-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ib/13Wo545mlet+AHF/lJ6oSxkWAisL/emKUQK+7ApDexJiqHAYJHL2d9GlmZqZD RJWZ65iiwHMdxuYoi5Rx0w== 0001144204-02-000666.txt : 20020814 0001144204-02-000666.hdr.sgml : 20020814 20020814180948 ACCESSION NUMBER: 0001144204-02-000666 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEGO FINANCIAL CORP CENTRAL INDEX KEY: 0000736035 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT) [6532] IRS NUMBER: 135629885 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08645 FILM NUMBER: 02738091 BUSINESS ADDRESS: STREET 1: 4310 PARADISE RD CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027373700 MAIL ADDRESS: STREET 1: 4310 PARADISE RD CITY: LAS VEGAS STATE: NV ZIP: 89109 10-Q 1 doc1.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________ COMMISSION FILE NUMBER: 1-8645 MEGO FINANCIAL CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 13-5629885 (STATE OR OTHER JURISDICTION OF (I. R. S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4310 PARADISE ROAD, LAS VEGAS, NEVADA 89109 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (702) 737-3700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: As of June 30, 2002, there were 6,009,310 shares of Common Stock, $.01 par value per share, of the Registrant outstanding. ================================================================================ MEGO FINANCIAL CORP. AND SUBSIDIARIES INDEX Page ----- PART I FINANCIAL INFORMATION (unaudited) Item 1. Condensed Financial Statements Condensed Consolidated Balance Sheets at June 30, 2002 and December 31, 2001 1 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and May 31, 2001 2 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and May 31, 2001 3 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 23 PART II OTHER INFORMATION Item 1. Legal Proceedings 24 Item 2. Changes in Securities 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Submission of Matters to a Vote of Security Holders 24 Item 5. Other Information 24 Item 6. Exhibits and Reports on Form 8-K 24 Signatures 26 i PART I FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS
MEGO FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (thousands of dollars) (unaudited) ASSETS JUNE 30, 2002 DECEMBER 31, 2001 --------------- ------------------- Cash and cash equivalents $ 1,550 $ 1,271 Restricted cash 7,551 6,708 Notes receivable, net of allowance of $13,407 and $14,557 at June 30, 2002 and December 31, 2001, respectively 114,469 109,347 Retained interests in receivables sold 2,948 3,688 Vacation ownerships held for resale 19,784 17,865 Land and improvements inventory 2,540 2,757 Assets available for sale 3,382 3,468 Property and equipment, net 9,678 9,690 Deferred financing costs, net 1,953 2,071 Deferred selling costs 3,901 5,422 Other assets 13,580 15,409 Assets related to discontinued operations - 15,156 --------------- ------------------- TOTAL ASSETS $ 181,336 $ 192,852 =============== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Notes and contracts payable $ 126,884 $ 131,530 Accounts payable 3,858 1,873 Accrued liabilities 16,322 12,274 Interest rate swap liabilities 3,630 2,251 Deferred income 2,790 2,097 Reserve for notes receivable sold with recourse 2,757 3,560 Customer deposits 1,804 2,831 Deferred income taxes - 1,289 Liabilities related to discontinued operations - 9,545 --------------- ------------------- Total liabilities before subordinated debt 158,045 167,250 --------------- ------------------- Subordinated debt - 4,211 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value (authorizedshares, none - - issued and outstanding) Common stock, $.01 par value (authorizedshares; 6,013,400 shares issued and outstanding at June 30, 2002 and 3,500,557 shares at December 31, 2001) 60 35 Additional paid-in capital 20,992 13,068 Retained earnings 4,635 9,773 Accumulated other comprehensive loss (2,396) (1,485) --------------- ------------------- Total stockholders' equity 23,291 21,391 --------------- ------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 181,336 $ 192,852 =============== ===================
1 MEGO FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (thousands of dollars, except per share amounts) (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------- ----------------------- JUNE 30, MAY 31, JUNE 30, MAY 31, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- REVENUES (Restated) (Restated) Vacation ownership sales $ 8,428 $ 17,331 $ 17,585 $ 30,958 Land sales 6,639 6,418 12,963 11,740 Interest income 4,173 3,965 8,207 7,515 Financial income 134 844 326 1,694 Loss on sale of investments and other assets (9) (19) (9) (19) Other 1,042 1,127 2,162 2,059 ----------- ----------- ----------- ----------- Total revenues 20,407 29,666 41,234 53,947 ----------- ----------- ----------- ----------- COSTS AND EXPENSES Direct cost of: Vacation ownership sales 1,341 3,069 2,821 5,524 Land sales 844 964 1,928 1,741 Interest expense 3,016 3,006 6,186 6,054 Marketing and sales 9,589 13,260 18,435 24,317 General and administrative 6,874 4,920 11,424 9,329 Provision for cancellations 1,882 3,118 3,224 4,874 Depreciation 661 333 1,095 684 Restructuring charges - - 2,480 - ----------- ----------- ----------- ----------- Total costs and expenses 24,207 28,670 47,593 52,523 ----------- ----------- ----------- ----------- (LOSS) INCOME FROM CONTINUING OPERATIONS (3,800) 996 (6,359) 1,424 BEFORE INCOME TAX BENEFIT INCOME TAX BENEFIT (67) (121) (854) (112) ----------- ----------- ----------- ----------- (LOSS) INCOME FROM CONTINUING OPERATIONS (3,733) 1,072 (5,505) 1,536 Discontinued operations Income (loss) from discontinued operations 324 (90) 556 (55) Income tax expense (130) 31 (189) - ----------- ----------- ----------- ----------- INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX 194 (59) 367 (36) NET (LOSS) INCOME APPLICABLE TO COMMON STOCK $ (3,539) $ 1,013 $ (5,138) $ 1,500 =========== =========== =========== =========== NET (LOSS) INCOME PER COMMON SHARE Basic and diluted: From continuing operations $ (0.67) $ 0.31 $ (1.12) $ 0.44 From discontinued operations 0.03 (0.02) 0.07 (0.01) ----------- ----------- ----------- ----------- Net (loss) income $ (0.64) $ 0.29 $ (1.05) $ 0.43 =========== =========== =========== =========== Weighted-average number of common shares 5,533,987 3,500,557 4,899,888 3,500,557 =========== =========== =========== ===========
2 MEGO FINANCIAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands of dollars, except per share amounts)
SIX MONTHS ENDED ------------------- JUNE 30, MAY 31, 2002 2001 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income $ (5,138) $ 1,500 --------- --------- Adjustments to reconcile net (loss) income to net cash used in operating activities: Charges to allowance for cancellations (2,127) (4,571) Provision for cancellations 3,224 4,874 Gain on sale of business (542) - Cost of vacation ownership interest and land sales 4,749 7,265 Depreciation 1,095 684 Repayments on notes receivable 14,801 24,459 Additions to notes receivable (21,823) (42,426) Purchase of land and vacation ownership interests (6,451) (4,794) Changes in operating assets and liabilities: Restricted cash (843) (2,245) Retained interests in receivables sold 740 (522) Deferred financing costs 118 (123) Deferred selling costs 1,521 (435) Other assets 1,829 2,432 Accounts payable 1,985 (61) Accrues liabilities 4,048 (2,058) Interest rate swap liability 468 348 Deferred Income 693 1,477 Customer deposits (1,027) 49 Deferred income taxes (1,289) (293) Assets related to discontinued operations 414 26 Liabilities related to discontinued operations 25 115 --------- --------- Net cash provided by (used in) operating activities (3,530) (14,299) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (997) (434) Proceeds from the disposition of business 5,714 - --------- --------- Net cash provided by (used in) investing activities 4,717 (434) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 20,581 37,020 Reduction of debt (25,227) (21,641) Payments on subordinated debt (4,211) (75) Proceeds from issuance of common stock 7,949 - --------- --------- Net cash provided by (used in) financing activities (908) 15,304 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 279 571 CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 1,271 15 --------- --------- CASH AND CASH EQUIVALENTS END OF PERIOD $ 1,550 $ 586 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest, net of amounts capitalized $ 6,453 $ 5,969
3 Cautionary Notice Regarding Forward-Looking Statements The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by and information currently available to management. Such forward-looking statements include, without limitation, the Company's expectations and estimates as to the Company's business operations, including the introduction of new vacation ownership and land sales programs and future financial performance, including growth in revenues, net income and cash flows. In addition, included herein the words "anticipates," "believes," "estimates," "expects," "plans," "intends" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company's management with respect to future events and are subject to certain risks, uncertainties and assumptions. The economic downturn in the tourism industry following the September 11, 2001 terrorist attacks had an adverse impact on the operating results of the Company's first fiscal quarter, which impact has continued through the current quarter. While management believes this event will not have a material effect on the operations in the future, there can be no assurance that the travel and tourism industry will return to its pre-September 11 levels. The Company has customers who both fly and drive to the various resort locations. At this time, there can be no assurance that the economic downturn, a decrease in travel and anxiety about possible terrorist attacks and the current economic uncertainly within the travel industry will not extend to future periods. In addition, the Company specifically advises readers that the factors listed under the caption "Liquidity and Capital Resources" could cause actual results to differ materially from those expressed in any forward-looking statement. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The following discussion and analysis should be read in conjunction with the Company's Form 10-KT for the transition period from September 1, 2001 to December 31, 2001, the Form 10-Q for the quarterly period ended March 31, 2002, the other public filings of the Company including all 8-K's and S-3 filings and the Condensed Consolidated Financial Statements, including the notes thereto, contained elsewhere herein. 4 MEGO FINANCIAL CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2002 (unaudited) 1. Basis of Presentation The accompanying condensed consolidated financial statements present the results of operations, financial position and cash flows of Mego Financial Corp. (the "Company" or "LESR"). The accompanying condensed consolidated financial statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States. In the opinion of management, the financial information furnished herein reflects adjustments of normal recurring accruals necessary for a fair presentation of the results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes to those financial statements included in our transition report on Form 10-KT for the transition period September 1, 2001 to December 31, 2001. The results of operations for the six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the year ending December 31, 2002. In February 2002, the Company changed its fiscal year end from August 31 to December 31. Accordingly, the financial information for the three and six months ended June 30, 2002 is based on the Company's new fiscal year. The information presented for the three and six months ended May 31, 2001 is based on the Company's old fiscal year and is considered to be comparable to the June 30, 2002 information for purposes of this quarterly report. Organization The Company is a developer and operator of vacation ownership resorts. It provides consumer financing to purchasers of its vacation ownership intervals. Vacation ownership sales and operations are performed through Mego's wholly owned subsidiary, Leisure Homes Corporation ("LHC"), formerly known as Preferred Equities Corporation. LHC also develops and sells parcels of raw land to be used primarily as sites for second and/or vacation homes, and provides consumer financing to the purchasers of the land parcels. By providing financing to virtually all of its customers, LHC originates consumer receivables that it hypothecates, sells and services. LHC acquires, develops and markets vacation ownership interests in resorts located in popular high volume vacation destinations such as Steamboat Springs, Colorado (two resort locations); Indian Shores and Orlando, Florida; Honolulu, Hawaii; Las Vegas and Reno, Nevada and Brigantine, New Jersey (adjacent to Atlantic City, New Jersey). LHC, through its wholly-owned subsidiary, Leisure Resorts Corporation ("LRC"), manages eight vacation ownership properties and receives management 5 income in connection therewith. Leisure Services Corporation ("LSC"), another wholly owned subsidiary of LHC, provides travel services to the leisure vacation ownership marketplace and customer service to the Company's existing owners. The Company has incorporated Leisure Industries Corporation of America, Inc. in Delaware and proposes, subject to stockholder approval, to merge into that company and thus change its name and corporate domicile from New York to Delaware. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All significant inter-company balances and transactions are eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of sales and expenses during the reporting period and the disclosures of contingent liabilities. Accordingly, actual results could differ from those estimates. Earnings (Loss) Per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in the same manner as basic earnings (loss) per share, but also gives effect to all dilutive stock options and warrants using the treasury stock method. As of June 30, 2002 and December 31, 2001, options to purchase 48,570 shares of common stock at $6.00 per share were outstanding. As of June 30, 2002 warrants to purchase 1,121,020 shares of common stock at prices ranging from $3.00 to $6.00 per share were outstanding. These options and warrants were not included in the computation of diluted earnings per share because the Company generated a loss from operations. The options, which expire on September 2, 2002 through September 22, 2008 and the warrants, which expire on April 20, 2003 through June 25, 2005, were still outstanding at June 30, 2002. 6 Sales of Notes Receivable and Related Retained Interest When the Company sells notes receivable, it retains a residual interest in the future cash flows from the portfolio sold and usually retains the associated servicing rights. The sales are generally subject to limited recourse provisions as provided in the respective notes receivable sales agreements. Under these agreements, the Company is generally obligated to replace or repurchase notes receivable that become 60 to 90 days delinquent or are otherwise subject to replacement or repurchase in either cash or receivables. Reserve for notes receivable sold with recourse represents the Company's estimate of the fair value of future credit losses to be incurred in connection with the recourse provisions of the sales agreements and is shown separately as a liability in the Company's condensed consolidated balance sheets. Gain or loss on sale of the receivables depends in part on the previous carrying amount of the notes receivable sold, allocated between the notes sold and the retained interest based on their relative fair value at the date of transfer. To obtain fair values on the retained interests (both at the point of the related receivable sale and periodically thereafter), the Company generally estimates fair value based on the present value of future expected cash flows estimated using management's best estimates of the key assumptions - default rates, rates of prepayment, loss severity and discount rates commensurate with the risks involved. The Company's retained interests in receivables sold are carried at fair value as either derivatives or available-for-sale investments. Unrealized holding gains or losses on the retained interests in notes receivable sold are included in earnings for those transactions structured so that the Company, through its retained interest, receives fixed interest amounts and pays the buyer variable amounts based on a floating interest rate index, as the resulting financial interest meets the definition of a derivative in accordance with SFAS No. 133. Unrealized holding gains, if any, on retained interests in notes receivable sold not meeting the definition of a derivative would be included in shareholders' equity, net of income taxes. Declines in fair value in such retained interests below amortized cost caused by changes in the amount or timing of cash flows to be received are reflected in earnings. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 7 2. New Accounting Standards The Accounting Standards Executive Committee ("AcSEC") of the American Institute of Certified Public Accountants ("AICPA") began a project to address the accounting for timeshare transactions in 1997. The proposed guidance is currently in the drafting stage of the promulgation process and no formal exposure draft has been issued to date; therefore, the Company is unable to assess the possible impact of this proposed guidance. Currently, it is likely that a final pronouncement on timeshare transactions will not be effective until the Company's fiscal year 2004. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets." SFAS No. 141 eliminated the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001 and is effective for any business combination accounted for by the purchase method completed after June 30, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with SFAS No. 142. Effective for fiscal years beginning after December 15, 2001, other intangible assets will continue to be amortized over their useful lives. The provisions of SFAS 141 and 142 were adopted by the Company effective January 1, 2002. The adoption of SFAS 141 and 142 did not have any impact on the results of operations or financial position of the Company. The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in August 2001. This statement is effective for fiscal years beginning after December 15, 2003. This new statement is not expected to have any impact on the results of operations or financial position of the Company. In December 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" that is applicable to the Company's fiscal 2002 financial statements. The FASB's new rules on asset impairment supersede FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and provide a single accounting model for the disposition of long-lived assets. In the first quarter of 2002, the Company adopted SFAS No. 144, which resulted in the financial statement presentation of Central Nevada Utilities Corporation ("CNUC") and its operating results as discontinued operations (See Note 4 below). In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections." For most companies, SFAS No. 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4. Extraordinary treatment will be required for certain extinguishments as provided in Accounting Principles Board Opinion No. 30. SFAS No. 145 also amends SFAS No. 13 to require certain modifications to capital leases be treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor). SFAS No. 145 is effective for transactions occurring after May 15, 2002, and is not expected to have a material impact on the results of operations or financial position of the Company. 8 FASB Statement 146, "Accounting for Costs Associated with Exit or Disposal Activities," addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between Statement 146 and Issue 94-3 relates to Statement 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. Statement 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. A fundamental conclusion reached by the FASB in this Statement is that an entity's commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, this Statement eliminates the definition and requirements for recognition of exit costs in Issue 94-3. This Statement also establishes that fair value is the objective for initial measurement of the liability. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, and is not expected to have a material impact on the results of operations or financial position of the Company. 3. Interest Rate Swaps To manage its exposure to interest rate risk in August 2000, the Company entered into an interest rate swap agreement with a notional amount of $25 million that expires in August 2005. The Company entered into another similar interest rate swap agreement in August 2001 for a notional amount of $20 million that expires in August 2006. The swaps convert the floating interest rate on certain of the Company's long-term debt obligation into fixed interest rates. At June 30, 2002, and December 31, 2001, the fair value of the swaps was approximately $3.6 million and $2.3 million, respectively. Management has determined these agreements are not required based on the economic climate and its future operations. Management intends to seek ways to terminate or reduce the obligations of these agreements in the future. Such termination or elimination could have a negative effect on the Company's operating results. 4. Discontinued Operations On October 2, 2001, CNUC entered into an agreement with Utilities Inc. providing for the acquisition by Utilities Inc. of substantially all of the assets of CNUC for $5.5 million (Asset Sale). Utilities Inc. deposited in escrow $500,000 of the purchase price to assure its performance of the agreement. The transaction was subject to the approval of the Nevada Public Utilities Commission. The transaction was approved on April 9, 2002. On April 11, 2002, the sale was consummated by the Company. As a result the Company has recognized a gain on sale of approximately $542,000. The net proceeds of $5.2 million was used to repay the Subordinated Debt and accrued interest and the at-risk payment. At December 31, 2001 significant assets included in discontinued operations consisted of cash of $429,000, restricted cash of $927,000, property and equipment, net, of approximately $12.0 million. At 9 December 31, 2001 significant liabilities included in liabilities from discontinued operations consisted of accrued liabilities of approximately $9.4 million, and deferred revenue of $185,000. Discontinued operations for the three months ended June 30, 2002 included and May 31, 2001 revenues of $6,000 and $357,000. Discontinued operations for the six months ended June 30, 2002 and May 31, 2001 included revenues of $453,000 and $745,000. 5. Inventory Vacation ownership inventory consist of the following (in thousands) June 31, December 31, 2002 2001 ---------- ------------ Vacation ownership interests $17,790 $13,771 Vacation ownership interests in development 1,994 4,094 ---------- ------------ $19,784 $17,865 6. Comprehensive Income Total comprehensive loss was approximately $4.7 million and $6.0 million for the three and six months ended June 30, 2002. Total comprehensive income was approximately $796,000 and $1.2 million for the three and six months ended May 31, 2001. In both 2002 and 2001 periods, the difference between net income (loss) and total comprehensive income (loss) was due to unrealized losses on interest rate swaps. 7. Commitments and Contingencies Litigation - On August 27, 1998, an action was filed in Nevada District Court, County of Clark, No. A 392585, by Robert and Jocelyne Henry, husband and wife, individually and on behalf of all others similarly situated against LHC, LHC's previously wholly-owned subsidiary, CNUC, and certain other defendants. The plaintiffs' complaint asked for class action relief claiming that LHC and CNUC were guilty of collecting certain betterment fees and not providing associated sewer and water lines. The court determined that plaintiffs had not properly pursued their administrative remedies with the Nevada Public Utilities Commission ("PUC") and dismissed plaintiffs' complaint, as amended, without prejudice. Notwithstanding their appeal of the dismissal, plaintiffs also filed for administrative relief with the PUC. On November 17, 1999, the PUC found that CNUC, the only defendant over which the PUC has jurisdiction, was not in violation of any duties owed the plaintiffs or otherwise in violation of CNUC's approved tariffs. Subsequent to the PUC's decision, plaintiffs voluntarily dismissed their appeal. On May 4, 2000, plaintiffs re-filed their complaint in Nevada District Court, naming all of the above parties with the exception of CNUC. The May 4, 2000 complaint is virtually identical to the amended complaint referred to above and asserts six claims for relief against defendants: breach of deed restrictions, two claims for breach of contract, unjust enrichment, consumer fraud in violation of NRS 41.600 and violation of NRS 119.220, with all claims arising out of the alleged failure to provide water and sewer utilities to purchasers of land in the subdivisions commonly known as Calvada Valley North and Calvada Meadows located in Nye County, Nevada. On September 8, 2000, the Company filed a motion to dismiss each of the claims made in the complaint. The Court denied the Company's motion in an order entered on December 19, 2000. 10 Plaintiffs then filed a motion to certify class, which defendants opposed. On September 5, 2001, the Court refused to certify a class for the claims of: breach of contract, unjust enrichment, consumer fraud in violation of NRS 41.600 and violation of NRS 119.220. Accordingly, the defendants are no longer subject to class claims for monetary damages. The defendants' only potential liability is for the construction of water and sewer facilities. In July of 2002, the defendants filed a motion for Summary Judgment on which the court has not yet ruled. The case is scheduled for a jury trial on August 13, 2002. The Company does not believe that any likely outcome of this case will have a materially adverse effect on the Company's financial condition or results of operations. At various times in the general course of business, the Company and LHC have each been named in other lawsuits. The Company believes that it has meritorious defenses to these lawsuits and that resolution of these matters will not have a material adverse effect on its financial condition or results of operations. In June 2002, the Company entered into an agreement to lease certain office space, including furniture, fixtures and equipment located at 2280 Corporate Circle, Building 9, Henderson, Nevada, for a period of three years. The lease provides for monthly base rent of approximately $96,000 during the first year; $99,000 during the second year, and 102,000 during the third year. In July 2002, the Company entered into an agreement to lease office space located at 2285 Corporate Circle, Henderson, Nevada, for a period of ten years. The Company is required to post a Letter of Credit of $150,000 and to advance an amount of approximately $300,000 for leasehold improvements. The Company expects to commence occupancy on or before November 1, 2002. The lease provides for a monthly base rent of approximately $365,000 with adjustments applied annually. 8. Restructuring Costs and Other Charges In January 2002, the Company's Board of Directors approved a business restructuring. Among other things, this restructuring included: approval of seven terminations at senior management levels; relocation of corporate office facilities from 1500 E. Tropicana Avenue and 4310 Paradise Road to newer office facilities in closer proximity to one another; discontinuance of the license agreement with Cendant Corporation whereby the Company licensed the use of the name "Ramada Vacation Suites" in its vacation ownership and resort operations; and approval of change in the name of the resort facilities from "Ramada Vacation Suites" to "Leisure Resorts." During the quarter ended March 31, 2002, the Company recorded a non-recurring charge of approximately $2.5 million. Included in this total were: severance benefits associated with former senior management and officers of approximately $1.9 million; future rental expense to be incurred on vacated office space of $311,000; and non-cash charges associated with the termination of the Cendant license agreement in the amount of $308,000. As of June 30, 2002, the Company has paid in cash approximately $1.2 million and expects to pay the remainder by the end of December 2002. The Company has incurred and continues to incur substantial non-recurring costs in eliminating the Ramada signage and brand identification at all of its resorts and within its operations. Restructuring charges, in certain cases, are based on estimates and subject to change; however, the Company does not believe revisions to the above estimates will be material. 9. Promissory Notes During the quarter ended June 30, 2002, the Company issued $2.9 million in promissory notes. Generally, the notes provide for interest at eight percent 11 and are payable one year from the date of issuance. The Company has the option to settle these obligations, in whole or in part, without penalty or premium, with common stock of the Company or cash. If the obligation is settled with the Company's common stock, the holders will receive one warrant for each share of common stock. The number of shares of common stock issued to satisfy the obligation will be based on the amount of debt an accrued interest outstanding in relation to market value of the common stock on the date it is settled. These warrants entitle the holder to purchase one share of common stock at purchase prices ranging from $3.00 to $6.00. The warrants generally expire one year from the date of issuance. 10. Common Stock During the quarter ended June 30, 2002, the Company sold approximately 1.2 million shares of its common stock for net proceeds of approximately $8.0 million. Included with each of these sales, the purchasers received one warrant for each share of common stock purchased. These warrants entitle the holder to purchase one share of common stock at purchase prices ranging from $4.00 to $6.00. The warrants expire one year from the date of issuance. Under the agreements, the Company has the right to demand exercise, at its discretion, if the Company's common stock trades at $7.00 or more for ten consecutive trading days at any time during the term of the warrants. 11. Income Taxes Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The realization of deferred tax assets is based on historical tax positions and expectations about future taxable income. Valuation allowances are recorded related to deferred tax assets if their realization does not meet the "more likely than not" criteria of SFAS 109, "Accounting for Income Taxes." The provision for income taxes as reported is different from the tax provision computed by applying the statutory federal rate of 34 percent. The differences are as follows:
Three Months Ended Six Months Ended ---------------------- --------------------- June 30, May 31, June 30, May 31, 2002 2001 2002 2001 ------------ --------- ----------- --------- (Loss) income before income taxes $ (3,539) $ 1,013 $ (5,138) $ 1,500 ============ ========= =========== ========= Tax at the statutory federal rate $ (1,203) $ 344 $ (1,747) $ 510 (Decrease) Increase in income taxes resulting from Changes in certain income tax liability reserves (268) 2,601 (398) Changes in certain income tax asset reserves 1,270 - - - ------------ --------- ----------- --------- Income tax benefits $ 67 $ 76 $ 854 $ 112
12. Restatement - Three Months Ended November 30, 2000 Certain amounts have been restated for the three months ended May 31, 2001 in connection with adjustment of net gain on sale of two buildings in accordance with SFAS No. 98, "Accounting for Leases", Sale - Leaseback Transactions Involving Real Estate. To restate the three months ended May 31, 2001, the Company recorded $24,744 gain on sale of investments and other assets, net of tax $12,746. This resulted in net income applicable to common stock of $1.0 million and earnings per share of $0.29 from net income applicable to common stock of $981,000 and earnings per share of $0.28. 13. Subsequent Events In July 2002, the Company completed a $4.0 million private placement to various accounts managed by Ashford Capital Management in the form of a 7.5 percent convertible debenture due in 2006. At any time, upon written notice, the Company may convert all or any portion of the outstanding principal and interest of the debenture into shares of common stock at a price of $5 per share. According to the terms of the placement, the investors also received 200,000 warrants. These warrants entitle the holder to purchase one share of the Company's common stock at $3.00. The warrants expire one year from the date of issuance. The Company entered into an agreement to acquire 2,209 lots in Arizona from Atlantic Development Corporation in an effort to add to its land inventory. The agreement was subject to the completion of registration which is currently in process. 12 The Company entered into a sales and marketing agreement with La Quinta Partners to sell and market a new fractional vacation experience at PGA West in Palm Springs, California. Pursuant to the agreement, the Company advanced $300,000. The closing of the agreement is subject to an acceptable appraisal, which has not been completed but is expected to be completed during the third quarter. The Company entered into a Letter of Intent to acquire Raintree Resorts International subject to due diligence and future negotiations. In accordance with the provisions of the Letter of Intent, the Company later amended the Letter of Intent to consider the acquisition of only three Raintree properties. These properties were the Cimarron Golf Resort in Palm Springs, California, Whiski Jack in British Columbia and Teton Club in Jackson Hole, Wyoming. In accordance with the business plan of the Company, the negotiations with Raintree and the Board of Directors' review of the due diligence, management was authorized by it Board of Directors to purchase the Cimarron Golf Club in Palm Springs, California. The Board voted not to pursue the purchase of either the Teton Club or Whiski Jack from Raintree. While no assurance can be made that this transaction will be consummated, the Company is in the process of completing the final acquisition documents. The Company entered into a Letter of Intent to acquire the Cimarron Golf Club in Palm Springs, California, from OB Sports for a purchase price of $10,800,000. This transaction is subject to the closing of the acquisition of the Cimarron Golf Resort discussed above. While no assurance can be made that this transaction will be consummated, the Company is in the process of completing the final acquisition documents and said transaction has been approved by its Board of Directors at its August, 2002, meeting. On August 12, 2002, the Company entered into a Letter of Intent to purchase all of the assets of FareQuest, Inc. FareQuest is an application service provider which searches the websites of major airlines, major regional airlines, and all major aggregator websites to find the lowest airfares on the Internet. Using a universal booking interface it searches, compares, books, and communicates passenger profile information to websites. FareQuest then returns and stores the booking information within the application for future use and reporting. Over 90 travel agencies with an aggregate $15 billion in annual travel sales have agreed to utilize FareQuest for the procurement of web inventory for corporate clients to date. Issues Affecting Liquidity LHC is required to comply with certain financial and non-financial covenants under these lines of credit agreements. Among other things, these agreements require LHC to meet certain minimum tangible net worth requirements, maintain certain liabilities to tangible net worth ratios, maintain marketing and sales and general and administrative expenses, as defined, relative to net processed sales for each rolling 12-month period below a certain percentage and maintain certain interest coverage ratios for each rolling 12 month period. The maximum percentage related to costs and expenses referred to above has been exceeded in the last seven quarters. This does not constitute an Event of Default as defined under this loan agreement, or this line of credit; however, it gives the lender the option to suspend advances to LHC. The lender has not elected to exercise this option, but has continued to make regular advances and has verbally informed LHC that it intends to continue such advances. The maximum loan-to-value ratio referred to above was exceeded in the last five quarters. As a result, the Lender has the right to declare an Event of Default as defined under this loan agreement, or this line of credit. Default of the loan-to-value ratio, under this line, can only cause the lender to cease advances to the Company. The Company has agreed with the Lender that it will, as part of its financial restructuring, (1) not request additional advances pursuant to the terms of the line of credit; (2) effect a payment of the complete line on the earlier of the completion of the Company's financial restructuring or December 31, 2002; and (3) maintain an agreement to loan-to-value ratio with the existing line. As of July 31, 2002, the Company was out of compliance with the loan-to-value ratios by approximately $6,000,000. While the Company believes that the financial restructuring initiated by management will result in repayment or satisfactory restructuring of this indebtedness, there can be no assurance such financial restructuring will be completed to the satisfaction of the lender. The interest coverage requirement referred to above has been exceeded according to the terms of two lines of credit. As a result, the lenders have the right to declare an Event of Default as defined under these agreements. Generally, default of the interest coverage ration, under these lines, can only cause the lenders to cease advances to the Company and make the obligation due and payable upon expiration of the required notice period. These covenants have been, from time to time, exceeded in the past with the various lenders forbearing from exercising any of these remedies. Management expects, but cannot assure this practice to continue. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The business of the Company is marketing, financing and sale of vacation ownership interests, retail lots and land parcels; servicing receivables related to the purchase money financing of vacation ownership and land sales; managing vacation ownership resorts; providing sales and marketing services to other vacation ownership resort owners or owners of leisure properties and managing travel services focused on the leisure consumer. LHC provides financing to purchasers of its vacation ownership interests and land. This financing is generally evidenced by notes secured by deeds of trust and mortgages. These notes receivable are payable over a period up to twelve years and bear interest at rates ranging from 12.5 percent to 15.5 percent. Revenue from sales of 13 vacation ownership interests and land is recognized after the requisite rescission period has expired and at such time as the purchaser has paid at least 10 percent of the sales price for vacation ownership interests and 20 percent of the sales price for land parcels. Land sales typically meet these requirements within three to ten months of closing and sales of vacation ownership interests typically meet these requirements at the time of sale. The sale price is recorded as revenue and the allocated cost related to such net revenue is recorded as expense in the period that revenue is recognized. When revenue related to land sales is recognized, the portion of the sales price attributable to uncompleted required improvements, if any, is deferred. Notes receivable with payment delinquencies of 90 days or more have been considered in determining the allowance for cancellations. Cancellations occur when the note receivable is determined to be uncollectable, and the related collateral, if any, has been recovered or is in the process of being recovered. Cancellation of a note receivable in the quarter the related sales revenue is recognized is accounted for as a reversal of the revenue with an adjustment to gross sales. Cancellation of a note receivable subsequent to the quarter the revenue was recognized is charged to the allowance for cancellations. The Company generally sells its notes receivable at par value. When the Company sells notes receivable, it retains certain participation in the cash flows of the notes receivable sold and generally retains the associated servicing rights. The sales are generally subject to limited recourse provisions as provided in the respective notes receivable sales agreements. Under these agreements, the Company is generally obligated to replace or repurchase accounts that become 60 to 90 days delinquent or are otherwise subject to replacement or repurchase in either cash or receivables. Reserve for notes receivable sold with recourse represents the Company's estimate of losses to be incurred in connection with the recourse provisions of the sales agreements and is shown separately as a liability in the Company's Balance Sheet. Gain on sale of receivables depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of the transfer. To obtain fair values on the retained interests (both at the point of the related receivable sale and periodically thereafter), the Company generally estimates fair value based on the present value of future expected cash flows estimated using management's best estimates of certain key assumptions including; default dates, rates of prepayment, loss reserve rates and discount rates commensurate with the risks involved. The Company's retained interests in receivables sold are carried at fair value as either derivatives or available-for-sale investments. Unrealized holding gains or losses on the retained interests are included in earnings for those transactions structured so that the Company, through its retained interests, receives fixed interest amounts and pays the buyer variable amounts based on a floating rate index, as the resulting financial interest meets the definition of a derivative in accordance with Statement of Financial Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities." Unrealized holding gains, if any, on retained interests in receivables sold not meeting the definition of a derivative would be included in shareholders' equity, net of income taxes. Losses in such retained interests are reflected in earnings. 14 Provision for cancellations relating to notes receivable is recorded as expense in amounts sufficient to maintain the allowance at a level considered adequate to provide for anticipated losses resulting from customers' failure to fulfill their obligations under the terms of their notes receivable. LHC records provision for cancellations at the time revenue is recognized, based on historical experience and current economic factors. The related allowance for cancellations represents LHC's estimate of the amount of the future credit losses to be incurred over the lives of the notes receivable. The allowance for cancellations is adjusted for actual cancellations experienced, including cancellations related to previously sold notes receivable which were reacquired pursuant to the recourse obligations discussed herein. Such allowance is also reduced to establish the separate liability for reserve for notes receivable sold with recourse. LHC's judgment in determining the adequacy of this allowance is based upon a periodic review of its portfolio of notes receivable. These reviews take into consideration changes in the nature and level of the portfolio, historical cancellation experience, current economic conditions that may affect the purchasers' ability to pay, changes in collateral values, estimated value of inventory that may be reacquired and overall portfolio quality. Changes in the allowance as a result of such reviews are included in the provision for cancellations. Fees for servicing notes receivable originated by LHC and sold with servicing rights retained are generally based on a stipulated percentage of the outstanding principal balance of such notes receivable and are recognized when earned. Costs to service notes receivable are recorded to expense as incurred. Interest earned on notes receivable sold, less amounts paid to investors, is reported as financial income. Retained interests in receivables sold are amortized systematically to reduce notes receivable servicing income to an amount representing normal servicing income and the present value discount. Late charges and other miscellaneous income are recognized when collected. Interest income represents the interest received on loans held in LHC's portfolio, the accretion of the discount on the retained interests in receivables sold and interest on cash funds. Total costs and expenses consist primarily of marketing and sales expenses, general and administrative expenses, direct costs of sales of vacation ownership interests and land, depreciation and interest expense. Marketing and sales costs directly attributable to unrecognized sales are accounted for as deferred selling costs until such time as the sale is recognized. Land sales as of June 30, 2002, exclude $12.7 million of sales not yet recognized under generally accepted accounting principles because the requisite payment amounts have not yet been received or the respective rescission periods have not yet expired. Of the $12.7 million unrecognized land sales, the Company estimates that it will ultimately recognize $10.8 million of revenues, which would be reduced by a related provision for cancellations of $1.6 million, estimated deferred selling costs of $3.0 million and cost of sales of $1.7 million, for an estimated net profit of $4.5 million. Results of Operations Three Months Ended June 30, 2002 Compared to Three Months Ended May 31, 2001 15 Total revenues for the Company decreased 31.2 percent or $9.3 million to $20.8 million during the three months ended June 30, 2002 from $29.7 million during the three months ended May 31, 2001. The net decrease was primarily due to: (1) a lack of land inventory; (2) a lack of certain vacation ownership resort inventory; (3) initiation of planned changes in the Company's sales and marketing practices; (4) the reorganization of the Company's management team and operations and (5) the financial restructuring. The result of these primary corporate changes was a net decrease of $8.7 million in vacation ownership interest and land sales from $23.8 million during the three months ended May 31, 2001 to $15.1 million during the three months ended June 30, 2002, and a decrease of $710,000 in financial income to $134,000 for the three months ended June 30, 2002 from $844,000 for the three months ended May 31, 2001. This was partially offset by an increase of $208,000 in interest income from $4.0 million for the three months ended May 31, 2001 to $4.2 million for the three months ended June 30, 2002. Gross sales of vacation ownership interests decreased to $8.4 million during the three months ended June 30, 2002 from $17.3 million during the three months ended May 31, 2001, a decrease of 51.4 percent. The provision for cancellations increased to 15 percent of gross sales of vacation ownership interest for the three months ended June 30, 2002 from 13.3 percent for the three months ended May 31, 2001, primarily due to a downward adjustment based on the results of the customary quarterly review of the allowance adequacy during the three months ended June 31, 2002. This adjustment was based on the economic slow down since May 2001. Gross sales of land increased to $6.6 million during the three months ended June 30, 2002 from $6.4 million during the three months ended May 31, 2001, a increase of 3.4 percent. The provision for cancellations represented 15 percent and 8 percent, respectively, of gross sales of land for the three months ended June 30, 2002 and May 31, 2001. Interest income increased to $4.2 million during the three months ended June 30, 2002 from $4.0 million for the three months ended May 31, 2001, an increase of five percent, primarily due to an increase in notes receivable during the period and a change in the Company's collection policies instituted during the quarter. Financial income decreased to $134,000 for the three months ended June 30, 2002 from $844,000 for the three months ended May 31, 2001, a decrease of 84.1 percent. The decrease is directly related to an increase in the obligation to replace delinquent accounts. This increase reduces the principal balance on the sold portfolio which in turn reduces the amount of financial income the Company would record from the sold portfolio. This decrease was partially offset by an increase in the spread on those sold portfolios with a variable, pass-through interest rate. The interest rate decreased 150 basis points in the current quarter from 8.5 percent to 7.0 percent, which typically would increase the amount of financial income the Company would recognize. 16 Total costs and expenses for the Company decreased to $24.2 million for the three months ended June 30, 2002 from $28.7 million for the three months ended May 31, 2001, a decrease of $4.5 million or 15.6 percent. The decrease resulted primarily from the net effect of a decrease in direct costs of vacation ownership interest sales to $1.3 million from $3.1 million, a decrease of 56.3 percent, and a decrease to $9.6 million from $13.3 million in marketing and sales expense, a decrease of 27.7 percent. As there are significant variable cost elements in marketing and sales, the percentage of marketing and sales expenses to gross sales generally remain relatively constant in periods of lower sales. Within the context of changes in the tourism industry resulting from the September 11, 2001 terrorist attacks and its attendant economic downturn, the Company believes that the decline in sales volume is directly related to its lack of inventory during the period, its change in sales and marketing practices and its financial restructuring, but is unable to quantify the sales volume decline that is directly attributable to such events. A pretax loss of $3.5 million was recorded during the three months ended June 30, 2002 compared to pretax income of $1.0 million earned during the three months ended May 31, 2001. Income tax benefit of $67,000 was recorded for the three month period ended June 30, 2002, compared to an income tax benefit of $76,000 recorded for the three month period ended May 31, 2001. The income tax calculation for the period ended May 31, 2001 was reduced due to the use of net operating loss carry forwards, which were previously fully reserved and were used to offset income on a consolidated basis. Income taxes are recorded based on an ongoing review of related facts and circumstances. Net loss applicable to common stock amounted to $3.6 million during the three month period ended June 30, 2002 compared to net income applicable to common stock of $1.0 million during the three month period ended May 31, 2001, primarily due to the foregoing. Six Months Ended June 30, 2002 Compared to Six Months Ended May 31, 2001 Total revenues for the Company decreased 23.6 percent, or $12.7 million, to $41.7 million during the six months ended June 30, 2002 from $53.9 million during the six months ended May 31, 2001. The decrease was primarily due to a decrease in vacation ownership and land sales from $42.7 million during the six months ended May 31, 2001 to $30.5 million during the six months ended June 30, 2002, (vacation ownership sales decreased by $13.4 million and land sales increased by $1.2 million), an increase in interest income to $8.2 million during the six months ended June 30, 2002, from $7.5 million during the six months ended May 31, 2001, and a gain on sale of other assets of $486,000 during the six months ended June 30, 2002. The decrease in vacation ownership and land sales was primarily due to: (1) a lack of land inventory; (2) a lack of certain vacation ownership resort inventory; (3) a change in the sales and marketing practices; (4) the reorganization of the Company's management team and operations and (5) the financial restructuring. The Company previously purchased a vacation ownership complex consisting of several buildings in Orlando, Florida. The portions of the complex that required renovation were renovated and converted into inventory in April of 2002. The remaining portions of the complex requiring renovation will be converted into inventory upon their completion. 17 The Company has experienced a lack of two-bedroom resort inventory during the period and, while management is taking steps to acquire and build new two-bedroom inventory, it anticipates having this deficiency for the remainder of the fiscal year. There can be no assurance that Management will be able to complete the acquisition or development of this type of inventory. The Company has also had a limited land inventory that directly affected the operations during the current quarter. Management has entered into agreements to acquire sufficient inventory in the future. Management expects the land inventory to be available for sale in the fourth quarter of 2002. Gross sales of vacation ownership interests decreased to $17.6 million during the six months ended June 30, 2002 from $30.9 million during the six months ended May 31, 2001, a decrease of 43.2 percent. The provision for cancellations increased to 15 percent of gross sales of vacation ownership interests for the six months ended June 30, 2002 from 13.25 percent for the six months ended May 31, 2001, primarily due to a downward adjustment based on the results of the customary quarterly review of the allowance adequacy during the three months ended June 31, 2002. This adjustment was based on the economic slow down since May 2001. Gross sales of land increased to $13.0 million during the six months ended June 30, 2002 from $11.7 million during the six months ended May 31, 2001, an increase of 10.4 percent. The provision for cancellations increased to 15 percent of gross land sales for the six months ended June 30, 2002 from 8 percent for the six months ended May 31, 2001, primarily due to a downward adjustment based on the results of the customary quarterly review of the allowance adequacy during the six months ended June 30, 2002. This adjustment was based on the economic slow down since May 2001. Interest income increased to $8.2 million for the six months ended June 30, 2002 from $7.5 million for the six months ended May 31, 2001, an increase of 9.2 percent, primarily due to increased notes receivable for the current period. Financial income decreased to $326,000 for the six months ended June 30, 2002 from $1.7 million for the six months ended May 31, 2001, a decrease of 80.7 percent. The decrease is directly related to an increase in the obligation to replace delinquent accounts. This increase reduces the principal balance on the sold portfolio which in turn reduces the amount of financial income the Company would record from the sold portfolio. This decrease was partially offset by an increase in the spread on those sold portfolios with variable, pass-through interest rates. The interest rate decreased 150 basis points in the current quarter from 8.5 percent to 7.0 percent, which typically would increase the amount of financial income the Company would recognize. 18 Total costs and expenses for the Company decreased to $47.6 million for the six months ended June 30, 2002 from $52.6 million for the six months ended May 31, 2001, a decrease of $5.0 million or 9.5 percent. The decrease resulted primarily from a decrease in direct costs of vacation ownership sales to $2.8 million from $5.5 million, a decrease of 48.9 percent; a decrease in marketing and sales expenses to $18.7 million from $24.3 million, a decrease of $5.9 million or 24.2 percent; and, an increase in general and administrative expenses to $10.5 million from $8.6 million, an increase of $1.9 million or 22.4 percent. The decrease in direct costs of vacation ownership sales is attributable to lower net vacation ownership sales during the six months ended June 30, 2002 compared to the six month period ended May 31, 2001. As a percentage of gross sales of vacation ownership interests and land, marketing and sales expenses related thereto increased to 60.3 percent for the six months ended June 30, 2002 from 57.0 percent for the six months ended May 31, 2001. The increase in marketing and sales expense is due primarily to the initiation of planned changes in the sales and marketing department, new sales offices and general increases related to a competitive sales environment. Sales prices of vacation ownership interests are typically lower than those of land, while selling costs per sale, other than commissions, are approximately the same in amount for vacation ownership interests and land; accordingly, the Company generally realizes lower profit margins from sales of vacation ownership interests than from sales of land. The increase in general and administrative expenses is primarily due to: an increase in payroll, professional fees, and insurance; an increase in supplies, rent, and property taxes; the inclusion of the rent expense related to the sale and leaseback of the two office buildings in 2001, the expense for which was formerly reported in Interest and Depreciation expense; an increase in recording and filing fees and escrow costs related to the increased land sales volume; and, reserves for the Company's guaranty of office and equipment leases related to a previously affiliated company. Pre-tax loss of $6.9 million was earned during the six months ended June 30, 2002 compared to pre-tax income of $1.3 million during the six months ended May 31, 2001. An income tax benefit of $884,000 was recorded for the six months ended June 30, 2002 compared to an income tax benefit of $112,000 recorded during the six months ended May 31, 2001. The income tax calculation for the period ended May 31, 2001 was reduced due to the use of net operating loss carry forwards, which were previously fully reserved and were used to offset income on a consolidated basis. Income taxes are recorded, and the liability is adjusted, based on an ongoing review of related facts and circumstances. Net loss applicable to common stock was $5.1 million during the six months ended June 30, 2002 compared to net income applicable to common stock of $1.4 million during the six months ended May 31, 2001, primarily due to the foregoing. Liquidity and Capital Resources The following discussion relates to our financial position at June 30, 2002 and the results of our operations for the period then ended. In January 2002 the Company's new management adopted a business plan of reorganization and restructuring contemplating, among other things, the substantial expansion of our vacation resort business, and the initiation and acquisition of businesses that expand the core business into a travel and leisure entity. (See "Business - - Recent Events" in Form 10-KT for the transition period from September 1, 2001 19 to December 31, 2001 for a discussion of the elements of our business plan.) This change in our business model, as well as the risks and uncertainties inherent in our historical business, are expected to cause our results of operations and the components thereof to change materially in the future. In addition, we will require substantial additional capital in the near term to implement certain elements of our business plan, including the acquisition of a property from Raintree as well as other acquisitions and business expansion. There is no assurance that we will be able to raise the necessary capital in a timely manner and on terms acceptable to us. Any failure to raise the necessary capital may have a material adverse effect on our current operations and future financial results. At June 30, 2002, commitments existed for material capital expenditures consisting of the following: 158 Ida Street, Las Vegas, Nevada $1.3 million At June 30, 2002, LHC had arrangements, as amended for subsequent agreement revisions, with institutional lenders for the financing of receivables in connection with sales of vacation ownership interests and land and the acquisition of vacation ownership properties and land, which provide for lines of credit of up to an aggregate of $167.0 million. Such lines of credit are secured by vacation ownership, land receivables and mortgages. At June 30, 2002, an aggregate of $112.0 million was outstanding under such lines of credit and $55.0 million was available for borrowing (subject to the availability of qualified collateral). Under the terms of these lines of credit, LHC may borrow 65 percent to 90 percent of the balances of the pledged vacation ownership and land receivables. LHC is required to comply with certain covenants under these agreements which, among other things, require LHC to meet certain minimum tangible net worth requirements. The most stringent of such requirements provides that LHC maintains a minimum tangible net worth of $27.5 million. At June 30, 2002, LHC's tangible net worth was $36.0 million. Summarized lines of credit information and accompanying notes relating to these lines of credit outstanding at June 30, 2002, consist of the following: (thousands of dollars)
OUTSTANDING MAXIMUM REVOLVING LENDER JUNE 30, 2002 AMOUNTS EXPIRATION DATE (A) MATURITY DATE (A) INTEREST RATE - -------------- -------------- -------- ------------------- ------------------- -------------------- Finova $ 54,008 $ 65,000 December 31, 2002 1/28/02-12/31/02 Prime + 2.0 - 2.25% Textron 25,208 35,000 December 1, 2002 12/31/02- 12/31/05 Prime + 2.0 - 3.00% GE Capital 25,489 40,000 April 30, 2003 March 30, 2006 LIBOR + 4.0-4.25% HSBC 145 - Inactive February 6, 2006 Prime + 1.0% Capital Source 7,398 27,000 9/11/03- 3/11/05 August 11, 2005 Prime + 2.5% - - -------------- -------- $ 112,248 $167,000 ============== ========
(a) As it has typically done in the past, management expects to extend the Revolving Expiration Date and Maturity Date on similar terms. When the Revolving Expiration Date expires as shown, the loans convert to term loans with maturities as stated or extended. LHC is required to comply with certain financial and non-financial covenants under lines of credit agreements. Among other things, these 20 agreements require LHC to meet certain minimum tangible net worth requirements, maintain certain liabilities to tangible net worth ratios, maintain marketing and sales and general and administrative expenses, as defined, relative to net processed sales for each rolling 12-month period below a certain percentage and maintain certain interest coverage ratios for each rolling 12 month period. The maximum percentage related to costs and expenses referred to above has been exceeded in the last seven quarters. This does not constitute an Event of Default as defined under this loan agreement, or this line of credit; however, it gives the lender the option to suspend advances to LHC. The lender has not elected to exercise this option, but has continued to make regular advances and has verbally informed LHC that it intends to continue such advances. The maximum loan-to-value ratio referred to above was exceeded in the last five quarters. As a result, the Lender has the right to declare an Event of Default as defined under this loan agreement, or this line of credit. Default of the loan-to-value ratio, under this line, can only cause the lender to cease advances to the Company. The Company has agreed with the Lender that it will, as part of its financial restructuring, (1) not request additional advances pursuant to the terms of the line of credit; (2) effect a payment of the complete line on the earlier of the completion of the Company's financial restructuring or December 31, 2002; and (3) maintain an agreement to loan-to-value ratio with the existing line. As of July 31, 2002, the Company was out of compliance with the loan-to-value ratios by approximately $6,000,000. While the Company believes that the financial restructuring initiated by management will result in repayment or satisfactory restructuring of this indebtedness, there can be no assurance such financial restructuring will be completed to the satisfaction of the lender. The interest coverage requirement referred to above has been exceeded according to the terms of two lines of credit. As a result, the lenders have the right to declare an Event of Default as defined under these agreements. Generally, default of the interest coverage ration, under these lines, can only cause the lenders to cease advances to the Company and make the obligation due and payable upon expiration of the required notice period. These covenants have been, from time to time, exceeded in the past with the various lenders forbearing from exercising any of these remedies. Management expects, but cannot assure this practice to continue. Scheduled maturities of the Company's notes and contracts payable are as follows: Years Ending December 31, (thousands of dollars) - ---------------------------- 2002 $ 8,619 2003 6,089 2004 14,058 2005 15,757 2006 28,995 Thereafter 58,012 ---------- $ 131,530 ========== The components of the Company's debt, including lines of credit consist of the following: 21
(thousands of dollars) June 30, December 31, 2002 2001 ------------ ------------- Notes collateralized by receivables $ 102,273 $ 106,599 Mortgages collateralized by real estate properties 14,454 14,781 Installment contracts and other notes payable 7,295 10,150 Investor notes 2,862 - ------------ ------------- Total $ 126,884 $ 131,530 ============ =============
A schedule of the cash shortfall arising from recognized and unrecognized sales for the periods indicated is set forth below:
Six Months Ended (thousands of dollars) June 30, May 31, --------------------- 2002 2001 -------- -------- Marketing and selling expenses attributable to recognized and unrecognized sales $17,877 $23,907 Less: Down payments (4,833) (6,305) -------- -------- Cash shortfall $13,044 $17,602 ======== ========
The Company sells notes receivable subject to recourse provisions as contained in each agreement. At June 30, 2002, total sold notes receivable was $47.0 million. The Company is obligated under these agreements to replace or repurchase accounts that become over 90 days delinquent or are otherwise subject to replacement or repurchase in either cash or receivables generally at the option of the purchaser. The repurchase provisions provide for substitution of receivables as recourse for $38.5 million of sold notes receivable and cash payments for repurchases relating to $3.3 million of sold notes receivable at June 30, 2002. The discounted amounts of the recourse obligations on such notes receivable were $4.2 million and $3.6 million at June 30, 2002 and December 31, 2001, respectively. LHC continually reviews the adequacy of this liability. These reviews take into consideration changes in the nature and level of the portfolio, current and future economic conditions which may affect the obligors' ability to pay, changes in collateral values, estimated value of inventory that may be reacquired and overall portfolio quality. 22 Financial Condition The Company provides allowance for cancellations in amounts which, in the Company's judgment, will be adequate to absorb losses on notes receivable that may become uncollectible. The Company's judgment in determining the adequacy of this allowance is based on its continual review of its portfolio which utilizes historical experience and current economic factors. These reviews take into consideration changes in the nature and level of the portfolio, historical rates, collateral values, current and future economic conditions which may affect the obligors' ability to pay, collateral values and overall portfolio quality. Changes in the aggregate of the allowance for cancellations, including the reserve for notes receivable sold with recourse for the six months ended June 30, 2002 consisted of the following: (thousands of dollars) Balance at December 31, 2001 $ 14,557 Provision for cancellations 3,224 Amounts charged to allowance for cancellations, net (4,374) ---------- 13,407 Reserve for notes sold with recourse - ----------- Allowance for cancellations $ 13,407 =========== June 30, 2002 Compared to December 31, 2001 Cash and cash equivalents including increased to $9.1 million at June 30, 2002 from $1.7 million at December 31, 2001. Notes receivable, net, increased 4.7 percent to $114.5 million at June 30, 2002 from $109.3 million at December 31, 2001. Land and improvements inventory and vacation ownership interest held for sale increased to $22.3 million at June 30, 2002 from $20.6 million at December 31, 2001.
(thousands of dollars) June 30, December 31, 2002 2001 ------- ------- Vacation ownership interests $17,790 $13,771 Vacation ownership interest in development 1,994 4,094 ------- ------- Total $19,784 $17,865 ======= =======
Notes and contracts payable decreased 3.5 percent to $126.9 million at June 30, 2002 from $131.5 million at December 31, 2001. Stockholders' equity increased 14 percent to $24.4 million at June 30, 2002 from $21.4 million at December 31, 2001. Item 3. Quantitative and Qualitative Disclosures About Market Risk There was no material change for the quarter ended June 30, 2002 in the information about the Company's "Quantitative and Qualitative Disclosures About Market Risk" as disclosed in its Transition Report on Form 10-KT for the transition period from September 1, 2001 to December 31, 2001. 23 PART II OTHER INFORMATION Item 1. Legal Proceedings See note 7 commitments and contingencies for discussion of legal proceedings. Item 2. Changes in Securities During the three months ended June 30, 2002, the Company sold approximately 1.2 million additional shares of common stock for proceeds of approximately $8.0 million. Included with each of these shares, the purchasers received one warrant for each share of common stock purchased. These warrants entitle the holder to purchase one share of common stock at purchase prices ranging from $4.00 to $6.00. The warrants expire one year from the date of issuance. Under the subscription agreements, the Company has the right to demand exercise, at its discretion, if the Company's common stock trades at $7.00 or more for ten consecutive trading days at any time during the term of the warrants. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
10.246 - Lease between Corporate Ctr. IV, LLC, as Landlord, and Mego Financial Corp as Tenant in 2285 Corporate Circle, Henderson Nevada, dated May __, 2002. 10.247 - Lease between Corporate Ctr. IV, LLC, as Landlord, and Mego Financial Corp as Tenant in 2280 Corporate Circle, Henderson Nevada, dated May__, 2002. 10.248 - Amendment to Guarantee and Subordination Agreement between Mego Financial Corp. and Finova Capital Corporation dated May 24, 2002. 10.249 - Tenth Amendment to Forbearance Agreement and Amendment No. 15 to Second Amended and Restated and Consolidated Loan and Security Agreement among Finova Capital Corporation, Leisure Homes Corporation, and Mego Financial Corp. dated May 24, 2002. 10.250 - Amendment No. 5 to Promissory Note (Biloxi Property) between Leisure Homes Corporation and Finova Capital Corporation, dated May 24, 2002. 10.251 - Amendment number 1 to Employment Contract for Jon Joseph dated May 23, 2002. 10.252 - Certification by Floyd W. Kephart, CEO 24 10.253 - Certification by Robert S. Understein, CFO 10.254 - Certification by Chris D. Whetman, CAO
(b) Reports on Form 8-K None. 25 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEGO FINANCIAL CORP. By: /s/ Robert S. Understein Robert S. Understein Chief Financial Officer Date: August 13, 2002 26 EX-10.246 3 doc2.txt EXHIBIT 10.246 OFFICE FULL SERVICE GROSS L E A S E (2285 CORPORATE CIRCLE) MEGO FINANCIAL CORP. THIS LEASE is made and entered into this 31st day of May, 2002, by and between CORPORATE CTR. IV, LLC, a Nevada limited liability company (herein referred to as "Landlord") and MEGO FINANCIAL CORP., a New York corporation (herein referred to as "Tenant"). SECTION 1 DEFINITIONS ----------- Definitions. The following definitions shall pertain hereto: 0.0.1 "Additional Rent" shall mean charges payable by Tenant other than Base Rent. See Section 3.3. 0.0.2 "Adjustment Month" shall mean the thirteenth (13th) month and each successive twelve (12) month period thereafter throughout the Lease Term commencing with the first full calendar month following the Commencement Date (i.e. 25th, 37th, 49th month, etc.), and each successive twelve (12) month period throughout any applicable Extension Term(s) (i.e. 13th, 25th, 37th month, etc.). 0.0.3 "Aggregate Monthly Rent" shall mean Base Rent and all Additional Rent. 0.0.4 "Allowance" Allowance shall mean an amount equal to Thirty and 00/100 Dollars ($30.00) per square foot of Usable Area, as defined below, which Allowance may be increased by an amount equal to three (3) months of Base Rent, calculated at Two and 10/100 Dollars ($2.10) per month for each square foot of Usable Area of the Premises (the "Additional Allowance"), as more fully elaborated in Exhibit C, "Landlord's Work Letter," attached hereto and incorporated herein. In the event that Tenant elects to increase the Allowance by all or a portion of the Additional Allowance, the amount of said Additional Allowance utilized by Tenant to increase the Allowance shall be deducted from the rental abatement provided to Tenant initially for month three (3) and then month two (2), and if Tenant utilizes the aggregate sum of the three (3) months of rental abatement then month one (1), as more fully set forth in Section 3.1. See Exhibit C. 0.0.5 "Base Rent" shall mean the sum of Two and 10/100 Dollars ($2.10) per month for each square foot of Rentable Area of the Premises, which is equal to the sum of Four Hundred Thirty Thousand Nine Hundred Ninety-Five and 60/100 Dollars ($430,995.60) per annum, as may be adjusted pursuant to Section 2.1.1 hereof. The Base Rent shall be due and owing as of the Commencement Date. See Section 3.1. 0.0.6 "Base Year" shall mean the calendar year 2003. 0.0.7 "Broker" Broker shall refer to CB Richard Ellis and Lee & Associates. See Section 34. 0.0.8 "Building" Building shall mean the structure and all of its improvements constructed upon the Property, which structure has a business address of 2285 Corporate Circle, Henderson, Nevada 89074. The total Rentable Area for the Building is anticipated to be approximately 44,109 square feet. 0.0.9 "Commencement Date" shall refer to the Occupancy Date, subject to Section 3.1. 0.0.10 "Common Areas" shall mean those areas as more fully defined in Section 9. 0.0.11 "Default Interest Rate" shall mean the lesser of eighteen percent (18%) per annum or the maximum interest rate permitted by Nevada law. 0.0.12 "Landlord's Work" shall refer to the improvements to be installed by Landlord pursuant to the Landlord's Work Letter, attached hereto and incorporated herein. See Exhibit C. 0.0.13 "Landlord's Share" of Property Operating Costs shall be defined as that amount equal to one hundred percent (100%) of the Property Operating Costs during the Base Year and such amount shall be borne by Landlord during each Lease Year throughout the Term of this Lease. 0.0.14 "Lease Year" shall mean a twelve (12) month calendar year, except that in the event that the Commencement Date for the Premises occurs on a date other than January 1, the first Lease Year hereunder shall be that fractional part of the calendar year from the Commencement Date to December 31 of the same year, and the final Lease Year shall be that fractional part of the calendar year from January 1 to the expiration date of the Lease. 0.0.15 "Mortgagee" shall mean the holder of a lien of first priority on the Property. 0.0.16 "Occupancy Date" shall be deemed to refer to the fifth (5th) business day following Landlord's written notification to Tenant, that Landlord's Work has been Substantially Completed, as defined in Section 1.1.21 below, and as more fully elaborated in Exhibit C, and the Premises is available and suitable for Tenant's move-in and occupancy. Such Occupancy Date is, at the outset of this Lease, anticipated to be on or about September 1, 2002, subject to Force Majeure, as that term is defined in Section ----- --------- 25 below, encountered by Landlord and subject to Tenant Delays, as defined in Exhibit C. If for any reason Landlord cannot deliver possession of the Premises to Tenant on or before the Occupancy Date, this Lease will not be void or voidable, and Landlord will not be liable to Tenant for any resultant loss or damage, except as otherwise provided herein. 0.0.17 "Premises" Premises shall mean that suite or space as indicated by cross hatching on the Site Plan attached hereto as Exhibit A-4 and Exhibit A-5, incorporated herein by reference, and commonly referred to as Suite 200 located within the Building. 0.0.18 "Property" Property shall mean the real property upon which the Building is located, as more legally described in Exhibit A-1, and depicted on Exhibit A-2, attached hereto and incorporated herein, and all easements, rights, rights-of-way, and licenses appurtenant thereto. The Property is located in a business center commonly referred to as "Green Valley Corporate Center." 0.0.19 "Property Operating Costs" shall mean those costs and expenses as further elaborated in Section 3.3.3. 0.0.20 "Rentable Area" shall be determined pursuant to measurement standards for rentable area promulgated by BOMA and designated with the Standard Building Owners and Manager's Association ANSI Z65.1-1980 (reaffirmed 1996) (the "BOMA Standard"). It is anticipated that the Rentable Area for the Premises shall be approximately 17,103 square feet. The Rentable Area of the Premises shall be noted in a memorandum, in a form substantially similar to Exhibit B, attached hereto, and same, after execution shall be incorporated herein by reference. 0.0.21 "Substantially Complete or Substantial Completion" shall mean the (i) completion of the Tenant Improvements, as defined below, in accordance with the Final Plans, as defined in Section 2.3 of the Landlord's Work Letter, subject only to the completion of minor items that do not materially interfere with Tenant's occupancy of the Premises ("punch list items"); and (ii) issuance by the City of Henderson of its conditional or final certificate of occupancy permitting legal occupation of the Premises by Tenant. 0.0.22 "Tenant Improvements" shall refer to those improvements to be made, installed or otherwise constructed by the Landlord, as more fully elaborated in Landlord's Work Letter. See Exhibit C. 0.0.23 "Tenant's Pro-Rata Portion" shall mean a percentage based upon a fraction, the numerator of which is the Rentable Area of the Premises, and the denominator of which is the total number of Rentable Area of the Building. Tenant's Pro-Rata Portion is anticipated to be approximately 38.7744%, subject to the final confirmation of the Rentable Area for the Premises as described in Section 2.1.1. 0.0.24 "Tenant's Share" of Property Operating Costs shall be calculated as the product of Tenant's Pro-Rata Portion and the Property Operating Costs. See Section 3.3.1. 0.0.25 "Term" shall mean the period of time commencing with the Commencement Date and continuing for ninety-nine (99) months following the first day of the first calendar month following the Commencement Date. At such time as the Commencement Date shall have been established, Landlord and Tenant shall execute a memorandum confirming said date, as set forth in Exhibit B, attached hereto, and the same, after execution, shall be deemed incorporated herein by reference; provided, however, that the term of Tenant's and Landlord's rights and obligations hereunder may be extended pursuant to Section 39 below. 0.0.26 "Usable Area" shall be determined pursuant to measurement standards for usable area promulgated by BOMA and designated with the BOMA Standard (as defined in Section 1.1.20 above) and as more specifically set forth in Exhibit B. It is anticipated that the Usable Area for the Premises shall be approximately 14,957 square feet. The Usable Area of the Premises shall be noted in a memorandum in a form substantially similar to Exhibit B, attached hereto, and same, after execution shall be incorporated herein by reference. 0.0.27 "Utilities" shall mean those facilities provided to the Premises and Common Areas of the Building and/or Property, such as water, gas, heat, electricity, power, refuse disposal, environmental waste disposal, air conditioning, telephone service, sewer service, and cable television, if available. SECTION 2 PREMISES ------------- 1.2 Premises. Upon the conditions, limitations, covenants and agreements herein set forth, Landlord hereby leases to Tenant, and Tenant hereby accepts, hires and leases from Landlord, the Premises. Subject to the other provisions of this Lease, Landlord shall have the right, in its sole and absolute discretion, to modify the Property and/or the Building from time to time, but in no event shall such modification substantially interfere with Tenant's use of the Premises, as such use is more fully elaborated in Section 7 below, nor will it materially reduce the Rentable or Usable Area of the Premises. 0.0.1 Rental Area Within a reasonable period following the Occupancy Date, the Rentable Area of the Premises will be confirmed in writing by Landlord's architect and/or licensed designer or space planner following completion of construction of the Premises. Tenant may measure the Premises following the date that the demising walls are established; otherwise, the Rentable Area set forth in Exhibit B shall be Landlord's final measurement of the Premises. Landlord's final measurement shall be binding upon Tenant, unless Tenant notifies Landlord of any actual error therein within ten (10) days after written notice thereof. Landlord shall notify Tenant of any adjustment to Rentable Area within thirty (30) days of its receipt of Tenant's notice of any actual error. Landlord's determination of the Rentable Area shall be binding. Tenant's rental obligation set forth herein shall be subject to the final confirmation of the Rentable Area for the Premises. 0.0.2 Landlord's Reservations. Landlord reserves to itself the use of the roof, exterior walls and the area above and below the Premises (other than roll-up doors and exterior doorways), together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements now or in the future leading through the Premises and which serve other parts of the Property. 1.3 Declaration. The Green Valley Corporate Center development is subject to that certain Declaration of Covenants, Conditions and Restrictions, recorded on January 25, 1996, in Book 960125, as Document No. 01411, in the Office of the Recorder of Clark County, Nevada, and any amendments or supplements thereto (the "Declaration"). The Declaration is enforced and implemented in part by the Green Page -3- Valley Corporate Center Commercial Association, Inc. (the "Association"). SECTION 3 BASE RENT ----------- 1.4 Base Rent. The Base Rent for each Lease Year or portion thereof, together with the estimated Additional Rent, pursuant to Section 3.3. below, shall be due and payable in advance, in legal tender of the United States of America, in twelve (12) equal installments, one such installment being due on the first day of each calendar month during the Term of the Lease and any applicable extensions or renewals thereof. Tenant agrees to pay such Base Rent and Additional Rent to Landlord monthly, in advance, without demand. If the Lease Term commences on a day other than the first day of a month or terminates other than the last day of a month, then the installments of Base Rent and Additional Rent for such month(s) shall be prorated, based upon the number of days in such month. Provided Tenant is in full compliance with the terms and conditions of this Lease, Aggregate Monthly Rent shall be abated for the first three (3) months of the Lease Term, subject to Tenant's election to increase the Allowance. 0.0.1 First Month's Rental Obligation. Concurrent with the execution of this Lease, Tenant shall deliver to Landlord the sum of Thirty-Five Thousand Nine Hundred Sixteen and 30/100 Dollars ($35,916.30), which amount shall be applied to the Tenant's first month of rental obligation due hereunder (see Sections 1.1.4 and 3.1 above), and which sum may be subject to adjustment pursuant to Section 2.1.1. 1.5 Base Rent Increases. The Base Rent shall be increased by three percent (3%) commencing on the first day of each Adjustment Month. 1.6 Additional Rent. In addition to Base Rent, Tenant shall pay to Landlord, from the Commencement Date throughout the Term of this Lease, at the time and manner set forth herein, the following Additional Rent: 0.0.1 Tenant's Share of Property Operating Costs. Tenant shall pay to Landlord its Pro-Rata Share of Property Operating Costs to the extent that the Property Operating Costs, as that term is more fully defined below, exceed Landlord's Share. Following the Base Year, Landlord shall estimate each Lease Year's Property Operating Costs and shall notify Tenant, in writing, within one hundred and twenty (120) days after the beginning of each successive Lease Year of Tenant's Share (net of Landlord's Share), applying the current Lease Year's estimated Property Operating Costs ("Estimated Tenant's Share"). The Estimated Tenant's Share shall be pro-rated on a monthly basis for the applicable Lease Year and such pro-rated amount shall be remitted by Tenant, in advance, commencing on the Commencement Date and continuing on the first day of each month thereafter, without further demand or any deduction or setoff. Until such time as Landlord notifies Tenant of the current Lease Year's Estimated Tenant's Share, Tenant shall continue to pay the Estimated Tenant's Share for the previous Lease Year. 0.0.2 Notification of Property Operating Costs. Following the end of each Lease Year, Landlord will ascertain the actual Property Operating Costs for the current Lease Year then ending, and shall compute the difference thereof from the Estimated Tenant's Share paid by Tenant for the applicable Lease Year. Landlord shall notify Tenant, in writing, within one hundred and twenty (120) days of the end of each Lease Year of such difference, if any (the "Property Operating Cost Statement"). In no event, however, shall failure to deliver the Property Operating Cost Statement within said one hundred and twenty (120) day period prevent Landlord from collecting the difference, if any, from Tenant. Tenant shall pay to Landlord, within thirty (30) days following receipt of the Property Operating Cost Statement, the amount, if any, due to Landlord (inclusive of the last year Page -4- of the Term). In the event that the Property Operating Cost Statement reflects an amount due to Tenant, then same shall be credited and applied to the next monthly payment of Base Rent and Additional Rent, until such amount has been fully exhausted, provided that in the last year of the Term any excess shall be refunded to Tenant within thirty (30) days following Tenant's receipt of the Property Operating Cost Statement, or any shortfall shall be paid by Tenant within thirty (30) days of its receipt of the Property Operating Cost Statement. In no event shall Landlord or Tenant be entitled to receive interest on any amounts due to the respective party as shown on the Property Operating Cost Statement. The obligation of Tenant to pay Landlord Tenant's Pro-Rata Portion of the Property Operating Costs, or Landlord's obligation to refund any excess paid by Tenant shall survive the early termination or expiration of this Lease. 0.0.3 Property Operating Costs. The term "Property Operating Costs" shall mean the total cost and expense incurred, during each Lease Year, in managing, operating, equipping, lighting, repairing, replacing and maintaining the Property, as well as any owners association's common area assessments which are established and which are allocable to the Property as reasonably determined by the Landlord, annualized over a Lease Year. Such operating and maintenance costs shall include all costs and expenses of operating and maintaining such areas and facilities in such manner as Landlord may, from time to time, deem appropriate, and for the best interests of the tenants of the Property, including, without limitation, the following: d. all Impositions, as that term is defined in Section 3.3.5 below; e. all Utilities not separately metered or billed to Tenant, or other tenants, and all other utilities and services provided to the Property; f. all cleaning and janitorial service for the Premises and cleaning on a regular basis for all Common Areas of the Building; g. Landlord's insurance for the Property, including fire and extended coverage, liability, property damage, rent loss, boiler insurance, vandalism, malicious mischief, earthquake insurance, insurance against liability for defamation and claims of false arrest, and such other insurance in such amounts and covering hazards deemed appropriate by Landlord or which Landlord or any Mortgagee deems necessary or prudent; h. the cost (amortized over such period as Landlord reasonably determines, together with interest at twelve percent (12%) on the unamortized balance) of any capital improvements to the Property or equipment replacements made by Landlord after the Commencement Date that are intended to reduce Property Operating Costs, or are required by any laws, which are necessary in order to operate the Property at the same quality level as prior to such replacement; i. costs and expenses of operation, repair and maintenance of all structural portions and components of the Property, including, without limitation, plumbing, communication, common area heating, ventilating and air-conditioning, elevator, and common area electrical and other common Property systems; g. costs of repairs, maintenance, or replacement of paving, curbs, walkways, remarking, directional or other signs, landscaping, drainage, lighting facilities, repair and maintenance of the Common Areas and parking areas, costs and expenses of planting, replanting and replacing flowers, shrubbery and other landscaping, and the cost to Landlord of servicing and maintaining any sprinkler system; h. rental or lease payments paid by Landlord for rented or leased personal property used in the operation or maintenance of the Property; i. management fees not to exceed three percent (3%) of the annual gross revenue of the Building, and administrative fees not to exceed fifteen percent (15%) of the direct Property Operating Costs, for direct labor and overhead for administrative personnel at or below the property manager level allocable to the Premises, Building or Property, which fees shall be payable to Landlord or to any other entity which is managing or administering the Property and/or the Building; j. costs incurred in providing private police protection, roving patrol, or night watchmen (including, but not limited to, uniforms), and fire protection; k. expenses for the rental of music program services and loudspeaker systems (if Page -5- Landlord elects to provide the same), including, but not limited to, furnishing electricity therefor; l. Landlord's share of any charges or contributions made under a recorded covenant or other agreement that relates to the Property and any other property, which are disclosed, in writing, in advance to the Tenant; and m. cost of leasing and operating any signs, the cost of personnel to implement any service described above, to direct traffic and to police the Common Areas. 1.6.1.1 For any period that the occupancy of the Building during the Base Year or any Lease Year is less than ninety-five percent (95%), Property Operating Costs for such Base Year shall be "grossed up" to that amount of Property Operating Costs that, using reasonable projections, would normally be expected to be incurred if the Building were ninety-five percent (95%) occupied during the Base Year; provided, further, that to the extent that for any reason the Building was only in operation for a portion of the Base Year, Property Operating Costs for the Base Year shall be "grossed up" and shall reflect such adjustments for seasonality and otherwise as Landlord deems appropriate to that amount of Property Operating Costs that, using reasonable projections and assumptions, would normally be expected to be incurred if the Building had been in operation during the entire Base Year. With respect to Real Property Taxes included in Property Operating Costs for the Base Year, such amount shall be determined under the assumption that the Building is fully assessed as a completed and occupied unit and if one or more additional buildings are at any time constructed on the parcel of real property that the Building is situated upon, then at the option of Landlord at each instance the amount of the Base Year shall be changed to give effect to restatement of the Property Operating Costs for the Base Year predicated upon recomputation of the Real Property Taxes which were included in Property Operating Costs to be a new amount of Real Property Taxes multiplied by the fraction whose numerator is the total Rentable Area of the Building and whose denominator is the total Rentable Area of all buildings (including the Building) situated upon such parcel. 1.6.1.2 With respect to any Utilities or service mentioned herein which is not separately metered or billed to Tenant, if Landlord determines that Tenant's use of such utility or service is excessive or abnormal such that it is unfair to assess Tenant and other tenants therefor on a pro-rata square footage basis, Landlord shall so notify Tenant. Such written notice shall contain Landlord's estimate of a reasonable amount of the overall cost of such utility or service which should be billed to Tenant. If, within thirty (30) days after Tenant's receipt of such notice, Landlord and Tenant are unable to agree upon a reasonable amount of the overall cost of such utility or service to be paid by Tenant, then, and in such event, Tenant shall cause such utility or service to be separately metered to Tenant or separately contracted-for by Tenant, so that Tenant will pay separately, at Tenant's sole expense, for such utility or service (in which case Landlord shall not thereafter assess Tenant for any amount of such utility or service). The cost of the installation of any separate meter shall be paid by Tenant. Tenant has requested and Landlord will provide certain Additional Service, as defined and more fully elaborated in Section 10.1(c) below. 0.0.4 Property Operating Cost Exclusions. Property Operating Costs shall not include any expenditures by --- Landlord in connection with: n. leasing costs (including Tenant Improvements), fees and leasing commissions; o. legal fees and costs, including costs of litigating with other tenants; p. taxes other than "Impositions," as that term is defined in Section 3.3.5 of this Lease; q. costs and fines assessed against Landlord, due to violation of any other leases within the overall development within which the Premises is situated; r. all costs and expenses associated with capital improvements or additions (except as otherwise provided above) to the Property or the construction of any buildings to be occupied or used primarily for other tenants; Page -6- s. depreciation, amortization and interest payments, except as provided herein, and when required, the item shall be amortized over its reasonably anticipated useful life; t. interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering the Property except in conjunction with a permitted charge hereunder; and u. Landlord's general corporate overhead, general and administrative expenses and profits in connection with goods and services in or to the Property as supplied by Landlord to the extent the same exceeds the costs therefor if rendered by an unaffiliated third party within Clark County, Nevada. 21.0.1 Impositions . For the purpose of this Lease, the term "Impositions" means: v. any real estate taxes, fees, assessments (including, but not limited to, any local improvement district assessments), or other charges assessed against the Property and any improvements thereon; w. all personal property taxes on personal property used in connection with the Property and related structures other than taxes payable by Tenant under Section 12.1 hereof, or payable by any other tenant in the Building; x. any and all taxes, assessments, license fees, and public charges levied, assessed, or imposed, and which become payable during the Term hereof upon all improvements made to the Premises, over and above the Building shell, whether installed by Landlord or Tenant; y. any and all environmental levies or charges now in force affecting the Property or any portion thereof, or which may hereafter become effective, including, but not limited to, parking taxes, levies, or charges, employer parking regulations, and any other parking or vehicular regulations, levies, or charges imposed by any municipal, state or federal agency or authority; z. any other taxes levied or assessed in addition to, as a replacement, alteration, or substitute for, or in lieu of such real or personal property taxes; aa. any and all fees reasonably paid by Landlord in its opposition of tax assessments that are directly related to the Premises and/or the Property, provided, however, that in no event shall such fees exceed the amount of actual savings; bb. any expenses incurred in connection with any requirement subsequent to the date hereof for changes at the Property so as to comply with then existing laws, ordinances or codes imposed by federal, state or local governmental authorities, together with any and all fees reasonably incurred by Landlord in its opposition to any such regulations; and cc. all new and increased assessments, taxes, fees, levies and charges relating to the Property shall be included within the definition of "Impositions" for the purposes of this Lease. 1.7 Expenditures by Landlord. Whenever under any provision of this Lease, Tenant shall be obligated to make any payment or expenditure, or to do any act or thing, or to incur any liability whatsoever, and Tenant fails, refuses or neglects to perform as herein required, Landlord shall be entitled, but shall not be obligated, (i) to make any such payment; (ii) to do any such act or thing; or (iii) to incur any such liability, all on behalf of and at the cost of and for the ac-count of Tenant. In exercising this right, Landlord shall be permitted to charge Tenant the cost thereof plus interest thereon at the rate of fifteen percent (15%) per annum, which charge shall constitute and be collectible as Additional Rent on demand. 1.8 Monetary Payments. All rent and other monies required to be paid by Tenant hereunder shall be paid to Landlord, without deduction or offset, except as otherwise provided herein, in legal tender of the United States of America, Page -7- at 901 N. Green Valley Parkway, Suite 200, Henderson, Nevada 89074, Attention: Property Management, or at such other place as Landlord may, from time to time, designate in writing. Tenant agrees that all monies required to be paid by Tenant pursuant to this Lease, except for the Base Rent, are hereby conclusively deemed to be Additional Rent. SECTION 4 RIGHT OF AUDIT ---------------- 1.9 Right of Audit. In the event of any good faith dispute as to the amount of the Property Operating Costs, as set forth in the Property Operating Cost Statement forwarded to Tenant by Landlord, pursuant to Section 3.3.2, Tenant shall have the right to inspect Landlord's Property Operating Cost records for the Building and the Property at Landlord's offices; provided, however, that Tenant is not in default under the terms of this Lease at the time such request for such inspection is made, no more frequently than once per calendar year, and upon not less than thirty (30) days prior written notice to Landlord and at reasonable times. Tenant shall further have the right to photocopy Landlord's Property Operating Cost records for the Building and the Property at Landlord's offices, in the event that Tenant requests that an inspection be made. If, after such inspection and photocopying, Tenant continues, in good faith, to dispute the amount of the Property Operating Costs, as set forth in said Property Operating Cost Statement, Tenant shall be entitled not later than ninety (90) days following Tenant's receipt of Property Operating Cost Statement to retain a national, independent, certified public accountant, who is not contracted on a contingency fee basis, and who is mutually acceptable to Landlord and Tenant, to audit Landlord's Property Operating Cost records, with respect to the calendar year covered by said Property Operating Cost Statement, to determine the proper amount of the Property Operating Costs. Landlord shall be entitled to review the results of such audit promptly after completion of same. If the results of such audit states that Landlord has overcharged Tenant, then within a reasonable time after the results of the audit are made available to Landlord, Landlord shall credit Tenant the amount of such overcharge toward the payments of Base Rent and Additional Rent next coming due under this Lease, until such amount has been fully exhausted. If such audit proves that Landlord has undercharged Tenant, then within fifteen (15) days after the results of the audit are made available to Tenant, Tenant shall pay to Landlord the amount of any such undercharge. 21.0.1 Audit Confidentiality. Tenant's receipt of any information in response to a request for inspection of Landlord's books and records with respect to the Property Operating Costs for the Building is subject to the following: e. Tenant must keep information confidential. All of the information obtained through the Tenant's audit with respect to financial matters (including, without limitation, costs, expenses, and income) and any other matters pertaining to the Landlord and/or the Property, as well as any compromise, settlement, or adjustment reached between Landlord and Tenant relative to the results of the audit, shall be held in strict confidence by the Tenant and its officers, agents, and employees; and Tenant shall cause its auditor and any of its officers, agents, and employees to be similarly bound pursuant to subparagraph b., below. f. Auditor must sign confidentiality covenant. As a condition precedent to Tenant's exercise of its right to audit, Tenant must deliver to Landlord a signed covenant from the auditor, in a form to be provided by Landlord, acknowledging that all of the results of such audit as well as any compromise, settlement, or adjustment reached between Landlord and Tenant shall be held in strict confidence and shall not be revealed in any manner to any person except: (i) upon the consent of the Landlord, which consent may be withheld in Landlord's sole discretion; (ii) if reasonably necessary in connection with any arbitration or litigation, or regulatory arbitration or mediation proceeding between Landlord and Tenant materially related to the facts disclosed by such audit; or (iii) if required by law. g. Acknowledgment. Tenant understands and agrees that this provision is of material importance to the Landlord and that any violation of the terms of this provision shall result in immediate and irreparable harm to the Landlord. h. Damages. Landlord shall have all rights allowed by law or equity if Tenant, its officers, agent, or employees and/or the auditor violate the terms Page -8- of this provision, including, without limitation, the right to terminate this Lease or the right to terminate Tenant's right to audit in the future pursuant to this clause. i. Indemnification by Tenant and auditor. Tenant shall indemnify, defend upon request, and hold Landlord harmless from and against all costs, damages, claims, liabilities, expenses, losses, court costs, and attorney's fees suffered by or claimed against Landlord, based, in whole or in part, upon the breach of this Section by Tenant and/or its auditor; and shall cause its auditor to be similarly bound. j. Survival clause. The obligations within this Section shall survive expiration or earlier termination of the Lease. 1.9.1.1 If Tenant does not request an audit in accordance with the provisions of this Section 4.1 within ninety (90) days of its receipt of the Property Operating Cost Statement, such Property Operating Cost Statement shall be conclusively binding upon Tenant. In the event that Tenant was the prevailing party, in whole or in part, in an audit, Tenant shall only be entitled to audit Landlord's books and records that apply to the prior year immediately preceding the year in which Tenant prevailed in such audit, and in connection with the same specific item that was the subject of the previous audit in which Tenant prevailed, but in no event shall Tenant be entitled to conduct an audit nor challenge the correctness of the Property Operating Cost Statement for a period earlier than one (1) year prior to the year in which Landlord delivers the most recent Property Operating Cost Statement. In addition, once having conducted an audit with respect to a specific item in any year, Tenant shall have no right to conduct another audit of the same specific item for such year. SECTION 5 SECURITY DEPOSIT5 --------------------- 1.10 Security Deposit. Tenant, concurrently with the execution of this Lease, has deposited with Landlord the sum of Thirty-Five Thousand Nine Hundred Sixteen and 30/100 Dollars ($35,916.30), representing Tenant's first month's rental ---------- obligation hereunder, receipt of which is hereby acknowledged by Landlord ("Deposit"), which Deposit may be subject to adjustment pursuant to Section 2.1.1. Said Deposit shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants and conditions of this Lease by Tenant to be kept and performed during the Term hereof, including the vacating of the Premises by Tenant; provided that Tenant shall not be excused from the payment of any rent herein reserved or any other charge herein provided. If Tenant defaults with respect to any provision of this Lease, Landlord may, but shall not be required, (i) to use or retain all or any part of the Deposit for the payment of any rent or other monies due Landlord; (ii) to repair damages to the Premises; (iii) to clean the Premises; or (iv) to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of the Deposit is so used or applied, Tenant shall, within five (5) business days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Deposit to its original amount. 21.0.1 Return of Deposit Landlord shall not be required to keep the Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Deposit. Should Tenant comply with all of said terms, covenants and conditions and promptly pay all the rent herein provided for and all other sums payable by Tenant to Landlord hereunder as the same fall due, then the Deposit shall be returned to Tenant within thirty (30) days after the end of the Term, or thirty (30) days after the last payment due from Tenant is received by Landlord, whichever last occurs. In the event of sale, transfer or the making of a master lease of the Property or of any portion thereof containing the Premises, if Landlord transfers the Deposit to the lessee or transferee for the benefit of Tenant, and if such lessee or transferee assumes all liability with respect to the Deposit, then Landlord shall be considered released by Tenant from all liability for the return of the Deposit, and Tenant agrees to look solely to the new landlord for the return of the Deposit, and it is agreed that this Section 5 shall apply to every transfer or assignment to a new landlord. No Mortgagee or beneficiary holding a lien on the Property or any portion thereof shall be liable to Tenant for any Deposit, unless said Deposit has actually been delivered to such Mortgagee or beneficiary. 21.0.2 No Right of Tenant to Encumber Deposit Page -9- Tenant shall have no right or privilege to mortgage, encumber, transfer or assign the Deposit without the prior written consent of Landlord. 1.11 No Right of Deduction. Tenant may not deduct from its Aggregate Monthly Rent or from other payments to Landlord under this Lease, the Deposit, and Landlord's right to possession of the Premises, or to take appropriate action for nonpayment of any rent, or for any other reason, shall not be affected by the fact that Landlord holds the Deposit and does not use, apply or retain the same as set forth herein. 1.12 Right to Raise Security Depositto Raise Security Deposit. Upon the occurrence of an Event of Default, as defined below, more than three (3) times within any twelve (12) month period, irrespective of whether or not such default is cured, then, without limiting Landlord's other rights and remedies provided for in this Lease, or at law or in equity, the Deposit shall automatically be increased by an amount equal to the greater of: (i) three (3) times the original Deposit; or (ii) three (3) months Base Rent, which shall be paid by Tenant to Landlord within ten (10) days following receipt of written notice by Landlord of same. SECTION 6 POSSESSION AND SURRENDER -------------------------- 1.13 Possession of the Premises. Subject to the following provisions, Tenant shall upon entering and occupying the Premises be conclusively deemed to have accepted the Premises, subject to Exhibit C, and Landlord shall not be liable for any latent or patent defects therein. Notwithstanding the foregoing, Landlord shall correct any latent defects in Landlord's Work with respect to which Tenant delivers notice to Landlord within one (1) year after the Occupancy Date, or within such longer period as coincides with the term of a third party warranty covering that portion of the Landlord's Work at issue. Landlord will construct the Tenant Improvements to be constructed or installed by Landlord according to the Landlord's Work. Tenant acknowledges that neither Landlord nor its agents or employees have made any representations or warranties as to the suitability or fitness of the Premises for the conduct of Tenant's business or for any other purpose, nor has Landlord or its agents or employees agreed to undertake any alterations or construct any Tenant Improvements to the Premises except as expressly provided for in this Lease and the Landlord's Work. If for any reason Landlord cannot deliver possession of the Premises to Tenant on or before the fixed date component of the Occupancy Date, if applicable, this Lease will not be void or voidable, and Landlord will not be liable to Tenant for any resultant loss or damage. 1.14 Surrender. Upon the expiration or sooner termination of the Term of this Lease, if Tenant has fully and faithfully perform-ed all of the terms, conditions and covenants of this Lease to be performed by Tenant, but not otherwise, Tenant shall, at its sole cost and expense, remove all personal property and trade fixtures which Tenant has installed or placed in or on the Premises (all of which are hereinafter referred to as "Tenant's Property") from the Premises and repair all damage thereto resulting from such removal, and Tenant shall thereupon surrender the Premises in the same condition as on the Occupancy Date, reasonable wear and tear excepted. If Tenant has not fully and faithfully performed all of the terms, conditions and covenants of this Lease to be performed by Tenant, Tenant shall never-theless remove Tenant's Property from the Premises in the manner aforesaid within fifteen (15) days after receipt of written direction to do so from Landlord. In the event Tenant shall fail to remove any of Tenant's Property as provided herein, Landlord may, but is not obligated to, at Tenant's expense, remove all of such Tenant's Property not so removed and repair all damage to the Premises resulting from such removal, and Landlord shall have no responsibility to Tenant for any loss or damage to Tenant's Property caused by or resulting from such removal or otherwise. If the Premises is not surrendered at the end of the Term, Tenant shall indemnify Landlord against all loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant due to such delay. Tenant agrees not to commit or allow waste to be committed on any portion of the Premises. SECTION 7 USE OF PREMISES ----------------- 1.15 Use of Premises. The Premises are leased to Tenant solely for office and administrative use relating to a travel/timeshare company, and for no other Page -10- purpose or purposes whatsoever. Tenant shall not use, or suffer to be used, the Premises, or any portion thereof, as a sales office for timeshare and/or land sale presentations to the general public. Tenant shall conduct business under the trade name of "Leisure Industries Corporation of America, Inc.," and no other, without Landlord's prior written consent, which consent shall not be unreasonably withheld or conditioned. 1.16 Maintenance and Repair. Subject to Section 10, "Landlord Services," Tenant shall maintain the Premises in good repair and condition (ordinary wear and tear excepted) and every part thereof and any and all appurtenances thereto wherever located, including, but without limitation, the exterior and interior portion of all doors, door checks, windows, plate glass, Tenant signage, all plumbing and sewage facilities within the Premises including free flow up to the main sewer line, fixtures, heating and air conditioning and electrical systems (whether or not located in the Premises), fire sprinkler system, interior walls, floors and ceilings, and any work performed by or on behalf of Tenant hereunder. Tenant shall also keep and maintain in good order and condition any special equipment, fixtures or facilities other than the usual and ordinary plumbing and utility facilities. 1.17 Storage of Garbage. Tenant shall store all trash and garbage in appropriate refuse containers in a designated area provided by Landlord and reasonably located, so as not to be visible or create a nuisance to customers and business invitees in the Premises and/or the Property, and so as not to create or permit any health or fire hazard. If Tenant requires larger refuse facilities over that generally provided by Landlord, Tenant shall arrange and pay for same. 1.18 Abidance of Rules and Regulations. Tenant hereby covenants and agrees that it, its agents, employees, servants, contractors, subtenants and licensees shall abide by the Rules and Regulations that Landlord has established, as set forth in Exhibit D, attached hereto and incorporated herein by reference, and such additional reasonable rules and regulations hereafter adopted, and reasonable amendments and modifications of any of the foregoing, as Landlord may, from time-to-time, adopt for the safety, care and cleanliness of the Premises or the Property or for the preservation of good order thereon and therein. 1.19 Commercially Reasonable Operation. Tenant shall operate its business in the Premises and such operation shall be conducted in a commercially reasonable manner. 1.20 Prohibition Against Interference With Other Tenants. Tenant shall not do, permit or suffer anything to be done or kept upon the Property or in the Premises which will obstruct or interfere with the rights of other tenants and/or property owners, Landlord or the patrons and customers of any of them, or which will unreasonably annoy any of them, their patrons or customers by reason of unreasonable noise or otherwise, nor will Tenant commit or permit any nuisance on the Premises or commit or suffer any immoral or illegal act to be committed thereon. 1.21 Use of Common Areas. The use of the Premises and all Common Areas whatsoever by Tenant, its employees, agents, customers, licensees, invitees and contractors shall at all times be in compliance with all covenants, conditions and restrictions, easements, reciprocal easement agreements, and all matters presently of public record, or which may hereafter be placed of public record, which affect the Premises or the Property, or any part thereof. 1.22 Parking. Subject to Section 9, Tenant agrees that Tenant and its employees, invitees and all other individuals visiting the Premises, except for Tenant's customers, will, if deemed necessary by Landlord, only park in the areas designated for such use. Written notice of such designation shall be delivered to Tenant and same shall have the same force and effect as if it was originally included in this Lease. 1.23 Trademark Restrictions. Tenant agrees to abide by the trademark restriction covenants contained in Section 7.9.1 below. Tenant hereby acknowledges and agrees that, upon any breach by Tenant of such covenants, Landlord and ANC, Inc., an affiliate of the Landlord, will be irreparably and materially injured for no just cause and without adequate remedy at law, such that Landlord and ANC, Inc. (as a third party beneficiary hereof) shall be irrebuttably presumed to be immediately entitled to all forms of equitable relief, including, without limitation, a temporary restraining order and preliminary or permanent injunction. Page -11- 21.0.1 Trademark. Tenant acknowledges that Landlord has informed it that ANC, Inc., a Nevada corporation, and an affiliate of Landlord, is the owner of trademark and trade name rights relative to the name "GREEN VALLEY" and with respect to various distinctive marks utilized in conjunction with the Green Valley development. Tenant therefore agrees not to denote or utilize the name "GREEN VALLEY" or any of said distinctive marks as the name of or part of the name of or in conjunction with the name of the business to be conducted on the Premises leased to Tenant hereunder without first obtaining the written approval of ANC, Inc., and executing such license agreements relative thereto as may be requested and required by ANC, Inc. Any breach of this provision shall constitute a material breach of this Lease with all attendant rights accruing to Landlord. Further, ANC, Inc. is acknowledged by both Landlord and Tenant to be an additional intended beneficiary of this provision of this Lease. Tenant agrees and acknowledges that either Landlord and/or ANC, Inc. shall be entitled to all forms of equitable relief, including, without limitation, a temporary restraining order, preliminary and permanent injunction, in the event of any unauthorized use by Tenant of the name "GREEN VALLEY" or any trademark of ANC, Inc., utilized in conjunction with the Green Valley development. 1.24 Gaming. No slot machine, gambling game or device, or other "gaming" of any type as defined by Nevada law or requiring a gaming license issued by the State of Nevada shall be permitted in or on the Premises without the prior written consent of Landlord, which consent is strictly within Landlord's discretion. 1.25 Satellite Dish. Tenant shall have the right, at its sole cost and expense, in accordance with all applicable governmental laws, codes and regulations, to install one (1) satellite dish, the size of which shall be consented to by Landlord (not greater than two (2) meters), utilizing a non-penetrating roof mount. Tenant represents and warrants that the installation of the dish shall not cause any damage to the Premises or the Building. Installation of the satellite dish by Tenant will not adversely affect the Landlord's roof warranty. Said installation shall be at a location mutually agreed upon by Landlord and Tenant. The dish shall be screened by view from all elevations of the Premises and Building in accordance with the City of Henderson and all governmental ordinances. Tenant shall mount said dish by the mounting configuration and in a manner reasonably required by Landlord. Tenant agrees to indemnify and hold harmless Landlord from any costs, liabilities or damages arising from or caused by the installation, use and/or existence of said satellite dish. Additionally, at the expiration or early termination of the Lease, Tenant shall remove the satellite dish at Tenant's sole cost and expense and shall repair any damage caused by such removal. In the event Tenant fails to remove said dish within fifteen (15) days after the expiration or earlier termination of this Lease, Landlord may remove same and Tenant shall pay to Landlord the reasonable costs therefor incurred. Tenant represents and warrants that any and all roof work shall comply with the requirements set forth in Exhibit G, attached hereto and incorporated herein. Tenant shall indemnify, defend, and hold Landlord harmless from and against all costs, damages, claims, liabilities, expenses, losses, court costs, and attorney's fees suffered by or claimed against Landlord, based, in whole or in part, upon the breach of this Section by Tenant. SECTION 8 IMPROVEMENTS, SIGNAGE AND ALTERATIONS -------------------------------------- 1.26 Improvements. Landlord shall diligently perform and install or cause to be installed the improvements to the Premises required of it as specifically set forth on Exhibit C, attached hereto and incorporated herein ("Landlord's Work"). Except as so set forth, Tenant otherwise accepts the Premises in its "as is" condition. Landlord's Work shall be performed substantially in accordance with the plans, specifications and related requirements as so outlined on said Exhibit C or established pursuant thereto. 21.0.1 Exterior Directional Signage. At Tenant's sole cost and expense, Landlord shall provide Tenant the ability to display its trade name on exterior directional signage located within the Green Valley Corporate Center parking lot, as more fully depicted on Exhibit F, attached hereto and incorporated herein, subject to the sign criteria currently in effect within the Property. The right to display Tenant's trade name shall terminate upon the expiration of this Lease or sooner termination as provided herein Page -12- 21.0.2 Directory Signage. Tenant shall have the ability to display its trade name on the directory sign and suite identification signage located within the Building lobby, which designs, sizes and locations shall be subject to Landlord's approval (the "Directory Sign"). Tenant, at its sole cost and expense, shall have the ability to display its trade name at the entry door to the Premises. All signage shall be subject to the sign criteria currently in effect within the Property. The right to display Tenant's trade name and/or logo shall terminate upon the expiration of this Lease or sooner termination as provided herein. 21.0.3 Monument Signage . In the event that Landlord elects to construct a monument sign, Landlord shall provide Tenant a right to display its trade name on said monument signage (the "Monument Sign"). Tenant shall be responsible for the cost of the design, construction and placement of the sign panel, bearing Tenant's trade name on the Monument Sign, which design, size and location shall be subject to Landlord's approval. The right to display Tenant's trade name shall terminate upon the expiration of this Lease or sooner termination as provided herein. 1.27 Alterations. After completion of the Landlord's Work outlined herein, Tenant shall not make any further additions, alterations, improvements or changes ("Alterations") in, or to the Premises without the prior written approval of Landlord, excepting therefrom the interior non-structural Alterations costing less than Ten Thousand and 00/100 Dollars ($10,000.00) made by Tenant to the Premises. The approval of any and all structural Alterations shall be at the sole and absolute discretion of the Landlord. Any such approved Alterations shall be at the sole cost and expense of Tenant. Landlord may impose, as a condition to such consent, such requirements as Landlord may deem reasonably necessary in its judgment, including, without limitation, (i) the manner in which the work is done; (ii) a right of approval of the contractor by whom the work is to be performed; (iii) the times during which the work is to be accomplished, approval of all plans and specifications, certifications and inspections; and (iv) the procurement of all licenses and permits. Landlord shall be entitled to post notices on and about the Premises with respect to Landlord's non-responsibility for mechanics' liens, and Tenant shall not permit such notices to be defaced or removed. Tenant further agrees not to connect any apparatus, machinery or device to the Building systems, including electric wires, water pipes, fire safety, heating and mechanical systems, or any penetrations to the roof, walls or structure support of the Building, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any Alterations shall be made promptly and in a good and workmanlike manner, lien free, and in compliance with all insurance requirements and with all applicable permits, authorizations, building regula-tions, zoning laws, environmental regulations, laws regarding the physically disabled and all other governmental rules, regulations, ordinances, statutes and laws, now or hereafter in effect per-taining to the Premises or Tenant's use thereof. Any Alterations made by Tenant shall, at Landlord's option, be-come the property of Landlord upon the expiration or sooner termination of this Lease. However, Landlord shall have the right to require Tenant to remove such Alterations, at Tenant's sole cost and expense, upon such termination of this Lease and to surrender the Premises in the same condition as it was prior to the making of any or all such Alterations, reasonable wear and tear excepted. 1.28 Hold Harmless. Tenant shall indemnify and hold Landlord, the Property and Landlord's managing agent for the Property free of and harmless from any and all liabilities, losses, claims, or damages arising out of any Alterations undertaken by Tenant, whether specifically under the provisions of this Lease or otherwise, including all costs, damages, expenses, court costs and reasonable attorneys' fees incurred in or resulting from claims made by any person or persons, by other tenants in the Property, their subtenants, agents, employees, customers and invitees. 21.0.1 Liability Insurance. Tenant, before undertaking any Alterations, or any other improvement(s) or construction, shall obtain and pay for a commercial liability insurance policy, as more fully set forth in Section 13 below, insuring Landlord and Tenant against any liability which may arise on account of such proposed Alterations or construction work in limits of not less than Two Million and 00/100 Dollars ($2,000,000.00) combined single limit coverage; a copy of such policy shall be delivered to Landlord prior to the commencement of any such Alterations. 1.29 Compliance with Applicable Law. Tenant, at its sole cost and expense, shall cause any Alterations, decorations, installations, additions, or improvements in or about the Premises to be performed in compliance with all applicable Page -13- requirements of insurance bodies having jurisdiction, and in such manner as not to interfere with, delay, or impose any additional expense upon Landlord in the construction, maintenance, or operation of the Building, and so as to maintain harmonious labor relations in the Building. 1.30 Liens. Tenant shall at all times indemnify, save and hold Landlord, the Premises, the Property and the lease-hold created by this Lease free of and harmless from any claims, liens, demands, charges, encumbrances, litigation and judgments arising directly or indirectly out of any use, occupancy or activity of Tenant, or out of any work performed, material furnished, or obligations incurred by Tenant in, upon or otherwise in connection with the Premises. Tenant shall give Landlord written notice at least seven (7) business days prior to the commencement of any such work on the Premises to afford Landlord the opportunity of filing appropriate notices of non-responsibility. Tenant shall, at its sole cost and expense, within fifteen (15) days after filing of any lien of record, obtain the discharge and release thereof. Nothing contained herein shall prevent Landlord, at the cost and for the account of Tenant, from obtaining said discharge and release in the event Tenant fails or refuses to do the same within said fifteen (15) day period. SECTION 9 PARKING AND COMMON AREAS --------------------------- 1.31 Common Areas. Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers and business invitees shall have the nonexclusive right to utilize parking spaces in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use such Common Areas of the Property (including, but not limited to, the parking lot(s), walkways, corridors, halls, passageways and ramps, sidewalks, access roads, landscape and planted areas, public restrooms and other public facilities) as designated from time to time by Landlord in its sole discretion (collectively, the "Common Areas"), subject to such reasonable rules and regulations as Landlord or the Association may, from time to time, impose. Tenant agrees that it, its agents, employees, servants, contractors, subtenants, invitees and licensees shall abide by such rules and regulations. Landlord may at any time, upon written notice to Tenant (except in the case of an emergency), close any such Common Areas, (i) to make repairs or changes; (ii) to prevent the acquisition of public rights in such Common Areas; or (iii) to discourage noncustomer parking. Landlord shall operate, manage, equip, light, repair and maintain the Common Areas for their intended purposes in such manner as Landlord, in its sole discretion, shall determine. Landlord reserves the right to dedicate all or portions of such Common Areas and other portions of the Property for public utility purposes. Landlord may do such other acts in and to the Common Areas as in its sole judgment may be desirable. Tenant shall not at any time interfere with the rights of Landlord, other tenants, its and their agents, employees, servants, contractors, subtenants, licensees, customers and business invitees to use any part of the parking lot or Common Areas. Landlord shall not be subject to any liability, nor shall Tenant be entitled to any compensation, or reduction or abatement of rent, by reason of any alteration or diminution of the Common Areas, and no such alteration or diminution of the Common Areas shall be deemed constructive or actual eviction. 1.32 Parking Space Leasing. Tenant shall not be permitted to park on any access roads and drives located within the Property ("Prohibited Parking"). Tenant shall be allocated sixty-seven (67) spaces for unreserved, uncovered parking spaces at no charge during the Lease Term ("Parking Allotment"). Landlord shall not have the risk of loss regarding any vehicle. Tenant shall not use more parking spaces than its Parking Allotment, or any spaces (i) which have been specifically assigned by Landlord to other tenants or for other uses (e.g., as visitor parking); or (ii) which have been designated by governmental entities of competent jurisdiction as being restricted to certain uses. In the event that Landlord determines in good faith that Tenant is exceeding its Parking Allotment, Landlord shall give Tenant notice of such fact ("Notice of Excessive Parking") and shall require Tenant to provide Landlord with Tenant's employees State license plate numbers within five (5) business days of its receipt of said initial notice. In the event that Tenant receives three (3) Notices of Excessive Parking in any six (6) month period, Landlord shall be entitled to, in addition to any other remedies, including, but not limited to, towing, charge Tenant Twenty-Five and 00/100 Dollars ($25.00) per day per car in any prohibited area. Tenant's use of the parking area shall be based upon a non-exclusive use in common with Landlord, other tenants of the Building, and their guests and invitees. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas Page -14- other than those designated by Landlord for such activities. If Tenant permits or allows any of such prohibited activities, then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord. Tenant agrees not to use guest parking for its employees; unless waived in writing by Landlord, guest parking is limited to guest use only. Tenant acknowledges that, subject to the express rights of Tenant set forth herein, Landlord has the right to allocate parking spaces in such manner as it shall determine in its sole discretion. 21.0.1 Covered Parking. Tenant's Parking Allotment shall include twenty-six (26) reserved covered parking spaces at the market rate, which is currently Thirty-Five and 00/100 Dollars ($35.00) per month, per parking space. A separate license agreement shall be entered into by and between Landlord and Tenant for said reserved parking spaces. SECTION 10 LANDLORD'S SERVICES -------------------- 1.33 Landlord Services. Landlord agrees to provide Tenant, as Landlord deems reasonably necessary, and subject to: (i) limitations contained in any governmental controls, now or hereafter imposed, or matters beyond Landlord's reasonable control; (ii) cessation on a temporary basis for reasonable necessity; (iii) tenants requiring excess amounts of services for the conduct of their business, in which event, at Landlord's discretion and with notice to such tenant, the cost of such excess services shall be allocated to that particular tenant on a equitable allocation basis and payable as Additional Rent hereunder, as billed to the tenant by the Landlord; (iv) Landlord's Duty to Repair, more fully set forth in Section 10.3 below; and (v) Tenant's obligation in connection with the Property Operating Costs, the following services: 11. Cleaning and janitorial service five (5) days each week throughout the Term so that the Premises and Common Areas of the Building are cleaned according to the standards set forth in the janitorial service specifications attached as Exhibit E; 12. Electrical, heating and air-conditioning service to the Common Areas during normal business hours, Monday through Friday from 7:00 a.m. to 6:00 p.m. and on Saturday from 9:00 a.m. to 2:00 p.m., except on recognized Federal or State of Nevada Holidays, but all costs in excess of Landlord's Share, shall be promptly paid by Tenant, as a part of Additional Rent defined in Section 3.3. Tenant shall be permitted to install or use computer, calculator or similar equipment; provided, however, (i) no such equipment shall exceed the maximum legal structural load bearing capacity of the floor(s) of the Premises; (ii) Tenant shall notify Landlord in writing of any and all such additional equipment; and (iii) any additional costs of operation and maintenance associated with such additional equipment shall be paid as Additional Rent by Tenant to Landlord on the date Base Rent is due as such rates are established by Landlord. All such charges from Landlord to Tenant shall be promptly paid to Landlord within thirty (30) days following receipt of billing therefor by Landlord. All costs associated with metering or submetering not included as part of the budgeted Property Operating Costs shall be borne by Tenant. Should Tenant desire either heating or air-conditioning at times other than the normal business hours as set forth above within the Common Areas, Landlord will furnish such services as requested by Tenant, but at Tenant's expense and at such hourly charge as is from time-to-time determined by Landlord (currently Forty-Five and 00/100 Dollars ($45.00) per hour), which charges Tenant shall pay within thirty (30) days following receipt of billing therefor by Landlord; 13. Normal facilities for furnishing light and electric power for the operation of primary office equipment such as typewriters, lamps, adding machines, computers, and calculators, dictating equipment, and clocks. Normal facilities for electric power is defined as follows: (i) electricity drawn from Building standard receptacles being 1 watt per usable square foot of the Premises per hour; (ii) Building standard lighting being 2.5 watts per usable square foot of the Premises per hour; and (iii) electricity to operate the Building heating and air conditioning systems being 6.0 watts per usable square foot of the Premises per hour. Tenant shall not be permitted to exceed any of the amounts of electricity as referenced herein without Landlord's prior written approval. Landlord's approval shall be determined at Landlord's sole discretion and, in the event, Landlord grants its permission to Tenant to use more than Tenant's permitted allotment of electricity, Landlord may pass through to Tenant any additional costs to purchase and install equipment, circuit panels and circuit Page -15- breakers, electrical submeters and the like, incurred in providing electricity in excess of that which is stated herein, to Tenant, in addition to the cost of such excess electricity use. Any additional costs to Tenant for electrical consumption in excess of that stated herein shall be deemed to be Additional Rent and shall be due from Tenant in the same manner of payment set forth in Section 3 of this Lease. Tenant has requested excess heating and air-conditioning services at times other than the normal business hours as set forth above within the Premises. Landlord will furnish such services as requested by Tenant, at Tenant's expense and at an hourly charge of Twenty-Five and 00/100 ($25.00) per hour for such excess hours ("Additional Service"). Tenant must subscribe to one hundred (100) hours of Additional Service per year for the Term of this Lease, which amount shall be pro rated for calendar year 2002 (33 hours). In the event that Tenant requires more than the Additional Service (or different hours for the Additional Service than pre-arranged, as set forth below) to the Premises, Landlord will furnish such services as requested by Tenant, but at Tenant's expense and at an hourly charge of Forty-Five and 00/100 ($45.00) per hour. Tenant shall remit to Landlord the cost of said excess electricity within thirty (30) days following receipt of billing therefor by Landlord. All electrical cost may be subject to periodic increases imposed upon Landlord by the electrical utility provider, in such event Landlord shall provide Tenant with commercially reasonable documentation evidencing such increases. Prior to the Commencement Date Tenant shall schedule with Landlord the desired hours for the Additional Service through December 31, 2002. Tenant shall have thirty (30) days following the end of the calendar year 2002 to notify Landlord whether it intends to continue the Additional Service for the following calendar year, and the schedule of hours for said year should it desires to continue the Additional Service; 14. Repair and maintenance service for Tenant's heating, ventilating and air-conditioning system; 15. Repair and maintenance service of plumbing within the Premises; 16. Utilities for the reasonable use of the Premises by Tenant; 17. Water and sewer reasonably used in the Premises and the Common Areas with the exception of commercial enterprises which require excessive amounts of water for the conduct of their business, the latter cost thereof being paid as Additional Rent hereunder as billed to Tenant by Landlord; 18. Landscaping, streetscaping, parking lot repair and maintenance and sweeping and electrical power for the Common Areas and lighting for the Common Areas of the Property and other areas of the Property; and 19. A system for limited access to the Building during other than normal business hours shall be provided in such form as Landlord deems appropriate. Landlord may charge a reasonable fee for card keys or other security devices. Landlord, however, shall have no liability to Tenant, its employees, agents, invitees or licensees for losses due to theft or burglary, or for damages resulting from the actions of unauthorized persons on the Premises or in the Building and Landlord shall not be required to insure against any such losses. Tenant shall cooperate fully in Landlord's efforts to maintain security in the Building and shall follow all regulations promulgated by Landlord with respect thereto. Subparagraphs (a) through (i) shall collectively be referred to as "Landlord's Services." The failure by Landlord, to any extent, to furnish, or the interruption or termination of Landlord's Services, in whole or part, resulting from causes beyond the reasonable control of Landlord shall not render Landlord liable in any respect, nor be construed as an eviction of Tenant, nor work an abatement of Aggregate Monthly Rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement hereof. Should any of the equipment or machinery used in the provision of such services for any cause cease to function properly, Tenant shall have no claim for offset or abatement of rent or damages on account of an interruption in service resulting therefrom; provided that Landlord shall use commercially reasonable efforts to restore any Landlord Service which has been interrupted, as soon as practicable. Notwithstanding the foregoing, if any of the Landlord's Services are not restored within five (5) business days, Tenant's Page -16- Aggregate Monthly Rent under this Lease shall abate each day after such five (5) business day period that such service is not restored. If Landlord fails to perform any maintenance or repair work required hereunder within thirty (30) days following Landlord's receipt of written notice from Tenant of the need for such repairs (or such period of time in excess of thirty (30) days, as is reasonably necessary based upon the nature of such work, provided Landlord commences and diligently pursues the work during such thirty (30) day period), then Tenant shall be permitted to make such repairs upon delivery of an additional three (3) business days' prior written notice to Landlord indicating that Tenant will be undertaking such repairs, and Tenant shall be entitled to recover from Landlord the reasonable costs of such repairs made by Tenant. 1.34 Improvements to Common Areas. Landlord reserves the right from time to time without unreasonable interference with Tenant's access to, or use, of the Premises: (i) to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the Premises which are located in the Premises or located elsewhere outside the Premises, and to expand the Building; (ii) to make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas and walkways and parking spaces and parking areas, provided that such changes do not materially interfere with or adversely affect Tenant's use of the Premises and/or the parking areas; (iii) to close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available and advance written notice to Tenant is given; (iv) to use the Common Areas while engaged in making additional improvements, repairs or alterations to the Property, or any portion thereof; and (v) to do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Property as Landlord may, in the exercise of sound business judgment, deem to be appropriate. 1.35 Landlord's Duty to Repair. Landlord agrees to keep in good order, condition and repair the foundations, exterior walls, roof of the Building, plumbing and electrical systems of the Premises, except for reasonable wear and tear and except for any damage thereto caused by any act or negligence of Tenant or its agents, employees, servants, contractors, subtenants, licensees, customers or business invitees. It is an express condition precedent to all obligations of Landlord to repair and maintain the Premises that Tenant shall have notified Landlord in writing of the need for such repairs or maintenance. The cost of such repairs shall be included in the Property Operating Costs, as such term is defined herein, or as to repairs of the Premises, otherwise directly billed to Tenant, as the case may be. All repair, maintenance, upkeep, and the like, upon or within the Premises, shall be the responsibility of and at the expense of Tenant during the entire Lease Term, except for any obligations of Landlord as set forth herein. 21.0.1 Utility Service Facilities. All additions to the utility service facilities and equipment of the Property which may be installed for the specific need of Tenant shall be Tenant's responsibility to maintain and repair. SECTION 11 LAWS AND REGULATIONS -------------------- 1.36 Americans With Disabilities Act. Landlord shall, subject to reimbursement as part of the Property Operating Costs, be responsible for any alterations, modifications or improvements to the Building and Property which are required under Title III of the Americans With Disabilities Act, hereinafter referred to as the "ADA." Landlord represents and warrants to Tenant, that to the best of the Landlord's knowledge, that as of Substantial Completion of the base Building, Landlord's Work and the operation of the base Building will be in full compliance with applicable building codes, environmental, zoning and land use laws, and other applicable local, state and federal laws, regulations and ordinances, including but not limited to ADA. 1.37 Insurance Services Office. Tenant shall, at Tenant's sole cost and expense, be responsible for any alterations, modifications or improvements to the Premises, and the acquisitions of any auxiliary aids required under the ADA Page -17- after the Occupancy Date, and regulations of any ISO (Insurance Services Office) or any other body or entity exercising similar functions in force during the Term and affecting the Building, the Premises or Tenant's use thereof, including all alterations, modifications, or improvements required: (i) as a result of Tenant (or any subtenant, assignee, or concessionaire) being a "Public Accommodation" (as defined in the ADA); (ii) as a result of the Premises being a "Commercial Facility" (as defined in the ADA); (iii) as a result of any Alterations made to the Premises by, or on behalf of, Tenant or any subtenant, assignee, or concessionaire (whether or not Landlord's consent to such Alterations was obtained); or (iv) as a result of the employment by Tenant (or any subtenant, assignee, or concessionaire) of any individual with a disability. 1.38 Storage of Disposition of Hazardous Materials. Tenant will not cause or permit the storage, use, generation, or disposition of any Hazardous Materials in, on, or about the Premises or the Property by Tenant, its agents, employees, or contractors. Tenant will not permit the Premises to be used or operated in a manner that may cause the Premises or the Property to be contaminated by any Hazardous Materials in violation of any Hazardous Materials Laws. Tenant will immediately advise Landlord in writing of: (i) any and all known enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any Hazardous Materials Laws relating to any Hazardous Materials affecting the Premises; and (ii) all known claims made or threatened by any third party against Tenant, Landlord, or the Premises relating to damage, contribution, cost recovery, compensation, loss, or injury resulting from any Hazardous Materials on or about the Premises. Without Landlord's prior written consent, Tenant will not take any remedial action or enter into any agreements or settlements in response to the presence of any Hazardous Materials in, o/n, or about the Premises. 21.0.1 Hazardous Materials and Substances. For purposes of this Lease, "Hazardous Materials" means any explosives, radioactive materials, hazardous wastes, or Hazardous Substances, including, without limitation, substances defined as "Hazardous Substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601-9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C. 1801-1812; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901-6987; or any other federal, state, or local statute, law, ordinance, code, rule, regulation, order, or decree regulating, relating to, or imposing liability or standards of conduct concerning Hazardous Materials, waste, or substances now or at any time hereafter in effect (collectively, "Hazardous Materials Laws"). 1.38.1.1 The foregoing notwithstanding, Tenant shall be entitled to use and maintain such limited quantities of materials that may otherwise be defined as "Hazardous Substances," "Hazardous Materials," "toxic substances" or "solid waste" as used in the ordinary course of Tenant's business; provided, that such "materials" are properly maintained, stored and disposed of, and that Tenant complies with all laws, ordinances, rules and regulations applicable thereto and that Tenant bears all responsibility and liability therefor. 1.39 Indemnification. Tenant will be solely responsible for and will defend, indemnify and hold Landlord, its partners, directors, officers, employees, agents, successors and assigns, the Property and Landlord's management agent for the Property harmless from and against all claims, costs, and liabilities, including attorney's fees and costs, arising out of or in connection with Tenant's breach of its obligations in this Section 11. Tenant will be solely responsible for and will defend, indemnify, and hold Landlord, its agents, and employees harmless from and against any and all claims, costs, and liabilities, including attorney's fees and costs, arising out of or in connection with the removal, cleanup, and restoration work and materials necessary to return the Premises and any other property of whatever nature located in, on, or about the Building, to their condition existing prior to the introduction of Hazardous Materials by Tenant, its agents, employees or contractors. The foregoing indemnity shall further apply to any residual contamination on, under, from or about the Premises, the Property or the property in general, or affecting any natural resources arising in connection with the use, generation, manufacturing, production, handling, storage, transport, discharge or disposal of any such Hazardous Substance, and irrespective of whether any of such activities were or will be undertaken in accordance with environmental laws or other applicable laws, regulations, codes and ordinances. Tenant's obligations under this Section 11 will survive the expiration or other termination of this Lease. 21.0.1 Exclusion for Tenant's Liability. Page -18- Notwithstanding the above, Tenant shall not be responsible for handling, removal or treatment of any Hazardous Substance which is present prior to the delivery of the Premises to Tenant. Landlord hereby agrees to defend, indemnify, and hold Tenant, its partners, directors, officers, employees, agents, successors and assigns, harmless (including defending and paying Tenant's attorney's fees) from and against any liability arising out of or attributable to Landlord, its agents', contractors', servants', or employees' use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or the presence of any Hazardous Substance on, under, from, or about the Premises prior to the date of delivery of the Premises, or on the Property. The indemnity provided for in this Section 11 shall survive the termination of this Lease. 1.40 Jeopardize Insurance Policies. Tenant will not do or permit to be done any act or thing upon the Premises or the Building which would: (i) jeopardize or be in conflict with fire insurance policies covering the Building or covering any fixtures and property in the Building; (ii) increase the rate of fire insurance applicable to the Building to an amount higher than it otherwise would be for general office use of the Building; or (iii) subject Landlord to any liability or responsibility for injury to any person or persons or to the property by reason of any business or operation being carried on or upon the Premises. SECTION 12 TAXES ----- 1.41 Taxes. Tenant shall be liable for and shall pay before delinquency (and, upon demand by Land-lord, Tenant shall furnish Landlord with satisfactory evidence of the payment thereof) all taxes, fees, bonds and assessments of whatsoever kind or nature, and penalties and interest thereon, if any, levied against Tenant's personal property or any other personal property of whatsoever kind and to whomsoever belonging to, situated on or installed in or upon the Premises whether or not affixed to the realty. If at any time during the Term of this Lease any such taxes on personal property are assessed as part of the tax on the real property of which the Premises is a part, then in such event Tenant shall pay to Landlord the amount of such additional taxes as may be levied against the real property by reason thereof. 1.42 Excise Tax. If at any time during the Term, under the laws of the United States, Nevada or any political sub-division thereof, a tax or excise on rent or other tax (except income tax), however described, is levied or assessed by the United States, Nevada or said political subdivision against Landlord on account of any rent reserved under this Lease, all such tax or excise on rent or other taxes shall be paid by Tenant. Whenever Landlord shall receive any statement or bill for any such tax or shall otherwise be required to make any payment on account thereof, Tenant shall pay, as Additional Rent, the amount due hereunder within ten (10) days after demand therefor accompanied by delivery to Tenant of a copy of such tax statement, if any. 21.0.1 Contest Validity. Tenant, at Tenant's own cost and expense, may, in good faith so desire, contest the validity or amount of any taxes in which event Tenant may defer the payment thereof for such period as such contest shall be actively prosecuted and shall be pending undetermined, so long as such proceedings and any appeals shall not operate to legally prevent the collection of such payments and/or force the sale of the Premises and/or Property to satisfy any lien arising out of the non-payment of the same. SECTION 13 INSURANCE --------- 1.43 General Liability Insurance. Tenant shall, at all times during the Term, at its sole cost and expense, pro-cure and maintain in full force and effect a policy or policies of commercial general liability insurance coverage issued by an insur-ance carrier having an A.M. Best rating of at least A-VIII or higher and authorized to transact business in the State of Nevada assuring against loss, damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever in connection with the Premises or Tenant's use thereof. Such liabil-ity insurance shall be in amounts not less than One Million and 00/100 Dollars ($1,000,000.00) per occurrence and Two Million and 00/100 Dollars ($2,000,000.00) aggregate, or Two Million and 00/100 Dollars ($2,000,000.00) combined single limit coverage. Such insurance shall also cover and include all exterior signs maintained by Tenant hereunder. Landlord shall be named as an additional insured Page -19- (and at Landlord's option, any other persons, firms or corporations designated by Landlord shall be additionally named insureds) under each such policy of insur-ance. Each such party shall be designated as an additional insured under ISO endorsement CG 20 10 3 97 or such other comparable endorsement upon Landlord's reasonable request. 1.44 Special Peril Property Insurance. Tenant shall, at all times during the Term, at its sole cost and expense, procure and maintain in full force and effect "special peril" property insurance covering not less than one hundred percent (100%) of the current replacement value of the Tenant's Improvements on or within the Premises and the personal property therein. 1.45 Certificate of Insurance. A certificate issued by the insurance carrier for each policy of insurance required to be maintained by Tenant hereunder shall be delivered to Landlord and all other named insureds on or before the Commencement Date hereof and thereafter, as to policy renewals, within thirty (30) days prior to the expiration of the term of each such policy. Each certificate of insurance and each such policy of insurance required to be maintained by Tenant hereunder shall be in form and substance reasonably satisfactory to Landlord and shall expressly evidence insurance coverage as required by this Lease and shall contain an endorsement or provision requiring not less than thirty (30) days' prior written notice to Landlord and all other named insureds of the cancellation. As to any proposed diminution in the perils insured against, or reduction of the amount of coverage of the particular policy in question, initiated (i) by the insurer, shall require not less than thirty (30) days' prior written notice to Landlord; and (ii) by Tenant, shall require not less than thirty (30) days' prior written notice to Landlord. 1.46 Use of Premises. Tenant shall not use, occupy or permit the Premises to be used or occupied, in a manner which will make void or voidable any insurance then in force with respect thereto or the Property, or which will make it impossible to obtain casualty or other insurance with respect to the Property. 1.47 Waiver of Recovery Rights. The parties hereto hereby waive any and all rights of recovery from the other, their respective partners, officers, agents and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in each form of insurance policy required to be maintained by the other hereunder. 1.48 Waiver of Subrogation. Each policy of insurance provided for in this Section 13 shall contain an express waiver of any and all rights of subrogation thereunder whatsoever against the insured party, its partners, officers, agents and employees, to the extent of the insurance coverage required under this Lease. All such policies shall be written as primary policies and not contributing with or in excess of the coverage, if any, which such party may carry. Any other provision contained in this Section or elsewhere in this Lease notwithstanding, the amounts of all insurance required hereunder to be paid by a party shall be not less than an amount sufficient to prevent the other party from becoming a co-insurer. 1.49 Prohibited Sales or Activity. Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises or any section thereof, any item, or permit any activity, which may be prohibited by the standard form of casualty or public liability insurance policy. Tenant agrees to pay any increase in premiums for insurance which may be carried by Landlord on the Premises or the Building of which it is a part, resulting from the use or activities in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Premises, a schedule, issued by the organization making the insurance rate on the Premises, showing various components of such rate, shall be conclusive evidence of the several items and charges which make up the respective insurance rate on the Premises. 1.50 Prohibited Use Deemed Ultra Hazardous. Tenant shall not use or occupy the Premises or any part thereof, or suffer or permit the same to be used or occupied for any business or purpose deemed ultra hazardous on account of fire or otherwise. In the event Tenant's use and/or occupancy causes any increase of premium for insurance on the Premises or any part thereof above the rate for the least hazardous type of occupancy legally permitted in the Premises, Tenant shall pay such additional premium on the insurance policy that may be carried by Landlord for its protection. Bills for such additional premiums shall be rendered by Landlord to Tenant at such time as Landlord may elect, and shall be due from and payable by Tenant when rendered in writing, but such increase in Page -20- the rate of insurance shall not be deemed a breach of this covenant by Tenant. Failure to pay amounts due hereunder shall be a breach of the Lease. 1.51 Landlord's Maintenance of Special Peril Property Insurance. Landlord shall, at all times during the Term, subject to Tenant's obligation for its Pro-Rata Share of the Property Operating Costs, procure and maintain in full force and effect "special peril" property insurance against perils included therein (excluding flood and earthquake), boiler and machinery coverage and such further coverage as Landlord may conclude is necessary covering not less than one hundred percent (100%) of the current replacement value of the Building in which the Premises is situated and its improvements. The insurer therefor shall meet the minimum requirements as otherwise set forth above. Mortgagee(s) of the Property or any portion thereof may be named as additional insureds thereon. Such insurance shall also cover all exterior signs maintained by Landlord hereunder. 1.52 Landlord's Maintenance of General Liability Insurance. Landlord shall, during the Term, subject to Tenant's obligation for its pro-rata share of the Property Operating Costs, procure and maintain in full force and effect a policy or policies of commercial general liability insurance assuring against loss or damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever in connection with the Property. Such liability insurance shall be in an amount of not less than One Million and 00/100 Dollars ($1,000,000.00) per occurrence and Two Million and 00/100 Dollars ($2,000,000.00) aggregate. Such insurance shall also cover and include all exterior signs maintained by Landlord hereunder. The insurer therefor shall meet the minimum requirements as otherwise set forth above. Mortgagee(s) of the Property or any portion thereof may be named as additional insureds thereon. SECTION 14 INDEMNIFICATION --------------- 1.53 Indemnification. Tenant hereby indemnifies, saves and holds Landlord, the Premises, the Property, the leasehold estate and Landlord's management agent for the Property free of and harmless from any and all liabilities, losses, costs, expenses, including attorney's fees (at trial, and on appeal), causes of action, suits, judgments, claims, liens and demands of any kind whatsoever in connection with, arising out of, or by reason of any act, omission or negligence of Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers or business invitees while in, upon, about or in any way connected with the Premises or the Property or arising from the use and occupancy of the Premises by Tenant, or occasioned wholly or in part by any act or omission of Tenant, its subtenants, agents, contractors, employees, servants, lessees or concessionaires, excepting, however, such claims and demands, whether for injuries to persons or loss of life, or damage to property, caused by the gross negligence or wilful misconduct of Landlord. If, however, any liability arises in the Common Areas because of the gross negligence or wilful misconduct of Tenant, Tenant's subtenants, agents, employees, contractors, invitees, customers or visitors, then in such event Tenant shall hold Landlord harmless. In case Landlord shall, without fault on its part, be made a party to any litigation relating to claims and demands described in this Section 14.1, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorney's fees that may be incurred or paid by Landlord in enforcing the covenants and agreements of this Lease. Landlord shall not be liable for any damage arising from any acts or neglect of co-tenants or other occupants of the Property or of adjacent property or of the public. 1.54 Landlord's Liability. Landlord shall indemnify, defend and save Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers, or business invitees harmless from and against any and all claims, demands, actions, suits, losses, damages, costs, expenses and liabilities of any kind or nature by or in favor of anyone whomsoever, resulting from or in connection with loss of life, bodily injury or property damage arising out of the use or maintenance of the Common Areas or occurring within the Common Areas and arising solely and directly out of the negligence of Landlord or its employees, agents, servants, contractors or subcontractors. SECTION 15 SUBORDINATION AND NONDISTURBANCE -------------------------------------- Page -21- 1.55 Subordination. Subject to the receipt by Tenant of the nondisturbance agreement described in Section 15.4 below, in a commercially reasonably form executed by the holder of the mortgage (the "Mortgagee"), Tenant agrees upon request of Landlord to subordinate every term, provision and covenant in this Lease to the lien of any mortgage, deed of trust or other encumbrance (a "Mortgage"), together with any renewals, extensions, or replacement thereof, now or hereafter placed, charged or enforced against the Premises, or any portion of the Property of which the Premises is a part. If the holder of a Mortgage becomes the owner of the Property by reason of foreclosure or acceptance of a deed in lieu of foreclosure, at such holder's election, this Lease and Tenant's right to possession of the Premises shall not be disturbed, and Tenant will be bound to such holder or its designee under all the terms and conditions of this Lease, and Tenant will be deemed to have attorned to and recognized such holder or its designee as Landlord's successor-in-interest for the remainder of the Term. Tenant, upon ten (10) business days' written request by Landlord, will execute and deliver without charge, a commercially reasonably document(s) acceptable to Landlord or such holder in order to confirm the subordination and/or attornment set forth above. Tenant's failure to respond to Landlord's request to negotiate in good faith and execute any such documents referred to in this Section 16.1, at the expiration of such ten (10) day period, shall constitute an immediate default (without notice from Landlord or additional time to cure) by Tenant and shall entitle Landlord to exercise its rights at law, in equity or under this Lease. 1.56 Prior Lien. In the event that the Mortgagee or beneficiary of any such mortgage or deed of trust elects to have this Lease a prior lien to its mortgage or deed of trust, then and in such event, upon such Mortgagee's or beneficiary's giving written notice to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of recordation of such mortgage or deed of trust. 1.57 Attornment. Tenant shall, in the event of the exercise of any power of sale under any deed of trust or any proceedings that are brought for the foreclosure of a lien affecting the Property, in which the Premises are situated, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this Lease, and such purchaser shall recognize the interest of the Tenant under the Lease, provided that Tenant is not then in default under this Lease. 1.58 Nondisturbance. With respect to each Mortgage that may encumber the Property, at or after the commencement of the Term, Landlord agrees that promptly following receipt of a written request by Tenant (one time only), to ask the holder of the Mortgage to grant Tenant a "nondisturbance agreement," in a commercially reasonable form of such holder. The term of the "nondisturbance agreement," as used herein, shall mean, in general, an agreement that, as long as Tenant is not in default under this Lease, this Lease will not be terminated if such holder acquires title to the Property by reason of foreclosure proceedings or acceptance of a deed in lieu of foreclosure, provided that Tenant attorns to such holder, in accordance with its requirements. Except for making such written request, Landlord will be under no duty or obligation hereunder, nor will the failure or refusal of such holder to grant a nondisturbance agreement render Landlord liable to Tenant, or affect this Lease, in any manner. Tenant will bear all costs and expenses, including attorneys' fees, of such holder in connection with a nondisturbance agreement. SECTION 16 ASSIGNMENT AND SUBLETTING ---------------------------- 1.59 Assignment. Tenant shall not assign, sublease, transfer or encumber this Lease or any interest therein. Any one or more (in the aggregate) transfers of more than a twenty percent (20%) interest in the Tenant shall be deemed to be an assignment under this Lease (including, but not limited to, any change in ownership or power to vote, on a cumulative basis, of a majority of Tenant's outstanding voting stock). Any attempted assignment or sublease by Tenant in violation of the terms and covenants of this Section 16 shall be void. Tenant shall not: (i) assign or in any manner transfer this Lease or any estate or interest therein; (ii) permit any assignment of this Lease or any estate or interest therein, whether by operation of law or otherwise; (iii) sublet the Premises or any part thereof; (iv) grant any license, concession, franchise or other right of occupancy in the Premises or any part thereof; or (v) mortgage, pledge or otherwise encumber its interest or estate in this Lease or in the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld or conditioned, and any such acts shall be ineffective as against Landlord. Waiver by Landlord as to any assignment or subletting shall not operate as a waiver of the prohibition contained herein or of Landlord's rights as to any subsequent assignment or subletting. Notwithstanding any assignment or subletting, Tenant shall at all times remain fully responsible and liable for the performance of all Tenant's covenants and obligations under this Lease. If any default of this Lease should occur while the Premises or any part thereof are then assigned or sublet, Landlord, in Page -22- addition to any other rights and remedies which Landlord may have whether hereunder, at law or in equity, may at its option collect directly from such assignee or sublessee all rent becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord by Tenant hereunder, and Tenant hereby authorizes and directs any such assignee or sublessee to make such payments of said rent directly to Landlord upon receipt of notice from Landlord. No direct collection by Landlord from any such assignee or sublessee shall be construed to constitute a novation or a release of Tenant from the performance of its covenants and obligations hereunder. Landlord is authorized and empowered, on behalf of Tenant, to endorse the name of Tenant upon any check, draft or other instrument payable to Tenant evidencing payment of rent, or any part thereof, and to receive and apply the proceeds therefrom in accordance with the terms hereof. 21.0.1 Permitted Assignees. Notwithstanding anything to the contrary contained in this Lease, Tenant may, upon ten (10) days' written notice to, but without any requirement of consent by Landlord, assign this Lease to a wholly owned subsidiary of Tenant, to an affiliate of Tenant, to an entity that is controlled by, controls or is under common control with Tenant, or any person or entity simultaneously acquiring, by asset or stock transfer, consolidation, merger, sale or reorganization, a majority of Tenant's assets, provided such assignee assumes this Lease in its entirety, and agrees to perform the obligations of Tenant under this Lease ("Permitted Assignee(s)"). Further, if Tenant is a corporation or a partnership, or a publicly traded company, as defined by applicable federal securities laws, then, in any such event, any change of ownership resulting in a change of majority control from those persons or entities not having control will not be deemed an assignment or transfer requiring Landlord's consent. For purposes herein, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, or majority ownership of any sort, whether through ownership or voting securities, by contract or otherwise. 21.0.2 Proposed Assignee. In the event that Tenant requests Landlord's consent to assign or otherwise transfer this Lease, sublet or license all or any part of the Premises, Tenant shall submit to Landlord the name, address, financial statement, credit authorization and business experience resume for the immediately preceding three (3) years of the proposed assignee, transferee or subtenant and such other information concerning such proposed assignee, transferee or subtenant as Landlord may reasonably require. This information shall be in writing and shall be received by Landlord not less than thirty (30) days prior to the effective date of the proposed assignment, transfer or sublease. 21.0.3 Default. Notwithstanding any of the foregoing provisions, if Tenant, at the time of any request to approve an assignment or sublease, is in default under any of the terms of this Lease, beyond any applicable notice and cure period, Tenant may not assign, transfer, or sublet the Premises, in whole or in part, until such default is cured. 1.60 Option to Terminate. If Tenant requests Landlord's consent to an assignment of this Lease or subletting of all or part of the Premises, Landlord shall have the option (without limiting Landlord's other rights hereunder) of terminating this Lease upon thirty (30) days' notice. Landlord may then, at Landlord's option, lease space to the prospective assignee or subtenant. In the event that Landlord elects to terminate this Lease, Tenant may, if it so elects, by written notice to the Landlord within five (5) business days after receipt of Landlord's termination notice, revoke its notice to assign or sublet, and in such event, this Lease shall continue in full force and effect as if such notice for assignment or sublet had not been given. If Landlord should fail to notify Tenant in writing of its decision within a twenty (20) day-period after Landlord is notified in writing of the proposed assignment or sublease, Landlord shall be deemed to have refused to consent to such proposed assignment or sublease, and to have elected to keep this Lease in full force and effect. 1.61 Bonus Rent. In the event that Landlord does consent to any assignment or sublet pursuant to this Section 16, then Landlord may also require, as a condition to such consent, that Tenant agree to pay Landlord as Additional Rent, Page -23- one hundred percent (100%) of any Bonus Rent received by Tenant. For purposes of this Lease, Bonus Rent shall mean sums or other economic consideration (i) which Tenant receives pursuant to the terms of the assignment or sublet, whether or not denominated rentals under the transfer, and which sums are in excess of total sums which Tenant is obligated to pay Landlord under this Lease (to be pro-rated if only a portion of the Premises is subject to such transfer); less (ii) (a) reasonable leasing commissions paid by Tenant; (b) other reasonable out-of-pocket costs paid by Tenant, including attorney's fees, advertising costs, and expenses of subtenant improvements or other expenses of readying the Premises for occupancy by the transferee; and (c) any consideration paid to the transferee or any third party to induce the transferee to consummate the transfer. This covenant and assignment shall run with the land and shall bind Tenant and Tenant's heirs, executors, administrators, personal representatives, successors and assigns. This Section shall not apply to Permitted Assignees. 1.62 Remedies. No assignment, sublease or other transfer consented to by Landlord shall release Tenant or change Tenant's primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Upon the occurrence of any default under this Lease, beyond any applicable notice and cure period, Landlord may proceed directly against Tenant without the necessity of exhausting any remedies against any subtenant or assignee. Upon termination of this Lease, any permitted subtenant shall, at Landlord's option, attorn to Landlord and shall pay all rent directly to Landlord. Landlord's acceptance of rent from any other person shall not constitute a waiver of any provision of this Section 16. Consent to one (1) transfer shall not constitute a consent to any subsequent transfer. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant's transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant of its liability under this Lease. 1.63 Processing Fee. Tenant shall reimburse Landlord a processing fee in an amount not to exceed Seven Hundred Fifty and 00/100 Dollars ($750.00) as reimbursement to Landlord for any and all legally-related expenses and Landlord's administrative costs in connection with the review of assignment, transfer or sublease-related documents, which may be incurred by Landlord in connection therewith. Payment of such fee shall be submitted to Landlord along with Tenant's request for Landlord's consent. This Section shall not apply to Permitted Assignees. SECTION 17 CONDEMNATION ------------ If the whole or substantially the whole of the Building or the Premises shall be taken for any public or quasi-public use, by right of eminent domain or otherwise or shall be sold in lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. If less than the whole or substantially the whole of the Building or the Premises is thus taken or sold, Landlord (whether or not the Premises are affected thereby) may terminate this Lease by giving written notice thereof to Tenant, in which event this Lease shall terminate as of the date when physical possession of such portion of the Building or Premises is taken by the condemning authority. If the Lease is not so terminated upon any such taking or sale, the Base Rent payable hereunder shall be diminished by an equitable amount, and Landlord shall, to the extent Landlord deems feasible promptly undertake to repair and restore the Building in which the Premises are situated to a complete architectural unit, consistent with the base Building and Landlord's Work specified in Exhibit C. Landlord, in any event, shall not be required to spend for such work an amount in excess of the amount received by Landlord as compensation for such taking. All amounts awarded upon a taking of any part or all of the Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to and expressly waives all claims to any such compensation. SECTION 18 DAMAGE OR DESTRUCTION --------------------- 1.64 Destruction of Premises. In the event of the total or partial destruction of the Building or the Premises, or any portion thereof, whether by fire or other casualty, this Lease shall not terminate except as otherwise specifically provided herein. Landlord shall promptly undertake to repair and restore the Building in which the Premises is situated including Common Areas therein consistent with the provisions of Section 18.2 below. Thereafter, Tenant shall, in accordance with Section 18.2 below, promptly undertake and with reasonable dispatch repair and reconstruct the Premises and other improvements of the Tenant on the Premises. To the extent insurance proceeds are Page -24- insufficient therefor, Tenant shall be liable for any such differences. In determining what constitutes reasonable dispatch, consideration shall be given to delays caused by labor disputes, civil commotion, war, warlike operations, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials or services, acts of God and other causes beyond Tenant's reasonable control. In the event of a casualty, not the result of Tenant's negligence or wilful misconduct, such that the Premises are unusable to the Tenant in the conduct of its business for a period of more than ten (10) days, Base Rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of business, as may be reasonably determined by Landlord (but there shall be no abatement of Base Rent by reason of any portion of the Premises being unusable for a period equal to ten (10) days or less. 1.65 Reconstruction. The provisions of this Section 18 with respect to repair and reconstruction by Landlord shall be limited as to that which is necessary to place the Premises in the condition existing as of the Occupancy Date specified in Landlord's Work Letter or like condition, and when placed in such con-dition the Premises shall be deemed restored and rendered tenantable, promptly following which time, but not more than ninety (90) days thereafter, subject to extension of time for Force Majeure and Landlord Delays, as defined in Exhibit ----- ------- C, in the completion of its repair or restoration work, at Tenant's expense, Tenant shall perform Tenant's Work and any and all modification, addition or alteration subsequent thereto, and Tenant shall also repair and restore all Alterations. Tenant shall also repair or replace its stock in-trade, fixtures, furniture, furnishings, floor coverings and equipment. 21.0.1 Lease Termination. If the Premises cannot be restored and Tenant's business opened within twelve (12) months following such damage or destruction based upon a reasonable estimate therefor made by Landlord's architect following such damage or destruction, then, and in such event, Landlord or Tenant may, within thirty (30) days after written notice from Landlord estimating the time to complete such repair or restoration (which notice shall be given to Tenant within thirty (30) days of such damage or destruction), elect to terminate this Lease by written notice to the other. 1.66 Insurance Proceeds Maintained by Tenant. All insurance proceeds payable under any casualty insurance policy procured and maintained by Tenant shall be payable solely to Tenant and/or its Mortgagee with the provision that such proceeds shall be made available for repair and restoration of the Premises. Tenant shall in no case be entitled to compensation or damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent pro-vided for in this Section 18, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. 1.67 Insurance Proceeds Maintained by Landlord. All insurance proceeds payable under any casualty insurance policy procured and maintained by Landlord shall be payable solely to Landlord and/or its Mortgagee(s), and Tenant shall have no interest therein. Landlord shall endeavor to see that the proceeds are made available for repair and restoration as required of Landlord. Tenant shall in no case be entitled to compensation or damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent provided for in this Section 18, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. SECTION 19 RIGHT OF ACCESS ----------------- 1.68 Right of Access. Landlord and its authorized agents and representatives shall be entitled to enter the Premises with forty-eight (48) hours prior written notice to Tenant (facsimile notice being acceptable), and with minimal interference with Tenant's business at any reasonable time for the purpose of observing, posting or keeping posted thereon notices provided for hereunder, and such other notices as Landlord may deem necessary or appropriate for protection Page -25- of Landlord, its interest or the Premises; for the purpose of inspecting the Premises or any portion thereof; to inspect the Premises relative to concerns over use, storage or disposal of hazardous waste and chemicals; and for the purpose of making repairs to the Premises or any other portion of the Property and performing any work therein or thereon which Landlord may elect or be required to make hereunder, or which may be necessary to comply with any laws, ordinances, rules, regulations or requirements of any public authority or any applicable standards that may, from time to time, be established by an Insurance Services Office or any similar body, or which Landlord may deem necessary or appropriate to prevent waste, loss, damage or deterioration to or in connection with the Premises or any other portion of the Property or for any other lawful purpose. Landlord shall have the right to use any means which Land-lord may deem proper to open all doors in the Premises in an emergency. Entry into the Premises obtained by Landlord by any such means shall not be deemed to be forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof. Nothing contained herein shall impose or be deemed to impose any duty on the part of Landlord to do any work or repair, maintenance, reconstruction or restoration which under any provision of this Lease is required to be done by Tenant; the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to do the same. 1.69 Performance of Work. Landlord may, during the progress of any work on the Premises, keep and store upon the Premises all necessary materials, tools and equipment. Landlord shall not in any event be liable for inconvenience, annoy-ance, disturbance, loss of business or quiet enjoyment, or other damage or loss to Tenant by reason of making any such repairs or performing any such work upon the Premises, or on account of bringing materials, supplies and equip-ment into, upon or through the Premises during the course thereof, and the obligations of Tenant under this Lease shall not thereby be affected in any manner whatsoever. Landlord shall, however, in connection with the performance of such work, cause as little inconvenience, disturbance or other damage or loss to Tenant as may be reasonably possible under the circumstances. 1.70 Exhibiting Premises. Landlord, its authorized agents and representatives, shall be entitled to enter the Premises upon not less than forty-eight (48) hours prior written notice to Tenant (facsimile notice being acceptable), and with minimal interference with Tenant's business at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final year of the Term of this Lease, Landlord shall be entitled to exhibit the Premises for lease and post signs therein announcing the same. SECTION 20 ESTOPPEL CERTIFICATE --------------------- Tenant agrees that within ten (10) days of any demand therefor by Landlord, Tenant will execute and deliver to Landlord and/or Landlord's designee a recordable certificate stating that this Lease is in full force and effect (an "Estoppel Certificate") in a form that is reasonably requested by Landlord. Tenant acknowledges that any such statement may be relied upon by any Mortgagee or prospective purchaser of the Building or any interest therein. In the event that Tenant fails to execute any such certificate for Landlord within said ten (10) days, Tenant shall be in immediate default under this Lease. SECTION 21 TENANT'S DEFAULT/LANDLORD'S REMEDIES ---------------------------- 1.71 Events of Default. Tenant's compliance with each and every covenant and obligation hereof on its part to be performed hereunder is a condition precedent to each and every covenant and obligation of Landlord hereunder. Any one or more of the following shall be deemed to be an "Event of Default" by Tenant and a material breach of this Lease: 21.0.1 Non-Payment of Money. If Tenant shall fail to pay Aggregate Monthly Rent or any other amount or charge to be paid by Tenant hereunder, within five (5) days of when they are due; or 21.0.2 Non-Monetary Non-Performance. If Tenant shall default in the performance of any other term, covenant or condition of this Lease on the part of Tenant to be kept and performed and such default continues for thirty (30) days after written notice thereof from Land-lord to Tenant; provided, however, that if the default complained of in Page -26- such notice is of such a nature that the same can be rectified or cured, but cannot with reasonable diligence be done within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Tenant shall, within said thirty (30) day period, commence to rectify and cure the same and shall thereafter complete such rectification and cure with all due diligence; or 21.0.3 Abandonment of Premises. If Tenant shall abandon the Premises for a period of ten (10) consecutive days; or 21.0.4 Bankruptcy. If there is filed any petition in bankruptcy, or if Tenant is adjudicated as bankrupt or insolvent, or if there is appointed a receiver or trustee to take possession of Tenant or of all or substantially all of the assets of Tenant, or if there is a general assignment by Tenant for the benefit of creditors, or if any action is taken by or against Tenant under any state or federal insolvency or bankruptcy act, or if any similar law now or hereafter in effect, including, without limitation, the filing of execution or attachment against Tenant and such levy continues in effect for a period of ninety (90) days. This provision hereof shall also apply to any guarantor of this Lease or occupant of the Premises; or 21.0.5 Mechanic Liens. If Tenant does, or permits to be done, any act which creates a mechanic's lien or claim thereof against the Premises or the Property and fails to timely discharge same; or 21.0.6 Falsified Financial Reports. If Tenant falsifies any monetary report to Landlord or fails to furnish Landlord with any monetary report when due, and such default shall continue for twenty (20) days after written notice from Landlord; or 21.0.7 Failure to Obtain Policies and/or Certificates of Insurance. If Tenant fails to furnish Landlord with a copy of any insurance policy or certificate required to be furnished by Tenant to Landlord when due, and such default shall continue for thirty (30) days after written notice from Landlord; or 21.0.8 Failure to Obtain Consent. If Tenant's causing, permitting or suffering to be done any act (i) required by this Lease to have the prior written consent of Landlord, unless such consent is so obtained; or (ii) prohibited by this Lease; or 21.0.9 Intentionally Omitted. 21.0.10 Intentionally Omitted . 21.0.11 Failure to Perform Other Obligations. In addition to the events constituting a default and breach of the Lease by Tenant as stated above, if within any twelve (12) month period during the Term of the Lease, Tenant shall have failed to perform any obligation required of Tenant hereunder, or has been in breach for any reason under the Lease more than two (2) times, and Landlord, because of any such failure and/or breach, shall have served upon Tenant within said twelve (12) month period two (2) or more notices of any such failure or breach, then any subsequent failure or breach shall be deemed a noncurable default, without requirement of notice or opportunity to cure, and Landlord shall be immediately entitled to exercise any and all rights, remedies and/or elections specified below or otherwise available at law or in equity. 1.71.1 Cross-Defaults. The parties hereto acknowledge that in addition to executing this Lease, Tenant has executed an additional lease with an affiliate of Landlord's for space located at 2280 Corporate Circle, Henderson, Nevada, dated __________, 2002, with 2280 Corporate Circle, LLC, as the landlord (the "Additional Lease"). Any default, beyond any applicable notice and cure periods, under this Lease shall constitute a default under the Additional Lease and any default, beyond any applicable notice and cure periods, under the Additional Lease shall constitute a default hereunder. 1.72 Additional Remedies. Upon the occurrence of an Event of Default, Landlord shall have the right, in accordance with applicable laws, at its election, then, or at any time thereafter, and while any such Event of Default shall continue, either: 20. to give Tenant written notice of Landlord's intention to terminate this Page -27- Lease on the date such notice is given or on any later date specified therein, whereupon, on the date specified in such notice, Tenant's right to possession of the Premises shall cease and this Lease shall thereupon be terminated; provided, however, that all of Tenant's obligations, including, but not limited to, payment of the amount of Aggregate Monthly Rent and other obligations reserved in this Lease for the balance of the Lease Term, shall immediately be accelerated and due and payable; or 21. to the extent permitted by applicable law, to re-enter and take possession of the Premises or any part thereof and repossess the same as Landlord's former estate and expel Tenant and those claiming through or under Tenant, and remove the effects of both or either, using such force for such purposes as may be reasonably necessary, (i) without being liable for prosecution thereof; (ii) without being deemed guilty of any manner of trespass; and (iii) without prejudice to any remedies for arrears of rent or preceding breach of covenants or conditions. Should Landlord elect to re-enter the Premises as provided in this Section 21 or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, from time to time, without terminating this Lease, relet the Premises or any part thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term of this Lease) and on such conditions and upon such other terms (which may include concessions of free rent, alteration, and repair of the Premises) as Landlord, in its discretion, may determine, and Landlord may collect and receive the rents therefor. Landlord shall in no way be responsible or liable for any failure to relet the Premises or any part thereof or for any failure to collect any rent due upon such reletting. No such re-entry or taking possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease unless a written notice of such intention be given to Tenant. No notice from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so stated. Landlord reserves the right following any such re-entry and/or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which event, this Lease will terminate as specified in said notice; or 22. the parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim (except for compulsory counterclaims) brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use of occupancy of the Premises, and/or any claim of injury or damage. In the event Landlord commences any proceedings for non-payment of any rent, Tenant will not interpose any counterclaim of whatever nature or description in any such proceedings. This shall not, however, be construed as a waiver of the Tenant's right to assert such claims in any separate action or actions brought by Tenant. 1.73 Right to Possession. In the event that Landlord does not elect to terminate this Lease as permitted in Section 21.2(a) hereof, but, on the contrary, elects to take possession as provided in Section 21.2(b), Tenant shall pay to Landlord (i) the rent and other sums as herein provided which would be payable hereunder if such repossession had not occurred; less (ii) the net proceeds, if any, of any reletting of the Premises after deducting all Landlord's expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, reasonable legal expenses, attorney's fees, expenses of employees, alteration and repair costs, and expense of preparation for such reletting. If, in connection with any reletting, the new lease term extends beyond the existing Lease Term, or the premises covered thereby include other premises not part of the Premises, a fair apportionment of the rent received from such reletting and the expenses incurred in connection therewith as provided aforesaid will be made in determining the net proceeds from such reletting. Tenant shall pay such apportioned rent and other sums to Landlord, monthly on the days on which the rent would have been payable hereunder if possession had not been taken. 1.74 Loss of Bargain. In the event this Lease is terminated, Landlord shall be entitled to recover forthwith against Tenant, as damages for loss of the bargain and not as a penalty, an aggregate sum which, at the time of such termination of this Lease, represents the excess, if any, of the aggregate of the rent and all other sums payable by Tenant hereunder that would have accrued for the balance of the Lease Term over the aggregate rental value of the Premises (such rental value to be computed on the basis of a tenant paying not only rent to Landlord for the use and occupation of the Premises, but also such other charges as are required to be paid by Tenant under the terms of this Lease) for the balance of such Lease Term. Alternatively, at Landlord's option, Tenant shall remain liable to Landlord for damages in an amount equal to the rent and other sums arising Page -28- under the Lease for the balance of the Lease Term had the Lease not been terminated, less the net proceeds, if any, from any subsequent reletting, after deducting all expenses associated therewith and as enumerated above. Landlord shall be entitled to receipt of such amounts from Tenant pro-rated monthly on the days on which such sums would have otherwise been payable. 1.75 Actions for Recovery. Suit or suits for the recovery of the amounts and damages set forth above may be brought by Landlord, from time to time, at Landlord's election, and nothing herein shall be deemed to require Landlord to await the date whereon this Lease or the Lease Term would have expired had there been no such default by Tenant or no such termination, as the case may be. 1.76 Actions for all Rent. After an Event of Default by Tenant, Landlord may sue for or otherwise collect all rents, issues, and profits payable under all subleases on the Premises, including those past due and unpaid. 1.77 Landlord not Liable for Trespass. After an Event of Default by Tenant, to the extent permitted by applicable law, Landlord may, without terminating this Lease, enter upon the Premises: (i) without being liable for prosecution of any claim for damages; (ii) without being deemed guilty of any manner of trespass; and (iii) without prejudice to any other remedies, and do whatever Tenant is obligated to do under the terms of this Lease. Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may reasonably incur in effecting compliance with the Tenant's obligations under this Lease; further, Tenant agrees that Landlord shall not be liable for any damages resulting to Tenant from effecting compliance with Tenant's obligations under this Section unless caused by the negligence of Landlord or otherwise. 1.78 No Waiver. No failure by Landlord to insist upon the strict performance of any agreement, term, covenant, or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach of such agreement, term, covenant, or condition. No agreement, term, covenant, or condition hereof to be performed or complied with by Tenant, and no breach thereof, shall be waived, altered, or modified except by written instrument executed by Landlord. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant, and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. Notwithstanding any unilateral termination of this Lease, this Lease shall continue in full force and effect as to any provisions hereof which require observance or performance of Landlord or Tenant subsequent to termination (i.e. any and all insurance and indemnifications provisions provided for herein). 1.79 Liquidated Damages. Nothing contained in this Section shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization, or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to, or less than the amounts recoverable, either as damages or rent, referred to in any of the provisions of this Section. 1.80 Administrative and Interest Charges. Any rents or other amounts due and owing to Landlord hereunder which are not paid within five (5) days of the date they are due shall thereafter bear interest at the Default Interest Rate until paid. In addition to the foregoing, Tenant shall pay to Landlord whenever any Base Rent, Additional Rent, or any other sums due hereunder remain unpaid more than five (5) days after the due date thereof, an administrative charge (and not a penalty) to compensate Landlord for the costs and expenses associated with handling a delinquent account equal to five percent (5%) of the amount due. 23. Further, upon an Event of Default by Tenant, in addition to all other rights and remedies, Landlord shall be entitled to receive from Tenant all sums, the payment of which may previously have been waived or abated by Landlord, or which may have been paid by Landlord pursuant to any agreement to grant Tenant a rental abatement or other monetary inducement or concession, including, but not limited to, any Tenant Improvement Allowance or moving allowance, together with interest thereon from the date or dates such amounts were paid by Landlord or would have been due from Tenant but for the abatement, at the Default Interest Page -29- Rate, until paid; it being understood and agreed that such concession or for Recovery abatement was made on the condition and basis that Tenant fully perform all obligations and covenants under the Lease for the entire Term. Nothing herein contained shall limit any other remedy of Landlord provided for in this Lease, at law or in equity. Landlord shall have the right to require that Tenant pay monies due in the form of a money order or certified funds. 1.81 Landlord's Lien. Tenant agrees that Landlord shall have a Landlord's lien on and against all real or personal property belonging to Tenant, Tenant's agents, subtenants, or licensees, which real or personal property is situated on or in the Premises, which lien shall secure the payment of all rental and additional charges payable by Tenant to Landlord under the terms hereof. SECTION 22 QUIET POSSESSION ----------------- Tenant, upon paying the Base Rent, Additional Rent and all other charges and monies herein required of Tenant, and upon Tenant's performance of all of the terms, covenants and conditions of this Lease on its part to be kept and per-formed, may quietly have, hold and enjoy the Premises during the Term of this Lease without any disturbance from Landlord or from any other person claiming through Landlord. SECTION 23 CONVEYANCE BY LANDLORD ------------------------ In the event of any sale, transfer or exchange of the Premises by Landlord, Land-lord shall be and is hereby relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease, arising out of any act, occurrence or omission relating to the Premises occurring after the consummation of such sale, transfer, conveyance or exchange. Tenant agrees to attorn to such purchaser, transferee or grantee. SECTION 24 DEFAULT BY LANDLORD --------------------- Subject to Section 10.1, it is agreed that in the event Landlord fails or refuses to perform any of the provisions, covenants or conditions of this Lease on Landlord's part to be kept or performed, that Tenant, prior to exercising any right or remedy Tenant may have against Landlord on account of such default, shall give written notice to Landlord of such default, specifying in said notice the default with which Landlord is charged and Landlord shall not be deemed in default if the same is cured within thirty (30) days of receipt of said notice. Notwithstanding any other provision hereof, Tenant agrees that if the default complained of in the notice provided for by this Section is of such a nature that the -same can be rectified or cured by Landlord, but cannot with reasonable diligence be rectified or cured by Landlord within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Landlord within a thirty (30) day period shall commence the rectification and curing thereof and shall continue thereafter with all due diligence to cause such rectification and curing to proceed. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord's default as to any covenant or agreement contained in this Lease or as a result of the breach of any promise or inducement hereof, whether in the Lease or elsewhere. Tenant hereby waives such remedies of termination and recession and hereby agrees that Tenant's remedies for default hereunder and for breach of any promise or inducement shall be limited to a suit for specific performance, declaratory judgment, and/or injunctive relief. SECTION 25 FORCE MAJEURE ------------- Whenever a day is appointed herein on which, or a period of time is appointed in which, either party hereto is required to do or complete any act, matter or thing, the time for the doing or completion thereof shall be extended by a period of time equal to the number of days on or during which such party is prevented from or is unreasonably interfered with, the doing or completion of such act, matter or thing because of labor disputes, civil commotion, war, warlike operation, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials, or to obtain fuel or energy, weather or other acts of God, terrorism, or bioterrorism, or other causes beyond Page -30- such party's reasonable control (financial inability excepted); provided, however, that nothing contained herein shall excuse Tenant from the prompt payment of any rent or charge required of Tenant hereunder. SECTION 26 NOTICES ------- 1.82 Notices. Any and all notices and demands by or from Landlord to Tenant, or by or from Tenant to Landlord, required or desired to be given hereunder shall be in writing and shall be validly given or made if served either personally, or delivered by recognized commercial courier that requires a written acknowledgment of delivery (such as Federal Express), or if deposited in the United States mail, certified or registered, postage prepaid, return receipt re-quested. All notices given in accordance with this Section shall be effective when actually received; provided, however, that the first attempted delivery of any notice which was not delivered as a result of a change of address of which the sending party was not notified or as a result of any party's refusal to accept delivery shall be deemed receipt. 21.0.1 Address of Landlord Address of Landlord. Any notice or demand to Landlord shall be addressed to Landlord at: 901 N. Green Valley Parkway Suite 200 Henderson, Nevada 89074 Attn: Vice President Property Management with a copy to: American Nevada Realty 901 N. Green Valley Parkway Suite 200 Henderson, Nevada 89074 Attn: Legal Department 21.0.2 Address of Tenant Address of Tenant. Any notice or demand to Tenant shall be addressed to Tenant at the Premises with a copy to: Mego Financial Corp. 4310 Paradise Rd. Suite 302 Las Vegas, Nevada 89109 Attn: Jon Joseph, General Counsel 1.83 Change of Address. Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective, however, until the actual receipt thereof by the other party. SECTION 27 HOLDOVER TENANCY ------------- In the event of holding over by Tenant after the expiration of the Term of this Lease (the "Expiration Date"), or in the event Tenant continues to occupy the Premises after the termination of Tenant's right of possession pursuant to Section 21.2, Tenant shall throughout the entire holdover period pay rent equal to two hundred percent (200%) of the Base Rent, which would have been applicable had the Term of this Lease continued through such holding over by Tenant. If Tenant remains in possession of all or any part of the Premises after the expiration of the Lease Term, with the express written consent of Landlord: (i) such tenancy will be deemed to be a periodic tenancy from month-to-month only; (ii) such tenancy will not constitute a renewal or extension of this Lease for Page -31- any further term; and (iii) such tenancy may be terminated by Landlord upon the earlier of thirty (30) days prior written notice or the earliest date permitted by law. Such month-to-month tenancy will be subject to every other term, condition, and covenant contained in this Lease including the Base Rent and Additional Rent provisions. Nothing contained in this Section 27 shall be construed as consent by Landlord to any holding over of the Premises by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord upon the expiration or earlier termination of this Lease. If Tenant fails to surrender the Premises upon the expiration or earlier termination of this Lease, despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability, including, without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender. SECTION 28 REMEDIES CUMULATIVE -------------------- The various rights, options, elections and remedies of Landlord contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. SECTION 29 SUCCESSORS AND ASSIGNS ------------------------ The terms, provisions, covenants and conditions contained in this Lease shall apply to, bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of Landlord and Tenant (where permitted), respectively. SECTION 30 PARTIAL INVALIDITY ------------------ If any term, covenant or condition of this Lease, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void, or unenforceable, all terms, covenants and conditions of this Lease, and all applications thereof, not held invalid, void, or unenforceable shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. SECTION 31 TIME OF THE ESSENCE ------------------- Time is of the essence of this Lease and all of the terms, covenants and conditions hereof. SECTION 32 ENTIRE AGREEMENT ---------------- This Lease contains the entire agreement between the parties and shall not be amended, changed or terminated orally. SECTION 33 NO PARTNERSHIP -------------- Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, or of partnership, or of joint venture, or of any association between Landlord and Tenant. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. SECTION 34 BROKERS ----------- The parties hereto warrant that they have had no dealings with any broker or agent in connection with this Lease other than the Broker, for which Landlord shall be responsible for the payment of a real estate commission, pursuant to a separate agreement with Broker. Landlord and Tenant hereby hold each other Page -32- harmless and indemnify the other from and against any and all cost, expense, or liability including legal fees and costs in defense thereof, for any compensation, commissions and charges claimed by any broker or agent, other than Broker, with respect to this Lease or the negotiation thereof based on any such broker's or agent's representation of Tenant or Landlord. SECTION 35 SAVINGS CLAUSE -------------- In the event the Term of this Lease shall not have commenced within one (1) year from the date of execution hereof, this Lease shall become null and void and Landlord and Tenant shall thereupon be released from any and all obligations with respect thereto. SECTION 36 ATTORNEYS' FEES --------------- In the event any action at law or in equity, or any special proceeding, be instituted by either of the parties hereto against the other to enforce this Lease, or any rights arising hereunder, or in connection with the subject matter hereof, the prevailing party shall be entitled to recover all costs of suit and reasonable attorney's fees at trial and on appeal. SECTION 37 INSOLVENCY AND DEATH ------------------------ It is understood and agreed that neither this Lease nor any interest herein or hereunder, nor any estate hereby created in favor of Tenant, shall pass by operation of law under any state or federal insolvency, bankruptcy or inheritance act, or any similar law now or hereafter in effect, to any trustee, receiver, assignee for the benefit of creditors, heir, legatee, devisee, or any other person whomsoever without the express prior written consent of Landlord. SECTION 38 GENERAL PROVISIONS ------------------ 1.84 Captions. The captions appearing at the commencement of the Sections hereof are descriptive only and for convenience of reference to this Lease and in no way whatsoever define, limit or describe the scope or intent of this Lease, nor in any way affect this Lease. 1.85 Pronouns. Masculine or feminine pronouns shall be substituted for the neuter form and vice versa, and the plural shall be substituted for the singular form and vice versa, in any place or places herein in which the context requires such substitution(s). 1.86 Governing Law. The laws of the State of Nevada shall govern the validity, construction, performance, enforcement and effect of this Lease. Any legal action under this Lease or in any way pertaining to this Lease must be instituted and maintained in Clark County, Nevada. The exclusive venue of any action or proceeding arising out of or in connection with this Lease shall be Clark County, Nevada. Each party hereby consents to the personal jurisdiction of any court of competent subject matter jurisdiction sitting in Clark County, Nevada, and to the service of process in accordance with the laws of the State of Nevada and any rules applicable to such court. 1.87 Words of Obligation. Whenever in this Lease any words of obligation or duty are used in connection with either party, such words shall have the same force and effect as though framed in the form of express covenants on the part of the party obligated. 1.88 Joint and Several Liability. In the event Tenant now or hereafter shall consist of more than one person, firm or corporation, then and in such event, all such persons, firms or corporations shall be jointly and severally liable as Tenant hereunder. 1.89 Execution of Lease. The submission of this Lease for examination does not constitute a reservation of or option to lease the Premises; this Lease becomes effective as a Lease only upon execution by Landlord and delivery thereof by Landlord to Tenant. 21.0.1 Deposit. Upon acceptance of Tenant's offer to lease under the terms Page -33- hereof and receipt by Landlord of a deposit in connection with Tenant's submission of said offer, Landlord shall be entitled to retain such deposit and apply same to damages, costs and expenses incurred by Landlord in the event Tenant fails to occupy the Premises, and subject to Landlord completing the Landlord's Work in accordance with Exhibit C. If Landlord declines said offer, any such deposit shall be returned to Tenant. 1.90 Notice of Claim. Should any claim or lien be filed against the Premises, or any action or proceeding be instituted affecting the title to the Premises, Tenant shall give Landlord written notice thereof as soon as Tenant obtains actual or constructive knowledge thereof. 1.91 Neutral Construction. This Lease shall not be construed either for or against Landlord or Tenant, but this Lease shall be interpreted in accordance with the general tenor of its language. 1.92 Construction Allowance. Tenant agrees and acknowledges that Landlord has bargained for Tenant's full and faithful compliance with the terms of the Lease, and Tenant's full and faithful payment of all Base Rent, Additional Rent and other charges and monies to be paid by Tenant. Therefore, if Landlord has granted Tenant any construction allowance, Tenant Improvement Allowance, free rent, or other monetary concession, all such concessions and/or benefits to Tenant shall be effective only so long as Tenant is not in default of any term, covenant or provision of this Lease. Thus, should Tenant default hereunder, in addition to any amounts owing from Tenant to Landlord as a result of such default, the full amount of any such construction allowance, Tenant Improvement Allowance, free rent and/or other monetary concession shall be immediately due and payable by Tenant to Landlord upon demand. If such default by Tenant occurs after the first full Lease Year of the Term, the total amount provided to Tenant as construction allowance or Tenant Improvement Allowance shall be reimbursed to Landlord, equitably prorated in proportion to the balance of the Lease Term, any free rent or other monetary concessions shall be reimbursed to Landlord in full. 1.93 Third Party Beneficiary Status. Tenant acknowledges that, by entering into this Lease with Landlord, Tenant has not become a third party beneficiary of any lease between Landlord and any other tenant of the Property, and that no part of the inducement to Tenant to enter into this Lease was any promise or covenant of Landlord, express or implied, to enforce any other lease for the benefit of Tenant. 1.94 Limited Liability. The obligations of Landlord under this Lease do not constitute personal obligations of Landlord, or its members, managers, partners, directors, officers, or shareholders, and Tenant shall look solely to Landlord's interest in the Property and to no other assets of Landlord for satisfaction of any liability with respect to this Lease and will not seek recourse against the members, managers, partners, directors, officers, or shareholders of Landlord herein, nor against any of their personal assets for such satisfaction. SECTION 39 OPTION TO EXTEND -------------- 1.95 Extension Term. Provided Tenant is in compliance with each and every term, covenant and condition of this Lease at the time that Tenant notifies Landlord of its intent to exercise its Option to Extend, as defined herein, and on the commencement date of any extension granted hereby, Tenant shall have the right and option to extend this Lease ("Option to Extend") for one (1) consecutive additional term of five (5) years ("Extension Term"). 21.0.1 Commencement Date. The Extension Term shall commence at the expiration of the original Term of this Lease. 1.96 Notice of Election. The Option to Extend shall be exercised by Tenant giving Landlord notice in writing of such election to extend at least nine (9) months, but not more than twelve (12) months, prior to the expiration of the original Term. 21.0.1 Adjustment of Base Rent. Such Extension Term shall be on the same terms, covenants, and conditions as provided herein for the original Term, except that the Base Rent provided in Section Page -34- 1.1.5 of the Lease shall be determined in accordance with this Section. The Base Rent payable by Tenant during the initial year of the Extension Term shall be equal to the fair market rental value of the Premises ("FMV"), as defined below, as of the commencement date of the Extension Term. nn. Within thirty (30) days following the Tenant's notification to exercise its Option to Extend, Landlord shall furnish Tenant with Landlord's good faith determination of the FMV for the Premises for the applicable Extension Term ("Landlord's Determination"). Tenant shall have thirty (30) days following receipt of Landlord's Determination to elect to proceed with the exercise of its Option to Extend by executing an amendment to this Lease, reflecting the adjustment to Base Rent. b. As used herein, the term "FMV" shall mean the average annual rental, expressed as a rate per rentable square foot, which a willing, comparable, non-equity, Tenant would pay for comparable space, and that a willing Landlord, exercising reasonable business judgment, would accept, at arms-length for comparable space in a comparable building product type, comparable business park environment, limited to facilities and proximity to amenities within the Green Valley and airport sub-markets, as evidenced where possible by leases that commence or are to commence on or about the commencement of the applicable Extension Term ("Comparison Leases"), adjusted to account for variations between this Lease and the Comparison Leases with respect to all relevant terms and conditions, including, without limitation, the brokerage commissions, and tenant improvements or tenant allowances, the age and quality of construction of the Building and the relative credit worthiness and financial strength of Tenant as compared to the tenants under Comparison Leases. 1.97 Termination of Option to Extend. The Option to Extend shall automatically terminate and become null and void upon the earlier to occur of: (i) the termination of Tenant's right to possession of the Premises; (ii) the assignment by Tenant of this Lease, in whole or in part, excepting therefrom to Permitted Assignees; (iii) the sublease by Tenant of all or any part of the Premises, excepting therefrom to Permitted Assignees; (iv) the recapture by Landlord of all or any portion of the Premises under Section 21; or (v) the failure of Tenant to timely or properly exercise the Option to Extend. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date set forth above. LANDLORD TENANT CORPORATE CTR. IV, LLC, MEGO FINANCIAL CORP., a Nevada limited liability company a New York corporation By: Silver Springs, Inc., s/s Robert S. Understein _______________________________ a Nevada corporation, By: Robert S. Understein _______________________________ Its Manager Title: Chief Financial Officer _______________________________ By: s/s Gregory E. Jones --------------------------- Gregory E. Jones, Senior Vice President Page -35- EXHIBIT A-1 LEGAL DESCRIPTION OF 2285 CORPORATE CIRCLE That portion of Section Nineteen (19), Township Twenty-two (22) South, Range Sixty-two (62) East, M.D.M., City of Henderson, Clark County, Nevada, being a portion of Lot Four (4) as shown on record of Survey on file in File 82 of Surveys, Page 6, in the Office of the County Recorder, Clark County, Nevada, also being a portion of Lot One (1) of Green Valley/Pebble Commercial Center, as shown by map thereof on file in Book 64 of Plats, Page 68, in the Office of the County Recorder of Clark County, Nevada, being more particularly described as follows: COMMENCING at the Northwest (NW) Corner of the Northeast Quarter (NE 1/4) of said Section Nineteen (19); thence along the Northerly line of said Section Nineteen (19), South 89o05'55" East 657.42 feet; thence South 89o06'54" East 362.98 feet to the westerly line of Parcel "A," as shown on Record of Survey on file in File 81 of Surveys, Page 1, in the Office of the County Recorder, Clark County, Nevada; thence South 15o32'09" East along said Westerly line of Parcel "A," 287.61 feet to the Southwest (SW) Corner of said Parcel "A" and the TRUE POINT OF BEGINNING, said point also being the Northwest (NW) Corner of Parcel "B" of said Record of Survey on file in File 81 of Surveys, Page 1; Thence South 74o27'51" West 421.99 feet to the beginning of a 184.00 foot radius non-tangent curve to the right; thence along said curve to the right through a central angle of 55o47'05" (the long chord of which bears South 13o01'32" West 172.16 feet) for an arc distance of 179.15 feet to a point of tangency; Thence South 40o55'05" West 33.43 feet to the beginning of a 308.55 foot radius non-tangent curve to the left; Thence along said curve to the left through a central angle of 48o41'39" (the long chord of which bears South 73o25'45" East 254.41 feet) for an arc distance of 262.23 feet; Thence North 08o42'17" West 10.01 feet; Thence North 81o17'43" East 10.00 feet; Thence South 08o42'17" East 10.01 feet to the beginning of a 308.55 foot radius non-tangent curve to the left; thence along said curve to the left through a central angle of 05o54'10" (the long chord of which bears North 77o24'56" East 31.77 feet) for an arc distance of 31.79 feet; thence North 74o27'51" East 275.00 feet to the southerly extension of the westerly line of said Parcel "B;" thence North 15o32'09" West along the westerly line of said Parcel "B" and it's southerly extension 307.72 feet to the TRUE POINT OF BEGINNING. Containing 3.213 acres, more or less. APN #178-19-511-021 Legal prepared by: WRG Design, Inc. 2260 Corporate Circle, Suite 430 Henderson, NV 89074 May 8, 2000 EXHIBIT A-2 SITE PLAN OF PROPERTY EXHIBIT A-3 SCHEMATIC OF BUILDING EXHIBIT A-4 SITE PLAN OF PREMISES WITHIN BUILDING EXHIBIT A-5 SCHEMATIC OF PREMISES EXHIBIT B MEMORANDUM OF COMMENCEMENT DATE AND CONFIRMATION OF RENTABLE AREA The Commencement Date of that Lease by and between CORPORATE CTR. IV, LLC, a Nevada limited liability company, as Landlord, and MEGO FINANCIAL CORP., a New York corporation, as Tenant, as provided for in Section 1.1.9 of said Lease is the __ day of _____, 200_. The Lease expiration date is the __ day of _____, 200_. Further, the parties hereto confirm that the Rentable Area (i) of the Premises shall be deemed to be __________ square feet; and (ii) of the Building shall be deemed to be __________ square feet; and (iii) of the Usable Area of the Premises shall deemed to be __________ square feet, which may be adjusted from time to time. Tenant's Pro-Rata Portion shall be ____%. Dated: _______ __, 2002. LANDLORD TENANT CORPORATE CTR. IV, LLC, MEGO FINANCIAL CORP., a Nevada limited liability company a New York corporation By: Silver Springs, Inc., _________________________________ a Nevada corporation, By:______________________________ Its Manager Title:___________________________ By: ________________ Gregory E. Jones, Senior Vice President EXHIBIT C LANDLORD'S WORK LETTER THIS WORK LETTER ("Work Letter") is attached to and made a part of that certain Lease at 2285 Corporate Circle, dated May __, 2002, by and between CORPORATE CTR. IV, LLC, a Nevada limited liability company, as Landlord, and MEGO FINANCIAL CORP., a New York corporation, as Tenant, covering the Premises (the "Lease"). General - ------- 24. The purpose of this Work Letter is to set forth how the Tenant Improvements in the Premises are to be constructed, who will undertake the construction of the Tenant Improvements, who will pay for the construction of the Tenant Improvements, and the time schedule for completion of the construction of the Tenant Improvements. 25. Except as defined in this Work Letter to the contrary, all terms utilized in this Work Letter shall have the same meaning ascribed to them in the Lease. 26. When work, services, consents or approvals are to be provided by or on behalf of Landlord, the term "Landlord" shall include Landlord's Employees. 27. The provisions of the Lease, except where clearly inconsistent or inapplicable to this Work Letter, are incorporated into this Work Letter. 28. The Tenant Improvements shall be constructed pursuant to this Work Letter. Landlord shall provide the Tenant an Allowance, as such term is defined in Section 3 below, and Landlord shall provide possession of the Premises to Tenant upon the Substantial Completion of the Tenant Improvements, as more fully set forth in the Lease and this Work Letter. 3. Plans and Specifications for Tenant Improvements ----------------------------------------------------- 21.1 Selection of Designer. Tenant shall select an architect or designer (hereinafter referred to as the "Designer") of its choice, to prepare the plans and specifications for the Tenant Improvements. The Designer shall be selected by Tenant, subject to Landlord's consent, which consent shall not be unreasonably withheld, and which consent (or refusal to consent) shall be granted or denied, within three (3) days following the submission of the name of said Designer to Landlord. The following Designer, Parker & Scaggiari, if retained by Tenant, is hereby deemed consented to by Landlord. All plans and specifications shall be submitted to Landlord in accordance with the schedule set forth in Section 6 below. Tenant shall be solely responsible for the design and function of such plans and specifications, including, without limitation, their integration with all of the Building systems. 21.2 Space Plan. Landlord shall submit the Building plans and specifications to Designer, to permit Designer to complete the Premises space plans, sufficient to convey the architectural design of the Premises, including, without limitations, displaying all demising walls, corridors, entrances, exits, location of doors, partitions, the location of all offices, conference rooms, computer rooms, millwork, finishes, electrical, data and telephone outlets, plumbing fixtures, heavy floor loads and other special requirements, together with reflective ceiling plans (the "Space Plan"). Tenant shall cause the Designer to submit the Space Plan to Landlord for approval, within such time frame, as is more fully elaborated in Section 6 below. If Landlord shall disapprove of any portion of the Space Plan, Landlord shall advise Tenant of recommended revisions to the Space Plans, and reasons therefor, as are required by Landlord for the purpose of obtaining approval. Tenant shall then submit to Landlord, for Landlord's approval, a redesign of the Space Plan, incorporating the recommended revisions and such modifications thereof as may be suggested by Tenant (said modifications to be subsequently approved by Landlord prior to Tenant's submission of Final Plans). 21.3 Final Plans. Landlord shall submit the Building plans and specifications to Designer, to permit Designer to complete the Premises final plans, sufficient to convey the architectural design of the Premises, including, without limitations, displaying all demising walls, corridors, entrances, exits, location of doors, partitions, the location of all offices, conference rooms, computer rooms, millwork, finishes, electrical, data and telephone outlets, plumbing fixtures, heavy floor loads and other special requirements, together with reflective ceiling plans (the "Final Plan"). Tenant shall cause the Designer to submit the Final Plan to Landlord for approval, within such time frame, as is more fully elaborated in Section 6 below. If Landlord shall disapprove of any portion of the Final Plan, Landlord shall advise Tenant of recommended revisions to the Final Plans, and reasons therefor, as are required by Landlord for the purpose of obtaining approval. Tenant shall then submit to Landlord, for Landlord's approval, a redesign of the Final Plan, incorporating the recommended revisions and such modifications thereof as may be suggested by Tenant (said modifications to be subsequently approved by Landlord prior to Tenant's submission of Final Plan). 21.4 Indemnification. Tenant acknowledges that, unless specifically shown as Landlord's responsibility on the Final Plans, Landlord shall not be responsible for the design, construction or installation of, various nonstructural items which Tenant may find desirable for the Premises including, without limitation, furniture, trade fixtures, office equipment, telephone, telecommunications and data equipment and systems, artwork or cabling required in connection with any of these items. 21.5 Tenant Improvement Permits. Landlord shall be responsible for obtaining all permits for the Tenant Improvements, and Tenant shall cooperate with Landlord in obtaining approval of the Final Plans by all governmental agencies having jurisdiction. 4. Allowance for Work and Work Costs -------------------------------------- 21.1 Allowance. Tenant shall receive from Landlord an Allowance, which Allowance shall be used solely for "Work Costs," as that term is defined in Section 3.2 below, in an amount equal to Thirty and 00/100 Dollars ($30.00) per square foot of Usable Area of the Premises, which Allowance may be increased by an amount equal to three (3) months of Base Rent, calculated at Two and 10/100 Dollars ($2.10) per month for each square foot of Usable Area of the Premises (the "Additional Allowance"). All Tenant Improvements, whether or not the cost thereof is covered by the Allowance and/or the Additional Allowance, shall become the property of Landlord upon expiration or earlier termination of the Lease and shall remain on the Premises at all times during the Lease Term. The Allowance and Additional Allowance shall be provided to Tenant only during the original Term of this Lease. In the event that Tenant elects to increase the Allowance by all or a portion of the Additional Allowance, the amount of said Additional Allowance utilized by Tenant to increase the Allowance shall be deducted from the rental abatement provided to Tenant as more fully set forth in Section 3.1 of the Lease. 4.1 Work Costs. As used herein, "Work Costs" shall include all expenses associated with space planning, engineering, construction drawings, construction of Tenant's Premises, any necessary permits, so long as they are associated with the improvement of the Premises, including but not limited to: (i) engineering fees for the review of the Tenant's Space Plans and Final Plans; (ii) the actual contractor costs and charges for material and labor, contractor's profit, overhead and general conditions incurred by Landlord in having the Tenant Improvements constructed in accordance with the Final Plans; (iii) governmental agency plan check, permit and other fees and sales and use taxes; (iv) testing and inspection costs; (v) any paint touch-up or repair work necessary due to Tenant's move into the Premises; (vi) all other costs expended or to be expended by Landlord in the construction of the Tenant Improvements including, window blind system within the Premises, fluorescent light fixtures, air balancing, and other pre-stocked materials; and (vii) a fee to be paid to Landlord equal to five percent (5%) of all Work Costs for construction management by Landlord of construction of the Tenant Improvements. 5. Construction ------------ 21.1 General Contractor. Upon the approval of the Final Plans, Landlord shall submit the Final Plans to Crisci Custom Builders, who shall act as the general contractor on this project (the "General Contractor"). 21.2 Submittal of Work Costs to Tenant. Following the submittal of the Finals plans to the General Contractor, Landlord shall submit to Tenant Landlord's Work Costs estimate, based upon the Final Plans ("Work Cost Estimate"). Landlord's Work Cost Estimate shall include a reasonable contingency to allow for changes in Tenant Improvements and/or other unforeseen costs and expenses arising after Tenant's approval thereof. 21.3 Tenant Improvement Overage. In the event that the Work Cost Estimate exceeds the sum of the Allowance and the Additional Allowance, in the event Tenant elects to utilize same ("Tenant Improvement Overage"), Tenant shall pay one hundred percent (100%) of the Tenant Improvement Overage, to Landlord, prior to the commencement of construction of the Tenant Improvements. Landlord shall not be required to commence construction of the Tenant Improvements until Landlord receives the Tenant Improvement Overage. 21.4 Commencement of Tenant Improvements. Following: (i) Tenant's payment of any Tenant Improvement Overage; and (ii) receipt by Landlord of all relevant governmental agency approvals and permits, Landlord shall cause the General Contractor to commence the construction of the Tenant Improvements per the Final Plans. Landlord shall furnish Tenant with a schedule setting forth the projected completion dates therefor and showing the deadlines for any actions required to be taken by Tenant during such construction. Landlord may, from time to time, during the construction of the Tenant Improvements, reasonably modify or amend such schedule. 21.5 Modifications to Final Plans. Any changes to the approved Final Plans ("Changes") which are requested by Tenant, or required by any governmental agency, as a result of the requested Changes by Tenant, shall be forwarded to Landlord for approval and pricing. If Landlord approves of the Changes, Tenant shall be given a written cost estimate for the completion of said Changes, which estimate must be approved by Tenant, prior to construction of the Changes. To the extent the revised contract amount, inclusive of the Changes, exceeds the sum of the Allowance and Additional Allowance, if Tenant elects to use such Additional Allowance, Tenant shall pay to Landlord one hundred percent (100%) of such excess, prior to Landlord commencing construction of the Changes ("Tenant Additional Payments"), inclusive of a fee equal to five percent (5%) of the cost of said Changes. Any delay in the construction of Tenant Improvements as a result of Changes shall be a Tenant Delay, as defined in Section 7 below. 21.6 Construction Representatives. In connection with the construction of the Tenant Improvements, each party shall be entitled to rely upon the other party's construction representative who shall be as follows: Landlord's construction representative ("Landlord's Construction Representative"): PATTI LESTER, Tenant's construction representative ("Tenant's Construction Representative"): JEN MURPHY of Plaza Construction Company. Each respective construction representative shall have the authority to make binding commitments relative to the Tenant Improvements on behalf of the party appointing such construction representative. All inquiries of Tenant pertaining to construction of the Tenant Improvements shall be directed in writing to Landlord's Construction Representative. A party may designate a substitute construction representative by giving written notice to the other party at any time. Any representatives of Tenant who desires to visit the Premises during construction of the Tenant Improvements must obtain the prior consent of and be accompanied by the Landlord and the General Contractor. Substantial Completion and Punch List - ----------------------------------------- 21.1 Inspection of Premises. Upon Substantial Completion of the Tenant Improvements of the Premises, Landlord shall cause the General Contractor to inspect the Premises with Landlord's Construction Representative and Tenant's Construction Representative, and to complete a written punch list of unfinished items of Tenant Improvements. Tenant's Construction Representative shall execute said written punch list to indicate approval thereof, and thereafter Landlord shall cause the General Contractor to correct all such punch list items with reasonable diligence. 21.2 Work Costs Accounting. Within forty-five (45) days after Substantial Completion of the Tenant Improvements, Landlord shall submit to Tenant a final written accounting of the Work Costs, completed in accordance with the Final Plans (inclusive of Changes, if any), and a reconciliation of such costs with the Allowance and Additional Allowance, if Tenant elects to use such Additional Allowance, and payments made by Tenant in accordance with Section 4.3 and Section 4.5. f. In the event that the reconciliation shows that the Work Costs exceeded the sum of (i) the Allowance; (ii) Additional Allowance; (iii) payment of the Tenant Improvement Overage; and (iv) Tenant Additional Payments, Tenant shall reimburse Landlord such excess within thirty (30) days of receipt thereof. g. In the event the Work Costs are less than the sum of (i) the Allowance; (ii) payment of the Tenant Improvement Overage; and (iii) Tenant Additional Payments, Landlord will refund to Tenant the difference up to the sum of Tenant payments made in (ii), (iii) and (iv) above, within thirty (30) days of Tenant's receipt of said reconciliation. Any remaining unused Allowance will be held by Landlord, and Tenant, subject to its being in full compliance with the terms and provisions of the Lease and not in default thereunder, shall have the ability to utilize the remaining Allowance during the initial Term of the Lease for Alterations made to the Premises, pursuant to Section 8.2 of the Lease. Landlord agrees to disburse to Tenant, within thirty (30) days following receipt of invoices and/or other reasonable documentation evidencing and/or supporting the costs incurred for services performed or material supplied regarding the Alterations, in an amount not to exceed the remaining Allowance. 7. Schedule -------- Preparation and approval of the Space Plan, Final Plans and the Work Costs Estimate shall proceed as indicated below and each action shall be completed on or before the date herein specified. Time is of the essence.
Action Responsibility Date Due - ------ -------------- --------- 1. Submission of Space Tenant 5 days from Lease execution Plan to Landlord 2. Delivery of written approval Landlord 3 business days from receipt of of Space Plan to Tenant Space Plan from Tenant (including any necessary design revision comments) 3. Submission of Final Plans Tenant 20 days from Lease execution to Landlord for approval (including any necessary re-design of the Final Plans) 4. Delivery of written approval Landlord 5 days from Tenant's submittal of Final Plans to Tenant of approved Final Plans 5. Building Department Landlord within 5 business days from Submission Landlord's approval of Final Plans 6. Delivery of Work Costs Landlord on or before submittal to Estimate to Tenant Building Department 7. Delivery of written approval Tenant within 5 days after Tenant's of Work Costs Estimate receipt of Work Costs to Landlord 8. Payment of Tenant Improvement Tenant at the time of approval of Work Overage, if any Costs. Tenant to remit to Landlord, if applicable 9. Receipt of Building permit; Landlord estimated 4 weeks from commence construction of submittal to City of Henderson Tenant Improvements 10. Substantial Completion of Landlord 45 days from receipt of Tenant Improvements permit from City of Henderson 11. Occupancy Date Landlord September 1, 2002
8. Delays ------ 8.1 Tenant Delay. Any one or more of the following, which causes Landlord to be delayed in substantially completing the Tenant Improvements shall be deemed to be a "Tenant Delay": 12. Tenant's failure to complete any action item which is the responsibility of Tenant on or before the due date specified in Section 6 above to the extent that such failure is not caused by failure of Landlord to timely perform its obligations in accordance with the schedule in Section 6; or 13. Tenant's changes to Final Plans after the final submission date in Section 6(iii) above; or i. any delay of Tenant in making payment to Landlord of the Tenant Improvement Overage or Tenant Additional Payments as provided in Section 4.3 and Section 4.5 above, relating to changes to Final Plans above; or ii. any delay, requested or caused by Tenant. In the event of a Tenant Delay, so long as Landlord notifies Tenant that a Tenant Delay has occurred within five (5) business days of the date of the event causing such delay, the Occupancy Date shall be accelerated to the date that Landlord would have Substantially Completed the Tenant Improvements, but for such Tenant Delay. If for any reason Landlord cannot deliver possession of the Premises to Tenant on or before the Occupancy Date, the Lease will not be void or voidable, and Landlord will not be liable to Tenant for any resultant loss or damage, except as otherwise provided herein. 7.2 Force Majeure Delay. The Occupancy Date shall be delayed by one (1) day for each day of delay that is caused by any Force Majeure Delay or Landlord Delay. No Landlord Delay (defined below), Force Majeure Delay or Tenant Delay shall be deemed to have occurred unless and until the party claiming such delay has provided written notice to the other party specifying the action or inaction that such notifying party contends constitutes a Landlord Delay, Force Majeure Delay or Tenant Delay, as applicable. If such action or inaction is not cured within one (1) day of receipt of such notice, then a Landlord Delay, Force Majeure Delay or Tenant Delay, as set forth in such notice shall be deemed to have occurred commencing as of the date such notice is received and continuing for the number of days the design of the Tenant Improvements and/or Tenant's move-in into the Premises was in fact delayed as a direct result of such action or inaction. The term "Force Majeure" as used in this Work Letter shall mean any delay incurred by Tenant in the design of its Tenant Improvements or its move-in into the Premises attributable to any: (i) actual delay or failure to perform attributable to any strike, lockout or other labor or industrial disturbance (whether or not on the part of the employee of either party hereto), civil disturbance, further order claiming jurisdiction, act of public enemy, war, riot, sabotage, blockade, embargo; (ii) delay due to changes in any Applicable Laws (including, without limitation, the ADA); or (iii) delay attributable to lightning, earthquake, fire, storm, hurricane, tornado, flood, washout, explosion, or any other similar industry-wide or Building-wide cause beyond the reasonable control of the party from whom performance is required, or any of its contractors or other representatives. Any prevention, delay or stoppage due to any Force Majeure Delay shall excuse the performance of the party affected for a period of time equal to any such prevention, delay or stoppage (except the obligations of either party to pay money, including rental and other charges, pursuant to the Lease). 7.3 Landlord Delay. The term "Landlord Delay" as used in this Work Letter shall mean any delay in the design of the Tenant Improvements or Tenant's move-in into the Premises which is due to any act or omission of Landlord (wrongful, negligent or otherwise), its agents or contractors. The term Landlord Delay shall include, but shall not be limited to any: (i) delay in the giving of authorizations or approvals by Landlord; (ii) delay attributable to the acts or failures to act, whether willful, negligent or otherwise, of Landlord, its agents or contractors; and (iii) delay attributable to Landlord giving the Designer incorrect Building requirement plans, or revision made to such Building requirement or subsequent to the delivery of such items to Tenant. In the event that, at any time and for any reason, Tenant elects not to proceed with or to suspend (i) the design or construction of the Tenant Improvements, or (ii) move into the Premises, then, such election shall not require any further performance of Landlord under the Lease or this Work Letter, until Tenant resumes its obligations under this Work Letter, and shall not result in an Event of Default by Landlord. The only economic consequence to Tenant as a result of such election shall be that the Occupancy Date shall be accelerated for the days Landlord would have Substantially Completed the Tenant Improvements, but for Tenant's suspension of Tenant Improvements and Tenant's obligation to pay all rent shall begin in accordance with Section 1.1.9 of the Lease. 9. Miscellaneous ------------- Any default by either party under the terms of this Work Letter shall constitute a default under the Lease and shall entitle either party to exercise all remedies set forth therein. Both Landlord and Tenant agree to use reasonable diligence in performing all of their respective obligations and duties under this Work Letter and in proceeding with the construction and completion of the Building and all Tenant Improvements in the Premises. LANDLORD TENANT CORPORATE CTR. IV, LLC, MEGO FINANCIAL CORP., a Nevada limited liability company a New York corporation By: Silver Springs, Inc., _________________________________ a Nevada corporation, By:______________________________ Its Manager Title:___________________________ By: ________________ Gregory E. Jones, Senior Vice President EXHIBIT D 2285 CORPORATE CIRCLE RULES AND REGULATIONS Tenant agrees as follows: 9. All loading and unloading of supplies, equipment or the like shall be done only at such time, in the areas, and through the entrance(s) or areas as may be designated for such purposes by Landlord. The delivery or shipping of merchandise, supplies and fixtures to and from the Premises shall be subject to such Rules and Regulations as, in the judgment of Landlord, are necessary for the proper operation of the Premises or the Property. 10. Without the prior written consent of the Landlord, Tenant shall not sell, or permit the sale at retail, of newspapers, magazines, periodicals, or theater tickets, in or from the Premises, nor shall Tenant carry on, or permit or allow any employee or other person or carry on, the business of stenography, typewriting or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, or any manufacturing of any kind, or the business of a public barber shop, beauty parlor, or a manicuring and chiropodist business or any business other than that specifically provided for in the Lease. No Tenant shall obtain for use upon the Premises ice, drinking water, towel and other similar services, or accept barbering or bootblack services in the Premises, except from persons authorized by the Landlord and at hours and under regulations fixed by the Landlord. 11. Subject to the terms of the Lease, no aerial, antenna, satellite dish or similar device shall be erected on the roof or exterior walls of the Premises or in the Property, without in each instance, the prior written consent of Landlord, unless otherwise provided in the Lease. Any such item so installed without such written consent shall be subject to removal without notice at any time at Tenant's expense. 12. Tenant shall not, without the prior written consent of Landlord, use in or about the Premises any advertising or promotional media such as searchlights, loud speakers, phonographs, or other similar visual or audio media which can be seen or heard outside the Premises. 13. Tenant shall keep the Premises at a temperature sufficiently high to prevent freezing of water in pipes and fixtures. 14. The exterior areas immediately adjoining the Premises shall be kept clean and free from dirt and rubbish by Tenant to the satisfaction of Landlord, and Tenant shall not place or permit any obstructions in such areas. 15. Tenant shall not burn any trash or garbage of any kind in or about the Premises or Property. 16. The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be thrown therein. The expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by the Tenant who shall, or whose employees, agents, servants, customers or invitees shall, have caused it. 17. Tenant shall keep the Premises free from pests and vermin. 18. On Saturdays, Sundays or legal holidays, and on other days between the hours of 6 p.m. and 7 a.m., access to the Building, or to the halls, corridors, or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the building watchman, if any, in charge and has a pass or is properly identified. The Landlord shall in no case be liable for damages for the admission or exclusion from the Building of any person whom the Landlord has the right to exclude under these Rules and Regulations. In case of invasion, mob riot, public excitement, or other commotion, the Landlord reserves the right to prevent access to the Building during the continuance of the same by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. 19. The Landlord shall clean the Premises as provided in this Lease and, except with the written consent of the Landlord, no person or persons other than those approved by the Landlord will be permitted to enter the Building for such purpose, but the Tenant shall not cause unnecessary labor by reason of the Tenant's carelessness and indifference in the preservation of good order and cleanliness. 20. No Tenant shall lay linoleum or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except by a paste or other material which may easily be removed with water, the use of cement or other similar adhesive materials being expressly prohibited. The method of affixing any such linoleum or other similar floor covering to the floor, as well as the method of affixing carpets or rugs to the Premises, shall be subject to prior approval by the Landlord. The expense of repairing any damage resulting from a violation of this rule shall be borne by the Tenant by whom, or by whose agents, clerks, employees or visitors, the damage shall have been caused. 21. No sign, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted or affixed by the Tenant on any part of the Building without the prior written consent of the Landlord. If the Landlord shall have given such consent at any time, whether before or after the execution of this Lease, such consent shall in no way operate as a waiver or release of any of the provisions hereof or of this Lease, and shall be deemed to relate only to the particular sign, advertisement or notice so consented to by the Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of the Landlord with respect to each and every such sign, advertisement or notice other than the particular sign, advertisement or notice, as the case may be, so consented to by the Landlord. If the Landlord, by a notice in writing to the Tenant, shall object to any curtain, blind, shade or screen attached to, or hung in, or used in connection with any window or door of the Premises, such use of such curtain, blind, shade or screen shall be forthwith discontinued by the Tenant. No awning shall be permitted on any part of the Premises. 22. Tenant shall not make noises, cause disturbances, or create odors which may be offensive to Landlord or to other tenants of the Property or their employees, agents, servants, customers or invitees. 23. No portion of the Premises or the Property shall be used for sale or display of any obscene, pornographic, so called "adult" or other offensive merchandise or activities. 24. Without Landlord's prior written consent, no sign or other object or thing visible to public view outside of the Premises shall be placed or allowed on the exterior of the Premises or in the interior of the Premises in such a manner as shall be visible from outside the Premises. Tenant shall be required to properly maintain any sign permitted under the Lease, including prompt repairs of any nature. Upon expiration of the Lease, Tenant shall be responsible for promptly removing any sign placed in and around the Premises by Tenant. Tenant shall repair all damage caused to the Building or Premises by such removal, including proper "capping off" of electrical wiring. Without limiting the generality of the foregoing, Tenant shall adhere to all requirements contained in Exhibit C attached to this Lease and incorporated herein by reference. 25. Tenant and Tenant's employees and agents shall not solicit business in the parking areas or other Common Areas, nor shall Tenant distribute any handbills or other advertising matter in automobiles parked in the parking area or in the Common Areas. 26. Tenant shall refrain from keeping, displaying or selling any merchandise or any object outside of the interior of the Premises or in any portion of any sidewalks, walkways or other part of the Property outside of the Premises. No sales tables, merchandise displays, signs or other sections shall be placed in front of, or affixed to, any part of the exterior of the Building nor placed in the halls, common passageways, corridors, vestibule or parking area without the prior written consent of the Landlord. 27. The sidewalks, halls, passages, corridors, exits, stairways and other Common Areas shall not be obstructed by Tenant or used for any purpose other than for ingress and egress to the Premises. Tenant shall not erect or maintain any barricade or scaffolding which may obscure the signs, entrances or show window of any other tenant in the Property or tend to interfere with any such other tenant's business. 28. Landlord reserves the right to exclude or expel from the Property any person who, in the judgment of the Landlord is intoxicated or under the influence of liquor, or who shall in any manner do any act in violation of any of the rules and regulations of the Property. 29. Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot which said floor was designed to carry or which is allowed by law. a. The Landlord shall have power to prescribe the weight and position of safes or other large or heavy objects which shall, if considered necessary by the Landlord, stand on three-inch thick wood strips to distribute the weight. The moving of safes shall occur only between such hours as may be designated by, and only upon previous notice to, the manager of the Building and the persons employed to move safes in or out of the Building must be acceptable to the Landlord. No freight, furniture or bulky matter of any description shall be received into the Building except during hours and in a manner approved by the Landlord. 30. Landlord will direct electricians as to where and how telephone wires are to be introduced. No boring or cutting for wires will be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the reasonable approval of Landlord. 31. Tenant, upon termination of the Lease, shall deliver to Landlord the keys of offices, rooms and toilet rooms which shall have been furnished to Tenant or which Tenant shall have made, and in the event of loss of any keys so furnished, shall pay Landlord its reasonable cost therefor. Tenant shall not alter any lock or install any new or additional locks or any bolts on any doors of the Premises without the prior approval of Landlord, and if such approval is given, then Tenant shall furnish Landlord with the key therefor. 32. Tenant shall see that the doors of the Premises are closed at all times when not in use for ingress or egress and securely locked before leaving the Building of which the Premises is a part, and that all electricity, gas, heating or air conditioning shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness in connection there with Tenant shall make good all injuries sustained by other tenants or occupants of the Property by Landlord. a. Tenant shall see that the windows, transoms and doors of the Premises are closed and securely locked before leaving the Building and must observe strict care not to leave windows open when it rains, and Tenant shall exercise extraordinary care and caution that all water faucets or water apparatus are entirely shut-off before Tenant or Tenant's employees leave the Building and that all electricity, gas or air shall likewise be carefully shut-off as to prevent waste or damage and for any default or carelessness Tenant shall make good all injuries sustained by other tenants or occupants of the Building or by Landlord. 33. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and none of Landlord's employees will admit any person to any office without specific instructions from Landlord. 34. All professional practice conducted on the Premises shall be in compliance with the Code of Ethics of such profession. All advertising, if any, by Tenant, its agents, employees, servants, contractors, and licenses in connection with the Premises shall be in compliance with said Code of Ethics. 35. Landlord reserves the right to waive any rule in any particular instance or as to any particular person or occurrence and further, Landlord reserves the right to amend or rescind any of these Rules and Regulations or make, amend or rescind new rules to the extent Landlord, in its sole judgment, deems suitable for the safety, care and cleanliness of the Property and the conduct of high standards of performance therein. Tenant agrees to conform to such new or amended rules upon receiving written notice of the same. 36. Tenant shall not use any space heaters in any portion of the Premises. 37. There shall be no smoking in any portion of the Premises or the Building. 38. Tenant shall not, without Landlord's prior written approval, operate or permit to be operated on the Premises any coin or token-operated vending machines or similar device for the sale or leasing to the public of any goods, wares, merchandise, food, beverages, and or service, including, without limitation, pay telephones, pay lockers, pay toilets, scales and amusement devices. 39. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof as living quarters, sleeping quarters or lodging rooms. 40. Tenant shall not, without Landlord's prior written approval, cover or obstruct any windows, glass doors, lights, skylights, canopies or other apertures that reflect or admit light into the Premises. 41. Tenant shall refrain from keeping or permitting the keeping of any animals of any kind in, about or upon the Premises without Landlord's prior written approval. EXHIBIT E JANITORIAL SERVICE SPECIFICATIONS Pursuant to Section 10.1 (a) of this Lease, Landlord shall perform, or have performed, the following janitorial services to the Premises and Common Areas of the Building, subject to the limitations outlined below: 42. Daily service, as outlined below, shall be performed five (5) nights per week, typically Sunday through Thursday, excluding all legally recognized federal and state holidays. Any weekly, quarterly, semi-annual, or annual service, which Landlord shall deem necessary, shall be performed as scheduled by Landlord. 43. Landlord may, if deemed necessary by Landlord, at its sole discretion, utilize a day porter for performing specific janitorial services to the Common Areas of the Building, during the hours of operation of the Building. 44. Landlord's obligation to clean the Premises shall exclude any portion of the Premises not used as office areas, including, but not limited to, closets, storage rooms, mailrooms, computer areas, laboratories, and areas used for the storage, preparation, service or consumption of food and beverage. Tenant, at its sole cost and expense, shall cause all portions of the Premises not used as office areas to be cleaned on a regular basis. This shall be done by contracting directly with the Landlord, or at Landlord's option, directly with Landlord's contractor for cleaning service in excess of those furnished by Landlord in accordance with this Lease. 1. COMMON AREAS OTHER THAN RESTROOM ------------------------------------ 1. Daily Service -------------- a. Dust and wipe all lobby walls. b. Empty cigarette receptacles. c. Empty all waste containers and spot clean. d. Wash and clean all glass doors. e. Clean all drinking fountains. f. Clean all floor surfaces. g. Vacuum all mats and runners, as needed. h. Clean building directory glass. i. Polish all metal. j. Remove trash from plantings. k. Clean all elevators, including doors, walls, switch plates and controls, as specified by manufacturer. l. Clean sidewalks and plaza areas. B. PREMISES -------- 1. Daily Service -------------- a. Empty all wastebaskets and trash containers. b. Install plastic wastebasket liners, replace as necessary. c. Dust telephones, desks, chairs, file cabinets, furniture and equipment. d. Wipe furniture, counter tops, tabletops and equipment. e. Clean, as needed, all glass and metal surfaces, including window interiors. f. Vacuum all carpeted areas and spot clean. g. Clean vinyl floor surfaces. h. Wipe all door facings, doors, light switches, receptacle covers and walls. C. RESTROOMS --------- 1. Daily Service -------------- a. Wash and disinfect all commodes, urinals, wash basins, counters, toilet seats, faucets and urinal partitions. b. Spot clean all partitions, ledges, light fixtures, receptacles and dispensers. c. Empty all wastepaper and sanitary napkin containers. d. Wash and clean all mirrors. e. Clean and polish all metal and metal dispensers. f. Sweep restroom floors and clean with all germicidal disinfectant solution. g. Refill soap and towel dispensers, toilet tissue holders and sanitary napkin machines. h. Wipe all door facings, doors, light switches, receptacle covers and partitions. i. Wipe and clean all walls to remove dust, dirt, smudges, stains and fingerprints. EXHIBIT F EXTERIOR DIRECTIONAL SIGNAGE EXHIBIT G ROOFING REQUIREMENTS Tenant shall notify Landlord's roofing/waterproofing contractor, Commercial Roofers, Michael Lee at 702/876-1777 ("Roofing Contractor") before any type of work is performed that impacts any roofing or waterproofing system in any fashion. Roofing Contractor shall be given the opportunity to review all proposed modifications to the roofing/ waterproofing system (including, but not limited to, the installation of new unit curbs, satellite dishes, vent stacks, etc.). Roofing Contractor shall note any proposed modifications, ensure that they are in compliance with requirements by the roofing or waterproofing membrane manufacturer, and shall advise Tenant of any conflicts or requirements to maintain Landlord's roofing/waterproofing manufacturer's guarantee. No roofing or waterproofing work, in any form, shall commence until Roofing Contractor has reviewed and approved all proposed roofing or waterproofing modifications and developed a cost proposal regarding said items. Tenant shall be liable for any and all costs relating to any roofing or waterproofing modifications. In the event that Tenant fails to adhere to these guidelines, Landlord shall have the right to direct Roofing Contractor to make all necessary changes to the roofing or waterproofing system in order to maintain Landlord's roofing or waterproofing warranty (including, but not limited to, new roofing or waterproofing membrane items and all associated items such as HVAC equipment, electrical, etc.) said costs shall then be passed on to the Tenant. Tenant shall adhere to the guidelines set above. Should Tenant be uncertain of any potential impacts to any roofing or waterproofing system, they shall first contact the Roofing Contractor for clarification. Lease between CORPORATE CTR. IV, LLC, a Nevada limited liability company, as Landlord, and MEGO FINANCIAL CORP., a New York corporation, as Tenant, in 2285 Corporate Circle Henderson, Nevada May _____ , 2002 SECTION 1 DEFINITIONS Page -1- ----------- 1.1 DEFINITIONS Page -1- 1.1.1 "ADDITIONAL RENT" Page -1- 1.1.2 "ADJUSTMENT MONTH" Page -1- 1.1.3 "AGGREGATE MONTHLY RENT" Page -1- 1.1.4 "ALLOWANCE" Page -1- 1.1.5 "BASE RENT" Page -1- 1.1.6 "BASE YEAR" Page -1- 1.1.7 "BROKER" Page -1- 1.1.8 "BUILDING" Page -1- 1.1.9 "COMMENCEMENT DATE" Page -1- 1.1.10 "COMMON AREAS" Page -1- 1.1.11 "DEFAULT INTEREST RATE" Page -1- 1.1.12 "LANDLORD'S WORK" Page -1- 1.1.13 "LANDLORD'S SHARE" Page -1- 1.1.14 "LEASE YEAR" Page -1- 1.1.15 "MORTGAGEE" Page -1- 1.1.16 "OCCUPANCY DATE" Page -2- 1.1.17 "PREMISES" Page -2- 1.1.18 "PROPERTY" Page -2- 1.1.19 "PROPERTY OPERATING COSTS" Page -2- 1.1.20 "RENTABLE AREA" Page -2- 1.1.21 "SUBSTANTIALLY COMPLETE OR SUBSTANTIAL COMPLETION" Page -2- 1.1.22 "TENANT IMPROVEMENTS" Page -2- 1.1.23 "TENANT'S PRO-RATA PORTION" Page -2- 1.1.24 "TENANT'S SHARE" Page -2- 1.1.25 "TERM" Page -2- 1.1.26 "USABLE AREA" Page -2- 1.1.27 "UTILITIES" Page -2- SECTION 2 PREMISES Page -2- -------- 2.1 PREMISES Page -2- 2.1.1 RENTAL AREA Page -3- 2.1.2 LANDLORD'S RESERVATIONS Page -3- 2.2 DECLARATION Page -3- SECTION 3BASE RENT Page -3- ---------- 3.1 BASE RENT Page -3- 3.1.1 FIRST MONTH'S RENTAL OBLIGATION Page -3- 3.2 BASE RENT INCREASES Page -3- 3.3 ADDITIONAL RENT Page -3- 3.3.1 TENANT'S SHARE OF PROPERTY OPERATING COSTS Page -3- 3.3.2 NOTIFICATION OF PROPERTY OPERATING COSTS Page -3- 3.3.3 PROPERTY OPERATING COSTS Page -4- 3.3.4 PROPERTY OPERATING COST EXCLUSIONS Page -5- 3.3.5 IMPOSITIONS Page -5- 3.4 EXPENDITURES BY LANDLORD Page -6- 3.5 MONETARY PAYMENTS Page -6- SECTION 4RIGHT OF AUDIT Page -6- ---------------- 4.1 RIGHT OF AUDIT Page -6- 4.1.1 AUDIT CONFIDENTIALITY Page -6- SECTION 5SECURITY DEPOSIT Page -7- ----------------- 5.1 SECURITY DEPOSIT Page -7- 5.1.1 RETURN OF DEPOSIT Page -7- 5.1.2 NO RIGHT OF TENANT TO ENCUMBER DEPOSIT Page -7- 5.2 NO RIGHT OF DEDUCTION Page -7- 5.1 RIGHT TO RAISE SECURITY DEPOSIT Page -7- SECTION 6POSSESSION AND SURRENDER Page -7- -------------------------- 6.1 POSSESSION OF THE PREMISES Page -7- 6.2 SURRENDER Page -8- SECTION 7USE OF PREMISES Page -8- ----------------- 7.1 USE OF PREMISES Page -8- 7.2 MAINTENANCE AND REPAIR Page -8- 7.3 STORAGE OF GARBAGE Page -8- 7.4 ABIDANCE OF RULES AND REGULATIONS Page -8- 7.5 COMMERCIALLY REASONABLE OPERATION Page -8- 7.6 PROHIBITION AGAINST INTERFERENCE WITH OTHER TENANTS Page -8- 7.7 USE OF COMMON AREAS Page -8- 7.8 PARKING Page -9- 7.9 TRADEMARK RESTRICTIONS Page -9- 7.9.1 TRADEMARK Page -9- 7.10 GAMING Page -9- 7.11 SATELLITE DISH Page -9- SECTION 8 IMPROVEMENTS, SIGNAGE AND ALTERATIONS Page -9- ---------------------------------------- 8.1 IMPROVEMENTS Page -9- 8.1.1 EXTERIOR DIRECTIONAL SIGNAGE Page -9- 8.1.2 DIRECTORY SIGNAGE Page -9- 8.1.3 MONUMENT SIGNAGE Page -10- 8.2 ALTERATIONS Page -10- 8.3 HOLD HARMLESS Page -10- 8.3.1 LIABILITY INSURANCE Page -10- 8.4 COMPLIANCE WITH APPLICABLE LAW Page -10- 8.5 LIENS Page -10- SECTION 9 PARKING AND COMMON AREAS Page -10- --------------------------- 9.1 COMMON AREAS Page -10- 9.2 PARKING SPACE LEASING Page -11- 9.2.1 COVERED PARKING Page -11- SECTION 10 LANDLORD'S SERVICES Page -11- -------------------- 10.1 LANDLORD SERVICES Page -11- 10.2 IMPROVEMENTS TO COMMON AREAS Page -12- 10.3 LANDLORD'S DUTY TO REPAIR Page -13- 10.3.1 UTILITY SERVICE FACILITIES Page -13- SECTION 11 LAWS AND REGULATIONS Page -13- ---------------------- 11.1 AMERICANS WITH DISABILITIES ACT Page -13- 11.2 INSURANCE SERVICES OFFICE Page -13- 11.3 STORAGE OF DISPOSITION OF HAZARDOUS MATERIALS Page -13- 11.3.1 HAZARDOUS MATERIALS AND SUBSTANCES Page -13- 11.4 INDEMNIFICATION Page -13- 11.4.1 EXCLUSION FOR TENANT'S LIABILITY Page -14- 11.5 JEOPARDIZE INSURANCE POLICIES Page -14- SECTION 12 TAXES Page -14- ----- 12.1 TAXES Page -14- 12.2 EXCISE TAX Page -14- 12.2.1 CONTEST VALIDITY Page -14- SECTION 13 INSURANCE Page -14- --------- 13.1 GENERAL LIABILITY INSURANCE Page -14- 13.2 SPECIAL PERIL PROPERTY INSURANCE Page -14- 13.3 CERTIFICATE OF INSURANCE Page -15- 13.4 USE OF PREMISES Page -15- 13.5 WAIVER OF RECOVERY RIGHTS Page -15- 13.6 WAIVER OF SUBROGATION Page -15- 13.7 PROHIBITED SALES OR ACTIVITY Page -15- 13.8 PROHIBITED USE DEEMED ULTRA HAZARDOUS Page -15- 13.9 LANDLORD'S MAINTENANCE OF SPECIAL PERIL PROPERTY INSURANCE Page -15- 13.10 LANDLORD'S MAINTENANCE OF GENERAL LIABILITY INSURANCE Page -15- SECTION 14 INDEMNIFICATION Page -16- --------------- 14.1 INDEMNIFICATION Page -16- 14.2 LANDLORD'S LIABILITY Page -16- SECTION 15 SUBORDINATION AND NONDISTURBANCE Page -16- ---------------------------------- 15.1 SUBORDINATION Page -16- 15.2 PRIOR LIEN Page -16- 15.3 ATTORNMENT Page -16- 15.4 NONDISTURBANCE Page -16- SECTION 16ASSIGNMENT AND SUBLETTING Page -16- --------------------------- 16.1 ASSIGNMENT Page -16- 16.1.1 PERMITTED ASSIGNEES Page -17- 16.1.2 PROPOSED ASSIGNEE Page -17- 16.1.3 DEFAULT Page -17- 16.2 OPTION TO TERMINATE Page -17- 16.3 BONUS RENT Page -17- 16.4 REMEDIES Page -17- 16.5 PROCESSING FEE Page -18- SECTION 17 CONDEMNATION Page -18- ------------ SECTION 18 DAMAGE OR DESTRUCTION Page -18- ----------------------- 18.1 DESTRUCTION OF PREMISES Page -18- 18.2 RECONSTRUCTION Page -18- 18.2.1 LEASE TERMINATION Page -18- 18.3 INSURANCE PROCEEDS MAINTAINED BY TENANT Page -18- 18.4 INSURANCE PROCEEDS MAINTAINED BY LANDLORD Page -19- SECTION 19 RIGHT OF ACCESS Page -19- ----------------- 19.1 RIGHT OF ACCESS Page -19- 19.2 PERFORMANCE OF WORK Page -19- 19.3 EXHIBITING PREMISES Page -19- SECTION 20 ESTOPPEL CERTIFICATE Page -19- --------------------- SECTION 21 TENANT'S DEFAULT/LANDLORD'S REMEDIES Page -19- -------------------------------------- 21.1 EVENTS OF DEFAULT Page -19- 21.1.1 NON-PAYMENT OF MONEY Page -19- 21.1.2 NON-MONETARY NON-PERFORMANCE Page -19- 21.1.3 ABANDONMENT OF PREMISES Page -20- 21.1.4 BANKRUPTCY Page -20- 21.1.5 MECHANIC LIENS Page -20- 21.1.6 FALSIFIED FINANCIAL REPORTS Page -20- 21.1.7 FAILURE TO OBTAIN POLICIES AND/OR CERTIFICATES OF INSURANCE Page -20- 21.1.8 FAILURE TO OBTAIN CONSENT Page -20- 21.1.9 INTENTIONALLY OMITTED Page -20- 21.1.10 INTENTIONALLY OMITTED Page -20- 21.1.11 FAILURE TO PERFORM OTHER OBLIGATIONS Page -20- 21.1.12 CROSS-DEFAULTS Page -20- 21.2 ADDITIONAL REMEDIES Page -20- 21.3 RIGHT TO POSSESSION Page -21- 21.4 LOSS OF BARGAIN Page -21- 21.5 ACTIONS FOR RECOVERY Page -21- 21.6 ACTIONS FOR ALL RENT Page -21- 21.7 LANDLORD NOT LIABLE FOR TRESPASS Page -21- 21.8 NO WAIVER Page -21- 21.9 LIQUIDATED DAMAGES Page -21- 21.10 ADMINISTRATIVE AND INTEREST CHARGES Page -22- 21.11 LANDLORD'S LIEN Page -22- SECTION 22 QUIET POSSESSION Page -22- ----------------- SECTION 23 CONVEYANCE BY LANDLORD Page -22- ------------------------ SECTION 24 DEFAULT BY LANDLORD Page -22- --------------------- SECTION 25 FORCE MAJEURE Page -22- -------------- SECTION 26 NOTICES Page -23- ------- 26.1 NOTICES Page -23- 26.1.1 ADDRESS OF LANDLORD Page -23- 26.1.2 ADDRESS OF TENANT Page -23- 26.2 CHANGE OF ADDRESS Page -23- SECTION 27 HOLDOVER TENANCY Page -23- ----------------- SECTION 28 REMEDIES CUMULATIVE Page -23- -------------------- SECTION 29 SUCCESSORS AND ASSIGNS Page -23- ------------------------ SECTION 30 PARTIAL INVALIDITY Page -24- ------------------- SECTION 31 TIME OF THE ESSENCE Page -24- ---------------------- SECTION 32 ENTIRE AGREEMENT Page -24- ----------------- SECTION 33 NO PARTNERSHIP Page -24- --------------- SECTION 34 BROKERS Page -24- ------- SECTION 35 SAVINGS CLAUSE Page -24- --------------- SECTION 36 ATTORNEYS' FEES Page -24- ---------------- SECTION 37 INSOLVENCY AND DEATH Page -24- ---------------------- SECTION 38 GENERAL PROVISIONS Page -24- ------------------- 38.1 CAPTIONS Page -24- 38.2 PRONOUNS Page -24- 38.3 GOVERNING LAW Page -24- 38.4 Words of Obligation Page -25- 38.5 JOINT AND SEVERAL LIABILITY Page -25- 38.6 EXECUTION OF LEASE Page -25- 38.6.1 DEPOSIT Page -25- 38.7 NOTICE OF CLAIM Page -25- 38.8 NEUTRAL CONSTRUCTION Page -25- 38.9 CONSTRUCTION ALLOWANCE Page -25- 38.10 THIRD PARTY BENEFICIARY STATUS Page -25- 38.11 LIMITED LIABILITY Page -25- SECTION 39 OPTION TO EXTEND Page -25- ------------------ 39.1 EXTENSION TERM Page -25- 39.1.1 COMMENCEMENT DATE Page -25- 39.2 NOTICE OF ELECTION Page -25- 39.2.1 ADJUSTMENT OF BASE RENT Page -25- 39.3 TERMINATION OF OPTION TO EXTEND Page -26- EXHIBITS -------- EXHIBIT A-1 LEGAL DESCRIPTION OF PROPERTY EXHIBIT A-2 SITE PLAN OF PROPERTY EXHIBIT A-3 SCHEMATIC OF BUILDING EXHIBIT A-4 SITE PLAN OF PREMISES WITHIN BUILDING EXHIBIT A-5 SCHEMATIC OF PREMISES EXHIBIT B MEMORANDUM OF COMMENCEMENT DATE AND CONFIRMATION OF RENTABLE AREA OF THE PREMISES EXHIBIT C LANDLORD'S WORK LETTER EXHIBIT D RULES AND REGULATIONS EXHIBIT E JANITORIAL SERVICE SPECIFICATIONS EXHIBIT F EXTERIOR DIRECTIONAL SIGNAGE EXHIBIT G ROOFING REQUIREMENTS EX-10.247 4 doc3.txt EXHIBIT 10.247 OFFICE TRIPLE NET L E A S E (2280 CORPORATE CIRCLE) MEGO FINANCIAL CORP. THIS LEASE is made and entered into this 31st day of May, 2002, by and between 2280 CORPORATE CIRCLE, LLC, A NEVADA LIMITED LIABILITY COMPANY (herein referred to as "Landlord") and MEGO FINANCIAL CORP., A NEW YORK CORPORATION (herein referred to as "Tenant"). SECTION 1 DEFINITIONS SECTION -------------------- 1.1 Definitions. The following definitions shall pertain hereto: 0.0.1 "ADDITIONAL RENT" shall mean charges payable by Tenant other than Base Rent. SEE SECTION 3.3. 0.0.2 "ADJUSTMENT MONTH" shall mean the thirteenth (13th) month and each successive twelve (12) month period thereafter throughout the Lease Term commencing with the first full calendar month following the Commencement Date (i.e. 25th, 37th, 49th month, etc.), and each successive twelve (12) month period throughout any applicable Extension Term(s) (i.e. 13th, 25th, 37th month, etc.). 0.0.3 "AGGREGATE MONTHLY RENT" shall mean Base Rent and all Additional Rent. 0.0.4 "ALLOWANCE" shall mean an amount equal to __None___ and __/100 Dollars ($00.00) per square foot of Rentable Area, as defined below, of the Premises, as more fully elaborated in EXHIBIT C, "Landlord's Work Letter," attached hereto and incorporated herein. SEE EXHIBIT C. 0.0.5 "BASE RENT" shall mean the sum of One and 40/100 Dollars ($1.40) per month for each square foot of Rentable Area of the Premises, which is equal to the sum of One Million Seventy-Four Thousand Five Hundred Eleven and 20/100 Dollars ($1,074,511.20) per annum, as may be adjusted pursuant to Section 2.1.1 hereof. The Base Rent shall be due and owing as of the Commencement Date. SEE SECTION 3.1. 0.0.6 "BROKER" shall refer to CB Richard Ellis and Lee & Associates. SEE SECTION 35. 0.0.7 "BUILDING" shall mean the structure and all of its improvements constructed upon the Property, which structure has a business address of 2280 Corporate Circle, Henderson, Nevada 89074. The total Rentable Area for the Building, for purposes of this Lease, is deemed to be approximately 63,959 square feet. 0.0.8 "COMMENCEMENT DATE" shall refer to July 1, 2005. The parties hereto anticipate that Tenant shall be in occupancy of the Premises pursuant to a sublease agreement with Providian Bancorp Services, a California corporation, the previous tenant of the Premises ("Providian"). In the event that Tenant is no longer an occupant of the Premises at any time on or before the Commencement Date, or Tenant is in default of its sublease arrangement with Providian, beyond any notice and cure periods, this Lease shall be voidable, at Landlord's option. 0.0.9 "COMMON AREAS" shall mean those areas as more fully defined in Section 9. 0.0.10 "DEFAULT INTEREST RATE" shall mean the lesser of eighteen percent (18%) per annum or the maximum interest rate permitted by Nevada law. 0.0.11 "LANDLORD'S WORK" shall refer to the improvements to be installed by Landlord pursuant to the Landlord's Work Letter, attached hereto and incorporated herein. SEE EXHIBIT C. 0.0.12 "LEASE YEAR" shall mean a twelve (12) month calendar year, except that in the event that the Commencement Date for the Premises occurs on a date other than January 1, the first Lease Year hereunder shall be that fractional part of the calendar year from the Commencement Date to December 31 of the same year, and the final Lease Year shall be that fractional part of the calendar year from January 1 to the expiration date of the Lease. 0.0.13 "MORTGAGEE" shall mean the holder of a lien of first priority on the Property. 0.0.14 INTENTIONALLY OMITTED 0.0.15 "PREMISES" shall mean that suite or space as indicated by cross hatching on the Site Plan attached hereto as EXHIBIT A-4 and EXHIBIT A-5, incorporated herein by reference, and commonly referred to as Suite 100 located within the Building. 0.0.16 "PROPERTY" shall mean the real property upon which the Building is located, as more legally described in EXHIBIT A-1, and depicted on EXHIBIT A-2, attached hereto and incorporated herein, and all easements, rights, rights-of-way, and licenses appurtenant thereto. The Property is located in a business center commonly referred to as "Green Valley Corporate Center." 0.0.17 "PROPERTY OPERATING COSTS" shall mean those costs and expenses as further elaborated in Section 3.3.3. 0.0.18 "RENTABLE AREA" shall be deemed to be, for purposes of this Lease, 63,959 square feet. 0.0.19 INTENTIONALLY OMITTED. 0.0.20 "TENANT IMPROVEMENTS" shall refer to those improvements to be made, installed or otherwise constructed by the Landlord, as more fully elaborated in Landlord's Work Letter. SEE EXHIBIT C. 0.0.21 "TENANT'S PRO-RATA PORTION" shall mean a percentage based upon a fraction, the numerator of which is the Rentable Area of the Premises, and the denominator of which is the total number of Rentable Area of the Building. 0.0.22 "TENANT'S SHARE" of Property Operating Costs shall be calculated as one hundred percent (100%) attributable to the Property. SEE SECTION 3.3.1. 0.0.23 "TERM" shall mean the period of time commencing with the Commencement Date and continuing coterminously with a second lease executed by Tenant for space within a building, commonly referred to as 2285 Corporate Circle, Suite 200, Henderson, Nevada, dated ___________________, 2002, with Corporate Ctr. IV, LLC, as the Landlord ("Second Lease"), but in no event shall the term of this Lease be less than sixty (60) months; provided, however, that the term of Tenant's and Landlord's rights and obligations hereunder may be extended pursuant to Section 41 below. SECTION 2 PREMISES -------- 1.2 Premises. Upon the conditions, limitations, covenants and agreements herein set forth, Landlord hereby leases to Tenant, and Tenant hereby accepts, hires and leases from Landlord, the Premises. Subject to the other provisions of this Lease, Landlord shall have the right, in its sole and absolute discretion, to modify the Property and/or the Building from time to time, but in no event shall such modification substantially interfere with Tenant's use of the Premises, as such use is more fully elaborated in Section 7 below, nor materially reduce the Rentable Area of the Premises. 0.0.1 LANDLORD'S RESERVATIONS Landlord reserves to itself the use of the roof, exterior walls and the area above and below the Premises (other than roll-up doors and exterior doorways), together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements now or in the future leading through the Premises and which serve other parts of the Property. 1.3 Declaration. The Green Valley Corporate Center development is subject to that certain Declaration of Covenants, Conditions and Restrictions, recorded on January 25, 1996, in Book 960125, as Document No. 01411, in the Office of the Recorder of Clark County, Nevada, and any amendments or supplements thereto (the "Declaration"). The Declaration is enforced and implemented in part by the Green Valley Corporate Center Commercial Association, Inc. (the "Association"). SECTION 3 BASE RENT --------- 1.4 Base Rent. The Base Rent for each Lease Year or portion thereof, together with the estimated Additional Rent, pursuant to Section 3.3 below, shall be due and payable in advance, in legal tender of the United States of America, in twelve (12) equal installments, one such installment being due on the first day of each calendar month during the Term of the Lease and any applicable extensions or renewals thereof. Tenant agrees to pay such Base Rent and Additional Rent to Landlord monthly, in advance, without demand. If the Lease Term commences on a day other than the first day of a month or terminates other than the last day of a month, then the installments of Base Rent and Additional Rent for such month(s) shall be prorated, based upon the number of days in such month. 0.0.1 FIRST MONTH'S RENTAL OBLIGATION Ninety (90) days prior to the Commencement Date, Tenant shall deliver to Landlord the sum of Eighty-Nine Thousand Five Hundred Forty-Two and 60/100 Dollars ($89,542.60), representing Tenant's first month's rental obligation hereunder. 1.5 Base Rent Increases. The Base Rent shall be increased by three percent (3%) commencing on the first day of each Adjustment Month. 1.6 Additional Rent. In addition to Base Rent, Tenant shall pay to Landlord, from the Commencement Date throughout the Term of this Lease, at the time and manner set forth herein, the following Additional Rent: 0.0.1 TENANT'S SHARE OF PROPERTY OPERATING COSTS. Landlord shall estimate the initial Lease Year's Property Operating Costs, as that term is more fully defined below, and shall notify Tenant, in writing, on or about the Commencement Date and within one hundred and twenty (120) days after the beginning of each successive Lease Year of Tenant's Share, applying the current Lease Year's estimated Property Operating Costs ("Estimated Tenant's Share"). The Estimated Tenant's Share shall be pro-rated on a monthly basis for the applicable Lease Year and such pro-rated amount shall be remitted by Tenant, in advance, commencing on the Commencement Date and continuing on the first day of each month thereafter, without further demand or any deduction or setoff. Until such time as Landlord notifies Tenant of the current Lease Year's Estimated Tenant's Share, Tenant shall continue to pay the Estimated Tenant's Share for the previous Lease Year. 0.0.2 NOTIFICATION OF PROPERTY OPERATING COSTS. Following the end of each Lease Year, Landlord will ascertain the actual Property Operating Costs for the current Lease Year then ending, and shall compute the difference thereof from the Estimated Tenant's Share paid by Tenant for the applicable Lease Year. Landlord shall notify Tenant, in writing, within one hundred and twenty (120) days of the end of each Lease Year of such difference, if any (the "Property Operating Cost Statement"). In no event, however, shall failure to deliver the Property Operating Cost Statement within said one hundred and twenty (120) day period prevent Landlord from collecting the difference, if any, from Tenant. Tenant shall pay to Landlord, within thirty (30) days following receipt of the Property Operating Cost Statement, the amount, if any, due to Landlord (inclusive of the last year of the Term). In the event that the Property Operating Cost Statement reflects an amount due to Tenant, then same shall be Page -3- credited and applied to the next monthly payment of Base Rent and Additional Rent, until such amount has been fully exhausted, provided that in the last year of the Term any excess shall be refunded to Tenant within thirty (30) days following Tenant's receipt of the Property Operating Cost Statement, or any shortfall shall be paid by Tenant within thirty (30) days of its receipt of the Property Operating Cost Statement. In no event shall Landlord or Tenant be entitled to receive interest on any amounts due to the respective party as shown on the Property Operating Cost Statement. The obligation of Tenant to pay Landlord Tenant's Pro-Rata Portion of the Property Operating Costs, or Landlord's obligation to refund any excess paid by Tenant shall survive the early termination or expiration of this Lease. 0.0.3 PROPERTY OPERATING COSTS. The term "Property Operating Costs" shall mean the total cost and expense incurred, during each Lease Year, in managing, operating, equipping, lighting, repairing, replacing and maintaining the Property, as well as any owners association's common area assessments which are established and which are allocable to the Property as reasonably determined by the Landlord, annualized over a Lease Year. Such operating and maintenance costs shall include all costs and expenses of operating and maintaining such areas and facilities in such manner as Landlord may, from time to time, deem appropriate, and for the best interests of the tenants of the Property, including, without limitation, the following: 4. all Impositions, as that term is defined in Section 3.3.5 below; 5. all Utilities not separately metered or billed to Tenant, or other tenants, and all other utilities and services provided to the Property; 6. Landlord's insurance for the Property, including fire and extended coverage, liability, property damage, rent loss, boiler insurance, vandalism, malicious mischief, earthquake insurance, insurance against liability for defamation and claims of false arrest, and such other insurance in such amounts and covering hazards deemed appropriate by Landlord or which Landlord or any Mortgagee deems necessary or prudent; 7. the cost (amortized over such period as Landlord reasonably determines, together with interest at twelve percent (12%) on the unamortized balance) of any capital improvements to the Property or equipment replacements made by Landlord after the Commencement Date that are intended to reduce Property Operating Costs, or are required by any laws, which are necessary in order to operate the Property at the same quality level as prior to such replacement; 8. costs and expenses of operation, repair and maintenance of all structural portions and components of the Property, including, without limitation, plumbing, communication, common area heating, ventilating and air-conditioning, elevator, and common area electrical and other common Property systems; 9. costs of repairs, maintenance, or replacement of paving, curbs, walkways, remarking, directional or other signs, landscaping, drainage, lighting facilities, repair and maintenance of the Common Areas and parking areas, costs and expenses of planting, replanting and replacing flowers, shrubbery and other landscaping, and the cost to Landlord of servicing and maintaining any sprinkler system; 10. rental or lease payments paid by Landlord for rented or leased personal property used in the operation or maintenance of the Property; 11. management fees not to exceed three percent (3%) of the annual gross revenue of the Building, and administrative fees not to exceed fifteen percent (15%) of the direct Property Operating Costs, for direct labor and overhead for administrative personnel at or below the property manager level allocable to the Premises, Building or Property, which fees shall be payable to Landlord or to any other entity which is managing or administering the Property and/or the Building; 12. costs incurred in providing private police protection, roving patrol, or night watchmen (including, but not limited to, uniforms), and fire protection; Page -4- 13. expenses for the rental of music program services and loudspeaker systems (if Landlord elects to provide the same), including, but not limited to, furnishing electricity therefor; 14. Landlord's share of any charges or contributions made under a recorded covenant or other agreement that relates to the Property and any other property, which are disclosed, in writing, in advance to the Tenant; and 15. cost of leasing and operating any signs, the cost of personnel to implement any service described above, to direct traffic and to police the Common Areas. 3.3.4 PROPERTY OPERATING COST EXCLUSIONS. Property Operating Costs shall not include any expenditures by Landlord in connection with: - --- 16. leasing costs (including Tenant Improvements), fees and leasing commissions; 17. legal fees and costs, including costs of litigating with other tenants; 18. taxes other than "Impositions," as that term is defined in Section 3.3.5 of this Lease; 19. costs and fines assessed against Landlord, due to violation of any other leases within the overall development within which the Premises is situated; 20. all costs and expenses associated with capital improvements or additions (except as otherwise provided above) to the Property or the construction of any buildings to be occupied or used primarily for other tenants; 21. depreciation, amortization and interest payments, except as provided herein, and when required, the item shall be amortized over its reasonably anticipated useful life; 22. interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering the Property except in conjunction with a permitted charge hereunder; and 23. Landlord's general corporate overhead, general and administrative expenses and profits in connection with goods and services in or to the Property as supplied by Landlord to the extent the same exceeds the costs therefor if rendered by an unaffiliated third party within Clark County, Nevada. 3.3.5 IMPOSITIONS. For the purpose of this Lease, the term "Impositions" means: 24. any real estate taxes, fees, assessments (including, but not limited to, any local improvement district assessments), or other charges assessed against the Property and any improvements thereon; 25. all personal property taxes on personal property used in connection with the Property and related structures other than taxes payable by Tenant under Section 13.1 hereof, or payable by any other tenant in the Building; 26. any and all taxes, assessments, license fees, and public charges levied, assessed, or imposed, and which become payable during the Term hereof upon all improvements made to the Premises, over and above the Building shell, whether installed by Landlord or Tenant; 27. any and all environmental levies or charges now in force affecting the Property or any portion thereof, or which may hereafter become effective, including, but not limited to, parking taxes, levies, or charges, employer parking regulations, and any other parking or vehicular regulations, levies, or charges imposed by any municipal, state or federal agency or authority; Page -5- 28. any other taxes levied or assessed in addition to, as a replacement, alteration, or substitute for, or in lieu of such real or personal property taxes; 29. any and all fees reasonably paid by Landlord in its opposition of tax assessments that are directly related to the Premises and/or the Property, provided, however, that in no event shall such fees exceed the amount of actual savings; 30. any expenses incurred in connection with any requirement subsequent to the date hereof for changes at the Property so as to comply with then existing laws, ordinances or codes imposed by federal, state or local governmental authorities, together with any and all fees reasonably incurred by Landlord in its opposition to any such regulations; and 31. all new and increased assessments, taxes, fees, levies and charges relating to the Property shall be included within the definition of "Impositions" for the purposes of this Lease. 1.7 Expenditures by Landlord. Whenever under any provision of this Lease, Tenant shall be obligated to make any payment or expenditure, or to do any act or thing, or to incur any liability whatsoever, and Tenant fails, refuses or neglects to perform as herein required, Landlord shall be entitled, but shall not be obligated, (i) to make any such payment; (ii) to do any such act or thing; or (iii) to incur any such liability, all on behalf of and at the cost of and for the ac-count of Tenant. In exercising this right, Landlord shall be permitted to charge Tenant the cost thereof plus interest thereon at the rate of fifteen percent (15%) per annum, which charge shall constitute and be collectible as Additional Rent on demand. 1.8 Monetary Payments. All rent and other monies required to be paid by Tenant hereunder shall be paid to Landlord, without deduction or offset, except as otherwise provided herein, in legal tender of the United States of America, at 901 N. Green Valley Parkway, Suite 200, Henderson, Nevada 89074, Attention: Property Management, or at such other place as Landlord may, from time to time, designate in writing. Tenant agrees that all monies required to be paid by Tenant pursuant to this Lease, except for the Base Rent, are hereby conclusively deemed to be Additional Rent. SECTION 4 RIGHT OF AUDIT --------------- 1.9 Right of Audit. In the event of any good faith dispute as to the amount of the Property Operating Costs, as set forth in the Property Operating Cost Statement forwarded to Tenant by Landlord, pursuant to Section 3.3.2, Tenant shall have the right to inspect Landlord's Property Operating Cost records for the Building and the Property at Landlord's offices; provided, however, that Tenant is not in default under the terms of this Lease at the time such request for such inspection is made, no more frequently than once per calendar year, and upon not less than thirty (30) days prior written notice to Landlord and at reasonable times. Tenant shall further have the right to photocopy Landlord's Property Operating Cost records for the Building and the Property at Landlord's offices, in the event that Tenant requests that an inspection be made. If, after such inspection and photocopying, Tenant continues, in good faith, to dispute the amount of the Property Operating Costs, as set forth in said Property Operating Cost Statement, Tenant shall be entitled not later than ninety (90) days following Tenant's receipt of Property Operating Cost Statement to retain a national, independent, certified public accountant, who is not contracted on a contingency fee basis, and who is mutually acceptable to Landlord and Tenant, to audit Landlord's Property Operating Cost records, with respect to the calendar year covered by said Property Operating Cost Statement, to determine the proper amount of the Property Operating Costs. Landlord shall be entitled to review the results of such audit promptly after completion of same. If the results of such audit states that Landlord has overcharged Tenant, then within a reasonable time after the results of the audit are made available to Landlord, Landlord shall credit Tenant the amount of such overcharge toward the payments of Base Rent and Additional Rent next coming due under this Lease, until such amount has been fully exhausted. If such audit proves that Landlord has undercharged Tenant, then within fifteen (15) days after the results of the audit are made available to Tenant, Tenant shall pay to Landlord the amount of any such undercharge. 3.3.1 AUDIT CONFIDENTIALITY. Tenant's receipt of any information in response to a request for inspection of Landlord's books and records with respect to the Property Operating Costs for the Building is subject to the following: 32. TENANT MUST KEEP INFORMATION CONFIDENTIAL. All of the information obtained through the Tenant's audit with respect to financial matters Page -6- (including, without limitation, costs, expenses, and income) and any other matters pertaining to the Landlord and/or the Property, as well as any compromise, settlement, or adjustment reached between Landlord and Tenant relative to the results of the audit, shall be held in strict confidence by the Tenant and its officers, agents, and employees; and Tenant shall cause its auditor and any of its officers, agents, and employees to be similarly bound pursuant to subparagraph b., below. 33. AUDITOR MUST SIGN CONFIDENTIALITY COVENANT. As a condition precedent to Tenant's exercise of its right to audit, Tenant must deliver to Landlord a signed covenant from the auditor, in a form to be provided by Landlord, acknowledging that all of the results of such audit as well as any compromise, settlement, or adjustment reached between Landlord and Tenant shall be held in strict confidence and shall not be revealed in any manner to any person except: (i) upon the consent of the Landlord, which consent may be withheld in Landlord's sole discretion; (ii) if reasonably necessary in connection with any arbitration or litigation, or regulatory arbitration or mediation proceeding between Landlord and Tenant materially related to the facts disclosed by such audit; or (iii) if required by law. 34. ACKNOWLEDGMENT. Tenant understands and agrees that this provision is of material importance to the Landlord and that any violation of the terms of this provision shall result in immediate and irreparable harm to the Landlord. 35. DAMAGES. Landlord shall have all rights allowed by law or equity if Tenant, its officers, agent, or employees and/or the auditor violate the terms of this provision, including, without limitation, the right to terminate this Lease or the right to terminate Tenant's right to audit in the future pursuant to this clause. 36. INDEMNIFICATION BY TENANT AND AUDITOR. Tenant shall indemnify, defend upon request, and hold Landlord harmless from and against all costs, damages, claims, liabilities, expenses, losses, court costs, and attorney's fees suffered by or claimed against Landlord, based, in whole or in part, upon the breach of this Section by Tenant and/or its auditor; and shall cause its auditor to be similarly bound. 37. SURVIVAL CLAUSE. The obligations within this Section shall survive expiration or earlier termination of the Lease. 1.9.1.1 If Tenant does not request an audit in accordance with the provisions of this Section 4.1 within ninety (90) days of its receipt of the Property Operating Cost Statement, such Property Operating Cost Statement shall be conclusively binding upon Tenant. In the event that Tenant was the prevailing party, in whole or in part, in an audit, Tenant shall only be entitled to audit Landlord's books and records that apply to the prior year immediately preceding the year in which Tenant prevailed in such audit, and in connection with the same specific item that was the subject of the previous audit in which Tenant prevailed, but in no event shall Tenant be entitled to conduct an audit nor challenge the correctness of the Property Operating Cost Statement for a period earlier than one (1) year prior to the year in which Landlord delivers the most recent Property Operating Cost Statement. In addition, once having conducted an audit with respect to a specific item in any year, Tenant shall have no right to conduct another audit of the same specific item for such year. SECTION 5 SECURITY DEPOSIT ----------------- 1.10 Security Deposit. Tenant, ninety (90) days prior to the Commencement Date, will deposit with Landlord the sum of Eighty-Nine Thousand Five Hundred Forty-Two and 60/100 Dollars ($89,542.60), representing Tenant's first month's ---------- rental obligation hereunder ("Deposit"). Said Deposit shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants Page -7- and conditions of this Lease by Tenant to be kept and performed during the Term hereof, including the vacating of the Premises by Tenant; provided that Tenant shall not be excused from the payment of any rent herein reserved or any other charge herein provided. If Tenant defaults with respect to any provision of this Lease, Landlord may, but shall not be required, (i) to use or retain all or any part of the Deposit for the payment of any rent or other monies due Landlord; (ii) to repair damages to the Premises; (iii) to clean the Premises; or (iv) to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of the Deposit is so used or applied, Tenant shall, within five (5) business days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Deposit to its original amount. 3.3.2 RETURN OF DEPOSIT. Landlord shall not be required to keep the Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Deposit. Should Tenant comply with all of said terms, covenants and conditions and promptly pay all the rent herein provided for and all other sums payable by Tenant to Landlord hereunder as the same fall due, then the Deposit shall be returned to Tenant within thirty (30) days after the end of the Term, or thirty (30) days after the last payment due from Tenant is received by Landlord, whichever last occurs. In the event of sale, transfer or the making of a master lease of the Property or of any portion thereof containing the Premises, if Landlord transfers the Deposit to the lessee or transferee for the benefit of Tenant, and if such lessee or transferee assumes all liability with respect to the Deposit, then Landlord shall be considered released by Tenant from all liability for the return of the Deposit, and Tenant agrees to look solely to the new landlord for the return of the Deposit, and it is agreed that this Section 5 shall apply to every transfer or assignment to a new landlord. No Mortgagee or beneficiary holding a lien on the Property or any portion thereof shall be liable to Tenant for any Deposit, unless said Deposit has actually been delivered to such Mortgagee or beneficiary. 3.3.3 NO RIGHT OF TENANT TO ENCUMBER DEPOSIT. Tenant shall have no right or privilege to mortgage, encumber, transfer or assign the Deposit without the prior written consent of Landlord. 1.11 No Right of Deduction. Tenant may not deduct from its Aggregate Monthly Rent or from other payments to Landlord under this Lease, the Deposit, and Landlord's right to possession of the Premises, or to take appropriate action for nonpayment of any rent, or for any other reason, shall not be affected by the fact that Landlord holds the Deposit and does not use, apply or retain the same as set forth herein. 1.12 Right to Raise Security Deposit. Upon the occurrence of an Event of Default, as defined below, more than three (3) times within any twelve (12) month period, irrespective of whether or not such default is cured, then, without limiting Landlord's other rights and remedies provided for in this Lease, or at law or in equity, the Deposit shall automatically be increased by an amount equal to the greater of: (i) three (3) times the original Deposit; or (ii) three (3) months Base Rent, which shall be paid by Tenant to Landlord within ten (10) days following receipt of written notice by Landlord of same. SECTION 6 POSSESSION AND SURRENDER -------------------------- 1.13 Possession of the Premises. Subject to the following provisions, Tenant shall upon entering and occupying the Premises be conclusively deemed to have accepted the Premises (subject, if EXHIBIT C is attached hereto, only to the completion by Landlord of minor "punch list items" as provided in EXHIBIT C) and Landlord shall not be liable for any latent or patent defects therein. Landlord will construct the Tenant Improvements to be constructed or installed by Landlord according to the Landlord's Work. If EXHIBIT C, Landlord's Work, is not attached to this Lease, Landlord will be deemed to have delivered to Tenant possession of the Premises in its "as is" condition as of the Commencement Date. Tenant acknowledges that neither Landlord nor its agents or employees have made any representations or warranties as to the suitability or fitness of the Premises for the conduct of Tenant's business or for any other purpose, nor has Landlord or its agents or employees agreed to undertake any alterations or construct any Tenant Improvements to the Premises except as expressly provided for in this Lease and the Landlord's Work. If for any reason Landlord cannot deliver possession of the Premises to Tenant on or before the fixed date component of the Commencement Date, if applicable, this Lease will not be void Page -8- or voidable, and Landlord will not be liable to Tenant for any resultant loss or damage. 1.14 Surrender. Upon the expiration or sooner termination of the Term of this Lease, if Tenant has fully and faithfully perform-ed all of the terms, conditions and covenants of this Lease to be performed by Tenant, but not otherwise, Tenant shall, at its sole cost and expense, remove all personal property and trade fixtures which Tenant has installed or placed in or on the Premises (all of which are hereinafter referred to as "Tenant's Property") from the Premises and repair all damage thereto resulting from such removal, and Tenant shall thereupon surrender the Premises in the same condition as on the Commencement Date, reasonable wear and tear excepted. If Tenant has not fully and faithfully performed all of the terms, conditions and covenants of this Lease to be performed by Tenant, Tenant shall never-theless remove Tenant's Property from the Premises in the manner aforesaid within fifteen (15) days after receipt of written direction to do so from Landlord. In the event Tenant shall fail to remove any of Tenant's Property as provided herein, Landlord may, but is not obligated to, at Tenant's expense, remove all of such Tenant's Property not so removed and repair all damage to the Premises resulting from such removal, and Landlord shall have no responsibility to Tenant for any loss or damage to Tenant's Property caused by or resulting from such removal or otherwise. If the Premises is not surrendered at the end of the Term, Tenant shall indemnify Landlord against all loss or liability resulting from delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant due to such delay. Tenant agrees not to commit or allow waste to be committed on any portion of the Premises. SECTION 7 USE OF PREMISES -------------------------- 1.15 Use of Premises. The Premises are leased to Tenant solely for office and administrative use, including the operation of a call center and related uses with respect to the operation of a travel/timeshare company, and for no other purpose or purposes whatsoever. Tenant shall not use, or suffer to be used, the Premises, or any portion thereof, for a sales office for timeshare and/or land sale presentations to the general public. Tenant shall conduct business under the trade name of "LEISURE INDUSTRIES CORPORATION OF AMERICA, INC.," and no other, without Landlord's prior written consent, which consent shall not be unreasonably withheld or conditioned. 1.16 Maintenance and Repair. Except as provided for elsewhere herein, Tenant is responsible to maintain, at Tenant's sole cost and expense, in good order, condition and repair (including any such replacement and restoration as is required for that purpose) the Premises and every part thereof and any and all appurtenances thereto wherever located, including, but without limitation, the exterior and interior portion of all doors, door checks, windows, plate glass, Tenant signage, all plumbing and sewage facilities within the Premises including free flow up to the main sewer line, fixtures, heating and air conditioning and electrical systems (whether or not located in the Premises), fire sprinkler system, interior walls, floors and ceilings, and any work performed by or on behalf of Tenant hereunder. Tenant shall also keep and maintain in good order, condition and repair (including any such replacement and restoration as is required for that purpose) any special equipment, fixtures or facilities other than the usual and ordinary plumbing and utility facilities, including but not limited to that certain generator servicing the Building (the "Generator"). Landlord agrees to assign to Tenant any warranties it receives, and continues to have in its possession, pertaining to those parts of the Premises Tenant is responsible for maintaining hereunder. Tenant shall service, maintain, and regularly test the Generator, such that it meets all governmental regulatory requirements required for the use of same. 1.17 Storage of Garbage. Tenant shall store all trash and garbage in appropriate refuse containers in a designated area provided by Landlord and reasonably located, so as not to be visible or create a nuisance to customers and business invitees in the Premises and/or the Property, and so as not to create or permit any health or fire hazard. If Tenant requires larger refuse facilities over that generally provided by Landlord, Tenant shall arrange and pay for same. 1.18 Abidance of Rules and Regulations. Tenant hereby covenants and agrees that it, its agents, employees, servants, contractors, subtenants and licensees Page -9- shall abide by the Rules and Regulations that Landlord has established, as set forth in EXHIBIT D, attached hereto and incorporated herein by reference, and such additional reasonable rules and regulations hereafter adopted, and reasonable amendments and modifications of any of the foregoing, as Landlord may, from time-to-time, adopt for the safety, care and cleanliness of the Premises or the Property or for the preservation of good order thereon and therein. 1.19 Commercially Reasonable Operation. Tenant shall operate its business in the Premises and such operation shall be conducted in a commercially reasonable manner. 1.20 Prohibition Against Interference With Other Tenants. Tenant shall not do, permit or suffer anything to be done or kept upon the Property or in the Premises which will obstruct or interfere with the rights of other tenants and/or property owners, Landlord or the patrons and customers of any of them, or which will unreasonably annoy any of them, their patrons or customers by reason of unreasonable noise or otherwise, nor will Tenant commit or permit any nuisance on the Premises or commit or suffer any immoral or illegal act to be committed thereon. 1.21 Use of Common Areas. The use of the Premises and all Common Areas whatsoever by Tenant, its employees, agents, customers, licensees, invitees, and contractors shall at all times be in compliance with all covenants, conditions and restrictions, easements, reciprocal easement agreements, and all matters presently of public record, or which may hereafter be placed of public record, which affect the Premises or the Property, or any part thereof. 1.22 Parking. Subject to Section 9, Tenant agrees that Tenant and its employees, invitees and all other individuals visiting the Premises, except for Tenant's customers, will, if deemed necessary by Landlord, only park in the areas designated for such use. Written notice of such designation shall be delivered to Tenant and same shall have the same force and effect as if it was originally included in this Lease. 1.23 Trademark Restrictions. Tenant agrees to abide by the trademark restriction covenants contained in Section 7.9.1 below. Tenant hereby acknowledges and agrees that, upon any breach by Tenant of such covenants, Landlord and ANC, Inc., an affiliate of the Landlord, will be irreparably and materially injured for no just cause and without adequate remedy at law, such that Landlord and ANC, Inc. (as a third party beneficiary hereof) shall be irrebuttably presumed to be immediately entitled to all forms of equitable relief, including, without limitation, a temporary restraining order and preliminary or permanent injunction. 3.3.1 TRADEMARK. Tenant acknowledges that Landlord has informed it that ANC, Inc., a Nevada corporation, and an affiliate of Landlord, is the owner of trademark and trade name rights relative to the name "GREEN VALLEY" and with respect to various distinctive marks utilized in conjunction with the Green Valley development. Tenant therefore agrees not to denote or utilize the name "GREEN VALLEY" or any of said distinctive marks as the name of or part of the name of or in conjunction with the name of the business to be conducted on the Premises leased to Tenant hereunder without first obtaining the written approval of ANC, Inc., and executing such license agreements relative thereto as may be requested and required by ANC, Inc. Any breach of this provision shall constitute a material breach of this Lease with all attendant rights accruing to Landlord. Further, ANC, Inc. is acknowledged by both Landlord and Tenant to be an additional intended beneficiary of this provision of this Lease. Tenant agrees and acknowledges that either Landlord and/or ANC, Inc. shall be entitled to all forms of equitable relief, including, without limitation, a temporary restraining order, preliminary and permanent injunction, in the event of any unauthorized use by Tenant of the name "GREEN VALLEY" or any trademark of ANC, Inc., utilized in conjunction with the Green Valley development. 1.24 Gaming. No slot machine, gambling game or device, or other "gaming" of any type as defined by Nevada law or requiring a gaming license issued by the State of Nevada shall be permitted in or on the Premises without the prior written consent of Landlord, which consent is strictly within Landlord's discretion. 1.25 Satellite Dish. Tenant shall have the right, at its sole cost and expense, Page -10- in accordance with all applicable governmental laws, codes and regulations, to install one (1) satellite dish, the size of which shall be consented to by Landlord (not greater than two (2) meters), utilizing a non-penetrating roof mount. Tenant represents and warrants that the installation of the dish shall not cause any damage to the Premises or the Building. Installation of the satellite dish by Tenant will not adversely affect the Landlord's roof warranty. Said installation shall be at a location mutually agreed upon by Landlord and Tenant. The dish shall be screened by view from all elevations of the Premises and Building in accordance with the City of Henderson and all governmental ordinances. Tenant shall mount said dish by the mounting configuration and in a manner reasonably required by Landlord. Tenant agrees to indemnify and hold harmless Landlord from any costs, liabilities or damages arising from or caused by the installation, use and/or existence of said satellite dish. Additionally, at the expiration or early termination of the Lease, Tenant shall remove the satellite dish at Tenant's sole cost and expense and shall repair any damage caused by such removal. In the event Tenant fails to remove said dish within fifteen (15) days after the expiration or earlier termination of this Lease, Landlord may remove same and Tenant shall pay to Landlord the reasonable costs therefor incurred. Tenant represents and warrants that any and all roof work shall comply with the requirements set forth in EXHIBIT G, attached hereto and incorporated herein. Tenant shall indemnify, defend, and hold Landlord harmless from and against all costs, damages, claims, liabilities, expenses, losses, court costs, and attorney's fees suffered by or claimed against Landlord, based, in whole or in part, upon the breach of this Section by Tenant. SECTION 8 IMPROVEMENTS, SIGNAGE AND ALTERATIONS ------------------------------------- 1.26 Improvements. Landlord shall diligently perform and install or cause to be installed the improvements to the Premises required of it as specifically set forth on EXHIBIT C, attached hereto and incorporated herein ("Landlord's Work"). Except as so set forth, Tenant otherwise accepts the Premises in its "as is" condition. Landlord's Work shall be performed substantially in accordance with the plans, specifications and related requirements as so outlined on said EXHIBIT C or established pursuant thereto. 3.3.1 INTENTIONALLY OMITTED. 3.3.2 BUILDING SIGN. At Tenant's sole cost and expense, Tenant shall have the ability to display its trade name and/or logo on the exterior fascia of the Building, which design, size and location shall be subject to Landlord's approval (the "Building Sign"). The right to display Tenant's trade name and/or logo shall terminate upon the expiration of this Lease or sooner termination as provided herein. 3.3.3 GATEWAY SIGNAGE. Landlord shall provide Tenant a right to display its trade name on the gateway signage located in the Green Valley Corporate Center parking lot, as generally depicted on EXHIBIT F, attached hereto and incorporated herein (the "Gateway Sign"). Tenant shall be responsible for the cost of the design, construction and placement of the sign panel, bearing Tenant's trade name logo on the Gateway Sign, which design, size and location shall be subject to Landlord's approval. The right to display Tenant's trade name shall terminate upon the expiration of this Lease or sooner termination as provided herein. 1.27 Alterations. After completion of the Landlord's Work outlined herein, Tenant shall not make any further additions, alterations, improvements or changes ("Alterations") in, or to the Premises without the prior written approval of Landlord, excepting therefrom the interior non-structural Alterations costing less than Ten Thousand and 00/100 Dollars ($10,000.00) made by Tenant to the Premises. The approval of any and all structural Alterations shall be at the sole and absolute discretion of the Landlord. Any such approved Alterations shall be at the sole cost and expense of Tenant. Landlord may impose, as a condition to such consent, such requirements as Landlord may deem reasonably necessary in its judgment, including, without limitation, (i) the manner in which the work is done; (ii) a right of approval of the contractor by whom the work is to be performed; (iii) the times during which the work is to be accomplished, approval of all plans and specifications, certifications and inspections; and (iv) the procurement of all licenses and permits. Landlord shall be entitled to post notices on and about the Premises with respect to Landlord's non-responsibility for mechanics' liens, and Tenant shall not permit Page -11- such notices to be defaced or removed. Tenant further agrees not to connect any apparatus, machinery or device to the Building systems, including electric wires, water pipes, fire safety, heating and mechanical systems, or any penetrations to the roof, walls or structure support of the Building, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any Alterations shall be made promptly and in a good and workmanlike manner, lien free, and in compliance with all insurance requirements and with all applicable permits, authorizations, building regulations, zoning laws, environmental regulations, laws regarding the physically disabled and all other governmental rules, regulations, ordinances, statutes and laws, now or hereafter in effect pertaining to the Premises or Tenant's use thereof. Any Alterations made by Tenant shall, at Landlord's option, be-come the property of Landlord upon the expiration or sooner termination of this Lease. However, Landlord shall have the right to require Tenant to remove such Alterations, at Tenant's sole cost and expense, upon such termination of this Lease and to surrender the Premises in the same condition as it was prior to the making of any or all such Alterations, reasonable wear and tear excepted. 1.28 Hold Harmless. Tenant shall indemnify and hold Landlord, the Property and Landlord's managing agent for the Property free of and harmless from any and all liabilities, losses, claims, or damages arising out of any Alterations undertaken by Tenant, whether specifically under the provisions of this Lease or otherwise, including all costs, damages, expenses, court costs and reasonable attorneys' fees incurred in or resulting from claims made by any person or persons, by other tenants in the Property, their subtenants, agents, employees, customers and invitees. 3.3.1 LIABILITY INSURANCE Tenant, before undertaking any Alterations, or any other improvement(s) or construction, shall obtain and pay for a commercial liability insurance policy, as more fully set forth in Section 14 below, insuring Landlord and Tenant against any liability which may arise on account of such proposed Alterations or construction work in limits of not less than Two Million and 00/100 Dollars ($2,000,000.00) combined single limit coverage; a copy of such policy shall be delivered to Landlord prior to the commencement of any such Alterations. 1.29 Compliance with Applicable Law. Tenant, at its sole cost and expense, shall cause any Alterations, decorations, installations, additions, or improvements in or about the Premises to be performed in compliance with all applicable requirements of insurance bodies having jurisdiction, and in such manner as not to interfere with, delay, or impose any additional expense upon Landlord in the construction, maintenance, or operation of the Building, and so as to maintain harmonious labor relations in the Building. 1.30 Liens. Tenant shall at all times indemnify, save and hold Landlord, the Premises, the Property and the lease-hold created by this Lease free of and harmless from any claims, liens, demands, charges, encumbrances, litigation and judgments arising directly or indirectly out of any use, occupancy or activity of Tenant, or out of any work performed, material furnished, or obligations incurred by Tenant in, upon or otherwise in connection with the Premises. Tenant shall give Landlord written notice at least seven (7) business days prior to the commencement of any such work on the Premises to afford Landlord the opportunity of filing appropriate notices of non-responsibility. Tenant shall, at its sole cost and expense, within fifteen (15) days after filing of any lien of record, obtain the discharge and release thereof. Nothing contained herein shall prevent Landlord, at the cost and for the account of Tenant, from obtaining said discharge and release in the event Tenant fails or refuses to do the same within said fifteen (15) day period. SECTION 9 PARKING AND COMMON AREAS -------------------------- 1.31 Common Areas. Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers and business invitees shall have the nonexclusive right to utilize parking spaces in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use such Common Areas of the Property (including, but not limited to, the parking lot(s), walkways, corridors, halls, passageways and ramps, sidewalks, access roads, landscape and planted areas, public restrooms and other public facilities) as designated, from time to time, by Landlord in its sole discretion (collectively, the "Common Areas"), subject to such reasonable rules and regulations as Page -12- Landlord or the Association may, from time to time, impose. Tenant agrees that it, its agents, employees, servants, contractors, subtenants, invitees and licensees shall abide by such rules and regulations. Landlord may at any time, upon written notice to Tenant (except in the case of an emergency), close any such Common Areas, (i) to make repairs or changes; (ii) to prevent the acquisition of public rights in such Common Areas; or (iii) to discourage noncustomer parking. Landlord shall operate, manage, equip, light, repair and maintain the Common Areas for their intended purposes in such manner as Landlord, in its sole discretion, shall determine. Landlord reserves the right to dedicate all or portions of such Common Areas and other portions of the Property for public utility purposes. Landlord may do such other acts in and to the Common Areas as in its sole judgment may be desirable. Tenant shall not at any time interfere with the rights of Landlord, other tenants, its and their agents, employees, servants, contractors, subtenants, licensees, customers and business invitees to use any part of the parking lot or Common Areas. Landlord shall not be subject to any liability, nor shall Tenant be entitled to any compensation, or reduction or abatement of rent, by reason of any alteration or diminution of the Common Areas, and no such alteration or diminution of the Common Areas shall be deemed constructive or actual eviction. 1.32 Parking Space Leasing. Tenant shall not be permitted to park on any access roads and drives located within the Property ("Prohibited Parking"). Tenant shall be allocated 448 spaces for unreserved, uncovered parking spaces at no charge during the Lease Term ("Parking Allotment"). Landlord shall not have the risk of loss regarding any vehicle. Tenant shall not use more parking spaces than its Parking Allotment, or any spaces (i) which have been specifically assigned by Landlord to other tenants or for other uses (e.g., as visitor parking); or (ii) which have been designated by governmental entities of competent jurisdiction as being restricted to certain uses. In the event that Landlord determines in good faith that Tenant is exceeding its Parking Allotment, Landlord shall give Tenant notice of such fact ("Notice of Excessive Parking") and shall require Tenant to provide Landlord with Tenant's employees State license plate numbers within five (5) business days of its receipt of said initial notice. In the event that Tenant receives three (3) Notices of Excessive Parking in any six (6) month period, Landlord shall be entitled to, in addition to any other remedies, including, but not limited to, towing, charge Tenant Twenty-Five and 00/100 Dollars ($25.00) per day per car in any prohibited area. Tenant's use of the parking area shall be based upon a non-exclusive use in common with Landlord, other tenants of the Building, and their guests and invitees. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities. If Tenant permits or allows any of such prohibited activities, then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord. Tenant agrees not to use guest parking for its employees; unless waived in writing by Landlord, guest parking is limited to guest use only. Tenant acknowledges that, subject to the express rights of Tenant set forth herein, Landlord has the right to allocate parking spaces in such manner as it shall determine in its sole discretion. 3.3.1 COVERED PARKING. Tenant's Parking Allotment shall include fifty-nine (59) reserved covered parking spaces at the market rate, which is currently Thirty-Five and 00/100 Dollars ($35.00) per month, per parking space. A separate license agreement shall be entered into by and between Landlord and Tenant for said reserved parking spaces. SECTION 10 LANDLORD'S SERVICES -------------------------- 1.33 Landlord Services. Landlord agrees to provide Tenant, as Landlord deems reasonably necessary, and subject to: (i) limitations contained in any governmental controls, now or hereafter imposed, or matters beyond Landlord's reasonable control; (ii) cessation on a temporary basis for reasonable necessity; (iii) tenants requiring excess amounts of services for the conduct of their business, in which event, at Landlord's discretion and with notice to such tenant, the cost of such excess services shall be allocated to that particular tenant on a equitable allocation basis and payable as Additional Rent hereunder, as billed to the tenant by the Landlord; and (iv) Tenant's obligation in connection with the Property Operating Costs, the following services: Page -13- a. Preventive maintenance service for Tenant's heating, ventilating and air-conditioning system; landscaping, streetscaping, parking lot repair and maintenance and sweeping and electrical power for the Common Areas and lighting for the Common Areas of the Property and other areas of the Property; b. Cleaning and janitorial service five (5) days each week throughout the Term so that the exterior Common Areas of the Building and/or Property are cleaned according to the standards set forth in the janitorial service specifications attached as EXHIBIT E; c. Water and sewer reasonably used in the Premises and the Common Areas with the exception of commercial enterprises which require excessive amounts of water for the conduct of their business, the latter cost thereof being paid as Additional Rent hereunder as billed to Tenant by Landlord; and Landlord reserves the right to enter the Premises, with forty-eight (48) hours prior written notice (facsimile notice is acceptable) so as to minimize any interference with Tenant's business, excepting therefrom in the event of an emergency, to install and maintain pipes, energy submeters, conduits and other appurtenances in the soffit or other space above the ceilings or ceiling line, the walls and under any floors of the Premises, which appurtenances or the like may be for other tenants of the building in which the Premises is situated. Subparagraphs (a) through (d) shall collectively be referred to as "Landlord's Services." The failure by Landlord, to any extent, to furnish, or the interruption or termination of Landlord's Services, in whole or part, resulting from causes beyond the reasonable control of Landlord shall not render Landlord liable in any respect, nor be construed as an eviction of Tenant, nor work an abatement of Aggregate Monthly Rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement hereof. Should any of the equipment or machinery used in the provision of such services for any cause cease to function properly, Tenant shall have no claim for offset or abatement of rent or damages on account of an interruption in service resulting therefrom. Tenant shall contract directly with the utility company for all electrical, water, janitorial, and telephone provided to the Premises; provided that Landlord shall use commercially reasonable efforts to restore any Landlord Service which has been interrupted, as soon as practicable. Notwithstanding the foregoing, if any of the Landlord's Services are not restored within five (5) business days, Tenant's Aggregate Monthly Rent under this Lease shall abate each day after such five (5) business day period that such service is not restored. If Landlord fails to perform any maintenance or repair work required hereunder within thirty (30) days following Landlord's receipt of written notice from Tenant of the need for such repairs (or such period of time in excess of thirty (30) days, as is reasonably necessary based upon the nature of such work, provided Landlord commences and diligently pursues the work during such thirty (30) day period), then Tenant shall be permitted to make such repairs upon delivery of an additional three (3) business days' prior written notice to Landlord indicating that Tenant will be undertaking such repairs, and Tenant shall be entitled to recover from Landlord the reasonable costs of such repairs made by Tenant. 1.34 Improvements to Common Areas. Landlord reserves the right from time to time without unreasonable interference with Tenant's access to, or use, of the Premises: (i) to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the Premises which are located in the Premises or located elsewhere outside the Premises, and to expand the Building; (ii) to make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas and walkways and parking spaces and parking areas, provided that such changes do not materially interfere with or adversely affect Tenant's use of the Premises and/or the parking areas; (iii) to close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available and advance written notice to Tenant is given; (iv) to use the Common Areas while engaged in making additional improvements, repairs or alterations to the Property, or any portion thereof; and (v) to do and Page -14- perform such other acts and make such other changes in, to or with respect to the Common Areas and Property as Landlord may, in the exercise of sound business judgment, deem to be appropriate. 1.35 Landlord's Duty to Repair. Landlord agrees to keep in good order, condition and repair the foundations, exterior walls, roof of the Building, plumbing and electrical systems of the Premises, except for reasonable wear and tear and except for any damage thereto caused by any act or negligence of Tenant or its agents, employees, servants, contractors, subtenants, licensees, customers or business invitees. It is an express condition precedent to all obligations of Landlord to repair and maintain the Premises that Tenant shall have notified Landlord in writing of the need for such repairs or maintenance. The cost of such repairs shall be included in the Property Operating Costs, as such term is defined herein, or as to repairs of the Premises, otherwise directly billed to Tenant, as the case may be. All repair, maintenance, upkeep, and the like, upon or within the Premises, shall be the responsibility of and at the expense of Tenant during the entire Lease Term, except for any obligations of Landlord as set forth herein. 3.3.1 UTILITY SERVICE FACILITIES All additions to the utility service facilities and equipment of the Property which may be installed for the specific need of Tenant shall be Tenant's responsibility to maintain and repair. SECTION 11 UTILITIES --------- 1.36 Utilities. Tenant shall pay all charges for water, gas, heat, electricity, power, refuse disposal, environmental waste disposal, air conditioning, telephone service, sewer service charges and sewer rentals and cable television, if available (collectively "Utilities") charged or attributable to the Premises, and all other services or utilities used in, upon or about the Premises by Tenant during the Term. Tenant shall contract with each and every utility service provider to the Premises, to the extent the costs therefore can be separately metered or billed to the Tenant. To the extent the costs therefore are not separately metered or billed to the Tenant, but are a cost of the Property, Landlord shall estimate in advance and Tenant shall pay as Additional Rent and in the manner and at the time(s) Tenant pays its pro-rata share of Property Operating Costs, all charges for Utilities and all other ser-vices or utilities used in, upon or about the Premises by Tenant. 3.3.1 EXCESSIVE USE. With respect to any utility or service mentioned herein which is not separately metered or billed to Tenant, if Landlord determines that Tenant's use of such utility or service is excessive or abnormal, such that it is unfair to assess Tenant and other tenants therefor on a pro-rata square footage basis, Landlord shall so notify Tenant. Such written notice shall contain Landlord's estimate of a reasonable amount of the overall cost of such utility or service which should be billed to Tenant. If, within thirty (30) days after Tenant's receipt of such notice, Landlord and Tenant are unable to agree upon a reasonable amount of the overall cost of such utility or service to be paid by Tenant, then, and in such event, Tenant shall cause such utility or service to be separately metered to Tenant or separately contracted-for by Tenant, so that Tenant will pay separately, at Tenant's sole expense, for such utility or service (in which case Landlord shall not thereafter assess Tenant for any amount of such utility or service). The cost of the installation of any separate meter shall be paid by Tenant. 3.3.2 MAINTENANCE. All repair, maintenance, upkeep, construction and the like, upon or within the Premises, shall be the responsibility of and at the expense of Tenant during the entire Term from the Commencement Date, except for any obligations of Landlord as set forth in this Lease, including, without limitation, Landlord's obligations to specifically repair and maintain improvements in the Common Areas or any warranty applicable to Landlord's Work. 3.3.3 SERVICE CONTRACTS. Tenant shall provide to Landlord proof, if requested, of the on-going existence of service contracts for the maintenance of all equipment located in the Premises which Tenant is required to maintain under this Lease. SECTION 12 Page -15- LAWS AND REGULATION -------------------- Americans With Disabilities Act. Landlord shall, subject to reimbursement as part of the Property Operating Costs, be responsible for any alterations, modifications or improvements to the Building and Property which are required under Title III of the Americans With Disabilities Act, hereinafter referred to as the "ADA." Landlord represents and warrants to Tenant, that to the best of the Landlord's knowledge, that as of Substantial Completion of the base Building, Landlord's Work and the operation of the base Building will be in full compliance with applicable building codes, environmental, zoning and land use laws, and other applicable local, state and federal laws, regulations and ordinances, including but not limited to ADA. 1.38 Insurance Services Office. Tenant shall, at Tenant's sole cost and expense, be responsible for any alterations, modifications or improvements to the Premises, and the acquisitions of any auxiliary aids required under the ADA after the Commencement Date, and regulations of any ISO (Insurance Services Office) or any other body or entity exercising similar functions in force during the Term and affecting the Building, the Premises or Tenant's use thereof, including all alterations, modifications, or improvements required: (i) as a result of Tenant (or any subtenant, assignee, or concessionaire) being a "Public Accommodation" (as defined in the ADA); (ii) as a result of the Premises being a "Commercial Facility" (as defined in the ADA); (iii) as a result of any Alterations made to the Premises by, or on behalf of, Tenant or any subtenant, assignee, or concessionaire (whether or not Landlord's consent to such Alterations was obtained); or (iv) as a result of the employment by Tenant (or any subtenant, assignee, or concessionaire) of any individual with a disability. 1.39 Storage of Disposition of Hazardous Materials. Tenant will not cause or permit the storage, use, generation, or disposition of any Hazardous Materials in, on, or about the Premises or the Property by Tenant, its agents, employees, or contractors. Tenant will not permit the Premises to be used or operated in a manner that may cause the Premises or the Property to be contaminated by any Hazardous Materials in violation of any Hazardous Materials Laws. Tenant will immediately advise Landlord in writing of: (i) any and all known enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any Hazardous Materials Laws relating to any Hazardous Materials affecting the Premises; and (ii) all known claims made or threatened by any third party against Tenant, Landlord, or the Premises relating to damage, contribution, cost recovery, compensation, loss, or injury resulting from any Hazardous Materials on or about the Premises. Without Landlord's prior written consent, Tenant will not take any remedial action or enter into any agreements or settlements in response to the presence of any Hazardous Materials in, on, or about the Premises. 3.3.1 HAZARDOUS MATERIALS AND SUBSTANCES. For purposes of this Lease, "Hazardous Materials" means any explosives, radioactive materials, hazardous wastes, or Hazardous Substances, including, without limitation, substances defined as "Hazardous Substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601-9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C. 1801-1812; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901-6987; or any other federal, state, or local statute, law, ordinance, code, rule, regulation, order, or decree regulating, relating to, or imposing liability or standards of conduct concerning Hazardous Materials, waste, or substances now or at any time hereafter in effect (collectively, "Hazardous Materials Laws"). 1.40 Indemnification. Tenant will be solely responsible for and will defend, indemnify and hold Landlord, its partners, directors, officers, employees, agents, successors and assigns, the Property and Landlord's management agent for the Property harmless from and against all claims, costs, and liabilities, including attorney's fees and costs, arising out of or in connection with Tenant's breach of its obligations in this Section 12. Tenant will be solely responsible for and will defend, indemnify, and hold Landlord, its agents, and employees harmless from and against any and all claims, costs, and liabilities, including attorney's fees and costs, arising out of or in connection with the removal, cleanup, and restoration work and materials necessary to return the Premises and any other property of whatever nature located in, on, or about the Building, to their condition existing prior to the introduction of Hazardous Page -16- Materials by Tenant, its agents, employees or contractors. The foregoing indemnity shall further apply to any residual contamination on, under, from or about the Premises, the Property or the property in general, or affecting any natural resources arising in connection with the use, generation, manufacturing, production, handling, storage, transport, discharge or disposal of any such Hazardous Substance, and irrespective of whether any of such activities were or will be undertaken in accordance with environmental laws or other applicable laws, regulations, codes and ordinances. Tenant's obligations under this Section 12 will survive the expiration or other termination of this Lease. 1.41 Jeopardize Insurance Policies. Tenant will not do or permit to be done any act or thing upon the Premises or the Building which would: (i) jeopardize or be in conflict with fire insurance policies covering the Building or covering any fixtures and property in the Building; (ii) increase the rate of fire insurance applicable to the Building to an amount higher than it otherwise would be for general office use of the Building; or (iii) subject Landlord to any liability or responsibility for injury to any person or persons or to the Property by reason of any business or operation being carried on or upon the Premises. SECTION 13 TAXES ----- 1.42 Taxes. Tenant shall be liable for and shall pay before delinquency (and, upon demand by Land-lord, Tenant shall furnish Landlord with satisfactory evidence of the payment thereof) all taxes, fees, bonds and assessments of whatsoever kind or nature, and penalties and interest thereon, if any, levied against Tenant's personal property or any other personal property of whatsoever kind and to whomsoever belonging to, situated on or installed in or upon the Premises whether or not affixed to the realty. If at any time during the Term of this Lease any such taxes on personal property are assessed as part of the tax on the real property of which the Premises is a part, then in such event Tenant shall pay to Landlord the amount of such additional taxes as may be levied against the real property by reason thereof. 1.43 Excise Tax. If at any time during the Term, under the laws of the United States, Nevada or any political sub-division thereof, a tax or excise on rent or other tax (except income tax), however described, is levied or assessed by the United States, Nevada or said political subdivision against Landlord on account of any rent reserved under this Lease, all such tax or excise on rent or other taxes shall be paid by Tenant. Whenever Landlord shall receive any statement or bill for any such tax or shall otherwise be required to make any payment on account thereof, Tenant shall pay, as Additional Rent, the amount due hereunder within ten (10) days after demand therefor accompanied by delivery to Tenant of a copy of such tax statement, if any. 3.3.1 CONTEST VALIDITY. Tenant, at Tenant's own cost and expense, may, in good faith so desire, contest the validity or amount of any taxes in which event Tenant may defer the payment thereof for such period as such contest shall be actively prosecuted and shall be pending undetermined, so long as such proceedings and any appeals shall not operate to legally prevent the collection of such payments and/or force the sale of the Premises and/or Property to satisfy any lien arising out of the non-payment of the same. SECTION 14 INSURANCE --------- 1.44 General Liability Insurance. Tenant shall, at all times during the Term, at its sole cost and expense, pro-cure and maintain in full force and effect a policy or policies of commercial general liability insurance coverage issued by an insurance carrier having an A.M. Best rating of at least A-VIII or higher and authorized to transact business in the State of Nevada assuring against loss, damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever in connection with the Premises or Tenant's use thereof. Such liability insurance shall be in amounts not less than One Million and 00/100 Dollars ($1,000,000.00) per occurrence and Two Million and 00/100 Dollars ($2,000,000.00) aggregate, or Two Million and 00/100 Dollars ($2,000,000.00) combined single limit coverage. Such insurance shall also cover and include all exterior signs maintained by Tenant hereunder. Landlord shall be named as an additional insured (and at Landlord's option, any other persons, firms or corporations designated by Landlord shall be additionally named insureds) under each such policy of insurance. Each such Page -17- party shall be designated as an additional insured under ISO endorsement CG 20 10 3 97 or such other comparable endorsement upon Landlord's reasonable request. 1.45 Special Peril Property Insurance. Tenant shall, at all times during the Term, at its sole cost and expense, procure and maintain in full force and effect "special peril" property insurance covering not less than one hundred percent (100%) of the current replacement value of the Tenant's Improvements on or within the Premises and the personal property therein. 1.46 Certificate of Insurance. A certificate issued by the insurance carrier for each policy of insurance required to be maintained by Tenant hereunder shall be delivered to Landlord and all other named insureds on or before the Commencement Date hereof and thereafter, as to policy renewals, within thirty (30) days prior to the expiration of the term of each such policy. Each certificate of insurance and each such policy of insurance required to be maintained by Tenant hereunder shall be in form and substance reasonably satisfactory to Landlord and shall expressly evidence insurance coverage as required by this Lease and shall contain an endorsement or provision requiring not less than thirty (30) days' prior written notice to Landlord and all other named insureds of the cancellation. As to any proposed diminution in the perils insured against, or reduction of the amount of coverage of the particular policy in question, initiated (i) by the insurer, shall require not less than thirty (30) days' prior written notice to Landlord; and (ii) by Tenant, shall require not less than thirty (30) days' prior written notice to Landlord. 1.47 Use of Premises. Tenant shall not use, occupy or permit the Premises to be used or occupied, in a manner which will make void or voidable any insurance then in force with respect thereto or the Property, or which will make it impossible to obtain casualty or other insurance with respect to the Property. 1.48 Waiver of Recovery Rights. The parties hereto waive any and all rights of recovery from the other, their partners, officers, agents and employees for any loss or damage, including consequential loss or damage, caused by any peril or perils (including negligent acts) enumerated in each form of insurance policy required to be maintained by the other hereunder. 1.49 Waiver of Subrogation. Each policy of insurance provided for in this Section 14 shall contain an express waiver of any and all rights of subrogation thereunder whatsoever against the insured party, its partners, officers, agents and employees, to the extent of the insurance coverage required under this Lease. All such policies shall be written as primary policies and not contributing with or in excess of the coverage, if any, which such party may carry. Any other provision contained in this Section or elsewhere in this Lease notwithstanding, the amounts of all insurance required hereunder to be paid by a party shall be not less than an amount sufficient to prevent the other party from becoming a co-insurer. 1.50 Prohibited Sales or Activity. Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises or any section thereof, any item, or permit any activity, which may be prohibited by the standard form of casualty or public liability insurance policy. Tenant agrees to pay any increase in premiums for insurance which may be carried by Landlord on the Premises or the Building of which it is a part, resulting from the use or activities in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Premises, a schedule, issued by the organization making the insurance rate on the Premises, showing various components of such rate, shall be conclusive evidence of the several items and charges which make up the respective insurance rate on the Premises. 1.51 Prohibited Use Deemed Ultra Hazardous. Tenant shall not use or occupy the Premises or any part thereof, or suffer or permit the same to be used or occupied for any business or purpose deemed ultra hazardous on account of fire or otherwise. In the event Tenant's use and/or occupancy causes any increase of premium for insurance on the Premises or any part thereof above the rate for the least hazardous type of occupancy legally permitted in the Premises, Tenant shall pay such additional premium on the insurance policy that may be carried by Landlord for its protection. Bills for such additional premiums shall be rendered by Landlord to Tenant at such time as Landlord may elect, and shall be due from and payable by Tenant when rendered in writing, but such increase in Page -18- the rate of insurance shall not be deemed a breach of this covenant by Tenant. Failure to pay amounts due hereunder shall be a breach of the Lease. 1.52 Landlord's Maintenance of Special Peril Property Insurance. Landlord shall, at all times during the Term, subject to Tenant's obligation for its Pro-Rata Share of the Property Operating Costs, procure and maintain in full force and effect "special peril" property insurance against perils included therein (excluding flood and earthquake), boiler and machinery coverage and such further coverage as Landlord may conclude is necessary covering not less than one hundred percent (100%) of the current replacement value of the Building in which the Premises is situated and its improvements. The insurer therefor shall meet the minimum requirements as otherwise set forth above. Mortgagee(s) of the Property or any portion thereof may be named as additional insureds thereon. Such insurance shall also cover and include all exterior signs maintained by Landlord hereunder. 1.53 Landlord's Maintenance of General Liability Insurance. Landlord may, during the Term, subject to Tenant's obligation for its pro-rata share of the Property Operating Costs, procure and maintain in full force and effect a policy or policies of commercial general liability insurance assuring against loss or damage or liability for injury or death to persons and loss or damage to property occurring from any cause whatsoever in connection with the Property. Such liability insurance shall be in an amount of not less than One Million and 00/100 Dollars ($1,000,000.00) per occurrence and Two Million and 00/100 Dollars ($2,000,000.00) aggregate. Such insurance shall also cover and include all exterior signs maintained by Landlord hereunder. The insurer therefor shall meet the minimum requirements as otherwise set forth above. Mortgagee(s) of the Property or any portion thereof may be named as additional insureds thereon. SECTION 15 INDEMNIFICATION ------------ 1.54 Indemnification. Tenant hereby indemnifies, saves and holds Landlord, the Premises, the Property, the leasehold estate and Landlord's management agent for the Property free of and harmless from any and all liabilities, losses, costs, expenses, including attorney's fees (at trial, and on appeal), causes of action, suits, judgments, claims, liens and demands of any kind whatsoever in connection with, arising out of, or by reason of any act, omission or negligence of Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers or business invitees while in, upon, about or in any way connected with the Premises or the Property or arising from the use and occupancy of the Premises by Tenant, or occasioned wholly or in part by any act or omission of Tenant, its subtenants, agents, contractors, employees, servants, lessees or concessionaires, excepting, however, such claims and demands, whether for injuries to persons or loss of life, or damage to property, caused by the gross negligence or wilful misconduct of Landlord. If, however, any liability arises in the Common Areas because of the gross negligence or wilful misconduct of Tenant, Tenant's subtenants, agents, employees, contractors, invitees, customers or visitors, then in such event Tenant shall hold Landlord harmless. In case Landlord shall, without fault on its part, be made a party to any litigation relating to claims and demands described in this Section 15.1, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorney's fees that may be incurred or paid by Landlord in enforcing the covenants and agreements of this Lease. Landlord shall not be liable for any damage arising from any acts or neglect of co-tenants or other occupants of the Property or of adjacent property or of the public. 1.55 Landlord's Liability. Landlord shall indemnify, defend and save Tenant, its agents, employees, servants, contractors, subtenants, licensees, customers, or business invitees harmless from and against any and all claims, demands, actions, suits, losses, damages, costs, expenses and liabilities of any kind or nature by or in favor of anyone whomsoever, resulting from or in connection with loss of life, bodily injury or property damage arising out of the use or maintenance of the Common Areas or occurring within the Common Areas and arising solely and directly out of the negligence of Landlord or its employees, agents, servants, contractors or subcontractors. SECTION 16 SUBORDINATION AND NONDISTURBANCE --------------------------------- Page -19- 1.56 Subordination. Subject to the receipt by Tenant of the nondisturbance agreement described in Section 16.4 below, in a commercially reasonably form executed by the holder of the mortgage (the "Mortgagee"), Tenant agrees upon request of Landlord to subordinate every term, provision and covenant in this Lease to the lien of any mortgage, deed of trust or other encumbrance (a "Mortgage"), together with any renewals, extensions, or replacement thereof, now or hereafter placed, charged or enforced against the Premises, or any portion of the Property of which the Premises is a part. If the holder of a Mortgage becomes the owner of the Property by reason of foreclosure or acceptance of a deed in lieu of foreclosure, at such holder's election, this Lease and Tenant's right to possession of the Premises shall not be disturbed, and Tenant will be bound to such holder or its designee under all the terms and conditions of this Lease, and Tenant will be deemed to have attorned to and recognized such holder or its designee as Landlord's successor-in-interest for the remainder of the Term. Tenant, upon ten (10) business days' written request by Landlord, will execute and deliver without charge, a commercially reasonably document(s) acceptable to Landlord or such holder in order to confirm the subordination and/or attornment set forth above. Tenant's failure to respond to Landlord's request to negotiate in good faith and execute any such documents referred to in this Section 16.1, at the expiration of such ten (10) day period, shall constitute an immediate default (without notice from Landlord or additional time to cure) by Tenant and shall entitle Landlord to exercise its rights at law, in equity or under this Lease. 1.57 Prior Lien. In the event that the Mortgagee or beneficiary of any such mortgage or deed of trust elects to have this Lease a prior lien to its mortgage or deed of trust, then and in such event, upon such Mortgagee's or beneficiary's giving written notice to Tenant to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of recordation of such mortgage or deed of trust. 1.58 Attornment. Tenant shall, in the event of the exercise of any power of sale under any deed of trust or any proceedings that are brought for the foreclosure of a lien affecting the Property, in which the Premises are situated, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this Lease, and such purchaser shall recognize the interest of the Tenant under the Lease, provided that Tenant is not then in default under this Lease. 1.59 Nondisturbance. With respect to each Mortgage that may encumber the Property, at or after the commencement of the Term, Landlord agrees that promptly following receipt of a written request by Tenant (one time only), to ask the holder of the Mortgage to grant Tenant a "nondisturbance agreement," in a commercially reasonable form of such holder. The term of the "nondisturbance agreement," as used herein, shall mean, in general, an agreement that, as long as Tenant is not in default under this Lease, this Lease will not be terminated if such holder acquires title to the Property by reason of foreclosure proceedings or acceptance of a deed in lieu of foreclosure, provided that Tenant attorns to such holder, in accordance with its requirements. Except for making such written request, Landlord will be under no duty or obligation hereunder, nor will the failure or refusal of such holder to grant a nondisturbance agreement render Landlord liable to Tenant, or affect this Lease, in any manner. Tenant will bear all costs and expenses, including attorneys' fees, of such holder in connection with a nondisturbance agreement. SECTION 17 ASSIGNMENT AND SUBLETTING ----------------- 1.60 Assignment. Tenant shall not assign, sublease, transfer or encumber this Lease or any interest therein. Any one or more (in the aggregate) transfers of more than a twenty percent (20%) interest in the Tenant shall be deemed to be an assignment under this Lease (including, but not limited to, any change in ownership or power to vote, on a cumulative basis, of a majority of Tenant's outstanding voting stock). Any attempted assignment or sublease by Tenant in violation of the terms and covenants of this Section 17 shall be void. Tenant shall not: (i) assign or in any manner transfer this Lease or any estate or interest therein; (ii) permit any assignment of this Lease or any estate or interest therein, whether by operation of law or otherwise; (iii) sublet the Premises or any part thereof; (iv) grant any license, concession, franchise or other right of occupancy in the Premises or any part thereof; or (v) mortgage, pledge or otherwise encumber its interest or estate in this Lease or in the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld or conditioned, and any such acts shall be ineffective as against Landlord. Waiver by Landlord as to any assignment or subletting shall not operate as a waiver of the prohibition contained herein or of Landlord's rights as to any subsequent assignment or subletting. Notwithstanding any assignment or subletting, Tenant shall at all times remain Page -20- fully responsible and liable for the performance of all Tenant's covenants and obligations under this Lease. If any default of this Lease should occur while the Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other rights and remedies which Landlord may have whether hereunder, at law or in equity, may at its option collect directly from such assignee or sublessee all rent becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord by Tenant hereunder, and Tenant hereby authorizes and directs any such assignee or sublessee to make such payments of said rent directly to Landlord upon receipt of notice from Landlord. No direct collection by Landlord from any such assignee or sublessee shall be construed to constitute a novation or a release of Tenant from the performance of its covenants and obligations hereunder. Landlord is authorized and empowered, on behalf of Tenant, to endorse the name of Tenant upon any check, draft or other instrument payable to Tenant evidencing payment of rent, or any part thereof, and to receive and apply the proceeds therefrom in accordance with the terms hereof. 3.3.1 PERMITTED ASSIGNEES. Notwithstanding anything to the contrary contained in this Lease, Tenant may, upon ten (10) days' written notice to, but without any requirement of consent by Landlord, assign this Lease to a wholly owned subsidiary of Tenant, to an affiliate of Tenant, to an entity that is controlled by, controls or is under common control with Tenant, or any person or entity simultaneously acquiring, by asset or stock transfer, consolidation, merger, sale or reorganization, a majority of Tenant's assets, provided such assignee assumes this Lease in its entirety, and agrees to perform the obligations of Tenant under this Lease ("Permitted Assignee(s)"). Further, if Tenant is a corporation or a partnership, or a publicly traded company, as defined by applicable federal securities laws, then, in any such event, any change of ownership resulting in a change of majority control from those persons or entities not having control will not be deemed an assignment or transfer requiring Landlord's consent. For purposes herein, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, or majority ownership of any sort, whether through ownership or voting securities, by contract or otherwise. 3.3.2 PROPOSED ASSIGNEE. In the event that Tenant requests Landlord's consent to assign or otherwise transfer this Lease, sublet or license all or any part of the Premises, Tenant shall submit to Landlord the name, address, financial statement, credit authorization and business experience resume for the immediately preceding three (3) years of the proposed assignee, transferee or subtenant and such other information concerning such proposed assignee, transferee or subtenant as Landlord may reasonably require. This information shall be in writing and shall be received by Landlord not less than thirty (30) days prior to the effective date of the proposed assignment, transfer or sublease. 3.3.3 DEFAULT. Notwithstanding any of the foregoing provisions, if Tenant, at the time of any request to approve an assignment or sublease, is in default under any of the terms of this Lease, beyond any applicable notice and cure period, Tenant may not assign, transfer, or sublet the Premises, in whole or in part, until such default is cured. 1.61 Option to Terminate. If Tenant requests Landlord's consent to an assignment of this Lease or subletting of all or part of the Premises, Landlord shall have the option (without limiting Landlord's other rights hereunder) of terminating this Lease upon thirty (30) days' notice. Landlord may then, at Landlord's option, lease space to the prospective assignee or subtenant. In the event that Landlord elects to terminate this Lease, Tenant may, if it so elects, Page -21- by written notice to the Landlord within five (5) business days after receipt of Landlord's termination notice, revoke its notice to assign or sublet, and, in such event, this Lease shall continue in full force and effect as if such notice for assignment or sublet had not been given. If Landlord should fail to notify Tenant in writing of its decision within a twenty (20) day-period after Landlord is notified in writing of the proposed assignment or sublease, Landlord shall be deemed to have refused to consent to such proposed assignment or sublease, and to have elected to keep this Lease in full force and effect. 1.62 Bonus Rent. In the event that Landlord does consent to any assignment or sublet pursuant to this Section 17, then Landlord may also require, as a condition to such consent, that Tenant agree to pay Landlord as Additional Rent, one hundred percent (100%) of any Bonus Rent received by Tenant. For purposes of this Lease, Bonus Rent shall mean sums or other economic consideration (i) which Tenant receives pursuant to the terms of the assignment or sublet, whether or not denominated rentals under the transfer, and which sums are in excess of total sums which Tenant is obligated to pay Landlord under this Lease (to be pro-rated if only a portion of the Premises is subject to such transfer); less (ii) (a) reasonable leasing commissions paid by Tenant; (b) other reasonable out-of-pocket costs paid by Tenant, including attorney's fees, advertising costs, and expenses of subtenant improvements or other expenses of readying the Premises for occupancy by the transferee; and (c) any consideration paid to the transferee or any third party to induce the transferee to consummate the transfer. This covenant and assignment shall run with the land and shall bind Tenant and Tenant's heirs, executors, administrators, personal representatives, successors and assigns. This Section shall not apply to Permitted Assignees. 1.63 Remedies. No assignment, sublease or other transfer consented to by Landlord shall release Tenant or change Tenant's primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Upon the occurrence of any default under this Lease, beyond any applicable notice and cure period, Landlord may proceed directly against Tenant without the necessity of exhausting any remedies against any subtenant or assignee. Upon termination of this Lease, any permitted subtenant shall, at Landlord's option, attorn to Landlord and shall pay all rent directly to Landlord. Landlord's acceptance of rent from any other person shall not constitute a waiver of any provision of this Section 17. Consent to one (1) transfer shall not constitute a consent to any subsequent transfer. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant's transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant of its liability under this Lease. 1.64 Processing Fee. Tenant shall reimburse Landlord a processing fee in an amount not to exceed Seven Hundred Fifty and 00/100 Dollars ($750.00) as reimbursement to Landlord for any and all legally-related expenses and Landlord's administrative costs in connection with the review of assignment, transfer or sublease-related documents, which may be incurred by Landlord in connection therewith. Payment of such fee shall be submitted to Landlord along with Tenant's request for Landlord's consent. This Section shall not apply to Permitted Assignees. SECTION 18 CONDEMNATION ---------------- If the whole or substantially the whole of the Building or the Premises shall be taken for any public or quasi-public use, by right of eminent domain or otherwise or shall be sold in lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. If less than the whole or substantially the whole of the Building or the Premises is thus taken or sold, Landlord (whether or not the Premises are affected thereby) may terminate this Lease by giving written notice thereof to Tenant, in which event this Lease shall terminate as of the date when physical possession of such portion of the Building or Premises is taken by the condemning authority. If the Lease is not so terminated upon any such taking or sale, the Base Rent payable hereunder shall be diminished by an equitable amount, and Landlord shall, to the extent Landlord deems feasible promptly undertake to repair and restore the Building in which the Premises are situated to a complete architectural unit, consistent with the base Building and Landlord's Work specified in EXHIBIT C. Landlord, in any event, shall not be required to spend for such work an amount in excess of the amount received by Landlord as compensation for such taking. All amounts awarded upon a taking of any part or all of the Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to and expressly waives all claims to any such compensation. SECTION 19 DAMAGE OR DESTRUCTION --------------------- Page -22- 1.65 Destruction of Premises. In the event of the total or partial destruction of the Building or the Premises, or any portion thereof, whether by fire or other casualty, this Lease shall not terminate except as otherwise specifically provided herein. Landlord shall promptly undertake to repair and restore the Building in which the Premises is situated including Common Areas therein consistent with the provisions of Section 19.2 below. Thereafter, Tenant shall, in accordance with Section 19.2 below, promptly undertake and with reasonable dispatch repair and reconstruct the Premises and other improvements of the Tenant on the Premises. To the extent insurance proceeds are insufficient therefor, Tenant shall be liable for any such differences. In determining what constitutes reasonable dispatch, consideration shall be given to delays caused by labor disputes, civil commotion, war, warlike operations, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials or services, acts of God and other causes beyond Tenant's reasonable control. In the event of a casualty, not the result of Tenant's negligence or wilful misconduct, such that the Premises are unusable to the Tenant in the conduct of its business for a period of more than ten (10) days, Base Rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of business, as may be reasonably determined by Landlord (but there shall be no abatement of Base Rent by reason of any portion of the Premises being unusable for a period equal to ten (10) days or less. 1.66 Reconstruction. The provisions of this Section 19 with respect to repair and reconstruction by Landlord shall be limited as to that which is necessary to place the Premises in the condition existing as of the Commencement Date specified in Landlord's Work Letter or like condition, and when placed in such condition the Premises shall be deemed restored and rendered tenantable, promptly following which time, but not more than ninety (90) days thereafter, subject to extension of time for Force Majeure and Landlord Delays, as defined ----- ------- in EXHIBIT C, in the completion of its repair or restoration work, at Tenant's expense, Tenant shall perform Tenant's Work and any and all modification, addition or alteration subsequent thereto, and Tenant shall also repair and restore all Alterations. Tenant shall also repair or replace its stock in-trade, fixtures, furniture, furnishings, floor coverings and equipment. 3.3.1 LEASE TERMINATION. If the Premises cannot be restored and Tenant's business opened within twelve (12) months following such damage or destruction based upon a reasonable estimate therefor made by Landlord's architect following such damage or destruction, then, and in such event, Landlord or Tenant may, within thirty (30) days after written notice from Landlord estimating the time to complete such repair or restoration (which notice shall be given to Tenant within thirty (30) days of such damage or destruction), elect to terminate this Lease by written notice to the other. 1.67 Insurance Proceeds Maintained by Tenant. All insurance proceeds payable under any casualty insurance policy procured and maintained by Tenant shall be payable solely to Tenant and/or its Mortgagee with the provision that such proceeds shall be made available for repair and restoration of the Premises. Tenant shall in no case be entitled to compensation or damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent pro-vided for in this Section 19, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. 1.68 Insurance Proceeds Maintained by Landlord. All insurance proceeds payable under any casualty insurance policy procured and maintained by Landlord shall be payable solely to Landlord and/or its Mortgagee(s), and Tenant shall have no interest therein. Landlord shall endeavor to see that the proceeds are made available for repair and restoration as required of Landlord. Tenant shall in no case be entitled to compensation or damages on account of any annoyance or inconvenience in making repairs under any provision of this Lease. Except to the extent provided for in this Section 19, neither the rent payable by Tenant nor any of Tenant's other obligations under any provision of this Lease shall be affected by any damage to or destruction of the Premises or any portion thereof by any cause whatsoever. SECTION 20 Page -23- RIGHT OF ACCESS ------------------ 1.69 Right of Access. Landlord and its authorized agents and representatives shall be entitled to enter the Premises and the area where that certain Generator servicing the Building, with forty-eight (48) hours prior written notice to Tenant (facsimile notice being acceptable), and with minimal interference with Tenant's business at any reasonable time for the purpose of observing, posting or keeping posted thereon notices provided for hereunder, and such other notices as Landlord may deem necessary or appropriate for protection of Landlord, its interest or the Premises; for the purpose of inspecting the Premises or any portion thereof; to inspect the Premises relative to concerns over use, storage or disposal of hazardous waste and chemicals; and for the purpose of making repairs to the Premises or any other portion of the Property and performing any work therein or thereon which Landlord may elect or be required to make hereunder, or which may be necessary to comply with any laws, ordinances, rules, regulations or requirements of any public authority or any applicable standards that may, from time to time, be established by an Insurance Services Office or any similar body, or which Landlord may deem necessary or appropriate to prevent waste, loss, damage or deterioration to or in connection with the Premises or any other portion of the Property or for any other lawful purpose. Landlord shall have the right to use any means which Land-lord may deem proper to open all doors in the Premises and the area where the Generator is located (as more fully depicted in EXHIBIT A-2) in an event of an emergency. Entry into the Premises obtained by Landlord by any such means shall not be deemed to be forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof. Nothing contained herein shall impose or be deemed to impose any duty on the part of Landlord to do any work or repair, maintenance, reconstruction or restoration which under any provision of this Lease is required to be done by Tenant; the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to do the same. 1.70 Performance of Work. Landlord may, during the progress of any work on the Premises, keep and store upon the Premises all necessary materials, tools and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business or quiet enjoyment, or other damage or loss to Tenant by reason of making any such repairs or performing any such work upon the Premises, or on account of bringing materials, supplies and equipment into, upon or through the Premises during the course thereof, and the obligations of Tenant under this Lease shall not thereby be affected in any manner whatsoever. Landlord shall, however, in connection with the performance of such work, cause as little inconvenience, disturbance or other damage or loss to Tenant as may be reasonably possible under the circumstances. 1.71 Exhibiting Premises. Landlord, its authorized agents and representatives, shall be entitled to enter the Premises upon not less than forty-eight (48) hours prior written notice to Tenant (facsimile notice being acceptable), and with minimal interference with Tenant's business at all reasonable times for the purpose of exhibiting the same to prospective purchasers and, during the final year of the Term of this Lease, Landlord shall be entitled to exhibit the Premises for lease and post signs therein announcing the same. SECTION 21 ESTOPPEL CERTIFICATE --------------------- Tenant agrees that within ten (10) days of any demand therefor by Landlord, Tenant will execute and deliver to Landlord and/or Landlord's designee a recordable certificate stating that this Lease is in full force and effect (an "Estoppel Certificate") in a form that is reasonably requested by Landlord. Tenant acknowledges that any such statement may be relied upon by any Mortgagee or prospective purchaser of the Building or any interest therein. In the event that Tenant fails to execute any such certificate for Landlord within said ten (10) days, Tenant shall be in immediate default under this Lease. SECTION 22 TENANT'S DEFAULT/LANDLORD'S REMEDIES -------------------------------------- 1.72 Events of Default. Tenant's compliance with each and every covenant and Page -24- obligation hereof on its part to be performed hereunder is a condition precedent to each and every covenant and obligation of Landlord hereunder. Any one or more of the following shall be deemed to be an "Event of Default" by Tenant and a material breach of this Lease: 3.3.1 NON-PAYMENT OF MONEY. If Tenant shall fail to pay Aggregate Monthly Rent or any other amount or charge to be paid by Tenant hereunder, within five (5) days of when they are due; or 3.3.2 NON-MONETARY NON-PERFORMANCE. If Tenant shall default in the performance of any other term, covenant or condition of this Lease on the part of Tenant to be kept and performed and such default continues for thirty (30) days after written notice thereof from Land-lord to Tenant; provided, however, that if the default complained of in such notice is of such a nature that the same can be rectified or cured, but cannot with reasonable diligence be done within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Tenant shall, within said thirty (30) day period, commence to rectify and cure the same and shall thereafter complete such rectification and cure with all due diligence; or 3.3.3 ABANDONMENT OF PREMISES. If Tenant shall abandon the Premises for a period of ten (10) consecutive days; or 3.3.4 BANKRUPTCY. If there is filed any petition in bankruptcy, or if Tenant is adjudicated as bankrupt or insolvent, or if there is appointed a receiver or trustee to take possession of Tenant or of all or substantially all of the assets of Tenant, or if there is a general assignment by Tenant for the benefit of creditors, or if any action is taken by or against Tenant under any state or federal insolvency or bankruptcy act, or if any similar law now or hereafter in effect, including, without limitation, the filing of execu-tion or attachment against Tenant and such levy continues in effect for a period of ninety (90) days. This provision hereof shall also apply to any guarantor of this Lease or occupant of the Premises; or 3.3.5 MECHANIC LIENS. If Tenant does, or permits to be done, any act which creates a mechanic's lien or claim thereof against the Premises or the Property and fails to timely discharge same; or 3.3.6 FALSIFIED FINANCIAL REPORTS. If Tenant falsifies any monetary report to Landlord or fails to furnish Landlord with any monetary report when due, and such default shall continue for twenty (20) days after written notice from Landlord; or 3.3.7 FAILURE TO OBTAIN POLICIES AND/OR CERTIFICATES OF INSURANCE. If Tenant fails to furnish Landlord with a copy of any insurance policy or certificate required to be furnished by Tenant to Landlord when due, and such default shall continue for thirty (30) days after written notice from Landlord; or 3.3.8 FAILURE TO OBTAIN CONSENT. If Tenant's causing, permitting or suffering to be done any act (i) required by this Lease to have the prior written consent of Landlord, unless such consent is so obtained; or (ii) prohibited by this Lease; or 3.3.9 INTENTIONALLY OMITTED 3.3.10 INTENTIONALLY OMITTED 3.3.11 FAILURE TO PERFORM OTHER OBLIGATIONS. In addition to the events constituting a default and breach of the Lease by Tenant as stated above, if within any twelve (12) month period during the Term of the Lease, Tenant shall have failed to perform any obligation required of Tenant hereunder, or has been in breach for any reason under the Lease more than two (2) times, and Landlord, because of any such failure and/or breach, shall have served upon Tenant within said twelve (12) month period two (2) or more notices of any such failure or breach, then any subsequent failure or breach shall be deemed a noncurable default, without requirement of notice or opportunity to cure, and Landlord shall be immediately entitled to exercise any and all rights, remedies and/or elections specified below or otherwise available at law or in equity. Page -25- 1.72.1 Cross-Defaults. The parties hereto acknowledge that in addition to executing this Lease, Tenant has executed the Second Lease, any default, beyond any applicable notice and cure periods, under this Lease shall constitute a default under the Second Lease and any default, beyond any applicable notice and cure periods, under the Second Lease shall constitute a default hereunder. 1.73 Additional Remedies. Upon the occurrence of an Event of Default, Landlord shall have the right, in accordance with applicable laws, at its election, then, or at any time thereafter, and while any such Event of Default shall continue, either: w. to give Tenant written notice of Landlord's intention to terminate this Lease on the date such notice is given or on any later date specified therein, whereupon, on the date specified in such notice, Tenant's right to possession of the Premises shall cease and this Lease shall thereupon be terminated; provided, however, that all of Tenant's obligations, including, but not limited to, payment of the amount of Aggregate Monthly Rent and other obligations reserved in this Lease for the balance of the Lease Term, shall immediately be accelerated and due and payable; or x. to the extent permitted by applicable law, to re-enter and take possession of the Premises or any part thereof and repossess the same as Landlord's former estate and expel Tenant and those claiming through or under Tenant, and remove the effects of both or either, using such force for such purposes as may be reasonably necessary, (i) without being liable for prosecution thereof; (ii) without being deemed guilty of any manner of trespass; and (iii) without prejudice to any remedies for arrears of rent or preceding breach of covenants or conditions. Should Landlord elect to re-enter the Premises as provided in this Section 22, or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, from time to time, without terminating this Lease, relet the Premises or any part thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term of this Lease) and on such conditions and upon such other terms (which may include concessions of free rent, alteration, and repair of the Premises) as Landlord, in its discretion, may determine, and Landlord may collect and receive the rents therefor. Landlord shall in no way be responsible or liable for any failure to relet the Premises or any part thereof or for any failure to collect any rent due upon such reletting. No such re-entry or taking possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease unless a written notice of such intention be given to Tenant. No notice from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so stated. Landlord reserves the right following any such re-entry and/or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which event, this Lease will terminate as specified in said notice; or y. the parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim (except for compulsory counterclaims) brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use of occupancy of the Premises, and/or any claim of injury or damage. In the event Landlord commences any proceedings for non-payment of any rent, Tenant will not interpose any counterclaim of whatever nature or description in any such proceedings. This shall not, however, be construed as a waiver of the Tenant's right to assert such claims in any separate action or actions brought by Tenant. 1.74 Right to Possession. In the event that Landlord does not elect to terminate this Lease as permitted in Section 22.2(a) hereof, but, on the contrary, elects to take possession as provided in Section 22.2(b), Tenant shall pay to Landlord (i) the rent and other sums as herein provided which would be payable hereunder if such repossession had not occurred; less (ii) the net proceeds, if any, of any reletting of the Premises after deducting all Landlord's expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, reasonable legal expenses, attorney's fees, expenses of employees, alteration and repair costs, and expense of preparation for such reletting. If, in connection with any reletting, the new lease term extends beyond the existing Lease Term, or the premises covered thereby include other premises not part of the Premises, a fair apportionment of the rent received from such reletting and the expenses incurred in connection therewith as provided aforesaid will be made in determining the net proceeds from such Page -26- reletting. Tenant shall pay such apportioned rent and other sums to Landlord, monthly on the days on which the rent would have been payable hereunder if possession had not been taken. 1.75 Loss of Bargain. In the event this Lease is terminated, Landlord shall be entitled to recover forthwith against Tenant, as damages for loss of the bargain and not as a penalty, an aggregate sum which, at the time of such termination of this Lease, represents the excess, if any, of the aggregate of the rent and all other sums payable by Tenant hereunder that would have accrued for the balance of the Lease Term over the aggregate rental value of the Premises (such rental value to be computed on the basis of a tenant paying not only rent to Landlord for the use and occupation of the Premises, but also such other charges as are required to be paid by Tenant under the terms of this Lease) for the balance of such Lease Term. Alternatively, at Landlord's option, Tenant shall remain liable to Landlord for damages in an amount equal to the rent and other sums arising under the Lease for the balance of the Lease Term had the Lease not been terminated, less the net proceeds, if any, from any subsequent reletting, after deducting all expenses associated therewith and as enumerated above. Landlord shall be entitled to receipt of such amounts from Tenant pro-rated monthly on the days on which such sums would have otherwise been payable. 1.76 Actions for Recovery. Suit or suits for the recovery of the amounts and damages set forth above may be brought by Landlord, from time to time, at Landlord's election, and nothing herein shall be deemed to require Landlord to await the date whereon this Lease or the Lease Term would have expired had there been no such default by Tenant or no such termination, as the case may be. 1.77 Actions for all Rent. After an Event of Default by Tenant, Landlord may sue for or otherwise collect all rents, issues, and profits payable under all subleases on the Premises, including those past due and unpaid. 1.78 Landlord not Liable for Trespass. After an Event of Default by Tenant, to the extent permitted by applicable law, Landlord may, without terminating this Lease, enter upon the Premises: (i) without being liable for prosecution of any claim for damages; (ii) without being deemed guilty of any manner of trespass; and (iii) without prejudice to any other remedies, and do whatever Tenant is obligated to do under the terms of this Lease. Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may reasonably incur in effecting compliance with the Tenant's obligations under this Lease; further, Tenant agrees that Landlord shall not be liable for any damages resulting to Tenant from effecting compliance with Tenant's obligations under this Section unless caused by the negligence of Landlord or otherwise. 1.79 No Waiver. No failure by Landlord to insist upon the strict performance of any agreement, term, covenant, or condition hereof or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial rent during the continuance of any such breach, shall constitute a waiver of any such breach of such agreement, term, covenant, or condition. No agreement, term, covenant, or condition hereof to be performed or complied with by Tenant, and no breach thereof, shall be waived, altered, or modified except by written instrument executed by Landlord. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant, and condition hereof shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. Notwithstanding any unilateral termination of this Lease, this Lease shall continue in full force and effect as to any provisions hereof which require observance or performance of Landlord or Tenant subsequent to termination (i.e. any and all insurance and indemnifications provisions provided for herein). 1.80 Liquidated Damages. Nothing contained in this Section shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization, or dissolution proceeding, an amount equal to the maximum allowed by any statute or rule of law governing such proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to, or less than the amounts recoverable, either as damages or rent, referred to in any of the provisions of this Section. 1.81 Administrative and Interest Charges. Any rents or other amounts due and Page -27- owing to Landlord hereunder which are not paid within five (5) days of the date they are due shall thereafter bear interest at the Default Interest Rate until paid. In addition to the foregoing, Tenant shall pay to Landlord whenever any Base Rent, Additional Rent, or any other sums due hereunder remain unpaid more than five (5) days after the due date thereof, an administrative charge (and not a penalty) to compensate Landlord for the costs and expenses associated with handling a delinquent account equal to five percent (5%) of the amount due. w. Further, upon an Event of Default by Tenant, in addition to all other rights and remedies, Landlord shall be entitled to receive from Tenant all sums, the payment of which may previously have been waived or abated by Landlord, or which may have been paid by Landlord pursuant to any agreement to grant Tenant a rental abatement or other monetary inducement or concession, including, but not limited to, any Tenant Improvement Allowance or moving allowance, together with interest thereon from the date or dates such amounts were paid by Landlord or would have been due from Tenant but for the abatement, at the Default Interest Rate, until paid; it being understood and agreed that such concession or abatement was made on the condition and basis that Tenant fully perform all obligations and covenants under the Lease for the entire Term. Nothing herein contained shall limit any other remedy of Landlord provided for in this Lease, at law or in equity. Landlord shall have the right to require that Tenant pay monies due in the form of a money order or certified funds. 1.82 Landlord's Lien. Tenant agrees that Landlord shall have a Landlord's lien on and against all real or personal property belonging to Tenant, Tenant's agents, subtenants, or licensees, which real or personal property is situated on or in the Premises, which lien shall secure the payment of all rental and additional charges payable by Tenant to Landlord under the terms hereof. SECTION 23 QUIET POSSESSION ----------------- Tenant, upon paying the Base Rent, Additional Rent and all other charges and monies herein required of Tenant, and upon Tenant's performance of all of the terms, covenants and conditions of this Lease on its part to be kept and per-formed, may quietly have, hold and enjoy the Premises during the Term of this Lease without any disturbance from Landlord or from any other person claiming through Landlord. SECTION 24 CONVEYANCE BY LANDLORD ------------------------ In the event of any sale, transfer or exchange of the Premises by Landlord, Land-lord shall be and is hereby relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease, arising out of any act, occurrence or omission relating to the Premises occurring after the consummation of such sale, transfer, conveyance or exchange. Tenant agrees to attorn to such purchaser, transferee or grantee. SECTION 25 DEFAULT BY LANDLORD --------------------- Subject to 10.1, it is agreed that in the event Landlord fails or refuses to perform any of the provisions, covenants or conditions of this Lease on Landlord's part to be kept or performed, that Tenant, prior to exercising any right or remedy Tenant may have against Landlord on account of such default, shall give written notice to Landlord of such default, specifying in said notice the default with which Landlord is charged and Landlord shall not be deemed in default if the same is cured within thirty (30) days of receipt of said notice. Notwithstanding any other provision hereof, Tenant agrees that if the default complained of in the notice provided for by this Section is of such a nature Page -28- that the same can be rectified or cured by Landlord, but cannot with reasonable diligence be rectified or cured by Landlord within said thirty (30) day period, then such default shall be deemed to be rectified or cured if Landlord within a thirty (30) day period shall commence the rectification and curing thereof and shall continue thereafter with all due diligence to cause such rectification and curing to proceed. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord's default as to any covenant or agreement contained in this Lease or as a result of the breach of any promise or inducement hereof, whether in the Lease or elsewhere. Tenant hereby waives such remedies of termination and recession and hereby agrees that Tenant's remedies for default hereunder and for breach of any promise or inducement shall be limited to a suit for specific performance, declaratory judgment, and/or injunctive relief. SECTION 26 FORCE MAJEURE --------------------- Whenever a day is appointed herein on which, or a period of time is appointed in which, either party hereto is required to do or complete any act, matter or thing, the time for the doing or completion thereof shall be extended by a period of time equal to the number of days on or during which such party is prevented from or is unreasonably interfered with, the doing or completion of such act, matter or thing because of labor disputes, civil commotion, war, warlike operation, sabotage, governmental regulations or control, fire or other casualty, inability to obtain any materials, or to obtain fuel or energy, weather or other acts of God, terrorism, bioterrorism, or other causes beyond such party's reasonable control (financial inability excepted); provided, however, that nothing contained herein shall excuse Tenant from the prompt payment of any rent or charge required of Tenant hereunder. SECTION 27 NOTICES ------- 1.83 Notices. Any and all notices and demands by or from Landlord to Tenant, or by or from Tenant to Landlord, required or desired to be given hereunder shall be in writing and shall be validly given or made if served either personally, or delivered by recognized commercial courier that requires a written acknowledgment of delivery (such as Federal Express), or if deposited in the United States mail, certified or registered, postage prepaid, return receipt re-quested. All notices given in accordance with this Section shall be effective when actually received; provided, however, that the first attempted delivery of any notice which was not delivered as a result of a change of address of which the sending party was not notified or as a result of any party's refusal to accept delivery shall be deemed receipt. 3.3.1 ADDRESS OF LANDLORD27.1.1 ADDRESS OF LANDLORD. Any notice or demand to Landlord shall be addressed to Landlord at: 901 N. Green Valley Parkway Suite 200 Henderson, Nevada 89074 Attn: Vice President Property Management with a copy to: American Nevada Realty 901 N. Green Valley Parkway Suite 200 Henderson, Nevada 89074 Attn: Legal Department 3.3.2 ADDRESS OF TENANT27.1.2 ADDRESS OF TENANT. Any notice or demand to Tenant shall be addressed to Tenant at the Premises with a copy to: Mego Financial Corp. 4310 Paradise Rd. Suite 302 Las Vegas, Nevada 89109 Attn: Jon Joseph, General Counsel Page -29- 1.84 Change of Address. Any party hereto may change its address for the purpose of receiving notices or demands as herein provided by a written notice given in the manner aforesaid to the other party hereto, which notice of change of address shall not become effective, however, until the actual receipt thereof by the other party. SECTION 28 HOLDOVER TENANCY ----------------- In the event of holding over by Tenant after the expiration of the Term of this Lease (the "Expiration Date"), or in the event Tenant continues to occupy the Premises after the termination of Tenant's right of possession pursuant to Section 22.2, Tenant shall throughout the entire holdover period pay rent equal to two hundred percent (200%) of the Base Rent, which would have been applicable had the Term of this Lease continued through such holding over by Tenant. If Tenant remains in possession of all or any part of the Premises after the expiration of the Lease Term, with the express written consent of Landlord: (i) such tenancy will be deemed to be a periodic tenancy from month-to-month only; (ii) such tenancy will not constitute a renewal or extension of this Lease for any further term; and (iii) such tenancy may be terminated by Landlord upon the earlier of thirty (30) days prior written notice or the earliest date permitted by law. Such month-to-month tenancy will be subject to every other term, condition, and covenant contained in this Lease including the Base Rent and Additional Rent provisions. Nothing contained in this Section 28 shall be construed as consent by Landlord to any holding over of the Premises by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord upon the expiration or earlier termination of this Lease. If Tenant fails to surrender the Premises upon the expiration or earlier termination of this Lease, despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability, including, without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender. SECTION 29 REMEDIES CUMULATIVE -------------------- The various rights, options, elections and remedies of Landlord contained in this Lease shall be cumulative and no one of them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or provided for by law and not expressly waived in this Lease. SECTION 30 SUCCESSORS AND ASSIGNS ------------------------ The terms, provisions, covenants and conditions contained in this Lease shall apply to, bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of Landlord and Tenant (where permitted), respectively. SECTION 31 PARTIAL INVALIDITY ------------------ If any term, covenant or condition of this Lease, or any application thereof, should be held by a court of competent jurisdiction to be invalid, void or unenforceable, all terms, covenants and conditions of this Lease, and all applications thereof, not held invalid, void, or unenforceable shall continue in full force and effect and shall in no way be affected, impaired or invalidated thereby. SECTION 32 TIME OF THE ESSENCE ------------------- Time is of the essence of this Lease and all of the terms, covenants and conditions hereof. SECTION 33 Page -30- ENTIRE AGREEMENT ---------------- This Lease contains the entire agreement between the parties and shall not be amended, changed or terminated orally. SECTION 34 NO PARTNERSHIP -------------- Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, or of partnership, or of joint venture, or of any association between Landlord and Tenant. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. SECTION 35 BROKERS ------- The parties hereto warrant that they have had no dealings with any broker or agent in connection with this Lease other than the Broker, for which Landlord shall be responsible for the payment of a real estate commission, pursuant to a separate agreement with Broker. Landlord and Tenant hereby hold each other harmless and indemnify the other from and against any and all cost, expense, or liability including legal fees and costs in defense thereof, for any compensation, commissions and charges claimed by any broker or agent, other than Broker, with respect to this Lease or the negotiation thereof based on any such broker's or agent's representation of Tenant or Landlord. SECTION 36 SAVINGS CLAUSE -------------- In the event the Term of this Lease shall not have commenced within one (1) year from the date of execution hereof, this Lease shall become null and void and Landlord and Tenant shall thereupon be released from any and all obligations with respect thereto. SECTION 37 ATTORNEYS' FEES --------------- In the event any action at law or in equity, or any special proceeding, be instituted by either of the parties hereto against the other to enforce this Lease, or any rights arising hereunder, or in connection with the subject matter hereof, the prevailing party shall be entitled to recover all costs of suit and reasonable attorney's fees at trial and on appeal. SECTION 38 INSOLVENCY AND DEATH ---------------------- It is understood and agreed that neither this Lease nor any interest herein or hereunder, nor any estate hereby created in favor of Tenant, shall pass by operation of law under any state or federal insolvency, bankruptcy or inheritance act, or any similar law now or hereafter in effect, to any trustee, receiver, assignee for the benefit of creditors, heir, legatee, devisee, or any other person whomsoever without the express prior written consent of Landlord. SECTION 39 NET LEASE ---------- This is an absolute net Lease and Landlord shall not be required to provide any services, or do any act or thing with respect to the Premises, or Improvements or the appurtenances thereto, except as may be specifically provided herein, and the rent reserved herein shall be paid to Landlord without any claim on the part of Tenant for diminution, setoff, or abatement, and nothing shall suspend, abate, or reduce any rent to be paid hereunder, except as otherwise specifically provided in this Lease. Page -31- SECTION 40 GENERAL PROVISIONS ------------------ 1.85 Captions. The captions appearing at the commencement of the Sections hereof are descriptive only and for convenience of reference to this Lease and in no way whatsoever define, limit or describe the scope or intent of this Lease, nor in any way affect this Lease. 1.86 Pronouns. Masculine or feminine pronouns shall be substituted for the neuter form and vice versa, and the plural shall be substituted for the singular form and vice versa, in any place or places herein in which the context requires such substitution(s). 1.87 Governing Law. The laws of the State of Nevada shall govern the validity, construction, performance, enforcement and effect of this Lease. Any legal action under this Lease or in any way pertaining to this Lease must be instituted and maintained in Clark County, Nevada. The exclusive venue of any action or proceeding arising out of or in connection with this Lease shall be Clark County, Nevada. Each party hereby consents to the personal jurisdiction of any court of competent subject matter jurisdiction sitting in Clark County, Nevada, and to the service of process in accordance with the laws of the State of Nevada and any rules applicable to such court. 1.88 Words of Obligation. Whenever in this Lease any words of obligation or duty are used in connection with either party, such words shall have the same force and effect as though framed in the form of express covenants on the part of the party obligated. 1.89 Joint and Several Liability. In the event Tenant now or hereafter shall consist of more than one person, firm or corporation, then and in such event, all such persons, firms or corporations shall be jointly and severally liable as Tenant hereunder. 1.90 Execution of Lease. The submission of this Lease for examination does not constitute a reservation of or option to lease the Premises; this Lease becomes effective as a Lease only upon execution by Landlord and delivery thereof by Landlord to Tenant. 3.3.1 DEPOSIT. Upon acceptance of Tenant's offer to lease under the terms hereof and receipt by Landlord of a deposit in connection with Tenant's submission of said offer, Landlord shall be entitled to retain such deposit and apply same to damages, costs and expenses incurred by Landlord in the event Tenant fails to occupy the Premises. If Landlord declines said offer, any such deposit shall be returned to Tenant. 1.91 Notice of Claim. Should any claim or lien be filed against the Premises, or any action or proceeding be instituted affecting the title to the Premises, Tenant shall give Landlord written notice thereof as soon as Tenant obtains actual or constructive knowledge thereof. 1.92 Neutral Construction. This Lease shall not be construed either for or against Landlord or Tenant, but this Lease shall be interpreted in accordance with the general tenor of its language. 1.93 Construction Allowance. Tenant agrees and acknowledges that Landlord has bargained for Tenant's full and faithful compliance with the terms of the Lease, and Tenant's full and faithful payment of all Base Rent, Additional Rent and other charges and monies to be paid by Tenant. Therefore, if Landlord has granted Tenant any construction allowance, Tenant Improvement Allowance, free rent, or other monetary concession, all such concessions and/or benefits to Tenant shall be effective only so long as Tenant is not in default of any term, covenant or provision of this Lease. Thus, should Tenant default hereunder, in addition to any amounts owing from Tenant to Landlord as a result of such default, the full amount of any such construction allowance, Tenant Improvement Allowance, free rent and/or other monetary concession shall be immediately due and payable by Tenant to Landlord upon demand. If such default by Tenant occurs after the first full Lease Year of the Term, the total amount provided to Tenant as construction allowance or Tenant Improvement Allowance shall be reimbursed to Page -32- Landlord, equitably prorated in proportion to the balance of the Lease Term, any free rent or other monetary concessions shall be reimbursed to Landlord in full. 1.94 Third Party Beneficiary Status. Tenant acknowledges that, by entering into this Lease with Landlord, Tenant has not become a third party beneficiary of any lease between Landlord and any other tenant of the Property, and that no part of the inducement to Tenant to enter into this Lease was any promise or covenant of Landlord, express or implied, to enforce any other lease for the benefit of Tenant. 1.95 Limited Liability. The obligations of Landlord under this Lease do not constitute personal obligations of Landlord, or its members, managers, partners, directors, officers, or shareholders, and Tenant shall look solely to Landlord's interest in the Property and to no other assets of Landlord for satisfaction of any liability with respect to this Lease and will not seek recourse against the members, managers, partners, directors, officers, or shareholders of Landlord herein, nor against any of their personal assets for such satisfaction. SECTION 41 OPTION TO EXTEND ------------------ 1.96 Extension Term. Provided Tenant is in compliance with each and every term, covenant and condition of this Lease at the time that Tenant notifies Landlord of its intent to exercise its Option to Extend, as defined herein, and on the commencement date of any extension granted hereby, Tenant shall have the right and option to extend this Lease ("Option to Extend") for one (1) consecutive additional term of five (5) years ("Extension Term"). 3.3.1 COMMENCEMENT DATE. The Extension Term shall commence at the expiration of the original Term of this Lease. 1.97 Notice of Election. The Option to Extend shall be exercised by Tenant giving Landlord notice in writing of such election to extend at least nine (9) months, but not more than twelve (12) months, prior to the expiration of the original Term. 3.3.1 ADJUSTMENT OF BASE RENT. Such Extension Term shall be on the same terms, covenants, and conditions as provided herein for the original Term, except that the Base Rent provided in Section 1.1.5 of the Lease shall be determined in accordance with this Section. The Base Rent payable by Tenant during the initial year of the Extension Term shall be equal to the fair market rental value of the Premises ("FMV"), as defined below, as of the commencement date of the Extension Term. 38. Within thirty (30) days following the Tenant's notification to exercise its Option to Extend, Landlord shall furnish Tenant with Landlord's good faith determination of the FMV for the Premises for the applicable Extension Term ("Landlord's Determination"). Tenant shall have thirty (30) days following receipt of Landlord's Determination to elect to proceed with the exercise of its Option to Extend by executing an amendment to this Lease, reflecting the adjustment to Base Rent. 39. As used herein, the term "FMV" shall mean the average annual rental, expressed as a rate per rentable square foot, which a willing, comparable, non-equity, Tenant would pay for comparable space, and that a willing Landlord, exercising reasonable business judgment, would accept, at arms-length for comparable space in a comparable building product type, comparable business park environment, limited to facilities and proximity to amenities within the Green Valley and airport sub-markets, as evidenced where possible by leases that commence or are to commence on or about the commencement of the applicable Extension Term ("Comparison Leases"), adjusted to account for variations between this Lease and the Comparison Leases with respect to all relevant terms and conditions, including, without limitation, the brokerage commissions, and tenant improvements or tenant allowances, the age and quality of construction of the Building and the relative credit worthiness and financial strength of Tenant as compared to the tenants under Comparison Leases. Page -33- 1.98 Termination of Option to Extend. The Option to Extend shall automatically terminate and become null and void upon the earlier to occur of: (i) the termination of Tenant's right to possession of the Premises; (ii) the assignment by Tenant of this Lease, in whole or in part, excepting therefrom a Permitted Assignee; (iii) the sublease by Tenant of all or any part of the Premises, excepting therefrom a Permitted Assignee; (iv) the recapture by Landlord of all or any portion of the Premises under Section 22; or (v) the failure of Tenant to timely or properly exercise the Option to Extend. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date set forth above. LANDLORD TENANT CORPORATE CTR. IV, LLC, MEGO FINANCIAL CORP., a Nevada limited liability company a New York corporation By: Silver Springs, Inc., s/s Robert S. Understein _______________________________ a Nevada corporation, By: Robert S. Understein _______________________________ Its Manager Title: Chief Financial Officer _______________________________ By: s/s Gregory E. Jones ---------------------------- Gregory E. Jones, Senior Vice President Page -34- EXHIBIT A-1 LEGAL DESCRIPTION OF 2280 CORPORATE CIRCLE A parcel of land being a portion of the South Half (S ) of Section Eighteen (18) and the North Half (N ) of Section Nineteen (19), Township Twenty-two (22) South, Range Sixty-two (62) East, M.D.M., City of Henderson, Clark County, Nevada, being a portion of Lot One (1) of Official Plat of Green Valley/Pebble Commercial Center, as recorded in Book 64 of Plats, Page 68, of Official Records of Clark County, Nevada, being more particularly described as follows: COMMENCING at a 2" brass cap in a monument box at the Northwest (NW) Corner of said Section Nineteen (19), said point being at the intersection of the centerline of Pebble Road (80 foot wide right-of-way) and the centerline of Pecos Road (100 foot wide right-of-way); thence South 89o06'51" East along the North line of said Section Nineteen (19) and along the centerline of said Pebble Road, 2385.84 feet to the intersection of the centerline of said Pebble Road and the intersection of Carnegie Street (80 foot wide right-of-way); thence South 00o53'09" West along the centerline of said Carnegie Street 363.63 feet; thence leaving said centerline South 89o06'51" East 136.69 feet to the TRUE POINT OF BEGINNING of the herein described tract; thence North 02o58'14" East 341.81 feet; thence North 15o00'00" East 221.39 feet to the beginning of a 750.00 foot radius curve to the right; thence along said 750.00 foot radius curve to the right through a central angle of 01o59'21" (the long chord of which bears North 15o59'41" East 26.04 feet) for an arc distance of 26.04 feet; thence South 73o00'39" East 28.95 feet; thence North 21o59'59" East 47.66 feet; thence North 68o00'00" East 144.48 feet; thence South 22o00'00" East 266.00 feet; thence North 68o00'00" East 254.91 feet to the beginning of a 582.00 foot radius non-tangent curve to the left; thence along said non-tangent curve to the left through a central angle of 26o02'26" (the long chord of which bears South 24o38'08" East 262.24 feet) for an arc distance of 264.52 feet to the beginning of a 25.00 foot radius reverse curve to the right; thence along said reverse curve to the right through a central angle of 83o13'13" (the long chord of which bears South 03o57'16" West 33.20 feet) for an arc distance of 36.31 feet to the beginning of a 352.55 foot radius reverse curve to the left; thence along said reverse curve to the left through a central angle of 20o31'09" (the long chord of which bears South 35o18'18" West 125.58 feet) for an arc distance of 126.26 feet; thence North 63o39'56" West 245.85 feet; thence South 68o00'00" West 212.32 feet; thence South 22o00'00" East 62.00 feet; thence South 68o00'00" West 27.00 feet; thence South 22o00'00" East 31.00 feet; thence South 68o00'00" West 212.86 feet; thence North 87o01'46" West 26.91 feet to the TRUE POINT OF BEGINNING. Containing 5.622 acres, more or less. APN #178-19-815-008 Legal prepared by: Tex J. Brooks WRG Design, Inc. 2260 Corporate Circle, Suite 430 Henderson, NV 89074 702/990-9300 Dated: October 22, 2001 EXHIBIT A-2 SITE PLAN OF PROPERTY EXHIBIT A-3 SCHEMATIC OF BUILDING EXHIBIT A-4 SITE PLAN OF PREMISES WITHIN BUILDING EXHIBIT A-5 SCHEMATIC OF PREMISES EXHIBIT B MEMORANDUM OF COMMENCEMENT DATE AND CONFIRMATION OF RENTABLE AREA The Commencement Date of that Lease by and between 2280 CORPORATE CIRCLE, LLC, A NEVADA LIMITED LIABILITY COMPANY, as Landlord, and MEGO FINANCIAL CORP., A NEW YORK CORPORATION, as Tenant, as provided for in Section 1.1.8 of said Lease is the __ day of _____, 200_. The Lease expiration date is the __ day of _____, 200_. Further, the parties hereto confirm that the Rentable Area (i) of the Premises shall be deemed to be __________ square feet; and (ii) of the Building shall be deemed to be __________ square feet, which may be adjusted from time to time. Tenant's Pro-Rata Portion shall be ____%. Dated: _______ __, 2002. LANDLORD TENANT CORPORATE CTR. IV, LLC, MEGO FINANCIAL CORP., a Nevada limited liability company a New York corporation By: Silver Springs, Inc., _______________________________ _______________________________ a Nevada corporation, By: _______________________________ _______________________________ Its Manager Title: _______________________________ _______________________________ By: ________________ Gregory E. Jones, Senior Vice President EXHIBIT C LANDLORD'S WORK LETTER Tenant accepts Premises in its "as is" condition. EXHIBIT D 2280 CORPORATE CIRCLE RULES AND REGULATIONS Tenant agrees as follows: 1. All loading and unloading of supplies, equipment or the like shall be done only at such time, in the areas, and through the entrance(s) or areas as may be designated for such purposes by Landlord. The delivery or shipping of merchandise, supplies and fixtures to and from the Premises shall be subject to such Rules and Regulations as, in the judgment of Landlord, are necessary for the proper operation of the Premises or the Property. 2. Without the prior written consent of the Landlord, Tenant shall not sell, or permit the sale at retail, of newspapers, magazines, periodicals, or theater tickets, in or from the Premises, nor shall Tenant carry on, or permit or allow any employee or other person or carry on, the business of stenography, typewriting or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, or any manufacturing of any kind, or the business of a public barber shop, beauty parlor, or a manicuring and chiropodist business or any business other than that specifically provided for in the Lease. No Tenant shall obtain for use upon the Premises ice, drinking water, towel and other similar services, or accept barbering or bootblack services in the Premises, except from persons authorized by the Landlord and at hours and under regulations fixed by the Landlord. 3. Subject to the terms of the Lease, no aerial, antenna, satellite dish or similar device shall be erected on the roof or exterior walls of the Premises or in the Property, without in each instance, the prior written consent of Landlord, unless otherwise provided in the Lease. Any such item so installed without such written consent shall be subject to removal without notice at any time at Tenant's expense. 4. Tenant shall not, without the prior written consent of Landlord, use in or about the Premises any advertising or promotional media such as searchlights, loud speakers, phonographs, or other similar visual or audio media which can be seen or heard outside the Premises. 5. Tenant shall keep the Premises at a temperature sufficiently high to prevent freezing of water in pipes and fixtures. 6. The exterior areas immediately adjoining the Premises shall be kept clean and free from dirt and rubbish by Tenant to the satisfaction of Landlord, and Tenant shall not place or permit any obstructions in such areas. g. Tenant shall not burn any trash or garbage of any kind in or about the Premises or Property. 7. The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be thrown therein. The expense of any breakage, stoppage, or damage resulting from a violation of this provision shall be borne by the Tenant who shall, or whose employees, agents, servants, customers or invitees shall, have caused it. 8. Tenant shall keep the Premises free from pests and vermin. 9. On Saturdays, Sundays or legal holidays, and on other days between the hours of 6 p.m. and 7 a.m., access to the Building, or to the halls, corridors, or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the building watchman, if any, in charge and has a pass or is properly identified. The Landlord shall in no case be liable for damages for the admission or exclusion from the Building of any person whom the Landlord has the right to exclude under these Rules and Regulations. In case of invasion, mob riot, public excitement, or other commotion, the Landlord reserves the right to prevent access to the Building during the continuance of the same by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. Page 1 of 3 10. Except with the written consent of the Landlord, no person or persons other than those approved by the Landlord will be permitted to enter the Building for such purpose, but the Tenant shall not cause unnecessary labor by reason of the Tenant's carelessness and indifference in the preservation of good order and cleanliness. 11. No Tenant shall lay linoleum or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except by a paste or other material which may easily be removed with water, the use of cement or other similar adhesive materials being expressly prohibited. The method of affixing any such linoleum or other similar floor covering to the floor, as well as the method of affixing carpets or rugs to the Premises, shall be subject to prior approval by the Landlord. The expense of repairing any damage resulting from a violation of this rule shall be borne by the Tenant by whom, or by whose agents, clerks, employees or visitors, the damage shall have been caused. 12. No sign, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted or affixed by the Tenant on any part of the Building without the prior written consent of the Landlord. If the Landlord shall have given such consent at any time, whether before or after the execution of this Lease, such consent shall in no way operate as a waiver or release of any of the provisions hereof or of this Lease, and shall be deemed to relate only to the particular sign, advertisement or notice so consented to by the Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of the Landlord with respect to each and every such sign, advertisement or notice other than the particular sign, advertisement or notice, as the case may be, so consented to by the Landlord. If the Landlord, by a notice in writing to the Tenant, shall object to any curtain, blind, shade or screen attached to, or hung in, or used in connection with any window or door of the Premises, such use of such curtain, blind, shade or screen shall be forthwith discontinued by the Tenant. No awning shall be permitted on any part of the Premises. 13. Tenant shall not make noises, cause disturbances, or create odors which may be offensive to Landlord or to other tenants of the Property or their employees, agents, servants, customers or invitees. 14. No portion of the Premises or the Property shall be used for sale or display of any obscene, pornographic, so called "adult" or other offensive merchandise or activities. 15. Without Landlord's prior written consent, no sign or other object or thing visible to public view outside of the Premises shall be placed or allowed on the exterior of the Premises or in the interior of the Premises in such a manner as shall be visible from outside the Premises. Tenant shall be required to properly maintain any sign permitted under the Lease, including prompt repairs of any nature. Upon expiration of the Lease, Tenant shall be responsible for promptly removing any sign placed in and around the Premises by Tenant. Tenant shall repair all damage caused to the Building or Premises by such removal, including proper "capping off" of electrical wiring. Without limiting the generality of the foregoing, Tenant shall adhere to all requirements contained in EXHIBIT C attached to this Lease and incorporated herein by reference. 16. Tenant and Tenant's employees and agents shall not solicit business in the parking areas or other Common Areas, nor shall Tenant distribute any handbills or other advertising matter in automobiles parked in the parking area or in the Common Areas. 17. Tenant shall refrain from keeping, displaying or selling any merchandise or any object outside of the interior of the Premises or in any portion of any sidewalks, walkways or other part of the Property outside of the Premises. No sales tables, merchandise displays, signs or other sections shall be placed in front of, or affixed to, any part of the exterior of the Building nor placed in the halls, common passageways, corridors, vestibule or parking area without the prior written consent of the Landlord. Page 2 of 3 18. The sidewalks, halls, passages, corridors, exits, stairways and other Common Areas shall not be obstructed by Tenant or used for any purpose other than for ingress and egress to the Premises. Tenant shall not erect or maintain any barricade or scaffolding which may obscure the signs, entrances or show window of any other tenant in the Property or tend to interfere with any such other tenant's business. 19. Landlord reserves the right to exclude or expel from the Property any person who, in the judgment of the Landlord is intoxicated or under the influence of liquor, or who shall in any manner do any act in violation of any of the rules and regulations of the Property. 20. Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot which said floor was designed to carry or which is allowed by law. The Landlord shall have power to prescribe the weight and position of safes or other large or heavy objects which shall, if considered necessary by the Landlord, stand on three-inch thick wood strips to distribute the weight. The moving of safes shall occur only between such hours as may be designated by, and only upon previous notice to, the manager of the Building and the persons employed to move safes in or out of the Building must be acceptable to the Landlord. No freight, furniture or bulky matter of any description shall be received into the Building except during hours and in a manner approved by the Landlord. 21. Landlord will direct electricians as to where and how telephone wires are to be introduced. No boring or cutting for wires will be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the reasonable approval of Landlord. 22. Tenant, upon termination of the Lease, shall deliver to Landlord the keys of offices, rooms and toilet rooms which shall have been furnished to Tenant or which Tenant shall have made, and in the event of loss of any keys so furnished, shall pay Landlord its reasonable cost therefor. Tenant shall not alter any lock or install any new or additional locks or any bolts on any doors of the Premises without the prior approval of Landlord, and if such approval is given, then Tenant shall furnish Landlord with the key therefor. 23. Tenant shall see that the doors of the Premises are closed at all times when not in use for ingress or egress and securely locked before leaving the Building of which the Premises is a part, and that all electricity, gas, heating or air conditioning shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness in connection there with Tenant shall make good all injuries sustained by other tenants or occupants of the Property by Landlord. 2. Tenant shall see that the windows, transoms and doors of the Premises are closed and securely locked before leaving the Building and must observe strict care not to leave windows open when it rains, and Tenant shall exercise extraordinary care and caution that all water faucets or water apparatus are entirely shut-off before Tenant or Tenant's employees leave the Building and that all electricity, gas or air shall likewise be carefully shut-off as to prevent waste or damage and for any default or carelessness Tenant shall make good all injuries sustained by other tenants or occupants of the Building or by Landlord. 24. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and none of Landlord's employees will admit any person to any office without specific instructions from Landlord. 25. All professional practice conducted on the Premises shall be in compliance with the Code of Ethics of such profession. All advertising, if any, by Tenant, its agents, employees, servants, contractors, and licenses in connection with the Premises shall be in compliance with said Code of Ethics. 26. Landlord reserves the right to waive any rule in any particular instance or as to any particular person or occurrence and further, Landlord reserves the Page 3 of 3 right to amend or rescind any of these Rules and Regulations or make, amend or rescind new rules to the extent Landlord, in its sole judgment, deems suitable for the safety, care and cleanliness of the Property and the conduct of high standards of performance therein. Tenant agrees to conform to such new or amended rules upon receiving written notice of the same. 27. Tenant shall not use any space heaters in any portion of the Premises. 28. There shall be no smoking in any portion of the Premises or the Building. 29. Tenant shall not, without Landlord's prior written approval, operate or permit to be operated on the Premises any coin or token-operated vending machines or similar device for the sale or leasing to the public of any goods, wares, merchandise, food, beverages, and or service, including, without limitation, pay telephones, pay lockers, pay toilets, scales and amusement devices. 30. Tenant shall refrain from using or permitting the use of the Premises or any portion thereof as living quarters, sleeping quarters or lodging rooms. 31. Tenant shall not, without Landlord's prior written approval, cover or obstruct any windows, glass doors, lights, skylights, canopies or other apertures that reflect or admit light into the Premises. 32. Tenant shall refrain from keeping or permitting the keeping of any animals of any kind in, about or upon the Premises without Landlord's prior written approval. Page 4 of 3 EXHIBIT E JANITORIAL SERVICE SPECIFICATIONS Pursuant to Section 10.1 (b) of this Lease, Landlord shall perform, or have performed, the following janitorial services to the Exterior Common Areas of the Building, subject to the limitations outlined below: 33. Daily service, as outlined below, shall be performed five (5) nights per week, typically Sunday through Thursday, excluding all legally recognized federal and state holidays. Any weekly, quarterly, semi-annual, or annual service, which Landlord shall deem necessary, shall be performed as scheduled by Landlord. 34. Landlord may, if deemed necessary by Landlord, at its sole discretion, utilize a day porter for performing specific janitorial services to the Exterior Common Areas of the Building, during the hours of operation of the Building. A. EXTERIOR COMMON AREAS ----------------------- 1. Daily Service -------------- a. Empty cigarette receptacles. b. Empty all waste containers and spot clean. c. Remove trash from plantings. d. Clean sidewalks and plaza areas. EXHIBIT F GATEWAY SIGNAGE EXHIBIT G ROOFING REQUIREMENTS Tenant shall notify Landlord's roofing/waterproofing contractor, Commercial Roofers, Michael Lee at 702/876-1777 ("Roofing Contractor") before any type of work is performed that impacts any roofing or waterproofing system in any fashion. Roofing Contractor shall be given the opportunity to review all proposed modifications to the roofing/ waterproofing system (including, but not limited to, the installation of new unit curbs, satellite dishes, vent stacks, etc.). Roofing Contractor shall note any proposed modifications, ensure that they are in compliance with requirements by the roofing or waterproofing membrane manufacturer, and shall advise Tenant of any conflicts or requirements to maintain Landlord's roofing/waterproofing manufacturer's guarantee. No roofing or waterproofing work, in any form, shall commence until Roofing Contractor has reviewed and approved all proposed roofing or waterproofing modifications and developed a cost proposal regarding said items. Tenant shall be liable for any and all costs relating to any roofing or waterproofing modifications. In the event that Tenant fails to adhere to these guidelines, Landlord shall have the right to direct Roofing Contractor to make all necessary changes to the roofing or waterproofing system in order to maintain Landlord's roofing or waterproofing warranty (including, but not limited to, new roofing or waterproofing membrane items and all associated items such as HVAC equipment, electrical, etc.) said costs shall then be passed on to the Tenant. Tenant shall adhere to the guidelines set above. Should Tenant be uncertain of any potential impacts to any roofing or waterproofing system, they shall first contact the Roofing Contractor for clarification. LEASE BETWEEN 2280 CORPORATE CIRCLE, LLC, A NEVADA LIMITED LIABILITY COMPANY, AS LANDLORD, AND MEGO FINANCIAL CORP., A NEW YORK CORPORATION, AS TENANT, IN 2280 CORPORATE CIRCLE HENDERSON, NEVADA MAY _____ , 2002 TABLE OF CONTENTS SECTION 1 DEFINITIONS Page -1- ----------- 1.1 DEFINITIONS Page -1- 1.1.1 "ADDITIONAL RENT" Page -1- 1.1.2 "ADJUSTMENT MONTH" Page -1- 1.1.3 "AGGREGATE MONTHLY RENT" Page -1- 1.1.4 "ALLOWANCE" Page -1- 1.1.5 "BASE RENT" Page -1- 1.1.6 "BROKER" Page -1- 1.1.7 "BUILDING" Page -1- 1.1.8 "COMMENCEMENT DATE" Page -1- 1.1.9 "COMMON AREAS" Page -1- 1.1.10 "DEFAULT INTEREST RATE" Page -1- 1.1.11 "LANDLORD'S WORK" Page -1- 1.1.12 "LEASE YEAR" Page -1- 1.1.13 "MORTGAGEE" Page -1- 1.1.14 INTENTIONALLY OMITTED Page -1- 1.1.15 "PREMISES" Page -1- 1.1.16 "PROPERTY" Page -1- 1.1.17 "PROPERTY OPERATING COSTS" Page -2- 1.1.18 "RENTABLE AREA" Page -2- 1.1.19 INTENTIONALLY OMITTED Page -2- 1.1.20 "TENANT IMPROVEMENTS" Page -2- 1.1.21 "TENANT'S PRO-RATA PORTION" Page -2- 1.1.22 "TENANT'S SHARE" Page -2- 1.1.23 "TERM" Page -2- SECTION 2 PREMISES Page -2- -------- 2.1 PREMISES Page -2- 2.1.1 LANDLORD'S RESERVATIONS Page -2- 2.2 DECLARATION Page -2- SECTION 3 BASE RENT Page -2- ---------- 3.1 BASE RENT Page -2- 3.1.1 FIRST MONTH'S RENTAL OBLIGATION Page -2- 3.2 BASE RENT INCREASES Page -2- 3.3 ADDITIONAL RENT Page -2- 3.3.1 TENANT'S SHARE OF PROPERTY OPERATING COSTS Page -2- 3.3.2 NOTIFICATION OF PROPERTY OPERATING COSTS Page -3- 3.3.3 PROPERTY OPERATING COSTS Page -3- 3.3.4 PROPERTY OPERATING COST EXCLUSIONS Page -4- 3.3.5 IMPOSITIONS Page -4- 3.4 EXPENDITURES BY LANDLORD Page -4- 3.5 MONETARY PAYMENTS Page -5- SECTION 4 RIGHT OF AUDIT Page -5- ---------------- 4.1 RIGHT OF AUDIT Page -5- 4.1.1 AUDIT CONFIDENTIALITY Page -5- SECTION 5 SECURITY DEPOSIT Page -6- ----------------- 5.1 SECURITY DEPOSIT Page -6- 5.1.1 RETURN OF DEPOSIT Page -6- 5.1.2 NO RIGHT OF TENANT TO ENCUMBER DEPOSIT Page -6- 5.2 NO RIGHT OF DEDUCTION Page -6- 5.3 RIGHT TO RAISE SECURITY DEPOSIT Page -6- SECTION 6 POSSESSION AND SURRENDER Page -6- -------------------------- 6.1 POSSESSION OF THE PREMISES Page -6- 6.2 SURRENDER Page -6- SECTION 7 USE OF PREMISES Page -7- ----------------- 7.1 USE OF PREMISES Page -7- 7.2 MAINTENANCE AND REPAIR Page -7- 7.3 STORAGE OF GARBAGE Page -7- 7.4 ABIDANCE OF RULES AND REGULATIONS Page -7- 7.5 COMMERCIALLY REASONABLE OPERATION Page -7- 7.6 PROHIBITION AGAINST INTERFERENCE WITH OTHER TENANTS Page -7- 7.7 USE OF COMMON AREAS Page -7- 7.8 PARKING Page -7- 7.9 TRADEMARK RESTRICTIONS Page -7- 7.9.1 TRADEMARK Page -8- 7.10 GAMING Page -8- 7.11 SATELLITE DISH Page -8- SECTION 8 IMPROVEMENTS, SIGNAGE AND ALTERATIONS Page -8- ---------------------------------------- 8.1 IMPROVEMENTS Page -8- 8.1.1 INTENTIONALLY OMITTED Page -8- 8.1.2 BUILDING SIGN Page -8- 8.1.3 GATEWAY SIGNAGE Page -8- 8.2 ALTERATIONS Page -8- 8.3 HOLD HARMLESS Page -9- 8.3.1 LIABILITY INSURANCE Page -9- 8.4 COMPLIANCE WITH APPLICABLE LAW Page -9- 8.5 LIENS Page -9- SECTION 9 PARKING AND COMMON AREAS Page -9- --------------------------- 9.1 COMMON AREAS Page -9- 9.2 PARKING SPACE LEASING Page -9- 9.2.1 COVERED PARKING Page -10- SECTION 10 LANDLORD'S SERVICES Page -10- -------------------- 10.1 LANDLORD SERVICES Page -10- 10.2 IMPROVEMENTS TO COMMON AREAS Page -10- 10.3 LANDLORD'S DUTY TO REPAIR Page -11- 10.3.1 UTILITY SERVICE FACILITIES Page -11- SECTION 11 UTILITIES Page -11- --------- 11.1 UTILITIES Page -11- 11.1.1 EXCESSIVE USE Page -11- 11.1.2 MAINTENANCE Page -11- 11.1.3 SERVICE CONTRACTS. Page -11- SECTION 12 LAWS AND REGULATIONS Page -11- ---------------------- 12.1 AMERICANS WITH DISABILITIES ACT Page -11- 12.2 INSURANCE SERVICES OFFICE Page -11- 12.3 STORAGE OF DISPOSITION OF HAZARDOUS MATERIALS Page -12- 12.3.1 HAZARDOUS MATERIALS AND SUBSTANCES Page -12- 12.4 INDEMNIFICATION Page -12- 12.5 JEOPARDIZE INSURANCE POLICIES Page -12- SECTION 13 TAXES Page -12- ----- 13.1 TAXES Page -12- 13.2 EXCISE TAX Page -12- 13.2.1 CONTEST VALIDITY Page -13- SECTION 14 INSURANCE Page -13- --------- 14.1 GENERAL LIABILITY INSURANCE Page -13- 14.2 SPECIAL PERIL PROPERTY INSURANCE Page -13- 14.3 CERTIFICATE OF INSURANCE Page -13- 14.4 USE OF PREMISES Page -13- 14.5 WAIVER OF RECOVERY RIGHTS Page -13- 14.6 WAIVER OF SUBROGATION Page -13- 14.7 PROHIBITED SALES OR ACTIVITY Page -13- 14.8 PROHIBITED USE DEEMED ULTRA HAZARDOUS Page -13- 14.9 LANDLORD'S MAINTENANCE OF SPECIAL PERIL PROPERTY INSURANCE Page -14- 14.10 LANDLORD'S MAINTENANCE OF GENERAL LIABILITY INSURANCE Page -14- SECTION 15 INDEMNIFICATION Page -14- --------------- 15.1 INDEMNIFICATION Page -14- 15.2 LANDLORD'S LIABILITY Page -14- SECTION 16 SUBORDINATION AND NONDISTURBANCE Page -14- ---------------------------------- 16.1 SUBORDINATION Page -14- 16.2 PRIOR LIEN Page -14- 16.3 ATTORNMENT Page -15- 16.4 NONDISTURBANCE Page -15- SECTION 17 ASSIGNMENT AND SUBLETTING Page -15- --------------------------- 17.1 ASSIGNMENT Page -15- 17.1.1 PERMITTED ASSIGNEES Page -15- 17.1.2 PROPOSED ASSIGNEE Page -15- 17.1.3 DEFAULT Page -15- 17.2 OPTION TO TERMINATE Page -15- 17.3 BONUS RENT Page -16- 17.4 REMEDIES Page -16- 17.5 PROCESSING FEE Page -16- SECTION 18 CONDEMNATION Page -16- ------------ SECTION 19 DAMAGE OR DESTRUCTION Page -16- ----------------------- 19.1 DESTRUCTION OF PREMISES Page -16- 19.2 RECONSTRUCTION Page -17- 19.2.1 LEASE TERMINATION Page -17- 19.3 INSURANCE PROCEEDS MAINTAINED BY TENANT Page -17- 19.4 INSURANCE PROCEEDS MAINTAINED BY LANDLORD Page -17- SECTION 20 RIGHT OF ACCESS Page -17- ----------------- 20.1 RIGHT OF ACCESS Page -17- 20.2 PERFORMANCE OF WORK Page -17- 20.3 EXHIBITING PREMISES Page -17- SECTION 21 ESTOPPEL CERTIFICATE Page -18- --------------------- SECTION 22 TENANT'S DEFAULT/LANDLORD'S REMEDIES Page -18- -------------------------------------- 22.1 EVENTS OF DEFAULT Page -18- 22.1.1 NON-PAYMENT OF MONEY Page -18- 22.1.2 NON-MONETARY NON-PERFORMANCE Page -18- 22.1.3 ABANDONMENT OF PREMISES Page -18- 22.1.4 BANKRUPTCY Page -18- 22.1.5 MECHANIC LIENS Page -18- 22.1.6 FALSIFIED FINANCIAL REPORTS Page -18- 22.1.7 FAILURE TO OBTAIN POLICIES AND/OR CERTIFICATES OF INSURANCE Page -18- 22.1.8 FAILURE TO OBTAIN CONSENT Page -18- 22.1.9 INTENTIONALLY OMITTED Page -18- 22.1.10 INTENTIONALLY OMITTED Page -18- 22.1.11 FAILURE TO PERFORM OTHER OBLIGATIONS Page -18- 22.1.12 CROSS-DEFAULTS Page -19- 22.2 ADDITIONAL REMEDIES Page -19- 22.3 RIGHT TO POSSESSION Page -19- 22.4 LOSS OF BARGAIN Page -19- 22.5 ACTIONS FOR RECOVERY Page -19- 22.6 ACTIONS FOR ALL RENT Page -20- 22.7 LANDLORD NOT LIABLE FOR TRESPASS Page -20- 22.8 NO WAIVER Page -20- 22.9 LIQUIDATED DAMAGES Page -20- 22.10 ADMINISTRATIVE AND INTEREST CHARGES Page -20- 22.11 LANDLORD'S LIEN Page -20- SECTION 23 QUIET POSSESSION Page -20- ----------------- SECTION 24 CONVEYANCE BY LANDLORD Page -20- ------------------------ SECTION 25 DEFAULT BY LANDLORD Page -21- --------------------- SECTION 26 FORCE MAJEURE Page -21- -------------- SECTION 27 NOTICES Page -21- ------- 27.1 NOTICES Page -21- 27.1.1 ADDRESS OF LANDLORD Page -21- 27.1.2 ADDRESS OF TENANT Page -21- 27.2 CHANGE OF ADDRESS Page -21- SECTION 28 HOLDOVER TENANCY Page -22- ----------------- SECTION 29 REMEDIES CUMULATIVE Page -22- -------------------- SECTION 30 SUCCESSORS AND ASSIGNS Page -22- ------------------------ SECTION 31 PARTIAL INVALIDITY Page -22- ------------------- SECTION 32 TIME OF THE ESSENCE Page -22- ---------------------- SECTION 33 ENTIRE AGREEMENT Page -22- ----------------- SECTION 34 NO PARTNERSHIP Page -22- --------------- SECTION 35 BROKERS Page -22- ------- SECTION 36 SAVINGS CLAUSE Page -23- --------------- SECTION 37 ATTORNEYS' FEES Page -23- ---------------- SECTION 38 INSOLVENCY AND DEATH Page -23- ---------------------- SECTION 39 NET LEASE Page -23- ---------- SECTION 40 GENERAL PROVISIONS Page -23- ------------------- 40.1 CAPTIONS Page -23- 40.2 PRONOUNS Page -23- 40.3 GOVERNING LAW Page -23- 40.4 WORDS OF OBLIGATION Page -23- 40.5 JOINT AND SEVERAL LIABILITY Page -23- 40.6 EXECUTION OF LEASE Page -23- 40.6.1 DEPOSIT Page -23- 40.7 NOTICE OF CLAIM Page -23- 40.8 NEUTRAL CONSTRUCTION Page -23- 40.9 CONSTRUCTION ALLOWANCE Page -24- 40.10 THIRD PARTY BENEFICIARY STATUS Page -24- 40.11 LIMITED LIABILITY Page -24- SECTION 41 OPTION TO EXTEND Page -24- ------------------ 41.1 EXTENSION TERM Page -24- 41.1.1 COMMENCEMENT DATE Page -24- 41.2 NOTICE OF ELECTION Page -24- 41.2.1 ADJUSTMENT OF BASE RENT Page -24- 41.3 TERMINATION OF OPTION TO EXTEND Page -25- EXHIBITS -------- EXHIBIT A-1 LEGAL DESCRIPTION OF PROPERTY EXHIBIT A-2 SITE PLAN OF PROPERTY EXHIBIT A-3 SCHEMATIC OF BUILDING EXHIBIT A-4 SITE PLAN OF PREMISES WITHIN BUILDING EXHIBIT A-5 SCHEMATIC OF PREMISES EXHIBIT B MEMORANDUM OF COMMENCEMENT DATE AND CONFIRMATION OF RENTABLE AREA OF THE PREMISES EXHIBIT C LANDLORD'S WORK LETTER EXHIBIT D RULES AND REGULATIONS EXHIBIT E JANITORIAL SERVICE SPECIFICATIONS EXHIBIT F GATEWAY SIGNAGE EXHIBIT G ROOFING REQUIREMENTS EX-10.248 5 doc4.txt EXHIBIT 10.248 AMENDMENT TO GUARANTEE ---------------------- AND SUBORDINATION AGREEMENT --------------------------- This Amendment to Guarantee and Subordination Agreement (the "Amendment") is made and entered into this 24th day of May, 2002, but effective as of March 1, 2002, by and between Mego Financial Corp., a New York corporation (formerly known as Mego Corp.) ("Guarantor") and FINOVA Capital Corporation, a Delaware corporation ("Lender"), successor in interest to Greyhound Real Estate Finance Company, an Arizona corporation ("GREFCO"). RECITALS -------- I. Guarantor executed and delivered to GREFCO an Amended and Restated Guarantee and Subordination dated May 10, 1989 (the "Guarantee") guarantying the performance of certain obligations owed by Leisure Homes Corporation, a Nevada corporation, formerly known as Preferred Equities Corporation ("Borrower"), to GREFCO. II. GREFCO assigned to Lender all of the rights and obligations owed by Borrower to GREFCO, pursuant to a plan of liquidation between GREFCO and Lender. III. On even date herewith, Borrower and Lender have entered into a Tenth Amendment to Forbearance Agreement and Amendment No. 15 to Second Amended and Restated and Consolidated Loan and Security Agreement (the "Loan Amendment"). As a condition to the effectiveness of the Loan Amendment, the Lender has required the execution of this Amendment. NOW, THEREFORE, in consideration of these Recitals, the covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency is hereby acknowledged, Lender and Guarantor agree as follows: 1. Amendment. Paragraph 3.9 of the Guarantee shall be amended and restated --------- -------------- in its entirety to read as follows: 3.9 Notwithstanding any payment or performance by Guarantor pursuant to this Guarantee, Guarantor hereby waives and releases any right of reimbursement and any right to be subrogated to any rights of Lender against Borrower. Guarantor acknowledges that the foregoing waiver and release has been specifically bargained for by Lender and has been relied upon by Lender in ascribing value to this Guarantee, which reliance was a condition precedent to Lender's willingness to extend the Loan to Borrower. Guarantor expressly waives any defenses to the enforcement of this Guarantee, to any rights of Lender created or granted hereby or to the recovery by Lender against Borrower, Guarantor or any other Obligor of any deficiency after judicial or nonjudicial foreclosure or sale, even though such a foreclosure or sale may impair the 1 subrogation rights of Guarantor or otherwise prevent Guarantor from obtaining reimbursement or contribution from Borrower or any other Obligor. 2. Representations and Warranties. Guarantor represents and warrants -------------------------------- to Lender that: 2.1 This Amendment and the documents and instruments executed in connection herewith have been authorized by all necessary action and, when executed, will be the legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance their respective terms. 2.2 Guarantor's execution, delivery and performance of this Amendment does not and will not (i) violate any law, rule, regulation or court order to which Guarantor is subject; (ii) conflict with or result in a breach of Guarantor's organizational documents or any agreement or instrument to which Guarantor is party or by which it or its properties are bound, or (iii) result in the creation or imposition of any lien, security interest or encumbrance on any property of Guarantor, whether now owned or hereafter acquired. 2.3 It has consulted with counsel and with such other experts and advisors as it has deemed necessary in connection with the negotiation, execution and delivery of this Amendment. This Amendment shall be construed without regard to any presumption or rule requiring that it be construed against the party causing this Amendment or any part hereof to be drafted. 3. Miscellaneous. ------------- 3.1 The Guarantee shall be deemed amended by the provisions of this Amendment, as and when applicable and any conflict or inconsistency between this Amendment and the Guarantee shall be resolved in favor of this Amendment. Except as so amended, all other consistent terms and conditions of the Guarantee will remain in full force and effect, and are hereby ratified and affirmed. 3.2 Except as may be expressly provided herein, Guarantor's obligations under the Guarantee shall remain in full force and effect and shall not be waived, modified, superseded or otherwise affected by this Amendment. This Amendment is not a novation, nor is it be construed as a release, waiver, extension of forbearance or modification of any of the terms, conditions, representations, warranties, covenants, rights or remedies set forth in any of the Guarantee, except as expressly stated herein. 3.3 Guarantor will execute and deliver such further instruments and do such things as in the judgment of Lender are necessary or desirable to effect the intent of this Amendment and to secure to Lender the benefits of all rights and 2 remedies conferred upon Lender by the terms of this Amendment and any other documents executed in connection herewith. 3.4 If any provision of this Amendment is held to be unenforceable under present or future laws effective while this Amendment is in effect (all of which invalidating laws are waived to the fullest extent possible), the enforceability of the remaining provisions of this Amendment shall not be affected thereby. In lieu of each such unenforceable provision, there shall be added automatically as part of this Amendment a provision that is legal, valid and enforceable and is similar in terms to such unenforceable provisions as may be possible. 3.5 THIS AMENDMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE PERFORMED IN THE STATE OF ARIZONA. THE PROVISIONS OF THIS AMENDMENT AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES. [SIGNATURE PAGE FOLLOWS] 3 [SIGNATURE PAGE TO AMENDMENT TO GUARANTEE AND SUBORDINATION AGREEMENT] IN WITNESS WHEREOF, this instrument is executed as of the date and year first above written. LENDER: FINOVA CAPITAL CORPORATION, a Delaware corporation By:____________________________________________ Its:______________________________________ Signed in the presence of: ______________________________________ GUARANTOR: MEGO FINANCIAL CORP., a New York corporation By: s/s Jon Joseph Its: Senior Vice President Signed in the presence of: s/s Mark Prasse 4 STATE OF NEVADA ) ) ss. County of Clark ) The foregoing instrument was acknowledged before me this 24 day of MAY 2002, by s/s John Joseph as Sr. V.P. of MEGO FINANCIAL CORP., a New York corporation, on behalf of the corporation. s/s Linda DeGirolamo _________________________________ Notary Public My Commission Expires: 7/12/04 _______________________ STATE OF ARIZONA ) ) ss. County of Maricopa ) This instrument was acknowledged before me this ___ day of _______________ 2002, by ______________________, as _______________ of FINOVA CAPITAL CORPORATION, a Delaware corporation, on behalf of the corporation. _____________________________ Notary My Commission expires: 5 AMENDMENT TO GUARANTEE ---------------------- AND SUBORDINATION AGREEMENT --------------------------- This Amendment to Guarantee and Subordination Agreement (the "Amendment") is made and entered into this _____ day of May, 2002, but effective as of March 1, 2002, by and between Mego Financial Corp., a New York corporation (formerly known as Mego Corp.) ("Guarantor") and FINOVA Capital Corporation, a Delaware corporation ("Lender"), successor in interest to Greyhound Real Estate Finance Company, an Arizona corporation ("GREFCO"). RECITALS -------- I. Guarantor executed and delivered to GREFCO a Guarantee and Subordination dated March 30, 1989 (the "Guarantee") guarantying the performance of certain obligations owed by Vacation Spa Resorts, Inc., a Tennessee corporation ("VSR") ("Borrower"), to GREFCO. II. GREFCO assigned to Lender all of the rights and obligations owed by VSR to GREFCO, pursuant to a plan of liquidation between GREFCO and Lender. III. VSR merged with and into Leisure Homes Corporation, a Nevada corporation, formerly known as Preferred Equities Corporation ("Borrower") with Borrower becoming liable for all of the liabilities and obligations of VSR. VI. On even date herewith, Borrower and Lender have entered into a Tenth Amendment to Forbearance Agreement and Amendment No. 15 to Second Amended and Restated and Consolidated Loan and Security Agreement (the "Loan Amendment"). As a condition to the effectiveness of the Loan Amendment, the Lender has required the execution of this Amendment. NOW, THEREFORE, in consideration of these Recitals, the covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency is hereby acknowledged, Lender and Guarantor agree as follows: 1. Amendment. Paragraph 3.9 of the Guarantee shall be amended and restated --------- -------------- in its entirety to read as follows: 3.9 Notwithstanding any payment or performance by Guarantor pursuant to this Guarantee, Guarantor hereby waives and releases any right of reimbursement and any right to be subrogated to any rights of Lender against Borrower. Guarantor acknowledges that the foregoing waiver and release has been specifically bargained for by Lender and has been relied upon by Lender in ascribing value to this Guarantee, which reliance was a condition precedent to Lender's willingness to extend the Loan to Borrower. Guarantor expressly waives 6 any defenses to the enforcement of this Guarantee, to any rights of Lender created or granted hereby or to the recovery by Lender against Borrower, Guarantor or any other Obligor of any deficiency after judicial or nonjudicial foreclosure or sale, even though such a foreclosure or sale may impair the subrogation rights of Guarantor or otherwise prevent Guarantor from obtaining reimbursement or contribution from Borrower or any other Obligor. 2. Representations and Warranties. Guarantor represents and warrants -------------------------------- to Lender that: 2.1 This Amendment and the documents and instruments executed in connection herewith have been authorized by all necessary action and, when executed, will be the legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance their respective terms. 2.2 Guarantor's execution, delivery and performance of this Amendment does not and will not (i) violate any law, rule, regulation or court order to which Guarantor is subject; (ii) conflict with or result in a breach of Guarantor's organizational documents or any agreement or instrument to which Guarantor is party or by which it or its properties are bound, or (iii) result in the creation or imposition of any lien, security interest or encumbrance on any property of Guarantor, whether now owned or hereafter acquired. 2.3 It has consulted with counsel and with such other experts and advisors as it has deemed necessary in connection with the negotiation, execution and delivery of this Amendment. This Amendment shall be construed without regard to any presumption or rule requiring that it be construed against the party causing this Amendment or any part hereof to be drafted. 3. Miscellaneous. ------------- 3.1 The Guarantee shall be deemed amended by the provisions of this Amendment, as and when applicable and any conflict or inconsistency between this Amendment and the Guarantee shall be resolved in favor of this Amendment. Except as so amended, all other consistent terms and conditions of the Guarantee will remain in full force and effect, and are hereby ratified and affirmed. 3.2 Except as may be expressly provided herein, Guarantor's obligations under the Guarantee shall remain in full force and effect and shall not be waived, modified, superseded or otherwise affected by this Amendment. This Amendment is not a novation, nor is it be construed as a release, waiver, extension of forbearance or modification of any of the terms, conditions, representations, warranties, covenants, rights or remedies set forth in any of the Guarantee, except as expressly stated herein. 7 3.3 Guarantor will execute and deliver such further instruments and do such things as in the judgment of Lender are necessary or desirable to effect the intent of this Amendment and to secure to Lender the benefits of all rights and remedies conferred upon Lender by the terms of this Amendment and any other documents executed in connection herewith. 3.4 If any provision of this Amendment is held to be unenforceable under present or future laws effective while this Amendment is in effect (all of which invalidating laws are waived to the fullest extent possible), the enforceability of the remaining provisions of this Amendment shall not be affected thereby. In lieu of each such unenforceable provision, there shall be added automatically as part of this Amendment a provision that is legal, valid and enforceable and is similar in terms to such unenforceable provisions as may be possible. 3.5 THIS AMENDMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE PERFORMED IN THE STATE OF ARIZONA. THE PROVISIONS OF THIS AMENDMENT AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES. [SIGNATURE PAGE FOLLOWS] 8 ------ [SIGNATURE PAGE TO AMENDMENT TO GUARANTEE AND SUBORDINATION AGREEMENT] IN WITNESS WHEREOF, this instrument is executed as of the date and year first above written. LENDER: FINOVA CAPITAL CORPORATION, a Delaware corporation By:____________________________________________ Its:______________________________________ Signed in the presence of: _______________________________________________ GUARANTOR: MEGO FINANCIAL CORP., a New York corporation By:____________________________________________ Its:______________________________________ Signed in the presence of: _______________________________________________ 9 STATE OF NEVADA ) ) ss. County of Clark ) The foregoing instrument was acknowledged before me this ____ day of ____________ 2002, by ______________ as _______________ of MEGO FINANCIAL CORP., a New York corporation, on behalf of the corporation. Notary Public My Commission Expires: STATE OF ARIZONA ) ) ss. County of Maricopa ) This instrument was acknowledged before me this ___ day of _______________ 2002, by ______________________, as _______________ of FINOVA CAPITAL CORPORATION, a Delaware corporation, on behalf of the corporation. ___________________________________ Notary My Commission expires: 10 EX-10.249 6 doc5.txt EXHIBIT 10.249 TENTH AMENDMENT TO FORBEARANCE AGREEMENT AND -------------------------------------------- AMENDMENT NO. 15 TO SECOND AMENDED AND RESTATED AND CONSOLIDATED LOAN AND ------------------------------------------------------------------------- SECURITY AGREEMENT ------------------ This Tenth Amendment to Forbearance Agreement and Amendment No. 15 to Second Amended and Restated and Consolidated Loan and Security Agreement ("Amendment") --------- is made and entered into this ___ day of May, 2002, but is effective as of March 1, 2002, by and among FINOVA CAPITAL CORPORATION, a Delaware corporation ("FINOVA" or "Lender"), LEISURE HOMES CORPORATION, a Nevada corporation, ------ ------ formerly known as Preferred Equities Corporation ("Borrower") and MEGO FINANCIAL -------- CORP., a New York corporation ("Guarantor") and has reference to the following --------- facts: A. Lender and Borrower entered into a Second Amended and Restated and Consolidated Loan and Security Agreement dated as of May 15, 1997 (the "Original -------- Loan Agreement") that evidences a loan from Lender to Borrower. The Original - --------------- Loan Agreement was amended by the Hartsel Springs Side Letter dated February 18, 1998 (the "First Amendment"); by the Letter Agreement [Biloxi Property] dated ---------------- March 20, 1998 (the "Second Amendment"); by the Letter Agreement [Headquarters ---------------- Readvance] dated September 29, 1998 (the "Third Amendment"); by the Amendment --------------- No. 4 to Second Amended and Restated and Consolidated Loan and Security Agreement dated November 6, 1998 (the "Fourth Amendment"); by that certain ---------------- Forbearance Agreement and Amendment No. 5 to Second Amended and Restated and Consolidated Loan and Security Agreement dated December 23, 1998 ("Amendment --------- 5"), as the same was amended by a Letter Agreement dated February 8, 1999 (the "Release Fee Letter") (the Amendment 5 and Release Fee Letter are collectively -------------------- called the "Fifth Amendment"); by a First Amendment to Forbearance Agreement and --------------- Amendment No. 6 to Second Amended and Restated and Consolidated Loan and Security Agreement dated May 7, 1999 (the "Sixth Amendment"); by a Second --------------- Amendment to Forebearance Agreement and Amendment No. 7 to Second Amended and Restated and Consolidated Loan and Security Agreement dated August 6, 1999 (the "Seventh Amendment"); by a September 7, 1999 letter agreement regarding the ------------------ Additional Advance Note (the "Additional Advance Letter"); by a Third Amendment --- ------------------------- to Forebearance Agreement and Amendment No. 8 to Second Amended and Restated and Consolidated Loan and Security Agreement dated November 9, 1999 (the "Eighth ------ Amendment"); by a letter agreement dated December 3, 1999 between the Borrower ------ and Lender (the "Receivable Loan Lot Cap Letter"); by a Fourth Amendment to -------------------------------- Forebearance Agreement and Amendment No. 9 to Second Amended and Restated and Consolidated Loan and Security Agreement dated December 17, 1999 (the "Ninth ----- Amendment"); by a Fifth Amendment to Forebearance Agreement and Amendment No. 10 - --------- to Second Amended and Restated and Consolidated Loan and Security Agreement dated February 25, 2000 (the "Tenth Amendment"); a Sixth Amendment to ---------------- Forbearance Agreement and Amendment No. 11 to Second Amended and Restated and Consolidated Loan Agreement (the "Eleventh Amendment"); by a Seventh Amendment ------------------ to the Forbearance Agreement and Amendment No. 12 to Second Amended and Restated and Consolidated Loan and Security Agreement (the "Twelfth Amendment"); by a ----------------- Letter Agreement entitled Side Letter Re: 4310 Paradise Road dated November 6, 2000 ("Headquarters Side Letter"); by an Eighth Amendment to the Forbearance -------------------------- Agreement and Amendment No. 13 to Second Amended Restated and Consolidated Loan and Security Agreement dated December 29, 2000 (the "Thirteenth Amendment"), by -------------------- a Ninth Amendment to Forbearance Agreement and Amendment No. 14 to Second Amended and Restated Consolidated Loan and Security Agreement dated April 6, 2001 (the "Fourteenth Amendment") and by a series of letter agreements between -------------------- Borrower and Lender dated October 5, 2001, October 19, 2001, November 5, 2001, November 15, 2001, November 28, 2001, January 3, 2002 and January 23, 2002 (collectively, the "2001 Letter Agreements"). The Original Loan Agreement, ------------------------ First Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth Amendment, Sixth Amendment, Seventh Amendment, Additional Advance Letter, Eighth Amendment, the Receivable Loan Lot Cap Letter, Ninth Amendment, Tenth Amendment, Eleventh Amendment, Twelfth Amendment, Headquarters Side Letter Thirteenth Amendment, Fourteenth Amendment and the 2001 Letter Agreements are collectively called the "Loan Agreement." Capitalized terms used in this Amendment which are -------------- defined in the Loan Agreement shall have the same meaning and definition when used herein. B. Borrower has requested the Lender to make certain modifications to the Loan Agreement and the Loan, which the Lender is willing to do, upon and subject to the terms and conditions set forth in this Amendment. NOW, THEREFORE, in consideration of the foregoing and for the good and valuable consideration provided herein, Lender, Borrower and Guarantor agree as follows: 1. Definitions. Except as set forth in and or modified by this Amendment, ----------- all capitalized terms set forth herein shall have the meanings set forth therefore in the Loan Agreement. The following capitalized terms shall have the meanings set forth below, notwithstanding any contrary definitions contained in the Loan Agreement. "Fifteenth Amendment": shall collectively refer to the Tenth Amendment to Forbearance Agreement and Amendment No. 15 to Second Amended and Restated and Consolidated Loan and Security Agreement made and entered into on May ____, 2002, but effective as of March 1, 2002, among Borrower, Lender and Guarantor. "Over Advance Amount": the amount by which the aggregate outstanding principal balance of the Receivables Loan exceeds the Borrowing Base. "Receivables Borrowing Term": shall mean the period of time during which Lender is committed to make Advances of the Receivables Loan under this Agreement which commitment terminated on February 28, 2002. 2 "Receivables Maturity Date": shall mean December 31, 2002. "Winnick Building Addition Maturity Date": shall mean December 31, 2002. 2. Additional Amendments to Loan Agreement and Documents. The Loan --------------------------------------------------------- Agreement and the Documents shall be further amended as follows: 2.1 Under the Loan Agreement, the maximum Borrowing Base allocable to Eligible Receivables arising from Unsolidified Lot Sales is limited to sixty five percent (65%) of the unpaid principal balance of all Eligible Receivables arising from Unsolidified Lot Sales. Effective on April 15, 2002, through June 29, 2002, receivables arising from Unsolidified Lot Sales shall no longer constitute an eligible receivable for purposes of satisfying Borrower's replacement obligations described in paragraphs 3.4 and 7.2 of the Loan ------------------------- Agreement, unless, in addition to the satisfying all other conditions of eligibility, the Rescission Period (contained within the definition of Unsolidified Lot Sales) is no greater than six (6) months following the date of execution of the contract evidencing such Unsolidified Lot Sale. Effective June 30, 2002, and at all times thereafter, receivables arising from Unsolidified Lot Sales shall no longer constitute an eligible receivable for purposes of satisfying Borrower's replacement obligations described in paragraphs 3.4 and ------------------ 7.2of the Loan Agreement. The foregoing restriction shall not however render as ineligible any receivables arising from Unsolidified Lot Sales that are then in the Borrowing Base provided that such receivables meet all other conditions of eligibility. 2.2 Paragraph 9.1 of the Original Loan Agreement shall be amended to add the following additional Event of Default: Guarantor shall default in the performance in any of the obligations owed to Lender under any Warrant or Warrant Agreements delivered by Guarantor to Lender. 2.3 The Biloxi Note and the Documents shall be amended to provide that all amounts due and owing under the Biloxi Note shall be due and payable in full on December 31, 2002, all as more fully set forth in an Amendment No. 5 to Promissory Note [Biloxi Property] of even date with this Amendment. 3. Over Advance Amount and Forbearance. --------------------------------------- 3.1. There presently exists an Over Advance Amount and Borrower has been unable to make the required mandatory prepayment and has further been unable to pledge additional Eligible Receivables, so as to eliminate the Borrowing Base deficiency. As a result, there presently exists a right of Lender to declare an Event of Default (the foregoing right of Lender to declare 3 an Event of Default hereinafter the "LTV Default"). That certain 2001 Letter ----------- Agreement dated January 3, 2002 (the "01/03/02 Side Letter") shall govern all -------------------- matters pertaining to the LTV Default through February 28, 2002. Commencing March 1, 2002 and thereafter, the provisions of this Amendment shall prevail over the provisions of that 2001 Letter Agreement with respect to the LTV Default. 3.2 At no time shall the Over Advance Amount exceed the following amounts as of the following dates: Determination Date Maximum Over Advance Amount ------------------- ------------------------------ March 31, 2002 $2,000,000 April 30, 2002 $1,500,000 May 31, 2002 $1,000,000 June 30, 2002 $500,000 July 31, 2002 -0- 3.3 In the event the Over Advance Amount exceeds the foregoing amounts, then Borrower shall make a mandatory payment to Lender or, in lieu thereof, assign new Eligible Receivables to Lender, sufficient so that the Over Advance Amount is not in excess of the permitted amount set forth above, within thirty (30) days following the determination of the Over Advance Amount for the particular determination date. In the event Borrower fails to make such payment or assignment within the foregoing thirty (30) day period, such failure shall constitute an immediate Event of Default without the benefit of any notice or grace period. 3.4 To the extent that on April 30, 2002 or on the last day of any month thereafter through and including the end of the month immediately prior to the payment in full of the Receivables Loan, there exists an Over Advance Amount in any amount, including an Over Advance Amount that is within the limits permitted under paragraph 3.2 hereof, then within forty-five (45) days -------------- thereafter, Borrower shall pay to Lender a fee (the "Over Advance Fee") in the ---------------- amount of five percent (5%) of the Over Advance Amount unless the Over Advance Amount has been reduced to zero on or before the due date of the Over Advance Fee. The Over Advance Fee shall not accrue interest until it is due. However if the required installment of the Over Advance Fee is not paid when due, such delinquent installment shall thereafter accrue interest at the Overdue Rate (as that term is defined in the Receivables Note) until paid. 3.5 Subject to the conditions set forth in this Amendment and the termination provisions of the following paragraph, during the period from the 4 date of this Amendment to and including July 31, 2002 (the "End Date"), Lender -------- will forbear from exercising any remedies under the Documents as a result of the LTV Default, but not as a result of the occurrence of any other Event of Default or Incipient Default. 3.5.1 Lender's agreement to so forbear shall automatically terminate, without further act or instrument, upon the occurrence of any of the following events: 3.5.1.1 Borrower or Guarantor repudiates or asserts a defense to any obligation or liability under the Documents or makes or pursues a claim against Lender; 3.5.1.2 Borrower fails to timely perform any of its obligations (other than the LTV Default) set forth in the Documents (after giving effect to the then applicable provisions of this Amendment), including, without limitation, Borrower's obligations contained in this Amendment; 3.5.1.3 Borrower or Guarantor makes an assignment for the benefit of creditors, or generally admits its inability to pay its obligations as they come due or files a petition in bankruptcy or an involuntary petition in bankruptcy is filed naming Borrower or Guarantor as debtor; 3.5.1.4 Lender hereafter becomes aware of (i) any fact or circumstance that Lender believes in good faith is reasonably likely to impair Lender's security (other than those described in this paragraph 3.5.1) or (ii) any --------------- Incipient Defaults or Events of Default under the Documents after giving effect to the then applicable provisions of this Amendment and other than the LTV Default, whether now or existing or hereafter occurring, which would give rise to a right by Lender to exercise any rights or remedies under the Loan Agreement or other Documents; 3.5.1.5 Borrower or Guarantor is generally not paying its debts as they become due; or 3.5.1.6 The LTV Default is not cured in its entirety on July 31, 2002. 3.5.2 Upon termination of Lender's agreement to forbear, Lender shall have the right, in its discretion, to exercise all rights and remedies available to Lender under the Documents with respect to any then existing Events of Defaults. 3.5.3 Lender's agreement to forbear, as set forth in this Amendment, pertains only to the LTV Default that arose on August 31, 2001 and does not constitute a waiver of the obligation of the Borrower to fully comply with any payment or replacement obligations occurring by reason of any subsequently-arising Borrowing Base deficiencies. Furthermore, the making of 5 the agreements in this Amendment does not constitute a waiver of any Events of Default (including, without limitation, the LTV Default) or Incipient Defaults now in existence. 3.5.4 This Amendment is intended to be a further accommodation by Lender to Borrower and Guarantor. In consideration of all such accommodations, -------------------------------------------- and acknowledging that Lender will be specifically relying on the following - -------------------------------------------------------------------------------- agreement as a material inducement in entering into this Amendment, so that - ----------------------------------------------------------------------- Lender will not be further delayed for an additional period of time under any circumstances, effective immediately upon execution of this Amendment by Borrower and Guarantor, Borrower and Guarantor hereby agree, in addition to and without limiting any of Lender's other rights or remedies under the Documents and related documents, to the following: 3.5.4.1 In connection with a bankruptcy or other similar proceeding initiated by or against Borrower or Guarantor, (i) Lender will be entitled to immediate relief from the automatic stay and all other stays and injunctions without further notice, hearing or order of court so that Lender will be able to immediately exercise all or any of its rights and remedies (A) as provided herein, (B) in the Documents, including, but not limited to, the commencement and consummation of a foreclosure on any and all of its collateral, the appointment of a receiver, or (C) under applicable law; (ii) neither Borrower nor Guarantor will seek or support an effort by any other party to obtain an injunction, judgment or any other type of order of any court staying or delaying Lender from proceeding with any one or more of its options or remedies under the Documents; (iii) neither Borrower nor Guarantor will contest any motion, application or other pleadings filed by or on behalf of Lender in any court of competent jurisdiction seeking enforcement of the terms of this paragraph 3.5.4 --------------- or otherwise seeking enforcement of this Amendment or termination of such automatic stay or other injunction; (iv) Borrower and Guarantor will cooperate with Lender so that Lender can promptly enforce its rights as set forth in the Documents; and (v) neither Borrower nor Guarantor will request or consent to (A) the imposition of any lien superior to those of Lender in the collateral given to Lender under any of the Documents, whether pursuant to 11 U.S.C. Section 364 or otherwise, (B) a "cramdown" of the Loan pursuant to 11 U.S.C. Section 1129(b) or (C) the impairment of Lender's claims, liens, rights under the Documents or otherwise affect Lender's rights or any collateral given to Lender under any of the Documents. 3.5.4.2 Upon the occurrence of an Event of Default (after giving effect to the then applicable provisions of this Amendment). Lender shall be entitled to file a petition for the appointment of a receiver over the operations and business of the Borrower, either before or after judgment, and without regard to the solvency or insolvency, at the time of the application for such receiver, of 6 Borrower or Guarantor and without regard to the then value of the security held for Performance of the Obligations; and any such receiver shall have all power and authority necessary or incidental for the protection, possession, control, management and operation of the operation and business of the Borrower, at the expense of the Borrower. The selection of the receiver and the amount of the receiver's fee shall be determined by Lender in its discretion. The foregoing right on the part of the Lender to obtain the appointment of a receiver is in addition to and not in substitution of any similar rights granted to Lender in any of the other Documents. 3.6 Borrower and Guarantor hereby acknowledge and agree that, notwithstanding anything contained in this Amendment or the other Documents to the contrary, the terms, provisions and agreements of Borrower and Guarantor set forth in paragraph 3.5.4 shall be immediately in full force and effect upon its --------------- execution and delivery by Lender, Borrower and Guarantor and shall not be vacated, modified, released or its validity or binding nature subject to attack for any reason because of the failure of third party consents to be obtained. 4. Fees and Expenses. ------------------- 4.1 Under the provisions of paragraph 1.5 of the 01/03/02 Side Letter, ------------- Borrower agreed to pay to Lender an extension fee in the amount of Two Hundred Fifty Thousand Dollars ($250,000) in consideration for the agreements of Lender contained therein, in weekly installments of Twenty Five Thousand Dollars ($25,000) each. Under the provisions of that certain 2001 Letter Agreement dated January 23, 2002 (the "01/23/02" Side Letter"), the due date of the ----------------------- extension fee mentioned in the 01/03/02 Side Letter was extended to February 28, 2002. The extension fee described in paragraph 1.5 of the 01/03/02 Side Letter ------------- was not paid. The 01/23/02 Side Letter further provided that if the Extension Fee was not paid in its entirety when due, the entire amount of such fee accrued interest at the Overdue Rate. 4.2 In lieu of Borrower's obligation to pay an extension fee under the 01/03/02 Side Letter, and in consideration of the agreements of Lender contained in this Amendment, Borrower agrees to pay to Lender an extension fee (the "Initial Extension Fee") in the amount of Two Hundred Fifty Thousand Dollars ----------------------- ($250,000), together with the Additional Extension Fees, as hereinafter defined, payable as set forth below. The Initial Extension Fee was earned by Lender in consideration for holding itself ready, willing and able to amend the Loan Agreement and the other Documents under the terms and conditions set forth herein and shall be due and payable in full as hereinafter provided. One Hundred Thousand Dollars ($100,000) of the Initial Extension Fee shall be due and payable on May 15, 2002. The remaining balance of the Initial Extension Fee, in the amount of One Hundred Fifty Thousand Dollars ($150,000), together 7 with interest thereon (the "Stipulated Interest Amount") in the amount of Six -------------------------- Thousand Dollars ($6,000), shall be due and payable in full on June 4, 2002. In the event the remaining balance of the Initial Extension Fee, together with the Stipulated Interest Amount, is not paid in full on June 4, 2002, then (i) such failure shall constitute an immediate Event of Default, without the benefit of any notice or grace periods, (ii) the remaining balance of the Initial Extension Fee and Stipulated Interest Amount shall accrue interest at the Overdue Rate until paid and (iii) the unpaid principal balance of each and every Loan (including without limitation, the Receivables Loan and the loans evidenced by the Winnick Building Addition Note and the Biloxi Note) shall accrue interest at the Overdue Rate from that date until the Initial Extension Fee and Stipulated Interest Amount, together with additional interest on those amounts, are paid in full and all other Events of Default (other than those with respect to which Lender has agreed to forbear) have been cured in full. 4.3 In further consideration of Lender holding itself ready, willing and able to amend the Loan Agreement and the other Documents under the terms and conditions set forth herein, an additional extension fee (each such fee, an "Additional Extension Fee") in the amount of Fifty Thousand Dollars ($50,000) --------------------------- shall be deemed earned by Lender on August 1, 2002 and on the first Business Day (as hereinafter defined) of each successive calendar month thereafter (each such date, an "Additional Extension Fee Due Date") unless prior to a particular ------------------------------------- Additional Extension Fee Due Date Borrower has paid and satisfied in full all of the Obligations. Until such time as all of the Obligations have been paid and satisfied in full, an Additional Extension Fee shall be due on each Extension Fee Due Date beginning August 1, 2002. However to the extent that all of the Obligations have been paid and satisfied in full prior to a particular Additional Extension Fee Due Date, no Additional Extension Fee shall be due or payable on that Additional Extension Fee Due Date or on any subsequently arising Additional Extension Fee Due Date. To the extent that a particular Additional Extension Fee is not paid on its due date, the same shall accrue interest at the Overdue Rate until paid. Furthermore, such failure shall constitute an immediate Event of Default without the benefit of any notice or grace period. 4.4 In addition to the fees and expenses which have been paid or are payable by Borrower pursuant to other Documents, and this Amendment, Borrower also agrees to pay to Lender, on demand, all costs and expenses arising from the preparation of this Amendment, or otherwise incurred by Lender in connection with this Amendment or the Loan, including, but not limited to, recording fees, Lender's attorneys' fees and costs, inspection costs and fees, any revenue and/or documentary stamps, intangible or recording taxes, out-of-pocket travel 8 expenses incurred by Lender or its agents and employees, title and escrow fees and lien search costs. All amounts payable by Borrower hereunder or under the other Documents, including without limitation, the Initial Extension Fee, each Additional Extension Fee, the Over Advance Fee (defined in paragraph 3.4 hereof) ------------- and any accrued interest are payable by Borrower in cash. Although Lender is hereby authorized to satisfy from the proceeds of the Receivables Collateral, the foregoing amounts payable by Borrower, Lender is not required to do so, even if demanded by Borrower. However in the event, in the exercise of Lender's sole and absolute discretion, Lender satisfies such amounts from the proceeds of the Receivables Collateral, such proceeds shall be applied against such amounts rather than against principal, interest or other amounts due and owing by Borrower. 4.5 For purposes of this paragraph 4, a Business Day shall mean any day ------------ other than a Saturday, a Sunday or a national holiday in the United States of America or a day in which banks in Phoenix, Arizona or Las Vegas, Nevada are required to be closed. 5. Further Extensions. The Lender has extended the maturity date of ------------------- the various facilities constituting the Loan pursuant to the provisions of this Amendment and the previous amendments to the Loan Agreement. Furthermore, Lender has extended the Receivables Loan Borrowing Term pursuant to previous amendments to the Loan Agreement. However, Lender has no intention of further extending such maturity dates or borrowing term beyond those dates set forth in this Amendment. Lender's willingness, in the past, to extend those maturity dates and the borrowing term is not meant to imply a continued willingness on the part of Lender to further extend such maturity dates or borrowing term. 6. Conditions Subsequent. ---------------------- 6.1 The obligations of the Lender under this Amendment are conditioned upon Lender receiving the following in form and content acceptable to Lender concurrently with the execution hereof: 6.1.1 An Amendment No. 5 to Promissory Note [Biloxi Property]; 6.1.2 An amendment to the guarantee agreements delivered by Guarantor to Lender, pursuant to which Guarantor shall irrevocably waive and relinquish any right to be subrogated to any rights of Lender against Borrower, notwithstanding payment or performance by Guarantor pursuant to such guarantees; 9 6.2 The obligations of the Lender under this Amendment are conditioned upon Lender receiving the following in form and content acceptable to Lender on or before June 30, 2002: 6.2.1 Such resolutions and authorizations and such other documents as Lender may require relating to the existence and good standing of Borrower and Guarantor, and the authority of any person executing this Amendment and other documents on behalf of Borrower and Guarantor; 6.2.2 An amendment to each of the Mortgages, encumbering each of the following parcels of real property, fully signed by the Borrower and in form and content satisfactory to Lender: 6.2.2.1 Second Winnick Building Addition; 6.2.2.2 Ida Building One (Grand Flamingo Terraces IV); 6.2.2.3 Ida Building Two (Grand Flamingo Fountains - First Annexation); 6.2.2.4 Ida Building Addition (Terrace Phase IV); 6.2.2.5 Winnick Building Addition (Grand Flamingo Plaza); 6.2.2.6 Hartsel Springs Lots; 6.2.2.7 Biloxi Property; 6.2.2.8 Calvada Meadows Unit 2 RV Park; 6.2.2.9 Calvada Unit 2 Raw Land; and 6.2.2.10 the multifamily lot and four (4) commercial lots described on the attached Exhibit A. ---------- 6.3 A commitment from the issuer of Lender's title insurance policies with respect to each of the Mortgages (collectively, the "Title Policies") to -------------- issue an endorsement, in a form satisfactory to Lender, to the Title Policies, insuring that the Mortgages, as amended as contemplated above, continue to be liens upon the real property described therein, as security for the payment and performance of the Obligations, as modified hereby, subject only to those exceptions contained in such Title Policies and to such additional exceptions as Lender may specifically agree to in writing; 10 6.4 Evidence of the payment by Borrower of any costs, fees and expenses then payable in connection with this Amendment, including, without limitation, those fees, costs and expenses described in paragraph 4 hereof; ------------ 6.5 Such additional documents or instruments as required and approved by the Lender so as to fully perfect the liens and security interest of Lender granted under the Loan Agreement and this Amendment; 6.6 An opinion from counsel, satisfactory to Lender, for Borrower and Guarantor, in a form satisfactory to Lender; 6.7 Appropriate amendments to Borrower's financing statements in favor of Lender adding to the scope thereof the Colorado Water Rights not released pursuant to the Fourteenth Amendment; and 6.8 Updated UCC, tax lien, judgment and litigation searches with respect to the Borrower, Guarantor and such other Persons as Lender shall require. 7. Representations and Warranties. Borrower and Guarantor each -------------------------------- represents and warrants that: 7.1 All financial information and other documents it has provided to Lender in connection with this Amendment are true, complete and correct as of the date provided and the date hereof; 7.2 There exists no Event of Default or Incipient Default, after giving effect to the then applicable provisions of this Amendment; 7.3 After giving effect to this Amendment, there has been no material adverse change in any real property or in the business or financial condition of Borrower and Guarantor since the date of the last financial statements submitted to Lender; and 7.4 The current status of all litigation matters effect the Borrower or the Guarantor is set forth on the attached Exhibit B. ---------- 7.5 The recitals set forth above are true and correct, that all financial statements and other information delivered to Lender by or on behalf of Borrower and Guarantor in connection with this Amendment, were true and correct as of the respective dates thereof, and Borrower's and Guarantor's financial condition has not materially altered as of the date of this Amendment from that presented by the latest such financial statements and other information provided to Lender. 11 7.6 The Loan is just and owing and each advance thereof was made for the business purposes of Borrower. 7.7 The obligation of Borrower to repay the Loan, together with all interest accrued thereon, is absolute and unconditional, and there exists no right of set-off or recoupment, counterclaim or defense of any nature whatsoever to payment and performance of the Borrower's Obligations. 7.8 As of the date hereof, neither Borrower nor Guarantor is the subject of a pending bankruptcy proceeding, and Borrower and Guarantor are not aware of any threatened bankruptcy proceeding against them, nor are they presently contemplating filing such a proceeding. 7.9 There are no proceedings pending, threatened against, or affecting Borrower or Guarantor in any court, before any governmental authority, or arbitration board or tribunal which may now or in the future materially adversely affect Borrower or Guarantor, except as have previously been disclosed to Lender in writing in accordance with the Loan Agreement. 7.10 Borrower hereby ratifies and reaffirms the Notes, the Loan Agreement, and the other Documents and represents that all of the foregoing are the valid, enforceable and collectible obligations of Borrower. Guarantor hereby ratifies and reaffirms the Guarantee and represents that the same is the valid, enforceable and collectible obligation of Guarantor. 7.11 All of the representations and warranties of the Borrower and Guarantor contained in the Loan Agreement and the other Documents (as the same may have been modified or supplemented by, and giving effect to, the reports and disclosures provided to Lender by Borrower and Guarantor pursuant to the Loan Agreement), are true and correct, in all material respects, as of the date hereof and, as so modified or supplemented, are hereby reaffirmed and ratified. 7.12 This Amendment and the documents and instruments executed in connection herewith have been authorized by all necessary action and, when executed, will be the legal, valid and binding obligations of the Borrower and Guarantor, enforceable against the Borrower and Guarantor in accordance their respective terms. 7.13 Borrower's and Guarantor's execution, delivery and performance of this Amendment do not and will not (i) violate any law, rule, regulation or court order to which Borrower or Guarantor is subject; (ii) conflict with or result in a breach of Borrower's or Guarantor's organizational documents or any agreement or instrument to which Borrower or Guarantor is party or by which it or its properties are bound, or (iii) result in the creation or imposition of any lien, 12 security interest or encumbrance on any property of Borrower or Guarantor, whether now owned or hereafter acquired, other than liens in favor of Lender. 7.14 Borrower and Guarantor acknowledge that they have consulted with counsel and with such other experts and advisors as it has deemed necessary in connection with the negotiation, execution and delivery of this Amendment. This Amendment shall be construed without regard to any presumption or rule requiring that it be construed against the party causing this Amendment or any part hereof to be drafted. 8. Miscellaneous. ------------- 8.1 Guarantor acknowledges and agrees that (i) the Guarantee shall remain in full force and effect, (ii) the obligations of the Guarantor under the Guarantee are joint and several with those of each other Obligor (as that term is defined in the Guarantee), (iii) Guarantor's liability under the Guarantee shall continue undiminished by and shall include the obligations of the Borrower under this Amendment and any other documents and instruments executed by Borrower in connection with this Amendment and each of the other Documents, as amended through the date hereof and (iv) all terms, conditions and provisions set forth in this Amendment and any other documents and instruments executed by Borrower in connection with this Amendment and each of the other Documents, as amended through the date hereof, are hereby ratified, approved and confirmed. 8.2 Borrower and Guarantor hereby release, remise, acquit and forever discharge Lender and Lender's employees, agents, representatives, consultants, attorneys, fiduciaries, servants, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (all of the foregoing hereinafter called the "Released Parties"), from any and all actions and causes of action, judgments, ---------------- executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature, whether heretofore or hereafter arising, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties prior to and including the date and execution hereof, and in any way directly or indirectly arising out of or in any way connected to this Amendment, the Loan Agreement and the other Documents (all of the foregoing hereinafter called the "Released Matters"); ---------------- provided, however, that the foregoing release shall not apply to discharge ---- ------- Lender from any obligations which are expressly imposed upon Lender pursuant to the terms of this Amendment, the Loan Agreement, or any of the other Documents, as modified through the date hereof. Borrower and Guarantor acknowledge that the agreements in this paragraph are intended to be in full satisfaction of all or any alleged injuries or damages arising in connection with the Released Matters. Borrower and Guarantor represent and warrant to Lender that they have not purported to transfer, assign or otherwise convey any right, title or 13 interest of Borrower or such Guarantor in any Released Matter to any other Person and that the foregoing constitutes a full and complete release of all Released Matters. 8.3 If any incurring of debt or the payment of money or transfer of property made to Lender by or on behalf of Borrower or Guarantor should for any reason subsequently be declared to be "fraudulent" (within the meaning of any state or federal law relating to fraudulent transfers or conveyances), preferential, or otherwise voidable or recoverable, in whole or in part, for any reason (hereinafter collectively called the "Voidable Transfers") under the Bankruptcy ------------------ Code or any other federal or state law, and Lender is required to repay or restore any such Voidable Transfer, or the amount or any portion thereof, or upon advice of its counsel is advised to do so, then, as to any such Voidable Transfer or the amount repaid or restored (including all costs, expenses and attorneys' fees of Lender related thereto), the liability of Borrower and the Guarantor shall automatically be revived, reinstated and restored and shall exist as though such Voidable Transfer had never been made to Lender. 8.4 The Documents shall be deemed amended by the provisions of this Amendment, as and when applicable and any conflict or inconsistency between this Amendment and the Documents shall be resolved in favor of this Amendment. Except as so amended, all other consistent terms and conditions of the Documents will remain in full force and effect, and are hereby ratified and affirmed. 8.5 Except as may be expressly provided herein, Borrower's and Guarantor's respective obligations under the Documents shall remain in full force and effect and shall not be waived, modified, superseded or otherwise affected by this Amendment. This Amendment is not a novation, nor is it be construed as a release, waiver, extension of forbearance or modification of any of the terms, conditions, representations, warranties, covenants, rights or remedies set forth in any of the Documents, except as expressly stated herein. 8.6 Except to the extent otherwise provided herein, this Amendment in no way acts as a waiver of any default of Borrower or as a release or relinquishment of any of the liens, security interests, rights or remedies securing payment and Performance of the Borrower's Obligations or the enforcement thereof. Such liens, security interests, rights and remedies are hereby ratified, confirmed, preserved, renewed and extended by Borrower in all respects. Further, Lender's execution of this Amendment shall not constitute a waiver (either express or implied) of the requirement that any further forbearance under or modification of the Loan Agreement or any other Document shall require the express written approval of Lender. No such approval (either express or implied) has been given as of the date hereof. 14 8.7 Borrower and Guarantor acknowledge that Lender has performed, and is not in default of, its obligations under the Documents; that there are no offsets, defenses or counterclaims in tort, contract or otherwise, with respect to any of Borrower's or Guarantor's or other party's obligations under the Documents; and that Lender has not directed Borrower to pay or not pay any of Borrower's payables. 8.8 Borrower and Guarantor will execute and deliver such further instruments and do such things as in the judgment of Lender are necessary or desirable to effect the intent of this Amendment and to secure to Lender the benefits of all rights and remedies conferred upon Lender by the terms of this Amendment and any other documents executed in connection herewith. 8.9 If any provision of this Amendment is held to be unenforceable under present or future laws effective while this Amendment is in effect (all of which invalidating laws are waived to the fullest extent possible), the enforceability of the remaining provisions of this Amendment shall not be affected thereby. In lieu of each such unenforceable provision, there shall be added automatically as part of this Amendment a provision that is legal, valid and enforceable and is similar in terms to such unenforceable provisions as may be possible. 8.10 Any further discussions by and among Borrower, Guarantor and Lender, if any, and all such discussions in the past, together with any other actions or inactions taken by and among Borrower, Guarantor and Lender, shall not cause a modification of the Documents, establish a custom or waive (unless Lender made such express waiver in writing), limit or condition the rights and remedies of Lender under the Documents, all of which rights and remedies are expressly reserved. All of the provisions of the Documents, including, without limitation, the time of the essence provision, are hereby reiterated and if ever waived are hereby reinstated (unless Lender made such express waiver in writing), except as expressly provided herein. Notwithstanding anything to the contrary contained herein or in any other instrument executed by the parties and notwithstanding any other action or conduct undertaken by the parties on or before the date hereof, the agreements, covenants and provisions contained herein and the Loan Agreement shall constitute the only evidence of Lender's agreement to forbear or to modify the Loan Agreement. Accordingly, no express or implied consent to any further forbearances or modifications shall be inferred or implied by Lender's execution of this Amendment. The Loan Agreement and this Amendment, together with the other Documents, constitute the entire agreement and understanding among the parties relating to the subject matter hereof, and supersedes all prior proposals, negotiations, agreements and understandings relating to such subject matter. In entering into this Amendment, Borrower acknowledges that it is relying on no statement, representation, warranty, covenant or agreement of any kind made by the Lender or any employee or agent of the Lender, except for the agreements of Lender set forth herein. 15 8.11 This Amendment shall not be binding upon Lender until accepted by Borrower and Guarantor as provided for below. This Amendment may be executed in counterpart, and any number of which have been executed by all parties shall be deemed to constitute one original. Lender, its attorneys and agents may also integrate into a single Amendment signature pages from separate counterpart Amendments. The telecopied signature of a person shall be deemed an original signature, may be relied upon by others and shall be binding upon the signer for all purposes provided however that Borrower, Guarantor or any person otherwise consenting hereto by telecopied signature shall confirm its telecopied signature by signing and returning to Lender a copy of this Amendment with an original signature. 8.12 Borrower's and Guarantor's representatives are experienced and knowledgeable business people and have been represented by independent legal counsel who are experienced in all matters relevant to this Amendment, including, but not limited to, bankruptcy and insolvency law. The parties hereto have accepted and agreed to this Amendment after being fully aware and advised of the effect and significance of all of its terms, conditions, and provisions. 8.13 Unless otherwise specifically stipulated elsewhere in the Documents, if a matter is left in the Documents or this Amendment to the decision, right, requirement, request, determination, judgment, opinion, approval, consent, waiver, satisfaction, acceptance, agreement, option or discretion of Lender, its employees, Lender's counsel or any agent for or contractor of Lender, such action shall be deemed to be exercisable by Lender or such other person in its sole and absolute discretion and according to standards established in its sole and absolute discretion. Without limiting the generality of the foregoing, "option" and "discretion" shall be implied by use of the words "if" or "may." 8.14 The Recitals in this Amendment are incorporated into the body hereof as fully set forth herein. 8.15 THIS AMENDMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE PERFORMED IN THE STATE OF ARIZONA. THE PROVISIONS OF THIS AMENDMENT AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT SUCH LAWS, THE LAWS OF THE UNITED STATES. EACH OF BORROWER, GUARANTOR AND LENDER: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO ANY DOCUMENT OR THE SUBJECT MATTER THEREOF, OR, IF LENDER SHALL INITIATE SUCH ACTION, IN THE COURT IN WHICH SUCH ACTION IS INITIATED PROVIDED THAT SUCH COURT HAS JURISDICTION, AND THE CHOICE OF SUCH 16 VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN ANY INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF BORROWER, GUARANTOR AND LENDER HEREBY WAIVE THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM. [SIGNATURE PAGE FOLLOWS] ------------------------ 17 ------ [SIGNATURE PAGE TO TENTH AMENDMENT TO FORBEARANCE AGREEMENT AND AMENDMENT NO. 15 TO SECOND AMENDED AND RESTATED AND CONSOLIDATED LOAN AND SECURITY AGREEMENT] IN WITNESS WHEREOF, this instrument is executed as of the date and year first above written. LENDER: FINOVA CAPITAL CORPORATION, a Delaware corporation By:________________________________________ Its:_____________________________________ Signed in the presence of: ____________________________________________ BORROWER: LEISURE HOMES CORPORATION, a Nevada corporation, formerly know as Preferred Equities Corporation By:________________________________________ Its:_____________________________________ Signed in the presence of: ____________________________________________ 18 GUARANTOR: MEGO FINANCIAL CORP., a New York corporation By:________________________________________ Its:_____________________________________ Signed in the presence of: ____________________________________________ 19 STATE OF NEVADA ) ) ss. County of Clark ) The foregoing instrument was acknowledged before me this ____ day of _________________ 2002 by ______________ as _______________ of LEISURE HOMES CORPORATION, a Nevada corporation, on behalf of the corporation. ____________________________________________ Notary Public My Commission Expires: _________________________ STATE OF NEVADA ) ) ss. County of Clark ) The foregoing instrument was acknowledged before me this ____ day of ____________ 2002, by ______________ as _______________ of MEGO FINANCIAL CORP., a New York corporation, on behalf of the corporation. ____________________________________________ Notary Public My Commission Expires: _________________________ STATE OF ARIZONA ) ) ss. County of Maricopa ) This instrument was acknowledged before me this ___ day of _______________ 2002, by ______________________, as _______________ of FINOVA CAPITAL CORPORATION, a Delaware corporation, on behalf of the corporation. ____________________________________________ Notary Public My Commission Expires: _________________________ 20 EXHIBIT A --------- Legal Description of -------------------- Multifamily Lot and Four (4) Commercial Lots -------------------------------------------- Lot 46, Block 29 of Calvada Valley Unit Number 2, recorded October 5, 1970 as document number 20291 in the Office of the County Recorder of Nye County, Nevada. Lots 8, 10 14 and 16, Block 12 of Calvada Valley Unit Number 9-A, recorded June 5, 1973 as document number 36870 in the Office of the County Recorder of Nye County, Nevada. 21 EXHIBIT B --------- Litigation Schedule ------------------- EX-10.250 7 doc6.txt EXHIBIT 10.250 AMENDMENT NO. 5 TO PROMISSORY NOTE [BILOXI PROPERTY] THIS AMENDMENT NO. 5 TO PROMISSORY NOTE [BILOXI PROPERTY] (this "Amendment") entered into as of this ____ day of ______________, 2002, but is effective as of March 1, 2002, between LEISURE HOMES CORPORATION, a Nevada corporation, formerly known as Preferred Equities Corporation ("Maker"), and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender"), is made with reference to the following: R E C I T A L S Maker previously executed and delivered to Lender a Promissory Note [Biloxi Property], dated March 20, 1998, in the original principal amount of $1,173,750.00, as amended by that certain Amendment No. 1 to Promissory Note [Biloxi Property] dated March 31, 2000, as further amended by that certain Amendment No. 2 to Promissory Note [Biloxi Property] dated December 29, 2000, as further amended by that certain Amendment No. 3 to Promissory Note [Biloxi Property] dated April 6, 2001 and as further amended by that certain Amendment No. 4 to Promissory Note [Biloxi Property] dated January 3, 2002 (collectively the "Note") to evidence the Biloxi Advance (as defined in the Loan Agreement [hereinafter defined] made pursuant to the terms of that certain Second Amended and Restated Loan and Security Agreement dated May 15,1997, between Maker and Lender (the "Original Loan Agreement"). On even date herewith, the Maker and Lender have entered into a Tenth Amendment to Forbearance Agreement and Amendment No. 15 to Second Amended and Restated and Consolidated Loan and Security Agreement (the "Loan Amendment"). The Loan Amendment provides, among other things, for an amendment to the maturity date of the Note. The Original Loan Agreement, as amended by the Loan Amendment and all other amendments executed prior to the date hereof, and as the same may, in the future, be amended and restated, is called the "Loan Agreement". All capitalized terms used in this Amendment, which are defined in the Loan Agreement, shall have the same meaning and definition when used herein. The Maker and Lender desire to amend the Note. NOW, THEREFORE, in consideration of these Recitals, the covenants contained in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which consideration are hereby acknowledged, Lender and Maker agree as follows: 1. All references in the Note to the term "Maturity Date" shall now mean and refer to December 31, 2002. Maker shall have no right to further extend the Maturity Date. 2. Maker hereby ratifies and confirms the Note, as amended hereby, in all respects; and, as amended hereby, the terms thereof shall remain in full force and effect. This Amendment may be attached to and shall form a part of the Note for all purposes. [SIGNATURE PAGE FOLLOWS] 2 IN WITNESS WHEREOF, this instrument is executed as of the date and year first above written. LEISURE HOMES CORPORATION, a Nevada corporation By:________________________________________ Name:_________________________________ Title:_________________________________ "MAKER" FINOVA CAPITAL CORPORATION, a Delaware corporation By:________________________________________ Name:_________________________________ Title:_________________________________ "LENDER" 3 State of Nevada ) ) County of Clark ) This instrument was acknowledged before me on ______________ ___, 2002, by _______________________________, as ______________________, of LEISURE HOMES CORPORATION, a Nevada corporation, on behalf of the corporation. ___________________________________ Notary (My commission expires: ________________) State of Arizona ) ) County of Maricopa ) This instrument was acknowledged before me on __________________ ___, 2002, by ____________________________________, as ______________________ of FINOVA CAPITAL CORPORATION, a Delaware corporation, on behalf of the corporation. ___________________________________ Notary (My commission expires: ________________) 4 EX-10.251 8 doc7.txt EXHIBIT 10.251 EX-10.252 9 doc8.txt EXHIBIT 10.252 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 IN CONNECTION WITH THE QUARTERLY REPORT OF MEGO FINANCIAL CORP., (THE "COMPANY") ON FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 2002 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON THE DATE HEREOF (THE "REPORT"), I, FLOYD W. KEPHART, CHIEF EXECUTIVE OFFICER OF THE COMPANY, CERTIFY, PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO 906 OF THE SARBANES-OXLEY ACT OF 2002, THAT: (1) THE REPORT FULLY COMPLIES WITH THE REQUIREMENTS OF SECTION 13 (A) OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934; AND (2) THE INFORMATION CONTAINED IN THE REPORT FAIRLY PRESENTS, IN ALL MATERIAL RESPECTS, THE FINANCIAL CONDITION AND RESULT OF OPERATIONS OF THE COMPANY. /S/ FLOYD W. KEPHART FLOYD W. KEPHART CHIEF EXECUTIVE OFFICER AUGUST 12, 2002 EX-10.253 10 doc9.txt EXHIBIT 10.253 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 IN CONNECTION WITH THE QUARTERLY REPORT OF MEGO FINANCIAL CORP., (THE "COMPANY") ON FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 2002 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON THE DATE HEREOF (THE "REPORT"), I, ROBERT S. UNDERSTEIN, CHIEF FINANCIAL OFFICER OF THE COMPANY, CERTIFY, PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO 906 OF THE SARBANES-OXLEY ACT OF 2002, THAT: (1) THE REPORT FULLY COMPLIES WITH THE REQUIREMENTS OF SECTION 13 (A) OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934; AND (2) THE INFORMATION CONTAINED IN THE REPORT FAIRLY PRESENTS, IN ALL MATERIAL RESPECTS, THE FINANCIAL CONDITION AND RESULT OF OPERATIONS OF THE COMPANY. /S/ ROBERT S. UNDERSTEIN ROBERT S. UNDERSTEIN CHIEF FINANCIAL OFFICER AUGUST 12, 2002 EX-10.254 11 doc10.txt EXHIBIT 10.254 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 IN CONNECTION WITH THE QUARTERLY REPORT OF MEGO FINANCIAL CORP., (THE "COMPANY") ON FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 2002 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON THE DATE HEREOF (THE "REPORT"), I, CHRIS D. WHETMAN, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER OF THE COMPANY, CERTIFY, PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO 906 OF THE SARBANES-OXLEY ACT OF 2002, THAT: (1) THE REPORT FULLY COMPLIES WITH THE REQUIREMENTS OF SECTION 13 (A) OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934; AND (2) THE INFORMATION CONTAINED IN THE REPORT FAIRLY PRESENTS, IN ALL MATERIAL RESPECTS, THE FINANCIAL CONDITION AND RESULT OF OPERATIONS OF THE COMPANY. /S/ CHRIS D. WHETMAN CHRIS D. WHETMAN VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER AUGUST 12, 2002 -----END PRIVACY-ENHANCED MESSAGE-----