Document:

EXHIBIT 4.13

 

PLEDGE AGREEMENT dated as of June 16,
2006 (the “Agreement”), among JACOBS ENTERTAINMENT, INC., a Delaware corporation
(the “Borrower”), BLACK HAWK GAMING & DEVELOPMENT COMPANY, INC.,
a Colorado corporation (“Black Hawk” and, together with Borrower, the “Pledgors”)
and CREDIT SUISSE, CAYMAN ISLANDS BRANCH (“Credit Suisse”), as
collateral agent (in such capacity, the “Collateral Agent”) for the
Secured Parties (as defined in the Credit Agreement referred to below).

 

Reference is
made to (a) the Credit Agreement dated as of June 16, 2006 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among the Borrower, the lenders from time
to time party thereto (the “Lenders”), CIBC World Markets Corp., as
Syndication Agent, Wells Fargo Bank, National Association, as Documentation
Agent and Swingline Lender, CIT Lending Services Corporation, as Documentation
Agent and Credit Suisse, as issuing bank (in such capacity, “Issuing Bank”),
Administrative Agent for the Lenders and Collateral Agent for the Secured
Parties and Issuing Bank, (b) the Guarantee Agreement dated as of June 16,
2006 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “Guarantee Agreement”), among the Borrower, the
Guarantors (including the Pledgors) party thereto and the Collateral Agent and (c) the
Security Agreement dated as of June 16, 2006 by and among the Pledgors and
the Collateral Agent (the “Security Agreement”).

 

The Lenders
have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to
issue Letters of Credit for the account of the Borrower and its Subsidiaries,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement.  Black Hawk has agreed
to guarantee, among other things, all the obligations of the Borrower under the
Credit Agreement (upon the terms specified in the Guarantee Agreement).  The obligations of the Lenders to make Loans
and of the Issuing Bank to issue Letters of Credit are conditioned upon, among
other things, the execution and delivery by the Pledgors of a pledge agreement
in the form hereof to secure (a) the due and punctual payment by the
Borrower of (i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Borrower to the Secured Parties under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Borrower and each Loan Party under or pursuant to the Credit

 

 

Agreement and
the other Loan Documents and (c) the due and punctual payment and
performance of all obligations of the Borrower under each Hedging Agreement and
Treasury Services Agreement entered into with any counterparty that was a
Lender or Lender Affiliate at the time such Hedging Agreement or Treasury
Services Agreement was entered into (all the monetary and other obligations
described in the preceding clauses (a) through (c) being
collectively called the “Secured Obligations”).  Capitalized terms used herein and not defined
herein shall have meanings assigned to such terms in the Credit Agreement.

 

Accordingly,
the Pledgors and the Collateral Agent, on behalf of itself and each Secured
Party (and each of their respective successors or assigns), hereby agree as
follows:

 

SECTION 1.                                Pledge.  As security for the payment and performance,
as the case may be, in full of the Secured Obligations, each Pledgor hereby
transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over
and delivers unto the Collateral Agent, its successors and assigns, and hereby
grants to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, a security interest in all of such Pledgor’s
right, title and interest in, to and under (a) subject to Gaming Laws (as
defined in Section 5(c)), the shares of capital stock or equity interest
owned by it and listed on Schedule I hereto and the certificates
representing all such shares (the “Pledged Stock”); (b) subject
to Section 5, all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed, in respect of, in exchange for or upon the conversion of
the securities referred to in clause (a) above; (c) subject to Section 5,
all rights and privileges of each Pledgor with respect to the securities and other
property referred to in clause (a) and (b) above; and (d) all
proceeds of any of the foregoing (the items referred to in clauses (a) through
(d) above being collectively referred to as the “Nevada Collateral”).  Upon delivery to the Collateral Agent, (a) any
stock certificates, or other securities now or hereafter included in the Nevada
Collateral (the “Pledged Securities”) shall be accompanied by stock
powers duly executed in blank satisfactory to the Collateral Agent and by such
other instruments and documents as the Collateral Agent may reasonably request
and (b) all other property comprising part of the Nevada Collateral shall
be accompanied by proper instruments of assignment duly executed by the
applicable Pledgor and such other instruments or documents as the Collateral
Agent may reasonably request.  Each
delivery of Pledged Securities shall be accompanied by a schedule describing
the securities theretofore and then being pledged hereunder, which schedule shall
be attached hereto as Schedule I and made a part hereof.  Each schedule so delivered shall
supersede any prior schedules so delivered. 
The security interest granted herein shall also secure all future
advances and re-advances that may be made by the Secured Parties to, or for the
benefit of, the Borrower or the Pledgors.

 

TO HAVE AND TO
HOLD the Nevada Collateral, together with all right, title, interest, powers,
privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, forever; subject, however, to the terms,
covenants and conditions hereinafter set forth.

 

SECTION 2.                                Delivery
of the Nevada Collateral.  Each Pledgor
agrees promptly to deliver or cause to be delivered to Dunham Trust Company,
the Collateral Agent’s designee in the State of Nevada (the “Nevada Nominee”),
any and all Pledged Securities, and any and all

 

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certificates or other instruments or documents representing the Nevada Collateral,
upon the receipt of all approvals required under Gaming Laws.

 

SECTION 3.                                Representations,
Warranties and Covenants.  Each Pledgor
hereby represents, warrants and covenants, as to itself and the Nevada Collateral
pledged by it hereunder, to and with the Collateral Agent that:

 

(a)                                  the Pledged Stock
represents that percentage as set forth on Schedule I of the issued
and outstanding shares of each class of the capital stock and equity interest
of the issuer with respect thereto;

 

(b)                                 except for the
security interest granted hereunder, such Pledgor (i) is and will at all
times continue to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule I, (ii) holds the
same free and clear of any mortgage, deed of trust, lien, pledge, encumbrance,
claim, charge, assignment, hypothecation, security interest or encumbrance of
any kind or any arrangement to provide priority or preference or any filing of
any financing statement under the UCC or any other similar notice of lien under
any similar notice or recording statute of any Governmental Authority,
including any easement, right-of-way or other encumbrance on title to Real
Property, whether voluntary or imposed by law, or any agreement to give any of
the foregoing and free and clear of the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such property (collectively, “Liens”), (iii) will
make no assignment, pledge, hypothecation or transfer of, or create or permit
to exist any security interest in or other Lien on, the Nevada Collateral,
other than pursuant hereto, and (iv) subject to Section 5 and, with
respect to delivery of the Pledged Stock, subject to receipt of all approvals
required under Gaming Laws, will cause any and all Nevada Collateral, whether
for value paid by such Pledgor or otherwise, to be forthwith deposited with the
Collateral Agent and pledged or assigned hereunder;

 

(c)                                  each Pledgor (i) has
the power and authority to pledge the applicable Nevada Collateral in the
manner hereby done or contemplated and (ii) will defend its title or
interest thereto or therein against any and all Liens (other than the Lien
created by this Agreement), however arising, of all persons whomsoever;

 

(d)                                 no consent of any
other person (including stockholders or creditors of any Pledgor) and no
consent or approval of any Governmental Authority or any securities exchange
was or is necessary to the validity or effectiveness of the pledge (other than
the approval of the Nevada Gaming Control Board (the “Nevada Board”) and
the Nevada Gaming Commission (the “Nevada Commission” and, together with
the Nevada Board, and any other Nevada state or local agency with jurisdiction
over gaming operations or liquor licensing in the State of Nevada or any
political subdivision thereof, the “Nevada Gaming Authorities”)) effected
hereby;

 

(e)                                  by virtue of the
execution and delivery by each Pledgor of this Agreement, when the Pledged
Securities, certificates or other documents representing or evidencing

 

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such Nevada Collateral
are delivered to the Collateral Agent in accordance with this Agreement, the
Collateral Agent will obtain a valid and perfected first lien upon and security
interest in such Pledged Securities as security for the payment and performance
of the Secured Obligations;

 

(f)                                    the pledge effected
hereby is effective to vest in the Collateral Agent, on behalf of the Secured
Parties, the rights of the Collateral Agent in the Nevada Collateral as set
forth herein;

 

(g)                                 all of the Pledged
Stock has been duly authorized and validly issued and is fully paid and
nonassessable;

 

(h)                                 all information set
forth herein relating to the Pledged Stock is accurate and complete in all
material respects as of the date hereof; and

 

(i)                                     the pledge of the
Pledged Stock pursuant to this Agreement does not violate Regulation T, U or X
of the Federal Reserve Board or any successor thereto as of the date hereof.

 

SECTION 4.                                Registration
in Nominee Name; Denominations.  The
Collateral Agent, on behalf of the Secured Parties, shall have the right (in
its reasonable discretion) to hold the Pledged Securities in its own name as
pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of
the applicable Pledgor, endorsed or assigned in blank or in favor of the
Collateral Agent except that, in the case of the Pledged Stock, the Collateral
Agent will hold the Pledged Stock in the name of the applicable Pledgor only.  Each Pledgor will promptly give to the
Collateral Agent copies of any notices or other communications received by it
with respect to Pledged Securities registered in the name of such Pledgor.  The Collateral Agent shall at all times have
the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.

 

SECTION 5.                                Voting
Rights; Dividends and Interest, etc.

 

(a)                                  Unless
and until an Event of Default shall have occurred and be continuing:

 

(i)                                     Each Pledgor shall
be entitled to exercise any and all voting and/or other consensual rights and
powers inuring to an owner of Pledged Securities or any part thereof for any
purpose not prohibited by the terms of this Agreement, the Credit Agreement and
the other Loan Documents.  Each Pledgor
agrees that it shall not exercise any such right for any purpose prohibited by
the terms of, or if the result thereof could materially and adversely affect
the rights inuring to a holder of the Pledged Securities or the rights and
remedies of any of the Secured Parties under, this Agreement or the Credit
Agreement or any other Loan Document or the ability of the Secured Parties to
exercise the same;

 

(ii)                                  The Collateral Agent
shall execute and deliver to each Pledgor, or cause to be executed and
delivered to each Pledgor, all such proxies, powers of attorney and other
instruments as such Pledgor may reasonably request for the purpose of enabling such

 

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Pledgor to exercise the voting and/or consensual rights and powers it
is entitled to exercise pursuant to subparagraph (i) above and to
receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below;
and

 

(iii)                               Each Pledgor shall be
entitled to receive and retain any and all cash dividends, interest and
principal paid on the Pledged Securities to the extent and only to the extent
that such cash dividends, interest and principal are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable laws.  All noncash dividends, interest and
principal, and all dividends, interest and principal paid or payable in cash or
otherwise in connection with a partial or total liquidation or dissolution,
return of capital, capital surplus or paid-in surplus, and all other
distributions (other than distributions referred to in the preceding sentence)
made on or in respect of the Pledged Securities, whether paid or payable in
cash or otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the issuer of any Pledged
Securities or received in exchange for Pledged Securities or any part thereof,
or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise, shall be and become part of the Nevada Collateral, and, if received
by a Pledgor, shall not be commingled by such Pledgor with any of its other
funds or property but shall be held separate and apart therefrom, shall be held
in trust for the benefit of the Collateral Agent and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement).

 

(b)                                 Upon
the occurrence and during the continuance of an Event of Default, all rights of
each Pledgor to dividends, interest or principal that the Pledgor is authorized
to receive pursuant to paragraph (a)(iii) above shall cease, and,
subject to Gaming Laws, all such rights shall thereupon become vested in the
Collateral Agent, which shall have the sole and exclusive right and authority
to receive and retain such dividends, interest or principal.  All dividends, interest or principal received
by each Pledgor contrary to the provisions of this Section 5 shall be held
in trust for the benefit of the Collateral Agent, shall be segregated from
other property or funds of such Pledgor and shall be forthwith delivered to the
Collateral Agent upon demand in the same form as so received (with any necessary
endorsement).  Any and all money and
other property paid over to or received by the Collateral Agent pursuant to the
provisions of this paragraph (b) shall be retained by the Collateral
Agent in an account to be established by the Collateral Agent upon receipt of
such money or other property and shall be applied in accordance with the provisions
of Section 7.  After all Events of
Default have been cured or waived, the Collateral Agent shall, within five
Business Days after all such Events of Default have been cured or waived, repay
to each Pledgor all cash dividends, interest or principal (without interest),
that such Pledgor would otherwise be permitted to retain pursuant to the terms
of paragraph (a)(iii) above and which remain in such account.

 

(c)                                  Upon
the occurrence and during the continuance of an Event of Default, all rights of
each Pledgor to exercise the voting and consensual rights and powers it is
entitled to exercise pursuant to paragraph (a)(i) of this Section 5
other than, in the case of Pledged Stock, those required pursuant to any
applicable federal, state and local gaming laws, rules or regulations, as
amended from time to time (the “Gaming Laws”), and the obligations of
the Collateral Agent

 

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under paragraph (a)(ii) of this Section 5, shall cease,
and all such rights shall thereupon become vested in the Collateral Agent,
which shall have the sole and exclusive right and authority to exercise such
voting and consensual rights and powers during the continuance of such Event of
Default, provided that, unless otherwise directed by the Required
Lenders, the Collateral Agent shall have the right from time to time following
and during the continuance of an Event of Default to permit each Pledgor to
exercise such rights.  After all Events
of Default have been cured or waived, all rights vested in the Collateral Agent
pursuant to this clause (c) shall cease and each Pledgor will have
the right to exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) of
this Section 5.

 

(d)                                 Each
Pledgor agrees that, upon the occurrence of and during the continuance of an
Event of Default and at the Collateral Agent’s request, it will, and will cause
each of its Subsidiaries to, immediately file such applications for approval
and shall use commercially reasonable efforts to take all other and further
actions required by the Collateral Agent to obtain such approvals or consents
of the Nevada Gaming Authorities, and any other Governmental Authorities with
jurisdiction as are necessary for the Collateral Agent, to continue operation
of the businesses of Pledgors and their Subsidiaries under the Gaming Licenses
held by it, or its interest in any Person holding any such Gaming License
pursuant to the Gaming Laws.  To enforce
the provisions of this Section 5, the Collateral Agent is empowered
to request the appointment of a receiver from any court of competent
jurisdiction.  Such receiver shall be
instructed to seek from the Nevada Gaming Authority any other Governmental
Authorities with jurisdiction, authorization pursuant to the Gaming Laws to
continue operation of the businesses of each Pledgor and its Subsidiaries under
all necessary Gaming Licenses for the purpose of seeking a bona fide purchaser
of the businesses of each Pledgor and its Subsidiaries.  Each Pledgor hereby agrees to authorize, and
to cause each of its Subsidiaries to authorize such an authorization pursuant
to the Gaming Laws to continue the operation of the businesses of such Pledgor
and its Subsidiaries upon the request of the receiver so appointed and, if any
Pledgor or any such Subsidiary shall refuse to authorize the transfer, its
approval may be required by the court. 
Upon the occurrence and continuance of any Event of Default, each
Pledgor shall further use, and shall cause its Subsidiaries to use,
commercially reasonable efforts to assist in obtaining approval of the Nevada
Gaming Authority and any other Governmental Authorities with jurisdiction if
required, for any action or transactions contemplated by this Agreement or the
Loan Documents, including, preparation, execution, and filing with the Nevada
Gaming Authority and any other Governmental Authorities with jurisdiction of
any application or applications for authorization pursuant to the Gaming Laws for
the receiver to continue the operation of the businesses of any Pledgor and its
Subsidiaries under any Gaming License or transfer of control necessary or
appropriate under the applicable Gaming Laws for approval of the transfer or
assignment of any portion of the Nevada Collateral.  Each Pledgor acknowledges that the
authorization pursuant to the Gaming Laws for the receiver to continue the
operation of the businesses of any Pledgor and its Subsidiaries under the
Gaming Licenses or for a transfer of control is integral to the Collateral
Agent’s realization of the value of the Nevada Collateral, that there is no
adequate remedy at law for failure by each Pledgor to comply with the
provisions of this Section 5 and that such failure would not be adequately
compensable in damages, and therefore agrees that the agreements contained in
this Section 5 may be specifically enforced.

 

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(e)                                  All
rights, remedies, and powers provided in this Agreement and the other Loan
Documents may be exercised only to the extent that the exercise thereof does
not violate any applicable mandatory provision of the Gaming Laws and all
provisions of this Agreement and the other Loan Documents are intended to be
subject to all applicable mandatory provisions of the Gaming Laws and to be limited
solely to the extent necessary to not render the provisions of this Agreement
or the other Loan Documents invalid or unenforceable, in whole or in part.  The CollateralAgent will timely apply for any
receive all required approvals of the Nevada Gaming Authority for the sale of
other disposition of gaming equipment regulated by the Gaming Laws (including
any such sale or disposition of gaming equipment consisting of slot machines,
gaming tables, cards, dice, gaming chips, player tracking systems, and all
other “gaming devices” (as such term or words of like import referring thereto
are defined in the Gaming Laws), and “associated equipment” (as such term or
words of like import referring thereto are defined in the Gaming Law).

 

(f)                                    For
purposes hereof, “Gaming License” means any finding of suitability,
registration, license, franchise, or other finding of qualification, or other
approval or authorization required to own, lease, operate or otherwise conduct
or manage gaming activities in the State of Nevada and all applicable liquor licenses.

 

SECTION 6.                                Remedies
upon Default.  Upon the occurrence
and during the continuance of an Event of Default, subject to applicable
regulatory and legal requirements (including the Gaming Laws), the Collateral
Agent may sell the Nevada Collateral, or any part thereof, at public or private
sale or at any broker’s board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem
appropriate.  The Collateral Agent shall
be authorized at any such sale (if it deems it advisable to do so) to restrict
the prospective bidders or purchasers to persons who will represent and agree
that they are purchasing the Nevada Collateral for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Nevada Collateral Agent shall have the right
to assign, transfer and deliver to the purchaser or purchasers thereof the Nevada
Collateral so sold.  Each such purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of the Pledgors, and, to the extent permitted by applicable
law, the Pledgors hereby waive all rights of redemption, stay, valuation and
appraisal the Pledgors now have or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted.

 

In the event
that, upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent intends to exercise any of the voting and other rights
with respect to any Pledged Stock, including, but not limited to (i) re-registration
of any Pledged Stock, or (ii) foreclosure, transfer or other enforcement
of the security interests in any Pledged Stock, pursuant to applicable Gaming
Laws, such exercise of remedies shall require the prior approval of any agency,
authority, board (including the Nevada Gaming Authorities), bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or city or other political
subdivision, whether now or hereafter existing, or any officer or official
thereof, including, without limitation, the gaming commission and any other
agency with authority to regulate any gaming operation or proposed gaming
operation owned, managed or operated by each Pledgor or its subsidiaries (the “Gaming

 

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Authorities”) and/or
licensing of the Collateral Agent or its nominee (unless such licensing
requirement is waived by the applicable Gaming Authorities upon the application
of the Collateral Agent or its nominee), pursuant to applicable Gaming Laws.  The approval by the applicable Gaming Authorities
of this Agreement shall not act or be construed as the approval, either express
or implied, for the Collateral Agent to take any action or steps provided for
in this Agreement for which prior approval of any applicable Gaming Authorities
is required, without first obtaining such prior approval of such applicable
Gaming Authorities to the extent then required by applicable Gaming Law.

 

The Collateral
Agent shall give the applicable Pledgor 10 days’ prior written notice (which such
Pledgor agrees is reasonable notice within the meaning of Section 9-612 of
the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions) of the Collateral Agent’s intention to make
any sale of such Pledgor’s Nevada Collateral. 
Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker’s board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Nevada Collateral, or portion thereof, will
first be offered for sale at such board or exchange.  Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale.  At any such sale, the Nevada Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may (in its sole and absolute
discretion) determine.  The Collateral Agent
shall not be obligated to make any sale of any Nevada Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such Nevada
Collateral shall have been given.  The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further
notice, be made at the time and place to which the same was so adjourned.  In case any sale of all or any part of the Nevada
Collateral is made on credit or for future delivery, the Nevada Collateral so
sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Nevada Collateral so sold and, in case of any such failure,
such Nevada Collateral may be sold again upon like notice.  At any public (or, to the extent permitted by
applicable law, private) sale made pursuant to this Section 6, any Secured
Party may bid for or purchase, free from any right of redemption, stay or
appraisal on the part of the applicable Pledgor (all said rights being also
hereby waived and released), the Nevada Collateral or any part thereof offered
for sale and may make payment on account thereof by using any claim then due
and payable to it from such Pledgor as a credit against the purchase price, and
it may, upon compliance with the terms of sale, hold, retain and dispose of
such property without further accountability to such Pledgor therefor.  For purposes hereof, (a) a written
agreement to purchase the Nevada Collateral or any portion thereof shall be
treated as a sale thereof, (b) the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and (c) the Pledgors shall not be
entitled to the return of the Nevada Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Nevada Collateral Agent shall
have entered into such an agreement all Events of Default shall have been
remedied and the Secured Obligations paid in full.  As an alternative to exercising the power of
sale herein conferred upon it, the Collateral Agent may proceed by a suit or
suits at law or in equity to foreclose upon the Nevada Collateral

 

8

 

and to sell the Nevada Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.  Any sale pursuant to the provisions of this Section 6
shall be deemed to the extent permitted by applicable law to conform to the
commercially reasonable standards as provided in Section 9-610(b) of
the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions.

 

SECTION 7.                                Application
of Proceeds of Sale.  Upon the
occurrence and during the continuance of an Event of Default, the proceeds of
any sale of Nevada Collateral pursuant to Section 6, as well as any Nevada
Collateral consisting of cash, shall be applied by the Collateral Agent as
follows:

 

FIRST, to the
payment of all reasonable costs and expenses incurred by the Administrative
Agent or the Collateral Agent in connection with such sale or otherwise in
connection with this Agreement, any other Loan Document or any of the Secured Obligations,
including all court costs and the reasonable fees and expenses of its agents and
legal counsel, the repayment of all advances made by the Collateral Agent
hereunder or under any other Loan Document on behalf of the Pledgors and any
other reasonable costs or expenses incurred in connection with the exercise of
any right or remedy hereunder or under any other Loan Document;

 

SECOND, to the
payment in full of the Secured Obligations (the amounts so applied to be
distributed among the Secured Parties pro rata in accordance with the amounts
of the Secured Obligations owed to them on the date of any such distribution);
and

 

THIRD, to each
Pledgor, its successors or assigns, or as a court of competent jurisdiction may
otherwise direct.

 

The Collateral
Agent shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement.  Upon any sale of the Nevada Collateral by the
Collateral Agent (including pursuant to a power of sale granted by statute or
under a judicial proceeding), the receipt of the purchase money by the Collateral
Agent or of the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Nevada Collateral so sold and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer or be answerable
in any way for the misapplication thereof.

 

SECTION 8.                                 Reimbursement of
Collateral Agent.

 

(a)                                  Each
Pledgor agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges and
disbursements of its counsel and of any experts or agents, that the Collateral
Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Nevada Collateral, (iii) the
exercise or enforcement of any of the rights of the Collateral Agent hereunder or
(iv) the failure by such Pledgor to perform or observe any of the provisions
hereof.

 

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(b)                                 Without
limitation of its indemnification obligations under the other Loan Documents,
each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as
defined in Section 10.03(b) of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the
execution or delivery of this Agreement or any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the consummation
of the Transactions and the other transactions contemplated thereby or (ii) any
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto, provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence, bad faith or wilful
misconduct of such Indemnitee or any of its Affiliates.

 

(c)                                  Any
amounts payable as provided hereunder shall be additional Secured Obligations
secured hereby and by the other Security Documents.  The provisions of this Section 8 shall
remain operative and in full force and effect regardless of the termination of
this Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Secured Obligations, the invalidity or unenforceability
of any term or provision of this Agreement or any other Loan Document or any
investigation made by or on behalf of the Collateral Agent or any other Secured
Party.  All amounts due under this Section 8
shall be payable on written demand therefor and shall bear interest at the rate
specified in Section 2.06 of the Credit Agreement.

 

SECTION 9.                                Collateral
Agent Appointed Attorney-in-Fact.  Subject
to Gaming Laws, each Pledgor hereby appoints the Collateral Agent the
attorney-in-fact of such Pledgor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instrument that the
Collateral Agent may reasonably deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest.  Without limiting the
generality of the foregoing, the Collateral Agent shall have the right, upon
the occurrence and during the continuance of an Event of Default, with full
power of substitution either in the Collateral Agent’s name or in the name of
the applicable Pledgor, to ask for, demand, sue for, collect, receive and give
acquittance for any and all moneys due or to become due under and by virtue of
any Nevada Collateral, to endorse checks, drafts, orders and other instruments
for the payment of money payable to the applicable Pledgor representing any interest
or dividend or other distribution payable in respect of the Nevada Collateral
or any part thereof or on account thereof and to give full discharge for the same,
to settle, compromise, prosecute or defend any action, claim or proceeding with
respect thereto, and to sell, assign, endorse, pledge, transfer and to make any
agreement respecting, or otherwise deal with, the same; provided, however,
that nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present
or file any claim or notice, or to take any action with respect to the Nevada Collateral
or any part thereof or the moneys due or to become due in respect thereof or
any property covered thereby.  The
Collateral Agent and the

 

10

 

other Secured Parties shall be
accountable only for amounts actually received as a result of the exercise of
the powers granted to them herein, and neither they nor their officers,
directors, employees or agents shall be responsible to the Pledgors for any act
or failure to act hereunder, except for their own gross negligence or wilful
misconduct.

 

SECTION 10.                          Waivers;
Amendment.

 

(a)                                  No
failure or delay of the Collateral Agent in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.  The rights and remedies of the Collateral
Agent hereunder and of the other Secured Parties under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any
provisions of this Agreement or consent to any departure by the Pledgor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.  No notice or demand on either Pledgor in any
case shall entitle such Pledgor to any other or further notice or demand in
similar or other circumstances.

 

(b)                                 Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to a written agreement entered into between the Collateral
Agent and the Pledgors with respect to which such waiver, amendment or
modification is to apply, subject to any consent required in accordance with Section 10.02
of the Credit Agreement.

 

SECTION 11.                          Securities
Act, etc.  In view of the position of
each Pledgor in relation to the Pledged Securities, or because of other current
or future circumstances, a question may arise under the Securities Act of 1933,
as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being called the “Federal Securities Laws”) with
respect to any disposition of the Pledged Securities permitted hereunder.  Each Pledgor understands that compliance with
the Federal Securities Laws might very strictly limit the course of conduct of
the Collateral Agent if the Collateral Agent were to attempt to dispose of all
or any part of the Pledged Securities, and might also limit the extent to which
or the manner in which any subsequent transferee of any Pledged Securities
could dispose of the same.  Similarly,
there may be other legal restrictions or limitations affecting the Collateral
Agent in any attempt to dispose of all or part of the Pledged Securities under
applicable Blue Sky or other state securities laws or similar laws analogous in
purpose or effect.  Each Pledgor
recognizes that in light of such restrictions and limitations the Collateral
Agent may, with respect to any sale of the Pledged Securities, limit the
purchasers to those who will agree, among other things, to acquire such Pledged
Securities for their own account, for investment, and not with a view to the
distribution or resale thereof.  Each Pledgor
acknowledges and agrees that in light of such restrictions and limitations, the
Collateral Agent, in its sole and absolute discretion, (a) may proceed to
make such a sale whether or not a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed under
the Federal Securities Laws and (b) may approach and negotiate with a
single potential purchaser to effect such sale. 
Each Pledgor acknowledges and

 

11

 

agrees that any such sale might result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions.  In the event of any such
sale, the Collateral Agent shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price that the Collateral
Agent, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were
approached.  The provisions of this Section 11
will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at
which the Collateral Agent sells.

 

SECTION 12.                          Condition
Precedent.  Notwithstanding anything
to the contrary contained in this Agreement, certificates representing the
shares of capital stock or equity interest owned by the Pledgors and listed on Schedule I
hereto shall not be physically delivered to the Collateral Agent pursuant to
the terms of this Agreement prior to receipt of all approvals required under
Gaming Laws; provided, however, that this Section 12 shall not affect any
other provision of this Agreement in any way.

 

SECTION 13.                          Security
Interest Absolute.  To the extent
permitted by applicable law, all rights of the Collateral Agent hereunder, the
grant of a security interest in the Nevada Collateral and all obligations of
the Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Secured Obligations or any
other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement, any other Loan Document or
any other agreement or instrument relating to any of the foregoing, (c) any
exchange, release or nonperfection of any other collateral, or any release or
amendment or waiver of or consent to or departure from any guaranty, for all or
any of the Secured Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, either Pledgor
in respect of the Secured Obligations or in respect of this Agreement (other
than the indefeasible payment in full of all the Secured Obligations).

 

SECTION 14.                          Termination
or Release.

 

(a)                                  This
Agreement and the security interests granted hereby shall terminate when all
the Secured Obligations have been paid in full and the Lenders have no further
commitment to lend under the Credit Agreement, the LC Exposure has been
reduced to zero and the Issuing Bank has no further obligation to issue Letters
of Credit under the Credit Agreement.

 

(b)                                 Upon
any sale or other transfer by the Pledgors of any Nevada Collateral that is
permitted under the Credit Agreement to any person that is not a Pledgor (as such
term is defined in the Credit Agreement), or, upon the effectiveness of any
written consent to the release of the security interest granted hereby in any Nevada
Collateral pursuant to Section 10.02 of the Credit Agreement, the security
interest in such Nevada Collateral shall be automatically released.

 

12

 

(c)                                  In
connection with any termination or release pursuant to paragraph (a) or
(b), the Collateral Agent shall (i) promptly deliver to the applicable Pledgor
all Nevada Collateral pledged to the Collateral Agent herein and (ii) execute
and deliver to the applicable Pledgor, at such Pledgor’s expense, all documents
that such Pledgor shall reasonably request from time to time to evidence such
termination or release.  Any execution
and delivery of documents pursuant to this Section 14 shall be without recourse
to or warranty by the Collateral Agent.

 

SECTION 15.                          Notices.  All communications and notices hereunder
shall be in writing and given as provided in Section 10.01 of the Credit
Agreement.  All communications and
notices hereunder to each Pledgor shall be given to it in care of the Borrower
at the Borrower’s address set forth in Section 10.01 of the Credit
Agreement.

 

SECTION 16.                          Further
Assurances.  Each Pledgor agrees to
do such further acts and things, and to execute and deliver such additional
conveyances, assignments, agreements and instruments, as the Collateral Agent
may at any time reasonably request in connection with the administration and
enforcement of this Agreement or with respect to the Nevada Collateral or any
part thereof or in order better to assure and confirm unto the Collateral Agent
its rights and remedies hereunder.

 

SECTION 17.                          Binding
Effect; Several Agreement; Assignments. 
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party; and all covenants, promises and agreements by or on behalf of the
Pledgors that are contained in this Agreement shall bind and inure to the
benefit of its successors and assigns. 
This Agreement shall become effective as to each Pledgor when a counterpart
hereof executed on behalf of such Pledgor shall have been delivered to the
Collateral Agent and a counterpart hereof shall have been executed on behalf of
the Collateral Agent, and thereafter shall be binding upon such Pledgor and the
Collateral Agent and their respective successors and assigns, and shall inure
to the benefit of such Pledgor, the Collateral Agent and the other Secured
Parties, and their respective successors and assigns, except that such Pledgor
shall not have the right to assign its rights hereunder or any interest herein
or in the Nevada Collateral (and any such attempted assignment shall be void),
except as expressly contemplated by this Agreement or the other Loan
Documents.  If all of the capital stock
of a Pledgor is sold, transferred or otherwise disposed of to a person that is
not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.05
of the Credit Agreement, such Pledgor shall be released from its obligations
under this Agreement without further action. 
This Agreement shall be construed as a separate agreement with respect
to each Pledgors and may be amended, modified, supplemented, waived or released
with respect to each Pledgor without the approval of any other Pledgor (as such
term is defined in the Credit Agreement) and without affecting the obligations
of any other Pledgor (as such term is defined in the Credit Agreement) under the
Credit Agreement or under any other Loan Document.

 

SECTION 18.                          Survival
of Agreement; Severability.

 

(a)                                  All
covenants, agreements, representations and warranties made by the Borrower or
the Pledgors in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery

 

13

 

of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Agents, the Issuing Bank or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any Fee or any other amount payable under this
Agreement (other than claims not yet asserted, including as to indemnification claims)
is outstanding and unpaid or any Letter of Credit is outstanding and so long as
the Commitments have not expired or terminated.

 

(b)                                 Any
provision of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

 

SECTION 19.                          Governing
Law.  This Agreement shall be
construed in accordance with and governed by the law of the State of New York,
without regard to conflicts of law principles that would require the
application of the laws of another jurisdiction.

 

SECTION 20.                          Counterparts;
Integration; Effectiveness.  This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents,
and any separate letter agreements with respect to fees payable to the
Administrative Agent, constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01
of the Credit Agreement, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative
Agent shall have received counterparts hereof that, when taken together, bear
the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

SECTION 21.                          Rules of
Interpretation.  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation.”  The word “will” shall be
construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise (a) any
definition of or reference to any Loan Document, agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any person
shall be construed to include such person’s successors and assigns, (c) the
words “herein,” “hereof” and “hereunder,” and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Sections and Schedules
shall be construed to refer to Sections of and Schedules to, this Agreement, (e) any
reference to any law

 

14

 

or regulation herein shall refer to such law or regulation as amended,
modified or supplemented from time to time and (f) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract.

 

SECTION 22.                          Jurisdiction;
Waiver of Venue; Consent to Service of Process.

 

(a)                                  Submission
to Jurisdiction.  Each Loan Party
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the fullest extent permitted by applicable law, in such Federal
court.  Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against any Loan Party or its properties in the courts of any
jurisdiction.

 

(b)                                 Waiver
of Venue.  Each Loan Party hereby
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable Requirements of Law, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court referred to
in Section 15.  Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
applicable Requirements of Law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

(c)                                  Service
of Process.  Each party hereto
irrevocably consents to service of process in any action or proceeding arising
out of or relating to any Loan Document, in the manner provided for notices
(other than telecopier or electronic communications) in Section 15.  Nothing in this Agreement or any other Loan
Document will affect the right of any party hereto to serve process in any
other manner permitted by applicable Requirements of Law.

 

SECTION 23.                          Waiver
of Jury Trial.  Each Loan Party
hereby waives, to the fullest extent permitted by applicable Requirements of
Law, any right it may have to a trial by jury in any legal proceeding directly
or indirectly arising out of or relating to this Agreement, any other Loan
Document or the transactions contemplated hereby (whether based on contract,
tort or any other theory).  Each party
hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section.

 

15

 

SECTION 24.                          Authorization
Regarding Filing of Financing Statements. 
Each Pledgor authorizes the Collateral Agent to file financing
statements with respect to the Nevada Collateral owned by it in such form and
in such filing offices as the Collateral Agent reasonably determines
appropriate to perfect the security interests of the Collateral Agent under
this Agreement.  A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.

 

SECTION 25.                          Compliance
with Gaming Laws.  Notwithstanding
anything to the contrary contained herein or in any of the other Loan
Documents, the Collateral Agent expressly acknowledges and agrees that the
exercise of its rights, powers, privileges and remedies under this Agreement is
subject to the mandatory provisions of the Gaming Laws and the requirements of
the Nevada Gaming Authorities. 
Specifically, the Collateral Agent acknowledges and agrees that:

 

(a)                                  The
pledge of the Pledged Stock by each Pledgor, and any restrictions on the
transfer of and agreements not to encumber the Pledged Stock contained in this
Agreement or in any other Loan Documents, are not effective without the prior
approval of the Nevada Gaming Authorities;

 

(b)                                 Any
amendment of this Agreement will require the approval of the Nevada Gaming
Authorities before such amendment will be effective;

 

(c)                                  The
Collateral Agent and the Nevada Nominee shall be required to comply with the
conditions, if any, imposed by the Nevada Gaming Authorities in connection with
its approval of the pledge granted hereunder by each Pledgor, including,
without limitation, the requirement that the Collateral Agent, by and through
the Nevada Nominee as its agent, maintain the certificates evidencing the
Pledged Stock at a location in Nevada designated to the Nevada Board, and that
the Collateral Agent and the Nevada Nominee permit agents or employees of the
Nevada Board to inspect such certificates immediately upon request during
normal business hours; and

 

(d)                                 Neither
the Collateral Agent nor the Nevada Nominee shall surrender possession of any
certificate evidencing the Pledged Stock to any person other than the respective
Pledgor without the prior approval of the Nevada Gaming Authorities or as
otherwise permitted by the Gaming Laws.

 

16

 

IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

 

	
   

  	
  JACOBS
  ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey
  P. Jacobs

  	
   

  
	
   

  	
   

  	
  Name:
  Jeffrey P. Jacobs

  
	
   

  	
   

  	
  Title: Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BLACK HAWK
  GAMING & DEVELOPMENT

  COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen
  R. Roark

  	
   

  
	
   

  	
   

  	
  Name:
  Stephen R. Roark

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS

  BRANCH, as Collateral Agent,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Cassandra Droogan

  	
   

  
	
   

  	
   

  	
  Name:
  Cassandra Droogan

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Doreen
  Barr

  	
   

  
	
   

  	
   

  	
  Name: Doreen
  Barr

  
	
   

  	
   

  	
  Title: Vice
  President

  

 

17

 

Schedule I to the

Pledge Agreement

 

CAPITAL STOCK

 

	
  Issuer (Jurisdiction of

  Incorporation)

  	
   

  	
  Number 

  of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number 

  and

  Class of Shares

  	
   

  	
  Percentage of

  Shares

  	
   

  
	
  Jacobs Pinon Plaza Entertainment, Inc.
  (Nevada)

  	
   

  	
  1

  	
   

  	
  Jacobs Entertainment, Inc.

  	
   

  	
  100 / Common

  	
   

  	
  100

  	
  %

  
	
  Gold Dust West Casino, Inc. (Nevada)

  	
   

  	
  1

  	
   

  	
  Black Hawk Gaming & Development
  Company, Inc.

  	
   

  	
  100 / Common

  	
   

  	
  100

  	
  %

  
	
  Black Hawk Gaming & Development
  Company, Inc. (Colorado)

  	
   

  	
  2

  	
   

  	
  Jacobs Entertainment, Inc.

  	
   

  	
  1,000 /
  Capital Stock

  	
   

  	
  100

  	
  %

  
	
  Jacobs Elko Entertainment, Inc.

  	
   

  	
  1

  	
   

  	
  Jacobs Entertainment, Inc.

  	
   

  	
  100 / Common
  Stock

  	
   

  	
  100

  	
  %

  

 

DEBT SECURITIES(1)

 

	
  Issuer

  	
   

  	
  Principal Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(1)                                  Company
to confirm that there are none.EXHIBIT 10.3

 

GROUND LEASE

 

This
GROUND LEASE AGREEMENT (“Lease”) is made this 26th day of June, 2006,
by and between CLARK G. RUSSELL and JEAN M. RUSSELL, Trustees of “THE CLARK AND
JEAN RUSSELL FAMILY TRUST” (hereinafter called “Landlord”), and JACOBS PINON
PLAZA ENTERTAINMENT, INC., a Nevada corporation (hereinafter called “Tenant”).

 

WITNESSETH:

 

1.             LEASED PREMISES.

 

A.            Leased Premises. Landlord is the owner of certain real
property situated in Carson City, State of Nevada, having a street address of
2171 Highway 50 East, consisting of approximately 17.67 acres, Assessor’s
Parcel Number 8-152-19, more particularly described and shown on Exhibit “A”,
attached hereto and incorporated herein (the “Leased Premises”). Landlord and
Tenant acknowledge and agree that at the time of this Lease various buildings
and other improvements exist on, under or above the Leased Premises, a schedule
of which is attached to this Lease as Exhibit “B”, attached hereto and
incorporated herein (collectively, the “Improvements”).

 

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

 

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

 

D.            Severance of Improvements. Landlord represents and warrants to Tenant
that the Improvements are not part of the Leased Premises and that legal title
to such Improvements has been severed from the legal title to the Leased
Premises by virtue of that certain Affidavit of Conversion dated June 23, 2006
and filed of record in the real property records of Carson City, Nevada, an
unrecorded copy of which is attached hereto as Exhibit “C” and
incorporated herein as if set out word for word. Landlord and Tenant agree that
upon recording of the Affidavit of Conversion, a recorded copy of such document
shall be substituted in replacement of the unrecorded version and will be
attached hereto as Exhibit “C”.  Landlord further represents and
warrants to Tenant that legal title to the Improvements is vested with Capital
City Entertainment, Inc., a Nevada corporation.  Landlord hereby disclaims
any claim to title to the Improvements or to any lien rights in same.

 

E.             Adjacent Property.

 

(1)           Landlord represents to Tenant that Landlord believes
in good faith that Landlord has the right, pursuant to a written agreement with
the Nevada Department of Transportation (“NDOT”) to purchase that certain seven
(7) acre tract of land situated adjacent to

 

1

 

the
Leased Premises (the “Adjacent Tract”), a depiction and legal description of
which is attached hereto and incorporated herein as Exhibit “D”, as if set
out word for word.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.             CONTROL OF LEASED PREMISES.

 

Tenant,
during the Term of this Lease, shall have exclusive control of the Leased
Premises, and Landlord shall take no action pertaining to the Leased Premises
(including the construction of new, or the alteration of existing, structures
on the Leased Premises) without the prior written consent of Tenant subject to the
provisions hereof which require or allow Landlord to take action with respect
to the Leased Premises.

 

2

 

3.             TERM.

 

A.            Initial Term. The initial Term of this Lease shall
commence on June 25, 2006, and shall continue for ten (10) calendar years,
having an expiration date of June 24, 2016 (the “Initial Term”).

 

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

 

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

 

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

 

4.             RENT. The annual rent to be paid to Landlord by
Tenant under the Lease (the “Annual Rent”) shall be as follows:

 

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

 

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

 

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

 

                B.            First Extension Term. The Annual Rent to be paid to Landlord
during the First Extension Term shall be calculated as follows:

 

(1)           Years 1-5:   The Annual Rent for
Years 1-5 of the First Extension Term shall be the First Extension Term MAI
Valuation Rate.

 

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

 

3

 

(3)           First Extension Term MAI Valuation Rate
Defined. For purposes of
this Lease, the term “First Extension Term MAI Valuation Rate” shall mean the
ground lease rental rate agreed to by Landlord and Tenant, but if they cannot
agree, then the fair market value ground lease rate for the Leased Premises
(based on the fair market value of the Leased Premises and rental rates for
ground leases in Carson City, Nevada) as determined by an Appraisal Team,
selected as set forth in Section 31.F. The valuation appraisal described
in this Section 4.B.(3) shall be in writing and shall be conducted and
prepared in accordance with MAI standards and methodologies and be based on a
valuation date which is not more than 60 days prior to the commencement of the
First Extension Term.   Such valuation appraisal shall exclude the
value of all Improvements (as well as any additions to the Improvements as may
have been constructed on the Leased Premises after the commencement date of
this Lease and shall further exclude the value of any existing lease on the
Leased Premises, including this Lease, or extension rights to this Lease, such
that it is appraised as unencumbered real property).

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

I.              CPI Escalation Factor. For purposes of this Lease, the term “CPI
Escalation Factor” shall mean that percentage increase in the Consumer Price
Index (“CPI”) established for the West Region of the United States of America
for the relevant immediately preceding twelve (12) month time period as
provided by the United States Bureau of Labor Statistics.

 

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

 

6.             FIXTURES; EQUIPMENT.

 

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

 

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

 

5

 

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

 

7.             USE OF PREMISES.

 

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

 

8.             PAYMENT OF TAXES.

 

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

 

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

 

C.            Special Assessments. In the event any additional tax or any
special assessment is levied or assessed against the Leased Premises, which
such additional tax or special assessment becomes due and payable in whole or
in part during the Term, Tenant shall pay in a timely manner such part of the
tax or assessment that becomes due and payable during the Term.

 

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

 

E.             Contest. Notwithstanding any provision in this Section 8 to the
contrary, Tenant may contest any tax or assessment referenced in this Section
8, provided that such contest is at no expense to Landlord and any late
charges or penalties imposed (on such tax amounts due to Tenant’s failure to
timely pay same) are paid by Tenant. Landlord agrees to promptly execute and
deliver to Tenant, upon Tenant’s request, any and all forms and documents, and
to assist and cooperate with Tenant, at Tenant’s expense, to comply with the
provisions in Tenant’s reasonable discretion of this Subsection 8.E. During
such contests, Tenant shall take all steps appropriate, including payment under
protest, to prevent foreclosure and public sale or other divesting of Landlord’s
title by reason of nonpayment of taxes. In any event, Tenant shall pay all
taxes prior to the issuance of any execution therefore by the applicable
jurisdiction unless

 

6

 

adequate provisions have been made for the
bonding of same. In the event that a written notice of tax sale is given by the
applicable taxing authority, Landlord, upon five (5) days advance written
notice to Tenant, shall have the right to pay all past due taxes and any
penalties. Tenant shall pay to Landlord all costs incurred in good faith of any
such performance by Landlord within thirty (30) days of Tenant’s receipt of a
written invoice supported by reasonable evidence as to such amounts. Tenant’s
failure to timely pay such amounts to Landlord shall constitute a default.

 

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

 

9.             INSURANCE AND INDEMNIFICATION.

 

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

 

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

 

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

 

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

 

7

 

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

 

10.          CONDEMNATION.

 

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

 

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

 

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

 

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

 

E.             Partial Taking. If only a portion of the Leased Premises be
taken or appropriated by eminent domain proceedings and if the Leased Premises
are still suitable for Tenant’s business use, to be determined by Tenant in its
sole discretion, after such taking, this Lease shall terminate as to that
portion of the Leased Premises so taken but shall remain in full force and
effect as to the remainder of the Leased Premises. Upon such event, the future
rentals to be paid by the Tenant shall be equitably abated in the ratio that
the value of the Leased Premises taken bears to the value of the whole of the
Leased Premises.

 

8

 

F.             Restriction Obligation. To the extent possible, any amounts awarded
shall be used by Landlord to fully restore the Leased Premises to its former
condition, with excess funds belonging to the Landlord.

 

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

 

11.          UTILITIES, ETC.

 

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

 

12.          COVENANTS AGAINST LIENS.

 

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

 

B.            Good Faith Contest. Notwithstanding the above, Tenant may in
good faith contest any mechanics, laborers’, materialmen’s or other liens filed
or established against the Leased Premises, and in such event may permit the
items so contested to remain undischarged and unsatisfied during the period of
such contest and any appeal therefrom. Upon such circumstances, Landlord shall
not have the rights set out in Section 12.A., above, unless by
nonpayment of any such items the interest of Landlord will be materially and
imminently endangered or the Leased Premises or any part thereof will be
subject to imminent material loss or forfeiture, in which event Tenant shall
promptly pay and cause to be satisfied and discharged all such unpaid items or
secure such payment by posting a bond, in form reasonably satisfactory to
Landlord, with the Landlord. Landlord will cooperate fully with the Tenant in
any such contest provided that Tenant shall fully and promptly reimburse
Landlord for all reasonable costs incurred by Landlord in that regard. Tenant
shall hold Landlord whole and harmless from any loss, cost or expenses Landlord
may reasonably incur related to any such contest.

 

9

 

C.            Landlord Representation.  Landlord hereby represents and
warrants to Tenant that the Leased Premises are free from all liens,
encumbrances, claims, impediments to title, encroachments, development
restrictions (other than zoning and gaming laws), restrictive covenants,
special taxing districts or the like.  Landlord hereby further represents
and warrants to Tenant that the Leased Premises are free from any other matter
which may impair or restrict Tenant’s business operations or the expansion of,
or the construction of additions to, the Improvements and that the Leased
Premises are situated within a zoning and gaming district which is compatible
with the use designations set out in Section 7, above.

 

13.          ASSIGNMENT AND SUBLETTING.

 

A.            General. Tenant shall have the right to assign or sublet the Leased Premises,
or any part thereof, without consent from Landlord, provided that no such
assignment or subletting shall relieve Tenant from any of its obligations as
Tenant hereunder (unless Landlord agrees otherwise in writing). Tenant shall be
entitled to retain all proceeds (whether in the form of rent or recoupments or
otherwise) generated from such sublease or assignment. Every such assignment or
sublease shall recite that it is and shall be subject and subordinate to the
provisions of this Lease, and the termination or cancellation of this Lease
shall constitute a termination and cancellation of every such assignment or
sublease (subject to the Lender rights, described in Section 35, below).

 

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

 

14.          NOTICES.

 

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

 

	
  Landlord:

  	
   

  	
  CLARK
  G. RUSSELL, Trustee

  
	
   

  	
   

  	
  JEAN
  M. RUSSELL, Trustee

  
	
   

  	
   

  	
  “The
  Clark and Jean Russell Family Trust”

  
	
   

  	
   

  	
  P.O.
  Box 1966

  
	
   

  	
   

  	
  Carson
  City, Nevada  89702

  

 

10

 

	
  Tenant:

  	
   

  	
  Jacobs
  Pinon Plaza Entertainment, Inc.

  
	
   

  	
   

  	
  17301 West Colfax
  Avenue

  
	
   

  	
   

  	
  Suite 250

  
	
   

  	
   

  	
  Golden, Colorado  80401

  
	
   

  	
   

  	
  Attention:  Stephen R. Roark, CFO

  
	
   

  	
   

  	
  (303) 215-5201

  
	
   

  	
   

  	
  (303) 215-5219
  facsimile

  
	
   

  	
   

  	
   

  
	
  With
  A Copy To:

  	
   

  	
  Jones
  & Keller, P.C.

  
	
   

  	
   

  	
  1625
  Broadway, 16th Floor

  
	
   

  	
   

  	
  Denver,
  Colorado  80202

  
	
   

  	
   

  	
  Attention:
  Samuel E. Wing, Esq.

  
	
   

  	
   

  	
  (303)
  573-1600

  
	
   

  	
   

  	
  (303)
  893-6506 (facsimile)

  

 

 

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

 

15.          RIGHT TO INSPECT.

 

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

 

16.          MAINTENANCE.

 

Tenant
shall, at its own expense, maintain the entire Leased Premises in good
condition and repair, and at the end of the Term or sooner termination of this
Lease, (whether by operation of law, for failure to comply with the provisions
hereof, or otherwise), Tenant shall deliver up the Leased Premises in the same
order, condition, and repair as when received by Tenant; provided, however,
Tenant shall not be obligated to restore diminution in condition caused by: (i)
ordinary wear and tear; or (ii) elements and damages due to casualty or
condemnation; or (iii) the construction of additional buildings, structures or
other improvements over, upon or under the Leased Premises; or (iv) the
demolition or alteration of existing buildings, structures, or other
improvements over, upon or under the Leased Premises.

 

11

 

17.          DEFAULT.

 

A.            Tenant Default.

 

(1)           Should Tenant default in the performance of
any covenant or agreement herein, and such default continues for sixty (60)
days after receipt by Tenant of written notice thereof from Landlord
(specifying the nature of such default and the remedy for same), or if the
default of Tenant is of a type which is not reasonably possible to cure
within  sixty (60) days, if Tenant has
not commenced to cure such default within the 
sixty (60) day period and does not thereafter diligently prosecute the
curing of such default to completion, Landlord may, so long as such default
continues, as Landlord’s exclusive remedy, either: (i) waive such default; or
(ii) accelerate the Annual Rent due under the remainder of the then current
Term by written notice to Tenant (which written notice shall specify the amount
to be paid to Landlord); (iii) terminate this Lease (subject to the Tenant
Lender Rights set out in Section 17.C. and Section 35 below, and
the rights of Tenant pursuant to the provisions of subsection A.(3),
below).

 

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

 

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

 

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

 

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

 

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

 

12

 

18.          SIGNS.

 

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

 

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

 

19.          LANDLORD LIEN RESTRICTION.

 

Landlord
shall not at any time during the Term create or suffer to be created any lien
or encumbrance upon or affecting the Leased Premises or any portion thereof,
except taxes and other liens created by operation of law upon the Leased
Premises (which, except as to taxes required hereby to be paid by Tenant,
Landlord shall pay and discharge before delinquency).

 

20.          HOLDING OVER.

 

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

 

21.          SUCCESSORS IN INTEREST.

 

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

 

22.          RECORDING MEMORANDUM OF LEASE.

 

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

 

13

 

23.          REMEDIES ARE CUMULATIVE.

 

Unless
expressly provided otherwise herein, remedies conferred by this Lease upon the
respective parties are not intended to be exclusive, but are cumulative and in
addition to remedies otherwise afforded by law.

 

24.          QUIET POSSESSION.

 

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

 

25.          ALTERATION OR EXPANSION.

 

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

 

26.          INVESTMENT CREDIT.

 

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

 

27.          GRANTING OF EASEMENTS.

 

A.            Tenant Rights. Tenant shall have the right from time to
time during the Term to enter into agreements with various parties (including
but not limited to utility providers creating easements, licenses, rights of
way or the like) as same may be appropriate for Tenant’s ownership, operation,
alteration, demolition or construction of new buildings, structures and
infrastructure comprising the Improvements. To the extent such agreements
materially affect the Leased Premises, Tenant shall seek written consent of Landlord
for same, which consent shall not be unreasonably withheld, conditioned or
delayed.

 

14

 

B.            Landlord Obligation. Landlord agrees from time to time during
the Term at the request of Tenant, without additional consideration and upon
condition that Tenant shall submit satisfactory documentation to Landlord that
the easements, licenses, rights of way, or other rights and privileges so
requested will not adversely affect the utilization of the Leased Premises or
the valuation thereof: (i) to grant easements, licenses, rights of way (and
other rights and privileges in the nature of easements) of such nature, extent
and duration (including perpetual) as Tenant may request; (ii) to release
existing easements and appurtenances which are for the benefit of the Leased
Premises; and (iii) to execute and deliver any instrument necessary or
appropriate to confirm such grants or releases to any person; in each of the
foregoing instances (i), (ii) and (iii), the same to be without consideration,
but only upon receipt by Landlord of and delivery of (x) a certificate of the
President or a Vice President of Tenant stating (A) that such grant or release
is not detrimental to the proper conduct of the business of Tenant on the
Leased  Premises, (B) that such grant or
release does not materially impair the effective use of the Leased Premises for
its intended purposes or materially and adversely affect its value; (y) a duly
authorized undertaking of Tenant, in form and substance satisfactory to
Landlord, to the effect that Tenant will remain obligated hereunder to the same
extent as if such grant or release had not been made; and (z) such instruments,
certificates (including evidence of authority) and opinions as Landlord may reasonably
request.

 

28.          GENERAL CONDITIONS.

 

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

 

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

 

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

 

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

 

29.          HAZARDOUS SUBSTANCES.

 

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

 

15

 

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

 

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

 

D.            Representations and Warranties of Landlord.

 

(1)           Uses. Landlord represents and warrants to Tenant,
after due inquiry and investigation, that the Leased Premises have not been
used by previous owners and/or operators, Landlord, or any tenant of Landlord
to generate, manufacture, refine, transport, treat, store, handle, or dispose
of Hazardous Materials.

 

16

 

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

 

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

 

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

 

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

 

30.          TENANT’S PREFERENTIAL RIGHT TO
PURCHASE.

 

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

 

17

 

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

 

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

 

D.            Nominee. The rights of Tenant under this Section 30 may be exercised by
a nominee which Tenant may designate and whose financial responsibility Tenant
hereby guarantees. Furthermore, Tenant’s preferential right to purchase shall
not apply to a transfer to a lender pursuant to foreclosure proceedings.

 

31.          OPTION TO PURCHASE.

 

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

 

B.            Purchase Price.  The purchase price for the Leased
Premises (the “Purchase Price”) shall be equal to the fair market value of
the Leased Premises (as of the date which is not more than thirty (30) days
from the Exercise Notice, defined below), as such value is determined by a
written appraisal conducted and prepared in accordance with MAI standards (the “Valuation
Appraisal”) by an appraisal team (the “Appraisal Team”) duly licensed by the
State of Nevada. Such Appraisal Team shall be selected in accordance with the
procedures set out in Section 31.F., below.   Such Valuation
Appraisal shall exclude the value of the Improvements (as well as any
additions to the Improvements as may have been constructed on the Leased
Premises after the commencement date of this Lease and shall further exclude
any other improvements made to the Leased Premises by Tenant or any third
party), and shall be made without regard to any existing lease on the Leased
Premises or extension rights to the Lease, such that it is appraised as
unencumbered real property.

 

18

 

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

 

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

 

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

 

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

 

D.            Real Estate Contract.           Within twenty (20) days of Tenant’s delivery
of the applicable Exercise Notice, Landlord and Tenant shall execute and
deliver a Real Estate Purchase Contract (the “Purchase Contract”) containing
such terms as are acceptable to Tenant and as are customary for commercial real
estate transactions of like nature and price in the Carson City, Nevada area. The
Purchase Contract shall provide for: (i)  Tenant’s right to review the
title and the survey status of the Leased Premises; (ii) various representations
and warranties which are customary for sellers of commercial property in the Carson
City, Nevada area; (iii)  a time period for and  Tenant’s right of
inspection and review of the Leased Premises; (iv) conveyance by general
warranty deed, which deed shall transfer title of the Leased Premises to
Tenant, free and clear of all debts, liens, claims, encumbrances, exceptions
and conditions to status of title (other than the standard pre-preprinted
exceptions set out in the owners title policy), adverse environmental or other
adverse conditions; and (v) the issuance by a reputable Nevada title company of
an owner’s title policy in favor of Tenant, satisfactory to Tenant.

 

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

 

F.             Appraisal Team Selection.

 

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

 

(2)           Within five (5) days of an Exercise Notice, Landlord and Tenant
shall designate in writing to each other their respective selection of an
appraiser to participate on the Appraisal Team (collectively, the “Designated
Appraisers” and singularly, a “Designated Appraiser”).  If either
Landlord or Tenant shall fail to timely notify the other as to the selection of
their respective Designated Appraiser, then the party who timely

 

19

 

selected
their Designated Appraiser shall have the right to select the remaining Designated
Appraiser on behalf of the non-timely party.

 

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

 

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

 

32.          APPLICABLE LAW.

 

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

 

33.          ENTIRE AGREEMENT/SUBTITLES.

 

A.            Entire Agreement. This Lease contains the entire agreement of
the parties, and no modifications thereof or statement or representation in
connection therewith shall be effective or binding upon either party unless the
same is reduced to writing signed by Landlord and Tenant, and attached hereto.

 

B.            Headings; Captions. The descriptive headings of the Lease are
inserted for convenience only and shall not control or affect the meaning or
construction of any provisions hereto.

 

34.          ATTORNEYS FEES.

 

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

 

35.          TENANT LENDER RIGHTS.

 

A.            Tenant’s Right to Encumber. Tenant may encumber all or any portion of
its interest in this Lease and the leasehold estate created by this Lease by a
deed of trust, mortgage or other security instrument (collectively, a “Leasehold
Mortgage”), provided that such

 

20

 

Leasehold
Mortgage, shall be a lien only on Tenant’s interest in and to this Lease
and the leasehold estate created hereby. For purposes of this Section 35,
the holder of a Leasehold Mortgage or anyone claiming by or through or under
such holder shall be referred to as a “Leasehold Mortgagee”.

 

B.            Rights of Leasehold Mortgagee.

 

(1)           Rights of Enforcement. A Leasehold Mortgagee may enforce its
rights under its Leasehold Mortgage and acquire title to the Tenant’s leasehold
estate in the Leased Premises in any lawful manner, and upon foreclosure under
the Leasehold Mortgage and the issuance of evidence of title, take possession
of the Leased Premises, subject, however, to all of the terms, provisions and
conditions of this Lease. During such time as a Leasehold Mortgagee or any
successor in interest is the owner and holder of the leasehold estate created
under this Lease, whether by foreclosure or otherwise, such interests so
acquired shall be subject to all of the terms, covenants and provisions of this
Lease.

 

(2)           Notice of Default. Landlord shall deliver to such Leasehold
Mortgagee a copy of each notice of default under this Lease (a “Lease Default”)
given by Landlord to Tenant (a “Landlord Notice”) concurrently with and
whenever any such Landlord Notice shall thereafter be given by Landlord to
Tenant, addressed to such Leasehold Mortgagee at its address last furnished to
Landlord. No such Landlord Notice shall be deemed to have been duly given
unless and until a copy thereof has been delivered to such Leasehold Mortgagee.

 

(3)           Landlord Covenants. Landlord agrees that it will not:  (i) accept the surrender of the Leased
Premises by Tenant prior to the termination of the Lease, or (ii) consent to
the modification of any material term of this Lease or the termination of this
Lease by Tenant, without prior written notice to the Leasehold Mortgagee in
each instance. Landlord further agrees that it will not seek to terminate this
Lease by reason of any act or omission of Tenant until Landlord has given to
the Leasehold Mortgagee a copy of the Landlord Notice with respect to the Lease
Default upon which the proposed termination is based.

 

(4)           Additional Required Notices To Leasehold
Mortgagee. After the
expiration of all applicable notice and grace periods set forth in this Lease
with respect to any such default, Landlord shall give written notice to the
Leasehold Mortgagee (“Mortgagee Notice”) of the failure of Tenant to cure such
Lease Default. The Mortgagee Notice shall be sent by certified mail, return
receipt requested, or by a nationally recognized commercial overnight delivery
service, to the address set forth in the Leasehold Mortgage (or such other
address as may hereafter be designated in writing to Landlord by the Leasehold
Mortgagee). Landlord shall not declare or assert a termination of this Lease by
reason of any such Lease Default until a “reasonable period of time” (as
defined below) shall have elapsed following the receipt of the Mortgagee
Notice, during which period the Leasehold Mortgagee shall have the right, but
shall not be obligated, to remedy such Lease Default. Landlord hereby agrees to
accept

 

21

 

performance
by any such Leasehold Mortgagee of any covenant, condition or agreement on
Tenant’s part to be performed hereunder with the same force and effect as
though performed by Tenant.

 

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

 

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

 

(7)           New Lease Covenants. If this Lease is terminated for any reason,
including, but not limited to, a termination following a Leasehold Mortgagee’s
failure to cure a Lease Default as permitted in this Section 35, or the
rejection or disaffirmance of this Lease pursuant to bankruptcy laws or other
laws affecting creditors’ rights, Landlord will enter into a new lease of the
Leased Premises with the Leasehold Mortgagee, or any party designated by the
Leasehold Mortgagee within thirty (30) days after the request of the Leasehold
Mortgagee. The new lease shall be effective as of the date of termination,
rejection or disaffirmance of this Lease and shall be upon the same terms,
covenants and provisions as are contained in this Lease, including the amount
of the Annual Rent and other sums due from Tenant hereunder. In order to obtain
a new lease, a Leasehold Mortgagee must make a written request to Landlord for
the new lease within (30) days after the Leasehold Mortgagee is notified of the
effective date of termination, rejection or disaffirmance of the Lease, as the
case may be, in which event no further action shall be taken by Landlord
pending the execution and delivery thereof. In addition, prior to making
written request to Landlord for the new lease, the Leasehold Mortgagee must
cure all Lease Defaults that can be cured by the payment of money and pay to
Landlord all rent and other sums that would have been due and payable by Tenant
under this Lease but for the rejection, disaffirmance or termination. Further,
the Leasehold Mortgagee shall promptly reimburse Landlord for its reasonable
costs and expenses (including attorneys fees) incurred in connection with such
termination, rejection or disaffirmance as

 

22

 

the
case may be. If the Leasehold Mortgagee or the party so designated by the
Leasehold Mortgagee shall have entered into a new lease with Landlord pursuant
this Section 35.B.(7), then any Lease Default that cannot be cured by
the payment of money shall be deemed cured. To the extent Landlord is able,
Landlord shall assure that any new lease made pursuant hereto shall be senior
and superior to any other encumbrances on the Leased Premises. The Leasehold
Mortgagee’s right under this Section 35.B.(7) are in addition to and not
limited by such Leasehold Mortgagee’s right to cure under Section 35.B.(4)
and (5), above. The provisions of this Section 35.B.(7) are a
separate and independent contract made by Landlord and each Leasehold Mortgagee.
From the effective date of termination, rejection or disaffirmance of this
Lease to the date of execution and delivery of such new lease or the expiration
of the period during which a Leasehold Mortgagee may make a request, such
Leasehold Mortgagee may, upon payment of any rent and any other sums as may be
due from Tenant, use, occupy and enjoy the leasehold estate created by this
Lease without hindrance by Landlord.

 

(8)           Benefit. The provisions of this Section 35 are for the benefit of each
Leasehold Mortgagee and may be relied upon and shall be enforceable by each
Leasehold Mortgagee. Neither a Leasehold Mortgagee nor any other holder or
owner of the indebtedness secured by a leasehold mortgage or otherwise shall be
liable with respect to the terms, covenants, agreements or obligations of
Tenant contained in this Lease, unless and until such Leasehold Mortgagee or
that holder or owner acquires the interest of Tenant hereunder.

 

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

 

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

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  THE
  CLARK AND JEAN RUSSELL FAMILY TRUST

  
	
   

  	
   

  
	
   

  	
  /s/ Clark G. Russell

  
	
   

  	
  Clark
  G. Russell, Trustee

  
	
   

  	
   

  
	
   

  	
  /s/ Jean M. Russell

  
	
   

  	
  Jean
  M. Russell, Trustee

  

 

23

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  JACOBS
  PINON PLAZA ENTERTAINMENT, INC.,

  
	
   

  	
  a
  Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Stanley Politano

  
	
   

  	
  Name:

  	
  Stanley
  Politano

  
	
   

  	
  Title:

  	
  Attorney-in-Fact
  for Jeffrey P. Jacobs in his capacity

  as President and Sole Director of Jacobs Pinon Plaza

  Entertainment, Inc.

  

 

24

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