Document:

Exhibit 10.17

BreitBurn Energy
Partners L.P.

2006 Long-Term Incentive Plan

Performance Unit-Based
Award Agreement

	
  Grantee:

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
  (the “Grant Date”)

  

 

This Performance
Unit-Based Award Agreement, dated as of
                 ,
2007 (this “Agreement”), is between BreitBurn
GP, LLC (the “Company”), as the general partner
of BreitBurn Energy Partners L.P., a Delaware limited partnership (the “Partnership”), and
                 ,
an Employee of the Company or its Affiliates (the “Grantee”).  Certain capitalized terms used herein are
defined in Appendix A hereto. 
Capitalized terms used in this Agreement but not otherwise defined
herein or in Appendix A shall have the meanings ascribed to such terms
in the Plan, unless the context requires otherwise.

WHEREAS, the Company maintains the BreitBurn Energy Partners L.P. 2006
Long-Term Incentive Plan (the “Plan”), the
terms of which are hereby incorporated by reference and made a part of this
Agreement;

WHEREAS, the Plan provides for the issuance of Other Unit-Based Awards
which are denominated, payable or valued in Units, or are otherwise based on or
related to Units, in whole or in part; and

WHEREAS, the Committee, appointed to administer the Plan, has
determined that it would be to the advantage and in the best interest of the
Company and the Partnership to issue the Other Unit-Based Award provided for
herein (the “Performance Unit-Based Award”) to
the Grantee as an inducement to enter into or remain in the service of the
Company, the Partnership or their Affiliates, and as an incentive for increased
efforts during such service.

NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:

1.                                       Grant
of Award. 
The Company hereby grants to the Grantee a Performance Unit-Based Award
of                
notional units (the “Performance Units”)
under the Plan on the terms and conditions set forth herein.  The Performance Unit-Based Award represents a
potential payment in cash or Units that may become vested and payable on the
terms and conditions set forth in this Agreement, subject to the Grantee’s
continued Service.  The Performance
Unit-Based Award shall not represent actual Units or other equity securities of
the Company or the Partnership, and unless and until the Performance Unit-Based
Award has become vested and payable and the Grantee has elected to receive
payment with respect thereto in Units, the Performance Unit-Based Award shall
not represent any right to receive actual Units or equity securities of the
Company or the Partnership.  In the event
of any conflict between the terms of this Agreement and the Plan, which is
incorporated herein by reference as a part of this Agreement, the terms of the
Plan shall control.

 

2.                                       Vesting.  Subject to the Grantee’s continued Service,
the Performance Unit-Based Award shall vest in full with respect to 100% of the
Performance Units subject thereto on [insert date that is the third anniversary
of January 1 of the year in which the grant is made] (the “Scheduled
Vesting Date”); provided, however, that in the event of a Change of
Control prior to the Scheduled Vesting Date, the Performance Unit-Based Award
shall vest in full with respect to 100% of the outstanding Performance Units
subject thereto immediately prior to the consummation of the Change of Control.

3.                                       Payment.  As of the date on which the
Performance Unit-Based Award (or any portion thereof) vests (the “Vesting Date”), the vested portion of the Performance
Unit-Based Award shall represent the right to receive payment, in accordance
with this Section 3, of either (i) an amount in cash equal to the Fair Market
Value on the Vesting Date multiplied by the number of vested Performance Units
subject to the Performance Unit-Based Award (as adjusted pursuant to Section
3(b) below), or (ii) at the election of the Grantee made at least 60 days prior
to the Vesting Date, a number of Units equal to the number of vested
Performance Units subject to the Performance Unit-Based Award as of the Vesting
Date (as adjusted pursuant to Section 3(b) below).  The Payment Date with respect to the
Performance Unit-Based Award shall be on or as soon as practicable after the
Vesting Date, but in no event later than 60 days following the Vesting
Date.  Notwithstanding the foregoing:

(a)                                  Change
of Control. 
In the event of a Change of Control prior to the Scheduled Vesting Date,
(i) the Fair Market Value for purposes of calculating the amount of the cash
payment described above in this Section 3 with respect to any outstanding
Performance Units that have not previously vested shall be the price per Unit
paid or payable by the acquiror in such Change of Control transaction, and (ii)
the Payment Date in respect of any outstanding vested Performance Units that
have not yet been paid as of such time shall be the earlier of (1) the
Scheduled Vesting Date, and (2) immediately prior to the consummation of the
Change of Control; and

(b)                                 Adjustment
of Number of Performance Units.  Immediately prior to the Payment Date, the
number of Performance Units upon which the amount of the Performance Unit-Based
Award is based shall be adjusted by multiplying the number of vested
Performance Units by (1) the Adjustment Ratio in effect as of the tenth trading
day preceding such Payment Date and (2) the Payout Multiplier applicable to the
Performance Unit-Based Award.

Notwithstanding any other provision of
this Agreement, but subject to the applicable requirements of any regulatory
authority, the Committee hereby reserves the right to make any additional
adjustments to the amounts payable pursuant to the Performance Unit-Based Award
if, in the sole discretion of the Committee, such adjustments are appropriate
in the circumstances having regard to the principal purposes of the Plan and
this Agreement.  Unless and until the
Performance Unit-Based Award vests, the Grantee will have no right to payment
with respect thereto.  Prior to actual
payment with respect to any vested portion of the Performance Unit-Based Award,
the Performance Unit-Based Award will represent an unsecured obligation of the
Company, payable (if at all) only from the general assets of the Company.

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4.                                       Termination
of Relationship as a Service Provider.  The following provisions shall apply in the
event of a termination of the Grantee’s Service:

(a)                                  Cause.  In the event of a termination of the Grantee’s
Service as a result of a termination by the Company for Cause, effective as of
the date of termination (the “Termination Date”),
the Performance Unit-Based Award and all Performance Units shall be terminated
and all rights to receive amounts with respect thereto shall be forfeited by
the Grantee without the payment of any consideration therefor.

(b)                                 Non-Cause
Termination. 
In the event of a termination of the Grantee’s Service by reason of a
termination by the Company other than for Cause and other than by reason of the
Grantee’s Disability, then, effective as of the Termination Date and
notwithstanding any other severance entitlements or entitlement to notice or
compensation in lieu thereof, the Performance Unit-Based Award shall thereupon
vest with respect to a pro rata number of Performance Units equal to the total
number of Performance Units subject to the Performance Unit-Based Award
multiplied by a fraction, the numerator of which is equal to the number of days
in the period commencing on January 1 of the year in which the Performance
Unit-Based Award was granted, and ending on the Termination Date, and the
denominator of which is equal to 1095. 
Subject to the foregoing, in the event of such a termination, the
Performance Unit-Based Award and all Performance Units shall, to the extent not
vested as of the Termination Date, be terminated as of the Termination Date,
and all rights to receive amounts with respect thereto shall thereupon be
forfeited by the Grantee without the payment of any consideration therefor.

(c)                                  Voluntary Resignation.  In the event of a termination of the Grantee’s
Service by the Grantee for any reason other than the Grantee’s Disability or
death, effective as of the Termination Date, the Performance Unit-Based Award
and all Performance Units shall be terminated and all rights to receive amounts
with respect thereto shall be forfeited by the Grantee without the payment of
any consideration therefor.

(d)                                 Death or Disability.  In the event of a termination of the Grantee’s
Service as a result of the Grantee’s death or Disability, the Performance
Unit-Based Award shall thereupon vest in full with respect to 100% of the
Performance Units subject thereto.

(e)                                  Forfeiture of Unvested Award.  No portion of the Performance Unit-Based
Award which is not vested as of the date of the Grantee’s termination of
Service shall thereafter become vested or payable.

For purposes of this Agreement, all
questions regarding whether the Grantee has incurred a termination of Service
shall be determined by the Committee in its sole discretion, and such
determination shall be binding and conclusive on all interested parties.

5.                                       Withholding
of Taxes. 
To  the  extent that a payment under this Agreement
results in the receipt of compensation by the Grantee with respect to which the
Company or an Affiliate has a tax withholding obligation pursuant to applicable
law, the Company or any Affiliate is authorized to withhold from any payment
with respect to the Performance Unit-Based Award or from any compensation or
other amount owing to the Grantee the amount (in cash, Units, Units that would
otherwise be issued pursuant to the Performance Unit-Based Award or other
property) any applicable taxes payable in respect of the Performance Unit-Based
Award or any payment with respect thereto and to take such other action as may
be necessary in the opinion of the Company to satisfy its withholding
obligations for the payment of such taxes.

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6.                                       Limitations
Upon Transfer. 
All rights under this Agreement shall belong to the Grantee alone and
may not be transferred, assigned, pledged, or hypothecated by the Grantee in
any way (whether by operation of law or otherwise), other than by will or the
laws of descent and distribution and shall not be subject to execution, attachment,
or similar process.  Upon any attempt by
the Grantee to transfer, assign, pledge, hypothecate, or otherwise dispose of
such rights contrary to the provisions in this Agreement or the Plan, or upon
the levy of any attachment or similar process upon such rights, such rights
shall immediately become null and void.

7.                                       Grantee Acknowledgement.  The Grantee hereby acknowledges that,
notwithstanding anything in the Plan or this Agreement to the contrary, the
Company shall not be required to issue or deliver any Units hereunder if, in the good
faith determination of the Committee, the Company is not reasonably able to
deliver such Units without violating applicable law or the applicable rules or
regulations of any governmental agency or authority or securities exchange.

8.                                       No Right to Continued Service; No Rights as
Unitholder.  Nothing in
the Plan or this Agreement shall confer upon the Grantee any right to continue
as an Employee, Consultant or Director or shall interfere with or restrict in
any way the rights of the Company, the Partnership or any Affiliate thereof,
which are expressly reserved, to discharge the Grantee at any time for any
reason whatsoever, with or without Cause, except to the extent expressly
provided otherwise in a written agreement between the Company and the
Grantee.  Neither the Grantee nor any
person claiming under or through the Grantee will have any of the rights or
privileges of a Unitholder with respect to the Performance Unit-Based Award or
the Performance Units unless and until certificates representing such Units
shall have been issued, recorded on the records of the Company or its transfer
agents or registrars, and delivered to the Grantee or any person claiming under
or through the Grantee.

9.                                       Code Section 409A.  Neither the Performance Unit-Based Award nor
any amounts payable hereunder are intended to constitute or provide for
“nonqualified deferred compensation” within the meaning of Section 409A of the
Code (“Section 409A”).  However,
notwithstanding any other provision of the Plan or this Agreement, if at any
time the Committee determines that the Performance Unit-Based Award or any
amounts payable hereunder may be subject to Section 409A, the Committee shall
have the right, in its sole discretion, to adopt such amendments to the Plan or
this Agreement or adopt other policies and procedures (including amendments,
policies and procedures with retroactive effect), or take any other actions, as
the Committee determines are necessary or appropriate either for the
Performance Unit-Based Award and any amounts payable hereunder to be exempt
from the application of Section 409A or to comply with the requirements of
Section 409A.

10.                                 Binding
Effect.  This Agreement
shall be binding upon and inure to the benefit of any successor or successors
of the Company or the Partnership and upon any person lawfully claiming under
the Grantee.

11.                                 Entire
Agreement.  This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, and contains
all the covenants, promises, representations, warranties and agreements between
the parties with respect to the Performance Unit-Based Award granted
hereby.  Without limiting the scope of
the preceding sentence, all prior understandings and agreements, if any, among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect.

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12.                                 Modifications.  Except as provided below, any modification of
this Agreement shall be effective only if it is in writing and signed by both
the Grantee and an authorized individual on behalf of the Company.

13.                                 Governing
Law.  This grant shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to conflicts of laws principles
thereof.

[Signature page follows]

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IN WITNESS WHEREOF the parties have executed and delivered this
Agreement effective as of the date first written above.

	
  BREITBURN GP, LLC

  	
   

  	
  GRANTEE

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  [Name]

  
	
  Title:

  	
   

  	
   

  
					

 

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APPENDIX A

DEFINITIONS

For purposes of
this Agreement, the following terms shall have the meanings specified below
unless the context clearly indicates otherwise.

(a)                                  “Adjustment Ratio” means the ratio used to adjust the
Performance Units with respect to which the amount to be paid on the applicable
Payment Date(s) under the Performance Unit-Based Award is determined in
accordance with the terms of the Agreement. 
The Adjustment Ratio shall initially be equal to one, and shall be
cumulatively adjusted thereafter by increasing the Adjustment Ratio on each
Distribution Payment Date by an amount, rounded to the nearest five decimal
places, equal to a fraction having as its numerator the Distribution, expressed
as an amount per Unit, paid on that Distribution Payment Date, and having as
its denominator the Fair Market Value on the Distribution Payment Date.

(b)                                 “Cause” shall mean “Cause” as defined in the Grantee’s
employment agreement with the Company if such an agreement exists and contains
a definition of Cause, or, if no such agreement exists or such agreement does
not contain a definition of Cause, then “Cause” shall mean (i) the Grantee’s
unauthorized use or disclosure of confidential information or trade secrets of
the Company or its Affiliates or any other material breach of a written
agreement between the Grantee and the Company or its Affiliates, including
without limitation a material breach of any employment or confidentiality
agreement; (ii) the Grantee’s commission of a felony or commission of any other
crime involving dishonesty or moral turpitude under the laws of the United
States or any state thereof; (iii) the Grantee’s gross negligence or willful
misconduct or the Grantee’s willful or repeated failure or refusal to
substantially perform assigned duties; (iv) any act of fraud, embezzlement,
misappropriation or dishonesty committed by the Grantee against the Company or
its Affiliates; or (v) any acts, omissions or statements by the Grantee which
the Company reasonably determines to be detrimental or damaging to the
reputation, operations, prospects or business relations of the Company or its
Affiliates.

(c)                                  “Code” shall mean the U.S. Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.

(d)                                 “Disability” means that the Grantee is receiving benefits
under any long-term disability plan of the Company or any Affiliate.

(e)                                  “Distribution”  means a
distribution paid by the Partnership with respect to the Units, expressed as an
amount per Unit.

(f)                                    “Distribution Payment Date” means any date that a
Distribution is distributed to Unitholders.

(g)                                 “Exchange” means the principal national securities exchange
or other market in which trading in Units occurs on the applicable date (or, if
there is no trading in the Units on such date, on the next preceding date on
which there was trading).

(h)                                 “Payment Date” means the date or time at which amounts
payable with respect to the Performance Unit-Based Award shall be paid to the
Grantee in accordance with Section 3 of the Agreement.

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(i)                                     “Payout Multiplier” means, at any time, the number obtained
by subtracting one from the product of (x) 0.04 and (y) the Percentile Rank in
effect at such time; provided, however,
that:

(i)                                     in the
event that such Percentile Rank is less than the 35, the Payout Multiplier
shall be zero; and

(ii)                                  in the
event that such Percentile Rank is greater than 75, the Payout Multiplier shall
be two.

(j)                                     “Peer Comparison Group” means, generally, organizations with
which the Partnership competes for employees in the United States petroleum
industry, including upstream or midstream companies whose attributes can be
considered comparable to the Partnership and which shall be determined from
time to time by the Committee.

(k)                                  “Percentile Rank” means, at any time when used to determine
the Payout Multiplier applicable in adjusting the amount payable pursuant to
the Performance Unit-Based Award, the percentile rank, expressed as a whole
number, of Total Unitholder Return relative to returns calculated on a similar
basis on units, shares or other equity securities of the oil and gas companies
included in the Peer Comparison Group, over the
period commencing on the January 1st of the year in which the Performance
Unit-Based Award was granted, and ending as of the date of the most recently
filed or available financial reports of such companies immediately preceding
the Vesting Date.

(l)                                     “Service” shall mean service as an Employee, Director, or
Consultant.

(m)                               “Total Unitholder Return” means, with respect to any period,
the total return to Unitholders on the Units, calculated using cumulative
Distributions on a reinvested basis and the change in the trading price of the
Units on the Exchange over such period.

(n)                                 “Unitholder”  means a holder
of Units.

 A-2EXHIBIT
10.32

GOLD RANCH CASINO LEASE

BETWEEN

LAST CHANCE, INC.

A Nevada Corporation

AND

PROSPECTOR GAMING
ENTERPRISES, INC.

A Nevada Corporation

AND

TARGET INVESTMENTS,
L.L.C.

a Nevada limited liability company

 

GOLD RANCH CASINO LEASE

This Gold Ranch Casino Lease (“Lease”) is made
this 27th day of December, 2001, by and between Last Chance, Inc., a Nevada
Corporation (Last Chance) and Prospector Gaming Enterprises, Inc., a Nevada
Corporation, doing business as Gold Ranch Casino & RV Resort (sometimes
referred to as PGE) with respect to the lease of the Gold Ranch Casino Property
and improvements and the FF&E; and by and between Last Chance and Target
Investments, L.L.C., a Nevada limited liability company (Target) with respect
to the lease of the Leach Field Property, the Frontage Parcel and the Sign
Easement.  PGE and Target are jointly
referred to as Landlord.

R E C I T A L S

This Lease is made with reference to the following facts and
objectives:

A.            Capitalized terms
used in this Lease and not otherwise defined shall have the meanings ascribed
to such terms in Section 1.

B.            This Lease is one of
the Integrated Agreements by and between Last Chance and PGE and its
Affiliates, for the acquisition by Last Chance of all of the Integral
Properties and Assets of the Gold Ranch Casino and RV Resort.

C.            PGE is the owner of
the Gold Ranch Casino Property, the Premises and the FF&E, and Target is
the owner of the Leach Field Property, the Frontage Parcel and the real property
to be burdened by the Sign Easement;

D.            Last Chance desires
to lease the Gold Ranch Casino Property, the Premises and the FF&E from PGE
and PGE desires to lease the Gold Ranch Casino Property, Premises and FF&E
to Last Chance; and

E.             Last Chance desires
to lease the Leach Field Property and the Frontage Parcel and to acquire the
Sign Easement from Target and Target desires to grant the Sign Easement and to
lease the Leach Field Property and the Frontage Parcel to Last Chance.

NOW, THEREFORE, in consideration of the Recitals and the premises, the
execution and delivery of the other Integrated Agreements, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties, Landlord and Last Chance covenant and agree as
follows:

1.                                      DEFINITIONS.

1.1           “Affiliate” means as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, spouse, children, grandchildren,
brothers and sisters, of such individual and any trust the principal
beneficiary of which is such individual or one or more members of such
individual’s immediate family and any Person who is controlled by any such
member or trust.  As used in this
definition, “control” (including its
correlative meanings, “controlled by”
and “under common control with”) means

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possession, directly or indirectly, of power to direct
or cause the direction of the management or policies, whether through the
ownership of securities, limited liability company or partnership or other
ownership interests, by contract or otherwise.

1.2           “Asset Purchase Agreement” means the Asset Purchase Agreement
by and between Prospector Gaming Enterprises, Inc., a Nevada Corporation and
Last Chance, Inc., a Nevada Corporation, executed contemporaneously herewith
and as to which this Lease is an integral part.

1.3           “Associated Equipment” shall have the meaning ascribed to
that term in NRS 463.0136.

1.4           “Business Expenditures” means all costs incurred by Last
Chance for the purchase, replacement, maintenance or repair of and for the
Integral Properties and Assets other than sums expended for fixtures and items
which are expensed, as opposed to amortized or depreciated, in accordance with
GAAP, excluding the purchase of the Acquired Assets as provided in the Asset
Purchase Agreement.

1.5           “California Lottery Property” means the real property and
improvements located in Washoe County, Nevada and Sierra County, California,
owned by Target Investments, L.L.C., and described in Exhibit 1 (APN
038-230-06 and APN 023-100-06) upon and from which California Prospectors,
Ltd., a Nevada limited liability company, operates the California Lottery Station.

1.6           “California Lottery Station” means the improvements located
on the California Lottery Property from which California Prospectors, Ltd.  operates as a California Lottery game
retailer, including the building containing the lottery station and a
convenience store, adjacent parking, landscaping and associated improvements,
furniture, fixtures and equipment not otherwise owned by California
Prospectors, L.L.C.

1.7           “California Lottery Station Lease” means the California
Lottery Station Lease between California Prospectors, Ltd., and Target
Investments, LLC, as “Landlord”, for
the lease of the California Lottery Property and the California Lottery
Station.

1.8           “CERCLA” means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.

1.9           “Closing” means the completion of the transaction
contemplated by the Integrated Agreements on the Closing Date.

1.10         “Closing Date”
means the last day of the month in which all conditions precedent to the
Closing have occurred as provided in the Asset Purchase Agreement.

1.11         “Environmental
Claim” means, with respect to any Person, any written notice, claim,
demand or other communication (collectively, a “claim”)
by any other person alleging or asserting such person’s liability for investigatory
costs, cleanup costs, Governmental Authority response costs, damages to natural
resources or other premises, personal injuries, fines or penalties arising out
of, based on or resulting from (A) the presence, or into the environment, of

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any Hazardous Material at any location, whether or not
owned by such person, or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.  The term “Environmental
Claim” shall include, without limitation, any claim by any
Governmental Authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and any
claim by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.

1.12         “Environmental
Laws” means any law, regulation or order relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges Releases or threatened Releases of Hazardous Materials into the
environment (including without limitation ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.

1.13         “Exhibit”
shall mean those documents identified as such and attached hereto and incorporated
by this reference.

1.14         “Extended
Term” means the term of any extension of the Lease arising from Last
Chance’s exercise of an option to extend under Section 2.3.

1.15         “FF&E”
means any and all furniture, fixtures and equipment installed or used, or to be
installed or used, in connection with the operation of the Property or the
Premises which is not owned by Last Chance, including, but not limited to, the
plumbing systems, HVAC systems, fire protection systems, electrical systems,
equipment, elevators, exterior sidings and doors, landscaping and irrigation
systems.

1.16         “Fixture”
means an item or items of personal property which have been permanently
attached to the Premises or the Property the removal of which will cause
material damage.

1.17         “Frontage
Parcel” means a portion of that certain parcel or real property (APN
038-241-08) located in Washoe County, Nevada, as more particularly described in
Exhibit 1.

1.18         “GAAP”
means generally accepted accounting principles applied on a consistent basis from
period to period.

1.19         “Gaming
Devices” shall have the meaning ascribed thereto by NRS 463.0155.

1.20         “Gaming
Revenue” shall mean Gross Revenue less: (i) all revenue received
from any game, gaming device or inter-casino linked gaming system operated on
the Premises which is shared with any other person or entity, including,
without limitation, the operator of an inter-casino linked gaming system, and
(ii) all sums paid by Last Chance to the Nevada Gaming Commission under and
pursuant to NRS 463.370.

1.21         “Gold Ranch
Casino Property” means the real property upon which the Gold Ranch
Casino, adjacent buildings, structures and parking facilities are located at
I-80 West,

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Exit 2, Gold Ranch Road, Verdi, Nevada 89439 (APN
038-230-24) as more particularly described in Exhibit 1.

1.22         “Gold Ranch
RV Resort” means the 105 space recreational vehicle park operated by
Gold Ranch RV Resort, LLC, a Nevada limited liability company, on the RV Park
Property, together with all improvements and furniture, fixtures and equipment
used in conjunction therewith.

1.23         “Governmental
Authority” shall mean any federal, state, regional, county or
municipal governmental agency, board, commission, officer or official having or
exercising or purporting to have or exercise jurisdiction over the Property,
the Premises or the FF&E.

1.24         “Gross
Revenue” means and shall be calculated as provided in NRS 463.0161,
and NRS 463.3715.

1.25         “Hazardous
Materials” means and includes (1) any “hazardous
substance,” as defined by CERCLA or any other similar substance or
waste regulated pursuant to any similar state or local law, regulation or
ordinance; (2) any “waste” or “hazardous waste,” as defined by the Resource Conservation
and Recovery Act, as amended, or any other similar substance or waste regulated
pursuant to any similar state or local law, regulation or ordinance; (3) any
pollutant, contaminant, material, substance or waste regulated by the Clean
Water Act, as amended, or any other similar substance or waste regulated
pursuant to any similar state or local law, regulation or ordinance; (4) any
pollutant, contaminant, material, substance or waste regulated by the Clean Air
Act, as amended, or any other similar substance or waste regulated pursuant to
any similar state or local law, regulation or ordinance; (5) any petroleum
product; (6) any polychlorinated biphenyls; or (7) any radioactive
material or substances.

1.26         “Initial Term”
means the term of this Lease and Last Chance’s obligation to pay Rent which
shall commence on the Closing and shall, unless terminated or extended as
provided in this Lease, continue for a period of twenty (20) years thereafter.

1.27         “Integral
Properties and Assets” means all of the assets, real and personal,
tangible and intangible, which constitute integral parts of the businesses
operated by Prospector Gaming Enterprises, Inc., and its Affiliates, as the
Gold Ranch Casino & RV Resort, as more particularly described in the Asset
Purchase Agreement.

1.28         “Integrated
Agreements” means this Lease and each of the agreements and
documents described as a component of that term in the Asset Purchase
Agreement, which constitute integral parts of the single transaction by which
Last Chance, Inc., will acquire the businesses and assets (real, personal,
tangible and intangible) operated by Prospector Gaming Enterprises, Inc., and
its Affiliates, as the Gold Ranch Casino & RV Resort.

1.29         “Jack In The
Box Lease” shall mean that certain lease agreement by and between
the PGE and Foodmaker, Inc., a Delaware corporation, dated November 16, 1998,
to be to be assigned by PGE to Last Chance for delivery on the Closing.

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1.30         “Leach Field
Property” means a portion of that certain parcel of real property
located in Washoe County, Nevada, designated as APN 038-230-02 and more
particularly described in Exhibit 1.

1.31         “Lease Term”
means the total of the Initial Term and any and all Extended Terms of this
Lease.

1.32         “Nevada
Gaming Authorities” means the Nevada Gaming Commission and the State
Gaming Control Board.

1.33         “Option to
Purchase the Gold Ranch Casino Property” means the Option to
Purchase the Gold Ranch Casino Property and Improvements, the Leach Field
Property, the Frontage Parcel, the California Lottery Station and the
California Lottery Property, and Right of First Refusal executed on even date
herewith by and between Prospector Gaming Enterprises, Inc.  and Target Investments, L.L.C., and Last
Chance, as one of the Integrated Agreements.

1.34         “Option to
Purchase Gold Ranch RV Resort Business” means the Option To Purchase
All Assets of Gold Ranch RV Resort Business and Right Of First Refusal executed
on even date herewith pursuant to the Asset Purchase Agreement by which Gold
Ranch RV Resort L.L.C., grants to Last Chance an option to purchase the Gold
Ranch RV Resort business and a right of first refusal with respect thereto.

1.35         “Option To
Purchase The RV Park Property” means the Option to Purchase the RV
Park Property and Right of First Refusal executed on even date herewith
pursuant to the Asset Purchase Agreement by which Prospector Gaming
Enterprises, Inc.  grants to Last Chance
an option to purchase the RV Park Property and a right of first refusal.

1.36         “Permitted
Exceptions” means those liens and encumbrances, approved by Last
Chance, to which the Property, Premises, or FF&E re or will be subject at
the Closing as set forth on Exhibit 2 attached hereto.

1.37         “Person”
means an individual, firm, corporation, trust, association, partnership, joint
venture, tribunal or other entity.

1.38         “Preliminary
Title Reports” shall mean, cumulatively, the preliminary title
reports prepared by Western Title Company, Inc., dated December 21, 2001 and
Inter-County Title Co., dated August 27, 2001, copies of which are attached to
the “Asset Purchase Agreement as Exhibit 24.

1.39         “Premises”
means all improvements located upon the Property including, but not limited to,
the Gold Ranch Casino, adjacent buildings, structures and parking facilities
otherwise known as the Gold Ranch Casino & RV Resort located at I-80 West,
Exit 2, Gold Ranch Road, Verdi, Nevada 89439.

1.40         “Property”
means the Gold Ranch Casino Property, the Leach Field Property, the Frontage
Parcel and the Sign Easement, as more particularly described in Exhibit 1.

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1.41         “Purchase
Options” means the Option to Purchase the Gold Ranch Casino
Property, the Option to Purchase the RV Park Property, the Option to Purchase
the Gold Ranch RV Resort Business and the options to purchase contained in the
Water and Sewer Service Agreement including, in each case, the rights of first
refusal granted to Last Chance in those documents.

1.42         “Readerboard
Sign” means the double column elevated electric readerboard sign
located on that certain parcel of real property designated as APN 038-241-08,
at the site depicted in Exhibit 1.

1.43         “Release”
means release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment or into or out of any real or personal property or any fixture,
including the movement of Hazardous Materials through or in the air, soil,
surface water or groundwater.

1.44         “RV Park
Property” means the real property described in Exhibit 1 (APN
038-241-07 and APN 023-100-13), and the improvements located thereon, upon
which the Gold Ranch RV Resort is located.

1.45         “Sign
Easement” means the easement granted by Target hereunder for the
placement, use, maintenance and enjoyment of the double column elevated
electric reader-board sign located on APN 038-241-08 at the site depicted in
Exhibit 1, as provided in Section 2.4 of this Lease.

1.46         “Title
Company” shall mean, collectively, Western Title Company, Inc.  located at 241 Ridge Street, Reno, Nevada
89501, the authorized agent for Ticor Title Insurance Company, and Inter-County
Title Co.  of Nevada County, with offices
at 11851 Sutton Way, Grass Valley, California 95945.

1.47         “Water and
Sewer Service Agreement” means the agreement by and between PGE,
Target, Stremmel Capital Group, Ltd.  and
Last Chance pursuant to which water and sewer service is to be provided by PGE,
Target and Stremmel Capital Group, Ltd. 
to the Integrated Properties and Assets.

2.                                      GRANT
AND TERM.

2.1           Lease Grant.  Landlord leases the Property, the Premises
and the FF&E, to Last Chance free and clear of all liens, claims,
encumbrances, and interests of third parties, subject only to the Permitted
Exceptions.  This Lease shall be a triple
net lease except where otherwise provided herein.  Landlord shall deliver possession of the
Property, the Premises and the FF&E to Last Chance on the Closing.

2.2           Initial Term.  The Initial Term of this Lease and Last
Chance’s obligation to pay Rent shall commence at the Closing and shall, unless
terminated or extended as provided in this Lease, continue for a period of
twenty (20) years thereafter.  At the
Closing, the parties shall insert the Closing Date and the date of termination
of the Initial Term in the spaces provided below:

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Closing Date:                                                                                                           

Date of Termination of the Initial Term:                                                                 

2.3           Option to Extend
Lease.  Last Chance is given the
option to extend this Lease following the Initial Term, on the terms and
conditions thereof as exist at the time of the exercise of any such option, for
four (4) five (5) year periods.  Last
Chance shall exercise its option(s) to extend by giving written notice thereof
to Landlord at least ninety (90) days before the expiration of the Initial Term
or any Extended Term.

2.4           Easement Grant,
Sign Easement.  Target hereby grants
to Last Chance a perpetual exclusive easement over that portion of the real
property (as depicted on Exhibit 1 and more specifically described
therein) upon which the Readerboard Sign (Sign) is located for the purposes of
the continued location thereon of the Sign, or any replacement or substitute
therefor, ingress to and egress from the Sign and the right to repair, replace,
reconstruct and maintain the Sign. 
Target shall execute a grant, bargain and sale deed, in the form of
Exhibit 3 attached hereto, confirming the conveyance of the easement
hereby created and shall deliver same to Last Chance at the Closing.

3.                                      RENT.

3.1           Rent.  The annual rent shall be equal to the greater
of (i) $560,000 (“Minimum Annual Rent”)
or (ii) the “Percentage Rent”, paid monthly
commencing on the first day of the first full month following the Closing.  Rent for any partial calendar month of actual
occupancy of the Property and Premises by Last Chance shall be prorated as
provided in Section 3.3.  The Percentage
Rent shall be equal to 7% of the first Twelve Million Dollars ($12,000,000) of
annual Gaming Revenue, 5.5% of annual Gaming Revenue in excess of Twelve Million
Dollars ($12,000,000) but less than or equal to Fifteen Million Dollars
($15,000,000), and 4.5% of annual Gaming Revenue in excess of Fifteen Million
Dollars ($15,000,000).  In all cases, the
Percentage Rent shall be reduced by the rent paid by California Prospectors,
L.L.C.  under and pursuant to the
California Lottery Station Lease.  Last
Chance shall pay Minimum Annual Rent in twelve (12) equal monthly installments
(except as provided above) during each year of the Lease Term, on the first day
of each calendar month following the Closing.

3.2           Percentage Rent.

(A)          In General.  Percentage Rent shall be payable monthly, in
arrears, commencing with the calendar month following the month in which Gaming
Revenue first exceeds the Minimum Annual Rent for such fiscal year, PROVIDED,
HOWEVER, that there shall be no payment or accrual of Percentage Rent until
Landlord shall have satisfied the gaming licensing requirements of Section
3.2(C) and any and all requirements of Chapter 463 of the Nevada Revised
Statutes and the Regulations of the Nevada Gaming Commission, the State Gaming
Control Board and Washoe County, Nevada.

The total Percentage Rent due and payable for a fiscal year shall be
computed based on Last Chance’s annual statement of Gaming Revenue for the
respective year, prepared and delivered pursuant to Section 3.2(B), and if Last
Chance paid an amount greater than the actual Percentage Rent payable
thereunder, the amount of such overpayment shall be refunded to

 7
 

 

Last Chance by the Landlord within five (5) business
days following the delivery of Last Chance’s annual statement of Gaming
Revenue; if Last Chance paid an amount less than the required Percentage Rent,
then Last Chance shall pay such difference to Landlord within five (5) days
following the delivery of Last Chance’s annual statement of Gaming Revenues for
said fiscal year.

(B)           Reporting of
Gaming Revenue.  Last Chance agrees
to furnish to Landlord a statement of Gaming Revenue within twenty business
(20) days after the close of each calendar month, and an annual statement,
including a monthly breakdown of Gaming Revenue, within ninety (90) days after
the close of each fiscal year of Last Chance during the Lease Term and any
partial fiscal year at the end of the Lease Term.  All statements shall itemize all elements of
Gaming Revenues and any respective adjustments, and shall be certified as true
and correct by a responsible officer of Last Chance.  Last Chance shall keep (i) full and accurate
books of account and records in accordance with GAAP and the Regulations of the
Nevada Gaming Authorities.  Such books,
receipts, and records shall be kept by Last Chance for a period of three (3)
years after the close of each fiscal year and shall, at the Landlord’s sole
expense, be available for inspection and audit by Landlord and its representatives,
at Landlord’s expense, at the Premises or Last Chance’s principal place of
business, at all times during regular business hours.  Any objection or dispute which Landlord may
wish to raise with respect to Percentage Rent payable hereunder, shall be made
in writing by Landlord to Last Chance within twenty (20) days following the
receipt by Landlord of each monthly or annual statement of Gaming Revenue, or
within thirty (30) days following: (i) receipt by Landlord of any amendment or
modification to a monthly or annual statement of Gaming Revenue resulting from
any audit by Landlord or (ii) receipt by Landlord of notice from Last
Chance of any such amendment or modification resulting from an internal or
external audit of Last Chance’s Gaming Revenue by other than Landlord.  Each of Landlord and Last Chance shall,
within ten (10) days of receipt by them of any such audit adjustment, give
written notice thereof to the other.  The
notice shall include a copy of the audit and the audit report, or that portion
thereof which deals with the calculation of Last Chance’s Gaming Revenue.  Any sum payable by Last Chance or to be
rebated by Landlord shall be paid over to the party entitled thereto within
thirty (30) days following receipt of the notice from the other.  Any objection or dispute not timely made or
raised by Landlord shall be deemed to have been waived by Landlord.  Further, the failure of Landlord to object to
a monthly statement shall preclude Landlord from raising any issue or objection
thereto in conjunction with other objections Landlord may have to the annual
statement of Gaming Revenue.

(C)           Gaming License
Requirement.  Landlord shall not
receive or accrue any Percentage Rent unless and until it has been found
suitable by the Nevada Gaming Authorities to participate in the Gaming Revenue
derived from the Premises and has provided evidence of such to Last
Chance.  Once Landlord has obtained a
finding of suitability to participate, it shall comply with all conditions
thereto and all regulations of the Nevada Gaming Authorities.  In the event that the Landlord’s suitability
status is suspended or revoked by the Nevada Gaming Authorities, Last Chance
shall cease all Percentage Rent payments or accruals immediately upon
notification thereof, and the Landlord shall not make any demands
therefor.  It is the sole responsibility
of the Landlord to submit whatever applications are necessary to the Nevada
Gaming Authorities for permission to participate in Gaming Revenues from the
Premises.  The Landlord shall bear all
costs and expenses associated with the application process.

 8
 

 

3.3           Proration of Rent
for Partial Month.  Rent payable by
Last Chance for any partial calendar month at the beginning or end of the Lease
Term which is calculated on the basis of a full calendar year shall be computed
on a daily basis to reflect the actual number of days in said partial month at
an amount equal to one-three hundred sixty-fifth (1/365th) of such annual Rent
for each day of said partial month.

3.4           Certain Rent
Abatement.  In the event that the
Landlord or any Affiliate is in default under a deed of trust, mortgage or
other lien secured by any of the Integrated Properties and Assets, Last Chance
may cure the default and setoff any amounts so paid against its Rent obligation
under this Lease.  In the event that any
setoff to which Last Chance is entitled under this Section 3.4 exceeds Last
Chance’s accrued Rent obligation on the date Last Chance exercises its option
to purchase or right of first refusal under any of the Purchase Options, the
purchase price or prices thereunder shall be reduced by such excess with the
excess being allocated and applied as Last Chance, in its sole discretion, may
elect.

4.                                      TAXES.

4.1           Personal Property
Taxes and Assessments.  Except as
provided in Section 4.3 of the Water and Sewer Service Agreement, Last Chance
shall, during the Lease Term, pay all taxes, assessments, license fees and
other charges that are levied and assessed against the FF&E, and Last
Chance’s personal property, installed, affixed or located in or on the Property
or the Premises.  On demand by Landlord,
Last Chance shall furnish Landlord with satisfactory evidence of these
payments.

4.2           Real Property
Taxes.  During the Lease Term, Last
Chance shall pay all real property taxes and, except as provided in Section 4.3
of the Water and Sewer Service Agreement, all general and special assessments
levied and assessed against the Property and the Premises.

4.3           Contests and
Protests.  Last Chance shall have the
right to contest or protest any levy or assessment for which it is liable under
this Section 4 and may withhold payment or pay under protest, as permitted by
law, pending any such contest.  Landlord
shall execute such powers of attorney or other documents as may be necessary
for Last Chance to contest or protest hereunder.

5.                                      USE.

5.1           Use.  Last Chance may use the Property, the
Premises and the FF&E for any lawful purpose or use.  Last Chance shall have no express or implied
obligation to use or continue operation of the Premises, PROVIDED, HOWEVER,
that Last Chance shall at all times take such actions as may be necessary to
continue the eligibility of the Premises for a nonrestricted gaming license
under legislative exemptions to NRS 463.1605.

5.2           Limitations on
Use.  Last Chance’s use of the
Property, the Premises and the FF&E as provided in this Lease shall be in
accordance with the following:

(A)          Last Chance shall not
do, bring or keep anything in or about the Property or the Premises that will
cause the cancellation of any insurance covering the Premises;

 9
 

 

(B)           Last Chance shall
comply will all laws concerning the Property, the Premises and the FF&E or
Last Chance’s use of the Property, Premises or the FF&E, including, without
limitation, the obligation at Last Chance’s cost to alter, maintain or restore
the Premises in compliance with all laws relating to the condition, use or
occupancy of the Property and the Premises as provided in Section 6.2.  Such costs and expenses incurred by Last
Chance under this Section 5.2(B) and Section 6.2 as constitute Business
Expenditures shall be applied to the satisfaction of Last Chance’s obligation
to make minimum annual Business Expenditures under Section 6.3;

(C)           Last Chance shall
not use the Property, the Premises or the FF&E in any manner that will constitute
waste, nuisance or unreasonable annoyance to owners or occupants of adjacent
properties; and

(D)          Last Chance’s use of
the Property, the Premises and the FF&E shall conform to the zoning
classifications of the Property and the Premises.

6.                                      MAINTENANCE,
UTILITIES, AND ALTERATIONS.

6.1           Landlord’s
Maintenance Obligations.  During the
first year of the Initial Term, Landlord shall be obligated to repair and
maintain, at its sole cost and expense, the structural components, roof and
foundation of all buildings and improvements on the Property and the
Premises.  In the event that Landlord
defaults in the performance of its obligations under this Section 6.1, Last
Chance may, in its sole discretion and without obligation to do so, cure the
default, after fifteen (15) days written notice to Landlord, and setoff any
amounts paid against Last Chance’s Rent obligation under this Lease.  In the event that any setoff to which Last
Chance is entitled under this Section 6.1 exceeds Last Chance’s accrued Rent
obligation on the date Last Chance exercises its option to purchase or right of
first refusal under any of the Purchase Options, the purchase price or prices
thereunder shall be reduced by such excess with the excess being allocated and
applied as Last Chance, in its sole discretion, may elect.

Before commencing
any work in the performance of its obligations under this Section 6.1,
Landlord shall provide Last Chance with a written copy of the proposed contract
and the construction schedule.  Last
Chance shall have ten (10) business days within which to deliver its written
objections to the construction schedule to Landlord.  Landlord shall modify the construction
schedule to accommodate Last Chance’s reasonable objections and shall require
that: (a) the contract for the work incorporates the construction schedule as
modified, and (b) that contractor and any subcontractor engaged in the
performance of the work shall cooperate with Last Chance and so perform the
work as not to interfere with Last Chance’s operations, use and enjoyment of
the Property, Premises and FF&E. 
Landlord shall further insure that Last Chance is, for all purposes, a
third party beneficiary of the contract for the work, without any obligation to
pay for work or materials, and shall provide Last Chance with a copy of the
final contract and construction schedule.

Landlord shall pay, when
due, all claims for labor performed or materials furnished to or for Landlord
at or for use on, in or about the Property, the Premises or the FF&E.  Landlord shall not permit any mechanics’ or
materialmen’s liens to be levied against the Property, the Premises or the
FF&E for any labor or materials furnished to Landlord or claimed to have
been furnished

 10

 

to Landlord or to Landlord’s agents or contractors in
connection with work of any character performed or claimed to have been
performed on the Property, the Premises or the FF&E by or at the direction
of Landlord.

6.2           Maintenance By
Last Chance.  Upon Expiration of
Landlord’s maintenance obligation under Section 6.1, Last Chance, at its sole
cost and expense, shall: (A) repair and maintain the structural components,
roof and foundation of all buildings and improvements on the Property and the
Premises for the remainder of the Lease Term, and (B) keep and maintain the
Premises in good working order and repair, reasonable wear and tear
excepted.  All such maintenance and
repairs shall be in quality and class equal to or better than the original work
or installations.  If Last Chance fails
to perform its obligations under this Section 6.2, Landlord may cure Last
Chance’s default, at Landlord’s cost and expense, and shall be entitled to
collect the reasonable costs thereof as additional Rent.  Landlord shall give Last Chance thirty (30)
days written notice of any alleged deficiency in Last Chance’s maintenance or
repair of the Property or the Premises prior to the performance of any work by
Landlord under this Section 6.2.

6.3           Minimum Annual
Business Expenditures.  Last Chance
shall incur minimum Business Expenditures of Two Hundred Thousand Dollars
($200,000) per annum during the Lease Term, pro rated for any partial year, in
connection with the Integral Properties and Assets being acquired pursuant to
the Integrated Agreements.  In addition,
Last Chance shall receive credit for all Business Expenditures made by
California Prospectors, L.L.C.  under and
pursuant to the California Lottery Station Lease.  Within sixty (60) days following the end of
each fiscal year of Last Chance during the Lease Term (currently June 30, but
subject to change by written notice to Landlord), Last Chance shall provide
Landlord with a written report of Business Expenditures for the preceding year.

6.4           Last Chance’s
Personal Property, Title and Removal. 
Furnishings, fixtures, equipment and inventory purchased or owned by
Last Chance, shall remain the property of Last Chance at the expiration or
earlier termination of this Lease and shall be removed by Last Chance within
thirty (30) days following such expiration or termination.

6.5           Alterations,
Additions and Other Improvements. 
Last Chance may, at its option and at its own cost and expense, at any
time and from time to time, make such alterations, additions and improvements
to the Property and the Premises, as it may deem desirable.  All such alterations, additions and
improvements shall be completed expeditiously, in a good and workmanlike manner
and in compliance with all applicable laws, regulations and ordinances and
shall be and become subject to this Lease. 
Last Chance shall give Landlord thirty (30) days written notice prior to
the commence of any alteration, addition or improvement hereunder having a
projected cost in excess of $50,000 (Project) which notice shall include a
detailed description of the Project. 
Last Chance shall, upon written request from Landlord, meet and confer
with Landlord about the Project, provided, however, that Landlord shall have no
right to veto any Project and Last Chance shall be entitled to proceed therewith
notwithstanding any objection by Landlord.

Unless Landlord requires their removal, all alterations, improvements
or additions which may be made to the Premises or the Property shall become the
property of Landlord and remain upon and be surrendered with the Premises at
the expiration of the Lease Term other than by

 11
 

 

reason of the exercise of the Option to Purchase the
Gold Ranch Casino Property in which case the alterations, improvements and
additions shall be the sole property of Last Chance.  Notwithstanding the provisions of this
Section 6.5, Last Chance’s machinery, equipment and other trade fixtures, other
than those which are affixed to the Premises in such a manner that they cannot
be removed without material damage to the Property or the Premises reasonably
requiring repair by Landlord in order to render the Premises usable by a
subsequent tenant, shall remain the property of Last Chance and may be removed
by Last Chance.

Last Chance shall pay, when due, all claims for labor or materials
furnished to or for Last Chance at or for use on, in or about the Property or
the Premises.  Last Chance shall not
permit any mechanics’ or materialmen’s liens to be levied against the Property
or the Premises for any labor or materials furnished to Last Chance or claimed
to have been furnished to Last Chance or to Last Chance’s agents or contractors
in connection with work of any character performed or claimed to have been
performed on the Property or the Premises by or at the direction of Last
Chance.

6.6           Utilities.  Last Chance shall furnish, at its sole cost
and expense, all utilities and services supplied to and used for or upon the
Property or the Premises, including, but not limited to, heat, electricity,
gas, fuel, oil, telephone, the garbage service, waste disposal service.  Water and sewer service shall, however, be
provided to Last Chance under and pursuant to the Water and Sewer Service
Agreement.

7.                                      INSURANCE
AND INDEMNITY

7.1           Fire and Other
Insurance.  Last Chance shall, at its
sole cost and expense, at all times during the Lease Term keep the Property and
Premises insured against loss or destruction by fire and other perils,
including vandalism and malicious mischief, commonly covered under the standard
extended coverage endorsement in Washoe County, Nevada.  The insurer shall be rated at least A+ by
A.M.  Best or a comparable rating by a
similar rating agency.  Attached hereto
as Exhibit 4 is a schedule of all such policies and coverages maintained
by Landlord as of the date of execution of this Lease.  Subject to the insurer rating requirements
provided herein, Last Chance shall, at a minimum, maintain like policies and
coverages.  The amount of such insurance
shall be increased or decreased periodically upon the renewal of each insurance
policy provided by Last Chance under this Section 7 to account for inflation.

Any loss payable under any policy described in this Section 7.1 shall
be paid by the insurance company to Landlord to be used solely to fund the
repair or replacement of the damaged building or improvement pursuant to this
Lease.  Any amount not used to fund
repairs or replacements shall be paid over to or retained by Last Chance,
without restriction on use.  In the event
of a loss Last Chance may, if it is entitled to do so under the terms of the
Option To Purchase the Gold Ranch Casino Property, exercise its option to
purchase or, if appropriate, its right of first refusal, subsequent to the
loss.  In the event Last Chance exercises
its option to purchase or right of first refusal, any insurance proceeds for
loss payable under any policy described in this Section 7 shall be paid by the
insurance company to Last Chance, as the loss payee, to be applied to the
purchase price under the Option To Purchase the Gold Ranch Casino Property.  Any insurance proceeds in excess of the
purchase price shall become the sole and exclusive property of Last Chance.

 12
 

 

Landlord shall be named as an additional insured on the policies and
the policies shall also contain cross-liability endorsements.  All insurance required under this Lease shall
contain an endorsement requiring thirty (30) days’ written notice from the
insurance company to both parties before cancellation or change in the
coverage, scope or amount of any policy.

Each policy, or a certificate of the policy, together with evidence of
payment of premiums, shall be deposited with the Landlord at the commencement
of the term, and on renewal of the policy when provided to Last Chance by the
insurance company.

7.2           Liability
Insurance.  Last Chance, at its sole
cost and expense, shall obtain and keep in force during the term of this Lease,
a policy of comprehensive public liability and property insurance insuring
Landlord and Last Chance, as co-insureds, against any liability arising out of
the ownership, use, occupancy or maintenance of the Property, the Premises and
the FF&E with combined single limits of not less than $2,000,000.  Last Chance shall provide Landlord with a
copy of such insurance policies upon request.

7.3           Waiver of
Subrogation.  The parties hereby
release each other, and their respective authorized representatives, from any
claims for damage to any person or to the Property, the Premises and the
FF&E and to the fixtures, personal property, and any improvements, or
alterations of either Landlord or Last Chance in or on the Property or the
Premises for claims which are insured against under any insurance policies
carried by the parties and in force at the time of any such damage.

Each party shall cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against either party in connection with any damage covered by any policy.  Neither party shall be liable to the other
for any damage caused by fire or any of the other risks insured against under
any insurance policy required by this Lease. 
If any insurance policy cannot be obtained with a waiver of subrogation,
or is obtainable only by the payment of an additional premium charge above that
charged by insurance companies issuing policies without a waiver of
subrogation, Last Chance shall notify Landlord of this fact.  Landlord shall have a period of ten (10) days
after receiving the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry the insurance
with a waiver of subrogation, or to agree to pay the additional premium if such
a policy is obtainable at additional cost. 
If the insurance cannot be obtained or the party in whose favor a waiver
of subrogation is desired refuses to pay the additional premium charged, the
other party is relieved of the obligation to obtain a waiver of subrogation
rights with respect to the particular insurance involved.

7.4           Last Chance’s
Indemnities.  Last Chance shall fully
and completely indemnify, defend and hold Landlord harmless from any and all
claims arising from Last Chance’s use of the Property, Premises or FF&E,
from the conduct of Last Chance’s business, from any activity or work which may
be permitted or suffered by Last Chance in or about the Property, Premises or
FF&E, based on events occurring after the Closing, and against any and all
claims arising from any breach or default by Last Chance under this Lease, from
any gross negligence or higher tort of Last Chance or any of Last Chance’s
agents, contractors, employees or invitees, and from any and all costs,
attorneys’ fees, expenses and liabilities incurred in the defense of any such

 13
 

 

claim or any action or proceeding brought
thereon.  This provision shall provision
shall survive the termination of this Lease.

7.5           Landlord’s
Indemnities.  Landlord shall fully
and completely indemnify, defend and hold Last Chance harmless from any and all
claims arising from Landlord’s use of the Property, Premises or FF&E, from
the conduct of Landlord’s business, from any activity or work which may have
been permitted or suffered by Landlord in or about the Property, Premises or
FF&E, based on events occurring prior to the Closing and the completion by
Landlord of its maintenance obligations under Section 6.1, and from and against
any and all claims arising from any breach or default by Landlord under this
Lease, from any gross negligence or higher tort of Landlord or any of
Landlord’s agents, contractors, employees or invitees, and from any and all
costs, attorneys’ fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon.  This provision shall provision shall survive
the termination of this Lease.

8.                                      REPRESENTATIONS
AND WARRANTIES.

8.1           Representations
and warranties of Landlord.  Except
as set forth in Exhibit 5, Landlord represents and warrants to Last Chance
that each of the following representations and warranties are true and correct
as of the date hereof and, except as otherwise expressly provided herein, will
be true and correct at the Closing and on and closing following a purchase by
Last Chance under the Option to Purchase the Gold Ranch Casino Property.  The truth and accuracy of the representations
and warranties herein shall constitute a condition to the Closing.

(A)          Organization, PGE.  PGE is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and every
other jurisdiction in which PGE does business or owns property, and has all
requisite power and authority to own and lease the Property, the Premises and
the FF&E.

(B)           Organization,
Target.  Target is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Nevada and every other jurisdiction in which Target
does business or owns property and has all requisite power and authority to own
and lease the Leach Field Property and the Frontage Parcel and to grant the
Sign Easement.

(C)           Power, Authority,
Due Execution, Binding Obligation. 
PGE and Target have full power and authority to execute and deliver this
Lease and to consummate the transactions contemplated hereby.  The execution and delivery of this Lease and
the consummation of the transactions contemplated hereby have been duly and
validly authorized in accordance with PGE’s Articles of Incorporation, Bylaws
and applicable provisions of Chapter 78 of the Nevada Revised Statutes and
any requisite approvals of shareholders and directors have been obtained.  The execution and delivery of this Lease and
the consummation of the transactions contemplated hereby have been duly and
validly authorized in accordance with Target’s Articles of Organization and
Operating Agreement and applicable provisions of Chapter 86 of the Nevada
Revised Statutes and any requisite approvals of its members have been
obtained.  This Lease has been duly and
validly executed and delivered by PGE and Target or their respective authorized
representatives and is a valid and binding obligation of each of PGE

 14
 

 

and Target, enforceable against each of them in
accordance with its terms.  Neither this
Lease nor the performance of the obligations of either PGE or Target
thereunder, will violate any contractual obligations with any third party or
contravene any law, governmental rule, regulation, order, writ, injunction or
decree applicable to PGE or Target.

(D)          Ownership and
Compliance.  Landlord hereby
represents and warrants that it is the legal owner of the Property, the
Premises and the FF&E, that it has the requisite authority and power to
enter into this Lease, that this Lease does not violate any of its contractual
obligations with any third party, including recorded documents such as deeds of
trusts, mortgages or security agreements, or violate or contravene any law,
governmental rule, regulation, order, writ, injunction or decree applicable to
it or its officers, directors, managers, employees or agents, that there are no
consents necessary from any person, association, entity, or Governmental Authority
necessary to render the Lease herein lawful, or effective in accordance with
its the terms, and that the Landlord is in compliance with all of applicable
laws of the U.S.  Federal Government, the
State of Nevada and State of California and any and all jurisdictions with
power over the Landlord.  Landlord
acknowledges that the execution and delivery of this Lease is a to condition
precedent to the obligation of Last Chance to consummate the Asset Purchase
Agreement and the other Integrated Agreements.

(E)           Status of Title.  Landlord represents and warrants that: (i) it
will lease the Property, Premises and FF&E to Last Chance as provided in
Section 2.1 and that (ii) Landlord owns the Property, the Premises and the
FF&E free and clear of all liens, claims, encumbrances, and interests of
third parties, subject only to the Permitted Exceptions; (iii) Landlord has not
assigned or encumbered any interest in the Property, the Premises or the
FF&E; and (iv) there are no outstanding preferential rights to acquire any
interest in the Property, the Premises or the FF&E granted by Landlord to
any third parties.  Last Chance
acknowledges, however, that the Gold Ranch Casino Property is encumbered by the
Jack In The Box Lease which shall be a Permitted Exception and assumed by Last
Chance as provided in the Asset Purchase Agreement.

(F)           Approval of
Conditions of Title.

(i)            This Lease is
contingent upon approval by Last Chance of the condition of the title to the
Property the Premises and the FF&E. 
Last Chance shall review the Preliminary Title Report for the
Property.  If the Preliminary Title
Report contains exception(s) that are unacceptable to Last Chance or in the
event that there are other defects in title to the Property, the Premises or
the FF&E which are unacceptable to Last Chance, it shall give written
notice thereof to Landlord no less than thirty (30) days prior to the Closing
under the Asset Purchase Agreement.

(ii)           Last Chance’s
notice of disapproval shall either state that (a) the Lease shall be
terminated, or (b) that Landlord shall have until the Closing to remove, at
Landlord’s expense, any defects in title which are disapproved.  If the Landlord does not remove a disapproved
defect, Last Chance shall notify Landlord that: (c) Last Chance elects to
terminate this Lease , or (d) that the disapproved defects or one or more of
them are waived and shall constitute Permitted Exceptions, or (e) the Last
Chance shall cure any remaining defects in title and deduct the cost thereof
from the Rent, or (f) that Last Chance will seek specific performance of
Landlords obligation to provide title to the

 15
 

 

Property, the Premises and the FF&E as set forth
in Sections 2.1 and 8.1 (E).  In the
event that Last Chance reasonably terminates this Lease under this Section
8.1(F), Landlord shall reimburse Last Chance for all costs (including
attorneys’ fees) incurred, by Last Chance in the negotiation and documentation
of this Lease and the Integrated Agreements .

(iii)          All matters shown
on the Preliminary Title Report, which are not specifically disapproved by Last
Chance within the period provided in Section 8.1(F)(i), shall be deemed to be
Permitted Exceptions.

(iv)          The costs of the
Preliminary Title Reports shall be shared equally by Landlord and Last Chance.

(v)           The cost of Last Chance’s
policy of title insurance shall be shared equally by Landlord and Last Chance.

(G)           Encroachment.  There are no structures or buildings on the
Property that encroach on a parcel of property not owned by the Landlord, no
structure or building is located on the Property in violation of any recorded
covenant or restriction.  In the event of
an encroachment on property owned by Landlord or an Affiliate, Landlord shall
and shall cause its Affiliates to grant a lease or easement to Last Chance,
without further consideration and that portion of the property of Landlord or
its Affiliates subject to the encroachment shall become part of the Option
Assets under the Option to Purchase the Gold Ranch Casino Property .  There are no encumbrances, easements, claims
of easement, rights, licenses, interest, conflicts in boundary lines, shortages
in area, encroachments, lack of water rights to the Property, mining claims,
reservations, releases, persons in possession, or other rights not disclosed by
public records.

(H)          Compliance With
Law.  The Property, Premises, and the
FF&E comply with, and are operated in accordance with, all material
applicable laws and ordinances affecting the Property, Premises, and the
FF&E or the ownership, improvement, development, possession, use, occupancy
or operation thereof.  Zoning applicable
to the Property, Premises, and the FF&E is consistent with and permits all
current uses thereon or thereof.  There are
no material defects in the physical condition of the Property, Premises, or the
FF&E.  Except as provided in
Exhibit 5, the Landlord has not received any notice from any Governmental
Agency (i) requiring it to make any material repairs or changes to the
Property, Premises or the FF&E, or the improvements located thereon, or
(ii) giving notice of any material governmental actions pending or threatened
relating to the Property, Premises or the FF&E.  All improvements on the Property, Premises
and the FF&E are in material compliance with current building codes, to the
extent applicable, and Landlord has not received any written notices of any
material violations of any applicable building codes relating to the Property,
Premises or the FF&E which have not been remedied,

(I)            Physical
Condition.  That, as of the date of
execution of this Lease, the Closing and for a period of one (1) year from and
after the Closing, the Property, the Premises and the FF&E are and shall
be, in compliance with all applicable laws, structurally sound, in good
operating condition and repair, free from patent and latent defects, and
adequate for the

 16
 

 

uses to which they are being put; and neither the
Property, the Premises nor the FF&E are or will be in need of maintenance
or repairs on any of the dates herein specified.

(J)            Eminent Domain
and Zoning.  There is no action,
proceeding, investigation or litigation pending or contemplated or threatened:
(i) to take all or any portion of the Property, Premises or the FF&E , or
any interest therein, by eminent domain; (ii) to modify the zoning of, or other
governmental rules or restrictions applicable to, the Property, Premises or the
FF&E or the use or development thereof; (iii) for any street widening or
changes in highway or traffic lanes or patterns in the immediate vicinity of
the Property, Premises the FF&E; or (iv) otherwise relating to the
Property, Premises or the FF&E or the interests of Landlord therein, or
which otherwise would interfere with the use, ownership, improvement,
development and/or operation of the Property, Premises or the FF&E .  (K) Environmental Matters.

(i)            Except as provided
in Exhibit 6, the Property, Premises, and the FF&E at all times have
been, and continue to be, operated by the Landlord in material compliance with
all Environmental Laws;

(ii)           Except as provided
in Exhibit 6, there have been no past, and there are no pending or
threatened (a) Environmental Claims, complaints, notices, requests for
information or investigations with respect to any alleged material violation of
any Environmental Law by Landlord, or (b) complaints, notices or inquiries to
or investigations of Landlord regarding potential liability under any
Environmental Law by the Landlord;

(iii)          Except as provided
in Exhibit 6, there have not been, at the Property, Premises or the
FF&E any Releases of Hazardous Materials and there are no citations,
notices or orders of noncompliance issued and outstanding to Landlord under any
Environmental Law;

(iv)          Landlord is in
material compliance with all permits, certificates, approvals, licenses and
other governmental authorizations relating to environmental matters and
necessary for the Property, Premises and FF&E, and no order has been
issued, no Environmental Claim has been made, no penalty has been assessed and
no investigation or review has occurred or is pending or threatened, by any
Person with respect to any alleged failure by the Landlord to have any license
or permit required under applicable Environmental Laws in connection with the
conduct of its business or operations or to comply with any Environmental Laws
or with respect to any generation, treatment, storage, recycling,
transportation, discharge, disposal or release of any Hazardous Material
generated by them;

(v)           Except as provided
in Exhibit 6 and Section 8.1(K)(vii), there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, under the
Property or the Premises.

(vi)          Except as provided
in Exhibit 6 and Section 8.1(K)(vii), Landlord warrants that no condition
exists on the Property, Premises or the FF&E that would represent an
environmental liability to Last Chance, and that if such a condition does

 17
 

 

exist, which was created by Landlord or any prior
tenant of the Landlord, that the Landlord shall indemnify, defend, and hold
harmless, Last Chance for any losses associated with such liability, including
but not limiting any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses surrounding sums paid in settlement of claims,
attorney fees, consultant fees and expert fees. 
The Landlord shall be held harmless for environmental liability
conditions created subsequent to Last Chance taking possession of the Property,
Premises, or the FF&E.

(vii)         PGE and Target
acknowledge that a petroleum Release from an underground storage tank on the
Gold Ranch Casino Property was discovered in 1995.  That Release resulted in the contamination of
the well(s) (Permit No.  48834 and Permit
No.  49019; Certificate No.  12799 and Certificate No.  12801) located inside the Casino
building.  Subsequent examination and
characterization led PGE to cease using these wells and to install numerous
monitoring wells, ground water recovery wells, soil vapor extraction points,
and a treatment system, which continue to operate.  It is expected that remediation will be
concluded within twelve (12) months following the Closing.  PGE and Target shall indemnify Last Chance
from and against liability for this Release to the extent provided in Section
4(g)(vi) of the Asset Purchase Agreement.

(L)           Restrictive
Covenant, No Lottery Business, Right of First Refusal-Gaming.

(i)            Restrictive Covenant, No Lottery Business.  Landlord and its Affiliates covenant that
following the Closing and for the Lease Term, any real property retained by
Landlord or its Affiliates that is adjacent to or located within one-half mile from
any of the Integral Properties and Assets, lying North or West of Interstate 80
(the “Restricted Properties” as described in
Exhibit 7) will be developed in a manner complementary to the Integrated
Properties and Assets.  Landlord shall,
prior to entering into any binding agreement to sell, lease, transfer or
develop any Restricted Properties disclose to Last Chance its plans for sale,
lease, transfer or development, consult with Last Chance regarding any
contemplated sale, lease, transfer or development and give fair consideration
to any objection communicated by Last Chance that a proposed sale, lease,
transfer or development will constitute a breach of this Restrictive
Covenant.  Landlord and its Affiliates
acknowledge and agree that a lottery business of any kind would violate this
Restrictive Covenant and that such business shall be prohibited.  Landlord shall cause each of its Affiliates
to comply with this Restrictive Covenant. 
Except as herein provided, this Restrictive Covenant will not affect the
right of Landlord or its Affiliates to sell, lease, transfer or develop the
Restricted Properties as they wish, though Landlord or any affected Affiliate
shall be liable, in law or in equity, including actions for injunctive relief
and for all damages, losses, costs and expenses actually suffered or incurred
by Last Chance as the proximate result of any breach of this Restrictive
Covenant.

(ii)           Right of First Refusal-Gaming.

(a)           Right of
First Refusal.  In the event
that Landlord or any Affiliate intends to sell, lease, transfer or develop any
of the Restricted Properties during

 18
 

 

the Lease Term, Last Chance shall have the right of
first refusal to conduct all forms of commercial gaming under the laws of the
States of Nevada and California (Gaming) on such Restricted Properties.  Landlord and its Affiliates agree that they
will not: (i) engage in Gaming on the Restricted Properties without first
offering Last Chance the opportunity to conduct such Gaming on commercially
reasonable terms and conditions within the context of the purpose of this
Restrictive Covenant which is the protection of the investment of Last Chance
in the Integral Properties and Assets (Commercially Reasonable Terms), or (ii)
transfer to or permit the development of any of the Restricted Properties by
any third party without first securing in writing the right of first refusal of
Last Chance with respect to Gaming conducted or to be conducted thereon.  This right of first refusal shall be a
covenant running with the title to the Restricted Properties and shall be
binding on the successors and assigns of Landlord and its Affiliates.

(b)           Notice of
Intent To Conduct Gaming. 
Prior to engaging in Gaming or making application for a license or other
authority to engage in Gaming on the Restricted Properties, Landlord, its
Affiliates and the successors in interest of any of them (Gaming Proponent),
shall give written notice (Notice) to Last Chance stating and declaring: (i)
the bona fide intention to engage in Gaming (Gaming Enterprise), (ii) the
Restricted Properties upon which the Gaming Enterprise is proposed to be
conducted, (iii) the principles involved as owners or proposed key employees in
the Gaming Enterprise, (iv) a detailed description of the nature of the
proposed Gaming Enterprise, including the number of gaming devices and table
games, (v) the Commercially Reasonable Terms upon which the Gaming Enterprise
is offered to Last Chance, (vi) the projected date for commencement of the
Gaming Enterprise, and (vii) copies of any drafted documents evidencing the
proposed Gaming Enterprise, including letters of intent.  The failure to offer Commercially Reasonable
Terms shall be a violation of the provisions of this Section 8.1(L) and shall
render the Notice voidable by Last Chance.

(c)           Notice of
Election.  Within thirty (30)
days following receipt of the Notice, Last Chance shall have the right, but not
the obligation, to elect to conduct the Gaming Enterprise on the Commercially
Reasonable Terms set forth in the Notice. 
Within thirty (30) days following receipt of the Notice, Last Chance
shall notify the Gaming Proponent, in writing, of the election of Last Chance
to exercise its right of first refusal (Notice of Election).  The failure of Last Chance to give a timely
Notice of Election shall constitute an election not to exercise.  In the event that Last Chance elects to
exercise its right of first refusal, the Gaming Proponent and Last Chance shall
execute such documents and instruments and make such deliveries as may be
reasonably required to consummate the transaction.  Any agreement reached by and between Last
Chance and the Gaming Proponent shall be subject to approval by Nevada and/or
California Gaming Authorities and shall terminate in the event that any such
approval is denied.

(d)           Non-Exercise.  If Last Chance elects or is deemed to have
elected not to exercise its right of first refusal the Gaming Proponent may
proceed with the Gaming Enterprise providing that: (i) the Gaming Enterprise
commences within the period provided in the Notice or if none is provided,
within eighteen (18) months after the expiration of Last Chance’s right of
first refusal, (ii) is conducted on terms identical to those specified in the
Notice, (iii) the transferee takes, and acknowledges in writing that it

 19
 

 

takes title to the Restricted Properties subject to
Last Chance’s rights under this Lease, specifically including, without
limitation, the rights of Last Chance under Section 8.1(L) of this Lease and
the Integrated Agreements, and (iv) all deeds and other documents by which the
Restricted Properties are conveyed recite that title thereto is taken subject
to the rights of Last Chance under Section 8.1(L) of this Lease and the other
Integrated Agreements (with specific reference to all pertinent recording
information) and that the grantee, lessee, transferee or assignee, as the case
may be, is bound thereby.  If the Gaming
Enterprise is not consummated, the Gaming Proponent giving the Notice, or the
successors thereto, must give notice anew in accordance with Section 8.1(L)(b)
prior to engaging in any subsequent Gaming Enterprise.  In the event that a Gaming Enterprise is
threatened or commenced on any of the Restricted Properties, Landlord and its
Affiliates, shall, upon demand by Last Chance and at the sole cost and expense
of Landlord and its Affiliates, take such actions as may be necessary to
protect the rights of Last Chance hereunder, including actions for injunctive
relief and damages, and indemnify, protect and defend Last Chance (including
costs and attorneys’ fees incurred by Last Chance) from and against the claims
of any such Gaming Proponent.

(e)           Enforcement
by Injunctive Relief. 
Landlord and its Affiliates have carefully considered the nature and
extent of the restrictions upon them and the rights and remedies conferred upon
Last Chance under this Section 8.1(L) and acknowledge that they are fully
required to protect the legitimate interests of Last Chance and do not confer a
benefit upon Last Chance disproportionate to the detriment of Landlord or its Affiliates.  Landlord and its Affiliates agree to provide
a copy of this Section 8.1(L) to all persons seeking to acquire an interest in
the Restricted Properties by purchase, lease, transfer, as a developer, or otherwise.  Landlord and its Affiliates agree that should
they, or any of them, violate any of the terms and conditions of this Section
8.1(L)(ii), they shall be liable, in law or in equity, including actions for
injunctive relief and for all damages, losses, costs and expenses actually
suffered or incurred by Last Chance as the proximate result of any breach of
Section 8.1(L)(ii).

Nothing in this Lease shall be construed to prohibit Last Chance from
also pursuing any other remedy, at law or in equity, the parties having agreed
that all remedies shall be cumulative. 
Nothing in Section 8.1(L)(ii) or (iii) shall constitute or be deemed to
constitute a waiver by the right of Last Chance to contend that any Gaming
Enterprise constitutes or will constitute a violation of the Restrictive
Covenant under Section 8.1(L)(i).

(iii)          No Waiver.  Nothing
contained in Section 8.1(L)(ii) shall be construed to constitute a waiver by
Last Chance of the right to object to development deemed by Last Chance not to
be complimentary to the Integral Properties and Assets.

8.2           Representations
and Warranties of Last Chance.  Last
Chance represents and warrants to Landlord that each of the following
representations and warranties are true and correct as of the date hereof and,
except as otherwise expressly provided herein, will be true and correct on the
as of the Closing and the close of escrow in the event of a purchase by it
under the Option to Purchase the Gold Ranch Casino Property.

 20
 

 

(A)          Organization.  Last Chance is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
every other jurisdiction in which the Last Chance does business, owns property
or has employees, and has all requisite power and authority to acquire the
rights granted or created by this Agreement.

(B)           Articles and By
Laws.  The execution and delivery of
this Lease does not, and the consummation of the transaction contemplated
hereby will not, conflict with the terms and provisions of the Articles of
Incorporation or the By Laws of Last Chance.

(C)           Proper Authority
and Action, Binding Obligation.  Last
Chance has all requisite corporate power and authority to enter into this Lease
and to perform its obligations thereunder. 
Last Chance has taken all action necessary under its organizational
documents and applicable corporate law to authorize the execution and delivery
of this Lease and the performance of its obligations thereunder and has duly
executed and delivered this Lease.  The
Lease is the valid and binding obligation of Last Chance, enforceable against
Last Chance in accordance with its terms. 
Neither this Lease nor Last Chance’s performance of its obligations
thereunder, will violate any contractual obligations with any third party or
contravene any law, governmental rule, regulation, order, writ, injunction or
decree applicable to Last Chance.

9.                                      DEFAULTS
AND REMEDIES

9.1           Defaults By Last
Chance.  The occurrence of any one or
more of the following events shall constitute a default and material breach of
this Lease by Last Chance:

(A)          the vacating or
abandonment of the Property or the Premises by Last Chance;

(B)           the failure by Last
Chance to make any payment of Rent or any other payment required to be made by
Last Chance hereunder where such failure shall continue for a period of ten
(10) days after written notice thereof from Landlord to Last Chance;

(C)           the failure by Last
Chance to observe or perform any of the covenants, conditions or provisions of
this Lease to be observed or performed by Last Chance, other than described in
Paragraph 9.1(B) above, or to perform any material obligation of Last Chance
under any of the Integrated Agreements, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Landlord to Last
Chance, provided, however, that if the nature of Last Chance’s default is such
that more than thirty (30) days are reasonably required for its cure, then Last
Chance shall not be deemed to be in default if Last Chance commences such cure
within said 30-day period and thereafter diligently prosecutes such cure to
completion;

(D)          the making by Last
Chance of any general assignment or general arrangement for the benefit of
creditors;

(E)           the filing by or
against Last Chance of a petition to have Last Chance adjudged a bankrupt or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of petition filed against Last Chance, the same is
dismissed within sixty (60) days);

 21

 

(F)           the appointment of a
trustee or receiver to take possession of substantially all of Last Chance’s
assets located on the Property or at the Premises or of Last Chance’s interest
in this Lease, where possession is not restored to Last Chance within thirty
(30) days; and

(G)           the attachment,
execution or other judicial seizure of substantially all of Last Chance’s
assets located on the Property or in the Premises or of Last Chance’s interest
in this Lease, where such seizure is not discharged within thirty (30) days.

9.2           Remedies in
Default.  If Landlord considers that
Last Chance is in default as provided in Section 9.1, other than a default in
the payment of Rent which shall be governed by Section 9.1(B), Landlord shall
notify Last Chance thereof in writing, setting out specifically in what
respects it is claimed that Last Chance has breached this Lease.  The receipt of such notice by Last Chance and
the lapse of thirty (30) days thereafter without Last Chance’s (i) curing such
alleged breach, (ii) commencing and diligently pursuing such action which is
necessary to cure the alleged breach, or (iii) commencing an action in a court
of competent jurisdiction contesting such alleged breach, shall be a default
hereunder.  In the event of any such
default by Last Chance, Landlord may, at any time thereafter, Landlord may
exercise any one or more of the following remedies:

(A)          Terminate Last
Chance’s right to possession of the Premises by any lawful means, in which case
this Lease shall terminate, and Last Chance shall immediately surrender
possession of the Premises to Landlord. 
In such event, Landlord shall be entitle to recover from Last Chance
twenty-five Thousand Dollars ($25,000.00) in liquidated damages by reason of the
Last Chance’s default.  In the event Last
Chance shall have abandoned the Premises, Landlord shall have the option of (i)
retaking possession of the Premises and recovering from Last Chance the amount
specified in Section 9.2(A), or (ii) proceeding under Section 9.2(B) and/or
9.2(C).

(B)           Maintain Last
Chance’s right to possession, in which case this Lease shall continue in effect
whether or not Last Chance shall have abandoned the Premises.  In such event, Landlord shall be entitled to
enforce all of Landlord’s rights and remedies under this Lease, including the
right to recover the Rent as it becomes due hereunder subject to reasonable
mitigation efforts of the Landlord.

(C)           Pursue any other
remedy now or hereafter available to Landlord under the laws or judicial
decisions of the State of Nevada.

9.3           Default by
Landlord.  Except as otherwise
provided in this Lease, Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event later than thirty (30) days after written notice by Last Chance to
Landlord, specifying the default of Landlord; provided, however, that if the
nature of Landlord’s obligation is such that more than thirty (30) days are
required for performance, then Landlord shall not be in default if Landlord commences
performance within such thirty (30) day period and thereafter diligently
prosecutes the same to completion.

 22
 

 

9.4           Condemnation.

(A)          Definitions.

(i)            “Condemnation” means (i) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor and (ii) a
voluntary sale or transfer by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation is pending.

(ii)           “Date of Taking” means the date the Condemnor has right to
possession of the property being condemned.

(iii)          “Award” means all compensation, sums, or anything of value
awarded, paid or received on a total or partial condemnation.

(iv)          “Condemnor” means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation.

(B)           Parties’ Rights
and Obligation to be Governed by Lease. 
If during the Lease Term there is any taking of all or any part of the
Property, the Premises , the FF&E or any interest in this Lease, by
Condemnation, the rights and obligations of the parties shall be determined
pursuant to Paragraph 9.4(C), 9.4 (D) and 9.4(E).

(C)           Partial Taking.  If any portion of the Property or the
Premises or the FF&E is taken by Condemnation, this Lease shall remain in
effect, except that Last Chance may elect to terminate this Lease if the
remaining portion of the Property, the Premises or the FF&E is rendered
unsuitable for Last Chance’s continued use of the Property or the Premises or
the FF&E, in Last Chance’s sole judgment, or Last Chance may, if it is
entitled to do so under the terms of the Option To Purchase the Gold Ranch
Property, exercise its option to purchase. 
In the event Last Chance exercises its option to purchase, the Award
shall be paid to Last Chance to be applied to the purchase price under the
Option To Purchase the Gold Ranch Property. 
Any Award in excess of the purchase price shall become the sole and
exclusive property of Last Chance.

If Last Chance elects to terminate this Lease, Last Chance must
exercise its right to terminate pursuant to this paragraph by providing notice
to Landlord within thirty (30) days after the nature and the extent of the
taking have been finally determined.  If
Last Chance elects to terminate this Lease as provided in this paragraph, Last
Chance also shall notify Landlord of the date of termination, which shall not
be earlier than thirty (30) days nor later than ninety (90) days after Last
Chance has notified Landlord of its election to terminate, except that this
Lease shall terminate on the Date of Taking if the Date of Taking falls on a
date before the date of termination as designated by Last Chance.  If Last Chance does not terminate this within
the thirty-(30) day period, this Lease shall continue in full force and effect,
except that Minimum Annual Rent shall be reduced pursuant to Paragraph 9.4(D).

(D)          Effect on Rent.  If any portion of the Property, the Premises
or the FF&E is taken by condemnation and this Lease remains in full force
and effect, on the Date of Taking the Minimum Annual Rent shall be reduced by
an amount that bears the same ratio to the

 23
 

 

Minimum Annual Rent as the value of the area of the
portion of the Property, the Premises or the FF&E taken bears to the total
value of the Property, Premises and FF&E immediately before the Date of
Taking.

(E)           Award —
Distribution.  In the event that Last
Chance does not elect to exercise its option to purchase under the Option To
Purchase the Gold Ranch Property in the event of either partial or full
condemnation of the Property the Premises or the FF&E, the Award shall
belong to and be paid to Landlord, except that Last Chance shall receive from
the Award the following:

(i)            As of the Date of
Taking of the portion of the Property, the Premises or the FF&E condemned,
a sum attributable to 100% of any amount attributable to the present value of
the market value of the Lease for the remainder of the Lease Term, as if all
extensions were exercised less the present value of the Minimum Annual Rent
payable for the remainder of the Lease Term;

(ii)           As of the Date of
Taking, a sum attributable to the unamortized or unrecovered value of any
Business Expenditures, improvements, alterations or additions made by Last
Chance;

(iii)          Reasonable removal
and relocation costs; and

(iv)          A sum attributable
to that portion of the Award constituting: severance damages for the
restoration of the Property, the Premises and the FF&E and/or loss of
goodwill.

(F)           Negotiation and
litigation.  Last Chance shall have
the right to negotiate directly with the Condemnor for the recovery of the
portion of the Award that Last Chance is entitled to herein and may participate
in litigation arising or instituted as a result of Condemnation.

9.5           Destruction.  If, at any time during the Lease Term, the
Property, the Premises or the FF&E are damaged or destroyed by fire or
other casualty, Landlord shall repair the Property, the Premises and/or the
FF&E as herein provided.  Landlord
shall complete such repairs within one hundred eighty (180) days after the
commencement of repairs, provided said repairs may be accomplished under the
applicable laws and regulations of the appropriate governmental authorities
within such time, and further provided that, if Landlord received a reasonable
estimate from competent personnel hired to make such repairs that the repairs
would be completed within the one hundred eighty (180) day period, but that,
beyond Landlord’s control, such work is not completed but could be concluded
within a reasonable time after the end of such period, Landlord shall have this
additional reasonable time to complete such work.  Repairs shall commence within a reasonable
time after the destruction of the Property and/or Premises.  If Landlord does not comply with the terms of
this paragraph, Last Chance may (i) terminate this Lease, or (ii) commence
making repairs to the Property, the Premises or the FF&E itself and abate
any amount paid for repairs immediately against the Rent, once the Property,
the Premises and the FF&E have become usable for the Last Chance’s business;
repairs made by the Last Chance pursuant to this Section shall not be
amortizable over the remaining Lease Term, they

 24
 

 

shall be immediately deductible from the Rent.  Commencing with the date of damage or
destruction and continuing during the course of repairs, Last Chance shall only
be required to pay Rent in proportion to those portions of the Property,
Premises and FF&E which Last Chance can reasonably use; the remaining
portion of the Rent during that period shall abate until repairs or restoration
are completed.

Alternatively, if any time during the Lease Term, the Property, the
Premises or the FF&E are damaged or destroyed by fire or other casualty,
Last Chance may, if it is entitled to do so under the terms of the Option To
Purchase the Gold Ranch Casino Property, exercise its option to purchase.  In the event Last Chance exercises its option
to purchase, insurance proceeds shall be disbursed to Last Chance as provided
in Section 7(A) of this Lease.

10.                               DISPUTE
RESOLUTION.

10.1         Informal Dispute
Resolution.  As a condition precedent
to the right to commence litigation or demand arbitration, all disputes arising
under this Lease shall be submitted in writing for resolution, by either party,
to the Chief Executive Officer of each party who shall, in good faith, attempt
to resolve the matter within five (5) business days of submission.  Upon their failure to do so, the matter may
be submitted by either party to arbitration as provided in Section 10.2.

10.2         Arbitration.  Upon the failure of the informal procedure
set forth in Section 10.1 to achieve a resolution of a dispute arising under
this Lease, the dispute shall be submitted to arbitration as provided in this
Section 10.2:

(A)          Either party may
demand arbitration by giving to the other party a notice specifying with
particularity the issue(s) in dispute, the amount involved, and the remedy
requested.  Demand for arbitration must
be given within one (1) year after the date of the act or omission out of which
the dispute arose or within thirty (30) days after service of a summons and
complaint in a court of competent jurisdiction alleging claims subject to this
Section 10, whichever is later, as otherwise it shall be deemed to be
conclusively waived.  Within twenty (20)
days after receipt of the notice, the responding party shall answer the demand
in writing, specifying with particularity the facts or issues that the
responding party disputes.

(B)           Within ten (10) days
after the responding party’s answer, each party shall select one qualified
arbitrator.  Each arbitrator shall be a
disinterested person qualified by education and experience to hear and
determine the issues and facts to be arbitrated.  Within ten (10) days after their selection,
the arbitrators so chosen shall select a neutral arbitrator similarly
qualified.  If the named arbitrators
cannot agree on a neutral arbitrator, either arbitrator may make application to
any judge of a court of competent jurisdiction, with a copy to both parties,
requesting that court to appoint the third arbitrator.  The court’s selection shall be final and
binding on the parties.  If either party
does not name an arbitrator, the arbitrator named by the other party shall
serve as the sole arbitrator.

(C)           Within five (5) days of the
appointment of the third arbitrator, each party shall present in writing to the
arbitrators (with a copy to the other party) its statement of the issues and
facts in dispute.  Any question regarding
the arbitrability of the dispute shall be

 25
 

 

decided by the arbitrators.  The arbitrators, as soon as possible, but not
more than thirty (30) days after their appointment, shall meet at a time and
place reasonably convenient for the parties, after giving each party at least
ten (10) days notice for the purpose of setting an arbitration hearing and establishing
the rules and timing of the arbitration. 
Unless otherwise agreed in writing, arbitration shall be held in Reno,
Nevada.  The arbitration hearing shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.  If there is any
conflict between the provisions of this Lease and the provisions of the
Commercial Arbitration Rules of the American Arbitration Association, the
provisions of this Lease shall prevail. 
The failure of a party to appear at the hearing shall not operate as a
default.  The attendance of all
arbitrators shall be required at all hearings. 
Action of the arbitrators shall be by majority vote.  After hearing the parties in regard to the
matter in dispute, taking such evidence and making such other investigations as
justice requires and as the arbitrators deem necessary, they shall decide the
issues submitted to them within ten (10) days thereafter and serve a written,
signed copy of the award upon each party.

(D)          The award shall be final
and binding on the parties, and judgment on the award may be entered by any
court of competent jurisdiction.  If the
parties settle the dispute in the course of the arbitration, the settlement
shall be approved by the arbitrators on request of either party and shall
become the award.  Fees and expenses of
the arbitration shall be allocated between the parties as provided by the
arbitrators.

The prevailing party in the arbitration proceedings shall be entitled
to receive from the other party reasonable attorneys’ fees, costs and expenses
to be determined by the arbitrator(s).

11.                               MISCELLANEOUS
PROVISIONS.

11.1         Severability.  The invalidity of any provision of this
Lease, as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provision.

11.2         Headings.  The headings of this Lease are inserted for
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Lease or any
provision hereof.

11.3         Waivers.  No waiver by any party hereto of any
provision hereof shall be deemed a waiver of any other provision hereof or of
any subsequent breach by the respective party of the same or any other
provision.  Any party’s consent to or
approval of any act shall not be deemed to render unnecessary the obtaining of
that party’s consent to or approval of any subsequent act by the breaching
party.

11.4         Recording.  The parties shall execute a Memorandum of
Lease, in recordable form, which may be recorded by either party.

11.5         Right to Inspect.  Landlord, or its agents, servants or
employees, may enter in and upon the Property or the Premises at any and all
reasonable times during normal business hours for the purposes of viewing the
same and inspecting the condition thereof.

11.6         Rent During Holding Over.  If Last Chance remains in possession of the
Premises, or any part thereof, after the expiration of the Lease Term without
the express written

 26
 

 

consent of Landlord, such occupancy shall be a tenancy
from month to month at a rental in the amount provided for in Section 3, plus
all other charges payable hereunder, and upon all the terms and conditions of
this Lease.

11.7         Cumulative
Remedies.  No remedy or election
hereunder shall be deemed exclusive, but shall, wherever possible, be
cumulative with all other remedies at law or in equity.

11.8         Covenants and
Conditions.  Each provision of this
Lease performable by Last Chance shall be deemed both a covenant and a
condition.

11.9         Binding Effect and
Choice of Law.  This Lease shall bind
the parties, their personal representatives, successors and assigns.  The laws of the State of Nevada shall govern
the validity, construction, performance and effect of this Lease.  Venue of any action concerning this Lease
shall be in Washoe County, Nevada.

11.10       Attorney’s Fees.  In the event a party must retain an attorney
to enforce this Lease or in the event of litigation which arises as a result of
any controversy, dispute, breach or construction of this Lease, the prevailing
party shall be entitled to recover, from the other party, all costs, expenses
and reasonable attorney’s fees incurred in connection with the enforcement
efforts or litigation.

11.11       Landlord’s Access.  Landlord and Landlord’s agents shall have the
right to enter the Premises at reasonable times for the purpose of determining
Last Chance’s compliance with the covenants and conditions of this Lease,
inspecting the same, showing the same to prospective purchasers, Last Chances
or lenders and making such alterations, repairs, improvements or additions to
the Premises as Landlord may deem necessary or desirable.

11.12       Merger.  The voluntary or other surrender of this
Lease by Last Chance, or a mutual cancellation thereof, shall not work a
merger, and shall, at the option of the Landlord, terminate all of any existing
subtenancies, or may, at the option of the Landlord, operate as an assignment
to Landlord of any or all of such subtenancies.

11.13       Approvals.  This Lease shall be contingent upon Last
Chance receiving any required approvals to operate gaming, bar, restaurant and
other commercial retail activities from the Nevada Gaming Authorities, State of
Nevada, Washoe County, or any other governmental board, commission or agency
that must provide Last Chance approval to operate the Premises.  In the event that the Last Chance is unable
to secure the required approvals, this Lease shall terminate with no damages
claimed by any party against the other.

11.14       Notices.  Whenever under this Lease a provision is made
for any demand, notice or declaration of any kind, or whether it is deemed
advisable or necessary by either party to give or serve any such notice, demand
or declaration to the other party, the notice shall be in writing and served
either personally or sent by certified or registered mail, return receipt
requested, postage prepaid, addressed to addresses set forth below:

 27
 

 

To:                              Prospector
Gaming Enterprises, Inc., or 

Target Investments, L.L.C.:

Peter Stremmel

1400 S. Virginia

Reno, Nevada  89502

With a copy to:

David R. Grundy, Esq.

Lemons, Grundy & Eisenberg

6005 Plumas Street, Suite 300

Reno, Nevada  89509

To Last Chance:

Ferenc B. Szony, President

Last Chance, Inc.

345 Arlington Ave.

Reno, Nevada 89501

With a copy to:

David R.  Wood,
Treasurer

The Sands Regent

345 Arlington Ave.

Reno, Nevada 89501

and

Paul A. Bible, Esq.

Bible, Hoy & Trachok

201 West Liberty Street, Third Floor

Reno, Nevada 89501.

11.15       Additional
Documents.  The parties hereto agree
to execute any additional documents, including escrow instructions, as may be
reasonable and necessary to carry out the provisions of this Lease and option
to purchase.

11.16       No Construction
Against Drafting Party.  This Lease
is not being offered on a take-it-or-leave-it basis.  Each party has been given an opportunity to
negotiate each term, propose new language or edits to existing language, and
has been given an opportunity to have the Lease reviewed by an independent
attorney.  This Lease is a joint product
of all parties and not one party. 
Therefore, the rule of construction that an ambiguous contract should be
construed against the drafting party shall not apply to this Lease.

11.17       Amendments.  This Lease may not be amended, except in
writing signed by all parties to this Lease.

 28
 

 

11.18       Expenses.  Each party shall pay its own attorneys’ fees
incurred to document or negotiate this Lease.

11.19       Integration.  This Lease and the other Integrated
Agreements constitute the entire agreement by, among and between the parties
and their Affiliates hereto and thereto and shall be deemed to constitute a
single integrated transaction.

 29
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Lease on the
date first written above.

	
  Last Chance, Inc.,

  	
  Prospector Gaming Enterprises, Inc.

  
	
  a Nevada
  corporation (Last Chance)

  	
  a Nevada corporation (PGE)

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ferenc Szony

  	
   

  	
  By:

  	
  /s/ Peter Stremmel

  	
   

  
	
  Its: 

  	
  Pres/CEO

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Target
  Investments, L.L.C,

  	
   

  	
   

  
	
  a Nevada limited
  liability company (Target)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Peter Stremmel

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Partner

  	
   

  	
   

  

 

 

For the purposes of Sections 8.1(L)(i) of this Lease and in
consideration of the execution and delivery of the Integrated Agreements by all
parties to each of them, the following join in the execution of this Lease and
agree to be bound thereby.

 

	
  /s/ Peter Stremmel

  	
   

  	
   

  	
  /s/ Steve
  Stremmel

  	
   

  
	
  Peter
  Stremmel

  	
   

  	
  Steve
  Stremmel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Stremmel
  Capital Group Ltd.

  	
   

  	
  Gold Ranch RV Resort, L.L.C.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Peter Stremmel

  	
   

  	
  By:

  	
  /s/ Steve Stremmel

  	
   

  
	
  Its:

  	
  Partner

  	
  Its:

  	
  Manager

  
						

 

 30
 

 

 

	
  State of Nevada

  	
  )

  
	
   

  	
  ) ss.

  
	
  County of Washoe

  	
  )

  

 

This instrument was acknowledged before me on the 27th day of December,
2001, by Peter Stremmel, the Partner Target Investments, L.L.C.

	
  

  	
  /s/ Yvonne Cody

  	
   

  
	
   

  	
  Notary Public

  

 

 

	
  State of Nevada

  	
  )

  
	
   

  	
  ) ss.

  
	
  County of Washoe

  	
  )

  

 

This instrument was acknowledged before me on the 27th day of December,
2001, by Peter Stremmel, the President of Prospector Gaming Enterprises, Inc.

	
  

  	
  /s/ Yvonne Cody

  	
   

  
	
   

  	
  Notary Public

  

 

 

	
  State of Nevada

  	
  )

  
	
   

  	
  ) ss.

  
	
  County of Washoe

  	
  )

  

 

This instrument was acknowledged before me on the 27th day of December,
2001, by Ferenc Szony, the President/CEO, Last Chance, Inc.

	
  

  	
  /s/ Yvonne Cody

  	
   

  
	
   

  	
  Notary Public

  

 

 

	
  State of Nevada

  	
  )

  
	
   

  	
  ) ss.

  
	
  County of Washoe

  	
  )

  

 

This instrument was acknowledged before me on the 27th day of December,
2001, by Peter Stremmel, the Partner Stremmel Capital Group, Ltd.

	
  

  	
  /s/ Yvonne Cody

  	
   

  
	
   

  	
  Notary Public

  

 

 31
 

 

 

	
  State of Nevada

  	
  )

  
	
   

  	
  ) ss.

  
	
  County of Washoe

  	
  )

  

 

This instrument
was acknowledged before me on the 27th day of December, 2001, by Steve
Stremmel, the Manager Gold Ranch RV Resort, L.L.C.

	
  

  	
  /s/ Yvonne Cody

  	
   

  
	
   

  	
  Notary Public

  

 

 32

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