LEASE AGREEMENT AND OPTION TO PURCHASE

 

 

                                                                EXHIBIT 10.18

 

                    LEASE AGREEMENT AND OPTION TO PURCHASE

 

     THIS LEASE AGREEMENT AND OPTION TO PURCHASE is made and entered into this

29th day of January, 2004, between Biggest Little Investments, L.P., a Delaware

limited partnership, hereinafter referred to as "LESSOR," and Golden Road Motor

Inn, Inc., a Nevada corporation, hereinafter referred to "LESSEE."

 

                                   ARTICLE 1

                                 GRANT AND TERM

 

     1.1 AGREEMENT TO LEASE.   LESSOR hereby leases the hereinafter described

real property to LESSEE, and LESSEE hereby leases said real property from

LESSOR for the term and according to the terms, covenants, agreements,

representations and conditions set forth herein.

 

     1.2 PROPERTY.   The subject property is all that certain property described

in Exhibit "A" attached hereto and located in the City of Reno, County of

Washoe, State of Nevada, hereinafter referred to as the "Property", including

the improvements to be constructed by LESSOR.   The Property is part of a

Shopping Center to be known as The Village, and formerly known as the Sierra

Marketplace Shopping Center (hereinafter "Shopping Center".)   LESSOR represents

that this Lease is subject only to the easements and encumbrances of record

against the Property as shown in the Title Report (described below).

 

     1.3 TERM.   The term ("Term") of this Lease shall be fifteen (15) years

commencing on the Commencement Date (defined below) and expiring at 5:00 p.m.

on the last day of the Term, unless sooner terminated under any provisions

hereof.   The Term of this Lease and the LESSEE'S obligation to pay rent, as

provided in Section 1.4 below, shall commence (hereinafter "Commencement Date")

on the first to occur of the following events:

 

        A. Following completion of the Improvements (defined below), the date

on which the Property is approved for use by the appropriate governmental

agency.

 

        B. The date on which the LESSEE shall open the Property for pedestrian

and vehicle traffic to the public.

 

     In the event that the Commencement Date does not occur on the first day of

the month, then the Term shall commence on the first day of the month next

succeeding the Commencement Date, provided LESSEE shall pay Minimum Monthly

Rent and Additional Rent as provided in Article 2 below, for the fractional

month from the Commencement Date through the first day of the next succeeding

month on a per diem basis, calculated on the basis of a thirty (30)-day month,

in advance.   All Lease expirations, renewal dates, notices of options to renew,

and any other provision relating to the commencement of the Term of this Lease

shall be determined by reference to (i) the Commencement Date where same occurs

of the first day of the month, or (ii) on the first day of the next succeeding

month where the Commencement Date does not occur on the first day of the month.

 

     1.4 OPTIONS TO EXTEND LEASE PERIOD.   LESSOR hereby grants to LESSEE three

(3) successive options to renew the Term of this Lease for additional five (5)

year terms each.   The first renewal option is granted at the expiration of this

original Lease Term, provided LESSEE is not in default

 

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under this Lease.   The two (2) additional options to extend and renew this

Lease for successive five (5) year terms each, are exercisable in the event

LESSEE properly exercised the prior option and provided LESSEE is not in

default under this Lease at the time thereof.   Said renewal terms shall be

collectively referred to herein as "Renewal Terms" and individually referred to

as "Renewal Term."   Each option to renew this Lease shall be exercised by

LESSEE giving written notice thereof to LESSOR at least ninety (90) days prior

to expiration of the original term or the Renewal Terms of this Lease, but not

before 180 days prior to said expiration.   All of the terms and provisions of

this Lease shall continue in full force and effect and shall apply in all

respects to all Renewal Terms and all references in this Lease to Term shall

hereinafter include the Renewal Terms.   During each Renewal Term, the Minimum

Monthly Rent shall be adjusted upward and increased as provided in Section 2.1

hereof.

 

     1.5 LESSOR'S FAILURE TO COMPLETE IMPROVEMENTS.   In the event the traffic

control signal on South Virginia Street at the access point to the Property and

the other build-to-suit improvements to be constructed by LESSOR pursuant to

Article 3 below, are not completed on or before December 31, 2004, this Lease

may be terminated by LESSEE upon not less than ten (10) days prior written

notice to LESSOR.

 

     1.6 LEASEHOLD POLICY OF TITLE INSURANCE.   LESSOR has delivered to LESSEE a

preliminary title report prepared by Western Title Company, Inc. (Order No.:

00138583) dated as of December 15, 2003 (the "Title Report").   LESSOR

represents that the Title Report is for the Shopping Center. Within 45 days

after the mutual execution and delivery of this Lease, LESSEE, in LESSEE'S sole

discretion and at its sole expense, may cause a title company to issue a

leasehold policy of title insurance for the Property (hereinafter "Leasehold

Title Policy"), insuring that LESSEE is leasing the Property subject only to

such exceptions acceptable to LESSEE and the standard printed exceptions

included within a Leasehold Title Policy.   In the event that LESSEE is unable

to have a Leasehold Title Policy issued which is acceptable to LESSEE within

the 45 day period stated herein, this Lease may be terminated by LESSEE upon

not less than ten (10) days prior written notice to LESSOR.   In the event that

a Leasehold Title Policy is not issued within said 45 day period and LESSEE

does not provide notice of Lease termination to LESSOR within ten (10) days

thereafter, LESSEE shall be deemed to have accepted this Lease subject to only

those exceptions contained in the Title Report and this Lease shall continue in

full force and effect in accordance with its terms.

 

                                   ARTICLE 2

                            RENT AND OTHER CHARGES

 

     2.1 RENT.   As and for rent for the Property, LESSEE shall pay LESSOR

monthly rent as follows:

 

        A. MINIMUM MONTHLY RENT.   The Minimum Monthly Rent shall be $25,000.00

per month for the first sixty (60) months, which shall be increased every sixty

(60) months on the day and the month on which the Commencement Date occurs in

each consecutive sixty (60) month period following the Commencement Date

(hereinafter "Anniversary Date"), as provided in Section 2.1(B) below.

 

     B. ADJUSTMENTS TO MINIMUM MONTHLY RENT.   The Minimum Monthly Rent is

subject to increase on the first day of the sixty-first (61) calendar month

following the month during which the Commencement Date occurs and on each

 

                                      -2-

Anniversary Date thereafter for the duration of the Term.   The base for

computing the increase (hereinafter "Beginning Index") is the All Urban

Consumers Index, U.S. Cities Average, All Items category published by the

United States Department of Labor, Bureau of Labor Statistics (hereinafter

"Index"), which is in effect for the month in which the Commencement Date

occurs.   The Index published and in effect the three (3) months preceding each

Anniversary Date (hereinafter "Comparison Index") is used in determining the

amount of the increase from one sixty (60) month period to the next.   Beginning

on the first Anniversary Date, and thereafter on each subsequent Anniversary

Date, the Minimum Monthly rent as indicated in Section 2.1(A) will be increased

by multiplying the Minimum Monthly Rent in effect during the preceding sixty

(60) month period by a fraction, the numerator being the Comparison Index and

the denominator being the Beginning Index.   In no event, however, will the

amount of Minimum Monthly Rent for one sixty (60) month period be less than the

Minimum Monthly Rent for the preceding sixty (60) month period.   Further the

cost of living adjustment will be applied to the Minimum Monthly Rent amount

only.

 

          i. If, in the future, the Index shall be changed then the Index shall

be converted in accordance with the conversion factor published by the United

Stated Department of Labor, Bureau of Labor Statistics.   In the event the Index

is discontinued or revised during the Term hereof, such other governmental

index or computation with which it is replaced shall be used in order to obtain

substantially the same result that would be obtained if the Index had not been

discontinued or revised.

 

          ii. No later than five (5) days after each Anniversary Date, LESSOR

will give LESSEE written notice of the adjusted Minimum Monthly Rent payable

for the next succeeding five (5) year period; provided, however, failure of

LESSOR to give such notice shall not be construed as a waiver of any increase

in the Minimum Monthly Rent.

 

        C. PAYMENT OF RENT.   Rent shall be payable in advance and shall be due

and payable on the first (1st) day of each month, commencing on the

Commencement Date, as provided in Section 2.1 (B) above.   Rent shall be paid to

LESSOR at the address provided herein for service of notice, unless otherwise

directed in writing by the LESSOR.

 

     2.2 ADDITIONAL RENT.   All charges payable by LESSEE hereunder, other than

Minimum Monthly Rent, are collectively referred to as "Additional Rent."

Unless this Lease provides otherwise, all Additional Rent shall be paid with

the next monthly installment of Minimum Monthly Rent.   The term "Rent" shall

mean Minimum Monthly Rent and Additional Rent.

 

     2.3 REAL PROPERTY TAXES.

 

        A. PAYMENT OF TAXES.   LESSEE agrees to pay LESSEE'S pro rata share of

all Real Property Taxes, as hereinafter defined, which may be levied or

assessed by any lawful authority against the land on which buildings are

located and improvements thereon in the Shopping Center.   LESSEE shall pay its

share of such Real Property Taxes upon receipt of a statement from LESSOR

delineating LESSEE'S share of same, which share shall be paid within ten (10)

days after receipt of LESSOR'S statement.   LESSEE hereby agrees for purposes of

this Lease that LESSEE'S proportionate share of such Real Property Taxes is

7.28%.   All Real Property Taxes for the year in which this Lease commences

shall be apportioned and adjusted.

 

 

                                      -3-

        B. DEFINITION OF "REAL PROPERTY TAXES".   "Real Property Taxes" means:

(i) any fee, license fee, license tax, business license fee, commercial rental

tax, levy, charge, assessment, penalty or tax (other than inheritance or estate

taxes) imposed by any authority having the direct or indirect power to tax,

including any city, county, state or federal government, or any school,

agriculture, lighting, drainage or other improvement district thereof, as

against any legal or equitable interest of LESSOR in the Property; (ii) any tax

on the LESSOR'S right to receive, or the receipt of, rent or income from the

Property or against LESSOR S business of leasing the Property; (iii) any tax or

charge for fire protection, streets, sidewalks, road maintenance, refuse or

other services provided to the Property by any governmental agency; (iv) any

tax imposed upon this transaction or based upon a reassessment of the Property

due to a change in ownership or transfer of all or part of LESSOR'S interest in

the Property; and (v) any charge or fee replacing any tax previously included

within the definition of Real Property Taxes.   "Real Property Taxes" shall not,

however, include LESSOR'S federal or state income, franchise, inheritance,

estate taxes or any real property transfer taxes.

 

     2.4 PERSONAL PROPERTY TAXES.

 

        A. LESSEE shall pay prior to delinquency all taxes charged against the

trade fixtures, furnishings, equipment or any other personal property belonging

to LESSEE.   LESSEE shall use its best efforts to have such personal property

taxed separately from the Property.

 

        B. If any such taxes on LESSEE'S personal property are levied against

LESSOR or LESSOR'S property, or if the assessed value of the Property is

increased by the inclusion therein of a value placed upon such personal

property or trade fixtures of LESSEE, then LESSOR, after written notice to

LESSEE, shall have the right to pay the taxes based upon such increased

assessments, regardless of the validity thereof, but only under proper protest

if requested by LESSEE in writing.   If LESSOR shall do so, then LESSEE shall,

upon demand, repay to LESSOR the taxes levied against LESSOR, or the proportion

of such taxes resulting from such increase in the assessment.   In any such

event, however, LESSEE, at LESSEE'S sole cost and expense, shall have the

right, in the name of LESSOR and with LESSOR'S full cooperation, to bring suit

in any court of competent jurisdiction to recover the amount of any such taxes

so paid under protest; any amount so recovered to belong to LESSEE.

 

        C. If any of LESSEE'S personal property is taxed with the Property,

LESSEE shall pay LESSOR the taxes for the personal property within fifteen (15)

days after LESSEE receives a written statement from LESSOR for such personal

property taxes.

 

     2.5 UTILITIES.   LESSEE shall pay, directly to the appropriate supplier,

the cost of all natural gas, heat, light, power, sewer service, telephone,

water, refuse disposal and other utilities and services supplied to the

Property, unless LESSOR elects to include the cost of any or all of such

utilities and services as a Shopping Center Operating Cost as defined in

Section 2.8.   LESSEE shall pay such charges within ten (10) days of

notification of the amount by the LESSOR.   LESSOR reserves the right to install

and maintain, at LESSOR'S sole expense, separate meters for any public utility

servicing the Property for which a separate meter is not presently installed.

LESSEE may also elect, at LESSEE's sole expense, to

 

 

                                      -4-

install and maintain separate meters for any public utility servicing the

Property for which a separate meter is not presently installed.

 

     2.6 COST OF MAINTAINING PROPERTY. LESSOR shall maintain and repair the

Property in a good, clean and presentable condition and state of repair as

provided in Section 4.6 below, and LESSEE shall pay to LESSOR, as Additional

Rent, sixty six and 66/100 percent (66.66%) of the cost of maintaining and

repairing the Property, with LESSOR to pay the remaining thirty three and

34/100 percent (33.34%) of the cost of maintaining and repairing the Property;

provided that the cost of maintaining the Property under this section shall not

include costs or expenses which are an Operating Cost as defined in Section 2.8

below.

 

     2.7 LESSEE'S PRO RATA SHARE OF OPERATING COST.   LESSEE will also pay to

LESSOR, as further Additional Rent, a proportionate share of the Shopping

Center's Operating Cost (hereinafter defined).   LESSOR and LESSEE hereby agree

for purposes of this Lease that LESSEE'S proportionate share ("Proportionate

Share") of such Shopping Center's Operating Costs is 7.28%.   Notwithstanding

the foregoing, if during the Lease Term LESSOR permits any tenant or parcel

owner in the Shopping Center to perform any item of Shopping Center Operating

Cost for its sole benefit and at its sole expense in lieu of LESSOR'S

performance thereof (which Shopping Center Operating Cost item is typically

provided by LESSOR to all tenants of the Shopping Center and the cost of which

would be included in Shopping Center Operating Cost pursuant to Section 2.7),

then LESSOR shall have the right, but not the obligation to equitably allocate

the Shopping Center Operating Cost of such specific Shopping Center Operating

Cost item so that only those tenants in the Shopping Center that directly or

indirectly benefit from such Shopping Center Operating Cost item shall pay such

Shopping Center Operating Cost (such tenants shall be hereinafter referred to

as "Cost Pool Tenants.").   In the event of a change in the square footage of

the Shopping Center, LESSEE's Proportionate Share of the Operating Cost shall

be recalculated on the basis of 16,961 square feet (which LESSOR and LESSEE

agree represents the square footage of the building demolished by LESSOR as

part of the build-to-suit improvements required under Article 3 hereof) to the

square footage of the entire Shopping Center.

 

     2.8 OPERATING COST DEFINED.   For the purpose of this Article 2, the term

"Operating Cost" means the total cost and expense incurred in connection with

the operation, repair, management, maintenance and replacement (provided,

however, if the benefit or useful life of any such repair or replacement

extends beyond the Lease Term, the useful life of such repair or replacement

shall be prorated over the remaining portion of the Lease Term, and LESSEE

shall be liable only for that portion of the cost which is applicable to the

Lease Term) of all Common Areas within the Shopping Center including, without

limitation, general maintenance and repair of all improvements; expenses

incurred by LESSOR under Section 4.6(A) hereof; gardening and landscaping;

snow, water and ice removal and control; security services; liability, property

damage and all other insurance carried by LESSOR under Section 6.2 with types

of coverage and in amounts determined by LESSOR; repairs; asphalt repairs,

resurfacing and striping; painting of improvements; servicing of common grease

interceptors; holiday decorations; snow and ice removal; utilities serving the

improvements and Common Areas; sanitary control; pest control; signage

operation, repair and replacement costs; removal of trash, rubbish, garbage and

other refuse; reasonable reserves for replacements and repairs; a property

management fee consistent with prevailing rates charged in the industry (not to

exceed five percent (5%) of gross Shopping Center

 

                                     -5-

rents); bookkeeping; advertising and promotional fees; Real Property Taxes; all

personal property taxes assessed for any reason on the personal property used

in connection with the Shopping Center; costs of equipment and machinery used

to maintain or operate the Common Areas and any depreciation of the cost

thereof (including financing); and the cost of personnel to implement such

services, to direct parking, and to police the Common Areas.

 

     Notwithstanding the foregoing, in no event shall the following items be

included as an Operating Cost: items for which the responsibility of repairing

or maintaining or replacement is the direct responsibility of a particular

tenant under their respective lease with LESSOR, amounts reimbursed by

insurance proceeds, or warranties; utilities or other expenses paid directly by

tenants to suppliers; ground rents; payments on any mortgage, or deed-of-trust;

leasing commissions; the cost of negotiating or enforcing leases of other

tenants; fines, penalties, and late fees or similar costs incurred by LESSOR;

depreciation;   costs of or arising from LESSOR'S charitable or political

contributions; costs, including but not limited to attorneys' fees associated

with the operation of the business of the partnership or entity that

constitutes LESSOR as the same are distinguished from the costs of operation of

the Shopping Center, including partnership accounting and legal matters, costs

of defending any lawsuits with any mortgagee, costs of selling, syndicating,

financing, mortgaging or hypothecating any of LESSOR'S interest in the Shopping

Center or any part thereof, costs of any disputes between LESSOR and its

employees, disputes of LESSOR with Shopping Center management or personnel, or

outside fees paid in connection with disputes with other tenants; costs

incurred in removing and storing the property of former tenants or occupants of

the Shopping Center; lease "takeover" expenses, including, but not limited to,

the expenses incurred by LESSOR with respect to space located in another

building of the Shopping Center of any kind or nature in connection with the

leasing of space in the Shopping Center; costs incurred in connection with the

original construction of the Shopping Center, or; any costs, fees, dues,

contributions or similar expenses for industry associations or similar

organizations.

 

     2.9 COLLECTION OF THE OPERATING COST.   LESSOR shall have the right to

collect LESSEE'S Proportionate Share (as defined in Section 2.7) of Operating

Cost and all other Additional Rent provided for under this Article 2 including,

without limitation, insurance premiums and Real Property Taxes, on a monthly

basis.   Such amounts shall be based on LESSOR'S reasonable estimate of the

costs, charges or premiums next due, and shall be paid by LESSEE as Additional

Rent upon the basis and at the times described herein.   LESSOR shall provide to

LESSEE a yearly expense estimate statement (hereinafter "Estimate Statement")

which shall set forth LESSOR'S reasonable estimate of the total amount due from

Tenant for the current or next ensuing Lease Year for Lessee's Proportionate

Share of the Operating Cost.   LESSEE shall pay to LESSOR with each installment

of Minimum Monthly Rent an amount equal to one-twelfth (1/12th) of the

estimated amount due from LESSEE as set forth in the Estimate Statement.   At

any time during any Lease Year, LESSOR may provide a new Estimate Statement to

Tenant indicating any additional amount due from LESSEE and LESSEE agrees to

pay such amount to LESSOR within fifteen (15) days after notification of the

amount of the deficiency.   LESSEE'S failure to pay such deficiency to LESSOR

within such fifteen (15)-day period shall constitute a breach of this Lease and

entitle LESSOR to any and all remedies available under this Lease and

applicable law.   Such estimated payments shall be paid to LESSOR with no

obligation to pay the LESSEE interest thereon.   Should LESSEE dispute any

amount billed to LESSEE as Lessee's Proportionate Share of the Operating Cost,

LESSEE may withhold the disputed portion of the

 

                                     -6-

billing, and timely pay the undisputed portion.   Upon notice of dispute, LESSOR

will expediently provide the information necessary to establish the legitimacy

of the disputed amount.   Upon resolution, should it be determined that any

portion of the withheld amount was due to LESSOR, LESSEE shall immediately pay

to LESSOR said amount, together with interest at the rate of nine percent (9%)

per annum, from the date on which the payment was originally due.   Within a

reasonable period of time after the end of each Lease Year hereunder, LESSOR

shall give to LESSEE a year-end statement (hereinafter "Annual Statement")

which shall indicate all of Lessee's Proportionate Share of the Operating Cost

and other amounts due from LESSEE hereunder for the previous Lease Year, and

the amounts paid by LESSEE relating thereto.   If the amount paid by LESSEE is

less than the amount owed by LESSEE, LESSEE agrees to pay such deficiency to

LESSOR within fifteen (15) days after receipt of the Annual Statement.   If the

amount paid by LESSEE for the prior Lease Year exceeds the amount required to

be paid by LESSEE, such overage shall be credited to amounts due from LESSEE

for the next Lease Year.   If LESSEE defaults under this Lease, LESSOR may apply

any funds in the impound account to any obligation then due under this Lease

without waiving any other remedy available under the Lease or applicable law.  

 

     2.10 LESSEE'S RIGHT TO AUDIT OPERATING COSTS. LESSEE and its agents will

have the right to examine LESSOR'S books and records relating to the Operating

Cost, at LESSOR'S office, and after providing at least fifteen (15) days prior

written notice to LESSOR, according to this section so long as (a) there is no

breach of or event of default under the Lease at the time that the LESSEE

examines LESSOR'S books and records; (b) LESSEE has fully and promptly paid its

Rent, including Lessee's Proportionate Share of the Operating Cost; (c) LESSEE,

its agents and contractors agree that they will not divulge the contents of

LESSOR'S books and records, or the result of their examination; (d) LESSEE, its

agents and contractors agree that they will give LESSOR, at no cost, a copy of

their draft and final reports of their examination of LESSOR'S books and

records; (e) LESSEE requests the examination of LESSOR'S books and records

within one (1) year after receipt of the statement of the Operating Cost with

regard to which LESSEE wishes to examine LESSOR'S books and records; (f) LESSEE

has not examined LESSORS'S books and records within the twelve (12) months

preceding LESSEE'S request; and (g) LESSEE shall not have the right to examine

any books or records that contain trade secrets (i.e. leases of other tenants,

rent rolls, etc.).   If LESSEE'S examination reveals that it has overpaid

Lessee's Proportionate Share of the Operating Cost, then the overpayment credit

will be applied to the next accruing Rent under the Lease.   If LESSEE'S audit

indicates that it has overpaid Lessee's Proportionate Share of the Operating

Cost by more than five percent (5%), in addition to the rent credit provided in

this Section, LESSEE shall be entitled to a credit against the next accruing

Rent for the reasonable costs of the audit.   Otherwise, the expense of LESSEE'S

audit shall be borne by LESSEE.   LESSEE will not have the right to terminate

the Lease on account of an overpayment. If LESSEE'S examination reveals that it

has underpaid Lessee's Proportionate Share of the Operating Cost, then the

underpayment amount will be paid along with the next accruing Rent under the

Lease.

 

     2.11 INTEREST ON PAST DUE OBLIGATIONS.   Any amount owed by LESSEE to

LESSOR which is not paid when due shall bear interest from the due date of such

amount at the lower of (i) ten percent (10%) per annum, or (ii) the maximum

legal interest rate permitted by law.   However, interest shall not be payable

on late charges to be paid by LESSEE under this Lease.   The payment of interest

on such amounts shall not excuse or cure any default by LESSEE under this

Lease.

                                     -7-

 

                                    ARTICLE 3

                          BUILD-TO-SUIT IMPROVEMENTS

 

     3.1 IMPROVEMENTS TO THE PROPERTY.   LESSOR will cause the existing building

located nearest the southwest corner of the Property (most recently leased by

Wynan's Furniture) to be demolished and will cause to be constructed

improvements on and adjacent to the Property consisting of a traffic control

signal on South Virginia Street at the access point to the Property, paved

driveways for ingress and egress to adjacent property owned by LESSEE and the

remainder of LESSOR'S Shopping Center, parking areas, pedestrian walkways and

landscaping, consistent with the Preliminary Plans and Specifications which are

attached hereto as (Exhibit "B") and by this reference made a part hereof

(hereinafter "Improvements").   The Improvements   shall conform to the

Preliminary Plans and Specifications (Exhibit "B"), unless modification is

necessary to comply with local building codes or other requirements of local

municipal authorities.

 

        A. LESSEE and LESSOR have approved and agreed upon Preliminary Plans

and Specifications and Preliminary Cost Estimates for the Improvements to the

Property.

 

        B. As soon as received from the contractor or designer, LESSOR shall

deliver to LESSEE copies of the Final Plans and Specifications and Working

Drawings (based upon the approved Preliminary Plans and Specifications and

Preliminary Cost Estimates) covering the construction of the driveway and other

Improvements that are a part of the Property.   LESSOR shall obtain approval of

the Final Plans and Specifications and Working Drawings from all appropriate

governmental agencies, and after they have been approved a copy of them shall

be initialed and dated by the parties.   LESSOR shall exercise due diligence in

attempting to obtain such approval.

 

        C. LESSOR shall construct the Improvements in accordance with the Final

Plans and Specifications and Working Drawings.   LESSOR agrees to secure all

necessary permits for the construction.   LESSOR agrees that such construction

shall be completed in a good workman-like manner; that materials and

workmanship will be of such quality as is usual and customary in the Washoe

County, Nevada, area; that such construction shall be free of mechanic's liens;

that such construction shall comply with applicable building and safety codes

and comport with the Final Plans and Specifications as set forth above.

 

        D. LESSEE shall pay sixty six and 66/100 percent (66.66%) of all

construction costs for said Improvements, or a maximum of $1,200,000.00,

whichever amount is lower.   LESSOR agrees to be responsible for all remaining

costs of constructing said Improvements.   LESSEE shall pay its share of the

construction costs in progress installments based on billings supported by

invoices or the terms of construction contracts.

 

        E. Within 15 days after LESSOR notifies LESSEE that the Improvements

have been substantially completed and are available for inspection by Lessee,

whether or not LESSEE is then in possession of the Property, LESSEE shall

deliver to LESSOR a list of items that LESSEE deems it necessary under the

Final Plans and Specifications and Working Drawings that LESSOR completes or

corrects in order for the Property to be acceptable to LESSEE.   LESSOR shall

immediately commence to complete or correct such items, except for items that

LESSOR disputes as not being within the scope of the Improvements.   If LESSEE

does not deliver the list to LESSOR within the 15 day period, LESSEE shall be

 

                                      -8-

deemed to have approved the Property and approved construction of the

Improvements as completed.

 

        F. LESSEE'S taking possession of the Property and acceptance of the

Property shall not constitute a waiver of any claim under Section 3.1(E) or a

waiver of any warranty or of any defect in regard to workmanship or material of

the Improvements ("Construction Defect").   LESSEE shall have the period of time

contained within LESSOR'S warranty from the contractor within which to notify

LESSOR of any Construction Defect covered by said warranty.   In the event of a

Construction Defect, it is LESSOR's duty to fully enforce all legal remedies to

achieve cure.

 

                                   ARTICLE 4

                                USE OF PROPERTY

 

     4.1 SIGNAGE.   LESSEE shall pay for all signs and maintenance and removal

of said signs located or constructed on the Property.   All sign design, color,

layout, graphics, location and size shall first be submitted to LESSOR for

approval prior to fabrication.   All signs shall be constructed and installed by

contractors qualified to fabricate and install commercial signs.   No signs

shall be installed until after LESSOR has approved the construction drawings

and specifications of the signs, including all connections.   LESSOR agrees to

apply for any necessary permits or zoning changes for signs to be located or

erected on the Property, at LESSEE's expense.   LESSEE shall maintain all signs

in a neat and attractive condition.

 

     4.2 USE OF PROPERTY.

 

        A. The Property shall be used by LESSEE solely for the purpose of

pedestrian and vehicle ingress and egress to the resort and casino located on

the adjacent real property and uses reasonably related or incidental thereto

and for landscaping features.   LESSEE shall not use, or permit to be used, any

portion of the Property for any purpose other than those stated above.

 

        B. LESSOR shall maintain the Property in a clean and sanitary condition

and shall comply with all laws, health and policy requirements with respect to

the Property and appurtenances and agrees to hold LESSEE harmless from all

fines, penalties and costs for violations, or noncompliances by LESSOR of said

laws, requirements, or regulations, and from all liability arising out of any

such violations or noncompliance, unless said liability results from the

conduct of LESSEE.

 

        C.   LESSEE shall not permit upon the Property any unlawful acts, or any

condition, act or thing constituting a nuisance, nor do or permit any act which

shall annoy, harass, disturb or imperil others; and shall abide by all laws,

ordinances and regulations of the City of Reno, County of Washoe, the State of

Nevada, and the United States of America, including without limitation, the

Americans with Disabilities Act, 42 U.S.C. 12101-12213 (and any rules and

regulations, restrictions, guidelines, requirements or publications promulgated

or published pursuant thereto, collectively referred to as the "ADA") and

LESSEE agrees to hold LESSOR harmless from all fines, penalties and costs for

violations, or noncompliances by LESSEE, of said laws, requirements, or

regulations, and from all liability arising out of any such violations or

noncompliance.

 

        D. LESSEE shall not use the Property for any purpose deemed hazardous

by any insurance company carrying insurance thereof.

 

                                     -9-

     4.3 HAZARDOUS MATERIALS.

 

        A. INDEMNITY BY LESSEE.   LESSEE shall not cause or permit any Hazardous

Material (as hereinafter defined) to be brought upon, kept, or used in or about

the Property by LESSEE, its agents, employees, contractors or invitees.   If (i)

LESSEE breaches the obligations stated in the preceding sentence, (ii) the

presence of Hazardous Material on the Property or on or in the soil or ground

water under or adjacent to the Property caused or permitted by LESSEE, its

agents, employees, contractors or invitees results in contamination of the

Property or such soil or ground water, (iii) contamination of the Property or

such soil or ground water by Hazardous Material otherwise occurs for which

LESSEE is legally liable to LESSOR for damage resulting therefrom, or (iv)

contamination occurs elsewhere in connection with the transportation by LESSEE

of Hazardous Material to or from the Property, then LESSEE shall indemnify,

protect, defend and hold LESSOR harmless from any and all claims, judgment,

damages, penalties, fines, costs, expenses, liabilities or losses (including,

without limitation, sums paid in settlement of claims, attorneys' fees,

consultant fees and expert fees) which arise during or after the term of this

Lease as a result of such contamination.   The foregoing obligation of LESSEE to

indemnify, protect, defend and hold LESSOR harmless includes, without

limitation, costs incurred in connection with any investigation of site

conditions or any cleanup, remedial, removal, restoration or other response

work required by any federal, state, or local governmental agency or political

subdivision because of Hazardous Material present as a result of any action or

inaction on the part of LESSEE, its agents, employees, contractors or invitees

in any improvements constituting the Property or the soil or ground water on,

under or adjacent to the Property or elsewhere in connection with the

transportation by LESSEE of Hazardous Material to or from the Property.

Without limiting the foregoing, if the presence of any Hazardous Material on or

in the Property or the soil or ground water under or adjacent to the Property

caused or permitted by LESSEE, or its agents, employees, contractors or

invitees, results in any contamination of the Property, LESSEE shall promptly

take all actions at its sole expense as are necessary to return the Property or

such soil or ground water to the condition existing prior to the introduction

of any such Hazardous Material to the Property or to such soil or ground water.

 

        B. INDEMNITY BY LESSOR.   LESSOR shall not cause or permit any Hazardous

Material (as hereinafter defined) to be brought upon, kept, or used in or about

the Property by LESSOR, its agents, employees, contractors or invitees.   As to

any contamination of the Property by Hazardous Material which exists as of the

Lease Commencement Date hereof or if (i) LESSOR breaches the obligations stated

in the preceding sentence, (ii) the presence of Hazardous Material on the

Property or on or in the soil or ground water under or adjacent to the Property

caused or permitted by LESSOR, its agents, employees, contractors or invitees

results in contamination of the Property or such soil or ground water, (iii)

contamination of the Property or such soil or ground water by Hazardous

Material otherwise occurs for which LESSOR is legally liable to LESSEE for

damage resulting therefrom, or (iv) contamination occurs elsewhere in

connection with the transportation by LESSOR of Hazardous Material; then LESSOR

shall indemnify, protect, defend and hold LESSEE harmless from any and all

claims, judgment, damages, penalties, fines, costs, expenses, liabilities or

losses (including, without limitation, sums paid in settlement of claims,

attorneys' fees, consultant fees and expert fees) which arise during or after

the term of this Lease as a result of such contamination.   The foregoing

obligation of LESSOR to

 

                                      -10-

indemnify, protect, defend and hold LESSEE harmless includes, without

limitation, costs incurred in connection with any investigation of site

conditions or any cleanup, remedial, removal, restoration or other response

work required by any federal, state or local governmental agency or political

subdivision because of Hazardous Material present as a result of any action or

inaction on the part of LESSOR, its agents, employees, contractors or invitees

in any improvements constituting the Property or the soil or ground water on,

under or adjacent to the Property or elsewhere in connection with the

transportation by LESSOR of Hazardous Material.   Without limiting the

foregoing, if the presence of any Hazardous Material on or in the Property or

the soil or ground water under or adjacent to the Property caused or permitted

by LESSOR, or its agents, employees, contractors or invitees results in any

contamination of the Property, LESSOR shall promptly take all actions at its

sole expense as are necessary to return the Property or such soil or ground

water to the condition existing prior to the introduction of any such Hazardous

Material to the Property or to such soil or ground water.

 

        C. HAZARDOUS MATERIAL DEFINED.   As used herein, the term "Hazardous

Material" means any hazardous or toxic substance, chemical, toxicant,

pollutant, contaminant, material or waste which is or becomes regulated by any

local governmental authority, the State of Nevada or the United States

Government for the protection of health or the environment. The term "Hazardous

Material" includes, without limitation, any material or substance that is (i)

defined as a "hazardous waste" under NRS 459.400 et seq. (Disposal of Hazardous

Waste) or NRS 459.700 et seq. (Transportation of Hazardous Waste); (ii)

petroleum; (iii) asbestos; (iv) designated as a "hazardous substance" pursuant

to Section 311 of the Water Pollution Control Act (33 U.S.C. 1321), (v) defined

as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation

and Recovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C. 6903), (vi) defined as a

"hazardous substance" pursuant to Section 101 of the Comprehensive

Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.

(42 U.S.C. 6901), (vii) defined as a "regulated substance" pursuant to

Subchapter IX, Solid Waste Disposal Act (Regulation of Underground Storage

Tanks), 42 U.S.C. 6991 et seq., (viii) defined as a "hazardous chemical

substance or mixture" or "imminently hazardous chemical substance or mixture"

within the meaning of the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.,

(ix) defined as a "hazardous air pollutant" within the meaning of the Federal

Clean Air Act, 42 U.S.C. 7400 et seq., (x) defined as a "toxic pollutant" or

"oil or hazardous substance" within the meaning of the Federal Water Pollution

Control Act, 33 U.S.C. 1250 et seq., (xi) defined as a "contaminant" within the

meaning of the Safe Drinking Water Act, 42 U.S.C. 300i, or (xii) defined as a

"chemical known to the state to cause cancer or reproductive toxicity."

 

     4.4 NO PARTNERSHIP.   This Lease shall in no way be deemed to be or

considered evidence that a partnership or joint venture exists between LESSOR

and LESSEE.

 

     4.5 COMPLIANCE WITH GOVERNMENT REGULATIONS AND REQUIREMENTS.   LESSOR shall

make any and all such improvements, alterations, repairs or do any other act to

or upon the Property as shall be required by any applicable statute, law,

ordinance or regulation, including, but not limited to those relating to

environmental quality or hazardous waste, by any competent governmental

authority.   The cost of any and all such improvements, alterations, repairs or

other acts shall be borne by LESSEE and LESSOR as provided in Section 2.6

above, except as otherwise provided in this Lease.

 

 

                                     -11-

     4.6 CONDITION OF PROPERTY; ALTERATIONS, REPAIRS AND MAINTENANCE.  

 

        A. LESSOR shall maintain and repair the Property in a good, clean and

presentable condition.   Except for such items as are included in Section 2.8,

the cost of any and all such maintenance and repairs shall be borne by LESSEE

and LESSOR as provided in Section 2.6 above.   LESSOR'S obligation to maintain

and repair the Property shall include the following:

 

          i. The routine and ordinary maintenance of the landscaping,

irrigation system and grounds, including weed control and cleaning; and

 

          ii. The routine and ordinary maintenance of the parking lot,

driveways and pedestrian walkways, including snow removal.

 

          iii. Any major repair or replacement of the parking lot, driveways

and pedestrian walkways.

 

        B. LESSEE shall not make any alterations or improvements to or upon the

Property without LESSOR'S prior written consent thereto, which consent shall

not be unreasonably withheld, provided that LESSEE may, from time to time, make

minor alterations to the Improvements with LESSOR'S consent.   All alterations

and improvements shall be accomplished in a good workmanlike manner and in

strict