GOLD RANCH CASINO LEASE

 

GOLD RANCH CASINO LEASE

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

R E C I T A L S

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

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

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

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

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

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

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

1.                                       DEFINITIONS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.                                       GRANT AND TERM.

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

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

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Closing Date:                                                                                                           

Date of Termination of the Initial Term:                                                                 

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

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

3.                                       RENT.

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

3.2           Percentage Rent .

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

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

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

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

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

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

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

4.                                       TAXES.

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

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

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

5.                                       USE.

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

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

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

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

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

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

6.                                       MAINTENANCE, UTILITIES, AND ALTERATIONS.

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

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

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

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

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

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

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

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

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

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

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

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

7.                                       INSURANCE AND INDEMNITY

7.1           Fire and Other Insurance .  Last Chance shall, at its sole c