Document:

Exhibit
10.12

 

LEASE

 

THIS LEASE (the “Lease”) is made and
entered into as of March         ,
1999, by and between CRIPPLE CREEK
DEVELOPMENT CORP. d/b/a the GOLD
RUSH HOTEL & CASINO, a Colorado corporation with offices at 195
Pine Cone Road, Spearfish, South Dakota, BLUE
BUILDING DEVELOPMENT, INC. d/b/a  GOLD
DIGGER’S CASINO, a
                
corporation with offices at 195 Pine Cone Road, Spearfish, South Dakota, MARK BROCKLEY, an individual residing in
Spearfish, South Dakota, and ANNESSE BROCKLEY,
an individual residing in Spearfish, South Dakota (collectively, the “Lessor”),
and GOLD RUSH I, LLC, a Colorado
limited liability company with offices at 2001 Killebrew Drive, Suite 306,
Minneapolis, Minnesota (the “Lessee”), and SOUTHWEST
CASINO AND HOTEL CORP., a Minnesota corporation with offices at 2001
Killebrew Drive, Suite 306, Minneapolis, Minnesota (the “Guarantor”).  Lessor and Lessee are sometimes referred to
in this Lease as a Party or the Parties.

 

W I T N E S S E T H:

 

1.                                       ASSETS. 
In consideration of the payment of rent and the keeping and performance
of the covenants and agreements by Lessee as hereinafter set forth, Lessor
hereby leases and demises to Lessee the assets, which consist of the Gold Rush
Hotel & Casino (the “Gold Rush”), Gold Digger’s Casino (“Gold Digger’s),
and any and all. improved and unimproved realty and the improvements thereon,
personal property, liquor licenses, and other assets of every kind and
description, tangible and intangible, which are in any way related to or affiliated
with the operation of the Gold Rush and Gold Digger’s, including without
limitation, (j) the Gold Rush, (ii) Gold Digger’s, (iii) all parking lots, (iv)
the Rock Shop, (v) the building in which the marketing office is currently
housed, (vi) the convenience store/former gasoline station, vii) the arcade,
(ix) all gaming-related assets, including gaming equipment (except slot
machines, which shall not be leased to Lessee by Lessor), furniture and
fixtures, surveillance equipment, and all restaurant and bar furniture and
fixtures and furnishings, (x) all hotel-related assets, including furniture and
fixtures, (xi) all inventory, (xii) all cash in gaming machines, cash registers
or elsewhere in, or required to be in, the Gold Rush, Gold Digger’s or any other
improved property governed by this Lease, (xiii) all cash in banks or financial
institutions held for the account or benefit of Lessor, (xiv) all books and
records of Lessor, (xv) all intangible assets, including customer lists and
profiles, customer tracking lists and data and any compilations thereof,
mailing lists, computer programs, trade names, trademarks, service marks,
copyrights, and patents, and (xvi) all amounts owed Mark Brockley and/or
Annesse Brockley in connection with resolution of litigation between them and
their former business associates arising out of or relating to operation of the
Assets, which amounts Mark Brockley and Annesse Brockley represent they will
use their best efforts to collect (the “Assets”).

 

Notwithstanding
the foregoing, the Assets shall not include (i) an automobile currently
reflected on Lessor’s books, provided that Lessor is not and shall not
be obligated to pay any debt or release any encumbrance in connection with the
automobile, (ii) the real property known as 127 Carr Avenue, Cripple Creek.
Colorado, or (iii) slot machines located in or on the various premises included
among the Assets.

 

 

The
automobile shall be removed from Lessor’ s books as an asset of Lessor and
shall be owned by and paid for by the Brockleys individually.

 

Legal
descriptions of all of the real property contained in the Assets are reflected
on Exhibit I attached hereto and incorporated by reference herein.

 

All
slot machines used in connection with operation of the Gold Rush and Gold
Digger’s will remain on those premises, and Lessor shall give Lessee a bill of
sale for each and all of them in form and substance satisfactory to Lessee
reflecting Lessor’s transfer of interest in them to Lessee as of the
Commencement Date.  The transfer shall be
at no cost to Lessee, provided that, in the event Lessee shall during
the Lease Term replace any such slot machine, the salvage value of such
machine, less any debt or other encumbrance placed on it by Lessor and due as
of the Commencement Date, shall be paid to Lessor within thirty (30) days of
such replacement.

 

An
inventory of the Assets, including, for this purpose, the slot machines, is
reflected on the inventory attached hereto as Exhibit 2 and incorporated by
reference herein.  Notwithstanding the foregoing,
the Parties understand and agree that they shall revise Exhibit 2 if
appropriate as of the Commencement Date of the Lease as herein defined.

 

The
cash identified in Sections 1(xii) and 1(xiii) above is referred to
collectively in this Lease as “the Cash”.

 

2.                                       TERM.

 

A.                                   Lease
Term/Conditions Precedent.  The term
of the Lease shall commence when each and all of the following conditions have
been satisfied — (i) execution of the Lease by both Parties, together with all
exhibits and appendices herein described, (ii) approval of the Lease by the
Colorado Division of Gaming (the “Division”) and the Colorado Limited Gaming
Control Commission (the “Commission”), (iii) Lessee’s obtaining such gaming
license(s)as the Division and Commission shall require, (iv) Lessee’s obtaining
such liquor licenses as state and local liquor licensing agencies shall
require, and (v) Lessor’s providing Lessee with an opinion of Lessor’s counsel,
or such other assurance in form and substance satisfactory to Lessee, that Lessor
owns and has the legal right to lease the Assets ( the “Conditions
Precedent”).  The date on which the
Conditions Precedent are fully satisfied shall be the commencement date of the
Lease (the “Commencement Date”), and the Lease shall be for a term at twenty
(20) years and several months thereafter, ending on the earlier of
June 30, 2019 or the date in the year 2019 on which the gaming license(s)
applicable to the Gold Rush and Gold Digger’s expire, unless earlier terminated
as provided in Section 17 and otherwise herein (the “Lease Term”).

 

The
Parties hope to satisfy the first of the Conditions Precedent (i.e., execution
of this Lease and of the related exhibits and appendices) by March 18,
1999. The Parties anticipate that barring unforeseen complications, and
assuming the full. cooperation of the Parties, the remaining Conditions
Precedent can be satisfied, if at all, by April 8, 1999, assuming State
and local liquor licensing authorities have approved the conversion and
transfer of Lessor’s liquor licenses by that date, and that Lessee may occupy
the Assets as of that date. 
Notwithstanding the foregoing, the Parties understand and agree that the
Lease Term shall be comprised of two distinct periods – (i) a formal due
diligence period which shall continue until June 30, 1999

 

 

during which period Lessee shall operate the Assets
and conduct such due diligence as Lessee deems necessary and appropriate (the
“Due Diligence Period”) and (ii) a twenty (20) year period thereafter.

 

B.                                     Due
Diligence Period.  During the Due
Diligence Period described in Section 2.A above, Lessee shall operate and
manage the Assets and continue its due diligence examination of Lessor and the
Assets.  Lessee may, at any time during
the Due Diligence Period, terminate the Lease, for any reason or for no reason,
immediately upon written notice to Lessor, provided that if Lessee does
so terminate this Lease during the Due Diligence Period, Lessee shall remain in
and continue to manage the Assets are herein contemplated for a period of sixty
(60) days, during which sixty (60) day period Lessee shall pay rent as provided
in Section 3 hereof. In the event Lessee terminates the Lease during the
Due Diligence Period, Lessee shall pay no penalty, liquidated damages, or
termination or other fee, compensation or penalty.

 

During
the period between execution of this Lease and satisfaction of each and all of
the Conditions Precedent, and thereafter during the formal Due Diligence Period
defined in Section 2.A. above, Lessee shall have full and complete access
at any time to public and private records relating to the Assets, and Lessor
shall use its best efforts to make all such information and records available
to Lessee.  Upon execution of this Lease,
Lessor shall simultaneously deliver to Lessee for Lessee’s use in conducting
its due diligence examination copies of (i) the title insurance policy(ies)
described in Section 9 hereof, (ii) all leases involving the Assets,
(iii) all parking agreements relating to the Assets, (iv) all joint
venture, strategic alliance and partnership agreements relating to the Assets
(including, by way of example, Megabucks and similar agreements), (v) all joint
marketing agreements relating to the Assets, (vi) all sharing agreements
relating to the Assets, and (vii) all soil tests, design or engineering
studies, drawings, plans, and other documents and materials relating to
Lessor’s acquisition and development of the Assets in Lessor’s possession or
subject to its control.

 

The
materials identified in this Section 2.B.(i)-(vii) shall also be reflected
on schedules prepared by Lessor and delivered by Lessor to Lessee by no later
than April 1, 1999. The schedules shall indicate the terms of the
scheduled documents and shall be attached to this Lease as Exhibits 3 - 9 and incorporated
by reference herein.

 

C.                                     Holding
Over.  Nothing contained in this
Lease shall be deemed to permit Lessee to use or occupy the Assets after the
expiration of the Lease Term If Lessee continues to occupy the Assets after
such expiration, such occupancy shall (unless the Parties hereto otherwise
agree in writing) be deemed to create a month to month tenancy at a monthly
rental, equal to one hundred ten percent (110%) of the annual rent prorated on
a monthly basis for the month prior to the commencement of the holdover
period.  Such holdover occupancy shall be
subject to all of the terms and conditions of this Lease

 

D.                                    Definition
of Lease Year. The term “Lease Year” shall mean a period of twelve (12)
full consecutive calendar months.  The
first Lease year shall correspondence as of the Commencement Date.

 

 

3.                                       RENT.

 

A.                                   During
the Due Diligence Period.  Lessee
shall pay no Base Rent or Additional Annual Rent (as those terms are defined
herein) before May 15, 1999. except as otherwise provided in this
Section 3.A., for purposes of this Lease, “Base Rent” shall mean the sum
of Forty Thousand Dollars ($40,000) per month, payable in advance during each
month of the Lease Term, Less any offsets as provided for in this Lease.

 

On May
15, 1999, assuming the Lease has not been terminated, Lessee shall pay Lessor
Fifteen Thousand Dollars ($15,000) as Base Rent for the period May 15 through
May 31, 1999. Thereafter, commencing as of June 1, 1999, and for so long
as the Lease is in effect, Lessee shall pay Lessor Base Rent of Forty Thousand
Dollars (40,000) per month as provided above, except for the month of
July 1999, for which month Lessee shall pay Base Rent of Fifty Thousand
Dollars ($50,000).

 

During
the Due Diligence period, Lessee shall pay current liabilities incurred by
Lessee during its operation of the assets from operating cash flow and capital
contributions, if any, made by Lessee during the Due Diligence Period.  All revenues and cash flow generated on or
for the benefit of the Assets by Lessee during the Due Diligence Period shall
remain at and be used for the operation of the Assets, including the payment of
on-site wages and salaries and other overhead expense.  Lessee shall not receive a management fee, however,
nor shall any expenses or obligations of Lessee’s parent or affiliated
corporations unrelated to the Assets be included in determining expenses
associated with operating the Assets during the Due Diligence Period.

 

B.                                     Following
the Due Diligence Period.  During the
balance of the Lease Term following expiration of the Due Diligence Period,
Lessee shall pay Lessor (1) the Base Rent as above defined, and (ii) Additional
Annual Rent based on the combined annual net income of the Gold Rush and Gold
Digger’s in any fiscal year as follows:

 

	
  If Combined Net Income Is

  	
   

  	
  Additional Annual Rent Due

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  72,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  800,000

  	
   

  	
  $

  	
  57,600

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  600,000

  	
   

  	
  $

  	
  43,200

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  400,000

  	
   

  	
  $

  	
  28,800

  	
   

  

 

For
purposes of determining the amount of Additional Annual Rent Due, if any, for
any fiscal year, expenses and obligations attributable to Lessee’s parent or
affiliated corporations which are unrelated to the Assets shall not be included
in calculating the combined net income of the Gold Rush and Gold Digger’s.

 

The
Additional Annual Rent payments shall not be cumulative; only the highest
combined net income figure shall be used in the calculation.  For example, if the combined net income of
the Gold Rush and Gold Digger’s in any fiscal year is $1,000,000, the
Additional Annual Rent due shall be $72,000, not the sun of $28,800,
$43,200, $57,600 and $72,000.

 

 

C.                                     Late
Fee.  In the event Lessee shall fail
to pay Base Rent for any month by the fifteenth day of the month in which it is
due, Lessee shall pay Lessor a late lee of Five Thousand Dollars ($5,000).

 

D.                                    Net
Lease.  Except as otherwise provided
herein, it is the intent of Lessor and Lessee that the rent to be paid during
the Lease Term shall be a net return to Lessor, free of expense, charge, or
reduction with respect to the Assets.  Except as otherwise provided herein, Lessee
shall pay all Operating Expenses of the Assets during the Lease Term.  For purposes of this Lease, “Operating
Expenses” are defined as:

 

(1)                                  All
real property taxes and assessments levied against the Assets by any
governmental authority, provided however, that the term “taxes or
assessments”, as used herein, shall not include any net federal or state income
taxes levied or assessed on Lessor, unless such taxes are a specific substitute
for real property taxes.  “Assessment”
shall include so-called special assessments imposed by any authority having the
direct power to tax, including any city, county, state or federal
government.  For purposes of this Lease,
any special assessments shall be deemed payable in such number of installments
as is permitted by law.

 

(2)                                  Costs
incurred in connection with providing energy for the Assets, including costs of
propane, butane, natural gas, steam, electricity, solar energy and fuel oils,
coal or any other energy sources.

 

(3)                                  Costs
of water and sanitary and storm drainage services.

 

(4)                                  Costs
of general maintenance and repairs occasioned by normal wear and tear or the
Assets experienced during the Lease Term, provided, however, that Lessee shall
have no obligation to make improvements to the Assets.  If, however, Lessee does make improvements to
the Assets, Lessee shall provide general maintenance and repair to them as
well.

 

(5)                                  Costs
of obtaining insurance insuring Lessor in the amount of
                              
($                          )
for damage to property.

 

“Operating Expenses” shall not include:

 

(a)                                  Costs
associated with making such repairs, corrections, investments or adjustments as
are required by any permits, certificates, laws, rules, and building and other codes
and regulations of governmental agencies or authorities in effect as of the
Commencement Date (collectively, the “Codes”) of which Lessor had actual
knowledge and failed to disclose to Lessee in writing.  In particular, Lessor represents now and will,
if accurate, represent as of the Commencement Date, that Lessor has received no
notice of violation of the Americans With Disabilities Act in connection with
operation of the Assets.

 

(b)                                 Costs
associated with making such repairs, corrections, investments or adjustments as
are necessitated by structural or other defects of or in the Assets of which
Lessor had actual knowledge and failed to disclose to Lessee in writing prior
to the Commencement Date.

 

 

(c)                                  Costs
of repairs or other work occasioned by fire, windstorm or other insured
casualty to the extent or insurance proceeds received.

 

(d)                                 Costs
of repairs or rebuilding necessitated by condemnation.

 

(e)                                  Any
interest on borrowed money or debt amortization.

 

(f)                                    Depreciation
of the Assets.

 

E.                                      Place
of Payment.  Rent and such other
amounts as Lessee is required to pay Lessor shall be payable at Lessor’s notice
address reflected in Section 20.E. hereof.

 

4.                                       Assumed Payments.  Lessor and Lessee understand that Lessor has
a significant amount of accounts payable and other indebtedness relating to the
Assets, the precise amounts of which may not have not been determined as of the
Commencement Date.  On or before
April 1, 1999, Lessor shall provide Lessee with information and a
schedule as described in Section 2.8. hereof reflecting the precise
nature and amounts of all such accounts payable and indebtedness, including the
amounts, terms and conditions of payment (including balloon payments, if any),
and current status of the obligations, which schedule shall be attached to
this Lease as Exhibit 10 and be incorporated by reference herein.  Upon completion of Exhibit 10, Lessor shall
incur no further obligations nor change any existing obligations (except by
payment) relating to the Assets.

 

Subject
to the provisions of this Section 4, Lessee shall, during the Lease Term,
pay, in accordance with the specific terms and conditions contained on Exhibit
10, such long terms liabilities and accounts payable owed by Lessor (the
“Assumed Payments”).  Lessee shall make
the Assumed Payments directly to Lessor’s lenders and creditors listed on
Exhibit 10, and Lessor shall obtain such consent from its lenders and creditors
as are necessary to permit Lessee to make such payments directly to them.

 

During
the Due Diligence Period, Lessor shall use its best efforts to ensure that the
total Assumed Payments shall not exceed One Hundred Thirty Thousand Dollars
($130,000) per month.  Upon expiration of
the Due Diligence Period, and for the balance of the Lease term, Lessor shall
use its best efforts to ensure that the total Assumed Payments shall not exceed
One Hundred Twenty-Five Thousand Dollars ($125,000) per month.  Should the total Assumed Payments exceed One
Hundred Thirty Thousand Dollars ($130, 000) per month during the Due Diligence
Period, or One Hundred Twenty-Five Thousand Dollars per month ($125,000)
thereafter during the Lease Term, Lessee may, at its option, (i) pay such
additional amount and set such payments off against rent or other payments due
hereunder, (ii) terminate the Lease, or (iii) pursue such additional remedies
as are available to Lessee pursuant to this Lease.

 

Should
Lessee opt to terminate the Lease, Lessee shall pay no penalty, liquidated
damages, or termination or other fee, penalty or damages to Lessor.

 

The
Parties expressly understand and agree that Lessee shall only be responsible
for making the Assumed Payments during the Lease Term, and only in the amounts
and in accordance with the terms and conditions indicated on Exhibit 10.  Should the Lease be terminated or expire
according to its terms, Lessee shall not be responsible for and shall have no

 

 

obligation to continue making the Assumed Payments or
pay any long terms liabilities, accounts payable or other financial obligations
of Lessor which have not been paid on the date the Lease is terminated or
expires.

 

5.                                       USE OF PREMISES.

 

A.                                   Lessee
may use the assets for any lawful purpose, including, without limitation,
restaurant operations, hotel operations, retail sales operations,
entertainment, an arcade, parking, casino operations as contemplated by the
Gaming Act (the Gaming Act and all amendments and gaming regulations now
existing or hereafter adopted, and all gaming related laws of the City of
Cripple Creek and the county of Teller, are sometimes collectively referred to
in this Lease as the “Gaming Laws”), and for any other ancillary or related use
as may be permitted by Law.  Lessor shall
have no control over or power to influence decisions concerning operation of
the Assets.

 

B.                                     Lessor
agrees to cooperate as reasonably required by Lessee in obtaining and
maintaining such licenses for the Assets as Lessee shall require and shall, in
particular, execute any and all documents necessary to obtain such
licenses.  Lessor shall not cause any
such licenses to be denied, revoked, not renewed, or suspended, whether through
actions of Lessor prior to the issuance of such licenses or thereafter during
the Lease Term.

 

C.                                     Lessor
further agrees that from and after the date the Parties execute this Lease, Lessor
shall not grant or convey any easement, lease, encumbrance, license, permit, or
any other legal or beneficial interest in or to the Assets without the prior,
written consent of Lessee, nor shall Lessor violate, or allow the violation of,
any law, ordinance, rule or regulation affecting the Assets.  Lessor shall do or cause to be done all
things reasonably within Lessor’s control to preserve intact and unimpaired any
and all rights of way, easements, grants, appurtenances. privileges, and
licenses in favor at or constituting any portion of the Assets.

 

D.                                    Subject
to the provisions of Section 3.D. hereof, Lessee shall, at its own
expense, keep the Assets in good repair and tenantable condition and shall
indemnity Lessor against any loss, damage or expense arising by reason of any
failure of Lessee so to keep the Assets or due to any act or neglect of Lessee,
its agents, employees, contractors, invitees, licensees, tenants or
assignees.  Lessee shall make no
structural modifications to the Gold Rush or Gold Digger’s without Lessor’s
consent, which consent shall not be unreasonably withheld, provided that
Lessee shall not be required to obtain Lessor’s consent to structural
modifications mandated by the Codes in effect on the Commencement Date or as
they may be from time to time adopted.

 

E.                                      Subject
to the provisions of Sections 2.B. and 3.D. hereof, Lessee’s taking of
possession of the Assets shall be conclusive evidence that Lessee (i) accepts
the Assets as suitable for the purposes for which the same are leased, and (ii)
accepts the Assets and all related improvements and appurtenances and each and
every part thereof as being in satisfactory condition.  Subject to the provisions of
Section 3.D. hereof, Lessor shall not be liable, except in the event of
gross negligence or willful misconduct, to Lessee or any of Lessee’s agents,
employees, licensees, servants, or invitees for any injury or damage to person
or property due to the condition or design of any defect in the Assets or
related improvements or their mechanical

 

 

systems and equipment
which may exist or occur, and Lessee, with respect to itself and its agents,
employees, licensees, servants, and invitees shall expressly assume all risks
of injury or damage to person or property, either proximate or remote, by
reason of the condition of the Assets.

 

F.                                      Except
as otherwise provided herein, Lessee shall, at its own expense, comply with all
statutes, regulations, rules, ordinances and orders of any governmental body,
department or agency thereof which apply to or result from Lessee’s use or
occupancy of the Assets.

 

6.                                       ADDITIONAL IMPROVEMENTS, MECHANIC’S LIENS.

 

A.                                   Additional
Improvements.  Lessee may, from time
to time, at Lessee’s expense, construct or install other improvements on the
Assets, and make such changes, alterations and additions to the Assets as
Lessee shall deem necessary or desirable (the “Additional Improvements”).  Where appropriate or required, Additional
Improvements will be conducted under the supervision of an architect or
engineer licensed in the State of Colorado and selected by Lessee in its sole
discretion.

 

In
particular, following expiration of the Due Diligence Period, and assuming the
Lease has not been terminated, Lessee shall use its reasonable efforts to
finance and construct an entertainment center on property comprising a portion
of the Assets, provided that Lessor and Lessee understand and agree that Lessee
shall have no obligation to finance and/or build an entertainment center
unless, among other things, the design and function are acceptable to Lessee
and Lessor and are necessary for and compatible with successful operation of
the Assets, as determined in Lessee’s sole discretion, (ii) financing on terms
deemed reasonable by Lessee in Lessee’s sole discretion is available, (iii) all
necessary permits can be obtained, and (iv) Lessor’s interest is subordinated
and a first mortgage can be placed on the entertainment center.

 

B.                                     Mechanic’s
Liens.  In connection with the
construction of any Additional Improvements, Lessee shall cause the payment of
all proper and valid invoices and charges of all contractors, subcontractors,
suppliers, materialmen and similar parties who furnish services or materials in
connection with the construction process. 
In the event any party records a mechanic’s lien to enforce any claim
for services or materials alleged to have been provided in connection with the
Assets, Lessee shall so advise Lessor in writing and shall cause the same to be
released of record within sixty (60) days after the recordation thereof, and
Lessee shall be liable to satisfy and cause a discharge of any such mechanic’s
lien claim.

 

Notwithstanding
the foregoing, Lessee shall have the right to contest any such mechanic’s lien
claim, provided that Lessee conducts such contest in a timely manner and with
due diligence, and that Lessee provides Lessor with either cash, a surety bond
or a letter of credit (as Lessee shall decide in its sole discretion) in an
amount equal to one hundred twenty-five percent (125%) of the lien claim.  In the event Lessee loses any such contest,
and all further rights of appeal have expired, Lessee shall satisfy the
mechanic’s lien claim in full prior to any foreclosure sale or other
disposition of the Assets in order to satisfy the claim.

 

 

7.                                       CONTRIBUTION TO CAPITAL.  Upon expiration of the Due Diligence Period,
and assuming this Lease has not been terminated, Lessee shall contribute Five
Hundred Thousand Dollars ($500,000) to be allocated among vault cash, working
capital, retirement of accounts payable and such other purposes as Lessee and
Lessor shall agree and determine in writing, provided that such
contribution shall be reduced pro rata by an contribution to capital made by
Lessee during the Due Diligence Period.

 

In
addition, upon expiration of the Due Diligence Period, and assuming this Lease
has not been terminated, Lessee may, in its sole discretion, borrow up to One
Million Dollars ($1,000,000) to be used as Lessee shall determine in its sole
discretion to improve and upgrade the Assets. 
Consistent with the provisions of Section 13 hereof, Lessee is
authorized by this Lease to utilize gaming and other equipment now among the
Assets as collateral for any such borrowing. 
Notwithstanding the foregoing, Lessee shall have no obligation to make
any such borrowing or improve or upgrade the assets, however.

 

8.                                       PURCHASE OF LESSOR’S CASE.  Immediately prior to the Commencement Date,
Lessee shall physically count all cash located in gaming machines, cash
registers or elsewhere in, or required to be in, the Gold Rush, Gold Digger’s
or any other improved property governed by this Lease, and shall be given a
current accounting of all cash in banks or financial institutions for the
account or benefit of Lessor and the Assets (collectively, the “Cash”). If the
Cash totals between Three Hundred Thousand Dollars ($300,000) and Three Hundred
Fifty Thousand Dollars ($350,000), and if this Lease is entered into and is not
terminated, Lessee shall pay Lessor Three Hundred Fifty Thousand Dollars
($350,000) for the Cash as follows:

 

(a)                                        Forty
Thousand Dollars ($40,000) on the Commencement Date (reflecting a $10,000
credit for the deposit paid upon the Parties’ execution of the Term Sheet which
preceded this Lease);

 

(b)                                       One
Hundred Thousand Dollars ($100,000) on May 30, 1999;

 

(c)                                        One
Hundred Thousand Dollars ($100,000) on June 30, 1999; and

 

(d)                                       One
Hundred Thousand Dollars ($100,000) on July 30, 1999.

 

It the
Cash is less than Three Hundred Dollars ($300,000), Lessee may, at its option
and in its sole discretion, either (i) decline to enter into, or terminate,
this Lease (without further obligation of any sort to Lessor), or (ii) enter
into this Lease and pay Lessor Three Hundred Fifty Thousand Dollars ($350,000)
for the Cash.

 

If the
Cash exceeds Three Hundred Fifty Thousand Dollars ($350,000), which excess
amount is referred to here as the “Excess Cash”, and assuming this Lease is
entered into and is not terminated, Lessee shall execute a promissory note to
secure payment of the Excess Cash, which promissory note shall bear no interest
and shall provide for payment of the amount owed in monthly installments of
Five Thousand Dollars ($5,000) until paid in full or until the Lease is
terminated, whichever first occurs.

 

9.                                       TITLE TO ASSETS AND IMPROVEMENTS.  By April 1, 1999, Lessor shall, at its
expense, obtain a title insurance policy insuring Lessee’s leasehold interest
in the Assets,

 

 

which title insurance
shall evidence Lessor’s fee simple interest ownership in the Assets subject
only to (i) mortgage liens or security interests acceptable to Lessee, (ii)
general property taxes for the current year, and (iii) such easements, rights
of way, restrictions and other title matters as Lessee shall deem, in its sole
discretion, not to adversely affect the value of, or Lessee’s intended use of,
the Assets (collectively, the “Permitted Exceptions”).  The title insurance policy shall be attached
to this Lease as Exhibit 4 and shall be incorporated herein by reference.  Lessor warrants that Landlord has fee simple
title to the Assets, free and clear of all encumbrances save for the Permitted
Exceptions.

 

Lessor
shall he the owner of all improvements paid for and constructed by Lessee upon
the Assets, as the same may be altered, expanded and/or improved in accordance
with this Lease, except that any gaming or other equipment purchased by Lessee
for use in operating the Assets shall be the property of Lessee.  Except as here provided, upon the expiration
or earlier termination of this Lease, all improvements then existing upon the
Assets shall revert to and become the property of Lessor without compensation
to Tenant.

 

Lessee
shall surrender the Assets at the end of the Lease Term or upon earlier
termination of the Lease in good condition and repair, reasonable wear and tear
and fire and other casualty excepted.

 

10.                                 QUIET
ENJOYMENT. So long as Lessee is not in default under this Lease, Lessee
shall peaceably and quietly use and enjoy the Assets during the Lease term
without hindrance or interruption by Lessor or any other person or persons
lawfully or equitably claiming by, through or under Lessor.  Notwithstanding the foregoing, Lessor may
conduct reasonable inspections of the Assets and the casinos’ operational
financial records upon providing ten (10) days prior notice of such inspections
to Lessee.

 

11.                                 CASUALTY
AND RESTORATION OF THE PREMISES.  If
the Assets shall be damaged by fire or other casualty, Lessee may, at its
option, (i) terminate the Lease, retain such insurance proceeds as relate to
improvements made by Lessee on the Assets prior to the casualty, and permit use
of whatever portion of the remaining proceeds is necessary to restore the
Assets to their condition as of the date of the execution at this Agreement, or
(ii) retain all insurance proceeds received as a result of the casualty, use
the same to restore the Assets to their condition as of the Commencement Date
of this Lease, and continue to make rent payments during the Lease Term.  Lessee shall notify Lessor in writing within
thirty (30) days following the occurrence of any casualty concerning which of
these two Options Lessee has chosen, and rent shall abate during the thirty
(30) day period.

 

12.                                 CONDEMNATION.  If any portion of the Assets shall be taken
by right of eminent domain or by condemnation or shall be conveyed in lieu of
any such taking, Lessee may terminate this Lease and retain such condemnation
proceeds as relate to improvements made by Lessee on the Assets prior to the
taking or condemnation.

 

13.                                 LESSEE’S RIGHT TO ENCUMBER.  Lessee may at any time during the Lease Term
encumber the leasehold estate by mortgage or deed or trust.  Such right of Lessee to encumber the
leasehold estate shall be a continuing right and shall not be deemed to be
exhausted by the exercise thereof on one or more occasions.  Any such encumbrance shall be

 

 

expressly subject to the
provisions of this Lease, shall not encumber Lessor’s fee simple interest in
the Assets, and shall be subordinate to any loans to which Lessor has
subordinated its fee simple interest.

 

14.                                 ASSIGNMENT.  Lessee shall be free to assign this Lease and
any estate or interest therein upon written notice to Lessor, provided that
notwithstanding any such assignment or transfer, Lessee shall at all times
remain liable for the payment of the rent and all other payment obligations
herein specified to be paid by Lessee and for compliance with all Lessee’s
other obligations under this Lease.

 

Lessor
may assign this Lease upon written notice to Lessee, provided that such
assignment is permitted by the Colorado Limited Gaming Act (the “Act”) and the
regulations promulgated pursuant to the Act (the “Regulations”), and further
provided that any such assignment shall be subject to Lessee’s right of
first refusal as provided in Section 20.L. hereof.

 

15.                                 DEFAULT BY LESSEE.

 

A.                                   Definition
of Event of Default.  Each one of the
following events is herein referred to as an “Event of Default”:

 

(1)                                  Any
failure by Lessee to pay the rent or any other monetary sums required to be
paid hereunder on the date such sums are due and the continuance of such
failure for a period of fifteen (15) days after written notice of such failure
from Landlord.

 

(2)                                  The
filing of any petition or the commencement of any case or proceeding by Lessee
under any provision or chapter of the Federal Bankruptcy Act, the Federal
Bankruptcy code, or any other federal or state law relating to insolvency,
bankruptcy, or reorganization or the adjudication that Lessee is insolvent or
bankrupt or the entry of an order for relief under the Federal Bankruptcy Code
with respect to Lessee.

 

(3)                                  The
filing of any petition or the commencement of any case or proceeding described
in subparagraph (2) above against Lessee, unless such petition and all
proceedings initiated thereby are dismissed within sixty (60) days from the
date of such filing; the filing of an answer by Lessee admitting the
allegations of any such petition; the appointment of or taking possession by a
custodian, trustee or receiver for all or any assets of Lessee, unless such
appointment is vacated or dismissed within sixty (60) days from the date of
such appointment.

 

(4)                                  Lessee
shall fail to perform any of the other agreements terms, covenants, or
conditions hereof on Lessee’s part to be performed and such non-performance
shall continue for a period of thirty (30) days after written notice thereof by
Lessor to Lessee or, if such performance cannot be reasonably had within such
thirty (30) day period, Lessee shall not in good faith have commenced such
performance within such thirty (30) day period and shall not diligently proceed
therewith to completion.

 

B.                                     Remedies
of Lessor.  If any one or more Events
of Default shall happen, then Lessor shall have the right at Lessor’s election,
then or at any time thereafter, either to;

 

 

(1)                                  Make
any payment or take any action to cure any such default by Lessee in such
manner and to such extent as Lessor may in good faith deem necessary or
desirable.

 

(2)                                  Give
Lessee written notice in accordance with the Colorado forcible entry and
detainer laws, terminate this Lease as of the date of Lessee’s default or as of
any later date specified in the notice, and demand and recover possession of
the Assets from Lessee.

 

(3)                                  Re-enter
and take possession of all or any part of the Assets and expel Lessee
therefrom.  After recovering possession
of the Assets, Lessor shall use reasonable efforts to re-let the Assets.

 

C.                                     Remedies
Cumulative.  Each of the remedies
described above, and all of the remedies available to Lessor at law or in
equity upon a default by Lessee, including the right to sue for damages, shall
be cumulative with and in addition to one another, and may be exercised
simultaneously or successively, as Lessor may deem appropriate, without any
exercise of one remedy being deemed an election of remedies or a waiver to the
exclusion of any other remedy.

 

16.                                 DEFAULT
BY LESSOR.

 

A.                                   Definition
of Default.  Lessor shall be in
default under this Lease if Lessor:

 

(1)                                  Permits
or causes the Assets to be or became encumbered by additional and/or greater
liens than those identified as Permitted Exceptions in Section 9 and on
Exhibit 10 hereof.

 

(2)                                  Fails
to timely and fully pay debt underlying the liens identified as Permitted
Exceptions.

 

(3)                                  Fails
to disclose any material financial obligation. 
For purposes of this Section 16.A.3, an undisclosed financial
obligation shall be deemed material if it is equal to One Hundred Thousand
Dollars ($100,000) or more in the aggregate. 
In addition, to other remedies available to Lessee in the event of
Lessor’s default, Lessor shall indemnify and hold Lessee harmless from any
material financial obligation of Lessor not disclosed as required by this
Lease.  In the event of Lessor’s failure
to make the required disclosure, Lessee may, at its sole option and in its sole
discretion, (i) terminate this Lease without further obligation of any kind to
Lessor or Lessor’s creditors, (ii) pay directly the undisclosed obligation and
set the amount of the payment oft against rent or any other amounts owed Lessor
by Lessee, or (iii) enforce Lessor’s indemnification as herein
contemplated.  In the event Lessee opts
to pay such additional amount and set such payments off against rent or other
payments due hereunder, such set off shall be at the maximum rate of ten percent
(10%) per month of the additional amount paid by Lessee until the entire
additional amount has been set off.  By
way of example only, should Lessee pay an additional amount of Fifty Thousand
Dollars ($50,000) pursuant to this Section 4, that amount shall be set off
against rent and other payments owed Lessor at the rate of Five Thousand
Dollars ($5,000) per month for ten (10) months.

 

 

(4)                                  Fails
to cap the Assumed Payments at the monthly levels described in Section 4
hereof, or fails to pay any amount in excess of the cap.

 

(5)                                  Violate
or fails to perform in connection with any warranty or representation contained
in Section 19 hereof.

 

(6)                                  Fails
to comply with any term, condition or obligation of Lessor under the Lease, and
such failure to comply continues for a period of thirty (30) days after Lessee
gives Lessor written notice of such failure.

 

B.                                     Remedies
of Lessee.  In addition to such
remedies as are described in other Sections and provisions of this Lease, upon
the occurrence of any default by Lessor, after expiration of any applicable
cure periods, Lessee shall have the right, at its election, then or at any time
thereafter, to exercise any one or more of the following remedies:

 

(1)                                  Make
any payment or take any action to cure any such default by Lessor in such
manner and to such extent as Lessee may in good faith deem necessary or
reasonable, and set off any such payment against rent or other payments
otherwise owed Lessor.

 

(2)                                  Terminate
this Lease as of the date of the default by Lessor, or as of any later date
specified in a written notice of termination to Lessor, without payment of any
penalty, liquidated damages, or termination or other fee or penalty to Lessor.

 

(3)                                  Commence
an action to specifically enforce any of Lessor’s obligations under the Lease.

 

C.                                     Remedies
Cumulative.  Each of the remedies
described above, and all of the remedies available to Lessee at law or in
equity upon a default by Lessor, including the right to sue for damages, shall
be cumulative with and in addition to one another, and may be exercised
simultaneously or successively, as Lessee may deem appropriate, without any
exercise of one remedy being deemed an election of remedies or a waiver to the
exclusion of any other remedy.

 

17.                                 TERMINATION BY LESSEE.  In addition to the foregoing, Lessee shall
have the right to terminate this Lease on June 30, 2004, for any reason or
for no reason, upon thirty (30) days written notice to Lessor, and without
payment or penalty of any kind to Lessor.

 

18.                                 LESSOR’S ADDITIONAL REPRESENTATIONS AND WARRANTIES.  Lessor represents and warrants that to the
best of Lessor’s knowledge and belief as of the Commencement Date of this
Lease:

 

A.                                   Except
for the Order To Show Cause proceeding pending before the Commission (the
“Commission Proceeding”), there is no litigation pending or threatened which in
any manner affects the Assets.

 

B.                                     There
are no violations of any federal, state, or local law, code, ordinance, rule,
regulation, or requirement affecting the Assets, except as may be alleged in
the pending Summary Suspension Proceeding.

 

 

C.                                     The
Assets have full and free access to and from public highways, streets, and/or
roads adjacent to the Assets, and Lessor has no knowledge of any fact or
condition which would result in the termination of such access.

 

D.                                    Lessor
has not received any notices, demands, or deficiency comments from any
mortgagee of the Assets or from any state, municipal, or county government or
any agency thereof with regard to the Assets.

 

E.                                      Lessor
has not received any notice of, and has no other knowledge or information of,
any pending or contemplated change in any applicable law, ordinance, or
restriction; or of any pending or threatened judicial or administrative action;
or of any action pending or threatened by adjacent landowners or of any natural
or artificial condition upon the Assets, or any part thereof, any of which
would result in any material change in the condition of the Assets, or any part
thereof, or in any way limit or impede the operation at contemplated
development of the Assets, or any part thereof, for any purpose.

 

F.                                      Lessor
has not entered into any agreements with the City of Cripple Creek or the
County of Teller or the State of Colorado, or any other governmental entity,
with respect to the Assets that may result in liability or expense to Lessee,
and further that there are no special improvement assessments relating to the
Assets.

 

G.                                     Each
and every document, schedule, item, and other information to be delivered to
Lessee by Lessor hereunder shall be fully true, accurate, and correct, and no
such document, schedule, or information contains or will contain any untrue
statement of a material fact or omits or will omit a material fact necessary to
make the statement or facts recited therein not misleading.

 

19.                                 GUARANTEE.  Southwest Casino and Hotel Corp. shall
guarantee the financial obligations of Lessee hereunder.

 

20.                                 MISCELLANEOUS.

 

A.                                   No
Implied Waiver.  No failure by either
Party to insist upon the strict performance of any term, covenant, or agreement
contained in this Lease, or to exercise any right or remedy in connection
therewith, and no acceptance of full or partial payment during the continuance
of any default by Lessor or Lessee, shall constitute a waiver of any such term,
covenant, or agreement or any such right or remedy or any such default by
Lessor or Lessee.

 

B.                                     Survival
of Provisions.  Notwithstanding any
termination of this Lease, the same shall continue in force and effect as to
any provisions hereof which specifically contemplate and require observance or
performance by Lessor or Lessee subsequent to termination.

 

C.                                     Binding
Effect.  This Lease shall extend to
and be binding upon the heirs, executors, legal representatives, successors,
and permitted assigns of the respective Parties hereto.  The terms, covenants, agreements, and
conditions in this Lease shall be construed as covenants running with the
Assets.

 

 

D.                                    Recording,
Subordination and Attornment. This Lease and/or any Memorandum of this
Lease may, at Lessee’s sole option, be recorded in such manner and at such time
as shall be selected by Lessee in its sole discretion.  Ins addition, upon execution of this Lease,
Lessee shall prepare, and Lessor shall use its best efforts to obtain from
Lessor’s mortgage lender(s), attornment agreements in form and substance
satisfactory to Lessee.  If Lessor fails
to obtain such attornment agreements by the expiration of the Due Diligence
Period, Lessee may, at its option, terminate this Lease without further
obligation of any sort or kind to Lessor or Lessor’s creditors.

 

E.                                      Notice.  All notices required or permitted under this
Lease shall be given by registered or certified mail, return receipt requested,
correctly addressed and postage prepaid, or by hand or commercial carrier
delivery, or by telecopier as follows:

 

If to Lessor:

 

Cripple Creek Development company

Attn: Mark Brockley, President

195 Pine Cone Road

Spearfish, South Dakota  57783

Telecopier Number: 605/642-9366

 

Blue Building Development, Inc.

Attn: Mark Brockley, President

195 Pine Cone Road

Spearfish, South Dakota  57783

Telecopier Number: 605/642-9366

 

with copy to:

 

Timothy M. Tymkovich

Hale Hackstaff Tymkovich ErkenBrack & Shih, L.L.C.

1675 Broadway, Suite 2000

Denver, Colorado  80202

Telecopier Number: 303/592-8710

 

If to Lessee:

 

James B. Druck

Gold Rush I, LLC

2001 Killebrew Drive, Suite 306

Minneapolis, Minnesota  55425

Telecopier Number: 612/853-9991

 

 

with copy to:

 

Christopher B. Whitney, Esq.

Hulliken, Gleason, Weiner & Whitney, P.C.

102 South Tejon street, Suite 700

Colorado Springs,
Colorado  80903

Telecopier Number: 719/635-8706

 

If to Guarantor:

 

James B. Druck

President

Southwest Casino and Hotel Corp.

2001 Killebrew Drive, Suite 306

Minneapolis, Minnesota  55425

Telecopier Number: 612/853-9991

 

Any
notice delivered by mail in accordance with this Section shall be deemed
to have been duly given on the third business day after the same is deposited
in any post office or postal box regularly maintained by the United States
Postal Service, properly addressed, postage prepaid.  Any notice delivered by telecopier shall be
deemed to have been duly given upon receipt if concurrently with sending by
telecopier receipt is confirmed mechanically or by the recipient..  Any notice delivered by hand or commercial
carrier shall be deemed to have been given upon actual receipt.  Either party, by notice given as herein
provided, may change the address to which future notices may be sent.

 

F.                                      Time
of the Essence.  Time is of the
essence under this Lease for the performance and observance of all obligations
of Lessor and Lessee, and all provisions of this Lease shall be strictly
construed.

 

G.                                     Captions
for Convenience.  The headings and
captions hereof are for convenience only and shall not be considered in
interpreting the provisions of this Lease.

 

H.                                    Severability.  If any provision of this Lease shall be held
invalid or unenforceable, the remainder of the Lease shall not be affected
thereby, it being the intent of the Parties that the provisions of this Lease
shall be enforceable to the fullest extent permitted by law.  There shall be deemed substituted for any
invalid or unenforceable provision a valid and enforceable provision as similar
as possible to the invalid provision.

 

I.                                         Jurisdiction
and Governing Law.  This Lease shall
be interpreted and enforced in the courts of the state of Colorado and in
accordance with the laws of the State of Colorado.

 

J.                                        Integration/Entire
Agreement.  This Lease, the Exhibits
hereto, and the other documents expressly referenced herein constitute the
entire agreement between the Parties with regard to the subject matter hereof,
and any extrinsic covenants, agreements, representations, warranties,
conditions or terms are superseded hereby and shall be of no force or effect.

 

 

K.                                    Modification.  No provision of this Lease may be amended or
modified except in a written instrument signed by both Parties.

 

L.                                      Right
of First Refusal.  Lessee shall, have
a right of first refusal to purchase the Assets in the event Lessor desires to
sell or assign all or any part of them.

 

M.                                 Assignment
of Trade Names.  Lessor shall assign
and transfer to Lessee for Lessee’s use during the Lease Term all Lessor’s
right, title and interest in and to all trademarks, trade names, service marks,
and copyrights used in connection with the Assets (the “Intellectual Property”),
and shall refrain from using the Intellectual Property and any similar
trademarks, trade names, service marks and copyrights during the Lease
Term.  Upon termination of the Lease,
whether by expiration or termination, Lessee shall transfer back to Lessor all
rights in the Intellectual Property.  The
assignment and agreement contemplated by this Section 20.M. shall be
contained in a separate document which shall be attached as an exhibit to and
incorporated by reference in this Lease.

 

IN WITNESS WEEREOF, the parties hereto have
caused this Lease to be executed as of the day and year first above written.

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  	
   

  
	
   

  	
  Cripple Creek
  Development Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mark Brockley

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  Blue Building
  Development, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mark Brockley

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mark Brockley

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Annesse Brockley

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  Gold Rush I, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  James B. Druck

  
	
   

  	
   

  	
  Manager

  

 

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
  Southwest Casino
  and Hotel Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  James B. Druck

  
	
   

  	
   

  	
  President

  

 

 

EXHIBIT 1

 

LEGAL DESCRIPTIONS OF REAL
PROPERTY COMPRISING THE ASSETS

 

 

EXHIBIT 2

 

INVENTORY OF THE ASSETS

 

Exhibit
Unnecessary.

 

/s/  4/9/99

 

 

EXHIBIT 3

 

TITLE INSURANCE POLICIES

 

Title policies
received and acceptable.

 

/s/ 4/9/99

 

 

EXHIBIT
4

 

GOLD
RUSH AND GOLD DIGGER’S SCHEDULE OF LEASES

 

	
  Name

  	
   

  	
  Loan Date

  	
   

  	
   

  	
   

  	
  Monthly Payment

  	
   

  	
  Exp. Date

  	
   

  
	
  Anchor Games

  	
   

  	
  3/5/97  30%

  	
   

  	
  30% of win on 2
  Wheel of Golds

  	
   

  	
  Varies 

  	
   

  	
  04/30/99

  	
   

  
	
  Vista Gaming 

  	
   

  	
   

  	
   

  	
  2 machines @ $27
  per day per mach.

  	
   

  	
  1,690.85

  	
   

  	
   

  	
   

  
	
  DataCard

  	
   

  	
  5/1/98

  	
   

  	
  Mtnce on Desktop
  Embosser

  	
   

  	
  125.33

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equifax

  	
   

  	
  12/1/98

  	
   

  	
  Ck. Auth. – 3.5%
  of check amount  

  	
   

  	
   

  	
   

  	
  Auto extend
  every 30 days

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Copier Mtnce

  	
   

  	
  103.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,919.18

  	
   

  	
   

  	
   

  

 

 

EXHIBIT
5

 

GOLD
RUSH AND GOLD DIGGER’S LONGTERM DEBT SCHEDULE

 

PARKING
AGREEMENTS

 

	
  Address of Lot/Spaces

  	
   

  	
  Lessor/Lessee

  	
   

  	
  No. of Spaces

  	
   

  	
  Agreement Terms

  	
   

  	
   

  
	
  *135 East Carr
  Avenue

  	
   

  	
  Cripple Creek
  Dev. Co./

  	
   

  	
  Pioneer Group,
  Inc.

  	
   

  	
  10

  	
   

  	
  Until Lot 16
  backfilled  And restored for parking

  

 

*Maximum
obligation assumed by lessee is $12,000.00

 

 

EXHIBIT
6

 

JOINT
VENTURE, STRATEGIC ALLIANCE & PARTNERSHIP AGREEMENTS

 

	
  Parties

  	
   

  	
  Term

  	
   

  	
  Subject

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

NONE

 

 

EXHIBIT
7

 

JOINT
MARKETING AGREEMENTS

 

	
  Parties

  	
   

  	
  Term

  	
   

  	
  Subject

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

JOINT
MARKETING AGREEMENTS ARE ACCEPTABLE

 

 

EXHIBIT
8

 

SHARING
AGREEMENTS

 

	
  Parties

  	
   

  	
  Term

  	
   

  	
  Subject

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

LET
IT RIDE

TRIPLE
PLAY

COLORADO
NICKLES

ANCHOR
GAMING SEE EXHIBIT 4

VISTA
GAMING SEE EXHIBIT 4

 

 

EXHIBIT
9

 

LISTING
OF SOIL TESTS, DESIGN AND ENGINEERING STUDIES, DRAWINGS AND PLANS RELATING TO
ACQUISITION AND DEVELOPMNET OF THE ASSETS

 

 

RECEIVED
AND ACCEPTABLE

 

 

EXHIBIT
10

 

FINANCIAL
OBLIGATIONS OF LESSOR RELATING TO THE ASSETS

 

	
  Parties

  	
   

  	
  Principal/Interest

  	
   

  	
  Maturity

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SEE
ATTACHED 4/9/99

 

 

EXHIBIT
10

 

GOLD
RUSH AND GOLD DIGGER’S ASSUMED OBLIGATIONS

 

SUMMARY

 

	
   

  	
   

  	
  Balance

  	
   

  	
  Monthly Payment

  	
   

  
	
  Exh. 10a 
  Longterm Debt

  	
   

  	
  9,618,292.95

  	
   

  	
  109,241.68

  	
   

  
	
  Exh. 10b 
  Accounts Payable

  	
   

  	
  906,439.78

  	
   

  	
  26,139.58

  	
   

  
	
  Exh. 10c  Gift
  Certificates

  	
   

  	
  5,357.44

  	
   

  	
  —

  	
   

  
	
  Exh. 10d 
  Progressive Liabilities

  	
   

  	
  62,501.98

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding chips/tokesn liability $5 old tokesn for
  sale liability  to be determined

  	
   

  	
  39,057.88

  	
   

  	
   

  	
   

  
	
  Re-establish Bronico Billy’s parking lot  Gold Point Liability

  	
   

  	
  12,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10,643,650.03

  	
   

  	
  135,381.26

  	
   

  

 

 

EXHIBIT
10a

 

GOLD
RUSH AND GOLD DIGGER’S LONGTERM DEBT SCHEDULE

 

	
  Acct#

  	
   

  	
  Name

  	
   

  	
  Loan

  Date

  	
   

  	
  Original Loan  

  Balance

  	
   

  	
  04/05/99

  G/L Loan

  Balance

  	
   

  	
  Interest

  Rate

  	
   

  	
  Monthly

  Payment

  	
   

  	
  Loan

  Due

  Date

  	
   

  	
  Balloon

  Payment

  	
   

  	
  Balloon

  Due Date

  
	
  2268

  	
   

  	
  Robert G. Rolofson

  	
   

  	
  07/03/96

  	
   

  	
  336,600

  	
   

  	
  303,434.31

  	
   

  	
  9.00

  	
  %

  	
  3,414.02

  	
   

  	
  07/01/03

  	
   

  	
  236,450.00

  	
   

  	
  07/01/03

  
	
  2267

  	
   

  	
  Joann Kipp Roos

  	
   

  	
  07/03/96

  	
   

  	
  336,600

  	
   

  	
  303,434.31

  	
   

  	
  9.00

  	
  %

  	
  3,414.02

  	
   

  	
  07/01/03

  	
   

  	
  236,450.00

  	
   

  	
  07/01/03

  
	
  2259

  	
   

  	
  Timothy O’Brien

  	
   

  	
  05/02/94

  	
   

  	
  149,875

  	
   

  	
  88,314.72

  	
   

  	
  10.00

  	
  %

  	
  1,180.72

  	
   

  	
  05/02/09

  	
   

  	
   

  	
   

  	
   

  
	
  2265

  	
   

  	
  Sierra & Associates

  	
   

  	
  10/04/94

  	
   

  	
  840,000

  	
   

  	
  810,000.00

  	
   

  	
  10.00

  	
  %

  	
  6,750.00

  	
   

  	
  12/01/04

  	
   

  	
   

  	
   

  	
   

  
	
  2264

  	
   

  	
  James Powell

  	
   

  	
  10/04/94

  	
   

  	
  160,000

  	
   

  	
  83,003.08

  	
   

  	
  10.00

  	
  %

  	
  1,640.11

  	
   

  	
  10/04/99

  	
   

  	
  78,832.78

  	
   

  	
  10/04/99

  
	
  2261

  	
   

  	
  David wilcox

  	
   

  	
  05/02/94

  	
   

  	
  76,500

  	
   

  	
  53,439.00

  	
   

  	
  8.00

  	
  %

  	
  645.30

  	
   

  	
  05/02/09

  	
   

  	
   

  	
   

  	
   

  
	
  2251

  	
   

  	
  Julie R. Yarbrough

  	
   

  	
  10/15/91

  	
   

  	
  1,637,500

  	
   

  	
  1,353,850.73

  	
   

  	
  11.50

  	
  %

  	
  18,950.50

  	
   

  	
  05/02/09

  	
   

  	
   

  	
   

  	
   

  
	
  2257

  	
   

  	
  Jerry Muzik

  	
   

  	
  07/01/93

  	
   

  	
  450,000

  	
   

  	
  387,069.71

  	
   

  	
  10.00

  	
  %

  	
  6,342.60

  	
   

  	
  06/01/06

  	
   

  	
   

  	
   

  	
   

  
	
  2255

  	
   

  	
  C.C. Masonic Lodge

  	
   

  	
  08/30/92

  	
   

  	
  280,000

  	
   

  	
  238,936.93

  	
   

  	
  10.00

  	
  %

  	
  2,702.10

  	
   

  	
  08/30/12

  	
   

  	
   

  	
   

  	
   

  
	
  2266

  	
   

  	
  Arthur G. Jones

  	
   

  	
  02/01/95

  	
   

  	
  270.000

  	
   

  	
  190,600.67

  	
   

  	
  10.00

  	
  %

  	
  2,901.00

  	
   

  	
  02/01/02

  	
   

  	
  139,250.00

  	
   

  	
  02/01/02

  
	
  2252

  	
   

  	
  Barchester – RUSH

  	
   

  	
  12/23/98

  	
   

  	
  640,000

  	
   

  	
  532,205.64

  	
   

  	
  8.75

  	
  %

  	
  5,646.45

  	
   

  	
  08/01/12

  	
   

  	
   

  	
   

  	
   

  
	
  New

  	
   

  	
  Comm. Bank of CO (Galati/CBOC/CBOC-Diggers)

  	
   

  	
  04/05/99

  	
   

  	
  616,233

  	
   

  	
  616,233.32

  	
   

  	
  9.25

  	
  %

  	
  6,342.23

  	
   

  	
  04/01/14

  	
   

  	
  >Need final docs

  	
   

  	
   

  
	
  Diggers

  	
   

  	
  Barchester – DIGGERS

  	
   

  	
  11/01/91

  	
   

  	
  400,000

  	
   

  	
  330,627.88

  	
   

  	
  8.75

  	
  %

  	
  3,531.33

  	
   

  	
  08/01/12

  	
   

  	
   

  	
   

  	
   

  
	
  Diggers

  	
   

  	
  *1 Mark Brockley

  	
   

  	
  106,965

  	
   

  	
  106,965.00

  	
   

  	
  10.00

  	
  %

  	
  891.00

  	
   

  	
  07/01/19

  	
   

  	
   

  	
   

  	
  >Interest only

  	
   

  	
   

  
	
  Rock Shop

  	
   

  	
  Mountain National Bank

  	
   

  	
  430,000

  	
   

  	
  388,077.65

  	
   

  	
  10.25

  	
  %

  	
  5,222.50

  	
   

  	
  02/28/02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rock Shop

  	
   

  	
  *(1) Brockley 95 Club

  	
   

  	
  770,000

  	
   

  	
  770,000.00

  	
   

  	
  7.00

  	
  %

  	
  4,491.67

  	
   

  	
  07/01/19

  	
   

  	
   

  	
   

  	
  >Interest only

  	
   

  	
   

  
	
  2254

  	
   

  	
  *(1) Mark Brockley

  	
   

  	
  966,500

  	
   

  	
  9666,500.00

  	
   

  	
  10.00

  	
  %

  	
  8,055.00

  	
   

  	
  07/01/19

  	
   

  	
   

  	
   

  	
  > Interest only

  	
   

  	
   

  
	
  2260

  	
   

  	
  Fisher

  	
   

  	
  04/21/94

  	
   

  	
  135,125

  	
   

  	
  118,072.00

  	
   

  	
  10.00

  	
  %

  	
  1,351.00

  	
   

  	
  04/21/02

  	
   

  	
  103,591.43

  	
   

  	
  04/21/02

  
	
  New

  	
   

  	
  LOC – CBOC

  	
   

  	
  04/05/99

  	
   

  	
  337,060

  	
   

  	
  337,060.46

  	
   

  	
  9.25

  	
  %

  	
  3,200.82

  	
   

  	
  04/05/09

  	
   

  	
  20,000.00

  	
   

  	
  > Prin 7/99, 8/99, 9/99, 10/99

  

 

 

	
  Acct#

  	
   

  	
  Name

  	
   

  	
  Loan

  Date

  	
   

  	
  Original Loan  

  Balance

  	
   

  	
  04/05/99

  G/L Loan

  Balance

  	
   

  	
  Interest

  Rate

  	
   

  	
  Monthly

  Payment

  	
   

  	
  Loan

  Due

  Date

  	
   

  	
  Balloon

  Payment

  	
   

  	
  Balloon

  Due Date

  
	
  New

  	
   

  	
  LOC – Mtn Nat’l Bank

  	
   

  	
  04/05/99

  	
   

  	
  550,000

  	
   

  	
  550,000.00

  	
   

  	
  9.75

  	
  %

  	
  5,800.00

  	
   

  	
  04/05/14

  	
   

  	
   

  	
   

  	
   

  
	
  2284

  	
   

  	
  PDS Financial

  	
   

  	
  12/31/97

  	
   

  	
  437,272

  	
   

  	
  258,012.12

  	
   

  	
  9.42

  	
  %

  	
  13,989.83

  	
   

  	
  12/30/00

  	
   

  	
   

  	
   

  	
   

  
	
  2276

  	
   

  	
  GMAC – Van

  	
   

  	
  08/10/98

  	
   

  	
  18,519

  	
   

  	
  15,055.66

  	
   

  	
  12.49

  	
  %

  	
  622.60

  	
   

  	
  08/10/01

  	
   

  	
   

  	
   

  	
   

  
	
  2277

  	
   

  	
  IGT

  	
   

  	
  06/10/98

  	
   

  	
  33,202

  	
   

  	
  22,775.57

  	
   

  	
  11.50

  	
  %

  	
  1,555.18

  	
   

  	
  06/10/00

  	
   

  	
   

  	
   

  	
   

  
	
  2285

  	
   

  	
  Bankers Leasing

  	
   

  	
  12/10/97

  	
   

  	
  16,851

  	
   

  	
  10,108.19

  	
   

  	
  12.50

  	
  %

  	
  601.70

  	
   

  	
  12/10/00

  	
   

  	
   

  	
   

  	
   

  
	
  2270

  	
   

  	
  Berryhill

  	
   

  	
  01/01/98

  	
   

  	
  682,500

  	
   

  	
  784,516.00

  	
   

  	
  12.00

  	
  %

  	
  10,000.00

  	
   

  	
  Per month commending 09/01/99, no balloon. No maturity

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  10,668,302

  	
   

  	
  9,618,292.95

  	
   

  	
   

  	
   

  	
  119,241.68

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*(1) Interest only
until 07/01/19

 

 

GOLD
RUSH AND GOLD DIGGER’S SCHEDULE OF A/P LIABILITIES

 

Exhibit
10b

 

	
  Name

  	
   

  	
  Loan

  Date

  	
   

  	
  Original

  Loan

  Balance

  	
   

  	
  04/05/99

  Balance

  	
   

  	
  Interest

  Rate

  	
   

  	
  Monthly

  Payment

  	
   

  	
  Loan

  Due

  Date

  	
   

  	
  Balloon

  Payment

  	
   

  	
  Balloon

  Due Date

  	
   

  
	
  Bader

  	
   

  	
  04/01/99

  	
   

  	
   

  	
   

  	
  80,000.00

  	
   

  	
  0.00

  	
  %

  	
  4,000.00

  	
   

  	
  04/04/01

  	
   

  	
  $

  	
  4k July-Oct,

  	
   

  	
  $

  	
  2k Nov-Apr, $3k
  May-June

  	
   

  
	
  Berryhill

  	
   

  	
  01/01/98

  	
   

  	
  222,048

  	
   

  	
  42,222.60

  	
   

  	
  12.00

  	
  %

  	
  10,000.00

  	
   

  	
  06/03/99

  	
   

  	
  Balance

  	
   

  	
  06/30/99

  	
   

  
	
  Blood

  	
   

  	
   

  	
   

  	
  12,788

  	
   

  	
  6,503.96

  	
   

  	
  18.00

  	
  %

  	
  500.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Davis

  	
   

  	
  08/06/98

  	
   

  	
  50,000

  	
   

  	
  32,000.00

  	
   

  	
  0.00

  	
  %

  	
  2,000.00

  	
   

  	
  08/06/00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IGT

  	
   

  	
  03/30/99

  	
   

  	
  55,995

  	
   

  	
  55,995.37

  	
   

  	
  10.75

  	
  %

  	
  4,942.44

  	
   

  	
  03/26/00

  	
   

  	
   

  	
   

  	
  03/26/00

  	
   

  
	
  Bally Games

  	
   

  	
   

  	
   

  	
  11/15/98

  	
   

  	
  28,183

  	
   

  	
  18,788.58

  	
   

  	
  0.00

  	
  %

  	
  4,697.14

  	
   

  	
  04/15/99

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subtotal

  	
   

  	
   

  	
   

  	
  369,014

  	
   

  	
   

  	
   

  	
  235,510.51

  	
   

  	
   

  	
   

  	
  26,139.58

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other Accounts Payable

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  670,929.27

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Accounts Payable

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  906,439.78

  	
   

  	
   

  	
   

  	
  26,139.58

  	
   

  	
   

  	
   

  	
   

  	
   

  
																				

 

 

EXHIBIT 10C

 

GIFT CERTIFICATES
1999

 

	
  CERT #

  	
   

  	
  DATE

  	
   

  	
  ISSUED TO

  	
   

  	
  REASON

  	
   

  	
  VALUE

  	
   

  	
  EXPIRES

  
	
  4089702

  	
   

  	
  04/08/97

  	
   

  	
  GEMINI
  TRAVEL-LAQUINTA

  	
   

  	
  PURCHASE

  	
   

  	
  125.00

  	
   

  	
  NONE

  
	
  4089704

  	
   

  	
  04/08/97

  	
   

  	
  GEMINI
  TRAVEL-LAQUINTA

  	
   

  	
  PURCHASE

  	
   

  	
  125.00

  	
   

  	
  NONE

  
	
  4089706

  	
   

  	
  04/08/97

  	
   

  	
  GEMINI
  TRAVEL-LAQUINTA

  	
   

  	
  PURCHASE

  	
   

  	
  125.00

  	
   

  	
  NONE

  
	
  6029701

  	
   

  	
  06/02/97

  	
   

  	
  CLEO DELANEY

  	
   

  	
  PURCHASE

  	
   

  	
  24.00

  	
   

  	
  NONE

  
	
  6139701

  	
   

  	
  06/13/97

  	
   

  	
  BOB LUFF

  	
   

  	
  PURCHASE

  	
   

  	
  20.00

  	
   

  	
  NONE

  
	
  6259701

  	
   

  	
  06/25/97

  	
   

  	
  CARD MORRIS

  	
   

  	
  PURCHASE

  	
   

  	
  115.54

  	
   

  	
  NONE

  
	
  11259701

  	
   

  	
  11/25/97

  	
   

  	
  PENNY WALRAUN

  	
   

  	
  PURCHASE

  	
   

  	
  70.00

  	
   

  	
  NONE

  
	
  12059701

  	
   

  	
  12/03/97

  	
   

  	
  KATHLEEN
  KLOKOLKA

  	
   

  	
  PURCHASE

  	
   

  	
  100.00

  	
   

  	
  NONE

  
	
  12109701

  	
   

  	
  12/10/97

  	
   

  	
  TONYA CARSON

  	
   

  	
  PURCHASE

  	
   

  	
  100.00

  	
   

  	
  NONE

  
	
  12189703

  	
   

  	
  12/18/97

  	
   

  	
  BECKY OSTERWOLD

  	
   

  	
  PURCHASE

  	
   

  	
  104.94

  	
   

  	
  NONE

  
	
  12229703

  	
   

  	
  12/22/97

  	
   

  	
  LAURA BOW

  	
   

  	
  PURCHASE

  	
   

  	
  100.00

  	
   

  	
  NONE

  
	
  122239701

  	
   

  	
  12/23/97

  	
   

  	
  COLENN IRWIN

  	
   

  	
  PURCHASE

  	
   

  	
  75.00

  	
   

  	
  NONE

  
	
  12239702

  	
   

  	
  12/23/97

  	
   

  	
  COLENN IRWIN

  	
   

  	
  PURCHASE

  	
   

  	
  75.00

  	
   

  	
  NONE

  
	
  12239703

  	
   

  	
  12/23/97

  	
   

  	
  COLENN IRWIN

  	
   

  	
  PURCHASE

  	
   

  	
  75.00

  	
   

  	
  NONE

  
	
  8059801

  	
   

  	
  08/05/98

  	
   

  	
  VINCE-4 CERTS
  WITH SAME #

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  08/31/00

  
	
  8059801

  	
   

  	
  08/05/98

  	
   

  	
  VINCE-4 CERTS
  WITH SAME #

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  08/31/00

  
	
  8059801

  	
   

  	
  08/05/98

  	
   

  	
  VINCE-4 CERTS
  WITH SAME #

  	
   

  	
  B/2

  	
   

  	
  9.00

  	
   

  	
  08/31/00

  
	
  9119802

  	
   

  	
  09/11/98

  	
   

  	
  WOODLAND PARK
  CHAMBER

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  09/11/99

  
	
  9179801

  	
   

  	
  09/17/98

  	
   

  	
  SUE RITT

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  09/17/99

  
	
  9179802

  	
   

  	
  09/17/98

  	
   

  	
  SUE RITT

  	
   

  	
  D/2

  	
   

  	
  23.00

  	
   

  	
  09/17/99

  
	
  9179803

  	
   

  	
  09/17/98

  	
   

  	
  SUE RITT

  	
   

  	
  D/2

  	
   

  	
  23.00

  	
   

  	
  09/17/99

  
	
  10129801

  	
   

  	
  10/12/98

  	
   

  	
  COLO STATE VETS
  HOME

  	
   

  	
  D/2

  	
   

  	
  23.00

  	
   

  	
  04/12/99

  
	
  10129802

  	
   

  	
  10/12/98

  	
   

  	
  VICKY GIBBONS

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  04/12/99

  
	
  10159801

  	
   

  	
  10/15/98

  	
   

  	
  WORKOUT LTD

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  04/15/99

  
	
  10289801

  	
   

  	
  10/28/98

  	
   

  	
  IOF

  	
   

  	
  ANY  HOTEL

  	
   

  	
  104.94

  	
   

  	
  04/28/99

  
	
  11169801

  	
   

  	
  11/16/98

  	
   

  	
  TELLER COUNTY

  	
   

  	
  D/2

  	
   

  	
  23.00

  	
   

  	
  05/16/99

  
	
  11179801

  	
   

  	
  11/17/98

  	
   

  	
  DEPT OF AIR
  FORCE

  	
   

  	
  D/2

  	
   

  	
  23.00

  	
   

  	
  05/17/99

  
	
  11179803

  	
   

  	
  11/17/98

  	
   

  	
  PKCO SENIORS

  	
   

  	
  D/2

  	
   

  	
  23.00

  	
   

  	
  05/17/99

  
	
  12079801

  	
   

  	
  12/07/98

  	
   

  	
  VILLAGE INN

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  06/07/99

  
	
  12089802

  	
   

  	
  12/08/98

  	
   

  	
  WORKOUT LTD

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  06/08/99

  

 

 

	
  CERT #

  	
   

  	
  DATE

  	
   

  	
  ISSUED TO

  	
   

  	
  REASON

  	
   

  	
  VALUE

  	
   

  	
  EXPIRES

  
	
  12089803

  	
   

  	
  12/08/98

  	
   

  	
  WORKOUT LTD

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  06/08/99

  
	
  12109801

  	
   

  	
  12/10/98

  	
   

  	
  SUSAN DEY

  	
   

  	
  PURCHASE

  	
   

  	
  62.54

  	
   

  	
  NONE

  
	
  12159801

  	
   

  	
  12/15/98

  	
   

  	
  KELLENE KENFIELD

  	
   

  	
  PURCHASE

  	
   

  	
  125.00

  	
   

  	
  NONE

  
	
  12239801

  	
   

  	
  12/23/98

  	
   

  	
  HIGGINS

  	
   

  	
  PURCHASE

  	
   

  	
  50.00

  	
   

  	
  NONE

  
	
  12239802

  	
   

  	
  12/23/98

  	
   

  	
  HEIDI

  	
   

  	
  PURCHASE

  	
   

  	
  30.00

  	
   

  	
  NONE

  
	
  1049901

  	
   

  	
  1/4/99

  	
   

  	
  BIG BROS/BIG SIS
  OF FINNEY CTY

  	
   

  	
  PURCHASE

  	
   

  	
  300.00

  	
   

  	
  NONE

  
	
  1129901

  	
   

  	
  1/12/99

  	
   

  	
  TINY TIM
  PRE-SCHOOL

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  7/12/99

  
	
  1129902

  	
   

  	
  1/12/99

  	
   

  	
  TINY TIM
  PRE-SCHOOL

  	
   

  	
  D-2

  	
   

  	
  23.00

  	
   

  	
  7/12/99

  
	
  KRMA-TV-1

  	
   

  	
  1/12/99

  	
   

  	
  KRMA-TV AUCTION

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/12/99

  
	
  KRMA-TV-2

  	
   

  	
  1/12/99

  	
   

  	
  KRMA-TV AUCTION

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/12/99

  
	
  KRMA-TV-3

  	
   

  	
  1/12/99

  	
   

  	
  KRMA-TV AUCTION

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/12/99

  
	
  KRMA-TV-4

  	
   

  	
  1/12/99

  	
   

  	
  KRMA-TV AUCTION

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/12/99

  
	
  KRMA-TV-5

  	
   

  	
  1/12/99

  	
   

  	
  KRMA-TV AUCTION

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/12/99

  
	
  KRMA-TV-6

  	
   

  	
  1/12/99

  	
   

  	
  KRMA-TV AUCTION

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/12/99

  
	
  1199901

  	
   

  	
  1/19/99

  	
   

  	
  AMERICAN LEGION

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  7/19/99

  
	
  1199902

  	
   

  	
  1/19/99

  	
   

  	
  AMERICAN LEGION

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  7/19/99

  
	
  1209901

  	
   

  	
  1/20/99

  	
   

  	
  GUTHERIE CHAMBER

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/20/99

  
	
  1209902

  	
   

  	
  1/20/99

  	
   

  	
  J C PENNEY

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  7/20/99

  
	
  1259901

  	
   

  	
  1/26/99

  	
   

  	
  MARK SWOPE
  (BASEBALL TEAM)

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  7/26/99

  
	
  1259902

  	
   

  	
  1/26/99

  	
   

  	
  ROCKY FORD FIRE
  DEPT

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  7/26/99

  
	
  2089901

  	
   

  	
  2/8/99

  	
   

  	
  PIKES PEAK
  AMATEUR HOCKEY

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  8/8/99

  
	
  2089902

  	
   

  	
  2/8/99

  	
   

  	
  PIKES PEAK
  AMATEUR HOCKEY

  	
   

  	
  D-2

  	
   

  	
  23.00

  	
   

  	
  8/8/99

  
	
  2089903

  	
   

  	
  2/8/99

  	
   

  	
  SHEPHERD OF THE
  HILLS CHURCH

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  8/8/99

  
	
  3039902

  	
   

  	
  3/4/99

  	
   

  	
  VERBAL INFO
  SERVICE INC

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  9/4/99

  
	
  3039904

  	
   

  	
  3/10/99

  	
   

  	
  WALMART
  SUPERCENTER SALIDA

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  9/10/99

  
	
  3169901

  	
   

  	
  3/16/99

  	
   

  	
  JIM WILSON

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  9/16/99

  
	
  3259901

  	
   

  	
  3/25/99

  	
   

  	
  CITY OF CR
  CR-SHRINERS’S

  	
   

  	
  D-2

  	
   

  	
  23.00

  	
   

  	
  9/25/99

  
	
  3259902

  	
   

  	
  3/25/99

  	
   

  	
  TELLER CTY 4-H

  	
   

  	
  D-2

  	
   

  	
  23.00

  	
   

  	
  9/25/99

  

 

 

	
  CERT #

  	
   

  	
  DATE

  	
   

  	
  ISSUED TO

  	
   

  	
  REASON

  	
   

  	
  VALUE

  	
   

  	
  EXPIRES

  
	
  3259903

  	
   

  	
  3/25/99

  	
   

  	
  TELLER CTY 4-H

  	
   

  	
  ANY HOTEL

  	
   

  	
  104.94

  	
   

  	
  9/25/99

  
	
  4049901

  	
   

  	
  4/4/99

  	
   

  	
  EL PASO CTY DEPT
  OF HEALTH

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  10/4/99

  
	
  4069901

  	
   

  	
  4/6/99

  	
   

  	
  MIDLAND TERMINAL

  	
   

  	
  S-TH HOTEL

  	
   

  	
  94.34

  	
   

  	
  10/8/99

  
	
  4069902

  	
   

  	
  4/6/99

  	
   

  	
  MIDLAND TERMINAL

  	
   

  	
  D-2

  	
   

  	
  23.00

  	
   

  	
  10/8/99

  
	
  5,357.44

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

GOLD
RUSH AND GOLD DIGGER’S PROGRESSIVE LIABILITIES

 

EXHIBIY
10d

 

	
  GOLD RUSH

  	
   

  	
   

  	
   

  	
  GOLD DIGGER’S

  	
   

  	
   

  	
   

  
	
  Gold Rush
  Nickels

  	
   

  	
  664.80

  	
   

  	
  Wild Cherry
  Quarters

  	
   

  	
  2,009.54

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  1,479.77

  	
   

  	
  Dollar (Various)

  	
   

  	
  7,397.53

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  742.77

  	
   

  	
  Poker Quarters

  	
   

  	
  1,236.17

  	
   

  
	
  Gold Rush
  Nickels

  	
   

  	
  554.55

  	
   

  	
  Poker Quarters

  	
   

  	
  98.22

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  635.22

  	
   

  	
  Jacks or Better

  	
   

  	
  1,003.61

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  893.70

  	
   

  	
  Jacks or Better

  	
   

  	
  31.88

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  660.23

  	
   

  	
  Double Bonus
  Poker

  	
   

  	
  1,579.87

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  904.90

  	
   

  	
  Double Bonus
  Poker

  	
   

  	
  124.57

  	
   

  
	
  Triple Diamonds
  Quarters

  	
   

  	
  731.93

  	
   

  	
  Double Bonus
  Poker

  	
   

  	
  226.07

  	
   

  
	
  Double Diamonds
  Quarters

  	
   

  	
  705.63

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Red, White &
  Blue $5

  	
   

  	
  28,955.75

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gold Rush Dollars

  	
   

  	
  5,068.33

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blazing 7’s

  	
   

  	
  1,031.02

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blazing 7’s

  	
   

  	
  1,048.52

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blazing 7’s

  	
   

  	
  1,112.98

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blazing 7’s

  	
   

  	
  1,147.89

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Double Bonus
  Poker

  	
   

  	
  1,843.65

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Double Bonus
  Poker

  	
   

  	
  145.55

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Double Bonus
  Poker

  	
   

  	
  242.33

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Blackjack
  Tournament

  	
   

  	
  225.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  48,794.52

  	
   

  	
  TOTAL

  	
   

  	
  13,707.46

  	
   

  
	
  TOTAL
  PROGRESSIVE LIAB.

  	
   

  	
  82,501.98

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

FIRST AMENDMENT TO LEASE

 

This FIRST AMENDMENT TO LEASE between CRIPPLE CREEK DEVELOPMENT CORP., BLUE BUILDING DEVELOPMENT, INC., MARK BROCKLEY and ANNESSE BROCKLEY (collectively, as Lessor),
and GOLD RUSH I, LLC (as Lessee),
and SOUTHWEST CASINO AND HOTEL CORP.
(as Guarantor) is made and entered into this
       day of February, 2004, by and between the
above-identified parties.

 

Recitals

 

A.                                   The
parties entered into the above-described lease (the “Lease”) governing the
Assets as therein defined in March 1999.

 

B.                                     The
parties desire to amend the Lease as provided in this First Amendment to Lease.

 

C.                                     Capitalized
terms not otherwise defined in this First Amendment to Lease shall have the
meanings ascribed to them in the Lease.

 

NOW, THEREFORE, in consideration of their
mutual obligations and undertakings hereunder, and in consideration of the parties’
agreement here made and acknowledged, which agreement is conditioned upon
Lessee performing, in full, all duties,
terms and conditions set forth in the Second
Amendment to Lease between MARK W. BROCKLEY, ANNESSE C. BROCKLEY,
and DEADWOOD PROPERTIES, INC. and SOUTHWEST CASINO DEADWOOD, LLC, (hereinafter
“Deadwood Amendment to Lease”), executed simultaneously with this Agreement
herein, and shall be effective as of the date upon which all the parties
execute this First Amendment To Lease, to (i) enter into such stipulations and file such documents in the District Court for Teller
County, Colorado in the pending litigation between the parties known as Cripple
Creek Development Corp., a Colorado corporation, Mark Brockley, an Individual,
and Annesse Brockley, an Individual v. Gold Rush I, LLC, a Colorado limited
liability company, and Southwest Casino and Hotel Corp., a Minnesota
corporation, Case No. 01CV156 (the “Litigation”) as are necessary to effect
the dismissal with prejudice of all claims and counterclaims between and among
the parties in the Litigation, and (ii) execute general releases of all claims
the parties have or may have against each other as of the date of the First
Amendment To Lease, the parties agree as follows:

 

 

Amendment

 

1.                                       The
Lease is hereby amended by the addition of the following subsections to
Section 20, which provide:

 

N.  At any
time on or after January 1,
2004, but
before 5:00 p.m. MDT on February 28, 2005, provided all duties, obligation of the Lessee
set forth in the Deadwood Amendment to Lease have been performed in full by
Lessee, Lessee shall have the right to purchase (hereinafter “the Option”) the
Assets, including all real estate and personal property as set forth in Section “1. Assets” of
the Lease, and all slot
machines located in or on, or used in
connection with, the operation of the Gold Rush and Gold Digger’s casinos, and all Lessor’s interest in the Lease
(collectively, the “Purchased Property”) for a total at (1) Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000.00)
and (2) at closing on the completion of exercise of the Option (i) payment in full of the
obligations described on Schedule A attached hereto and made a part
hereof, (ii) assumption by Lessee, releasing and indemnifying
Cripple Creek Development Corp., and Blue
Building Development, Inc. of any guaranty or other obligation or
liability thereunder, of the obligations described on Schedule B attached hereto and
made a part hereof and release of Mark Brockley, Cripple Creek Development
Corp., and Blue Building Development, Inc. of any guaranty or other obligation or liability thereunder,
and (iii) assumption by Lessee of the obligations described on Schedule C
attached hereto and made a part hereof, all
of which obligations as reflected on Schedules A, B and C comprise the
outstanding obligations of the Lessor’s note(s) and lien(s), whether promissory
notes, mortgages, or otherwise, encumbering the real estate and personal
property relating to the Purchased Property. 
Concerning the release contemplated by Section N(2)(ii) above
relating to Schedule B obligations, Lessee agrees to execute any such documents and take any such other or additional reasonable steps and actions as may be necessary to terminate
the obligations of Lessor, Cripple Creek Development Corp., and Blue Building Development, Inc.

 

O.                                    In consideration
of this First Amendment to Lease regardless of whether Lessee exercises the Option, the parties
agree Section 17 on page 15
of the Lease shall be deleted in its entirety and the parties waive any rights
or obligations thereof.  Lessor agrees
that Lessor shall execute any such documents and take any such other or
additional reasonable steps and actions as may be necessary to assist Lessee in
extending the maturity date and/or renegotiating the terms of any of the
obligations, promissory notes, liens, mortgages or other debt instruments
reflected in Schedules B and C as described in subsection N above so long
as any such extension or renegotiated terms do not extend beyond the Lease Term
and do not require the payment of additional consideration by Lessor.  For purposes of this First Amendment to
Lease, the term “exercise of Option” refers to the date on which Lessee
notifies Lessor in writing of Lessee’s
exercise of the Option, and not
the date of closing/completion of the purchase permitted by the Option.

 

2

 

P.                                      In
consideration of this First Amendment to Lease and upon the closing on
completion of the Option by Lessee, Lessee shall, subject to the provisions of
subsections N and O above, indemnify, protect, and hold harmless Lessor for any
and all outstanding balances of “Assumed Payments,” as described and defined in
Section 4 of Pages 6 and 7 of the Lease, thereby satisfying any such debt
or liability owed to creditors by Lessors as set forth in Section 4 of Pages 6 and 7 of the Lease.

 

Q.                                    In
consideration of this First Amendment to Lease, the parties agree Lessors may,
subject to subsection O above, enter into agreements allowing Lessors to
purchase or acquire the holder’s interest in those obligations secured by
existing mortgage note(s) and lien(s) encumbering
all Purchased Property considered in this First Amendment to Lease.  Lessor specifically agrees that any such
mortgage note(s) and lien(s) purchased
by Lessors may be prepaid in full and without penalty by Lessee at any time
prior to their maturity.

 

R.                                     In the
event Lessee shall exercise the Option, the following affirmative obligations
shall survive such exercise:

 

(1)                                  An
accounting, by Lessee, of all outstanding “Assumed Payments,” as described and defined in
Section 4 of Pages 6 and 7 of the Lease. 
Said accounting shall be
provided to Lessor within thirty (30) days of the full execution of this First Amendment to Lease.

 

(2)                                  An
accounting and report, by Lessee to Lessor of all past years’ “Combined Net
Income” as described in Section “3.
Rent.” for the purposes of determining
any “Additional Rent Due” as set forth in Section 3 of Pages 4
through 6.  Said accounting shall be
performed at Lessee’s expense and shall be provided to Lessor within thirty
(30) days of the full execution
of this First Amendment to Lease;

 

(3)                                  In full
satisfaction of Lessee’s obligation contained in the fourth paragraph on Page 2
of the Lease (being a part of Section “1. Assets”) to pay Lessor the
salvage value as defined of any slot machine transferred to Lessee by Lessor at
the Commencement Date of the Lease, Lessee shall pay lessor the sum of Ninety
Thousand Dollars ($90,000.00), plus any
proceeds from the sale of Colossus, within thirty (30) days of the full
execution of this First Amendment to Lease or upon exercise or the Option by
Lessee, as Lessee shall determine.

 

(4)                                  Payment in
full, if any, to Lessor by Lessee in accordance with the terms and condition of
the Lease and Sections 2 and 3 or this First Amendment to Lease above.

 

2.                                       Except
as otherwise amended herein, the Lease remains unchanged and in full force
effect between the parties.  In the event
Lessee (1) exercises the Option, (2) closes on the purchase of the Purchased
Property, and (3) satisfies the continuing obligations set forth in
Section R above, the Lease shall terminate accordingly.

 

3

 

IN WITNESS WHEREBY,
the parties have caused this First Amendment To Lease to be executed  as of the day and year first written
above.

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  	
   

  
	
   

  	
  Cripple Creek
  Development Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mark Brockley, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Blue Building
  Development, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  Mark Brockley President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
  Mark Brockley

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Annesse Brockley

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
   

  	
  Gold Rush I, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  James B. Druck, Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
  Southwest Casino
  and Hotel Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
  James B. Druck ,President

  
	
   

  	
   

  	
   

  

 

 

SCHEDULE A

 

Debts
to be paid off at the time the option is exercised:

 

	
  Name

  	
   

  	
   

  
	
   

  	
   

  
	
  Mark Brockley

  	
   

  
	
  Brockley 95 Club

  	
   

  
	
  Annesse Brockley

  	
   

  
	
  Berryhill

  	
   

  

 

 

SCHEDULE B

 

Debts
in connection with the exercise of purchase option to be assumed by Southwest
in such a manner as to relieve Mark Brockley, Cripple Creek Development Corp.,
and Blue Building Development, Inc. of any ongoing liability:

 

	
  Name

  	
   

  	
   

  
	
   

  	
   

  
	
  Community Banks of Colorado

  	
   

  
	
  Mountain National Bank

  	
   

  
	
  Line of Credit – CBOC

  	
   

  
	
  Line of Credit – MNB

  	
   

  
	
  Julie R. Yarbrough

  	
   

  

 

6

 

SCHEDULE C

 

Non-recourse
debt in connection with the exercise of Lessee’s option with Southwest would
assume for which there is currently no personal guarantees by Mark Brockley,
but a complete release of liability of Cripple Creek Development Corp., and Blue
Building Development, Inc.:

 

	
  Name

  	
   

  	
   

  
	
   

  	
   

  
	
  Robert G. Rolofson

  	
   

  
	
  Joann Kipp Roos

  	
   

  
	
  Timothy L. O’Brien

  	
   

  
	
  Sierra and Associates

  	
   

  
	
  David Wilcox

  	
   

  
	
  Jerry Muzik/Winona Griffin

  	
   

  
	
  Cripple Creek Masonic Lodge

  	
   

  
	
  Barchester Corp. – Rush

  	
   

  
	
  Barchester Corp. – Digger’s

  	
   

  
	
  Fisher

  	
   

  

 

7

 

Second
Amendment to Lease

Between

Southwest Casino and Hotel Corp. and Lois L. Woods

 

This Second Amendment to Lease (the “Second Amendment”) is made and
entered into as of the 10th day of February 2004 by and between Lois L.
Woods, an individual whose address is P.O. Box 489, Cripple Creek, Colorado
80813 (“Landlord”), and Southwest Casino and Hotel Corp., a Minnesota
corporation with offices at 2001 Killebrew Drive, Suite 305, Minneapolis, Minnesota
55425 (“Tenant”). Landlord and Tenant are sometimes referred to in this Second
Amendment as a “party” or the “parties,” as the sense requires.

 

Recitals

 

A.                                   Landlord
and Tenant are parties to a lease dated as of the 1st day of May, 1998
governing the Premises located at 251 East Bennett Avenue, Cripple Creek,
Colorado.

 

B.                                     The
parties amended the lease as of February 9, 2001 to reflect a change in
Section 3.B thereof. For purposes of this Second Amendment, the original
lease as amended as of February 9, 2001 is referred to as the lease.

 

C.                                     The
parties desire to further amend the Lease as set forth herein.

 

D.                                    Except
as otherwise provided in this Second Amendment, capitalized terms in the Second
Amendment shall have the meanings ascribed to them in the original lease
entered into as of May 1,1998.

 

Now Therefore, in consideration of the parties’ mutual obligations and
undertakings hereunder and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree to amend
the Lease as set forth below.

 

Amendments

 

1.                                       Section 3.C
of the Lease is amended to provide, in its entirety:

 

C.                                     During
the Extension Term. Tenant shall pay rent in the amount of Fourteen Thousand
Dollars ($14,000.00) per month during the Extension Term.

 

2.                                       Section 3.F(2)
of the Lease is amended to provide, in its entirety:

 

(2)                                  On
the Commencement Date, a deposit in the amount of One Hundred Forty-Four
Thousand Dollars ($144,000.00), Ninety-Six Thousand Dollars ($96,000.00) of
which shall be credited to the first eight (8) months rent due during the
Initial Term, and the Forty-Eight Thousand Dollar ($48,000.00) balance of which
will be credited against the last four (4) months rent owed during the Initial
Term or, if the Lease Term is extended, against the last four (4) months rent
owed during the Extension Term, except that the Forty-Eight Thousand Dollar
($48,000.00)

 

 

balance shall be returned to the Tenant in the event this Lease is
terminated by either party prior to expiration of the Initial Term.

 

3.                                       All
other terms and condition of the Lease shall remain in full force and effect.

 

In Witness Whereof, the parties have executed this Second Amendment To
Lease as of the day first written above.

 

	
   

  	
  Landlord:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  
	
   

  	
  Lois L. Woods

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tenant:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Southwest Casino
  and Hotel Corp.

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/

  	
   

  
	
   

  	
  James B. Druck,
  President

  
				

 

State of CO,
County of Jeller

Signed before me
this 11th day of

February, 2004 by

 

	
  /s/

  	
   

  
	
  Patricia Ruscoe

  
	
  Notary Public

  

 

 

EXTENSION
OF LEASE

 

This Extension of Lease is made and entered into as of this 10th day of
February, 2004, by and between LOIS L. WOODS, an individual whose address is
P.O. Box 489, Cripple Creek, Colorado 80813 (“Landlord”) and SOUTHWEST CASINO
AND HOTEL CORP., a Minnesota corporation with offices at 2001 Killebrew Drive,
Suite 306, Minneapolis, Minnesota 55425 (hereinafter referred to as “Tenant”).

 

WITNESSETH

 

WHEREAS, Landlord and Tenant are parties to the Lease dated the 1st day
of May, 1998, with respect to the Premises located at 251 East Bennett Avenue,
Cripple Creek, Colorado; and

 

WHEREAS, the parties desire to extend the Lease as set forth below.

 

NOW, THEREFORE, it is agreed by the parties as follows:

 

1.                                       Tenant
shall exercise their option to extend the term of the Lease as defined in
Section 2(C) for a single 5 year term.

 

2.                                       All
terms and conditions of the Lease and of the first and second amendments shall
remain in full force and effect.

 

IN WITNESS WHEREOF, the parties hereto have caused this Extension of
Lease to be executed as of the day and year first above written.

 

	
   

  	
  Landlord:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  
	
   

  	
  Lois L. Woods

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tenant:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Southwest Casino
  and Hotel Corp.

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/

  	
   

  
	
   

  	
  James B. Druck,
  President

  
				

 

State of CO,
County of Jeller

Signed before me
this 11th day of

February, 2004 by

 

	
  /s/

  	
   

  
	
  Patricia Ruscoe

  
	
  Notary Public

  

 

 

AMENDMENT TO LEASE

 

This Amendment to Lease is made and entered into as of this 9th
day of February, 2001, by and between LOIS L. WOODS, an individual whose
address is P.O. Box 489, Cripple Creek, Colorado 80813 (“Landlord”) and
SOUTHWEST CASINO AND HOTEL CORP., a Minnesota. corporation with offices at 2001
Killebrew Drive, Suite 306, Minneapolis, Minnesota 55425 (hereinafter referred
to as “Tenant”).

 

WITNESSETH:

 

WHEREAS, Landlord and Tenant are parties to the Lease dated the lst day
of May, 1998, with respect to the Premises located at 251 East Bennett Avenue,
Cripple Creek, Colorado; and

 

WHEREAS, the parties desire to amend the Lease as set forth below.

 

NOW, THEREFORE, it is agreed by the parties as follows:

 

1.                                       Section 3(B)
shall be amended as follows:

 

B.                                     During
the Initial Term. Tenant shall pay rent in the amount of Twelve Thousand
Dollars per month during the first five Lease Years following the Commencement
Date.

 

2.                                       All
other terms and conditions of the Lease shall remain in full force arid effect.

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
Lease to be executed as of the day and year first above written.

 

	
   

  	
  Landlord:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  
	
   

  	
  Lois L. Woods

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tenant:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Southwest Casino
  and Hotel Corp.

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/

  	
   

  
	
   

  	
  James B. Druck,
  President

  
				

 

 

LEASE

 

 

LOIS L. WOODS

(as Landlord)

 

 

and

 

 

SOUTHWEST CASINO
AND HOTEL CORP.

a Minnesota
corporation

(as Tenant)

 

 

LEASE

 

THIS LEASE is made and entered into as of the 1st day of May, 1998, by
and between LOIS L. WOODS, an individual who address is P.O. Box 489, Cripple
Creek, Colorado 80813 (“Landlord”), and SOUTHWEST CASINO AND HOTEL CORP., a
Minnesota corporation with offices at 2001 Killebrew Drive, Suite 306 in Minneapolis,
Minnesota (“Tenant”).

 

WITNESSETH:

 

1.                                       PREMISES.
In consideration of the payment of rent and the keeping and performance of the
covenants and agreements by Tenant as hereinafter set forth, Landlord hereby
leases and demises to Tenant the Premises, which consists of that certain real
property known as Lot 33, and the South 25 feet of Lot 8, Block 16, City of
Fremont (now Cripple Creek), County of Teller, State of Colorado, commonly
referred to as 251 East Bennett Avenue, Cripple Creek, Colorado, together with
all improvements thereon and all rights, easements and appurtenances thereto,
including the building currently known as Lucky Lola’s Casino and all
furniture, fixtures and equipment remaining therein as of May 1, 1998 (except
slot machines) as reflected in the Inventory attached hereto and incorporated
herein as Exhibit A (the “Casino”), and three (3) parking spaces located at the
rear of and adjacent to the Casino, and a vacant lot located across the alley
from the Casino on which currently are located a propane tank and a trash
dumpster, all as shown on Exhibit B attached hereto and incorporated herein by
reference.

 

Notwithstanding the foregoing, the parties understand and agree that
they shall revise Exhibit A as of the Commencement Date of the Lease as herein
defined to reflect which items of furniture, fixtures and equipment Tenant
intends to use in the operation of the casino here contemplated. Tenant shall
return to Landlord as of the Commencement Date all such items of furniture,
fixtures and equipment located on the Premises which Tenant does not intend to
use in its operations and which do not appear on the revised Exhibit A.

 

2.                                       TERM.

 

A.                                   Pre-Opening
Period. Tenant shall occupy the Premises as of May 1, 1998 in anticipation
of becoming licensed by the Colorado Limited Gaming Control Commission (the
“Gaming Commission”) to operate the casino currently located on the Premises by
the Spring of 1999 (the “Pre-Opening Period”). Rent payable during the
Pre-Opening Period shall be computed as provided in Section 3.A of this
Lease.

 

B.                                     Initial
Term. The initial term of the Lease shall commence as of the date upon
which Tenant opens the Premises to the public as a casino, having been duly
licensed by the Gaming Commission (the “Commencement Date”) and continue for a
period of five (5) years (the “Initial Term”).

 

C.                                     Extension
Term. Tenant shall have the option to extend the term of the Lease for a
single five (5) year term at the conclusion of the Initial Term (the “Extension
Term”).

 

Tenant shall give Landlord written notice of its election to exercise
the extension option at least six (6) months prior to the expiration of the
Initial Term. Tenant’s notice of its election to

 

2

 

exercise the extension
option shall be of no force and effect if as of the date of such notice to
extend, Tenant shall be in default under the Lease beyond any applicable cure
period.

 

The Extension Term shall be governed by all the provisions of the Lease
applicable to the Initial Term, except for an increase in rent payable during
the Extension Term which shall be computed as provided in Section 3.C
hereof, and except to the extent that the Lease provides other specific
provisions applicable to the Extension Term.

 

D.                                    Holding
Over. Nothing contained in this Lease shall be deemed to permit Tenant to
use or occupy the Premises after the expiration of the Initial Term or, if
applicable, the Extension Term of the Lease. If Tenant continues to occupy the
Premises after such expiration, such occupancy shall (unless the parties hereto
otherwise agree in writing) be deemed to create a month to month tenancy at a
monthly rental equal to one hundred fifty percent (150%) of the annual rent
prorated on a monthly basis for the month prior to the commencement of the
holdover period, and Tenant shall remain liable for all other additional rent
and other charges payable by Tenant under this Lease. Such holdover occupancy
shall be subject to all of the terms and conditions of this Lease.

 

E.                                      Definition
of Lease Term. The phrase “Lease Term” means the Initial Term together
with, if applicable, the Extension Term, both as herein defined.

 

F.                                      Definition
of Lease Year. The term “Lease Year” shall mean a period of twelve (12)
full consecutive calendar months. The first Lease year shall commence as of the
Commencement Date. Each subsequent Lease Year shall commence on the anniversary
of the commencement date of the first Lease Year.

 

3.                                       RENT.

 

A.                                   During
Pre-Opening Period.  Tenant shall pay
rent in the total sum of Eight Thousand Dollars ($8,000.00) per month
commencing as of May 1, 1998 and continuing on the first day of each month
thereafter through and including December 1, 1998. Commencing as of
January 1, 1999 and continuing on the first day of each month thereafter
until the Commencement Date, Tenant shall pay rent in the total sum of Twelve
Thousand Dollars ($12,000.00) per month.

 

B.                                     During
the Initial Term. Tenant shall pay rent in the amount of Twelve Thousand
Dollars ($12,000.00) per month during the first three Lease Years following the
Commencement Date, Thirteen Thousand Dollars ($13,000.00) per month during the
fourth Lease Year, and Fourteen Thousand Dollars ($14,000.00) per month during
the fifth Lease Year of the Initial Term.

 

C.                                     During
the Extension Term. Tenant shall pay rent in an amount equal to the monthly
rent paid during the Initial Term adjusted to reflect applicable changes in the
Consumer Price Index (the “CPI Adjustment”). For purposes of this Lease, the
Consumer Price Index shall mean the Consumer Price Index for All Items for All
Urban Consumers (often referred to as the “Cost of Living Index”), published by
the Bureau of Labor Statistics of the Department of Labor of the United States
Government.

 

3

 

D.                                    Net
Lease. It is the intent of Landlord and Tenant that the rent to be paid
during the Lease Term shall be a net return to Landlord, free of expense,
charge, or reduction with respect to the Premises. Except as otherwise provided
herein, Tenant shall pay all Operating Expenses of the Premises during the
Lease Term. Operating Expenses are defined as:

 

(1)                                  All
real property taxes and assessments levied against the Premises by any
governmental or quasi-governmental authority. The foregoing shall include any
taxes, assessments, surcharges, or service or other fees of a nature not
presently in effect which shall hereafter be levied on the Premises as a result
of the use, ownership or operation of the Premises or for any other reason,
whether in lieu of or in addition to, any current real estate taxes and
assessments; provided, however, that in no event shall the term “taxes or
assessments,”  as used herein, include
any net federal or state income taxes levied or assessed on Landlord, unless
such taxes are a specific substitute for real property taxes (all of the
foregoing are collectively referred to herein as the “Taxes”). “Assessment”
shall include so-called special assessments, license tax, business license fee
or tax, gaming license and/or gaming equipment fee, commercial rental tax,
levy, charge penalty or tax, imposed by any authority having the direct power
to tax, including any city, county, state or federal government, or any school,
agricultural, lighting, water, drainage or other improvement or special
district thereof, against the Premises or any legal or equitable interest of
Landlord therein. For purposes of this Lease, any special assessments shall be
deemed payable in such number of installments as is permitted by law, whether
or not actually so paid and shall include any applicable interest on such
installments.

 

(2)                                  Costs
of supplies.

 

(3)                                  Costs
incurred in connection with obtaining and providing energy for the Premises,
including, but not limited to, costs of propane, butane, natural gas, steam,
electricity, solar energy and fuel oils, coal or any other energy sources.

 

(4)                                  Costs
of water and sanitary and storm drainage services.

 

(5)                                  Costs
of general maintenance and repairs occasioned by normal wear and tear on the
Premises experienced during the Term, including the cost of maintaining (but
not repairing or replacing) HV AC and other mechanical systems.

 

(6)                                  Costs
of maintenance and replacement of landscaping.

 

(7)                                  Costs
of obtaining insurance insuring Tenant in the amount of Two Million Dollars
($2,000,000.00) for damage to property, provided that Tenant’s
obligation to obtain and maintain such insurance shall not arise until the
Commencement Date, and the risk of damage, injury or loss on and to the
Premises shall be borne by Landlord during the period May 1, 1998 to the
Commencement Date.

 

“Operating Expenses” shall not include:

 

(a)                                  Costs
of repair of structural defects, including the roof, walls and floors of the
Premises, or of repair or replacement of the HVAC, plumbing (except in the
event of damage caused by freezing pipes), or sprinkler system (except in the
event of damage caused by freezing pipes). Landlord has represented to Tenant
that the Premises’ structural integrity is

 

4

 

sound and that all
essential operating equipment and components were installed or replaced during
the 1991 calendar year. As such, Landlord warrants and represents to Tenant
that the Premises and all its major components are in good working order, free
from defects and deficiencies. Landlord further warrants and represents that
the Premises complies with all permits, certificates, laws, rules, building and
other codes and regulations of governmental agencies or authorities
(collectively, the “Codes”) now in effect, and that Landlord will, at its
expense, cause the Premises to continue to comply with such Codes as are now in
effect during the Pre-Opening Period and the Lease Term.

 

In addition, Landlord shall provide Tenant, prior to Tenant’s entry
into this Lease, with the most current information filed with the City of
Cripple Creek describing the amount and basis for calculation of electrical
power to the Premises. Upon review of the information, Tenant will determine
whether it wishes to proceed with the Lease and pay for whatever additional
power it needs to operate the casino, or decline to enter into or to terminate
the Lease.

 

In the event Landlord and Tenant shall disagree as to whether a
particular expense is an “Operating Expense” for purposes of this Lease, Tenant
may make and pay for the repair, and the parties shall thereafter each select
an expert, who shall determine the nature of the expense and its apportionment,
if any, between Landlord and Tenant. If the two experts are unable to agree on
the nature and apportionment of the expense, the two experts shall together
appoint a third expert, whose decision as to both elements of the determination
shall be final and binding upon Landlord and Tenant. Landlord and Tenant shall
each bear their own costs in retaining their own experts, and they shall share
equally in the costs associated with the retention and work of the third
(neutral) expert, if one is appointed.

 

(b)                                 Costs
of repairs or other work occasioned by fire, windstorm or other insured
casualty to the extent of insurance proceeds received.

 

(c)                                  Costs
of repairs or rebuilding necessitated by condemnation.

 

(d)                                 Any
interest on borrowed money or debt amortization, except as specifically
provided herein.

 

(e)                                  Depreciation
on the Premises.

 

Landlord and Tenant do not intend that Tenant shall pay any Operating
Expenses prior to the Commencement Date as herein defined. Until the
Commencement Date, Tenant shall be responsible 
for the rent described in Section 3.A hereof.

 

The parties contemplate that Tenant shall receive its gaming license(s)
from the Gaming Commission as of October 1, 1998, and that if Tenant does
not, and if Myers Avenue Gaming, Inc., or such other entity or person as
Landlord may designate, shall thereafter file its own gaming license
application governing the Premises, Tenant shall pay the cost of the filing of
such application up to a maximum total of Twenty Thousand Dollars ($20,000.00),
Ten Thousand Dollars ($10,000.00) of which will be refunded to Tenant in the form
of applying it to Tenant’s next month’s rent should Tenant receive its gaming
license(s) on or before April 1, 1999.

 

5

 

E.                                      Place
of Payment. Rent and such other charges as Tenant is required to pay Landlord
shall be payable at Landlord’s notice address reflected in Section 16.E
hereof.

 

F.                                      Deposits.
Tenant shall pay Landlord the following Lease deposits:

 

(1)                                  Upon
(a) execution of this Lease by both parties, and (b) delivery to Tenant of a
title insurance policy acceptable to Tenant, as described in Section 6 of
this Lease, a Fifteen Thousand Dollars ($15,000.00) non-refundable deposit.

 

(2)                                  On
the Commencement Date, a deposit in the amount of One Hundred Forty-Four
Thousand Dollars ($144,000.00), Ninety-Six Thousand Dollars ($96,000.00) of
which shall be credited to the first eight (8) months rent due during the
Initial Term, and the Forty-Eight Thousand Dollar ($48,000.00) balance of which
will be credited against the last four (4) months rent owed during the Initial
Term, exact that, the Forty-Eight Thousand Dollar ($48,000.00) balance
shall be returned to Tenant in the event this Lease is terminated by either
party prior to expiration of the Initial Term unless otherwise provided herein.

 

4.                                       USE
OF PREMISES.

 

A.                                   Tenant
shall use the Premises primarily as a gaming casino, as contemplated by the
Colorado Limited Gaming Act, C.R.S. § 12-47.1-101, et seq. (the
“Gaming Act”) (the Gaming Act and all amendments and gaming regulations now
existing or hereafter adopted, and all gaming related laws of the City of
Cripple Creek and the County of Teller, are sometimes collectively referred to
in this Lease as the “Gaming Laws”), and secondarily for any other ancillary or
related use as may be permitted by law. Subject to the Gaming Laws, Tenant
shall, in its sole discretion, determine the types, number and locations of
gaming devices on the Premises and the rules and procedures which will govern
the Premises’ operation as a gaming casino. Landlord shall have no control over
or power to influence decisions concerning operation of the Premises.

 

B.                                     Without
limiting the generality of the provisions of Section 4.A, Tenant shall
during the Lease Term (1) comply with all Gaming Laws, and (2) maintain in
force all licenses, consents and permits necessary for the use of the Premises
as a gaming casino.

 

C.                                     Landlord
agrees to cooperate as reasonably required by Tenant to assist Tenant in
obtaining and maintaining gaming and liquor licenses for the Premises and
shall, in particular, execute any and all documents necessary to obtain gaming
and liquor licenses. Landlord shall not cause any such licenses to be denied,
revoked, not renewed, or suspended, whether through actions of Landlord prior
to the issuance of such licenses or thereafter during the Lease Term. If
Landlord or Tenant receives notice that the status or actions of Landlord may
or will result, or have resulted, in the denial, revocation, failure to renew
or suspension of any gaming or liquor license, Landlord shall take such actions
as are necessary to cure the underlying conduct or status.

 

6

 

5.                                       ADDITIONAL
IMPROVEMENTS:  MECHANIC’S LIENS.

 

A.                                   Additional
Improvements. Tenant may, from time to time, construct or install other
improvements on the Premises, and make such changes, alterations and additions
to the Premises as Tenant shall deem necessary or desirable (the “Additional
Improvements”), at Tenant’s expense, subject to the following:

 

(1)                                  No
Additional Improvements requiring structural alteration of the Premises may be
made without Landlord’s prior written consent, which consent will not be
unreasonably withheld. For purposes of this Section 5.A.(1), moving or
removing partitions or non-load bearing walls shall not be structural
alterations requiring the prior consent of Landlord.

 

(2)                                  Where
appropriate or required, Additional Improvements will be conducted under the
supervision of an architect or engineer licensed in the State of Colorado and
selected by Tenant in its sole discretion.

 

(3)                                  All
Additional Improvements shall be of such a kind that, when completed, the value
and utility of the Premises at the time shall not be less than the value and
utility that the Premises would have had at the time if the Additional
Improvements had not been made.

 

(4)                                  All
work done in connection with the Additional Improvements shall be done in a
good and workmanlike manner.

 

(5)                                  Tenant
shall provide Landlord reasonable financial assurance that the Additional
Improvements will be completed as contemplated and that Tenant can pay for
them, which assurance shall include an estimate of the cost of the Additional
Improvements.

 

B.                                     Mechanic’s
Liens. In connection with the construction of any Additional Improvements,
Tenant shall cause the payment of all proper and valid invoices and charges of
all contractors, subcontractors, suppliers, materialmen and similar parties who
furnish services or materials in connection with the construction process. In
the event any party records a mechanic’s lien to enforce any claim for services
or materials alleged to have been provided in connection with the Premises,
Tenant shall cause the same to be released or record within sixty (60) days
after the recordation thereof, and Tenant shall be liable to satisfy and cause
a discharge of any such mechanic’s lien claim.

 

Notwithstanding the foregoing, Tenant shall have the right to contest
any such mechanic’s lien claim, provided that Tenant conducts such contest in a
timely manner and with due diligence, and that Tenant provides Landlord with
such security in connection therewith as Landlord may reasonably require. In
the event Tenant loses any such contest, and all further rights of appeal have
expired, Tenant shall satisfy the mechanic’s lien claim in full prior to any
foreclosure sale or other disposition of the Premises in order to satisfy the
claim.

 

6.                                       TITLE
TO PREMISES AND IMPROVEMENTS. As a condition precedent to Tenant’s entering
into this Lease, Landlord shall, at its expense, obtain a title insurance policy
insuring Tenant’s leasehold interest in the Premises, which title insurance
shall evidence Landlord’s fee simple interest ownership in the Premises subject
only to what are listed in the title insurance policy as Permitted Exceptions.
The title insurance policy shall be attached to this Lease as Exhibit C and
shall be incorporated herein by reference. Landlord warrants that she has

 

7

 

fee simple title to the
Premises, free and clear of all encumbrances save for the Permitted Exceptions.

 

Except as otherwise provided herein, Landlord shall be the owner of all
improvements paid for and constructed by Tenant upon the Premises, as the same
may be altered, expanded and/or improved in accordance with this Lease. Upon
the expiration or earlier termination of this Lease, all improvements then
existing upon the Premises shall revert to and become the property of Landlord
without compensation to, or the requirement of consent or act of, Tenant, and
tenant shall thereafter have no further rights thereto or interest therein.

 

Tenant shall surrender the Premises at the end of the Lease Term or
upon earlier termination of the Lease in good condition and repair, reasonable
wear and tear and fire and other casualty excepted.

 

7.                                       QUIET
ENJOYMENT.  So long as Tenant is not
in default under this Lease, Tenant shall peaceably and quietly use and enjoy
the Premises during the Pre-Opening Period and the Lease Term without hindrance
or interruption by Landlord or any other person or persons lawfully or
equitably claiming by, through or under Landlord.

 

8.                                       CASUALTY
AND RESTORATION OF THE PREMISES.

 

A.                                   If
the Premises shall be so damaged by fire or other casualty as to render the
casino wholly untenantable, and if such damage shall be so great that a
competent architect, in good standing, selected by Tenant shall certify in
writing to Tenant within sixty (60) days of said casualty that the Premises,
with the exercise of reasonable diligence, cannot be made fit for occupancy
within one hundred eighty (180) working days from the happening thereof, then
this Lease shall cease and terminate from the date of the occurrence of such
damage and Tenant shall thereupon surrender to Landlord the Premises and all
interest therein hereunder and Landlord may reenter and take possession of the
Premises and remove Tenant therefrom. 
If, however, the damage shall be such that said architect shall certify
within said sixty (60) day period that the Premises can be made tenantable
within said one hundred eighty (180) day period, then, except as hereinafter
provided, Landlord shall repair the damage so done with all reasonable speed.

 

B.                                     If
the Premises shall be slightly damaged by fire or other casualty, but not so as
to render the same wholly untenantable or to require a repair period in excess
of one hundred eighty (180) days, then, Landlord, after receiving notice in
writing of the occurrence of the casualty, except as hereafter provided, shall
cause the same to be repaired with reasonable promptness. If the estimated
repair period as established in accordance with the provisions of subparagraph
A above exceeds one hundred eighty (180) days, then the provisions of
subparagraph A shall control notwithstanding the fact that the Premises are not
wholly untenantable.

 

C.                                     In
case the Premises shall be so injured or damaged, whether by fire or otherwise,
that, within sixty (60) days after the happening of such injury, Landlord shall
decide not to reconstruct or rebuild the Premises, then, notwithstanding anything
contained herein to the contrary, upon notice in writing to that effect given
by Landlord to Tenant within said sixty (60)

 

8

 

days, this Lease shall
terminate from the date of such written notice, and both parties hereto shall
be freed and discharged of all further obligations hereunder.

 

D.                                    Landlord
and Tenant hereby waive any and all rights of recovery against the other, their
officers, agents, and employees occurring out of the use and occupancy of the
Premises for loss or damage to their respective real and/or personal property
arising as a result of a casualty or condemnation contemplated by this
Section 8. Each of the parties shall, upon obtaining the policies of
insurance required by this Lease, notify the insurance carrier that the
foregoing waiver is contained in this Lease and shall require such carrier to
include an appropriate waiver of subrogation provision in the policies.

 

E.                                      Provided
that the casualty is not the fault of Tenant, Tenant’s agents, servants, or
employees, Tenant’s rent shall abate during any such period of repair and
restoration.

 

9.                                       CONDEMNATION.  If the entire Premises or substantially all
of the Premises or any portion of the casino which shall render the Premises
untenantable shall be taken by right of eminent domain or by condemnation or
shall be conveyed in lieu of any such taking, then this Lease, at the option of
either Landlord or Tenant exercised by either party giving notice to the other
of such termination within thirty (30) days after such taking or conveyance,
shall forthwith cease and terminate and the rent shall be duly apportioned as
of the date of such taking or conveyance. Tenant thereupon shall surrender the
Premises and all interest therein under this Lease to Landlord and Landlord may
reenter and take possession of the Premises or remove Tenant therefrom. In the
event less than all of the Premises shall be taken by such proceeding, Landlord
shall promptly repair the Premises to its condition immediately prior to said
taking, unless Landlord elects not to reconstruct or rebuild as described in
subparagraph C of Section 8 above.

 

10.                                 OPTION
TO PURCHASE AND RIGHT OF FIRST REFUSAL.

 

A.                                   Option
To Purchase. During the Lease Term, Tenant may purchase the Premises on the
following terms:

 

(1)                                  During
the first two years of the Initial Term, Two Million Dollars ($2,000,000.00);

 

(2)                                  During
the third, fourth and fifth years of the Initial Term, Two Million Dollars
($2,000,000.00), plus the CPI Adjustment, if any;

 

(3)                                  At
any time during the Extension Term, Two Million Dollars ($2,000,000.00), plus
fifty percent (50%) on any increase in the Fair Market Value (as herein
defined) of the building housing the casino over its Fair Market Value as of
the end of the Initial Term. Immediately upon notice from Tenant to Landlord of
Tenant’s intent to exercise its option to purchase the Premises, the parties
will attempt to arrive at an agreement as to the Fair Market Value of the
Premises as herein determined. The Fair Market Value shall in no event include
any amount attributable to the value of Tenant’s business operations. If
Landlord and Tenant are unable to agree on the Fair Market Value within fifteen
(15) days of the notice, they shall jointly select an MAI certified appraiser familiar
with properties within the vicinity of the Premises to determine the Fair
Market Value. If Landlord and Tenant are unable within five (5) days to reach

 

9

 

agreement on one MAI
appraiser, each party shall designate one qualified MAI appraiser, who shall
then jointly select a third qualified MAI appraiser for the purpose of making
the Fair Market Value determination here contemplated. The costs of the
appraiser selected by the parties shall be borne by the party selecting the
same, and the cost of the appraiser who makes the actual determination of Fair
Market Value shall be shared equally by Landlord and Tenant. The determination
of Fair Market Value shall be made by the appraiser no later than thirty (30)
days following his selection.

 

Upon determination of the Fair Market Value, Tenant shall have fifteen
(15) days within which to decide whether it wants to proceed with the purchase
option granted herein. If Tenant fails to advise Landlord in writing of
Tenant’s intention to exercise the option by the expiration of the fifteen (15)
day period, it shall be presumed that Tenant does not wish to exercise the
option, and this Lease will expire according to its terms upon the expiration
of the Lease Term.

 

If Tenant timely advises Landlord of Tenant’s intention to exercise the
option, the closing on Tenant’s purchase of the Premises shall occur no later
than the last day of the Lease Term. If the closing date is other than the last
day of the Lease Term, the rent due hereunder shall be prorated to the date of
closing. Tenant shall pay the Fair Market Value to Landlord on the closing date
in readily available funds. Landlord shall convey title to the Premises by
General Warranty Deed, free and clear of all liens and encumbrances except
those created by, through or under Tenant during the Lease Term. Landlord shall
provide Tenant, at Landlord’s expense, an owner’s title insurance policy in the
amount of the purchase price paid by Tenant for the Premises. If Tenant is in
default under the Lease at the time of the exercise of the option to purchase,
such default must be cured prior to Tenant’s giving Landlord its notice of
intention to exercise.

 

B.                                     Right
of First Refusal. If Landlord desires to transfer, assign or otherwise
convey all of any portion of its interest in Premises, Landlord shall so notify
Tenant in writing (the “Notice”), specifying the terms and conditions, and the
price at which Landlord intends to offer its interest (the “Terms”). Tenant
shall have thirty (30) days after receipt of the Notice within which to notify
Landlord that Tenant desires to purchase the interest being offered on the
Terms. If Tenant fails to so notify Landlord, Landlord shall be free to
consummate a transaction with any third party or parties on the Terms at any
time within the next three (3) months without referring the same to Tenant. If
no sale occurs within that three (3) month period, then prior to consummating
any transaction, the provisions of this Section 10.B shall be complied
with again. If Tenant timely notifies Landlord that Tenant desires to exercise
the right to purchase contemplated by this Section 10.B, the closing shall
occur on the Terms within ninety (90) days of the date of Tenant’s giving such
notice.

 

11.                                 TENANT’S
RIGHT TO ENCUMBER.  Tenant may at any
time during the Pre-Opening Period or the Lease Term encumber the leasehold
estate by mortgage or deed or trust. Such right of Tenant to encumber the
leasehold estate shall be a continuing right and shall not be deemed to be
exhausted by the exercise thereof on one or more occasions. Any such
encumbrance shall be expressly subject to the provisions of this Lease, shall
not encumber Landlord’s fee simple interest in the Premises, and shall be
subordinate to any loans to which Landlord has subordinated its fee simple
interest.

10

 

12.                                 ASSIGNMENT
BY TENANT.  Tenant may assign or
transfer all or any part of its interest in this Lease and the underlying
Premises to any entity or person licensed to operate a casino in the State of
Colorado, provided that the transferee’s financial performance ranks it
among the top fifteen (15) casino operators in the State of Colorado as
measured by the gaming tax rate applied to its revenues during for the
preceding month determined in accordance with the Colorado Limited Gaming Act
and the Gaming Regulations promulgated thereunder, and provided further
that Tenant shall first obtain Landlord’s consent to such assignment or
transfer, which consent shall not be unreasonably withheld.

 

Tenant may, without first obtaining Landlord’s prior consent, transfer
or assign all or any part of Tenant’s interest in this Lease and the underlying
Premises to any entity in which Tenant retains an ownership interest, provided
that, Tenant provides Landlord with not less than thirty (30) days prior
written notice of such intended transfer.

 

13.                                 DEFAULT
BY TENANT.

 

A.                                   Definition
of Event of Default. Each one of the following events is herein referred to
as an “Event of Default.”

 

(1)                                  Any
failure by Tenant to pay the rent or any other monetary sums required to be
paid hereunder on the date such sums are due and the continuance of such
failure for a period of thirty (30) days after written notice of such failure
from Landlord.

 

(2)                                  After
the Commencement Date, Tenant shall vacate or abandon the Premises, except
that, mere vacation as may be necessary to facilitate the re-occupancy of
the Premises for a permitted use pursuant to an assignment or subletting authorized
under the terms of this Lease, or caused by any casualty or condemnation, or as
ordered by any legal authority shall not constitute an Event of Default
hereunder.

 

(3)                                  The
filing of any petition or the commencement of any case or proceeding by Tenant under
any provision or chapter of the Federal Bankruptcy Act, the Federal Bankruptcy
Code, or any other federal or state law relating to insolvency, bankruptcy, or
reorganization or the adjudication that Tenant is insolvent or bankrupt or the
entry of an order for relief under the Federal Bankruptcy Code with respect to
Tenant.

 

(4)                                  The
filing of any petition or the commencement of any case or proceeding described
in subparagraph (3) above against Tenant, unless such petition and all
proceedings initiated thereby are dismissed within sixty (60) days from the
date of such filing; the filing of an answer by Tenant admitting the
allegations of any such petition; the appointment of or taking possession by a
custodian, trustee or receiver for all or any assets of Tenant, unless such
appointment is vacated or dismissed within sixty (60) days from the date of
such appointment.

 

(5)                                  The
insolvency of Tenant or the execution by Tenant of an assignment for the
benefit of creditors; the convening by Tenant of a meeting of its creditors, or
any class thereof, for purposes of effecting a moratorium upon or extension or
composition of its debts; or the failure of Tenant generally to pay its debts
as they mature.

 

11

 

(6)                                  Tenant
shall fail to take possession of the Premises on the Commencement Date.

 

(7)                                  Tenant
shall fail to perform any of the other agreements terms, covenants, or
conditions hereof on Tenant’s part to be performed and such non-performance
shall continue for a period of thirty (30) days after written notice thereof by
Landlord to Tenant or, if such performance cannot be reasonably had within such
thirty (30) day period, Tenant shall not in good faith have commenced such
performance within such thirty (30) day period and shall not diligently proceed
therewith to completion.

 

B.                                     Remedies
of Landlord. If any one or more Events of Default shall happen, then
Landlord shall have the right at Landlord’s election, then or at any time
thereafter, either to:

 

(1)                                  Make
any payment or take any action to cure any such default by Tenant in such
manner and to such extent as Landlord may in good faith deem necessary or
desirable.

 

(2)                                  Give
Tenant written notice in accordance with the Colorado forcible entry and
detainer laws, terminate this Lease as of the date of Tenant’s default or as of
any later date specified in the notice, and demand and recover possession of
the Premises from Tenant.

 

(3)                                  Re-enter
and take possession of all or any part of the Premises and expel Tenant therefrom.
After recovering possession of the Premises, Landlord shall use reasonable
efforts to re-let the Premises.

 

C.                                     Remedies
Cumulative. Each of the remedies described above, and all of the remedies
available to Landlord at law or in equity upon a default by Tenant, shall be
cumulative with and in addition to one another, and may be exercised
simultaneously or successively, as Landlord may deem appropriate, without any
exercise of one remedy being deemed an election of remedies or a waiver to the
exclusion of any other remedy.

 

14.                                 DEFAULT
BY LANDLORD.

 

A.                                   Definition
of Default. Landlord shall be in default under this Lease if Landlord shall
fail to comply with any term, condition or obligation of Landlord under the
Lease, and such failure to comply continues for a period of thirty (30) days
after Tenant gives Landlord written notice of such failure, unless such failure
cannot reasonably be cured within such thirty (30) day period, in which event
the cure period shall extend so long as Landlord has in good faith begun to
take action to cure the default within the thirty (30) day period and
diligently proceeds to completion thereafter.

 

B.                                     Remedies
of Tenant. Upon the occurrence of any default by Landlord, after expiration
of any applicable cure periods, Tenant shall have the right, at its election,
then or at any time thereafter, to exercise any one or more of the following
remedies:

 

12

 

(1)                                  Make
any payment or take any action to cure any such default by Landlord in such
manner and to such extent as Tenant may in good faith deem necessary or
reasonable.

 

(2)                                  Terminate
this Lease as of the date of the default by Landlord, or as of any later date
specified in a written notice of termination to Landlord.

 

(3)                                  Commence
an action to specifically enforce any of Landlord’s obligations under the
Lease.

 

C.                                     Remedies
Cumulative. Each of the remedies described above, and all of the remedies
available to Tenant at law or in equity upon a default by Landlord, shall be
cumulative with and in addition to one another, and may be exercised
simultaneously or successively, as Tenant may deem appropriate, without any
exercise of one remedy being deemed an election of remedies or a waiver to the
exclusion of any other remedy.

 

15.                                 TERMINATION.
In addition to termination in accordance with Sections 2, 13 and 14 hereof,
this Lease may be terminated in the event of the following:

 

A.                                   Termination
By Landlord.  If by April 1,
1999, Tenant has not been licensed by the Gaming Commission to operate the
Premises as a gaming casino, and if, in addition, the One Hundred Forty-Four
Thousand Dollar ($144,000.00) deposit contemplated by Section 3.F.(2)
hereof has not been paid to Landlord, Landlord may terminate this Lease
forthwith, and neither party shall have any obligation to the other thereafter.

 

B.                                     Termination
By Tenant.

 

(1)                                  Tenant
may, in its sole discretion, terminate this Lease at any time during the
Pre-Opening Period as herein defined. In the event Tenant elects to do so,
Landlord’s sole remedy against Tenant shall be to retain the Fifteen Thousand
Dollar ($15,000.00) deposit provided for in Section 3.F.(1) hereof, and to
reenter the Premises.

 

(2)                                  If,
in the sole discretion of Tenant, the casino located on the Premises is not
operating profitably at any time after the first two years of the Initial Term
of this Lease, Tenant may terminate the Lease upon payment to Landlord of
Ninety-Six Thousand Dollars ($96,000.00), representing a year’s rental payments
less the Forty-Eight Thousand Dollar ($48,000.00) deposit balance described in
Section 3.F.(2) hereof. In such event, neither party shall thereafter have
any obligation to the other, except that, Landlord shall make all
reasonable efforts to re-let or re-open the Premises within one year following
the Lease’s termination and shall repay to Tenant any sums realized as a result
of the mitigation obligation here described.

 

(3)                                  If
at any time during the Lease Term the casino’s operations are, in the sole
discretion of Tenant, materially adversely affected by local, state or federal
legislative or administrative changes, Tenant may terminate the Lease upon
payment to Landlord of Ninety-Six Thousand Dollars ($96,000.00), representing
one year’s rental payments less the Forty-Eight Thousand Dollar ($48,000.00)
deposit balance described in Section 3.F.(2) hereof. In such event,
neither party shall thereafter have any obligation to the other, except that,
Landlord shall make all reasonable efforts to re-let or re-open the Premises
within one year following the Lease’s

 

13

 

termination and shall
repay to Tenant any sums realized as a result of the mitigation obligation here
described.

 

In the event Tenant shall terminate the Lease as contemplated by this Section 15.B.(1)
and (2), the Forty-Eight Thousand Dollar ($48,000.00) deposit balance described
in Section 3.F.(2) hereof shall be forfeited to Landlord.

 

16.                                 MISCELLANEOUS.

 

A.                                   No
Implied Waiver. No failure by Landlord or Tenant to insist upon the strict performance
of any term, covenant, or agreement contained in this Lease, or to exercise any
right or remedy in connection therewith, and no acceptance of full or partial
payment during the continuance of any default by Landlord or Tenant, shall
constitute a waiver of any such term, covenant, or agreement or any such right
or remedy or any such default by Landlord or Tenant.

 

B.                                     Survival
of Provisions.  Notwithstanding any
termination of this Lease, the same shall continue in force and effect as to
any provisions hereof which specifically contemplate and require observance or
performance by Landlord or Tenant subsequent to termination.

 

C.                                     Binding
Effect. This Lease shall extend to and be binding upon the heirs,
executors, legal representatives, successors, and permitted assigns of the
respective parties hereto. The terms, covenants, agreements, and conditions in
this Lease shall be construed as covenants running with the Premises.

 

D.                                    Recordation.
Neither this Lease nor any memorandum thereof shall be recorded. However,
Landlord understands, and agrees that as a condition precedent to Tenant’s
entry into this Lease, Tenant shall obtain from any and all lenders of record
as evidenced by the title insurance policy required by Section 6 hereof
such subordination and attornment agreements as Tenant deems necessary, and
Landlord shall assist Tenant as may be required in securing such agreements.

 

E.                                      Notice.
All notices required or permitted under this Lease shall be given by registered
or certified mail, return receipt requested, correctly addressed and postage
prepaid, or by hand or commercial carrier delivery, or by telecopier as
follows:

 

If to Landlord:

 

Ms. Lois L. Woods

P.O. Box 489

Cripple Creek, Colorado 80813

Telecopier Number: 719/689-2587

 

with copy to:

 

Robert M. Duitch, Esq.

811 South Tejon Street

Colorado Springs, Colorado 80903

 

14

 

Telecopier Number: 719/632-0006

 

If to Tenant:

 

James B. Druck, Esq.

President.

Southwest Casino and Hotel Corp.

2001 Killebrew Drive, Suite 306

Minneapolis, Minnesota 55425

Telecopier Number: 512/853-9991

 

with copy to:

 

Christopher D. Whitney, Esq.

Mulliken, Gleason, Weiner & Whitney, P. C.

102 South Tejon Street, Suite 700

Colorado Springs, Colorado 80903

Telecopier Number: 719/635-8706

 

Any notice
delivered by mail in accordance with this Section shall be deemed to have
been duly given on the third business day after the same is deposited in any
post office or postal box regularly maintained by the United States Postal
Service. Any notice delivered by telecopier shall be deemed to have been duly
given upon receipt if concurrently with sending by telecopier receipt s
confirmed mechanically or by the recipient. Any notice delivered by hand or
commercial carrier shall be deemed to have been given upon actual receipt.
Either party, by notice given as herein provided, may change the address to
which future notices may be sent.

 

F.                                      Time
of the Essence. Time is of the essence under this Lease for the performance
and observance of all obligations of Landlord and Tenant, and all provisions of
this Lease shall be strictly construed.

 

G.                                     Captions
for Convenience. The headings and captions hereof are for convenience only
and shall not be considered in interpreting the provisions of this Lease.

 

H.                                    Severability.
If any provision of this Lease shall be held invalid or unenforceable. The
remainder of the Lease shall not be affected thereby, it being the intent of
the parties that the provisions of this Lease shall be enforceable to the
fullest extent permitted by law.  There
shall be deemed substituted for any invalid or unenforceable provision a valid
and enforceable provision as similar as possible to the invalid provision.

 

I.                                         Jurisdiction
and Governing Law. This Lease shall be interpreted and enforced in the
courts of the state of Colorado and in accordance with the laws of the State of
Colorado.

 

J.                                        Integration/Entire
Agreement. This Lease, the Exhibit hereto, and the other documents
expressly referenced herein constitute the entire agreement between the parties
with regard to the subject matter hereof. and any extrinsic covenants,
agreements,

 

15

 

representations,
warranties, conditions or terms are superseded hereby and shall be of no force or
effect.

 

K.                                    Modification.
No provision of this Lease may be amended or modified except to the extent any
such amendment or modification is expressly and specifically set forth in a
written instrument executed by both parties.

 

IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the day and year first above written.

 

	
   

  	
  LANDLORD:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  
	
   

  	
  Lois L. Woods

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOUTHWEST CASINO
  AND HOTEL CORP.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Title:  President

  
				

 

16

 

EXHIBIT A

 

INVENTORY

 

Upstairs
Restaurant Space

 

12 tables, glass
tops

36 chairs

4 shelf stainless
rack

Small cashier
stand

Large cashier
stand

Cash register

Beverage air
cooler

Pepsi
dispenser/ice holder        (*Landlord
does not warrant title)

2 chandeliers

Heat lamp over
counter pass-through

Stainless cart

Phone

 

Upstairs

 

Hall - Locking
cabinet

3 light fixtures
(over table type)

Security office,
wires, racks

Phone

Restroom

- Lockers

Time clock

Freezer

Refrigerator

Stainless
five-shelf rack

Beverage system

Desk, two chairs

CO2 system

Beer cooler doors
- back hall

Fire extinguisher

 

Downstairs

 

Garavetta Stair
Trac             (*Landlord
does not warrant title)

Ambulatory seat

Back hall
chandelier

 

 

Mezzanine

 

Brass rail

1 camera

Mirrors on wall

3 rest chairs

2 square, 1 round
table

Bar

2 old, tired
buffalo heads

 

Main
Casino, Downstairs

 

3 Elk horn
chandeliers

2 inside

1 outside

Brass rails on
stairs

Ice chest,
stainless

Phones - 2 pay

Cigarette
machine                   (*Landlord
does not warrant title)

Drinking fountain

3 cameras

2 TV’s and stands

Cabinet

Front and back bar

Slot stands

7 short

16 tall

Brass rail -
bottom bar

2 outside benches

1 Elk head

2 Mule deer

Water heater

19 chairs, bar
height and regular height

Fire extinguisher

Cash register

4 tables - 2
round, 2 square

 

Cage equipment

1 4-door cabinet
for coin storage

3 -door cabinet
for storage

Front counter

1 section

2 doors

2 drawers

1 section

3 doors

 

 

2 drawers

 

Back
Room of Cage

 

Wire grate,
built-in

Cabinets: 3

2 with 2 large doors

1 with 6 long narrow doors

Built-in shelf

 

Kitchen
Equipment

 

Wolf oven and
open-top grill

Model #
KCHSS-4-1829-FT34L

Serial #
77598-000-K91

Condition: fair

 

Frymaster

Model # GF145D

Serial #
911OFM0240

Condition: Fair

 

Wolf combination
broiler frytop 29” wide oven

Model #
SCB-36-CHSS-29

Serial #
77598-002K91

Condition: Fair

 

Pepsi Soda
Dispenser              (*Landlord
does not warrant title)

Model # OM200

Serial # BIA-21847

 

Scottsman ice
maker w/o storage

Model # CM500AE-1D

Serial #
471899-03K

Condition: ice
maker is in working condition at the present time

 

Traulsen & Co.
refrigerator and/or freezer

Model # GHT2-32WUT

Serial # C1l219

Condition: fair

Model # GLTl-32WUT

Serial # C11224

Condition:

 

 

True refrigeration
unit

Model # TBB-4

Serial # AE4440A

Condition:

 

Edlund Can Opener

 

Randall Commercial
Refrigerator/Freezer

Model # 9401

Serial # APS-5190

Condition: Fair

 

Three Compartment
Steam Table

Model # unknown

Serial # unknown

Condition: Poor

 

Sharp Cash
Register

Serial # 29043845

 

Upstairs
Bar

 

True Beer
Dispenser and Beer Bottle Cooler

Model # TDD-3

Refrigeration Unit

Model # TBB-3

Serial # AE4440A

Condition: Poor

 

Lacrosse Three
Compartment Sink and Mixing Station

Model # SW36 -
Serial # 9IAK300

Model #563C -
Serial # 9IAK272

Model # 512BSU -
Serial # 91AMI05

Model # 524ET+7 -
Serial # 92AC262

Bar Gun Model #
518RSC - Serial # 91AJ302

Condition: Good

 

Downstairs
Bar

 

Perlic Beer
Refrigerator

Model # C5064ESCUL

Serial # 337423

Condition:
Excellent

 

Perlic Commercial
Refrigerator

 

 

Model # 8365AUL

Serial # 343108

Condition:
Excellent

 

Perlic Beer
Dispenser & Beer Cooler

Model # C5064ESCUL

Serial # 340393

Condition:
Excellent

 

Perlic Commercial
Refrigerator/Freezer

Model # 7260EUL

Serial # 343704

Condition: Poor

 

Auto Bar Controls
Soda Gun

Model #
WBM-14660-B

Serial # 4395-1118

Condition: Fair .

 

Infra Hand Sink
(No Numbers)

 

Sharp Cash
Register

Serial # 2904-8625

 

Sanyo 19” TV

 

Kitchen
(no model or serial numbers available)

 

1 Tabco Stainless
Steel Prep Counter

1 Stainless Steel
Sink with Hose and Garbage Disposal

1 Stainless Steel
Pot Sink

1 Plastic Mop SinkExhibit
10.13

 

EMPLOYMENT
AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT IS SUBJECT TO THE

PROVISIONS
OF SECTION 181.78 OF THE MINNESOTA STATUTES

 

THIS
AGREEMENT (“Agreement”) is made and entered into effective
July 1, 2004 (“Effective Date”),
by and between Southwest Casino and Hotel Corp., a Minnesota corporation (“Employer”), and James B. Druck (“Employee”).  Employee and Employer are collectively
referred to as the “Parties”.

 

BACKGROUND

 

A.                                   Employee
has been employed by Employer.

 

B.                                     The
Parties wish to state the final binding terms of Employee’s continued
employment by Employer.

 

C.                                     The
Parties agree to the terms and conditions of Employee’s employment by Employer
stated in this Agreement.

 

AGREEMENT

 

In consideration of the
Background and the Parties’ agreement as to Employee’s commencement or
continuation of employment, the payment of compensation and other benefits (as
defined in this Agreement), the Parties’ mutual agreements stated in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which the Parties acknowledge, the Parties agree as follows:

 

Section 1.  Employment Terms and Duties.

 

Section 1.1  Term.  Subject to the provisions of Section 4
of this Agreement regarding termination, Employer agrees to employ Employee and
Employee agrees to be employed by Employer for an initial term ending
July 1, 2006 (the “Initial Term”),
subject to automatic renewal for additional one year terms unless terminated
earlier in accordance with Section 4.

 

Section 1.2  Duties.

 

(a)                                  Employer
employs Employee on a full-time basis as its Chief Executive Officer, or in any
other capacity that is commensurate with Employee’s experience and current
position and the Board of Directors of Employer may, in its sole discretion,
designate. Employee will perform any and all duties as the Board of Directors
may reasonably direct.

 

(b)                                 During
the term of Employee’s employment by Employer, Employee will devote Employee’s
full attention and energy to the performance of Employee’s duties to
Employer.  Employee will perform
Employee’s duties under the supervision of and will report to an executive
committee made up of the President, the CEO and the Chairman of the Board of
Directors (the “Executive Committee”).
If no such Executive Committee exists, Employee will report to the Board of
Directors. Employee warrants and represents to Employer that Employee has no
contractual commitments inconsistent with Employee’s obligations under this
Agreement, and that during the term of this Agreement, Employee will not render
or perform services for any other corporation, firm, entity or person which

 

1

 

are inconsistent with the
provisions of this Agreement and which are not authorized by Employer. For
purposes of this Agreement, Employee and Employer understand that Employee is
permitted to serve on outside Boards of Directors, provided that such service
does not interfere with Employee’s rendition of services to Employer and does
not violate any non-competition or other covenant in this Agreement.

 

Section 2.  Compensation

 

Section 2.1  Salary.  For all services rendered by Employee,
Employee shall receive (i) an annual salary of $220,000 (the “Salary”) from Employer for the term of Employee’s
employment under this Agreement, subject to annual adjustment as determined by
the compensation committee of the Board of Directors. Employer will pay the Salary in equal semi-monthly
installments in accordance with Employer’s standard payroll practices. For
purposes of this Section 2, “compensation committee” refers to the Board
of Directors of Employer, unless and until a compensation committee is
established.

 

Section 2.2
Bonus. Additional compensation in the form of a bonus,
if any, will be determined on a purely discretionary basis by the compensation
committee of the Board of Directors based upon Employer’s overall performance,
Employee’s individual performance and any other factors the compensation
committee deems appropriate.

 

Section 2.3  Benefits.  During the term of the Employee’s employment
under this Agreement, Employee is entitled to participate in the employee
benefits or benefit plans the Employer’s Board of Directors provides from time
to time to other full-time employees, including, but not limited to, health,
disability and life insurance. Employee’s health, disability and life insurance
must be commensurate with such benefits provided to Employee on the effective
date of this Agreement. In addition, during the term of Employee’s employment
under this Agreement, Employee’s former spouse is entitled to participate in
the medical benefit plan of Employer to the extent legally-permitted by the
terms and conditions of such insurance plans. Notwithstanding the foregoing,
Employer may unilaterally amend or terminate all or any of the Employee’s
benefits and those of his former spouse so long as any amendment or termination
applies to each and every employee of Employer and subject to the terms and
conditions of Employer’s benefit plans and applicable laws.

 

Section 2.4  Reimbursement of Expenses.  Employer will reimburse Employee for all
reasonable and necessary out-of-pocket expenses incurred at the request of
Employer in the performance of Employee’s duties under this Agreement provided
that Employee properly accounts to Employer for all expenses in accordance with
the rules and regulations of the Internal Revenue Service under the Internal
Revenue Code of 1986, as amended (the “Code”), and in accordance with the
standard policies of Employer relating to reimbursement of business expenses.
In addition, Employer will reimburse Employee up to $1,000 per month for
expenses related to Employee’s personal automobile.

 

Section 2.5
Option.  Upon
the execution of this Agreement by the Parties, Employer shall grant Employee a
non-qualified option, exercisable for five years, to purchase 600,000 (pre
one-for-two split) shares of Employer’s Common Stock at an exercise price of
$0.50 per share for a total exercise price equal to $300,000 (the “Option”). The Option will become
exercisable immediately as to 200,000 shares with the remaining 400,000 shares
becoming exercisable (a) as to 1/24th of the remaining shares on the
first day of each of the next 24 Months and (b) as to 50 percent of any shares
not then exercisable, on the date the State of Missouri approves a law

 

2

 

permitting construction
and operation of a casino by Employer at Rockaway Beach, Missouri or on the
date the State of Minnesota approves construction and operation of a harness-racing
track by Employer in the Twin Cities Metropolitan Area of Minnesota. The
provisions of (b) are cumulative such that if both the Rockaway Beach casino
and the harness-racing track are approved, the Option will be exercisable as to
all Option shares. If, Employee’s employment with Employer terminates for any
reason other than for Cause (as defined in Section 4.4) or voluntary
termination under Section 4.1(f), the Option will become exercisable as to
all shares immediately upon termination, except, if Employee’s employment
continues under Section 4.2(c) of this Agreement, the Option will become
exercisable in accordance with this Section 2.5 and will continue in force
until the Option’s termination date.

 

Section 3. Restrictive
Covenants.

 

Section 3.1  Confidential Information.  Employee acknowledges that the confidential
information and data obtained by Employee during the course of Employee’s
performance under this Agreement (or Employee’s work for Employer before the
date of this Agreement) concerning the business or affairs of Employer (the “Confidential Information”) are the property of
Employer.  Employee agrees that Employee
will not disclose to any unauthorized persons or use for Employee’s own account
or for the benefit of any third party any Confidential Information or data
without the written consent of the Chief Executive Officer of Employer during
Employee’s employment or for a period of three years after termination of
Employee’s employment. Employee agrees to deliver to Employer upon termination
of Employee’s employment all memoranda, notes, plans, records, reports and
other documentation (and copies of that documentation) relating to the business
of Employer that Employee may then possess or have under Employee’s control.

 

Section 3.2  Title.  Subject to the provisions of the attached
Exhibit B, all documents, inventions, designs or other tangible property
relating in any way to the business of Employer that are conceived or generated
by Employee or come into Employee’s possession during the Initial Term or any
extension of employment will be automatically assigned to and/or will be and
remain the exclusive property of Employer. Employee agrees to return all such
documents and tangible property including, but not limited to, all records, manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports,
data, financial information and copies of such documents and tangible property,
which are the property of Employer or which relate in any way to the business,
practices or techniques of Employer, and all other property of Employer,
including, but not limited to, all documents that in whole or in part contain
any Confidential Information of Employer that are in the possession or under
the control of Employee, to Employer upon termination of this Agreement,
Employee’s employment, or at any time upon request of Employer.

 

All ideas, designs,
graphics, logos, slogans, copies, software, derivative works and all other
materials or intellectual property relating in any way to the business of
Employer created by or on behalf of Employee in the course of Employee’s
employment under this Agreement automatically becomes the property of and is
solely owned by Employer, its successors, assigns, and licensees, in
perpetuity, without reservation. Furthermore, all rights of whatever nature
affixed to such ideas, designs, graphics, logos, slogans, copies, software,
derivative works and other materials or intellectual property relating in any
way to the business of Employer, including, without limitation, any trademark
or service mark rights or copyrights and any

 

3

 

goodwill appurtenant to
such rights, any right of publicity, and any rights, title or interest which
may affix under any copyright laws now or hereafter in force and effect in the
United States or any other country or countries, automatically becomes the
property of and is solely owned by Employer, its successors, assigns and
licensees, in perpetuity, without reservation.

 

Section 3.4
Non-Competition Covenant. In consideration of the covenants of the Employer in this
Agreement, the receipt and sufficiency of which Employee acknowledges, Employee agrees that Employee will not at any
time during his employment with Employer, or for a period of one year after
Employee’s last day of employment with Employer, directly or indirectly own an
interest in, join, operate, control, manage or participate in or be connected
as an officer, employee, agent, independent contractor, consultant, partner, shareholder
or principal, or in any other manner with any Competitor within the Business
Territory. The term “Competitor” includes any Native American management
company, Indian tribe, or any person, firm, sole proprietorship, partnership,
association, limited liability company, corporation or other entity whatsoever
that engages in, or is about to engage in, any aspect of the gaming industry.
The term “Business Territory” includes the area within a 100 mile radius
of any location in which Employer has developed, or is in the process of
developing, as of the date of such termination, more than an insignificant
amount of business; provided, that, the phrase “in the process of developing”
includes any business that is at least the subject of a non-binding letter of
intent to which the applicable person or entity is party.  Notwithstanding anything to the contrary in
this Section 3.4, ownership by Employee, (y) of less than 2 percent of the
outstanding securities of a publicly-held corporation, or (z) as a passive
investment, of capital stock or other securities of any corporation dissimilar
from Employer, will not breach this Section 3.4.

 

Section 3.5
Non-Solicitation Covenant. In consideration of the
covenants of the Employer in this Agreement, the receipt and sufficiency of
which Employee acknowledges, Employee agrees that for a period of one year
after termination of Employee’s employment with the Employer, the Employee will
not directly or indirectly:

 

(a)                                  Hire
or solicit, or cause or induce others to hire or solicit for employment, any
employee of the Employer or encourage any employee (including persons who were
employed by Employer within ninety (90) days before or after Employee’s
termination date) to leave the employment of the Employer.

 

(b)                                 Disparage
or defame the Employer or request or advise any customer, client, prospective
client or vendor to curtail or cancel their business relationship with
Employer.

 

Section 3.6  Remedies.  Employee acknowledges that any violation of
Section 3 of this Agreement by Employee would result in immediate and
irreparable injury to Employer for which an award of money damages would not be
an adequate remedy. Employee agrees that employer has the right to obtain
equitable relief including an injunction to enforce specifically the terms of
this Agreement, and to obtain any other legal or equitable remedies that may be
available to Employer.

 

Section 3.7  Assignment.  The transfer of Employee from Employer to any
subsidiary, parent or affiliate, or to a successor company that results from
any acquisition, merger or reorganization of Employer will operate as an
assignment to that company of Employer’s rights under this Agreement, provided
that Employee’s position with the new entity must be

 

4

 

commensurate with
Employee’s position with Employer immediately before such transfer and Employer
may not transfer Employee without Employee’s prior consent to any entity that
necessitates any relocation of Employee to a location that is more than 75
miles from Employee’s primary residence. The aforementioned assignment will not
terminate or modify this Agreement, except that the company to which Employee
is transferred will be construed, for the purpose of this Agreement, as
standing in the same place as Employer as of the date of assignment.  All covenants and agreements under this
Agreement will inure to the benefit of and be enforceable by the successors and
assigns of Employer, including assignees by operation of law.

 

Employee’s performance
under this Agreement requires Employee’s personal services, unique skills and
experience and, therefore, may not be assigned or transferred by Employee nor
may Employee delegate Employee’s duties under this Agreement to another person
without the prior written consent of the Board of Directors of Employer.  Employer retains the exclusive right to
withhold consent for any reason.

 

Section 3.8  Survival.  Except as otherwise provided expressly in
this Agreement, the provisions of this Section 3 will survive (a) the
termination of this Agreement as a result of breach or otherwise, or (b) the
termination of Employee’s employment under this Agreement. However, if Employer
breaches Employer’s obligation to make any payments to Employee under this
Agreement, the provisions of Section 3.4 and 3.5 of this Agreement will
not survive a termination of this Agreement for so long as such breach remains
uncured.

 

Section 4. Termination

 

Section 4.1
Grounds for Termination. This Agreement will terminate prior to the expiration of the Initial Term
stated in Section 1.1 or any renewal term if at any time during the
Initial Term or any renewal term:

 

(a)                                  Employer elects to terminate this
Agreement for “Cause” (as defined in Section 4.4 below) and notifies
Employee in writing of such election,

 

(b)                                 Employee becomes “Disabled” (as defined in
Section 4.5 below),

 

(c)                                  Employee dies,

 

(d)                                 Employer elects to terminate this Agreement
for no reason or for any reason other than for “Cause” (as defined in
Section 4.4 below) and notifies Employee in writing of such election,

 

(e)                                  Employee voluntarily terminates his
employment for “Good Reason” (as defined in Section 4.6 below) and
notifies Employer in writing of such election,

 

(f)                                    Employee voluntarily terminates his
employment for no reason or for any reason other than a “Good Reason” (as
defined in Section 4.6 below), or

 

(g)                                 Employee and Employer mutually agree to
terminate this Agreement.

 

Section 4.2
Termination Date and Payment to Employee.

 

(a)                                  If this Agreement is terminated under subsection (a)
or (f) of Section 4.1, termination will be effective immediately and no
further payments of Salary, Bonus or other forms of compensation or benefits
will be due or payable to Employee with respect

 

5

 

to any period after or events occurring after the date
of termination, except as may be required by applicable law, and all vested
options may be exercised for only 30 days.

 

(b)                                 If this Agreement is terminated under
subsection (b) or (c) of Section 4.1, termination will be effective
immediately, except that Employer must pay to Employee’s beneficiaries or
estate, in the case of death, or to Employee, in the case of disability, a
termination payment equal to the Base Salary at the annual rate in effect as of
the date of termination for (i) a period of 90 days or (ii) the remainder of
the term of this Agreement, whichever is less (the “Termination
Payment”); provided that the
amount of any Termination Payment will be reduced by the amount of any death or
disability payments payable to the Employee under anydeath or disability
insurance coverage in effect as of the date of termination.

 

(c)                                  If either party elects to terminate this
Agreement under subsections (d) or (e) of Section 4.1, termination will be
effective thirty (30) days after delivery of written notice of termination to
the other party and subject to Employee’s right to elect to continue employment
with Employer under this Agreement on the following terms:

 

(i)                                     Employer will employ Employee for the minimum number
of hours per pay period required for Employee and Employee’s former spouse to
qualify for fullbenefits under Employer’s benefit plans;

 

(ii)                                  Employee will perform those duties assigned
to Employee by the Board of Directors or other member of the Executive
Committee; and

 

(iii)                               In consideration of Employee’s continued
service to Employer and the continuation of Employee’s non-competition and
non-solicitation covenants under Sections 3.4 and 3.5, Employee will be paid
Employee’s base salary at the time of termination for a period of 18 months,
and after 18 months, a salary equal to not less than $25,000 per year (or such
other amount as required to maintain Employee’s eligibility under Employer’s
health insurance plan), and, subject to Section 2.3 of this Agreement,
continuation of all benefits for Employee and Employee’s former spouse provided
under Employer’s health insurance plan; or

 

(d)                                 If this Agreement is terminated under
subsection (g) of Section 4.1, termination will be effective as of
the date agreed upon by the Parties and Employee will be entitled to receive
compensation due to the Employee through the last day of employment or as
otherwise agreed upon by the Parties.

 

Section 4.3
Exercise of Unexpired Stock Options. Except as stated in this Agreement, the
termination of this Agreement, the vesting and exercisability of stock options
or other incentive awards held by the Employee as of the termination date will
be controlled by the terms of the individual agreement or agreements evidencing
such options or other incentive awards.

 

Section 4.4
“Cause” Defined. As used in this Agreement, “Cause” means:

 

(a)                                  conviction
of Employee for any fraudulent or criminal act in connection with Employer’s
business;

 

(b)                                 proven
malfeasance by Employee in connection with Employer’s business; or

 

6

 

(c)                                  a
final determination by any regulatory body to which Employer is subject, that
Employee’s continued employment with Employer will result in (i) the disapproval,
modification, or non-renewal of any contract or proposed contract under which
the Employer or any of its subsidiaries has sole or shared authority to
develop, license or manage any gaming operations, wherever located, or (ii) the
disapproval, loss, modification, non-renewal or non-reinstatement of any
license, franchise, approval or consent issued by or sought from any federal,
state or tribal governmental authority with respect to the conduct of any
portion of the business of the Employer or any subsidiary.

 

Section 4.5
“Disabled” Defined.  As used in this Agreement, “Disabled” means
any mental or physical condition that renders Employee unable to perform the
essential functions of his position, with or without reasonable accommodation,
as defined by various state and federal disability laws. Employee is presumed
to have such a disability for the purpose of this Agreement if Employee
qualifies because of illness or incapacity to begin receiving disability income
insurance payments under any long-term disability income insurance policy that
Employer maintains for the benefit of Employee. If there is no long-term
disability policy in effect at the date of Employee’s illness or incapacity,
Employee is presumed to have such a disability for the purpose of this
Agreement if Employee is substantially incapable of performing his duties for a
period of more than twelve (12) consecutive weeks or as may otherwise be
required by applicable law.

 

Section 4.6
“Good Reason” Defined. As used in this Agreement, “Good Reason” means (a) the assignment to
Employee of any duties and responsibilities materially inconsistent with the
position that Employee holds as of the date Employee enters into this
Agreement, (b) a material adverse alteration or diminishment in the nature or
status of Employee or the Employee’s duties and responsibilities or conditions
of employment from those in effect as of the date Employee enters into this
Agreement; (c) relocation of the Employee to an office or site more than 75
miles from the Employee’s primary job location as of the date Employee enters
into this Agreement; (d) after the Initial Term, a determination by Employee
that Employee and Employer would be better served by Employee assuming fewer
responsibilities on behalf of Employer than may be required under this
Agreement; or (e) a change in the organizational structure of Employer,
requiring the Employee to report to person(s) other than the Executive
Committee or the Board of Directors of Employer; provided, that in the case of
clause (a) or (b), Employee has provided Employer with written notice detailing
the reasons why he believes the criteria specified in clause (a) or (b) have
been satisfied and Employer does not resolve such issue to the reasonable
satisfaction of the Employee within 30 days after receipt of such notice.

 

Section 4.7  Effect of Termination. Notwithstanding termination of this
Agreement, Employee, in consideration of his employment under this Agreement up
to the date of termination, remains bound by the provisions of this Agreement
that relate specifically to periods, activities or obligations existing upon or
subsequent to the termination of Employee’s employment.

 

Section 5. Change in
Control.

 

Section 5.1
“Change in Control” Defined. For purposes of this Agreement, “Change in Control” means:

 

7

 

(a)                                  any merger, acquisition, reorganization
or consolidation of Employer into or with any other entity or entities that
results in the exchange of outstanding shares of Employer for securities or
other consideration issued or paid or caused to be issued or paid by any such
entity or affiliate of such entity under which the shareholders of Employer
immediately prior to the transaction do not own a majority of the outstanding
shares of the surviving corporation immediately after the transaction;

 

(b)                                 any sale, lease, license (on an exclusive
basis), or transfer by Employer of all or substantially all its assets, or an
exclusive license granted by Employer of substantially all of its intellectual
property to a third party, or a liquidation of Employer;

 

(c)                                  any statutory exchange of securities with
another entity (except where Employer is the acquiring entity);

 

(d)                                 the acquisition of ownership by any
person or group of more than 50% of Employer’s outstanding voting stock from
existing shareholders (whether or not approved by Employer’s Board of
Directors) after the date of this Agreement, provided that this
subsection (d) will not apply to the closing of the issuance and sale of
Employer’s securities in an underwritten public offering, the issuance of
Employer capital stock under a registration of its shares under the Securities
Act of 1933, as amended, or under a private placement of Employer capital stock
exempt from the registration requirements of the Securities Act;

 

(e)                                  the “Continuity Directors” (as defined below)
cease to constitute a majority of Employer’s Board of Directors; or

 

(f)                                    any other change of control (except as a
result of one or more venture capital financings or other similar transactions
involving institutional funding) that would be required by the Securities and
Exchange Commission to be reported if Employer were a public company, including
successive series of such transactions.

 

For
purposes of this Section 5.1, “Continuity Directors” means any individuals
who are members of Employer’s Board of Directors as of the date of this
Agreement and any individual who subsequently becomes a member of Employer’s
Board of Directors whose election, or nomination for election, by Employer’s
shareholders was approved by a vote of at least a majority of the Continuity
Directors.

 

Section 5.2
Remedies for “Change in Control”.  If,
with or without the consent of Employer, a Change in Control occurs and within
nine months after that Change in Control, either Employer terminates Employee’s
employment under Section 4.1(d) above or Employee terminates his
employment under Section 4.1(e) above, Employee is entitled to exercise
Employee’s rights under Section 4.2(c) of this Agreement and all unexpired
stock options held by Employee as of the termination date will vest
immediately, notwithstanding the provisions of any option agreement between
Employee and Employer to the contrary, in accordance with the provisions of
Section 4.3 above.

 

Section 6. Provisions of
General Application

 

Section 6.1  Background Checks and Related Information.  Employee acknowledges that Employer’s gaming
business is extensively regulated and, as a result, various regulatory

 

8

 

bodies may request or
require background investigations and background information regarding
Employee. During the term of this Agreement, Employee agrees to comply with any
and all background investigations conducted or requested from time to time by
Employer or any federal, state, tribal or other regulatory authority. Employee
acknowledges and agrees that the provisions of this Section 5.1 are a
material part of this Agreement.

 

Section 6.2  Notices.  All notices, requests and other communications
from any of the Parties to this Agreement to any of the other Parties must be
in writing and, except as otherwise provided in this Agreement, will be
considered to have been duly given or served if sent by certified or registered
United States mail, postage prepaid, return receipt requested, to the
respective Parties at the address stated below or to any other address a Party
may designate by notice to the other Party.

 

	
  As to Employer:

  	
   

  	
  Southwest Casino and
  Hotel Corp.

  
	
   

  	
   

  	
  2001 Killebrew Drive,
  Suite 306

  
	
   

  	
   

  	
  Minneapolis, MN  55425

  
	
   

  	
   

  	
   

  
	
  As to Employee:

  	
   

  	
  Mr. James B.
  Druck

  
	
   

  	
   

  	
  140 Park Avenue

  
	
   

  	
   

  	
  Pine, CO 80470

  

 

Section 6.3
Amendment.  Only
a writing signed by both Employer and Employee may amend this Agreement.

 

Section 6.4  Parties in Interest.  This Agreement is binding upon, and the
benefits and obligations of this Agreement inure to the Parties and their
respective heirs, legal representatives, successors, assigns, transferees or
donees.

 

Section 6.6  Entire Agreement.  The Parties intend this Agreement as the
final and binding expression of their agreement and as the complete and
exclusive statement of its terms.  This
Agreement supersedes and revokes all other prior negotiations, representations
and agreements, whether oral or written, regarding the employment relationship
between Employer and Employee.

 

Section 6.7
Enforceability. 
If any provision in this Agreement is declared unenforceable or invalid,
that declaration will not impair any other provision of the Agreement, each of
which will be enforced according to their respective terms.

 

Section 6.8  Construction.  The headings of the paragraphs of this
Agreement are for the purpose of identification only and must not be used for
the construction or interpretation of any portion of this Agreement. Waiver by
any Party of any default, violation or nonperformance under this Agreement will
not be deemed a waiver of that Party’s right to seek legal or equitable relief
for any subsequent violation of the Agreement. As used in this Agreement and where
necessary, the singular includes the plural and vice versa, and masculine,
feminine and neuter expressions are interchangeable.

 

Section 6.9  Applicable Law.  This Agreement was made and entered into in
Minnesota, and the laws of the State of Minnesota govern and apply to this
Agreement and any enforcement, construction or interpretation of this
Agreement.

 

9

 

IN
WITNESS WHEREOF, Employer and Employee have knowingly,
voluntarily and with the right to seek independent counsel, executed this
Agreement on the date(s) reflected below with the Effective Date as stated
above.

 

	
  DATE:  July 21,  2004

  	
  DATE:  July 21, 2004

  
	
   

  	
   

  
	
  EMPLOYEE

  	
  SOUTHWEST CASINO AND

  
	
   

  	
  HOTEL CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  James B. Druck

  	
   

  	
  Thomas
  E. Fox, President

  	
   

  
					

 

10

 

EXHIBIT B

 

NOTICE
UNDER

MINNESOTA
STATUTES 181.78 (Subd. 3)

 

	
  TO:

  	
   

  	
  James B. Druck

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
  Southwest Casino and
  Hotel Corp. (the “Employer”)

  

 

You have entered into an
Employment Agreement with Employer requiring you, among other things, to assign
or offer to assign your rights in certain inventions to Employer.  You are hereby notified that the Employment
Agreement does not apply to any invention for which no equipment, supplies,
facility or trade secret information of Employer was used and which was
developed entirely on your own time, and (1) which does not relate (a) directly
to the business of Employer, or (b) to Employer’s actual or demonstrably
anticipated research or development; or (2) which does not result from any work
performed by you for Employer.

 

	
   

  	
  SOUTHWEST CASINO AND HOTEL
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  
					

 

I hereby acknowledge
receipt of the foregoing notice.

 

	
   

  	
   

  	
   

  
	
   

  	
  James B. Druck

  

 

11

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