Leasehold Premises for any particular purpose; and (iv) the propriety of using the Leasehold Premises for any particular purpose.

 

ARTICLE II

 

TERM

 

Section 2.01.                              Commencement and Expiration .  The term of this Lease (the “Lease Term”) shall commence on November 14, 2005 (hereinafter referred to as the “Commencement Date”) and shall continue until October 31, 2010 for five (5) years, unless sooner terminated or extended, as hereinafter provided.   The first five (5) year term described in the immediately preceding sentence shall be sometimes referred to as the “Initial Term”.

 

Section 2.02.                              Option to Renew .  Tenant shall have three (3) successive options to extend the Lease Term (hereinafter respectively referred to as the “First Option to Renew”, the “Second Option to Renew” and the “Third Option to Renew”). The First Option to Renew, the Second Option to Renew and Third Option to Renew are hereinafter collectively referred to as the “Options to Renew”.  In the event that any Option to Renew is not validly exercised in accordance with Section 2.02(b) , all subsequent Options to Renew shall expire and shall no longer be enforceable.  The Options to Renew shall each be subject to the following terms and conditions:

 

(a)                                   Renewal Periods .  Upon exercise of each Option to Renew, the Lease Term shall be extended for a period of five (5) years (which periods are respectively referred to herein as the “First Renewal Period”, the “Second Renewal Period”, and the “Third Renewal Period”).  The First Renewal Period, the Second Renewal Period and the Third Renewal Period are hereinafter collectively referred to as the “Renewal Periods”.  The First Renewal Period, the Second Renewal Period and the Third Renewal Period shall not be deemed to comprise part of the Lease Term unless the applicable Option to Renew relating to such Renewal Periods is executed by Tenant.

 

(b)                                  Renewal Exercise .  The Options to Renew shall be exercised by written notice to Landlord which must be given in accordance with Section 15.14 below.  The First Option to Renew must be exercised at least ninety (90) but no more than one hundred eighty (180) days prior to expiration of the Initial Term.  The Second Option to Renew must be exercised at least 90 but no more than 180 days prior to expiration of the First Renewal Period.  The Third Option to Renew

 

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must be exercised at least ninety (90) but no more than one hundred eighty (180) days prior to expiration of the Second Renewal Period.  No Option to Renew may be exercised at any time when there is an uncured Event of Default then existing.

 

(c)                                   Renewal Period Lease Terms .  During the Renewal Periods, the terms and conditions of this Lease shall remain unchanged from the Initial Term except as otherwise specifically set forth herein.

 

ARTICLE III

 

RENT

 

Section 3.01.                              Base Rent .  The minimum monthly rent to be paid to Landlord by Tenant under this Lease shall be as follows:

 

(a)  Initial Term .  The base rent under this Lease (the “Base Rent”) during the Initial Term shall be payable monthly in advance on the first day of each calendar month during such Initial Term as follows:

 

Minimum Rent payable on
each of the Rental Due
Dates occurring during
November 2005 through
October 2006		$	18,750.00
Minimum Rent payable on
each of the Rental Due
Dates occurring during
November 2006
through October 2007		$	31,250.00
Minimum Rent payable on
each of the Rental Due
Dates occurring during
November 2007
through October 2010		$	37,500.00

 

(b)                                  Renewal Periods .  In the event that any of the Options to Renew are exercised, the Base Rent which is payable on the first day of each month occurring during the applicable Renewal Periods shall be Thirty-Seven Thousand Five Hundred

 

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Dollars ($37,500.00) (the “Renewal Period Base Rent”) as such amount may be increased, from time to time in accordance with Section 3.02 .

 

Section 3.02. Increases in Base Rent .  The amount of the Base Rent, which is set forth by Section 3.01 , above, shall be subject to adjustment (in each case, a “Rent Adjustment”) on the on the first day of each Renewal Period (with each such date being referred to herein as an “Adjustment Date”).  The amount of the Base Rent as so adjusted on each Adjustment Date (the “Adjusted Rent”) shall be payable in advance on the Adjustment Date for which it was determined, and on the first (1st) day of each and every calendar month thereafter until, but not including, the next succeeding Adjustment Date.  The amount of the Adjusted Rent shall be determined as set forth below:

 

(a)                                   CPI Escalation .  Each adjustment shall be determined with reference to the Consumer Price Index for all Urban Consumers for All Items (1982-1984=100)- “West Region Average”, published by the United States Department of Labor, Bureau of Labor Statistics (the “Index”).  The Index which is published for August 2005 shall be the “Base Index,” and the Index which is published for the month of August immediately preceding each Adjustment Date shall be the “Adjustment Index.”

 

(b)                                  Adjusted Rent Calculation .  On each Adjustment Date, the Adjustment Index shall be divided by the Base Index, and the resulting quotient multiplied by the Renewal Period Base Rent.  The Adjusted Rent so determined shall be the amount of the Base Rent which is payable on the applicable Adjustment Date and on the same day of each succeeding month thereafter until, but not including, the next succeeding Adjustment Date. However, the terms of this Section 3.03 notwithstanding, in no event shall the Adjusted Rent be less than the Renewal Period Base Rent (or the most recently determined Adjusted Rent, as the case may be).

 

(c)                                   Alternate Indexes .  In the event the CPI Index referenced above shall cease to be published during the Lease Term, then and in such event only, the Adjusted Rent shall be determined on the basis of such other comparable index as shall be then published by the United States Government, or, if there be none, by the comparable index published by Standard & Poor’s.  In the event none of the foregoing indexes are published, it is understood and agreed that a Board of Arbitrators shall be constituted as of each Adjustment Date to decide the percentage of adjustment applicable to the rentals herein specified, based upon their examination of retail prices in Reno, Nevada, unless Landlord and Tenant agree  as to the amount

 

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of such adjustment.  Such Board of Arbitrators shall be selected pursuant to the following:

 

(i)                                      The Board of Arbitrators shall consist of three (3) disinterested persons.  Each Party shall appoint one (1) arbitrator, and the two (2) appointed arbitrators shall appoint the third.

 

(ii)                                   The Board of Arbitrators shall begin on the next business day after their selection at once and proceed with all reasonable dispatch to determine questions referred to them as herein provided, and their determination shall in each and every instance be final and binding on the Parties.

 

(iii)                                If either Party at any time prefers to have the adjustment of rental determined by the courts instead of by arbitrators, the same may be done by the Party having such preference beginning legal proceedings in the year prior to the appointment of the arbitrators, but not afterward.

 

(iv)                               The Board of Arbitrators shall report to the Parties  within fifteen (15) days after the rental adjustment question has been submitted to them, and their findings shall be in writing signed by not less than two (2) arbitrators.

 

(v)                                  If any one or more of such arbitrators shall resign, die or become incapacitated before a full and final determination is made, such arbitrator shall be replaced in the same manner as he was originally appointed and shall have the same power and authority as though he had been originally appointed.

 

(vi)                               The Parties shall share equally the cost and expense of the arbitrators and all expenses connected therewith.

 

Section 3.03 Additional Rent .  Subject to Tenant’s rights of contest and appeal set out in this Lease, all taxes, charges, costs and expenses which the Tenant is required to pay hereunder, together with all interest and penalties that may accrue thereon in the event of the Tenant’s failure to pay such amounts shall be deemed to be Additional Rent. In the event of nonpayment of Additional Rent by Tenant, the Landlord shall have all the rights and obligations with respect thereto as the Landlord has for the nonpayment of Base Rent.  Notwithstanding the above, and subject to Section 5.05 , below, Tenant may in good faith contest such taxes, charges, costs and

 

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expenses and such amounts shall not be deemed Additional Rent until a final, non-appealable judgment from a court of competent jurisdiction is rendered concerning same.

 

Section 3.04.                              Late Rental Payments .  Subject to Tenant’s rights of contest and appeal set out in this Lease, if any installment of rent or any sum due from Tenant shall not be received by Landlord or Landlord’s designee within ten (10) days after such amount is due, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of such overdue amount, plus any attorney’s fees incurred by Landlord by reason of Tenant’s failure to pay rent and/or other charges when due hereunder.  The Parties  agree that such late charges represent a fair and reasonable estimate of the cost that Landlord will incur by reason of the late payment of Tenant.  Acceptance of such late charges by the Landlord shall in no event constitute a waiver of Tenant’s default with respect to any of the other rights and remedies granted hereunder for uncured defaults.

 

Section 3.05. Minimum Rent Net to Landlord .  It is the intention of the Landlord and the Tenant that the Base Rent herein specified shall be net to the Landlord in each year during the term of the Lease.  Accordingly, all costs, expenses and obligations of every kind relating to the Leasehold Premises (except as otherwise specifically provided in this Lease) which may arise or become due during the Lease Term shall be paid by the Tenant, and the Landlord shall be indemnified by the Tenant against such costs, expenses and obligations due and owing by Tenant.  Subject to the various provisions of this Lease to the contrary, including, but not limited to Section 3.06 , the Minimum Rent shall be paid to the Landlord without notice of demand and without abatement, deduction, or setoff (except as otherwise specifically provided in this Lease).

 

Section 3.06.  Credit/Offset Rights of Tenant .  Notwithstanding any other provision of this Lease to the contrary,  Tenant shall have the right, in Tenant’s election, to offset against any amount due by Tenant under this Lease (as Base Rent, Additional Rent or otherwise) the sum of $50,000.00 to be applied by Tenant against such obligations in the manner and order as Tenant so elects (including the discharge of such obligations in consecutive months, whether in partial discharge of such monthly obligations or otherwise)(collectively, the “Offset Rights”). Tenant acknowledges that such Offset Rights are the product of the negotiations of the Parties and further based on the due diligence investigation of the Leasehold Premises by Tenant and that as a result of such matters, Landlord shall have no obligations to Tenant regarding any further repairs to the Leasehold Building.

 

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Section 3.07                                 Payment Terms .

 

(a)                                   Monthly Payment .  The Base Rent described above is to be paid in equal monthly installments in advance on the Commencement Date and thereafter, on the first day of each and every calendar month of the Lease Term (each a “Rental Due Date”).  The Base Rent for any other portion of the Lease Term which is less than a complete calendar month shall be the proration of the Base Rent above which the number of days in such portion of the Lease Term bears to thirty (30).

 

(b)                                  Payments Location .  Payments of Base Rental shall be made to Landlord at the address specified in Section 15.14 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).

 

ARTICLE IV

 

USE OF LEASEHOLD PREMISES

 

Section 4.01.                              Generally .  Except to the extent otherwise provided herein, Tenant shall not use the Leasehold Premises for any purpose other than:  (i) operation of a nonrestricted gaming business (including any ancillary activities reasonably related thereto); or (ii) any other lawful purpose, as permitted under the laws of the State of Nevada.

 

Section 4.02.                              Prohibited Uses .  Except as permitted by the Terms of this Lease or otherwise by Landlord, Tenant shall not suffer or permit the Leasehold Premises to be used in any manner, or permit anything to be brought into or kept in such areas which would in any way:  (i) violate any law or requirement of public authorities (including but not limited to, Environmental Laws and requirements, all as more particularly set forth by Section 4.07 below); (ii) cause material structural injury to the Leasehold Real Property or any part thereof; (iii) interfere with the normal operations of the heating, air conditioning, ventilation, plumbing or other mechanical or electrical systems of the building or the elevators installed therein; (iv) constitute a public or private nuisance; or (v) constitute a breach of any of the terms and conditions of this Lease.  The provisions of this Section 4.02 shall not apply to items, materials, products, chemicals or the like which are:  (i) permitted under this Lease or (ii) relate to the conduct of Tenant’s ordinary course of business.

 

Section 4.03.                              Compliance with Law .  Tenant shall at Tenant’s sole cost and expense, comply with all written requirements of all county, municipal, state, federal and other applicable governmental authorities, now in force, or which may

 

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hereafter be in force, pertaining to the Leasehold Premises, and shall faithfully observe in the use of the Leasehold Premises all municipal and county ordinances and state and federal statutes now in force or which may hereafter be in force.  Tenant shall not permit the Leasehold Premises, or any portion thereof, to be used or occupied in any manner which is in violation of such governmental requirements, and shall timely comply with all governmental administrative regulations, orders and pronouncements.  In furtherance of this Section 4.03 , Tenant shall provide Landlord with a copy of all inspection reports by state, federal and local authorities.

 

Section 4.04. Tenant Indemnification .  Tenant shall indemnify, defend and hold harmless Landlord, its managers, members 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) suffered by any of them and caused by, related to, arising out of, resulting from, or in any way connected with:  (i) any contamination of the Leasehold Premises with Hazardous Materials caused by Tenant; or (ii) the breach by Tenant of any obligation which it may have under this Section 4.04 ; or (iii) any violation of Environmental Laws (as hereinafter defined) in or about the Leasehold Premises caused by Tenant.   Subject to the provisions of this Section 4.04 , 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 Leasehold Premises due to Tenant’s (or its agents) use of or activities on or about the Leasehold Premises.  Tenant shall comply with all applicable Environmental Laws (as defined herein) and the written 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.

 

Section 4.05.                              Landlord Indemnification .  Landlord shall indemnify, defend and hold harmless Tenant, its managers, members, officers, directors, owners, shareholders, partners, 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) suffered by any of them and caused by, related to, arising out of, resulting from, or in any way connected with:  (i) any contamination of the Leasehold Premises with Hazardous Materials caused by Landlord; or (ii) the breach by Landlord of any obligation which it may have under this Section 4.05 ; or (iii) any violation of Environmental Laws (as hereinafter defined) in or

 

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about the Leasehold Premises caused by Landlord.   Subject to the provisions of this Section 4.05 , 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 Leasehold Premises due to Landlord’s (or its agents) use of or activities on or about the Leasehold Premises, and Landlord shall restore the Leasehold Premises, and any other properties (including the Improvements), to the condition existing prior to the introduction of such Hazardous Materials to the Leasehold Premises.  Landlord shall comply with all applicable Environmental Laws (as defined herein) and the written requirements of governmental authorities in undertaking such actions.  Landlord shall obtain Tenant’s prior written approval of such actions and of any consultants or contractors to be used by Landlord in connection therewith, such approval of Tenant not to be reasonably withheld, conditioned or delayed.  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.

 

Section 4.06                                 Representations and Warranties of Landlord .

 

(a)                                   Landlord Declaration .  Subject to the provisions of subsection (b)  below, Landlord represents and warrants to Tenant, to Landlord’s knowledge, that:

 

(1)                                   The Leasehold 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.

 

(2)                                   The Leasehold Premises have not contained, either asbestos, PCB, toxic materials or Hazardous Materials.

 

(3)                                   To Landlord’s current, actual knowledge, the Leasehold Premises do not now contain either asbestos, PCB, toxic materials or Hazardous Materials.

 

(4)                                   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 Leasehold Premises; or (ii) any alleged violation of any Environmental Laws; or (iii) the releasing, spilling, leaking,

 

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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, to Landlord’s actual knowledge, there is no litigation pending or threatened with respect to the Leasehold Premises concerning any Hazardous Materials or the violation of any Environmental Laws.

 

(b)                                  Limitation .  Landlord’s representations and warranties set out in subsections 4.06(a)(1)  and (2)  above shall be limited to the scope of disclosures, representations and warranties made and given to Landlord by its predecessors in the chain of title or by operation of law.  Landlord further represents and warrants to Tenant that Landlord has not received any other representations or warranties from Landlord’s predecessors in the chain of title other than by operation by law or by virtue of express warranties contained in Landlord’s vesting deed.

 

Section 4.07                                 Definitions .  As used herein, “ Hazardous Materials ” shall mean and include: (i) any “hazardous waste”, “hazardous substance” and “pollutant or contaminant”, all as such terms are defined in Section 101 of the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 (including, without limitation, asbestos and raw materials which include hazardous constituents); (ii) petroleum and any petroleum byproduct or constituent; and (iii) any 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 Article IV 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.

 

Section 4.08                                 Disclosure to Landlord .  Tenant further agrees to provide Landlord with copies of any communications between Tenant and any governmental authorities relating to any Hazardous Material on or affecting the Leasehold Premises, and to grant to Landlord the right (but not the obligation) to participate in any proceeding with any enforcement agency relating to any Hazardous Material on or affecting the Leasehold Premises.

 

Section 4.09                                 Reports .  Attached to this Lease as Exhibit ”B” and incorporated herein by reference is a list of  all reports and correspondence which Landlord has received (and which Landlord has delivered to Tenant) as of the date of

 

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this Lease regarding any environmental status of the Leasehold 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 Leasehold Premises, which come into Landlord’s possession, custody or control after the Commencement Date.

 

ARTICLE V

 

MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 5.01.                              Maintenance and Repairs .

 

(a)                                   Tenant Obligation .  Subject to the rights of Tenant set out in Section 3.06 , above, Tenant shall, at all times during the Lease Term, at its own expense, put and maintain the Leasehold Premises in thorough repair and in good and safe condition, including, but not limited to, the roof, floors, walls, heating and air conditioning fixtures, plumbing fixtures and sewage fixtures, together with all equipment situate thereon, or therein, and all appurtenances thereto, both inside and outside, structural and nonstructural, extraordinary and ordinary, however the necessity or desirability for repairs may occur, and whether or not necessitated by wear, tear, obsolescence, or defects, latent or otherwise.

 

(b)                                  Landlord Notice .  In the event Landlord determines (in its reasonable, good faith judgment) that Tenant has failed to make the repairs required by Tenant pursuant to subsection 5.01(a)  above, Landlord shall notify Tenant in writing as to the matters which have not been repaired in accordance with the terms of this Lease and of the specific repairs which remain outstanding (the “Repair Notice”).  The delivery of the Repair Notice shall be a condition precedent to Landlord’s right of entry described in s ubsection 5.01(c)  below.

 

(c)                                   Landlord Rights .  In the event that Tenant fails to make the repairs required by subsection 5.01(a) , above, and subject to the provisions set forthin Section 5.01(b) , above, Landlord shall be entitled, but shall be under no obligation (but only upon three (3) days advance written notice to Tenant), to enter upon the Leasehold Premises for the purpose of performing the repairs set out in the Repair Notice.  In the event that Landlord makes such repairs, the actual cost paid by Landlord for same shall be considered Additional Rent, which shall be payable by Tenant within thirty (30) days of Tenant’s receipt of an invoice for same supported by

 

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appropriate receipts.  Prior to commencing such repairs, Landlord shall give Tenant fifteen (15) days’ additional written notice unless Landlord determines, in its reasonable, good faith discretion, that immediate repairs are necessary to avoid irreparable damage or rapid deterioration of the condition of the Leasehold Premises.

 

Section 5.02.                              Alterations, Additions and Fixtures . Subject to the provisions hereinafter set forth, Tenant shall have the right, during the Lease Term to do any of the following (all of which are collectively referred to herein as the “Improvements”);  (i) make such modifications to the Leasehold Building (including, without limitation, alterations, expansions, demolitions and additions); and (ii) construct such other buildings, structures and infrastructure on the Leasehold  Real Property; in each case, as it deems necessary or advisable, in its discretion, for conduct of its use of the Leasehold Premises as permitted hereby.  However, the terms of this Section 5.02 notwithstanding:  (i) without the prior written consent of Landlord, which shall not be unreasonably delayed, conditioned or denied, Tenant shall not cause or undertake any Improvements which would, in the reasonable, good faith judgment of a structural engineer duly licensed in the State of Nevada, result in a material  diminution of the structural integrity or enclosure of the Leasehold Building, as it exists on the Commencement Date; and (ii) all Improvements shall be constructed with reasonable diligence, in a quality manner and in compliance with all applicable building codes, laws and other governmental rules and regulations.  All Improvements shall be deemed to constitute part of the Leasehold Premises (but shall not cause an increase in the amount of any Base Rent).  Tenant agrees to provide Landlord with such information regarding the Improvements, such as plans and specifications, equipment warranties and similar information as Landlord may, from time to time, reasonably request in writing to Tenant.

 

Section 5.03.                              Surrender of Premises .  Upon expiration of this Lease, Tenant shall surrender the Leasehold Premises in a condition which would result from Tenant’s complete compliance with all of its maintenance obligations hereunder.  Tenant shall surrender all keys for the Leasehold Premises to Landlord at the place then fixed for the payment of rent and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Leasehold Premises.  At the expiration of the Lease, Tenant shall remove from the Leasehold Premises all items which do not become the property of Landlord under Section 5.02 , above.  All such property not removed at the end of the Lease shall be deemed abandoned.

 

Section 5.04.                              Removal of Trade Fixtures .  Before surrendering the Leasehold Premises to Landlord, Tenant shall repair any damage caused by removal of trade fixtures, and the removal of any other items from the Leasehold Premises.  Such repairs shall be performed in a manner reasonably satisfactory to the Landlord

 

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and shall include, but not necessarily be limited to:  capping all plumbing fixtures, capping all electrical wiring and fixtures, repairing all holes in walls, restoring any damaged floor and/or ceiling tiles, and thoroughly cleaning the Leasehold Premises.  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 Leasehold Premises; or (iv) the demolition or alteration of existing buildings (including the Leasehold Building), structures, or other improvements over, upon or under the Leasehold Premises. Provided, however, subpart (ii) shall not relieve Tenant of its obligation, under Section 8.02 , and all matters described in subparts , (iii) or (iv)  shall be effected in compliance with Section 5.01 , above.

 

Section 5.05.                              Covenants Against Liens .

 

(a)                                   Discharge; Reimbursement .  Except for any indebtedness imposed on Tenant’s leasehold interest in the Leasehold Premises by Tenant’s lenders pursuant to Article XIV , below (the “Tenant Lender Liens”), Tenant covenants and agrees that it shall not, during the Lease Term, suffer or permit any lien to be attached to or upon the Leasehold 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 Tenant’s receipt of written notice 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 Leasehold 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 an invoice for such charges supported by detailed evidence of such expenditures.

 

(b)                                  Good Faith Contest .  Notwithstanding the provisions of Section 5.05(a) , above, Tenant may in good faith contest any mechanics, laborers’, materialmen’s or other liens filed or established against the Leasehold 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 5.05(a) , above, unless by nonpayment of any such items the interest of Landlord will be materially and imminently endangered or the Leasehold Premises or any part thereof will be subject to imminent material loss or forfeiture in Landlord’s reasonable, good faith determination, in which event Tenant shall promptly pay and cause to be satisfied and

 

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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 connection with same.  Tenant shall hold Landlord whole and harmless from any loss, cost or expenses Landlord may reasonably incur related to any such contest.

 

(c)                                   Landlord Representation .  Based solely on:  (i) Landlord’s actual knowledge and that certain Title Commitment dated October 26, 2005, issued by Stewart Title Guaranty Title Company and (ii) all other items within Tenant’s actual knowledge, Landlord states to Tenant in its good faith belief, that the Leasehold Premises are free from all liens, encumbrances, claims, impediments to title, encroachments, restrictive covenants, special taxing districts or the like (other than Exceptions 1 through 4 [with all taxes paid current] 5, 6 and 9, all as shown on Schedule B Part II of the above referenced Title Commitment).  Based solely on: (i) that certain letter from the City of Elko, Nevada Planning Department dated October 20, 2005 addressed to James M. Copenhaver, P.C.; and (ii) all other items within Tenant’s actual knowledge, Landlord states to Tenant in its good faith belief, that the Leasehold Premises are situated within a zoning and gaming district which is compatible with the operation of a non-restricted gaming business.

 

ARTICLE VI

 

UTILITIES AND SERVICES

 

Tenant shall make arrangements, and shall be responsible, for all utilities and services furnished to or used by it in occupation of the Leasehold Premises including, without limitation, gas, electricity, water, telephone service, sewer use fees and other services used in or about or supplied to the Premises.  Tenant shall indemnify Landlord from any obligation for any such expenses described above.

 

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ARTICLE VII

 

INSURANCE AND INDEMNITY

 

Section 7.01.                              Liability and Casualty Insurance .  Tenant agrees, at its sole expense, to maintain in full force during the Lease Term:

 

(a) A Commercial General Liability policy with a One Million Dollar ($1,000,000.00) combined single limit for bodily injury and property damage, including all standard policy form extensions.  The policy must provide a Two Million Dollar ($2,000,000.00) general aggregate and be written on an “occurrence form.”  The Landlord (and such persons, firms, or corporations as are designed by Landlord) will be named as Additional Insured on the Tenant’s Commercial General Liability Policy to protect the Landlord’s interest.  An Umbrella Policy shall be purchased with a limit of not less than Ten Million Dollars ($10,000,000.00) providing excess coverage of the required Commercial Liability Policy, which umbrella policy shall be endorsed to include Landlord as an Additional Insured.

 

(b) Property insurance with special causes of loss, insuring the Leasehold Building and any Improvements and the contents thereof with coverage in an amount equal to at least ninety percent (90%) of the replacement cost (“Tenant’s Property Policy”).  The Landlord (and such persons, firms, or corporations as are designed by Landlord) will be named as Loss Payee on the Tenant’s Property Policy to protect the Landlord’s interest.

 

(c) Boiler and Machinery Policy with respect to all boilers and hot water pressure vessels utilized in operation of the Leasehold Building providing coverage in an amount which is reasonably acceptable to Landlord.

 

Section 7.02                                 Policy/Certificate .  A copy of the policies or certificates of insurance evidencing the required coverage shall be delivered to Landlord before Tenant opens for business or before Tenant enters the Leasehold Premises in order to prepare the Leasehold Premises for occupancy and, thereafter, from time to time as reasonably requested by Landlord in writing, in order to evidence continued enforceability of the required coverage.  Such policies shall contain a clause that the insurer will not cancel or change the insurance without first giving the Landlord thirty (30) days’ prior written notice by certified mail.  All insurance policies required in this Lease shall be placed with insurance carriers qualified to do business in the State of Nevada and rated no lower than “B+” in the most recent addition of A.M. Best.

 

Section 7.03                                 Landlord’s Right To Procure .  Should Tenant fail to obtain insurance coverage anywhere required in this Article VII, the Landlord shall have the right, but not the obligation, to obtain such insurance (but only to the extent of the coverages described herein) and to pay premiums thereof. In such event, the entire amount of such premiums shall be paid by Tenant to Landlord within thirty (30) days of

 

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Tenant’s receipt of an invoice for same supported by reasonable evidence and proof of payment of same.

 

Section 7.04.                              Indemnification .

 

(a)                                   Tenant Obligation .  Tenant agrees to indemnify, defend and hold Landlord, its officers, directors, employees, members, managers, successors, assigns