days following
the date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 8.2.  The
Company shall not oppose Indemnitee’s right to seek any such adjudication or
award in arbitration.

 

8.3                                 De
Novo Review.  In the event that a
determination shall have been made pursuant to Article VI of this
Agreement that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Article VIII shall be
conducted in all respects as a de novo trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse
determination.  In any such proceeding or
arbitration, the Company shall have the burden of proving that Indemnitee is
not entitled to indemnification or advancement of Expenses, as the case may be.

 

8.4                                 Company
Bound.  If a determination shall have
been made or deemed to have been made pursuant to Article VI of this
Agreement that Indemnitee is entitled to indemnification, the Company shall be
bound by such determination in any judicial proceeding

 

8

 

or arbitration absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law.

 

8.5                                 Procedures
Valid.  The Company shall be
precluded from asserting in any judicial proceeding or arbitration commenced
pursuant to this Article VIII that the procedures and presumptions of this
Agreement are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Company is bound by all the
provisions of this Agreement.

 

8.6                                 Expenses
of Adjudication.  In the event that
Indemnitee, pursuant to this Article VIII, seeks a judicial adjudication
of or an award in arbitration to enforce Indemnitee’s rights under, or to
recover damages for breach of, this Agreement, Indemnitee shall be entitled to
recover from the Company, and shall be indemnified by the Company against, any
and all expenses (of the types described in the definition of Expenses in
Section 1.7 of this Agreement) actually and reasonably incurred by
Indemnitee in such adjudication or arbitration, but only if Indemnitee prevails
therein.  If it shall be determined in
such adjudication or arbitration that Indemnitee is entitled to receive part
but not all of the indemnification or advancement of expenses sought, the
expenses incurred by Indemnitee in connection with such adjudication or
arbitration shall be appropriately prorated.

 

ARTICLE IX

NON-EXCLUSIVITY, INSURANCE, SUBROGATION

 

9.1                               Non-exclusivity.  The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled
under applicable law, the Certificate of Incorporation, the By-Laws, any
agreement, a vote of stockholders or a resolution of directors, or
otherwise.  No amendment, alteration,
rescission or replacement of this Agreement or any provision hereof shall be
effective as to Indemnitee with respect to any action taken or omitted by such
Indemnitee in Indemnitee’s Corporate Status prior to such amendment,
alteration, rescission or replacement.

 

9.2                                 Insurance.  The Company may maintain an insurance policy
or policies against liability arising out of this Agreement or otherwise.

 

9.3                                 Subrogation.  In the event of any payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of Indemnitee, who shall execute all papers required
and take all action necessary to secure such rights, including execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.

 

9.4                                 No
Duplicative Payment.  The Company
shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder if and to the extent that

 

9

 

Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.

 

ARTICLE X

GENERAL PROVISIONS

 

10.1                           Successors and Assigns. 
This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs,
executors and administrators.

 

10.2                           Severability.  If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever:

 

(a)                                  the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and

 

(b)                                 to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision
held to be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.

 

10.3                           No
Adequate Remedy.  The parties declare
that it is impossible to measure in money the damages that will accrue to
either party by reason of a failure to perform any of the obligations under
this Agreement.  Therefore, if either
party shall institute any action or proceeding to enforce the provisions hereof,
such party against whom such action or proceeding is brought hereby waives the
claim or defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense that the
other party has an adequate remedy at law.

 

10.4                           Identical
Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall for all purposes be
deemed to be an original but all of which together shall constitute one and the
same Agreement.  Only one such
counterpart signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.

 

10.5                           Headings.  The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.

 

10.6                           Modification
and Waiver.  No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. 
No waiver

 

10

 

of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.

 

10.7                           Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:

 

	
  If to Indemnitee, to:

  	
   

  	
  As shown with Indemnitee’s Signature below.

  
	
   

  	
   

  	
   

  
	
  If to the Company, to:

  	
   

  	
  Southwest Casino and Hotel Corp.

  
	
   

  	
   

  	
  2001 Killebrew Drive, Suite 306

  
	
   

  	
   

  	
  Minneapolis, Minnesota 55425

  

 

or to such other address as may have been furnished to Indemnitee by
the Company or to the Company by Indemnitee, as the case may be.

 

10.8                           Entire
Agreement.  This Agreement
constitutes the entire agreement and understanding between the parties hereto
in reference to all the matters herein agreed upon.  This Agreement replaces in full all prior
indemnification agreements or understandings of the parties hereto, and any and
all such prior agreements or understandings are hereby rescinded by mutual
agreement.

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement on the dates indicated below to be
effective as
of                      ,
200      .

 

	
   

  	
   

  	
  SOUTHWEST
  CASINO CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
  Date

  	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  INDEMNITEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  [Name]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mailing Address of Indemnitee:

  
	
   

  	
   

  	
   

  
	
   

  	
  5801 Hyland Greens Drive

  
	
   

  	
  Bloomington, MN 55437

  
							

 

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