-----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, FdoGUcyqm2mc1rUv8Idw5emrBlGLoiVFArJanKrpKbgCDYJiTW8A9UtPe9f7vUoO nInujQh2EMk9CJsunXjrHQ== 0000950115-96-000128.txt : 19960216 0000950115-96-000128.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950115-96-000128 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAYERS INTERNATIONAL INC /NV/ CENTRAL INDEX KEY: 0000796912 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEMBERSHIP SPORTS & RECREATION CLUBS [7997] IRS NUMBER: 954175832 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14897 FILM NUMBER: 96517907 BUSINESS ADDRESS: STREET 1: 800 BILBO ST CITY: LAKE CHARLES STATE: LA ZIP: 70601 BUSINESS PHONE: 3184371560 MAIL ADDRESS: STREET 1: 800 BILBO ST CITY: LAKE CHARLES STATE: LA ZIP: 70601 FORMER COMPANY: FORMER CONFORMED NAME: PLAYERS CLUB INTERNATIONAL INC DATE OF NAME CHANGE: 19861020 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------- FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 ------------------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES EXCHANGE ACT OF 1943 For the transition period from _______________________ to ____________________ Commission file number 0-14897 Players International, Inc. Nevada 95-4175832 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1300 Atlantic Ave., Suite 800 Atlantic City, NJ 08401 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (609) 340-8004 -------------------------- 3900 Paradise Road, #135 Las Vegas, NV 89109 - ----------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check 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: The number of shares outstanding of each of the registrant's classes of common stock was 29,142,480 shares at February 12, 1996. PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES INDEX
PART I - FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Balance Sheets at December 31, 1995 and March 31, 1995 1 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 1995 and December 31, 1994 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit Index 15
PART I - FINANCIAL INFORMATION Item 1. Financial Statements PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) ASSETS
December 31, 1995 March 31, 1995 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 18,881 $ 23,886 Marketable securities, net 49,170 26,446 Accounts receivable, net of allowance for doubtful accounts of $155 at December 31, 1995 and $130 at March 31, 1995 2,547 1,351 Notes receivable 3,089 1,279 Inventories 2,212 863 Deferred income tax 2,140 2,345 Prepaid expenses and other current assets 9,097 5,452 ------ ------ Total current assets 87,136 61,622 ------ ------ PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $15,739 at December 31, 1995 and $10,248 at March 31, 1995 249,920 118,105 ------ ------ DEFERRED INCOME TAX - long-term 1,943 1,943 ------ ------ INTANGIBLES, net 37,121 39,130 ------ ------ INVESTMENT - joint venture 24,474 -- ------ ------ OTHER ASSETS 11,316 2,990 ------ ------ TOTAL ASSETS $ 411,910 $ 223,790 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except par value) LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 1995 March 31, 1995 (Unaudited) CURRENT LIABILITIES: Current portion of long-term debt $ 289 $ 3,375 Accounts payable 13,076 8,233 Accrued liabilities 23,286 27,030 Other liabilities 6,984 669 ------- ------ Total current liabilities 43,635 39,307 ------- ------ OTHER LONG-TERM LIABILITIES 27,805 2,808 ------- ------ LONG-TERM DEBT, net of current portion 150,000 5,532 ------- ------ STOCKHOLDERS' EQUITY: Preferred stock, no par value, Authorized--10,000,000 shares Issued and outstanding--none Common stock, $.005 par value, Authorized--90,000,000 shares Issued -- 29,814,100 at December 31, 1995 and 29,672,400 at March 31, 1995 149 148 Additional paid-in capital 122,970 121,712 Unrealized loss on marketable securities, net of tax (108) (451) Treasury stock, at cost; 510,000 shares at December 31, 1995 (5,834) -- Retained earnings 73,293 54,734 ------- ------ Total Stockholders' Equity 190,470 176,143 ------- ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 411,910 $ 223,790 ========= =========
The accompanying notes are an integral part of these condensed consolidated statements. PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data) (Unaudited)
For the Three Months For the Nine Months Ended December 31, Ended December 31, -------------------- -------------------- 1995 1994 1995 1994 ---- ---- ---- ---- REVENUES: Casino $ 66,394 $ 55,446 $ 203,247 $155,418 Food and beverage 3,246 1,824 8,416 5,848 Hotel 1,673 -- 3,273 -- Other 1,413 1,395 3,698 4,583 -------- -------- --------- -------- 72,726 58,665 218,634 165,849 -------- -------- --------- -------- COSTS AND EXPENSES: Casino 27,937 19,794 82,178 54,199 Food and beverage 3,464 1,674 9,204 5,570 Hotel 940 -- 1,858 -- Other gaming related expenses 21,448 13,945 57,093 36,149 Corporate administrative expenses 2,701 2,081 7,025 5,416 Pre-opening and gaming development costs 3,179 2,159 11,174 5,463 Depreciation and amortization 4,905 1,822 14,163 5,209 -------- -------- --------- -------- 64,574 41,475 182,695 112,006 -------- -------- --------- -------- Income before other income (expense) and provision for income taxes 8,152 17,190 35,939 53,843 -------- -------- --------- -------- OTHER INCOME (EXPENSE): Interest income 1,187 960 5,370 2,333 Other income (expense), net 315 -- 692 301 Interest expense (4,224) (188) (11,576) (506) -------- -------- --------- -------- (2,722) 772 (5,514) 2,128 -------- -------- --------- -------- Income before provision for income taxes 5,430 17,962 30,425 55,971 PROVISION FOR INCOME TAXES 2,118 6,387 11,866 20,645 -------- -------- --------- -------- NET INCOME $ 3,312 $ 11,575 $ 18,559 $ 35,326 ======== ======== ======== ======== EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT: Primary $ 0.10 $ 0.37 $ 0.57 $ 1.14 Fully diluted $ 0.10 $ 0.37 $ 0.57 $ 1.13 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES: Primary 31,743,708 31,323,600 32,282,100 30,992,100 Fully diluted 31,743,708 31,404,900 32,283,354 31,209,300
The accompanying notes are an integral part of these condensed consolidated statements. PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (Unaudited)
For the Nine Months Ended December 31, --------------------- 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 18,559 $ 35,326 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,163 5,209 Other (1,773) 246 Changes in assets and liabilities: Accounts and notes receivable (3,004) (733) Inventories, prepaid expenses and other current assets (4,995) (557) Other assets (10,670) (334) Accounts payable and accrued liabilities 556 4,101 Other liabilities (310) (275) Income tax payable -- (2,357) --------- --------- Net cash provided by operating activities 12,526 40,626 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net purchases of property and equipment (114,083) (23,477) Purchase of marketable securities, net (20,376) (10,790) Investment in joint venture (19,015) -- Investment in subsidiaries (350) -- --------- --------- Net cash used in investing activities (153,824) (34,267) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 150,000 -- Payments of long-term debt (9,132) (123) Proceeds from exercise of stock options 1,260 1,284 Purchase of treasury stock (5,834) -- Other (1) (256) --------- --------- Net cash provided by financing activities 136,293 905 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,005) 7,264 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,886 13,957 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,881 $ 21,221 ========= ========= SUPPLEMENTAL CASH FLOW DISCLOSURE: Interest paid $ 9,209 $ 506 Income taxes paid 12,805 22,399 Debt incurred to purchase land and equipment 667 3,211 Stock issued to purchase land -- 4,238 Unrealized gain (loss) on marketable securities, net of tax 342 (654) Accrued liabilities incurred to purchase property and equipment 31,743 -- Liabilities relating to costs in excess of fair value of tangible assets acquired 494 -- Land, property and equipment contributed to joint venture 5,459 --
The accompanying notes are an integral part of these condensed consolidated statements. PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K for the year ended March 31, 1995. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows of all periods presented have been made. On April 26, 1995, the Board of Directors declared a 3-for-2 stock split for stockholders of record at the close of business on May 8, 1995. All references to share data have been retroactively restated to reflect this split. The results of operations for the nine month period ended December 31, 1995, are not necessarily indicative of the operating results for the full year. Certain reclassifications have been made to the financial statements as previously presented to conform to current classifications. Note 2 - Casino Revenues and Promotional Allowances Casino revenues are the net of gaming wins less losses. Revenues exclude the retail value of complimentary admissions, food and beverage and other items furnished to customers, which totaled approximately $5,718,000 and $2,567,000, and $15,423,000 and $6,380,000 for the three and nine months ended December 31, 1995 and 1994, respectively. The estimated cost of providing such complimentary services are included in casino costs and expenses through inter-department allocations from the department granting the services as follows (dollars in thousands):
For the Three Months For the Nine Months Ended December 31, Ended December 31, 1995 1994 1995 1994 -------------- ------------ ------------ -------- Food and beverage $ 4,086 $ 1,311 $ 10,872 $ 3,545 Admissions and other 948 1,120 2,844 2,489 --------- ------- -------- -------- $ 5,034 $ 2,431 $13,716 $ 6,034 ======= ======= ======= =======
Note 3 - Pre-opening and Gaming Development Costs All costs in connection with the identification and development of new gaming jurisdictions and sites are being expensed, except for the cost of property and equipment which is capitalized. Note 4 - Primary and Fully Diluted Shares Per share amounts have been computed based on the weighted average number of outstanding shares and common stock equivalents, if dilutive, during each period. A summary of the number of shares used in computing primary earnings per share follows:
For the Three Months For the Nine Months Ended December 31, Ended December 31, 1995 1994 1995 1994 ----------- ---------- ---------- --------- Weighted average number of shares outstanding 29,856,733 27,268,800 29,845,154 26,888,700 Dilutive effect of options and warrants 1,886,975 4,054,800 2,436,946 4,103,400 ---------- ---------- ---------- ---------- Shares used in computing primary earnings per share 31,743,708 31,323,600 32,282,100 30,992,100 =========== =========== =========== ===========
The number of shares used in computing fully diluted earnings per share is as follows:
For the Three Months For the Nine Months Ended December 31, Ended December 31, 1995 1994 1995 1994 ---------- ---------- ---------- --------- Weighted average number of shares outstanding 29,856,733 27,268,800 29,845,154 26,888,700 Dilutive effect of options and warrants 1,886,975 4,136,100 2,438,200 4,320,600 ---------- ---------- ---------- ---------- Shares used in computing fully diluted earnings per share 31,743,708 31,404,900 32,283,354 31,209,300 ========== ========== ========== ==========
Note 5 - Long-Term Debt On April 17, 1995, the Company issued $150,000,000 aggregate principal amount of 10-7/8% Senior Notes maturing on April 15, 2005. Interest is payable in cash semi-annually on April 15 and October 15 commencing October 15, 1995. On June 30, 1995, the Company paid off an aggregate of $8,876,000 of existing debt. On August 31, 1995, the Company closed on a $120,000,000 line of credit. As of December 31, 1995, no draws had been made under the line of credit. Note 6 - Change in Accounting Estimate Effective October 1, 1995, the Company revised its estimate of depreciable useful lives as follows: Old Life New Life Riverboats, barges and improvements 10 years 30 years Buildings (new) 20 years 40 years Intangibles (goodwill) 15 years 40 years These changes were made to better reflect the estimated periods during which such assets will remain in service and be recoverable. The result of this change had the effect of reducing depreciation and amortization expense and increasing net income by approximately $1.7 million for the three and nine months ended December 31, 1995. Note 7 - Subsequent Events Subsequent to December 31, 1995, the Company repurchased 162,100 shares of its Common Stock for a total cost of $1.5 million. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition General The Company is currently a developer and operator of gaming and entertainment facilities. The Company owns and operates one riverboat casino in Metropolis, Illinois, which commenced operations on February 23, 1993, two riverboat casinos in Lake Charles, Louisiana, the Players Riverboat Casino, which commenced operations on December 8, 1993, and the Lake Charles Star Riverboat Casino, which commenced operations on April 27, 1995, and Players Island Resort, a land based casino complex which opened on June 29, 1995 in Mesquite, Nevada. The Company also operates a horse racetrack in Paducah, Kentucky. The Company is presently engaged in the application and/or development process for a number of potential gaming and entertainment facilities in jurisdictions where gaming has been legalized or may soon be legalized. Liquidity and Capital Resources As of December 31, 1995, cash and cash equivalents and marketable investment grade debt securities totaled $68.1 million as compared to $50.3 million at March 31, 1995. Cash provided by operating activities for the nine months ended December 31, 1995 was $12.5 million as compared to $40.6 million for the comparable period of the prior year. The decrease is attributable primarily to a decline in net income, an increase in other assets (due to the costs associated with issuance of $150 million of 10-7/8% Senior Notes and arranging the $120 million bank credit facility) and the payoff of accrued liabilities related to the purchase of the Showboat Star Partnership. During the nine months ended December 31, 1995, the Company used $153.8 million in investing activities as compared to $34.3 million for the comparable period of the prior year. The use of cash is related to the net investment by the Company of $114.1 million in property and equipment, primarily for its operations in Mesquite, Nevada, and Lake Charles, Louisiana. The Company also recorded net purchases of marketable securities during the current nine month period of $20.4 million and made a cash investment in its Maryland Heights, Missouri joint venture of $19 million. Cash provided by financing activities of $136.3 million for the nine months ended December 31, 1995, reflects $150 million in proceeds from the issuance of Senior Notes offset by the repayment of $9.1 million in long term debt and the repurchase of 510,000 shares of the Company's common stock in the open market for $5.8 million. The Company is pursuing the development or acquisition of additional gaming and entertainment facilities which will require extensive amounts of capital. Based on projects currently under development, the Company estimates that expenditures for completion of additional facilities could total up to $135 million over the next twelve months. The Company expects to fund these expenditures with (i) cash and marketable securities on hand, (ii) cash flow from operations, and if needed, (iii) drawings available under its $120 million bank credit agreement. On November 2, 1995, the Company finalized its agreement with Harrah's Entertainment, Inc. to form a joint venture and co-develop a $270 million riverboat casino complex in Maryland Heights, Missouri. The Company's portion of the project budget is expected to be $135 million, of which $24.5 million has been invested through December 31, 1995. The project is targeted to open in early 1997, subject to the receipt of all necessary gaming approvals. Through December 31, 1995, the Company repurchased a total of 510,000 shares of its common stock in the open market for a total cost of $5.8 million. Subsequent to December 31, 1995, the Company purchased an additional 162,100 shares for a total cost of $1.5 million. Results of Operations Total revenues for the three and nine months ended December 31, 1995 increased to $72.7 million and $218.6 million, or by 24% and 31.8%, respectively, when compared to total revenues of $58.7 million and $165.8 million for the comparable periods of the prior year. This increase is primarily attributable to the opening of two new casinos, the Lake Charles Star Riverboat which opened on April 27, 1995 and Players Island Resort in Mesquite, Nevada which opened on June 29, 1995. Combined casino revenues totaled $66.4 million and $203.2 million for the three and nine months ended December 31, 1995 as compared to $55.4 million and $155.4 million for the prior year periods. The period over period increases in casino revenues can be attributed to the opening of the aforementioned new facilities, the October 1995 replacement of the Players II Riverboat in Lake Charles with the larger Players III Riverboat and the November 1995 replacement of the smaller Players I Riverboat in Metropolis with the Players II Riverboat, and the success of the marketing programs in Metropolis. Gaming revenues in Metropolis were $21.1 million and $64.0 million for the three and nine months ended December 31, 1995 as compared to $18.2 million and $55.3 million for the comparable periods of the prior year. The period over period increase was primarily attributable to the continued success of the Metropolis facility's marketing programs and the opening of the larger Players II riverboat in November 1995. The increase was partially offset by the opening of a competing riverboat casino in Evansville, Indiana in December 1995. Lake Charles gaming revenues were $39.9 million and $128.3 million for the three and nine months ended December 31, 1995 as compared to $37.3 million and $100.1 million for the comparable periods of the prior year. The year over year increase was primarily due to the operation of two riverboats in the current period instead of one in the previous year. Gaming revenues for the December 1995 quarter declined from $44.9 million reported for the September 1995 quarter due to the impact of two competitive openings in the Lake Charles market in August 1995 and the disruption caused by the construction of a new parking garage as well as the normal seasonal decline in revenues. Gaming revenues in Mesquite were $5.4 million for the December 1995 quarter as compared to $5.5 million for the September 1995 quarter reflecting a lack of sufficient growth in gaming revenues to offset the absence of the revenues generated by the property's grand opening activities in the September 1995 quarter. Total operating costs, exclusive of corporate administrative expense, pre-opening and gaming development costs and depreciation and amortization, increased 52% to $53.8 million and 56.7% to $150.3 million for the three and nine months ended December 31, 1995 as compared to $35.4 million and $95.9 million for the comparable periods of the prior year. The increase in operating expenses is, again, primarily attributable to the opening of the Lake Charles Star Riverboat in April 1995 and Players Island Resort in June 1995. In addition, the Lake Charles and Metropolis operations have increased their spending on complimentaries, advertising and marketing as a result of increased competition. Beginning in August 1995, the Lake Charles facility was also subject to a $.50 per passenger increase in the tax it pays to the local governments for each passenger on the boats. Corporate administrative costs were $2.7 million and $7.0 million for the current year periods as compared to $2.1 million and $5.4 million for the three and nine months ended December 31, 1994. The increases primarily reflect staff expansion, additional administrative activities and travel associated with the operation of three facilities as compared to two facilities for the prior year periods and the move of the corporate offices to Atlantic City, New Jersey. Pre-opening and gaming development costs were $3.2 million and $11.2 million for the three and nine months ended December 31, 1995 as compared to $2.2 million and $5.5 million for the comparable periods of the prior year primarily due to the Company's Mesquite, Nevada and Maryland Heights, Missouri projects. Pre-opening expenses for the three and nine months ended December 31, 1995 were $1.4 million and $7.5 million. In comparison, the Company recorded pre-opening costs of $701,000 and $999,000 for the three and nine months ended December 31, 1994. Development costs for the three and nine months ended December 31, 1995 amount to $1.8 million and $3.7 million, respectively, and include the write-off of $831,000 in expenses associated with the pursuit of two New Orleans riverboat projects, as compared to $1.4 million and $4.5 million for the three and nine months ended December 31, 1994. Depreciation and amortization for the three and nine months ended December 31, 1995 increased to $4.9 million and $14.2 million, respectively, as compared to $1.8 million and $5.2 million for the comparable periods of the prior year. The increase in depreciation and amortization expense is directly related to (i) the addition of the Lake Charles Star Riverboat and related assets in April 1995 and the amortization of goodwill associated with the purchase, (ii) the completion of Players Island Resort in Mesquite, Nevada, in June 1995 and (iii) the purchase of the Players III Riverboat in October, 1995. In addition, the Company completed a study of the estimated useful lives of certain depreciable assets and intangibles which resulted in the adoption of revised estimated useful lives. These changes were made to better reflect the estimated periods during which such assets will remain in service and be recoverable. The result of the change, which was adopted on October 1, 1995, was a reduction in depreciation and amortization expense of $1.7 million for the three months ended December 31, 1995. During the quarter, the Company recorded a write-off of goodwill associated with the Players Bluegrass Downs racetrack in Paducah, Kentucky of $1.5 million. Interest income for the three and nine months ended December 31, 1995 increased to $1.2 million and $5.4 million, respectively, as compared to $960,000 and $2.3 million for the previous year periods. The increase resulted from the investment of $150 million in proceeds from the 10-7/8% Senior Notes issued in April 1995 in investment grade debt securities. The increase in interest expense to $4.2 million and $11.6 million for the three and nine months ended December 31, 1995 as compared to $188,000 and $506,000 for the same periods of the prior year reflects (i) interest expense of $3.1 million and $10.1 million for the three and nine months ended December 31, 1995 related to the April 1995 issuance of $150 million, 10-7/8% Senior Notes and (ii) imputed interest of $1.0 million for the three and nine months ended December 31, 1995 associated with the acquisition of the Downtowner Hotel in Lake Charles, Louisiana. The Company's effective net tax rate covering both state and Federal taxes was 39% for the three and nine months ended December 31, 1995 as compared to 36% and 37% for the comparable periods of the prior year. The increase reflects a decline in tax exempt income from investments during the current year periods as compared to the three and nine months ended December 31, 1994. Consolidated net income for the three and nine months ended December 31, 1995 was $3.3 million, or $.10 per share, and $18.6 million, or $.57 per share, respectively, as compared to $11.6 million, or $.37 per share, and $35.3 million, or $1.13 per share, for the comparable periods of the prior year. The period over period decreases in net income are primarily attributable to increased operating costs, higher depreciation and amortization expense associated with the Company's new operations, insufficient growth in gaming revenue at Players Island Resort in Mesquite, Nevada which resulted in an adjusted EBITDA loss in Mesquite of $1.7 million and $3.7 million for the three and nine months ended December 31, 1995, and increased interest expense related to the issuance of $150 million in Senior Notes in April 1995. `Adjusted EBITDA' is defined as income before interest income and expense, provision for income taxes, pre-opening expenses, depreciation and amortization and other income and expense. Adjusted EBITDA is not intended to represent cashflows for the period and is presently solely as supplemental disclosure because EBITDA is frequently used to analyze companies on the basis of operating performance, leverage and liquidity. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company has the following new legal proceedings and developments to report: Transam, Ltd. d/b/a Two Bunch Palms Resort & Spa v. Players International, Inc., et al On or about November 21, 1995, Transam, Ltd., a Delaware Corporation, d/b/a Two Bunch Palms Resort & Spa (`Two Bunch Palms') filed an action in the United States District Court, Central District of California, against the Company, a subsidiary of the Company, certain principals of the Company, and certain other defendants alleging various causes of action arising out of an agreement for services entered into by the Company with Gerald Greenbach and Creative Hospitality Management. Mr. Greenbach, at the time the Agreement was executed by the Company, was an executive of Two Bunch Palms. Mr. Greenbach both individually and through Creative Hospitality Management agreed to provide the Company with a variety of consulting services with respect to the operation and marketing of the Company's spa facilities at Players Island Resort in Mesquite, Nevada. Two Bunch Palms alleges that the Company and/or Mr. Greenbach and Creative Hospitality Management engaged in copyright infringement, trade dress infringement, unfair competition, false advertising, misappropriation of trade secrets, unfair competition as well as certain related allegations with respect to the services provided by Mr. Greenbach and Creative Hospitality Management to the Company. The Company has denied all of these allegations and intends to defend this matter vigorously. Ornstein v. Players International, Inc., et al On or about August 12, 1994, Marvin A. Ornstein (`Ornstein') and Mississippi Gold, Inc. (`Mississippi Gold') filed an Amended Compliant in United States District Court, Southern District of Illinois, seeking damages for defamation and for violation of their civil rights under 42 U.S.C.ss.1983, arising out of an alleged conspiracy among the Company, the Illinois Gaming Board and the Illinois State Police to aid and abet the Company in prohibiting Ornstein and Mississippi Gold from being licensed and/or being able to follow through with a joint venture to operate a riverboat casino in Cairo, Illinois. On April 12, 1995, Ornstein and Mississippi Gold were permitted to amend their complaint to include a claim that the Company had also violated the Racketeer Influenced and Corrupt Organizations Act (`RICO'). The Company was successful in its motion for summary judgment against Ornstein and Mississippi Gold on the claims for defamation and violation of their civil rights. This motion was granted in favor of the Company on January 4, 1996. Thereafter, Ornstein and Mississippi Gold voluntarily dismissed with prejudice their remaining RICO claims against the Company, and the litigation has therefore been concluded favorably from the Company's perspective. Labor Developments On June 28, 1995, a petition was filed by the United Food and Commercial Workers Union, Local 881 ('Local 881') before the NIRB seeking union representation of approximately one-half of the Metropolis workforce. An election was scheduled to be held on December 8, 1995. However, on December 4, 1995, Local 881 withdrew its petition voluntarily prior to the scheduled date for the election, and the election was canceled. On May 23, 1995, the Seafarers International Union (`SIU') filed a petition for an election with the National Labor Relations Board (the `Board') to represent unlicensed crew members of the Players and Star Riverboats in Lake Charles, Louisiana. After a decision on the appropriateness of the unit, the Board conducted an election on October 24 and 25, 1995. The outcome of that election, which remains uncertified, resulted in the SIU being chosen to represent 61 unlicensed crew members (from among approximately 1700 employees of the property). Players has filed objections to the conduct of the SIU and its representatives during the election. The Board has begun a hearing on the merits of these objections with the hearing to be continued on February 15, 1996. Item 6. Exhibits and Reports on Form 8-K (a) The Company has included as exhibits the following documents entered into during the quarter ended December 31, 1995 in connection with the closing of the transactions related to the Maryland Heights joint venture project. 10.1 Partnership Agreement dated November 2, 1995, by and between Harrah's Maryland Heights Corporation and Players MH, L.P. 10.2 Guaranty of Players International, Inc. dated November 2, 1995. 10.3 Management Agreement dated November 2, 1995 by and between Riverside Joint Venture and Harrah's Maryland Heights Operating Company. 10.4 License Agreement dated November 2, 1995 by and among Players International, Inc. Riverside Joint Venture and Harrah's Maryland Heights Operating Company. 10.5 Ground Lease dated November 3, 1995 by and between Harrah's Maryland Heights LLC and Riverside Joint Venture. 10.6 Lease Agreement dated as of November 3, 1995 by and between Riverside Joint Venture and Players MH, L.P. 10.7 Parent Guaranty of Players International, Inc. dated November 3, 1995. 10.8 Right of First Refusal to Purchase dated November 3, 1995 by and between Harrah's Maryland Heights LLC and Players MH, L.P. 10.9 Option Agreement dated November 3, 1995 by and between Riverside Joint Venture and Harrah's Maryland Heights, L.L.C. 10.10 Development Agreement (Earth City Expressway Extension) by and between the City of Maryland Heights and Riverside Joint Venture. (b) The Company filed no Current Reports on Form 8-K during the quarter ended December 31, 1995. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLAYERS INTERNATIONAL, INC. Date: February 12, 1996 By /s/ Peter J. Aranow ------------------------- Peter J. Aranow, Executive Vice President Chief Financial Officer Date: February 12, 1996 By /s/ Stephen K. Radusch ---------------------------- Stephen K. Radusch, Controller Principal Accounting Officer EXHIBIT INDEX
Exhibit Page 10.1 Partnership Agreement dated November 2, 1995, by and between Harrah's Maryland Heights Corporation and Players MH, L.P. 10.2 Guaranty of Players International, Inc. dated November 2, 1995. 10.3 Management Agreement dated November 2, 1995 by and between Riverside Joint Venture and Harrah's Maryland Heights Operating Company. 10.4 License Agreement dated November 2, 1995 by and among Players International, Inc. Riverside Joint Venture and Harrah's Maryland Heights Operating Company. 10.5 Ground Lease dated November 3, 1995 by and between Harrah's Maryland Heights LLC and Riverside Joint Venture. 10.6 Lease Agreement dated as of November 3, 1995 by and between Riverside Joint Venture and Players MH, L.P. 10.7 Parent Guaranty of Players International, Inc. dated November 3, 1995. 10.8 Right of First Refusal to Purchase dated November 3, 1995 by and between Harrah's Maryland Heights LLC and Players MH, L.P. 10.9 Option Agreement dated November 3, 1995 by and between Riverside Joint Venture and Harrah's Maryland Heights, L.L.C. 10.10 Development Agreement (Earth City Expressway Extension) by and between the City of Maryland Heights and Riverside Joint Venture. 27 Financial Data Schedule
EX-10.1 2 PARTNERSHIP AGREEMENT PARTNERSHIP AGREEMENT OF RIVERSIDE JOINT VENTURE TABLE OF CONTENTS
Section Page I. Basic Provisions.............................................................................. 1 1. Formation of Partnership............................................................. 1 2. Name of the Partnership.............................................................. 1 3. Principal Place of Business.......................................................... 1 4. Definitions.......................................................................... 1 4.1 Accounting Principles................................................................ 1 4.2 Additional Capital Contributions..................................................... 2 4.3 Adjacent Fee Site.................................................................... 2 4.4 Adjacent Fee Site Agreements......................................................... 2 4.5 Affiliate............................................................................ 2 4.6 Affiliate (Controlled)............................................................... 2 4.7 Affiliate Loan....................................................................... 2 4.8 Affiliate (Wholly Owned)............................................................. 2 4.9 Agreement............................................................................ 3 4.10 Annual Plan.......................................................................... 3 4.11 Appraisal Buyout..................................................................... 3 4.12 Appraisal Buyout Notice.............................................................. 3 4.13 Appraisal Buyout Price............................................................... 3 4.14 Appraisal Purchaser.................................................................. 3 4.15 Appraiser............................................................................ 3 4.16 Arbitrator........................................................................... 3 4.17 Authorized Appraiser ................................................................ 3 4.18 Available Cash....................................................................... 3 4.19 Beneficial Owner(ship)............................................................... 3 4.20 Budgets.............................................................................. 3 4.21 Business Day......................................................................... 3 4.22 Buy/Sell............................................................................. 3 4.23 Buy/Sell Notice...................................................................... 3 4.24 Buy/Sell Price....................................................................... 3 4.25 Buy/Sell Response.................................................................... 4 4.26 Capital Account...................................................................... 4 4.27 Capital Contribution................................................................. 4 4.28 Capital Stock ....................................................................... 4 4.29 Change of Control of Players' Parent................................................. 4 4.30 Code................................................................................. 5 4.31 Competing Developer.................................................................. 5 - ii - 4.32 Construction Costs................................................................... 5 4.33 Consumer Price Index................................................................. 5 4.34 Continuing Liabilities............................................................... 5 4.35 Conversion Notice.................................................................... 5 4.36 Cost Budget.......................................................................... 6 4.37 Debt................................................................................. 6 4.38 Debtor Partner....................................................................... 6 4.39 Default Lender....................................................................... 6 4.40 Default Loan......................................................................... 6 4.41 Defaulting Partner................................................................... 6 4.42 Depreciation......................................................................... 6 4.43 Designated Appraiser................................................................. 6 4.44 Distributable Cash................................................................... 7 4.45 Effective Date....................................................................... 7 4.46 Entertainment Facilities............................................................. 7 4.47 Event of Default..................................................................... 7 4.48 Exchange Act......................................................................... 7 4.49 Excluded Person...................................................................... 7 4.50 Exempt Sale or Disposition........................................................... 7 4.51 Fair Market Value.................................................................... 7 4.52 Fiscal Month......................................................................... 7 4.53 Fiscal Period........................................................................ 7 4.54 Fiscal Year.......................................................................... 8 4.55 Fischer Site......................................................................... 8 4.56 Ground Lease......................................................................... 8 4.57 Guarantor............................................................................ 8 4.58 Harrah's............................................................................. 8 4.59 Harrah's (LLC)....................................................................... 8 4.60 Harrah's Las Vegas................................................................... 8 4.61 Harrah's Lease....................................................................... 8 4.62 Harrah's Premises.................................................................... 8 4.63 HEI.................................................................................. 8 4.64 HMHOC................................................................................ 8 4.65 Holding Entity....................................................................... 8 4.66 Indemnified Person................................................................... 8 4.67 Indemnifying Partner................................................................. 8 4.68 Initial Capital Contribution......................................................... 8 4.69 Initial Period....................................................................... 9 4.70 Institutional Investor............................................................... 9 4.71 Invested Capital..................................................................... 9 4.72 IRS.................................................................................. 9 4.73 Leased Site.......................................................................... 9 4.74 Losses............................................................................... 9 4.75 Lot 7................................................................................ 9 4.76 Major Decisions...................................................................... 10 4.77 Management Agreement................................................................. 10 - iii - 4.78 Material Modification................................................................ 10 4.79 Monetary Default..................................................................... 10 4.80 Net Proceeds of Sale or Financing/Refinancing........................................ 10 4.81 Non-Arbitrable Decisions............................................................. 10 4.82 Non-Defaulting Partner............................................................... 10 4.83 Notice............................................................................... 10 4.84 Offering Partner..................................................................... 10 4.85 Offer................................................................................ 10 4.86 Offeree.............................................................................. 10 4.87 Offeror.............................................................................. 11 4.88 Opening Date......................................................................... 11 4.89 Operating Budget..................................................................... 11 4.90 Operating Expenses................................................................... 11 4.91 Operating Leases..................................................................... 11 4.92 Operating Lease Premises............................................................. 11 4.93 Option Period........................................................................ 11 4.94 Partner Loan......................................................................... 11 4.95 Partner Nonrecourse Debt............................................................. 11 4.96 Partner Nonrecourse Minimum Gain..................................................... 11 4.97 Partners............................................................................. 11 4.98 Partnership.......................................................................... 11 4.99 Partnership Accountants.............................................................. 11 4.100 Partnership Interest................................................................. 11 4.101 Percentage........................................................................... 11 4.102 Person............................................................................... 12 4.103 Plans and Specifications............................................................. 12 4.104 Players.............................................................................. 12 4.105 Players' Lease....................................................................... 12 4.106 Players' Parent...................................................................... 12 4.107 Players' Premises.................................................................... 12 4.108 Prime Rate........................................................................... 12 4.109 Profits.............................................................................. 13 4.110 Prohibited Person.................................................................... 13 4.111 Project Office....................................................................... 13 4.112 Project Property..................................................................... 13 4.113 Project Site......................................................................... 14 4.114 Qualified Institutional Buyer........................................................ 14 4.115 Receiving Partner.................................................................... 14 4.116 Redeemed Interest.................................................................... 14 4.117 Redemption Notice.................................................................... 14 4.118 Regulations.......................................................................... 14 4.119 Reserves............................................................................. 14 4.120 Sale or Financing/Refinancing........................................................ 14 4.121 Shoreside Complex.................................................................... 15 4.122 State................................................................................ 15 4.123 Substantial Completion............................................................... 15 - iv - 4.124 Transfer............................................................................. 15 4.125 Transferor Partner................................................................... 15 4.126 Unsuitability Determination.......................................................... 15 4.127 Unsuitability Redemption ............................................................ 16 4.128 Unsuitability Redemption Price....................................................... 16 4.129 Unsuitable Partner................................................................... 16 4.130 Usury Rate........................................................................... 16 4.131 Valuation Date....................................................................... 16 4.132 Voting Power......................................................................... 16 II. Operating Provisions 1. Purposes of the Partnership................................................................... 16 2. Term of Partnership.................................................................. 17 3. Percentage Interests................................................................. 17 4. Capital Contributions; Partner Loans................................................. 17 5. Distributions........................................................................ 19 6. Profits and Losses................................................................... 20 7. Management........................................................................... 22 8. Compensation to Partners; Other Interests............................................ 33 9. Disposition or Transferability of Partnership Interests.............................. 37 10. Dissolution of the Partnership....................................................... 45 11. Liquidation of the Partnership....................................................... 46 12. Books and Records.................................................................... 47 13. Reimbursement........................................................................ 48 14. Representations and Warranties/Indemnification....................................... 48 15. Certificates, Documents, Execution................................................... 56 16. Amendment............................................................................ 57 17. Notices.............................................................................. 57 18. Bank Accounts; Investments........................................................... 57 19. Arbitration.......................................................................... 58 - v - 20. Events of Default.................................................................... 61 21. Remedies............................................................................. 62 22. Choice of Remedies................................................................... 63 23. Advances; Buy-Down................................................................... 64 24. Redemption of Unsuitable Partner's Partnership Interest.............................. 68 25. Appraisal Buyout..................................................................... 69 26. Buy/Sell............................................................................. 73 27. Waiver............................................................................... 77 28. Gambling Qualifications in Missouri.................................................. 78 29. Other Gambling Qualifications........................................................ 79 30. Lender Suitability................................................................... 80 31. Covenants............................................................................ 81 32. Valuation and Appraisal Procedures................................................... 85 33. Miscellaneous........................................................................ 86 34. Binding Effect....................................................................... 87
- vi - TABLE OF EXHIBITS EXHIBIT A - Description of Adjacent Fee Site EXHIBIT B - Description of Fischer Site EXHIBIT C-1 - Description of Leased Site EXHIBIT C-2 - Description of Easements Appurtenant to Leased Site EXHIBIT D - Management Agreement EXHIBIT E - Plans & Specifications EXHIBIT F - Cost Budget EXHIBIT F-1 - Cost Budget Items Paid Between 03/01/95 and the Effective Date EXHIBIT G - Partner's Initial Capital Contributions EXHIBIT H - Prohibited Persons EXHIBIT I - Liens and Encumbrances on Project Property EXHIBIT J - Partnership Liabilities/Obligations EXHIBIT K - Irrevocable Banking Instructions EXHIBIT L - Partnership Investment Guidelines EXHIBIT M - Confidentiality Agreement EXHIBIT N - Form of Security Legend Regarding Partnership Agreement Transfer Restrictions and Redemption Requirements EXHIBIT O - Form of Redemption Provisions to be Included in Holding Entity Articles of Incorporation or Other Formative Documents EXHIBIT P - Form of Provision for Loan Documents EXHIBIT Q - Hotel and Special Events Room Allocation Policies EXHIBIT R - Escrow Agreement - vii - EXHIBIT S - Skidmore, Owings and Merrill Agreement EXHIBIT T - City Agreement, Howard Bend Levee District Agreement, U.S. Army Corps of Engineers Agreements EXHIBIT U - Players' Parent Stock Certificate EXHIBIT V - Conceptual Sign Plan
- viii - PARTNERSHIP AGREEMENT OF RIVERSIDE JOINT VENTURE This agreement (the "Agreement") is made this 2nd day of November, 1995, between HARRAH'S MARYLAND HEIGHTS CORPORATION, a Nevada corporation, and PLAYERS MH, L.P., a Missouri limited partnership. In consideration of the promises contained in this Agreement, the parties to this Agreement, each intending to be legally bound, agree as follows: I. Basic Provisions 1. Formation of Partnership Harrah's and Players hereby form a general partnership under and pursuant to, and, except to the extent permissibly modified hereby, governed by, the Uniform Partnership Law of the State of Missouri [Chapter 358 RsMO] (the "Act"). 2. Name of the Partnership The business of the Partnership shall be conducted under the name "Riverside Joint Venture". The Partners shall register this name (or any other name the Partners may decide to use for the Partnership) and/or comply with any applicable fictitious business name law in the State of Missouri. 3. Principal Place of Business The principal place of business of the Partnership beginning on the Opening Date shall be located at the Project Office. Until the Opening Date, the principal place of business of the Partnership shall be located at 1023 Cherry Road, Memphis, Tennessee 38117. 4. Definitions In addition to capitalized terms defined elsewhere in this Agreement, the following capitalized terms shall have the meanings set forth below. References to Sections of this Agreement refer to the Sections of Part II of this Agreement, except as otherwise noted. 4.1 Accounting Principles - United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in the event such Accounting Principles Board and Financial Accounting Standards Board are no longer in existence or no longer publish such principles, opinions and statements, in such other statements by such other entity as may be approved by a significant segment of the accounting profession, all as in effect from time to time. 4.2 Additional Capital Contributions - those Capital Contributions described in Section 4(b). 4.3 Adjacent Fee Site - land to be acquired pursuant to the Adjacent Fee Site Agreements, and more particularly described on Exhibit A. 4.4 Adjacent Fee Site Agreements - (i) that certain Agreement of Sale dated June 30, 1995 between Riverport Farm Partners, as seller, and Harrah's, as buyer; and (ii) that certain Agreement dated effective August 21, 1995 between Anita Bechtold and Eileen Carlson as Trustees under Indenture of Trust of Anita Bechtold dated March 14, 1991, as seller, and Harrah's, as buyer. 4.5 Affiliate - with respect to any designated Person, any other Person who, directly or indirectly, owns or controls ten percent (10%) or more of the Capital Stock or Voting Power of the Person (on a fully diluted basis), or percent (10%) or more of the Capital Stock or Voting Power of which is owned or controlled by the designated Person, directly or indirectly. 4.6 Affiliate (Controlled) - with respect to any designated Person, any other Person who, directly or indirectly, owns or controls more than fifty percent (50%) of the Capital Stock or Voting Power of the Person (on a fully diluted basis), or more than fifty percent (50%) of the Capital Stock or Voting Power of which is owned or controlled by the designated Person, directly or indirectly. 4.7 Affiliate Loan - any loan (including principal, interest and other charges) made by an Affiliate of a Partner to the Partnership, but excluding unpaid amounts due to an Affiliate from time to time under any contract with the Partnership for goods and/or services. 4.8 Affiliate (Wholly Owned) - with respect to any designated Person, any other Person who, directly or indirectly, owns or controls one hundred percent (100%) of the Capital Stock or Voting Power of the Person, or one hundred percent (100%) of the Capital Stock or Voting Power of which is owned or controlled in whole by the designated Person, directly or indirectly. - 2 - 4.9 Agreement - as defined in the introductory paragraph of this Agreement. 4.10 Annual Plan - as defined in Section 7(l). 4.11 Appraisal Buyout - as defined in Section 25(a). 4.12 Appraisal Buyout Notice - as defined in Section 25(a)(ii). 4.13 Appraisal Buyout Price - ninety percent (90%), or one hundred percent (100%) in the case of an Appraisal Buyout caused by casualty or condemnation, of the Fair Market Value of a Partner's Project Property determined in accordance with Section 9(n) (as modified by Section 25(a)(ii)). 4.14 Appraisal Purchaser - as defined in Section 25(a)(i). 4.15 Appraiser - as defined in Section 9(n)(ii)(A). 4.16 Arbitrator - as defined in Sections 19(a)(i) and 19(b)(i). 4.17 Authorized Appraiser - an individual designated by a Partner who: (i) is a partner or employee of a disinterested, reputable and nationally recognized certified public accounting firm or has comparable qualifications; and (ii) has at least ten (10) years' experience in the financial reporting and valuation of casino properties. 4.18 Available Cash - gross receipts of the Partnership derived from all sources (other than Net Proceeds of Sale or Financing/Refinancing, Capital Contributions, Partner Loans or Affiliate Loans), LESS Operating Expenses, determined on a cash basis. 4.19 Beneficial Owner(ship) - as defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all Capital Stock that any such person has the right to acquire, whether such right is exercisable immediately or after the passage of time. 4.20 Budgets - the Cost Budget that is approved or otherwise operative under this Agreement, or the Operating Budget that is approved or otherwise operative under this Agreement and the Management Agreement (if then existing), or both, as the case may be. 4.21 Business Day - any Monday through and including Friday that is not a legal holiday in the State. 4.22 Buy/Sell - as defined in Section 26(a). 4.23 Buy/Sell Notice - as defined in Section 26(a). 4.24 Buy/Sell Price - as defined in Section 26(a). - 3 - 4.25 Buy/Sell Response - as defined in Section 26(c). 4.26 Capital Account - a separate account maintained for each Partner in accordance with the Code and Regulations as part of the books and records of the Partnership. The Capital Account balance for each Partner shall be computed in accordance with the principles of Regulation Section 1.704-1(b)(2)(iv). 4.27 Capital Contribution - cash and the agreed value of property contributed from time to time by a Partner to the Partnership and credited to its Capital Account. 4.28 Capital Stock - all shares, interests, rights to purchase (other than convertible or exchangeable indebtedness), warrants, options, participations or other equivalents of or interests (however designated and whether or not presently exercisable): (i) with respect to a corporation, in stock of that corporation; (ii) with respect to a limited liability company, in the membership of such limited liability company; (iii) with respect to a partnership, in partnership interests and/or limited partnership interests thereof; (iv) with respect to a trust, in the beneficial ownership and/or beneficiaries thereunder; and (v) with respect to any other entity, in the ownership of the capital and profits of such entity, however designated. 4.29 Change of Control of Players' Parent - until the second anniversary of the Effective Date, any change in the identity, as members of the Board of Directors of four (4) or more of the following individuals currently serving as members of the Board of Directors of Players' Parent or any successor Holding Entity of Players' Project Property: Edward Fishman David Fishman Howard Goldberg Thomas E. Gallagher Marshall S. Geller Lee Seidler Steven P. Perskie On and following the second anniversary of the Effective Date, and continuing until the seventh anniversary of the Effective Date, any acquisition of more than forty-nine percent (49%) of the Capital Stock or Voting Power in Players, Players' Parent or any Holding Entity of Players' Project Property by a Prohibited Person. - 4 - 4.30 Code - The Internal Revenue Code of 1986, as amended to date and as amended hereafter. 4.31 Competing Developer - as defined in Section 8(d). 4.32 Construction Costs - all costs and expenses incurred in connection with the acquisition, design, financing, permitting, construction and opening for business of the Shoreside Complex and the Fischer Site, which, in accordance with Accounting Principles applicable to the Partnership, are properly attributable to the cost of acquisition, development and construction of such property, but excluding Tenant's Work and Tenant's Property (as defined in the Operating Leases) and other costs incurred by Harrah's (LLC) and Players in opening their respective Operating Lease Premises, which are not the responsibility and cost of the Partnership. Construction Costs shall be determined either (i) by written agreement of the Partners within ninety (90) days after the Opening Date of the Entertainment Facilities; or (ii) by arbitration pursuant to Section 19(b) at the request of either Partner, should the Partners not agree on such Construction Costs within such ninety (90) day period. 4.33 Consumer Price Index - the Consumer Price Index for All Urban Consumers most recently published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, all items, (1982-84=100), or any successor or replacement index thereto. If the Consumer Price Index shall, after the date hereof, be converted to a different standard reference base or shall otherwise be revised, any determination hereunder which uses the Consumer Price Index shall be made with the use of such conversion factor, formula or table for converting the Consumer Price Index as may be published by the Bureau of Labor Statistics, or, if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice Hall, Inc., or, failing such publication, by any other nationally recognized publisher of similar statistical information. If the Consumer Price Index shall cease to be published, then for the purpose of this Agreement there shall be substituted for the Consumer Price Index such other similar index as the Partnership Accountants shall determine which measures changes in the relative purchasing power of United States currency over the term of this Agreement. 4.34 Continuing Liabilities - indemnity obligations relating to events occurring prior to or during the time of a Partner's ownership of its Project Property. 4.35 Conversion Notice - as defined in Section 23(b). - 5 - 4.36 Cost Budget - the estimate of all categories of Construction Costs which is hereby approved by both Partners and attached to this Agreement as Exhibit F, as the same may be modified from time to time pursuant to this Agreement. 4.37 Debt - (a) all liabilities and obligations, contingent or otherwise: (i) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of the Partnership or only to a portion thereof); (ii) evidenced by bonds, notes, debentures or similar instruments; (iii) representing the balance deferred and unpaid of the purchase price of any property or services, if and to the extent any of the foregoing described in clauses (i), (ii) and (iii) would appear as a liability on the balance sheet of the Partnership; (iv) evidenced by bankers' acceptances or similar instruments issued or accepted by banks; (v) for the payment of money relating to a capitalized lease obligation; or (vi) evidenced by a letter of credit or reimbursement obligation of such person with respect to any letter of credit; (b) all liabilities of others of the kind described in the preceding clause(a) that the Partnership has guaranteed or that is otherwise its legal liability; and (c) all obligations secured by a lien to which the property or assets (including, without limitation, leasehold interests and any other tangible or intangible property rights) of the Partnership are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be the Partnership's legal liability, provided, that the amount of such obligations shall be limited to the lesser of the fair market value of the assets or property to which such lien attaches and the amount of the obligation so secured. 4.38 Debtor Partner - as defined in Section 9(c). 4.39 Default Lender - as defined in Section 23(a)(i). 4.40 Default Loan - as defined in Section 23(a). 4.41 Defaulting Partner - as defined in Section 21 (introductory paragraph). 4.42 Depreciation - the depreciation, amortization, or other cost recovery deduction allowable to the Partnership for each Fiscal Year as determined by the Partnership Accountants for the Partnership for Federal income tax purposes; provided, however, that if an asset is carried on the books of the Partnership at a value other than its remaining tax basis, then Depreciation shall be determined within the guidelines set forth in Regulation Section 1.704- 1(b)(2)(iv)(g)(3). 4.43 Designated Appraiser - as defined in Section 9(n)(ii)(A). - 6 - 4.44 Distributable Cash - Available Cash LESS Reserves, determined on a cash basis. 4.45 Effective Date - the date of execution of this Agreement. 4.46 Entertainment Facilities - all buildings within the Shoreside Complex intended to be used by the Partnership for hotel, parking, restaurant and entertainment purposes, (other than the Harrah's Premises and Players' Premises) and all surface parking lots serving such buildings. 4.47 Event of Default - as defined in Section 20. 4.48 Exchange Act - means the Securities and Exchange Act of 1934, as amended. 4.49 Excluded Person - means (a) Players' Parent or any Affiliate (Wholly Owned) of Players' Parent; (b) any employee benefit plan of Players' Parent or of any Affiliate (Wholly Owned) of Players' Parent or any trustee or similar fiduciary holding Capital Stock of Players' Parent or any Affiliate (Wholly Owned) of Players' Parent for or pursuant to the terms of any such plan; (c) HEI and any Affiliate (Wholly Owned) of HEI; (d) Merv Griffin; (e) Edward Fishman; (f) David Fishman; (g) Howard A. Goldberg; (h) Thomas E. Gallagher; (i) Marshall S. Geller; (j) Lee Seidler; (k) Steven P. Perskie; (l) Peter J. Aranow; (m) members of the immediate families of the individuals identified in (d) through and including (l); and (n) Affiliates (Wholly Owned) of the foregoing Persons. 4.50 Exempt Sale or Disposition - as defined in Section 8(d). 4.51 Fair Market Value - unless otherwise specifically provided in this Agreement, the Fair Market Value of any asset shall be its agreed value as determined by agreement of all of the Partners in accordance with Section 32(a), or, in the absence of such agreement, as determined in accordance with Sections 9(n) and 25. Solely for the purpose of determining and allocating unrealized gains and losses upon a liquidation or other distribution event, the Fair Market Value of an asset shall be at least equal to the nonrecourse debt to which it is subject. 4.52 Fiscal Month - a calendar month or such portion thereof as may occur during the term of this Agreement. 4.53 Fiscal Period - a Fiscal Year or Fiscal Month, as the case may be. - 7 - 4.54 Fiscal Year - a calendar year or applicable portion thereof as may occur during the term of this Agreement. 4.55 Fischer Site - the land located in Maryland Heights, Missouri, more particularly described in Exhibit B. 4.56 Ground Lease - the Ground Lease of even date herewith between Harrah's (LLC), as landlord, and the Partnership, as tenant, covering the Leased Site. 4.57 Guarantor - as defined in Section 4(b)(vi). 4.58 Harrah's - Harrah's Maryland Heights Corporation, a Nevada corporation. 4.59 Harrah's (LLC) - Harrah's Maryland Heights LLC, a Delaware limited liability company. 4.60 Harrah's Las Vegas - Harrah's Las Vegas, a Nevada corporation, and any successor owner of Harrah's System Marks (as defined in the Management Agreement) that are used at the Shoreside Complex. 4.61 Harrah's Lease - the Lease of even date herewith between Harrah's (LLC), as tenant, and the Partnership, as landlord. 4.62 Harrah's Premises - the portion of the Shoreside Complex that is leased to Harrah's (LLC) pursuant to the Harrah's Lease. 4.63 HEI - Harrah's Entertainment, Inc., a Delaware corporation. 4.64 HMHOC - Harrah's Maryland Heights Operating Company, a Nevada corporation. 4.65 Holding Entity - the Partners, and any corporation, partnership, trust, limited liability company, limited partnership or other Person that, directly or indirectly, holds any interest in, or any Beneficial Ownership of, any Partnership Interest or Project Property. 4.66 Indemnified Person - as to any Partner indemnified under Section 14, the Partnership, such Partner and any Affiliate of such Partner (other than the Indemnifying Partner), and any agents, attorneys, officers, members, directors, stockholders or employees of such Partner or such Affiliate. 4.67 Indemnifying Partner - a Partner that owes any amount or duty to any Indemnified Person pursuant to Section 14. 4.68 Initial Capital Contribution - as defined in Section 4(a). - 8 - 4.69 Initial Period - as defined in Section 9(n)(ii)(A). 4.70 Institutional Investor - any entity which (i) (A) (1) is an insurance company, state chartered commercial or savings bank, national bank, real estate investment trust, pension or profit sharing plan or trustee of any pension or profit sharing trust; and (2) has either net assets of not less than Fifty Million Dollars ($50,000,000) or total assets of not less than One Hundred Million Dollars ($100,000,000), in each instance annually adjusted to reflect increases, but not decreases, in the Consumer Price Index; or (B) is a Qualified Institutional Buyer, and (ii) agrees to comply with this Agreement by delivery of an instrument in form and substance reasonably acceptable to the Partners. 4.71 Invested Capital - as of the time of its determination, the total of a Partner's Capital Contributions and Partner Loans LESS any Distributable Cash, Net Proceeds of Sale or Financing/Refinancing and the fair market value of any non-cash property distributed to such Partner. 4.72 IRS - as defined in Section 12(d). 4.73 Leased Site - the land described in Exhibit C-1, together with the easements appurtenant thereto as described in Exhibit C-2. 4.74 Losses - for each Fiscal Year or other Fiscal Period, an amount equal to the Partnership's taxable loss for such Fiscal Year or Fiscal Period, as determined in accordance with Section 703(a) of the Code (for this purpose, all items of loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in Losses), with the adjustments required to comply with the Capital Account maintenance rules of Regulation Section 1.704-1(b). If Capital Accounts are adjusted in accordance with Regulation Section 1.704-1(b), such adjustments shall be treated as Losses (when appropriate under said Regulations), which are to be allocated among the Partners in accordance with this Section; subsequent to any such adjustments, tax allocations of loss and deduction with respect to Partnership assets shall take into account any variation between their respective adjusted bases for Federal income tax purposes and their fair market value in the same manner as under Code Section 704(c). Adjustments to Capital Accounts made pursuant to this Section 4.75 shall have no impact on the Partners' respective Percentages. 4.75 Lot 7 - Lot 1 of Riverport Subdivision Tract 7, as recorded in the Public Records of St. Louis County, Missouri. - 9 - 4.76 Major Decisions - as defined in Section 7(a). 4.77 Management Agreement - the Management Agreement by and between the Partnership and HMHOC, attached as Exhibit D and to be executed concurrently with this Agreement. 4.78 Material Modification - a modification of, addition to or deletion from the conceptual Plans and Specifications for the Shoreside Complex attached as Exhibit E, including without limitation, the sign layouts referred to in Section 8.2 of each Operating Lease as well as the use of proprietary marks as provided in Article 12.1 of the Management Agreement. 4.79 Monetary Default - any of: (i) the failure to make, when due, an Initial Capital Contribution pursuant to Section 4(a); (ii) the failure to make, when due, a mandatory Additional Capital Contribution pursuant to Section 4(b)(i); (iii) the failure to make, when due, a voluntary Additional Capital Contribution pursuant to Section 4(b)(ii) following approval of such Capital Contribution by the Partners; (iv) the failure of an Indemnifying Partner to pay any indemnity obligation or any cost of defense of any indemnity claim when due to or on behalf of the Indemnified Partner; and (v) the failure to timely contribute the amount of a negative Capital Account balance upon liquidation of the Partnership. 4.80 Net Proceeds of Sale or Financing/Refinancing - the net proceeds in cash or other property of a Sale or Financing/Refinancing after: (i) payment of all costs of the transaction realizing such proceeds; (ii) in the case of a financing or refinancing, the application of the proceeds of any such financing or refinancing to the Partnership uses for which they were borrowed; and (iii) the creation of reserves for contingent liabilities and liabilities, the exact amounts of which shall not then have been ascertained or as to which payment is not then due. 4.81 Non-Arbitrable Decisions - as defined in Section 7(b). 4.82 Non-Defaulting Partner - as defined in Section 21 (introductory paragraph). 4.83 Notice - any notice, demand or other communication required or permitted by this Agreement. Notices shall be given as set forth in Section 17. 4.84 Offering Partner - as defined in Section 8(d). 4.85 Offer - as defined in Section 26(a). 4.86 Offeree - as defined in Section 26(a). - 10 - 4.87 Offeror - as defined in Section 26(a). 4.88 Opening Date - the date that Players first opens for business at the Players' Premises, Harrah's (LLC) first opens for business at Harrah's Premises, and/or the Partnership first opens the Entertainment Facilities for business, as the case may be. 4.89 Operating Budget - as defined in Section 7(l). 4.90 Operating Expenses - all expenditures of the Partnership (other than Construction Costs) in connection with the Shoreside Complex and the Fischer Site, determined on a cash basis. Operating Expenses do not include: (a) any home office overhead expenses of any Partner, except when contained in an approved Budget or authorized by any contract or agreement executed by both Partners or otherwise approved by the Partners in writing; (b) any amount paid from Reserves of the Partnership; and (c) non-cash items such as depreciation and amortization of assets. 4.91 Operating Leases - the Players' Lease and/or the Harrah's Lease, as the context requires. 4.92 Operating Lease Premises - the portions of the Entertainment Facilities leased pursuant to the Operating Leases. 4.93 Option Period - as defined in Section 9(k)(i). 4.94 Partner Loan - any loan (including principal, interest and other charges) made by a Partner to the Partnership, but excluding unpaid amounts due to a Partner from time to time under any contract with the Partnership for goods or services. 4.95 Partner Nonrecourse Debt - as defined in Section 6(a). 4.96 Partner Nonrecourse Minimum Gain - as defined in Section 6(c). 4.97 Partners - collectively and separately, Harrah's, Players and Persons admitted to the Partnership pursuant to this Agreement. 4.98 Partnership - the partnership formed pursuant to this Agreement. 4.99 Partnership Accountants - as defined in Section 12(b). 4.100 Partnership Interest - the ownership interest of a Partner in the Partnership. 4.101 Percentage - the percentage ownership of a Partner in the Partnership, as initially set forth in Section 3, and thereafter determined in accordance with the terms of this Agreement. - 11 - 4.102 Person - an individual, corporation, association, partnership, limited partnership, limited liability company, trust, unincorporated organization or other entity. 4.103 Plans and Specifications - the plans and specifications for the Shoreside Complex, or portions thereof, approved by the Partners or otherwise adopted pursuant to this Agreement. The conceptual Plans and Specifications attached or identified as or in Exhibit E are hereby approved by the Partners. Prior to the commencement of construction of the Shoreside Complex or letting of the general contract therefor, the Partners shall: (i) agree upon, or there shall be determined in accordance with Section 19(a), all Material Modifications required to produce full detailed construction Plans and Specifications for the Shoreside Complex; and (ii) memorialize such determination by joint writing or written determination of the Arbitrator, as the case may be. 4.104 Players - Players MH, L.P., a Missouri limited partnership. 4.105 Players' Lease - the lease of even date herewith between Players, as tenant, and the Partnership, as landlord. 4.106 Players' Parent - Players International, Inc., a Nevada corporation. 4.107 Players' Premises - the portion of the Shoreside Complex leased to Players pursuant to the Players' Lease. 4.108 Prime Rate - the "Prime Rate" that is reported in the Money Rates column of The Wall Street Journal on the Business Day for which the rate is applicable (or the next preceding Business Day, if the applicable day is not a Business Day). If The Wall Street Journal ceases publication of the Prime Rate, the Prime Rate (or base rate) from time to time announced by Bankers Trust Company, New York, New York, or its successor (whether or not such rate has actually been charged by such bank), or if Bankers Trust Company discontinues the practice of announcing the Prime Rate, the "Prime Rate" shall mean the highest rate charged by such bank on short term, unsecured loans to corporate borrowers. If The Wall Street Journal (a) publishes more than one Prime Rate, the higher or highest of such rate shall apply, or (b) publishes a retraction or correction of any such rate, the rate reported in such retraction or correction shall apply. If the Prime Rate changes, interest rates in this Agreement which are based on the Prime Rate shall change, effective as of the first day of each calendar month, to reflect the Prime Rate in effect on the last day of the preceding calendar month. Notwithstanding anything to the contrary in this paragraph, the Prime Rate shall never exceed the Usury Rate. - 12 - 4.109 Profits - for each Fiscal Year or other Fiscal Period, an amount equal to the Partnership's taxable income for such year or period, as determined in accordance with Section 703(a) of the Code (for this purpose, all items of income or gain required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in Profits), with the adjustments required to comply with the Capital Account maintenance rules of Regulation Section 1.704-1(b). If Capital Accounts are adjusted in accordance with Regulation Section 1.704-1(b) (when appropriate under said Regulations), such adjustments shall be treated as Profits which are to be allocated among the Partners in accordance with this Section; subsequent to any such adjustments, tax allocations of income or gain with respect to Partnership assets shall take into account any variation between their respective adjusted bases for Federal income tax purposes and their fair market value in the same manner as under Code Section 704(c). Adjustments to Capital Accounts made pursuant to this Section 4.110 shall have no impact on the Partners' respective Percentages. 4.110 Prohibited Person - any of those Persons described in Exhibit H. 4.111 Project Office - the office of the Partnership to be established by the Partners at the Entertainment Facilities at or following the Opening Date of the Entertainment Facilities. 4.112 Project Property - in the case of Players: (i) the Partnership Interest of Players; and (ii) the interest of Players in the Players' Lease (and any personal property located or installed in Players' Premises or arising out of the business conducted therein). in the case of Harrah's: (i) the Partnership Interest of Harrah's; (ii) the interest of HMHOC or any other Affiliate (Wholly Owned) of HEI to which the obligations of HMHOC under the Management Agreement may be assigned; and (iii) the interest of Harrah's (LLC) in the Harrah's Lease (and any personal property located or installed in Harrah's Premises or arising out of the business conducted therein); - 13 - provided that, in the case of a purchase by Players of Harrah's Project Property pursuant to Sections 9(b), 9(c), 24, 25, or 26, Harrah's Project Property shall also include: (iv) Lot 7, if then owned by Harrah's or an Affiliate (Wholly Owned) of HEI; and (v) the fee simple interest of Harrah's (LLC) or any other Affiliate (Wholly Owned) of HEI to which such fee simple interest may be transferred, as ground lessor under the Ground Lease. Project Property owned by any Affiliate (Wholly Owned) of a Partner shall, for purposes of this Agreement, be Project Property of such Partner, and such Partner and its Guarantor shall cause its Affiliate (Wholly Owned) to take all necessary action to fulfill its obligations or satisfy such Partner's obligations under this Agreement. 4.113 Project Site - the Leased Site, the Adjacent Fee Site and the Fischer Site. 4.114 Qualified Institutional Buyer - a qualified institutional buyer as defined in Rule 144A of the Securities and Exchange Commission promulgated pursuant to the Securities Act of 1933, as amended. 4.115 Receiving Partner - as defined in Section 8(d). 4.116 Redeemed Interest - as defined in Section 24(a). 4.117 Redemption Notice - as defined in Section 24(a). 4.118 Regulations - regulations promulgated from time to time by the United States Treasury Department pursuant to the Code. All references to specific Regulations in this Agreement shall be deemed also to refer to any corresponding provisions of succeeding Regulations. 4.119 Reserves - with respect to any Fiscal Period, cash set aside by the Partnership for working capital and to pay taxes, insurance, debt service, repairs, capital replacements, capital improvements, contingent liabilities, or other costs and expenses incident to the ownership or operation of the Shoreside Complex. 4.120 Sale or Financing/Refinancing - any Partnership transaction resulting in the receipt of cash or other consideration not in the ordinary course of its business including, without limitation, any transaction of the following nature by the Partnership: sales or exchanges - 14 - of real or personal property, condemnation or casualty resulting in recovery of damage awards or property insurance proceeds, or any debt financing/refinancings or other third-party borrowing, provided however, there shall be excluded from the definition of Sale or Financing/Refinancing the following: (i) Partner Loans; (ii) Affiliate Loans; (iii) Capital Contributions; (iv) temporary condemnation proceeds; and (v) proceeds of business interruption, loss of rent or similar insurance. 4.121 Shoreside Complex - the Project Site, and any buildings, structures and improvements constructed on or affixed to the Project Site, including, without limitation, the Entertainment Facilities, Harrah's Premises, Players' Premises, and all roads, utilities, dredging, grading, landscaping, levees and other off-site improvements constructed or developed by the Partnership on or in support of the Project Site. 4.122 State - the State of Missouri. 4.123 Substantial Completion - substantial completion of the Shoreside Complex, or applicable portion thereof, in accordance with the Plans and Specifications as evidenced by: (i) a certificate of occupancy from the City of Maryland Heights; (ii) a certificate from: (x) the inspecting architect; and (y) the general contractor, that the Shoreside Complex has been substantially completed, as defined by Section 9.8.1 of American Institute of Architects Document A-201, General Conditions of the Contract for Construction (1987 Edition), in accordance with the Plans and Specifications; and (iii) to the extent required for its operation, issuance of a license or permit by the Missouri Gaming Commission approving the completion of construction thereof. 4.124 Transfer - any sale, assignment, gift, hypothecation, pledge or other disposition, whether voluntary or by operation of law, of all or any part of a Partner's Project Property or of any direct or remote interest therein owned by a Beneficial Owner except for: (i) the sale of Capital Stock of HEI and Players' Parent on the New York or NASDAQ Stock Exchanges, as the case may be; or (ii) the sale, assignment, gift, hypothecation, pledge or other disposition in a single or related series of transactions, of all or substantially all of the assets of HEI or Players' Parent, as the case may be. 4.125 Transferor Partner - as defined in Section 9(b). 4.126 Unsuitability Determination - a final determination by a gambling regulatory authority that, for reasons of character, honesty, integrity, fiscal probity, or unlawful - 15 - activity: (i) a Person is unsuitable to be associated (by contract or otherwise) with another Person; (ii) an application of a Person to such gambling regulatory authority for a gambling license, permit or entitlement will not be approved; or (iii) a license, permit or entitlement issued by such gambling regulatory authority to such Person will be suspended for more than seventy-two (72) hours, revoked, rescinded or not renewed. 4.127 Unsuitability Redemption - as defined in Section 24(a). 4.128 Unsuitability Redemption Price - ninety percent (90%) of the Fair Market Value of the Project Property determined in accordance with Section 9(n), except, in the case of: (i) Lot 7; (ii) the interest of Harrah's (LLC), as ground lessor of the Leased Site; and (iii) the interest of HMHOC as manager under the Management Agreement; the Unsuitability Redemption Price shall be ninety percent (90%) of the price for such assets determined in accordance with the procedure set forth in Section 26(b). 4.129 Unsuitable Partner - as defined in Section 24(a). 4.130 Usury Rate - the highest rate of interest that may be charged under the criminal law of the State of Missouri for the transaction between the Persons identified. 4.131 Valuation Date - as defined in Section 24(a). 4.132 Voting Power - the power to direct the management and policies of a Person, directly or through one or more intermediaries, whether through the ownership of Capital Stock, by contract, exercise of any right of approval or otherwise. II. Operating Provisions 1. Purposes of the Partnership The purposes of the Partnership are: (a) to lease the Leased Site under the Ground Lease and acquire fee title to the Adjacent Fee Site; (b) to own, hold, develop, operate, lease, transfer, sell, exchange, improve or otherwise dispose of all or any part of the Shoreside Complex; (c) to enter into and perform contracts of any kind necessary to, in connection with or incidental to the accomplishment of the foregoing purposes; (d) to incur Debt from any source, including without limitation any Partner or Affiliate of a Partner, to accomplish the foregoing purposes or to meet the obligations of the Partnership; to issue evidences of the Partnership's Debt to repay such - 16 - October 31, 1995 borrowings; and to grant security interests in the Partnership's assets to secure repayment of such Debt; and (e) to do all other things necessary, desirable or conducive to the accomplishment of the aforesaid purposes or otherwise contemplated by this Agreement. The Partnership is a single-purpose joint venture and is intended to engage in no business or project other than those described above regarding the Shoreside Complex. The Partnership is not responsible for, and shall have no liability in connection with, the activities and operations of Harrah's Premises and Players' Premises, which shall each be separately operated by the tenant under each such Operating Lease. Title to all Partnership property shall be held in the name of the Partnership. 2. Term of Partnership The term of the Partnership shall commence on the date hereof and continue until December 31, 2080, unless the Partnership is sooner dissolved in accordance with Section 10. 3. Percentage Interests (a) The initial Percentage of each Partner in the Partnership shall be as follows: Harrah's 50.00% Players 50.00% ====== TOTAL 100% (b) The Percentage of each Partner as stated in this Section 3, shall be adjusted from time to time pursuant to the provisions of this Agreement. 4. Capital Contributions; Partner Loans (a) Initial Capital Contributions Each Partner: (i) has this day made a cash Capital Contribution to the Partnership in the amount of Twenty Million Dollars ($20,000,000), for a total of Forty Million Dollars ($40,000,000); and (ii) shall make further cash Capital Contributions in the amount of Eighty-Five Million Five Hundred Thousand Dollars ($85,500,000), for a total of Two Hundred Eleven Million Dollars ($211,000,000), as provided in Exhibit G. Contributions of such Two Hundred Eleven Million Dollars ($211,000,000), One Hundred Five Million Five Hundred Thousand Dollars ($105,500,000) by each Partner, shall be called "Initial Capital Contributions". There shall be credited against the last required portion of each Partner's additional Eighty-Five Million Five Hundred Thousand Dollar ($85,500,000) Initial Capital Contribution the amounts set forth - 17 - in Exhibit G, which are the agreed value of Partnership expenses previously incurred and related property contributed by such Partner. (b) Additional Capital Contributions In addition to its Initial Capital Contribution under Section 4(a), each Partner shall be obligated, within five (5) Business Days after Notice from the other Partner, to fund its Percentage of "Additional Capital Contributions," in cash, for the following: (i) Mandatory Additional Capital Contributions - all additional cash required by the Partnership for the following uses, without the need for a decision by the Partners: (A) to meet contractual obligations of the Partnership (including, without limitation, the contractual obligations of the Partnership to the City, Howard Bend Levee District and U.S. Army Corps of Engineers under the Agreements identified in Exhibit T; (B) to pay uninsured judgments (other than for tort claims); (C) to comply with law; (D) to restore, repair, rebuild or replace the Shoreside Complex following casualty or condemnation (unless the Partners have unanimously decided not to do so); (E) to meet other cash shortfalls of the Partnership from the operation of the Shoreside Complex (other than for tort claims); or (F) to repair construction defects, the estimated cost of which does not exceed amounts recovered from contractors or other warrantors by more than $50,000,000. (ii) Voluntary Additional Capital Contributions - all additional cash required by the Partnership for any use other than uses specified in Section 4(b)(i), the decision to contribute which shall be a Non-Arbitrable Decision. (c) General Provisions (i) If the allocations or distributions required or permitted under this Agreement result in the reduction of a Partner's Capital Account, such reduction need not be restored, except for restoration of negative Capital Account balances as provided in Section 7(e). (ii) No Partner shall have the right to withdraw, earn interest on or reduce its Capital Contribution. (iii) No Partner shall have personal liability for the repayment of the Capital Contribution of any Partner. - 18 - (iv) Unless otherwise specified in this Agreement, Partner Loans and Affiliate Loans shall bear interest at a rate, not to exceed the Usury Rate, and be made on other terms and conditions, as are agreed by the Partners prior to the making of such loans; all of which shall be commensurate with the risk and nature of the particular loan. Partner Loans and Affiliate Loans shall be repayable solely as provided in this Agreement or as otherwise agreed and documented by the Partners. (v) Except to the extent provided for in this Agreement, no Partner shall have the right to receive a return of its Capital Contribution upon the dissolution of the Partnership, or to receive any distributions from the Partnership at any time. (vi) The obligation of Players to make its Initial Capital Contribution is guaranteed by Players' Parent, pursuant to the Guaranty appended to this Agreement, and the obligation of Harrah's to make its Initial Capital Contribution is guaranteed by Harrah's Operating Company, Inc., a Delaware corporation, pursuant to the Guaranty appended to this Agreement. Each of Players' Parent and Harrah's Operating Company, Inc. is referred to herein as a "Guarantor". 5. Distributions Except as otherwise provided in Section 11: (a) Distributable Cash shall be distributed to the Partners in accordance with their respective Percentage, provided that all Distributable Cash otherwise payable to a Partner shall first be applied to pay interest, principal and other amounts due in respect of any Default Loan owed by such Partner. (b) Distributable Cash, if any, shall be distributed to the Partners at such intervals as the Partners may determine, but not less frequently than once each Fiscal Year within ninety (90) days after the end of the Fiscal Year. (c) Net Proceeds of Sale or Financing/Refinancing shall be distributed to the Partners as promptly as practicable following a Sale or Financing/Refinancing and in the same order of priority as is described in Section 5(a). - 19 - (d) On the Effective Date, there shall be distributed to each of Harrah's and Players the respective amounts set forth in Exhibit F-1 representing fifty percent (50%) of certain costs incurred by each of them on behalf of the Partnership prior to the Effective Date, for items contained within the Cost Budget. A further reimbursing distribution in the amount of fifty percent (50%) of any further such costs which have not been recorded on the accounting records of Harrah's or Players, as the case may be, before the cut-off date of the accounting underlying the first tranche of such reimbursable expenses shall be made on or before ninety (90) days after the Effective Date. Each of Harrah's and Players has had the opportunity to and it approves the costs reimbursed on the Effective Date. The second reimbursing distribution shall be subject to the right of each Partner to review and approve the additional amounts reimbursed, provided that the standard for entitlement to, and arbitration of, any dispute as to any such reimbursement shall be to allow reimbursement of any amount incurred in good faith for an item or category of expense included within the Cost Budget that the Partnership's accountants concur is a proper Partnership expense. 6. Profits and Losses (a) Allocation of Losses All Losses shall be allocated to the Partners in accordance with their respective Percentage; provided, however, that: (i) Losses (or portion thereof) attributed to a loan made or guaranteed by a Partner, or Partner nonrecourse debt within the meaning of Regulation Section 1.704-1(b)(4)(iv)(g)2(i) ("Partner Nonrecourse Debt") shall be allocated to such Partner in accordance with such Regulation; and (ii) in accordance with Section 704(c) of the Code and Regulations thereunder, loss and deductions with respect to any property contributed to the Partnership shall be allocated solely to the contributing Partner so as to take account of any variation between the adjusted basis of such property and the agreed value at which such property was contributed. (b) Allocation of Profits All Profits shall be allocated in accordance with the following order and priority: (i) first, to those Partners who were allocated Losses (or portions thereof) under Section 6(a) in accordance with Regulation Section 1.704-1(b)(4)(iv)(g)2(i) - 20 - until the cumulative Profits allocated pursuant to this Section 6(b) to such Partners are equal to the total of such Losses allocated to such Partners for all prior periods; and (ii) second, to the Partners in accordance with their respective Percentage. Notwithstanding the foregoing, in accordance with Section 704(c) of the Code and Regulations thereunder, profit and gain with respect to any property contributed to the Partnership shall be allocated solely to the contributing Partner so as to take account of any variation between the adjusted basis of such property and the agreed value at which such property was contributed. (c) Minimum Gain Chargeback Notwithstanding any other provision of this Agreement, if there is a net decrease in Partnership minimum gain (as defined in Regulation Section 1.704-2(d), Profits (or items thereof) shall be allocated to all Partners in an amount determined as provided in Regulation Section 1.704-2(g)(2) and otherwise in accordance with Regulation Section 1.7042(f). This Section 6(c) is intended to comply with the minimum gain chargeback requirements of Regulation Section 1.704-2(f) and shall be interpreted consistently therewith. Any special allocations made under this Section 6(c) shall be taken into account for purposes of determining subsequent allocations of Profits and Losses so that the total allocations will, to the extent possible, equal the allocations that would have been made if this Section 6(c) had not previously applied. In addition, notwithstanding any other provision of this Agreement, if there is a net decrease in minimum gain attributable to a Partner Nonrecourse Debt (as defined in Section 6(a) hereof and as determined pursuant to Regulation Section 1.704-2(i)(3), such minimum gain being hereinafter referred to as "Partner Nonrecourse Minimum Gain") for a taxable year of the Partnership, then, after taking into account allocations pursuant to this Section 6(c), but before any other allocations are made for such taxable year, each Partner with a share of Partner Nonrecourse Minimum Gain attributable to such Partner Nonrecourse Debt at the beginning of such year shall be allocated items of income and gain for such year (and, if necessary, for subsequent years) in an amount equal to such Partner's share (determined in a manner consistent with Regulation Section 1.704-2(g)(2)) of the net - 21 - decrease in Partner Nonrecourse Minimum Gain. Any special allocations made under this Section 6(c) shall be taken into account for purposes of determining subsequent allocations of Profits and Losses so that the total allocations will, to the extent possible, equal the allocations that would have been made if this Section 6(c) had not previously applied. (d) Liquidating Distributions Upon liquidation of the Partnership, liquidating distributions shall in all cases be made in accordance with the positive Capital Account balances of the Partners, as determined after taking into account all Capital Account adjustments for the Partnership taxable year during which such liquidation occurs (other than those made pursuant to Regulation Sections 1.704-1(b)(2)(ii)(b)(2) and (3)), by the end of such taxable year (or, if later, within 90 days after the date of such liquidation). (e) Restoration of Negative Capital Account If any Partner has a deficit balance in its Capital Account following the liquidation of in the Partnership, determined after taking into account all Capital Account adjustments for the Partnership taxable year during which such liquidation occurs (other than those made pursuant to Regulation Section 1.704-1(b)(2)(ii)(b)(3)), such Partner shall be unconditionally obligated to restore the amount of such deficit balance to the Partnership by the end of such taxable year (or, if earlier, within thirty (30) days after the date of such liquidation), which amount shall, upon liquidation of the Partnership, be paid to creditors of the Partnership or distributed to other Partners in accordance with their positive Capital Account balances (in accordance with Regulation Section 1.704-1(b)(2)(ii)(b)). (f) References to Regulations The inclusion of references in this Section 6 to specific Regulation sections is not intended to imply that other Regulations are not to apply, the Partners' intent being that all Regulation Sections 1.704 are to apply to the allocation of Profits and Losses under this Agreement. 7. Management (a) Decisions other than Major Decisions and Non-Arbitrable Decisions may be made and related acts taken: (x) as provided in this Agreement; or (y) if not - 22 - specifically provided in this Agreement, by Harrah's, subject to the monetary limitations of the Budgets; or (z) as delegated by any contract entered into by the Partnership (including, without limitation, the Management Agreement). "Major Decisions" shall mean decisions to: (i) approve any Material Modification; (ii) approve the Annual Plan and Operating Budget; (iii) change the Partnership Accountants; (iv) change the permitted investments or irrevocable banking instructions identified in Section 18; (v) allocate a condemnation award or casualty insurance or title insurance proceeds among the various items of property taken (if not allocated by the condemnee, insurer or judicial or other authority making such award); (vi) modify any management agreement for the Shoreside Complex other than the Management Agreement; (vii) commence, discontinue, settle, compromise, submit to arbitration, or participate in any single or related series of actions in the nature of legal proceedings in any court, before any governmental agency, or in arbitration, other than actions arising out of the ordinary course of business, involving any potential liabilities to, or claims by or against, the Partnership, not covered by insurance or within the deductible amounts of any insurance policy, the cost of which, if lost or settled, would equal or be less than One Hundred Thousand Dollars ($100,000), adjusted annually on each anniversary of the Effective Date, to provide for increases, but not decreases, in the Consumer Price Index; (viii) make any tax election pursuant to Section 12(d); (ix) approve any sublease of a portion, less than substantially all, of any Operating Lease Premises; (x) enter into any contracts with or any compensation to a Partner or any Affiliates of a Partner, other than pursuant to the Management Agreement, the Ground Lease, the Harrah's Lease, the Players' Lease and/or any contract for insurance or related services entered into with HEI's Risk Management - 23 - Department as permitted by this Agreement and/or the Management Agreement; (xi) determine or change the location of the Project Office; (xii) determine the form of agreement to be required of Institutional Investors pursuant to Section 4.71(ii) of Part I of this Agreement; (xiii) allocate Impositions (as defined in the Operating Leases) to each of the tenants under the Operating Leases; (xiv) establishing rules and regulations governing the use of the Shoreside Complex by the tenants under the Operating Leases; or (xv) approve the amount of the second reimbursing distribution pursuant to Section 5(d) of this Agreement. (b) "Non-Arbitrable Decisions" shall mean any decisions to: (i) enter into the general contract with Hensel Phelps Construction Company and/or the architectural contract with Wittenberg, Deloney and Davidson, for the Entertainment Facilities; (ii) increase the Construction Costs for the Shoreside Complex in excess of the Cost Budget attached as Exhibit F; (iii) call for a voluntary Additional Capital Contribution pursuant to Section 4(b)(ii); (iv) construct any improvements on the Project Site, other than the work shown on the Plans and Specifications, any Material Modifications and any work approved as part of an Annual Plan or required by law or by reason of Harrah's Operational Standards as defined in Section 1.1(ab) of the Management Agreement; (v) repair, restore, rebuild or replace any damage to, or impairment or destruction of the Shoreside Complex following any condemnation, fire or other casualty or title defect which might result in an Operating Lease Termination; (vi) sell, assign, transfer, hypothecate, pledge, lease, encumber or otherwise dispose of, in a single transaction or related series of transactions, all or any portion of the Shoreside Complex or enter into any agreement to do - 24 - so, except the Harrah's Lease, the Players' Lease and the Management Agreement and any easements, rights-of-way or minor title encumbrances incidental to the development of the Shoreside Complex; (vii) incur Debt other than (A) Debt provided for in a Cost Budget; (B) Debt provided for in an Operating Budget; (C) Debt provided in an approved budget for future development; (D) trade debt incurred in the ordinary course of business; (E) Debt imposed by law; or (F) Debt incurred under any contract, loan document, lease or other agreement authorized pursuant to this Agreement. (viii) (A) enter into any management agreement other than the Management Agreement; or (B) enter into any amendment or modification of the Management Agreement; (ix) commence, discontinue, settle, compromise, submit to arbitration, or participate in any single or related series of actions in the nature of legal proceedings in any court, before any governmental agency, or in arbitration, or other than actions arising out of the ordinary course of business, involving any potential liabilities to, or claims by or against, the Partnership not covered by insurance or within the deductible amount of any insurance policy, the cost of which, if lost or settled, would exceed One Hundred Thousand Dollars ($100,000.00), adjusted annually on each anniversary of the Effective Date, to provide for increases, but not decreases, in the Consumer Price Index; (x) execute or enter into any single or related series of bonds, guaranties, or indemnities; (xi) invest in or operate any business other than the Shoreside Complex; (xii) other than admission of transferees of Partners in connection with any Transfer made in accordance with the terms of this Agreement, admit any additional or substitute Partners to the Partnership or approve any Transfer to any such additional or substitute Partner; (xiii) except as provided in Sections 10 and 11, dissolve, wind up the business affairs of, or liquidate the Partnership, or merge the Partnership into another entity; - 25 - (xiv) subject to the provisions of Section 16, amend or modify this Agreement; (xv) make an assignment for the benefit of creditors or file a voluntary petition under the Federal Bankruptcy Code or any insolvency law of the State or any other state of the United States of America; (xvi) approve any Transfer of an Operating Lease requiring Partnership approval; (xvii) approve any change in identity of the Arbitrator identified in Section 19(a)(i); (xviii) reject any agreement of the Partnership, including any Operating Lease and/or the Management Agreement, in the event of the filing of Partnership bankruptcy proceedings; or (xix) repair any construction defect in the Shoreside Complex, the cost of which is not recovered from contractors or other warrantors. (c) Subject to Sections 7(f) and 7(i), if the Partners are unable to reach a unanimous decision with respect to a Major Decision, either Partner may submit the matter to binding arbitration in accordance with Section 19(b); (d) Subject to Sections 7(f) and 7(i), if the Partners are unable to reach a unanimous decision with respect to a Non-Arbitrable Decision, the Partnership shall not undertake the related action, except that: (i) either Partner may cause the Partnership to take such action to the extent it, in good faith, determines that such action: (A) is necessary to comply with applicable laws, rules, regulations and orders; (B) is in defense of the Partnership's interests in any proceedings in any court, before any governmental agency, or in arbitration; or (C) is necessary to comply with any contractual or other Partnership obligations (including, without limitation, those certain agreements with the City, Howard Bend Levee District and U.S. Army Corps of Engineers identified in Exhibit J); (ii) with respect to Section 7(b)(v), if the Partners are unable to reach a unanimous decision, the related action shall be taken; and (iii) with respect to Section 7(b)(xix), if the Partners are unable to reach a unanimous decision, the related action shall be taken unless the estimated cost of repair in excess of any amounts recovered from contractors or other warrantors exceeds $50,000,000. - 26 - (e) Subject to the provisions of Sections 7(a) through (d), Harrah's shall have authority and responsibility, as well as the benefit of indemnification by the Partnership as provided in Section 14, to: (i) manage the development and construction of the Shoreside Complex, including, without limitation, supervising: (x) the preparation of the Plans and Specifications; and (y) the performance by the Persons contracting therefor with the Partnership; (ii) commit to contract and spend monies provided for in the Budgets; (iii) let contracts and change orders to contracts for the Shoreside Complex not to exceed the monies provided for in the Cost Budget, but not limited by individual line item sublimits; (iv) prepare or cause to be prepared for, and following review and approval by Players, file reports with, any governmental or regulatory agencies and any Federal, state or local tax returns (and if Players has not commented on the report, or tax return, submitted to it on or before fifteen (15) days after the Players' receipt thereof, the report shall be deemed to have been approved); (v) pay any taxes payable by the Partnership; (vi) place and maintain or cause to be placed or maintained insurance with such insurers and in such amounts as the Partners shall agree, or as required under any Partnership contract, loan document, lease or other agreement, or by law (which insurance may be placed through the Risk Management Department of HEI if the cost of insurance is: (x) approved by Players; or (y) within an applicable Budget; or (z) equivalent coverage cannot be obtained at a better cost after competitive bidding). Players shall have the right to have representatives present at all times to inspect (but not direct) work on the Shoreside Complex to assure itself that the work conforms with the requirements of the Plans and Specifications. (f) Notwithstanding the provisions of Section 7(a) and (b) except Section 7(b)(xviii), Players shall be the Partnership's representative with exclusive authority to exercise the Partnership's enforcement rights under the Harrah's Lease, the Ground Lease - 27 - (so long as Harrah's (LLC) or its Affiliate (Wholly Owned) is Ground Lessor) and the Management Agreement. Notwithstanding the provisions of Section 7(a) and (b) except Section 7(b)(xviii), Harrah's shall be the Partnership's representative with exclusive authority to exercise the Partnership's enforcement rights under the Players' Lease and, if the Leased Site is acquired by Players or its Affiliate (Wholly Owned) pursuant to Section 8(d) or otherwise, the Ground Lease. Any dispute between the Partnership and the other party to such agreements as to matters reserved to the exclusive authority of Harrah's or Players by this Section 7(f) shall be resolved under the dispute resolution sections of such agreements. (g) The Partners shall devote such time to the Partnership business as they deem reasonably necessary in furtherance of, and shall exercise their best judgment in all matters relating to, Partnership business. However, except as provided in this Section 7(g) (i.e., except for gross negligence, fraud, bad faith, breach of this Agreement or criminal conduct), no Partner shall have liability to the Partnership or to the other Partners for any failure or misfeasance on the part of such Partner whatsoever including, without limit, a failure or misfeasance with respect to any Partner's obligations under this Agreement. Without limiting the generality of the foregoing, the Partners recognize that innumerable decisions will have to be made by the Partners during the term of Partnership which will require the Partners to exercise broad discretion. Accordingly, each of the Partners hereby waives its right to institute any legal proceeding of any kind whatsoever against another Partner for any action taken by, or any omission of, a Partner in its capacity as a Partner in the Partnership, except for gross negligence, bad faith, fraud, breach of this Agreement or criminal conduct. (h) If, pursuant to the Code and the Regulations, the Partnership is to be treated as an association taxable as a corporation, the Partners shall, in compliance with the Code, the Regulations and applicable state law, take the necessary action to restructure the Partnership, change the form of entity under which the business of the Partnership is conducted, or make an appropriate tax election to enable the Partnership or its successor to be treated as a "pass-through entity" (an entity which, in most instances, will not be subject to tax in addition to the tax paid at the participant level) for Federal and State income tax purposes. - 28 - (i) Unless otherwise agreed by the Partners, all meetings of the Partners shall be held, either: (i) by telephone conference at which all designated representatives participating may hear and speak to each other (and such telephone presence shall be an appearance at a meeting for purposes of this Agreement); or (ii) (A) until the Opening Date, at the offices of Peper, Martin, Jensen, Maichel and Hetlage, 720 Olive Street, St. Louis, MO 63101-2396, or such other place, as the Partners may agree; and (B) after the Opening Date, at the Project Office; in either case, between 9:00 A.M. and 4:00 P.M. local time on any Tuesday, Wednesday or Thursday that is a Business Day. Any Partner may call a meeting upon no less than seven (7) Business Days' advance Notice to the other Partner, designating the time, place (or telephone conference method) and subject matter of the meeting. If a Partner does not appear at a duly Noticed meeting, action may be taken at such meeting by the Partner who does appear and vote, and such action will be deemed to have been consented to by the absent Partner. Each Partner shall designate two officers, each of whom, acting separately shall have the authority to designate, by Notice given on or before the Notice of each meeting: (i) no more than five (5) individuals entitled to appear on behalf of such Partner at such meeting; and (ii) the one (1) individual (and one (1) alternate) entitled to cast the vote of such Partner at such meeting. Each Partner shall have one vote notwithstanding the number of persons representing such Partner. Each designation shall remain in effect until modified by Notice designating new officers, representatives or individuals with voting authority, as the case may be. The initial designated officer of each Partner with power to designate representatives and individuals with voting authority is: as to Players: Howard A. Goldberg, or Steven P. Perskie as to Harrah's: Philip G. Satre, or Laurance B. Lacaff - 29 - The initial individual (and his/her alternate) currently authorized to cast the vote of each Partner at a meeting is: as to Players: Howard A. Goldberg, and David Fishman, Alternate as to Harrah's: Colin V. Reed, and Laurance B. Lacaff, Alternate Any decision permitted or required to be taken at a meeting may be made without a meeting if evidenced by a written consent signed by the individuals or alternates holding voting power for each Partner. Any decision so made shall be effective upon signing of such written consent by the last Partner whose voting representatives sign, unless the written consent specifies another effective date. Any Partner may waive any Notice required before or after the date such Notice would have otherwise been required. Such a waiver must be in writing signed by the individual or alternate authorized to vote on behalf of such Partner. A Partner may vote at a meeting only through the individual or alternate authorized to cast its vote. The right of other designated individuals to appear at a meeting is conditioned upon the presence of the individual or alternate with voting authority. The appearance at a meeting of the individual or alternate with voting authority shall waive any requirement of Notice of such meeting unless such person objects at the beginning of the meeting to holding the meeting or transacting business at the meeting and does not thereafter vote or assent to action taken at the meeting. For the duration of any Event of Default, the Defaulting Partner, and its designees, shall not be entitled to appear or vote at any meeting and there shall be not requirement to obtain the vote of such Defaulting Partner for any Partnership decision. (j) The Partners shall endeavor to coordinate the construction of tenant improvements at the Operating Lease Premises with that of the Partnership at the Shoreside Complex to arrange for a joint opening of the Entertainment Facilities and both Operating Lease Premises. To this end, construction of the Shoreside Complex shall be scheduled, to the extent practicable, to deliver possession of the Operating Lease Premises for commencement of tenant improvements to each of Harrah's (LLC) and Players - 30 - simultaneously. Neither Harrah's Premises nor Players' Premises shall have their Opening Date prior to the Opening Date of the Entertainment Facilities. (k) The Partners shall be free to compete and separately market their respective business operations at the Harrah's Premises and Players' Premises. (l) Harrah's shall annually prepare, for Players' review, an Annual Plan for the Entertainment Facilities (the "Annual Plan"). The Annual Plan for the first whole or partial Fiscal Year following the Opening Date of the Entertainment Facilities will be prepared by HMHOC on behalf of Harrah's and presented by Harrah's to Players not less than sixty (60) days before the anticipated Opening Date of the Entertainment Facilities. The Annual Plan for each subsequent Fiscal Year shall be prepared and submitted to Players not later than sixty (60) days before the beginning of such Fiscal Year. The Annual Plan will be comprised of the following: (i) a statement of the estimated income and expenses of the Entertainment Facilities for the coming Fiscal Year, such statement to reflect the estimated income and expenses during each Fiscal Month of the subject Fiscal Year; (ii) either as part of the statement of the estimated income and expenses referred to in the preceding clause (i), or separately, budgets (and related Capital Contribution and work timetables and requirements) for: (A) repairs and maintenance; (B) capital replacements and improvements; and (C) equipment purchases or leases; (iii) a business and marketing plan for the subject Fiscal Year including, without limitation: (A) room rates, food and beverage pricing and other charges to persons using the Entertainment Facilities; (B) a description of any modifications to the policies, governing the access of Harrah's (LLC) and Players to, and reservation of hotel and the special events rooms at the Entertainment Facilities by, each of Harrah's (LLC) and Players, a copy of which, as currently approved, is attached as Exhibit Q; - 31 - (C) a description of billing practices and policies to be implemented among the Partnership, HMHOC, Players and Harrah's (LLC) with respect to charges by customers of the Entertainment Facilities, Harrah's Premises and Players' Premises pursuant to Sections 5.09 and 5.10 of the Operating Leases; and (D) an advertising and marketing plan for the Shoreside Complex as a whole. (iv) the Minimum Balance (as defined in the Management Agreement) which must remain in the Bank Account (as defined in the Management Agreement) as of the end of each Fiscal Month during the Fiscal Year to assure sufficient monies for working capital purposes and other expenditures authorized under the Annual Plan. The "Operating Budget" shall mean the budgeted expenses approved under clauses (i), (ii), and (iii) above. References to budgeted items contained in the Annual Plan shall refer to the expenses for such items set forth in the Operating Budget. In connection with the submission of the Annual Plan, Harrah's and Players will meet within twenty (20) days after the proposed Annual Plan is delivered to Players to have an in-depth review, including, after the first full Fiscal Year, a comparison with the previous Fiscal Year's performance of the Entertainment Facilities and a discussion of proposed expenditures contained in the Operating Budget. Such meeting will be attended by the general manager of each of the casinos operated by Harrah's (LLC) at Harrah's Premises and Players at Players' Premises. It is the intention of the parties to complete the review and approval of the proposed Annual Plan no later than thirty (30) days prior to: (x) the Opening Date of the Entertainment Facilities; and (y) the commencement of each Fiscal Year thereafter. Players shall be required to approve or disapprove each proposed Annual Plan. If Players disapproves or raises any objections or proposed modifications to any items contained in Harrah's proposed Annual Plan, until otherwise mutually agreed, the undisputed portions (and, in the case of the Annual Plan for the first full Fiscal Year only, disputed portions, until such time as any disputed portion is resolved by arbitration or joint agreement) of the proposed Annual Plan shall be operative. In the case of any Annual Plan after the - 32 - Annual Plan for the first full Fiscal Year, the item corresponding to the disputed item and contained in the Annual Plan for the preceding Fiscal Year shall be substituted in lieu of the disputed portions of the proposed Annual Plan. In each instance where portions of the Annual Plan from the preceding Fiscal Year are deemed to be the Annual Plan in effect until a new Annual Plan is approved, the Operating Budget expense contained in the Annual Plan for the preceding Fiscal Year shall be automatically increased by a percentage equal to the percent of increase in the Consumer Price Index during the preceding Fiscal Year, based upon the Consumer Price Index at the time the calculation is made. If, notwithstanding such Consumer Price Index increase, Players and Harrah's do not reach agreement as to a mutually acceptable Annual Plan within thirty (30) days prior to: (x) the Opening Date of the Entertainment Facilities; or (y) the commencement of each Fiscal Year thereafter, as the case may be, the item(s) of the Annual Plan that are in dispute shall be submitted to and resolved by arbitration in accordance with Section 19(b). (m) All Furnishings and Equipment, Operating Equipment and Operating Supplies (as each is defined in the Management Agreement, whether or not the Management Agreement is then in effect) used in the Entertainment Facilities which bear any identifying information or proprietary marks identifying the Operating Lease Premises of one Partner (or its Affiliate (Controlled)) shall bear, in equivalent manner, the marks or other information identifying the Operating Lease Premises of the other Partner (or its Affiliate (Controlled)). Except for the primary sign identifying the hotel and the primary signs identifying each Operating Lease Premises (which shall be separate but equivalent), all building signs identifying the Operating Lease Premises of one Partner (or its Affiliate (Controlled)) shall, in equivalent manner, identify the Operating Lease Premises of the other Partner (or its Affiliate (Controlled)). The sketch attached as Exhibit V identifies the current conceptual sign plan for the Entertainment Facility, subject to modification required by law or hereafter agreed upon. 8. Compensation to Partners; Other Interests (a) No Partner shall be entitled to compensation by reason of the rendition of services to the Partnership; provided, however, that (i) each Partner shall be entitled to reimbursement of budgeted out-of-pocket costs paid to third parties who are not Affiliates - 33 - of such Partner within the scope of such Partner's authority; and (ii) nothing contained herein shall affect fees and amounts payable to any Affiliate of a Partner pursuant to any contract or agreement with such Affiliate approved by both Partners, including, without limitation, the Management Agreement, the Ground Lease, Harrah's Lease and Players' Lease, it being understood that the fact that any Partner is directly or indirectly interested in a Person employed by the Partnership to render or perform a service, or from whom the Partnership borrows money or buys merchandise, material or other property, shall not prohibit the Partnership from employing such Person or from otherwise dealing with it. (b) Each of the Partners understands that the other Partner or its Affiliates may be interested, directly or indirectly, in various other businesses and undertakings not included in the Partnership. Except as provided in Sections 8(d) and 31(g), the Partners hereby agree that the creation of the Partnership and the assumption by each of the partners of their duties hereunder shall be without prejudice to their rights (or the rights of their Affiliates) to have such other interests and activities and to receive and enjoy profits or compensation therefrom, and each Partner waives any rights it might otherwise have to, by reason of any duty otherwise owed to the Partnership or its Partners, prevent or share or participate in such other interests or activities of the other Partner or its Affiliates. Except as provided in Sections 8(d) and 31(g), the Partners and their Affiliates may engage in or possess any interest in any other business venture of any nature or description independently or with others, including, but not limited to, the ownership, financing, leasing, operation, management, syndication, brokerage, or development of real property and gambling casinos, and neither the Partnership nor any other Partner shall have the right by virtue of this Agreement or otherwise to prevent or participate in any such venture or the income or profits derived therefrom. (c) Except as provided in Sections 8(d) and 31(g), no Partner need disclose to any other Partner or the Partnership any other business venture in which it or its Affiliates may have an interest or any other business opportunity presented to it, even if such opportunity is of a character which, if presented to the Partnership, could be taken by the Partnership, and each Partner and its Affiliates shall have the right to take for its own account or to recommend to others any such particular investment opportunity or business venture. - 34 - (d) Until modified pursuant to Section 31(g), no Partner nor any Affiliate (Controlled) of a Partner, Players' Parent or HEI (each, a "Competing Developer") may directly or indirectly, possess any right or interest in the ownership, operation, management, income, or profits of any other casino and/or other gambling operation in the St. Louis, Missouri Metropolitan Statistical Area without the prior written consent of the other Partner, whether such business is conducted alone or in conjunction with others; unless, in each case, the Competing Developer has offered to the other Partner (the "Receiving Partner") a right of first refusal to participate on an equal basis with the Competing Developer in such business. The Competing Developer shall send a Notice to the Receiving Partner including a general description of the proposed business, incorporating such detail as a prudent investor would customarily require in order to make an informed investment decision; to the extent reasonably available, the proposed form of budgets of development and construction costs and projections of expenses and revenues; the proposed economic terms and conditions upon which the business partners would jointly participate in the proposed business; and the asserted fair market value of any real estate or personal property contemplated to be used in connection with the business. The foregoing right of first refusal shall not apply to the acquisition by a Partner or its Affiliate (Controlled) of a Person having casinos or other gambling operations both in the St. Louis, Missouri Metropolitan Statistical Areas and in two or more other locations or to the acquisition of a Partner and/or its Affiliates (Controlled) by any such Person. For so long as Harrah's or an Affiliate (Wholly Owned) of HEI is a Partner of the Partnership and Players' Lease remains in effect, and subject and subordinate to any rights of third parties currently existing, and any rights of holders of mortgages, easements or leases (including only the Ground Lease, Harrah's Lease and Players' Lease and leases of Lot 7 which are terminable without liability on not more than ninety (90) days' notice following a sale of Lot 7) hereafter granted, and other third-party rights approved by Players, which approval shall not be conditioned, or unreasonably withheld or delayed, neither Harrah's nor any such Affiliate (Wholly Owned) of HEI that owns Lot 7 or the Leased Site (each, also an "Offering Partner" for purposes of this Section 8(d)) shall sell, otherwise dispose of Lot 7 or the Leased Site, or develop Lot 7, except: (i) a - 35 - sale or other disposition to an Affiliate (Wholly Owned) of HEI; or (ii) as part of the sale or other disposition of all or substantially all of the Project Property of Harrah's; or (iii) as part of the sale or other disposition of all or substantially all of the assets of HEI; or (iv) a sale or other disposition pursuant to Sections 24, 25 or 26 (each, an "Exempt Sale or Disposition"); unless Players, as Receiving Partner, has been offered the right of first refusal to purchase all or any part of Lot 7 or the Leased Site, or, in the case of a proposal to develop Lot 7, join, on an equal basis, in the development of, Lot 7, as the case may be. Harrah's shall send a Notice to Players advising Players of: (i) the purchase price and other terms of the sale of Lot 7 or the Leased Site; or (ii) in the case of a development proposal, development information for Lot 7, comparable to that identified above for an offer to participate in a casino or gambling operation, except that, in the case of any offer to participate in development of Lot 7 that is not occasioned by a third-party offer to develop Lot 7 that values Lot 7 otherwise, Lot 7 shall be valued as provided in Section 26(b). In each instance above described, the Receiving Partner shall have a period of one hundred twenty (120) days following the date that the Receiving Partner has received from the Offering Partner the information specified (reduced to thirty (30) days in the case of a right of first refusal to purchase Lot 7 or the Leased Site) in order to decide, in good faith, to accept the offer and to execute comprehensive documents for such transaction. If the Partners are unable, in good faith, to agree upon and execute mutually satisfactory comprehensive documents within said period, then the right of first refusal of the Receiving Partner shall expire as to said business, sale or development, except that: (i) the right shall be reinstated if the Competing Developer or entity owning Lot 7 or the Leased Site, as the case may be, proceeds with the business, sale or development, as the case may be, on better terms than were offered to the Receiving Partner; and (ii) the right of first refusal to purchase Lot 7 and/or the Leased Site, as the case may be, shall survive an Exempt Sale or Disposition and shall not be extinguished thereby. The provisions of this Section 8(d) and Section 31(g) shall be incorporated into a recordable instrument and recorded in the land records of St. Louis County, Missouri. The obligations of each entity and its Affiliates (Controlled or Wholly Owned, as the case may be) under both such Sections are guaranteed by their respective Guarantors, and each - 36 - Guarantor shall take all actions necessary to assure the compliance of its Affiliates (Controlled or Wholly Owned, as the case may be) with the terms hereof. 9. Disposition or Transferability of Partnership Interests (a) Except for: (i) subleases of Operating Lease Premises approved by the Partnership or permitted by the terms of the Operating Leases; and (ii) as specifically permitted by the provisions of this Section 9, no Partner shall Transfer all or any portion of its Project Property. (b) Subject to the remaining provisions of this Section 9, each Partner shall have the right to Transfer all, but not part, of its Project Property, subject to the right of the other Partner to acquire all (but not part) of such Project Property at the price and upon the terms set forth in this Section 9(b), and the surviving rights of Players with respect to Lot 7 described in Section 8(d). A Partner whose Project Property is subject to acquisition pursuant to this Section 9(b) is sometimes referred to as the "Transferor Partner." (i) If a Transferor Partner desires to Transfer its Project Property and has received a non-collusive and bona fide third-party offer, the Transferor Partner shall give the other Partner written notice of its desire to make such transfer and provide the other Partner with a copy of such offer. The other Partner shall have a right for thirty (30) days thereafter to elect, by Notice to the Transferor Partner, to acquire the Transferor's Project Property on the terms set forth in such offer. If the other Partner timely exercises such right, the Transferor Partner shall thereafter Transfer the Project Property to the other Partner (the "purchasing Partner") on the terms set forth in such offer. If the purchasing Partner fails to timely exercise such right, the Transferor Partner shall thereafter have the right to dispose of the Project Property on the same or less favorable terms to the acquiror than are set forth in such offer. (ii) If the purchasing Partner will acquire the Transferor's Project Property, the closing of the purchase shall be held at such place in St. Louis, Missouri as the purchasing Partner shall specify. The exact date and time of closing shall be specified in a Notice from the purchasing Partner to the - 37 - Transferor Partner, but in no event shall it be fewer than ten (10) or more than ninety (90) days after the date upon which the purchasing Partner exercises its purchase rights. (iii) The purchase price, subject to agreed or customary real estate tax and private or levee district assessment prorations shall be paid either: (x) in cash and in full at closing; or (y) on the terms offered by the third party, at the election of the purchasing Partner; provided however, in either case, that if the purchasing Partner or its nominee shall not, by the scheduled date of closing, have been issued a license to operate the Operating Lease Premises of the Transferor Partner on substantially the same terms and conditions as were applicable to the Transferor Partner (for reason other than an Unsuitability Determination as to the purchasing Partner or such nominee), then the purchase money shall be deposited and held in escrow in an interest bearing account and shall not be released to the Transferor Partner unless and until the earliest of the date upon which: (i) the purchasing Partner and, if applicable, its nominee withdraw their application for such license; (ii) such license is issued; and (iii) an Unsuitability Determination is made by the Missouri Gaming Commission as to the purchasing Partner and its nominee or, if the purchasing Partner is an Affiliate (Controlled) of such nominee, the purchasing Partner or its nominee. The form of the Escrow Agreement, subject to any modifications required by the Missouri Gaming Commission, is attached as Exhibit R. If the purchase money is paid over time by delivery of a promissory note, such promissory note shall incorporate provisions for the automatic reduction of its principal amount by that portion of the value of the Project Property that is allocable to gambling activity, in the event that such license does not issue within twenty-four (24) months following the Closing, unless nonissuance is due to: (i) the withdrawal of the application for such License by the purchasing Partner, and, if applicable, its nominee; or (ii) an Unsuitability Determination as to both the purchasing Partner and its nominee or, if the purchasing Partner is an - 38 - Affiliate (Controlled) of such nominee, the purchasing Partner or its nominee. (iv) At the closing, the Transferor Partner shall deliver to the purchasing Partner, or its nominee, all documents reasonably requested by the purchasing Partner, or its nominee, to evidence and reflect the transfer of the Project Property being sold, which documents shall contain: (x) special warranties relating to the Transferor Partner's title (which shall be warranted to be free of encumbrances (excluding liens) other than those affecting the Project Site as of the date of its acquisition by the Partnership and reflected on the Partnership's title insurance policies, or those placed subsequent to such date in compliance with this Agreement, the Operating Leases, or the Ground Lease, as the case may be) to; and (y) full warranties as to the absence of any liens upon the property being transferred. (v) The provisions of this Section 9(b) shall be applicable to any sale or disposition by an Institutional Investor pursuant to foreclosure of a lien or security interest in a Partner's Project Property except that, in such event, the Purchase Price shall be the lesser of: (i) the Fair Market Value of the Project Property determined in accordance with Section 9(n); or (ii) the amount of all principal, interest and other charges secured by the foreclosed lien or security interest, and the closing shall be postponed until such Fair Market Value is determined pursuant to Sections 9(n)(i) and 9(n)(ii). (c) In the case of a composition with creditors, an assignment for the benefit of creditors or the reorganization or bankruptcy of a Partner (a "Debtor Partner") or its Guarantor under any federal or state law; the Partner other than the Debtor Partner shall have the option to purchase the Project Property of the Debtor Partner by giving Notice thereof to the Debtor Partner or its legal representatives within fifteen (15) days after the other Partner shall have received actual Notice of such composition, assignment, bankruptcy or reorganization. The purchase price payable for the Project Property of the Debtor Partner shall be an amount equal to ninety percent (90%) of the Fair Market Value of such Project Property on the date of the event giving rise to the option described in this Section 9(c) determined pursuant to Sections 9(n)(i) and 9(n)(ii). Closing of the acquisition of such Project Property shall occur on the date and at the - 39 - time and place designated in the Notice electing to purchase such Project Property, but the closing shall not be fewer than ten (10) days or more than ninety (90) days after the earlier of the date upon which the Partners reach agreement as to Fair Market Value or receive the appraisal report from the Appraiser. The purchase price shall be paid in cash at closing. (d) In addition to its option to purchase the Project Property of Harrah's pursuant to Section 9(b) and 9(c), if Players does not exercise such option and Harrah's Project Property is sold by Harrah's, Players shall have the additional right to purchase only the interest of HMHOC as manager of the Entertainment Facilities under the Management Agreement for its Fair Market Value, determined in accordance with the procedures established in Section 26(b). The purchase of the Management Agreement shall be elected in the same manner as an election to purchase Project Property. The closing of the purchase of the Management Agreement shall occur simultaneously with the transfer by Harrah's of the remainder of its Project Property, and the Purchase Price shall be paid in cash at closing. (e) At any time during the term hereof (subject only to Sections (f) through and including (l) of this Section 9 and free of any first offer, right of first refusal or other pre-emptive right of the other Partner), following Notice to the other Partner, a Partner may effect a Transfer of any of its Project Property or permit the Transfer of any Capital Stock and/or Voting Power in any Holding Entity to any Affiliate (Wholly Owned) of Players' Parent, in the case of Players, or HEI, in the case of Harrah's, provided that its Guarantor shall not be released from its obligations as Guarantor, and such obligations shall continue. (f) Any transferee of Project Property admitted as a Partner with respect to a transferred Partnership Interest shall, except as otherwise provided in this Agreement, have all of the rights, powers and obligations of its transferor with respect to the transferred Partnership Interest. (g) every transferee of Project Property shall (whether or not such transferee is a party hereto): (i) assume all of the obligations of its predecessor under this Agreement, the Ground Lease, the Operating Lease, the Management - 40 - Agreement, and any other agreements, other than non-recourse loans, affecting the transferred Project Property, as the case may be; and (ii) deliver to the Partners a statement, in form and content satisfactory to counsel for the Partners, acknowledging the assumption of such liabilities and that the transferee has read the provisions of this Agreement, the Ground Lease, the Operating Lease, the Management Agreement and any other agreements, as the case may be, and agrees to be legally bound by all the terms and conditions of such agreements; and (iii) pay all reasonable expenses in connection with such Transfer, including but not limited to the cost of the preparation, filing and publishing of any amendment to Partnership filings, notices, legal opinions, assignments or other documents of record as may be necessary or desirable in connection with the Transfer. (h) The Partners acknowledge and confirm that the Partnership Interests acquired by them hereunder: (i) have not been registered under the Securities Act of 1933 and, consequently, Transfer of such interests may be made only pursuant to such Act and the rules thereunder; and (ii) have not been registered under any other securities laws. Notwithstanding anything to the contrary contained in this Section 9, the Partners agree not to sell their Project Property within twelve (12) months from the Effective Date if such sale, in the opinion of counsel to the Partnership, would violate any provisions of the securities laws or the regulations promulgated thereunder; provided, however, that this sentence shall not be construed to permit any Transfers which are not permitted by the other provisions of this Section 9. (i) If a Partner shall attempt or purport to make a Transfer in violation of Section 9, any such attempt or purported transfer shall be null and void and of no legal effect. (j) No Partner shall Transfer its Partnership Interest or any part thereof if such Transfer, either alone or when taken together with other Transfers theretofore made or to be made substantially simultaneously therewith, would result in a transfer tax becoming payable by the Partnership or terminate the Partnership for Federal income tax purposes under Code Section 708(b)(1)(B), unless the transferring Partner shall have either: (A) - 41 - paid any resulting transfer tax or posted the full amount thereof with the Partnership, to be used by the Partnership to pay such tax; and (B) paid, or, if accepted by the other Partner, indemnified and held the other Partner harmless from and against any adverse current income tax consequences of the Transfer (determined after considering the mitigating effects of, but not any detrimental effect upon, the consolidation of the other Partner's Profits and Losses of this Partnership with those of other enterprises whose profits and losses are consolidated with those of such Partner for Federal or state income tax purposes). (k) (i) If a Change of Control of Players' Parent occurs, Harrah's shall have the option to purchase Players' Project Property for a purchase price equal to the Fair Market Value of Players' Project Property determined in accordance with Sections 9(n)(i) and 9(n)(ii). Harrah's may elect to exercise such option by Notice to Players given no later than twenty (20) Business Days following the first of: (A) receipt of Notice from Players of the Change of Control of Players' Parent; and (B) the giving of Notice to Players by Harrah's that a Change of Control of Players' Parent has occurred (the "Option Period"). If Harrah's exercises this option, the closing of the sale of Players' Project Property shall occur on the later of: (A) the date specified by Harrah's in its Notice of exercise that is no more than forty (40) days after such Notice; and (B) twenty (20) days after the determination of Fair Market Value, at the offices of Harrah's designated legal counsel in St. Louis, Missouri. (ii) Upon the expiration of an Option Period without election by Harrah's to exercise its option, Harrah's shall no longer have the option to purchase Players' Project Property. (iii) The Purchase Price for Players' Project Property shall be paid as provided in Section 9(b)(iii)(x). (l) No Transfer of Project Property may be made under any circumstances to any Person who: (A) has not been determined suitable or otherwise approved or exempted from such determination by the Missouri Gaming Commission; or (B) is subject to an Unsuitability Determination by any gambling commission or authority of any other state. (m) Notwithstanding the preceding provisions of this Section 9, a Partner - 42 - shall be entitled to pledge or mortgage all, but not part, of its Project Property, and Harrah's may separately mortgage its, or its Affiliate's, interest in the Leased Site, subject to the Ground Lease, and in Lot 7, to the same Institutional Lender who: (i) has been determined suitable or otherwise approved or exempted from approval by the Missouri Gaming Commission; and (ii) is not subject to an Unsuitability Determination by the gambling commission or authority of any other state, provided that its lien shall be subject to the provisions of this Agreement, the Operating Leases, the Ground Lease and the Management Agreement and, in connection therewith, there can be no separation, by foreclosure or otherwise, of ownership of the Project Property affected. The Capital Stock of Holding Entities owning 100% of the Project Property may be pledged, in whole but not in part, to the same Institutional Lender provided that: (i) the pledgee is legally bound by all provisions of this Agreement, the Ground Lease, the Operating Leases and the Management Agreement; and (ii) in connection therewith, there can be no separation, upon foreclosure or otherwise, of ownership of Project Property affected. The granting of such pledge or mortgage and any transfer in lieu of foreclosure thereof to such Institutional Investor shall not be subject to the preemptive right of first refusal set forth in Section 9(b) (but shall be subject to all other provisions of this Agreement), provided that any transfer upon foreclosure, or following acceptance of a Transfer in lieu of foreclosure, shall once again be subject to such preemptive right as provided in Section 9(b)(v). (n) (i) The Fair Market Value of Project Property, for purposes of this Section 9 and other Sections to which this Section is applicable, shall be determined based on then known costs, operating revenues and expenses or reasonable cost, revenue and expense projections, and determined: in the case of a Partnership Interest, on the assumptions that: (w) all Partnership assets are liquidated; (x) all Partnership liabilities are paid; and (y) the selling Partner is obligated to restore its negative Capital Account balance; provided that, in the case of Lot 7, the interest of Harrah's (LLC) as ground lessor of the Leased Site, and the interest of HMHOC as the manager of the Entertainment Facilities pursuant to the Management Agreement, such Project Property shall - 43 - be valued in accordance with the methodology specified in Section 26(b). If the Fair Market Value of a Partner's Project Property is a negative number, the selling Partner shall pay the negative amount to the purchasing Partner in cash at closing. If the gambling license of the selling Partner (or its Affiliate) may not be or is not surrendered by the selling Partner (or such Affiliate) to the Missouri Gaming Commission in connection with and at or before the closing, the Project Property of the selling Partner shall be valued on the assumption that it may not be used for gambling purposes. (ii) (A) For purposes of this Section 9(n) and where otherwise required pursuant to this Agreement, the Fair Market Value of a Partner's Project Property, as applicable, shall be determined by an Authorized Appraiser (the "Appraiser") selected as follows. Within fifteen (15) days after the giving of Notice of the event giving rise to the need for a determination of Fair Market Value (the "Initial Period"), if the Partners have not agreed on such Fair Market Value pursuant to Section 32, each Partner shall designate an Authorized Appraiser, and the Authorized Appraisers so designated (the "Designated Appraisers") shall select an Authorized Appraiser, within fifteen (15) days following the expiration of the Initial Period, to act as the Appraiser. If either Partner fails, within the Initial Period, to designate an Authorized Appraiser, the Authorized Appraiser selected by the other Partner during the Initial Period shall be the Appraiser. If the Designated Appraisers are unable to agree on the appointment of the Appraiser within fifteen (15) days following expiration of the Initial Period, either of the Partners shall have the right to request any appropriate court in St. Louis County, Missouri, to appoint an Authorized Appraiser to act as the Appraiser, and the other Partner shall not raise any question as to the court's full power and jurisdiction to make the appointment. The Appraiser shall deliver an appraisal report to the Partners as promptly after appointment as is reasonably possible, but in any event, not later than thirty (30) days after having been designated. - 44 - (B) The appraisal report delivered by the Appraiser shall be conclusive as to the Fair Market Value of the Project Property. The determination of Fair Market Value of Project Property pursuant to Section 9(n)(ii) shall be final and binding on the Partners, and the Partnership shall pay for the cost of the appraisal report. 10. Dissolution of the Partnership (a) The Partnership shall be dissolved upon the first to occur of the following events listed in this Section 10(a): (i) the occurrence of any of the following events listed in this Section 10(a)(i), unless the Partnership reconstitutes as a new partnership adopting the terms of this Agreement as its formative agreement in accordance with the provisions of Section 10(b); (A) an election by any Partner to dissolve the Partnership if an attachment, execution or judicial seizure of all or a substantial portion of the Project Property of any other Partner shall remain in effect for a period in excess of ninety (90) days; (B) an election by any Partner to dissolve the Partnership in the event of: (1) the dissolution, bankruptcy (voluntary or, if not stayed or discharged in ninety (90) days, involuntary) or insolvency of any other Partner; (2) an appointment of a receiver to hold or administer any substantial portion of another Partner's Project Property which remains in effect for more than ninety (90) days; (3) the filing by any other Partner of an arrangement or reorganization under the provisions of the United States Bankruptcy Code or any other federal or state statute for the relief of debtors; or (4) an assignment by such other Partner for the benefit of creditors; or (C) the occurrence of any act or omission by a Partner which results in the dissolution of the Partnership by operation of law under the provisions of the Act; - 45 - (ii) the sale or other disposition of all or substantially all of the assets of the Partnership and the collection of all sales proceeds, including any involuntary "sale" as a result of condemnation or casualty that is not restored; (iii) the acquisition by a Partner of all of the Project Property of the other Partners; or (iv) the written agreement of all Partners to dissolve. (b) Upon dissolution of the Partnership pursuant to Section 10(a)(i), the then Partners may elect, by unanimous consent, if more than one, to reconstitute the Partnership and the reconstituted Partnership shall continue the business pursuant to the terms of this Agreement. (c) No Partner shall have a right to recover any money or other property from the Partnership or the Partners at the time of such dissolution or thereafter, except as provided in this Agreement. In accordance with the foregoing, and except as otherwise provided in this Agreement, each Partner hereby waives any right it or its successors in interest might otherwise have at law (either at the time of a dissolution of the Partnership or at a later time) to: (i) have the value of its Partnership Interest ascertained or paid to it as a result of a dissolution of the Partnership; (ii) have the value of its Partnership Interest secured by bond as a result of such dissolution; or (iii) receive, as a result of such dissolution, interest on the value of its Partnership Interest with respect thereto that are not provided for in this Agreement. 11. Liquidation of the Partnership Within five (5) days after the dissolution of the Partnership (other than a dissolution by reason of the acquisition by a Partner of all of the Project Property of the other Partner), each Partner shall contribute to the Partnership the amount of any negative balance in its Capital Account. Upon the dissolution of the Partnership (other than a dissolution by reason of the acquisition by a Partner of all of the Project Property of the other Partners), and in the absence of an election to reconstitute the Partnership pursuant to Section 10(b), the Partners shall wind up the Partnership's affairs by completing any business then in progress, liquidating its assets to - 46 - the extent practicable and applying its funds or remaining assets in the following order of priority: (a) first, the expenses of liquidation and the liabilities of the Partnership (excluding all obligations owed to Partners) shall be paid or adequate provision therefor shall be made; (b) second, all Partner Loans and Affiliate Loans shall be paid until all such obligations have been repaid; (c) thereafter, the balance, if any, shall be distributed among the Partners having positive Capital Accounts pro rata in proportion to such Capital Accounts, first taking into account all Capital Account adjustments under this Agreement with respect to the taxable year during which the liquidation occurs. Where appropriate, Capital Accounts shall be adjusted as if assets in kind held by the Partnership at dissolution were sold for their then Fair Market Value and gain or loss therefrom were allocated under Section 6. Notwithstanding the foregoing, any amount payable to a Partner who has Default Loans outstanding, shall be paid in such Partner's behalf directly to the Default Lender(s) on a first in, first out basis, until such Default Loan(s) is (are) repaid in full. 12. Books and Records (a) Full and accurate books of the Partnership shall be maintained by the Partnership, at the Project Office or at the Partnership's principal place of business, showing all receipts and expenditures, assets and liabilities, Profits and Losses and all other records necessary for recording the Partnership's business and affairs. Such books and records shall, when reported, incorporate accounting information provided pursuant to the Management Agreement and be open to the inspection and examination at reasonable times of all Partners or their duly authorized representatives who have executed confidentiality agreements in the form attached as Exhibit M. (b) The Partnership shall cause to be prepared by the Partnership Accountants, as promptly as practicable after the end of each fiscal year and sufficient to permit timely preparation and filing of Federal and State income tax returns by each Partner, a balance sheet and income statement of the Partnership for such fiscal year, all in reasonable detail, together with a statement from the Partnership Accountants showing the amount of net income, net loss, capital gain or other items allocable to each Partner - 47 - for Federal, state and local income tax purposes. Additional services or reporting shall be undertaken only at the sole expense of the Partner requesting the same, unless otherwise unanimously agreed. The certified public accountants for the Partnership ("Partnership Accountants") shall be KPMG Peat Marwick LLP, which the Partners, by the execution of this Agreement approve, or such substitute firm of certified public accountants, as may be hereafter approved by the Partners. (c) The Partnership's fiscal year and tax year shall be the calendar year. (d) Subject to the following sentence, Harrah's is designated as the tax matters partner, as defined in Section 6231 of the Code, and as such shall perform all duties and functions within the contemplation of Sections 6223, 6224, 6226, 6228 and 6230 of the Code in connection with any administrative proceeding by the Internal Revenue Service ("IRS") (or any taxing authority) or ensuing judicial proceeding regarding a tax return of the Partnership. The Partners shall determine, as a Major Decision, whether the Partnership should make any available tax election. 13. Reimbursement Except in a case of fraud, bad faith, gross negligence, breach of this Agreement or criminal conduct, the Partnership shall promptly reimburse each Partner any expenses incurred by it pursuant to the authority granted to such Partner in this Agreement, but such reimbursement shall be paid from the Available Cash and the assets of the Partners, limited to their respective Project Property to the extent of any guaranty, the assets of the Guarantor. Such amount due from the Partnership shall be considered a debt of the Partnership due thirty (30) days after demand for payment is made, and shall bear interest until paid at the Prime Rate plus eight percent (8%) or the Usury Rate, if less. 14. Representations and Warranties/Indemnification Each Partner and Guarantor represents and warrants to and with the Partnership and each other Partner as of the date hereof, that: (a) (i) it is, and shall continue to be, validly existing and duly organized under the laws of the state of its formation, and the Persons acting in its behalf have all the requisite power and authority to execute, deliver and comply with the terms and provisions hereof and consummate the transactions contemplated herein; - 48 - (ii) its execution, delivery and performance of this Agreement do not require the consent or approval of any governmental body or regulatory authority or other entity other than approvals of the City of Maryland Heights and the Missouri Gaming Commission, is not in contravention of or in conflict with any applicable laws, regulations, rules or orders and this Agreement is, and will continue to be, the valid, binding and legally enforceable obligation of such Partner and its Guarantor in accordance with its terms; (iii) its Project Property has been or will be acquired solely by and for its account for investment purposes only and is not being purchased for, or with a view to, subdivision, fractionalization, resale or distribution; it has no contract, undertaking, agreement or arrangement with any Person to Transfer its Project Property (or any part thereof) to such Person or anyone else; and it has no present plans or intentions to enter into any such contract, undertaking or arrangement and agrees not to Transfer all or any part of its Project Property (or any part thereof), except that subject to compliance with the terms of this Agreement and all applicable laws, regulations, rules or orders; (iv) except as noted in Exhibit I, it has no knowledge of, and has not caused to exist, any liens or encumbrances on its Project Property, and hereafter will not cause or suffer to exist any liens or encumbrances on its Project Property, except in accordance with and subject to applicable law and the provisions of this Agreement, the Management Agreement and/or the Operating Leases, as the case may be; (v) each Partner has incorporated provisions into its articles of incorporation, charter, partnership agreement or other formative document as required by Section 31 and placed legends on its certificates of Capital Stock and, not later than thirty (30) days after the date hereof, those of its partners substantially in the form of Exhibit N; and (vi) it is not in violation or default under any agreement with any Person, or under any law, judgment, order, decree, license, permit, approval, rule, or regulation of any court, arbitrator, administrative agency, or other - 49 - governmental authority to which it may be subject which could reasonably be anticipated to have a material adverse impact on the Partnership, and hereafter shall take no action which shall be in violation or cause a default under any agreement with any Person, or under any law, judgment, order, decree, license, permit, approval, rule, or regulation of any court, arbitrator, administrative agency, or other governmental authority to which it may be subject which could reasonably be anticipated to have a material adverse impact on the Partnership; (b) with respect to its investment in the Project Property: (i) it has knowledge and experience in financial and business matters in general, and in investments of this type; (ii) it is capable of evaluating the merits and risks of such investment; (iii) it has either secured independent tax advice with respect to such investment, upon which it is solely relying, or it is sufficiently familiar with the income taxation of partnerships that it has deemed such independent advice unnecessary; (iv) it has received or has access to all material information and documents with respect to such investment and has had an opportunity to ask questions and receive answers thereto and to verify and clarify any information available; (v) notwithstanding any financial projections which may have been prepared by any other Person, it has relied solely upon its independent investigation, and not on any financial projections, statements, actions or representations of the other Partners or any Affiliate of the other Partners, in making the decision to acquire such investment; (vi) it understands that no Federal or State agency has reviewed or passed upon the adequacy or accuracy of the information set forth in the documents submitted to it or made any finding or determination as to the fairness for investment, or any recommendation or endorsement of such investment; - 50 - (vii) it understands that there are restrictions on the transferability of its Project Property; (viii) it understands that there will be no public market for its Project Property, and, accordingly, it may not be possible to liquidate such investment; (ix) it understands that any anticipated Federal or state income tax benefits applicable to its Project Property may be lost through changes in, or adverse interpretations of, existing laws and regulations; (x) it has entered into this Agreement freely and voluntarily, without coercion, duress, distress, or undue influence by any other Persons or their respective shareholders, members, directors, officers, partners, agents or employees; and (xi) it understands that this Agreement may affect legal rights and it has received legal advice from counsel of its choice in connection with the negotiation and execution of this Agreement and is satisfied with its legal counsel and the advice received from it; (c) each of the following is true and correct: (i) none of it or any of its Affiliates is a party to any other agreement or other arrangement which would interfere with the development or operation of the Shoreside Complex; (ii) performance of this Agreement will not violate any other material agreement or other arrangement to which it or its Affiliates is a party; (iii) it and its Affiliates have not received notice of any claim which would interfere with its or their performance of this Agreement; (iv) none of it or its Affiliates has incurred any material liabilities or obligations on behalf of the Partnership or has knowledge of any liabilities or obligations of the Partnership other than those described on Exhibit J and agrees hereafter that it or they, as the case may be, will not, nor cause any of its Affiliates, to incur any liability or obligation on behalf of the Partnership, except as otherwise expressly provided herein; - 51 - (v) it knows of no actions or lawsuits, pending, planned or threatened, by or against it, the Partnership, or its Affiliates, which could create an obligation or liability for the Partnership or any of the other Partners; and (vi) none of such Partner, its Affiliates or any officers or directors of any of them has been determined by any gambling commission or authority to be unsuitable, has been convicted of a crime (other than traffic offenses), has had any application for any gambling license or permit rejected, or has had any gambling license or permit, once having been issued, rescinded, suspended, revoked or not renewed or reinstated, and no Partner has knowledge that its affiliation with any other Partner will threaten any gambling license, permit, entitlement or approval in any jurisdiction of any other Partner or Affiliate of a Partner; (d) the execution, delivery and performance of this Agreement will not: (i) violate any law, judgment, order, decree, license, permit, approval, rule or regulation of any court, arbitrator, administrative agency, or other governmental authority to which it or its Guarantor may be subject; (ii) result in a breach or default under any contract or other binding commitment or any provision of the charter or by-laws or partnership agreement or other organizational documents, as the case may be, of any such entity; or (iii) require any consent, or approval or vote of any court or governmental authority or of any Person that, as of the date hereof, has not been given or taken, and does not remain effective. As used in this Section 14, the term "Agreement" includes this Agreement, the Guaranties attached hereto, the Harrah's Lease, the Ground Lease and the Management Agreement, as to Harrah's; and the Players' Lease as to Players. (e) (i) Players shall and does hereby indemnify, defend and hold harmless the Partnership and the Indemnified Persons of Harrah's, and each of them separately, from and against all loss, cost, or damage whatsoever (including attorneys fees) resulting from any act, claim or omission of or by - 52 - Players or any Affiliates (Controlled) of Players' Parent prior to the date hereof. (ii) Harrah's shall and does hereby indemnify, defend and hold harmless the Partnership, the Indemnified Persons of Players, and each of them separately, from and against any loss, cost, or damage whatsoever (including attorneys fees) resulting from any act, claim or omission of or by Harrah's and any Affiliates (Controlled) of HEI prior to the date hereof. (iii) Each Partner shall and does hereby indemnify, defend and hold harmless the Partnership and each other Partner from and against any loss, cost, or damage whatsoever (including attorneys fees) resulting from any breach by any of them of the representations and warranties under Section 14 hereof, or any losses or expenses as a result of or in connection with any breach of this Agreement. (f) (i) To the fullest extent permitted by applicable laws, regulations, rules or orders, each Partner and its Indemnified Persons shall not be liable, responsible or accountable in damages or otherwise to the Partnership, or to any of the Partners, for any act or omission performed or omitted by them in good faith on behalf of the Partnership and in a manner reasonably believed by them to be within the scope of their authority and in the best interests of the Partnership; provided, however, that this exculpation shall not apply to acts or omissions which are determined, by final decision of a court of competent jurisdiction, to constitute either fraud, bad faith, breach of this Agreement, gross negligence, or criminal conduct. (ii) To the fullest extent permitted by law, the Partnership, its receiver or its trustee, shall indemnify, defend and hold harmless each Partner and its Indemnified Persons from and against any and all loss, cost, damage, expense or liability (other than a loss of any equity contributions, Partner Loan, Affiliate Loan or other investment in the Partnership), which relate to or arise out of the Partnership, the Shoreside Complex, any development of the Partnership or the Partnership's business or affairs, regardless of whether the Partners continue to be Partners, an Affiliate of a Partner, or an agent, officer, - 53 - member, director, stockholder or employee of such Partner or such Affiliate at the time any such liability or expense is paid or incurred, if such Partner's or its Indemnified Persons' conduct did not constitute fraud, bad faith, breach of this Agreement, gross negligence or criminal conduct. (iii) To the extent that, at law or in equity, a Partner or its Indemnified Persons have duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, each Partner and its Indemnified Persons acting under this Agreement or otherwise shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement. The provisions of this Section 14, to the extent that they expand or restrict the duties and liabilities of a Partner or its Indemnified Persons otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of such Partner and its Indemnified Person. (g) (i) (A) Promptly after the assertion of any claim by a third party which may give rise to a claim for indemnification from an Indemnifying Partner under this Agreement, an Indemnified Person shall notify the Indemnifying Partner in writing of such claim and advise the Indemnifying Partner whether the Indemnified Person intends to contest such claim. (B) The Indemnified Person shall permit the Indemnifying Partner to contest and defend against such claim, at the Indemnifying Partner's expense, if the Indemnifying Partner has confirmed to the Indemnified Person in writing that it agrees that the Indemnified Person is entitled to indemnification hereunder in respect of such claim, unless the Indemnified Person can establish, by reasonable evidence, that the conduct of its defense by the Indemnifying Partner could be reasonably likely to prejudice such Indemnified Person due to the nature of the claims presented or by virtue of a conflict between the interests of such Indemnified Person and such Indemnifying Partner and another Indemnified Person whose defense has been assumed by the Indemnifying Partner. Notwithstanding a determination by the Indemnifying Partner to - 54 - contest such claim, the Indemnified Person shall have the right to be represented by its own counsel and accountants at its own expense. In any case, the Indemnified Person shall make available to the Indemnifying Partner and its attorneys and accountants, at all reasonable times during normal business hours, all books, records, and other documents in its possession relating to such claim. The party contesting any such claim shall be furnished all reasonable assistance in connection therewith by the other party (with reimbursement of reasonable expenses by the Indemnifying Partner). If the Indemnifying Partner fails to undertake the defense of or to settle or pay any such third-party claim within fifteen (15) days after the Indemnified Person has given Notice to the Indemnifying Partner advising the Indemnifying Partner of such claim, or if the Indemnifying Partner, after having given Notice to the Indemnified Person that it intends to undertake the defense, fails forthwith to defend, settle or pay such claim, then the Indemnified Person may take any and all necessary action to dispose of such claim including, without limitation, the settlement or full payment thereof upon such terms as it shall deem appropriate, in its sole discretion, subject to the following with respect to any proposed settlement thereof. (C) The Indemnifying Partner shall not consent to the terms of any compromise or settlement of any third-party claim defended by the Indemnifying Partner in accordance herewith (other than terms related solely to the payment of money damages and only after the Indemnifying Partner has furnished the Indemnified Person with such evidence as the Indemnified Person may reasonably request of the Indemnifying Partner's capacity and capability (financial and otherwise) to pay promptly the amount of such money damages at such times as provided in the compromise or settlement) without the prior written consent of the Indemnified Person if as a result of such compromise or settlement such Indemnified Person could be adversely affected. - 55 - (D) Any claim for indemnification under this Agreement which does not result from the assertion of a claim by a third party shall be asserted by Notice given by the Indemnified Person to the Indemnifying Partner. Such Indemnifying Partner shall have a period of thirty (30) days within which to respond thereto. If such Indemnifying Partner does not respond within such thirty (30) day period, such Indemnifying Partner shall be deemed to have accepted responsibility to make payment, and shall have no further right to contest the validity of such claim. If the Indemnifying Partner does respond within such thirty (30) day period and rejects such claim in whole or in part, such Indemnified Person shall be free to pursue such remedies as may be available to such party under applicable laws, regulations, rules or orders. (ii) Mitigation Each Indemnifying Partner and Indemnified Person shall use reasonable efforts and shall consult and cooperate with each other with a view towards mitigating claims, losses, liabilities, damages, deficiencies, costs and expenses that may give rise to claims for indemnification. (iii) Payment Each Indemnifying Partner agrees to pay any amounts due hereunder (A) within ten (10) days of Notice in respect of its indemnity obligations which it has accepted or which it has been deemed to accept; (B) within five (5) days of any final adjudication by a court of competent jurisdiction of any indemnity obligations as to which it has not so accepted; and (c) as attorneys' fees and other costs of defense are incurred and invoiced. 15. Certificates, Documents, Execution Each Partner shall execute, with acknowledgment or affidavit, if required, all documents and writings which may, in the reasonable opinion of either Partner, be necessary or expedient in the creation of the Partnership and the authorization of the Partnership to do business pursuant to this Agreement, including, without limitation, one or more trade or fictitious name registrations and all amendments thereto, as well as any cancellation thereof, provided the foregoing is not contrary to any other provision of this Agreement. - 56 - 16. Amendment Except as otherwise provided in this Agreement, this Agreement may be amended only by an instrument in writing signed by all of the Partners. 17. Notices All Notices, demands and other communications required or permitted to be given or delivered hereunder shall be in writing, addressed to the Partner intended at the address set forth below or such other address as it may designate by Notice given to the other parties in the manner herein provided, and shall be deemed to have been given (a) on the dated received if given by United States mail, postage prepaid, registered or certified, return receipt requested, or (b) on the date delivered if given by personal delivery or recognized overnight courier service, provided that delivery is acknowledged in writing by the receiving Partner or an employee of such Partner or its Affiliate: Harrah's: c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, TN 38117 FAX: (901) 762-8776 Attn: General Counsel Players: c/o Players International, Inc. 3900 Paradise Road, Suite 135 Las Vegas, NV 89109 FAX: (702) 792-9843 Attn: President 18. Bank Accounts; Investments All funds of the Partnership shall be deposited in its name in such checking and savings accounts, time deposits or certificates of deposit as shall be designated by the Partners from time to time, pursuant to Irrevocable Banking Instructions in the form attached as Exhibit K, in the case of accounts maintained by the Partnership, and in the form attached to the Management Agreement, in the case of accounts maintained under the Management Agreement. The Partnership may invest funds in any of the types of investments identified on Exhibit L. - 57 - 19. Arbitration (a) In the event of a failure of the Partners, at any meeting, unanimously to approve a Material Modification, any Partner may by Notice to the other Partner elect an arbitration which shall be conducted in accordance with the following procedures: (i) The Partners shall appoint a single qualified and disinterested advisor. For purposes of Section 19(a), the advisor (the "Arbitrator") shall be an individual who: (A) is not an Affiliate of any Partner; and (B) has at least five (5) years' experience in major hotel or casino hotel design. The initial agreed Arbitrator is the firm of Skidmore, Owings and Merrill ("SOM"), which shall act pursuant to the agreement attached as Exhibit S. Such appointment may be modified only by joint written agreement of the Partners or, if the Arbitrator resigns and the Partners fail to agree on a substitute Arbitrator within ten (10) days after the resignation of SOM, by a court of competent jurisdiction in St. Louis County, Missouri, upon petition of either Partner. Such Arbitrator shall render a decision within five (5) days of submission of any item for arbitration. If the Arbitrator fails to render the decision within such time, either Partner may seek an order from a court of competent jurisdiction: (x) in the state of residence of such Arbitrator or the State, requiring such Arbitrator to render the decision immediately; or (y) in the State, appointing another Arbitrator with equivalent experience and directing such Arbitrator to render such decision. (ii) The decision and award of such sole Arbitrator shall be binding upon the Partners. The fees and expenses of the Arbitrator shall be paid by the Partner whose position is not adopted by the Arbitrator. Arbitration shall be conducted upon written submission of the parties without need for hearing. (iii) In rendering a decision on each disputed item, the Arbitrator shall consider the following factors: (A) integrity of the Cost Budget, as a whole; (B) operational efficiency of the Shoreside Complex; (C) consistency of the disputed item with (x) the architectural design and the quality of the remainder of the Shoreside Complex; and (y) the conceptual Plans and Specifications approved as identified on Exhibit E and all other Plans and Specifications and - 58 - Material Modifications theretofore adopted by the Partnership; and (D) the effect upon future revenue of the Shoreside Complex, as a whole. (b) In the event of a failure of the Partners, at any meeting, unanimously to approve any Major Decisions, other than a Material Modification, either Partner may, by Notice to the other Partner, elect an arbitration which shall be conducted in accordance with the following procedures: (i) The Partners shall endeavor to appoint a single qualified and disinterested Arbitrator. For purposes of Section 19(b), an Arbitrator (the "Arbitrator") shall be an individual who: (A) is not a Beneficial Owner of, and who has not performed work for, any Holding Entity; and (B) who: (x) is a partner with any of Arthur Andersen LLP, Coopers & Lybrand, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick LLP, and Price Waterhouse or a firm of equivalent status; and (y) has at least five (5) years of auditing or accounting experience in the gambling or hotel industry; or, if the Partners so agree prior to the time for appointment herein provided, but not otherwise; (C) is an expert in a field other than accounting having qualifications agreed by the Partners. Such Arbitrator, if agreed, shall render his/her decision within thirty (30) days of such appointment. If the Arbitrator fails to render his/her decision within such time, either Partner may seek an order from a court of competent jurisdiction in the state of residence of such Arbitrator or the State, as the case may be: (x) requiring such Arbitrator to render his/her decision immediately; or (y) appointing another Arbitrator with equivalent experience and directing such Arbitrator to render such decision. (ii) If the Partners cannot agree on a single Arbitrator within twenty (20) days after an election to submit a Major Decision to arbitration, then each Partner shall appoint one Arbitrator within ten (10) days following such twenty (20) day period. The two appointed Arbitrators shall within ten (10) days of such referral appoint a third Arbitrator, and if such Arbitrators are not able to agree on such third Arbitrator within such time, then, on five (5) days' Notice in writing to the other Arbitrator, either Arbitrator shall apply to the branch of the American Arbitration Association in St. Louis, Missouri to designate and - 59 - appoint such third Arbitrator. The three Arbitrators shall render their decision within twenty (20) days after the appointment of the third Arbitrator. The Arbitrators shall act by majority vote. If the Arbitrators fail to render their decision within such time, either Partner may seek an order from a court of competent jurisdiction in the State: (x) requiring such Arbitrators to render their decision immediately, or (y) appointing one replacement Arbitrator of equivalent qualifications and directing such Arbitrator to render his/her decision. (iii) If either Partner fails timely to appoint an Arbitrator pursuant to Section 19(b)(ii), then the single Arbitrator designated by a Partner shall act as the sole Arbitrator and shall be deemed to be the unanimously approved Arbitrator to resolve such dispute. (iv) The fees and expenses of the Arbitrators shall be paid by the Partner whose position is not adopted by the Arbitrators. All Arbitrators, by accepting appointment, submit to the jurisdiction of the courts of the State. (v) The Arbitrators shall make their decision based solely on the best interests of the Partnership. All proceedings by the Arbitrators shall be conducted in accordance with the Uniform Arbitration Act as enacted in the State, except to the extent the provisions of such Act are modified by this Agreement or the mutual agreement of the parties. Unless otherwise agreed, all arbitration proceedings shall be conducted in St. Louis, Missouri, at the offices of Peper, Martin, Jensen, Maichel and Hetlage, Twenty-Fourth Floor, 720 Olive Street; St. Louis, Missouri, or if such law firm should no longer exist or no longer represent Harrah's, at a law office in St. Louis, Missouri, designated by the Partner invoking arbitration. (c) In all arbitration proceedings submitted to any Arbitrator(s), the Arbitrator(s) shall be required to agree upon and approve the substantive position advocated by one Partner with respect to each disputed item. The Arbitrator(s) shall exclusively and finally determine whether a particular dispute falls within the scope of his/her/their authority unless such determination is legally groundless or in excess of the limitations provided in this Agreement. The award of any Arbitrator(s) made in - 60 - accordance with this Section 19 shall be binding on the Partners and enforceable in any court of competent jurisdiction. (d) In the event of any disagreement as to a matter subject to arbitration under the Management Agreement, arbitration shall occur pursuant to Section 20.2 of the Management Agreement, rather than pursuant to this Section. In the event of any disagreement as to a matter subject to arbitration under an Operating Lease or the Ground Lease, arbitration shall occur pursuant to such agreement rather than pursuant to this Section. 20. Events of Default It shall be an event of default (an "Event of Default") if any one or more of the following events shall occur: (a) a Monetary Default that has not been cured within five (5) Business Days following Notice of such Monetary Default; (b) an Event of Default has occurred under the Players' Lease, as to Players, or Harrah's Lease, as to Harrah's (LLC), which has resulted in the termination thereof; (c) the failure of any Partner to perform any of its other obligations under this Agreement or the breach by any Partner of any of the other terms, conditions or covenants of this Agreement or the failure of any representation or warranty in this Agreement to be true in all material respects and a continuation of such failure or breach for more than thirty (30) days after Notice by any Non-Defaulting Partner to the Defaulting Partner that such Partner has failed to perform any of its obligations under, or has breached this Agreement; provided, that no Event of Default shall exist hereunder if (i) such default is not capable of being cured within such thirty (30) days, (ii) such default is capable of cure in a longer period of time, and (iii) cure of such default has been promptly commenced within such thirty (30) day period and such cure is thereafter diligently and expeditiously prosecuted to completion, but in no event shall any cure period under this Agreement for any default be longer than one hundred eighty (180) days; (d) a case or proceeding shall be commenced by any Partner or its Guarantor seeking relief under any provision or chapter of the Federal Bankruptcy Code or any other Federal or State law relating to insolvency, bankruptcy or reorganization; an - 61 - adjudication that any Partner or its Guarantor is insolvent or bankrupt; the entry of an order for relief under the federal Bankruptcy Code with respect to any Partner or its Guarantor; the filing of any such petition or the commencement of any such case or proceeding against any Partner or its Guarantor, unless such petition and the case or proceeding initiated thereby are dismissed within ninety (90) days from the date of such filing; the filing of an answer by any Partner or its Guarantor admitting the allegations of any such petition; the appointment of a trustee, receiver or custodian for all or substantially all of the assets of any Partner or its Guarantor unless such appointment is vacated or dismissed within ninety (90) days after the date of such appointment but not fewer than five (5) days before the proposed sale of any assets of any Partner or its Guarantor; the execution by any Partner or its Guarantor of a general assignment for the benefit of creditors; the convening by any Partner or its Guarantor of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or extension or composition of its debts; except in the case of a holder of a permitted security interest in a Partnership Interest, the levy, attachment, execution or other seizure of all or substantially all of the assets of any Partner or any Partner's Partnership Interest, where such seizure is not discharged within thirty (30) days thereafter; or the admission by any Partner in writing of its inability to pay its debts as they mature or that it is generally not paying its debts as they become due; (e) an Unsuitability Determination is made with respect to any Partner or an Affiliate (Controlled) of such Partner; (f) the dissolution of any Partner or its Guarantor; (g) any Transfer in violation of Section 9; or (h) the attempted withdrawal of any Partner from the Partnership other than in connection with any Transfer not in violation of Section 9. 21. Remedies Upon the occurrence of any Event of Default with respect to any Partner or its Guarantor (the "Defaulting Partner"), any Partner which is not a Defaulting Partner (the "Non-Defaulting Partner"), may elect to do one (1) or more of the following by Notice of such election to the Defaulting Partner: - 62 - (a) in the case of a Monetary Default: (i) advance money to the Defaulting Partner as a Default Loan; and (ii) in the case of a failure timely to repay a Default Loan, exercise the dilution rights as provided in Section 23; or (iii) elect to exercise the Appraisal Buyout remedy as provided in Section 25; or (iv) enforce such obligation against the Defaulting Partner and, if the Monetary Default is guaranteed, its Guarantor; (b) in the case of any other Event of Default: (i) elect to exercise the Appraisal Buyout Remedy as provided in Section 25; or (ii) enforce such obligation against the Defaulting Partner, and, if such Event of Default is guaranteed, its Guarantor; (c) if the Event of Default occurs pursuant to Section 20 (d), the Non-Defaulting Partner may specifically enforce its rights under Section 9(c); (d) if the Event of Default occurs pursuant to Section 20(e), the Non-Defaulting Partner may specifically enforce its rights under Section 24; (e) in the case of a non-permitted Transfer, the Partners agree that because of the uniqueness of this Partnership, no Partner can be adequately compensated in money damages for a breach by any other Partner of the Transfer restrictions of Section 9; and agrees that, if any Partner attempts to effect or suffers to occur a purported Transfer in violation of Section 9, the non-transferring Partner, at law, in equity, or otherwise, may seek to enjoin such a purported transfer, and the transferring Partner agrees to submit to the jurisdiction of any court of competent jurisdiction and to be bound by any order of such a court enjoining such an attempted or purported Transfer; (f) enforce any covenant by the Defaulting Partner to take or forbear from any other action hereunder; or (g) pursue any other remedy allowed by this Agreement or permitted at law or in equity. As provided in Section 7(i), a Defaulting Partner shall have its Voting Power in the Partnership suspended for the duration of its Event of Default. 22. Choice of Remedies (a) From and after the date a Non-Defaulting Partner has elected to exercise any remedy pursuant to Section 21, such exercise of remedies may be continued thereafter by the Non-Defaulting Partner regardless of whether the Defaulting Partner thereafter cures such Event of Default. - 63 - (b) The election to pursue any remedy pursuant to Section 21 may be made alone or in combination with any other remedies; provided that if a Partner elects a Default Loan for a Monetary Default pursuant to Section 21(a), no other remedy may be elected by such Partner with respect to such Event of Default prior to the maturity date of such Default Loan, except exercise of the dilution rights as provided in Section 23. (c) Except as provided in Section 22(b), nothing contained herein shall limit any rights to sue a Partner or Guarantor for amounts owing to the Partnership hereunder, or for any other breach of this Agreement or the guaranties appended to this Agreement. A Defaulting Partner shall have no right to demand the immediate valuation and payment for its Partnership Interest or other Project Property. (d) In any action against a Defaulting Partner for a failure to make any Initial Capital Contribution or any Additional Capital Contribution for which it is callable pursuant to Section 4 or in any levy or enforcement of any judgment against a Defaulting Partner for any such failure to contribute, the recovery against such Defaulting Partner may include any assets of such Defaulting Partner and, its Guarantor, in the case of a guaranteed obligation. (e) Upon any Transfer of a Project Property pursuant to Sections 9, 23, 24, 25 and/or 26, the transferee shall acquire the Project Property free and clear of any lien or security interest with respect to such Project Property; provided that nothing herein shall restrict or impair the lien of any lender holding any such security interest to any proceeds payable to the Partner so Transferring its Project Property or any right of such lender to receive directly such proceeds. (f) Prior to exercising the Appraisal Buyout remedy for an Event of Default, the Non-Defaulting Partner shall give notice and a twenty (20) day opportunity to cure to any Institutional Investor holding a permitted pledge of the Defaulting Partner's Project Property, provided that the name and address of such lender has previously been provided to the Non-Defaulting Partner by Notice in accordance with this Agreement. 23. Advances; Buy-Down (a) If a Defaulting Partner shall have failed to make any Capital Contribution required of it pursuant to Section 4, any Non-Defaulting Partner may, but shall not be obligated to, advance to the Partnership on behalf of the Defaulting Partner the amount - 64 - of all or any part of such delinquency, with each such advance to be treated as a loan by the Non-Defaulting Partner to the Defaulting Partner (a "Default Loan"). (i) The Non-Defaulting Partner shall promptly give Notice to the Defaulting Partner of making such advance to the Partnership. Such Non-Defaulting Partner making a Default Loan shall be the "Default Lender". (ii) Each separate advance by a Non-Defaulting Partner shall be a separate Default Loan. The amount of each such advance to the Partnership shall be credited to the Capital Account of the Defaulting Partner. (iii) Each Default Loan shall be due and payable one (1) year following advance of funds pursuant to this Section 23 and shall bear interest, payable monthly, at a fixed rate equal to the then Prime Rate plus eight percent (8%) but in no event greater than the Usury Rate. A Default Loan shall be prepayable, in whole or in part, at any time, and from time to time, without penalty or premium, at the option of the Defaulting Partner. (iv) Any interest payable by the Defaulting Partner on any Default Loan shall be paid directly to the Default Lender by the Defaulting Partner by direct distribution of one hundred percent (100%) of the Defaulting Partner's Distributable Cash, Net Proceeds of Sale or Financing/Refinancing, and other revenues and proceeds of its Project Property to the Default Lender, until repaid in full, and any such payment shall be a reduction of the Defaulting Partner's Capital Account, but shall not affect the Default Lender's Capital Account. Default Loans shall have relative priority on a first in, first out basis. (v) Upon the payment in full of the principal of and all accrued interest on a Default Loan, the Defaulting Partner's default, with respect to which a Default Loan was made, shall be deemed cured. The making of a Default Loan shall not be deemed to cure an Event of Default with respect to which a Default Loan has been made, and such cure may be made only in the manner set forth in the immediately preceding sentence. (b) Any Default Lender may elect, by Notice (the "Conversion Notice"), with respect to all or any portion of the Default Loans from such Default Lender to the - 65 - Defaulting Partner to increase such Default Lender's aggregate Percentage and decrease the Defaulting Partner's Percentage as of the date of the Conversion Notice as herein set forth with respect to such Default Lender's portion of any such outstanding Default Loan. (i) The Default Lender that delivered the Conversion Notice shall, as to its portion of any Default Loan, increase its aggregate Percentage (but not to exceed one hundred percent (100%)) by a percentage derived from a fraction, the numerator of which equals one hundred twenty percent (120%) of all outstanding principal and interest of the Default Loan being converted and the denominator of which equals the positive amount equal to one hundred percent (100%) of all Invested Capital of the Partners in the Partnership. The Defaulting Partner shall have its Percentage correspondingly decreased by the amount by which the Default Lender's Percentage is increased. If the Defaulting Partner's Percentage is decreased to zero (0) as a result of any conversion pursuant to this Section 23(b), the Defaulting Partner shall thereupon cease to be a Partner in the Partnership, but shall remain liable for the Continuing Liabilities. (ii) The Partners acknowledge that Capital Contributions will be of critical importance to the Partnership, and the Partners further acknowledge that the value of Capital Contributions or Default Loans made to Partners who have failed to make Capital Contributions is not readily ascertainable as of the date hereof and a reasonable estimate of such value is achieved by the formula contained in Section 23(b)(i) hereof. Such formula reflects such estimate of the Partners, and is not intended to be a penalty. (iii) Upon such recalculation and the corresponding adjustments of Percentages, if all of the Default Loan has been converted pursuant to this Section 23(b), the Event of Default associated with the Default Loan with respect to which such adjustments were made shall be deemed cured as of the date of such conversion. (iv) If the Percentage of Harrah's is reduced to zero (0) pursuant to Section 23(b)(i), Players may elect to terminate the Management Agreement and Harrah's Lease. If Players elects to terminate the Management - 66 - Agreement, and/or Harrah's Lease, HMHOC and Harrah's (LLC) shall receive no payments in respect of their interests in the Management Agreement or Harrah's Lease, and Harrah's (LLC) shall surrender its gambling license to the Missouri Gaming Commission and cooperate with Players' application to secure a new gambling license for Harrah's Premises. If the Percentage of Players is reduced to zero (0) pursuant to Section 23(b)(i), Harrah's may elect to terminate Players' Lease, and Players shall surrender its gambling license to the Missouri Gaming Commission and cooperate with Harrah's (LLC)'s application for a new gambling license for Players' Premises. If Harrah's elects to terminate Players' Lease, Players shall receive no payments in respect of its interest in the Players' Lease. (c) Notwithstanding anything to the contrary contained in Section 7, in the event that Percentages are adjusted as set forth in Section 23(b)(i), and the Defaulting Partner's Percentage, as readjusted, is equal to zero (0), then the Default Lender shall have the right (but not the obligation), in its sole discretion, either to (i) admit to the Partnership as an additional Partner of the Partnership a nominee of the Default Lender, and to deem the Defaulting Partner to have Transferred its Partnership Interest to such nominee (instead of increasing the Default Lender's Percentage by such amount), whereupon the Defaulting Partner will cease to be a Partner in the Partnership and to have any Partnership Interest and such Partner shall not be relieved of any Continuing Liabilities, or (ii) if, after the exercise of the dilution remedy Section 23(b)(i) no other Partner remains, take all steps necessary to dissolve and wind up the affairs of the Partnership, and to cause all assets to be liquidated and the net proceeds therefrom to be distributed solely to the Default Lender, with the Defaulting Partner having no right to receive any such Distribution. (d) Upon request by any Default Lender at any time from the date of the Default Lender's advance pursuant to Section 23(a) until any such Default Loan shall be repaid in full or converted to an increased Partnership Interest, the Defaulting Partner shall execute any and all documents reasonably requested by any Default Lender, including, without limitation, notes and any other documents which may be necessary to evidence the Default Loan. - 67 - (e) Until such time as a Defaulting Partner's Percentage is reduced to zero (0), notwithstanding any dilution of such Partner's Percentage, such Partner shall remain liable to contribute its initial Percentage of all Capital Contributions to the Partnership. 24. Redemption of Unsuitable Partner's Partnership Interest (a) Upon the occurrence of an Unsuitability Determination by the Missouri Gaming Commission, the remaining Partner may, by Notice (the "Redemption Notice") to the Partner with respect to which (or with respect to a Holding Entity of such Partner or its Project Property) an Unsuitability Determination has occurred (an "Unsuitable Partner") purchase all (but not part) of: (i) the Project Property of the Unsuitable Partner; or (ii) the Project Property of a Partner who has failed to redeem the interest of its Holding Entity as to which an Unsuitability Determination has occurred, as the case may be (each, the "Redeemed Interest"), pursuant to this Section 24 (an "Unsuitability Redemption") at the lowest of: (i) the Unsuitability Redemption Price; or (ii) the maximum amount as may be permitted to be paid by applicable law or rule, regulation or order of the Missouri Gaming Commission. The Redemption Notice may designate any date, beginning ninety (90) days before the date of such Notice, and ending on the date of such Notice, as to the effective date on which Fair Market Value of the Project Property being purchased shall be determined. Upon giving of the Redemption Notice, the Fair Market Value of the Project Property to be purchased shall be determined pursuant to Section 9(n). The purchasing Partner shall have the lesser of sixty (60) days or such period of time allowed or required by the Missouri Gaming Commission from the date upon which Fair Market Value is determined pursuant to Section 9(n) (the "Valuation Date") in which to purchase the Redeemed Interest by payment, to the Unsuitable Partner of an amount equal to the Unsuitability Redemption Price and shall select and designate the place and time for closing in St. Louis, Missouri within such period, by Notice to the Unsuitable Partner. (b) The Unsuitability Redemption Price, to the extent not prohibited, shall be paid either: (i) in cash at the closing of such Unsuitability Redemption; or (ii) to the extent permitted by law and elected by the purchasing Partner, over time, as provided in Section 25(b); in each case subject to escrow and adjustment in the manner provided in Section 9(b)(iii). At the closing of the purchase of a Redeemed Interest, the purchasing - 68 - Partner shall save, protect, defend, indemnify and hold harmless the selling Partner from all debts and liabilities owed by the Partnership to third parties, excluding any Continuing Liabilities. (c) Costs of the transaction, including recording fees, escrow costs, if any, and other fees (but not attorneys' fees) shall be borne by the Unsuitable Partner and paid at closing. The Unsuitable Partner shall deliver all appropriate documents of transfer of the purchasing Partner, or its nominee, at the closing and shall cause its entire Redeemed Interest to be transferred free and clear of all liens, claims, encumbrances, or other charges of any kind whatsoever. If the Redeemed Interest is transferred to a nominee of the purchasing Partner, the admission of such nominee to the Partnership as a successor to the Unsuitable Partner which owned the Redeemed Interest shall occur, and for all purposes shall be deemed to have occurred immediately prior to the transfer by the Partner of the Redeemed Interest. From and after the closing, the Unsuitable Partner which owned the Redeemed Interest shall have no further interest in the assets, profits or management of the Partnership and shall not be responsible for any of its obligations or losses in respect of the Redeemed Interest incurred after the redemption of its interest, and all obligations of the Partnership to the Unsuitable Partner which owned the Redeemed Interest shall be satisfied and discharged in respect of the Redeemed Interest, including all Capital Accounts or any other amounts advanced to the Partnership and owed by the Partnership to the Partner which owned the Redeemed Interest, but the Unsuitable Partner which owned the Redeemed Interest shall remain liable for any Continuing Liabilities. 25. Appraisal Buyout (a) Upon an Event of Default, any Non-Defaulting Partner may give to the Defaulting Partner written Notice that it intends to buy such Defaulting Partner's Project Property pursuant to this Section 25 (the "Appraisal Buyout"). This provision shall also be applicable if a condemnation, casualty or title defect affecting the Leased Site or the Adjacent Fee Site results in the termination of one, but not both, of Harrah's Lease and Players' Lease, in which event the Partner who is the tenant (or whose Affiliate (Wholly Owned) is the tenant) under the Operating Lease that is not terminated shall be deemed the Non-Defaulting Partner, and the Partner whose Lease is terminated shall be the Defaulting Partner. - 69 - (i) Any Non-Defaulting Partner exercising its right pursuant to this Section 25 shall be the "Appraisal Purchaser". (ii) Upon Notice to a Defaulting Partner of an election under this Section 25 (an "Appraisal Buyout Notice"), the Fair Market Value of the Project Property being purchased shall be determined pursuant to Sections 9(n)(i) and 9(n)(ii), provided that: (A) in the case of condemnation, the Fair Market Value of any Project Property taken by condemnation shall be the award established by the condemning authority or, if contested, by the court hearing such condemnation, rather than by an appraisal pursuant to Sections 9(n)(i) and 9(n)(ii) (and such award shall be allocated by the Partners among the assets taken as a Major Decision), and the Valuation Date shall be the date that possession of the Harrah's Premises or Players' Premises, as the case may be, is taken by the condemnor; (B) in the case of casualty, the Fair Market Value of any Project Property destroyed by casualty shall be the insurance proceeds recovered therefor, and the Valuation Date shall be the date upon which such insurance proceeds are paid by the insurer; and (C) in the case of a title defect, the Fair Market Value of the Project Property being purchased shall be the title insurance proceeds recovered therefor, and the Valuation Date shall be the date upon which such title insurance proceeds are paid by the title insurer. If condemnation, casualty insurance or title insurance proceeds are recovered for property in addition to the Project Property being purchased, and not separately allocated by the condemning authority, insurer, court or other body making the award, and Harrah's and Players do not agree as to the allocation thereof, the arbitrators making such determination pursuant to Article 19 shall allocate such award applying the criteria used by the condemnor, insurer or court to establish the amount of such award. Specifically, with reference to title insurance, if recovery under the Partnership's title insurance policy is determined according to the value of the business enterprises conducted at the Entertainment Facilities and Operating Lease Premises, the amount recovered shall be allocated according to the relative value of such business enterprises. The Appraisal Purchaser shall have - 70 - ninety (90) days from such Valuation Date in which to purchase the Defaulting Partner's Project Property by payment, in accordance with Section 25(b), to the Defaulting Partner of an amount equal to the Appraisal Buyout Price. (iii) In the case of an Appraisal Buyout of Players resulting from an Event of Default by Players, Harrah's may: (A) in lieu of Harrah's (LLC) enforcing the payment of damages pursuant to Section 29.3 of Players' Lease, reduce the Appraisal Buyout Price or, retroactively to the date of such promissory note, reduce the principal amount of the promissory note delivered pursuant to Section 25(b) (and apply any resulting overpayment of interest to future interest obligations, or if insufficient, to further reduction of principal) by the amount of damages that are determined to be due under Players' Lease; and (B) in lieu of HMHOC collecting damages under Section 17.2 of the Management Agreement, reduce the Appraisal Buyout Price, or, retroactively to the date of such promissory note, the principal amount of the promissory note delivered pursuant to Section 25(b) (and apply any resulting overpayment of interest to future interest obligations, or if insufficient, to further reduction of principal), by the amount of damages that are determined to be due from Players under Section 17.2 of the Management Agreement. (iv) The Appraisal Buyout Notice may designate any date, beginning ninety (90) days before the date of such Notice, and ending on the date of such Notice, as to the effective date for the determination of Fair Market Value of the Project Property to be purchased, provided that in the case of an Appraisal Buyout caused by condemnation, the date shall be the date specified in Section 25(a)(iii). (b) The closing of the Appraisal Purchaser's purchase of the Defaulting Partner's Project Property, shall occur at the time and in the offices of the Appraisal Purchaser's legal counsel in St. Louis, Missouri, designated by the Appraisal Purchaser in its Appraisal Buyout Notice, but no later than ninety (90) days after the Valuation Date. The Appraisal Buyout Price shall be paid either: (i) in cash at the time of the closing; or (ii) at the election of the Appraisal Purchaser, in the case of an Appraisal Buyout resulting from an Event of Default: (A) one-twentieth (1/20) of the Appraisal Buyout Price shall - 71 - be paid at closing by the plain check of Appraisal Purchaser (or its nominee); and (B) the balance by delivery of the Appraisal Purchaser's (or its nominee's) promissory note to the Defaulting Partner, payable in nineteen (19) equal and consecutive quarter-annual installments of principal, together with interest on the declining principal balance, from the date of closing until the principal shall have been paid in full, at a per annum rate equal to the greater of: (1) one hundred twenty percent (120%) of the interest rate payable, as of the date of closing, on five (5) year Treasury Notes of the United States Government selling at par; or (2) the minimum rate that is required in order to avoid both the imputation of interest and the presence of original issue discount pursuant to the provisions of the Code. The first payment under said promissory note shall be due and payable on the first day of the third month after the date of closing. The promissory note shall be prepayable in whole or in part at any time and from time to time, at the option of the maker thereof without penalty or premium. The promissory note shall provide that it is payable only from "cash flow" earned by the Appraisal Purchaser or its successor from the operation of the Defaulting Partner's Operating Lease Premises (gross revenue less expenses other than: (x) interest, principal or changes in respect of Debt thereon placed by the Appraisal Purchaser; or (y) increased expenses resulting from a lease amendment hereafter entered into), and if such cash flow is insufficient, to the extent of the insufficiency, any payment shall be deferred, without interest, until such time as such cash flow is sufficient to pay it. Payment at closing or pursuant to such promissory note will: (i) be subject to escrow and adjustment in the manner provided in Section 9(b)(iii). Payments at closing or pursuant to such promissory note will be distributed first to satisfy all outstanding obligations of the Appraisal Seller for Default Loans, indemnity obligations and unsatisfied calls for Capital Contributions, unless deducted in reaching the determination of Fair Market Value, and only the amount remaining after satisfaction of such obligations shall be paid to the Defaulting Partner. At the closing of the Appraisal Buyout pursuant to this Section 25, the Appraisal Purchaser shall save, protect, defend, indemnify and hold harmless the selling Partner from all debts and liabilities owed by the Partnership to third parties, excluding any Continuing Liabilities. - 72 - (c) Costs of the transaction, including recording fees, escrow costs, if any, and other fees (but not attorneys' fees) shall be borne and paid at closing by the Defaulting Partner, except in the case of a transaction resulting from damage, destruction or condemnation, in which event, costs of the transaction shall be split equally by both Partners. The Defaulting Partner shall deliver all appropriate documents of transfer at the closing and shall convey its entire Project Property to the Appraisal Purchaser, or its nominee(s), free and clear of all liens, claims, encumbrances, or other charges of any kind whatsoever. In the event such Project Property is transferred to a nominee of the Appraisal Purchaser, the admission of such nominee to the Partnership as a successor to the Defaulting Partner shall occur, and for all purposes shall be deemed to have occurred immediately prior to the transfer by the Defaulting Partner of its Project Property. From and after the closing, the Defaulting Partner shall have no further interest in the assets, profits or management of the Partnership and shall not be responsible for any of its obligations or losses, excluding any Continuing Liabilities. (d) In all events: (i) condemnation awards; (ii) insurance proceeds; and (iii) damages for Operating Lease or Management Agreement default of or caused by the Defaulting Partner or its Affiliate (if paid rather than credited against the Appraisal Buyout Price, or note owed in payment thereof, as previously herein provided), shall be retained by the Appraisal Purchaser or its Affiliate, or nominee, as the case may be. 26. Buy/Sell (a) (i) In the circumstance described in this Section, either Partner, provided that no Monetary Default exists with respect to such Partner, may, by Notice to the other Partner (a "Buy/Sell Notice"), establish a sales price ("Buy/Sell Price") for the Project Property of such Partner. This remedy shall be available only pursuant to Section 29 (Other Gambling Qualifications), and the Partner invoking this Section pursuant to Section 29 shall be the "Offeror". Any offer made in a Buy/Sell Notice pursuant to this Section 26 shall be the "Offer". The Buy/Sell Notice shall (A) state separately the components of the Buy/Sell Price attributable to each asset comprising the Offeror's Project Property; and (B) summarize in reasonable detail the calculations which determine the Buy-Sell Price for which the Offeror would be willing either (x) to purchase from the other Partner - 73 - (the "Offeree") the Offeree's Project Property; or (y) to sell to the Offeree the Offeror's Project Property (a "Buy/Sell"). (b) The Buy/Sell Price for each asset (other than: (i) the interest of Harrah's (LLC) as the ground lessor of the Leased Site; (ii) Lot 7; and (iii) the interest of HMHOC under the Management Agreement) comprising the Project Property of an Offeror shall be determined using the following methodology: (i) in the case of a Buy/Sell Notice given more than thirty-six (36) months after the Opening Date of the Entertainment Facilities; by multiplying: (x) the average annual EBITDA (earnings before interest, income taxes and depreciation allowance and excluding non-recurring costs) derived from such asset for the preceding five years (unless less than five years have expired following such Opening Date, in which case the number of years expired shall apply) by; (y) a multiple determined by Offeror; and (ii) in the case of any Buy/Sell Notice given before thirty-six (36) months after the Opening Date of the Entertainment Facilities, by multiplying: (x) the projected average annual EBITDA (as above defined) to be derived from such asset over the next succeeding five (5) years by; (y) a multiple determined by the Offeror; and deducting from the result of such multiplication the Offeror's Percentage of all additional amounts necessary to complete and open the Entertainment Facilities plus all additional amounts necessary to complete and open the Offeror's Operating Lease Premises. If, in any Buy/Sell invoking the methodology identified in (i) above, the asset being valued has not been income producing for any portion of the measuring period, then there shall be substituted as revenue and expense for such period, revenue and expense for the same period of the immediately prior year (or, if not available, the immediately following year) as the case may be. If EBITDA is negative as to any asset so valued, there shall be no payment for such asset, except as provided below with respect to Lot 7, the Leased Site and the Management Agreement. The methodology adopted by the Offeror shall be applied to like property of the Offeree. Any Offeror or Offeree must purchase all of the Project Property of the other Partner if it elects to purchase any of such Project Property. Notwithstanding the foregoing, if the gambling license of an Offeror or Offeree, may not be or is not surrendered by the seller, the Buy/Sell Price for a Partner's Partnership Interest and Operating Lease shall be determined by appraisal in accordance - 74 - with Section 9(n) (including without limitation, the non-gambling valuation assumption set forth in Section 9(n)(i)). If, in any Buy/Sell, Players should be the purchaser of Harrah's Project Property, and Harrah's (LLC) or an Affiliate (Wholly Owned) of HEI should, at such time, own Lot 7, and/or the Leased Site, then Players shall purchase such Project Property at a price equal to: (i) the seller's cost thereof; plus (ii) all costs incurred by the seller or its Affiliates during the period of its ownership thereof (including taxes, public and private assessments, insurance premiums and all payments of principal and interest under that certain promissory note dated July 21, 1994 given by Harrah's to Sverdrup/MDRC Joint Venture in the original principal amount of $4,000,000 that are not included in category (i)); or, in the case of the Leased Site only, if greater, the Fair Market Value of the Leased Site (encumbered by the Ground Lease) determined by appraisal in accordance with Sections 9(n)(i) and (n)(ii). The Management Agreement shall be valued at the amount of damages that would be due under Section 17.2 thereof for a termination caused by Players. (c) From the date the Buy/Sell Notice is given, the Offeree shall have sixty (60) days, or such lesser period of time as provided by applicable gambling laws, regulations, rules or orders, to notify the Offeror of its election either to purchase the Offeror's Project Property or sell its own Project Property at a price determined (using, in the case of an asset valued by EBITDA the same multiplier and types of financial information used by the Offeror to value its like Project Property) (a "Buy/Sell Response"). (i) If the Offeree determines to purchase the Offeror's Project Property, the Offeree shall, in its Buy/Sell Response, specify a closing date for such purchase not more than ninety (90) days, or such lesser period of time as provided by applicable gambling laws, regulations, rules or orders, from the date of its Buy/Sell Response, within which it must purchase the Project Property of the Offeror at the Offeror's Buy/Sell Price, as calculated above. (ii) If the Offeree determines to sell its Project Property, it shall so advise the Offeror in its Buy/Sell Response, and the Offeror shall, within ten - 75 - (10) days of receipt of the Offeree's Buy/Sell Response, designate, by Notice to Offeree, a closing date for such sale not more than ninety (90) days thereafter and shall purchase the Offeree's Project Property at the Offeree's Buy/Sell Price, as calculated above. (iii) If the Offeree does not elect either to buy or sell within the ten (10) day period referred to above, the Offeror may elect by Notice to Offeree, to buy the Offeree's Project Property, and the Offeror shall have ten (10) days following expiration of such ten (10) day period in which to designate, by Notice to Offeree, a closing date for such purchase not more than ninety (90) days from the date of such election. (d) The closing of the purchase and sale contemplated shall occur at a specific time designated by the buying Partner, by Notice given within the above-established time limits, at the offices of its legal counsel in St. Louis, Missouri. The Buy/Sell Price shall be paid in cash at the closing, subject to escrow and adjustment in the manner provided in Section 9(b)(iii). The Buy/Sell Price payable to an Offeror shall be distributed first to satisfy all outstanding obligations of the Offeror for Default Loans, indemnity obligations and unsatisfied calls for required Capital Contributions (to the extent not deducted in determining the Buy/Sell Price), and only the amount remaining after satisfaction of such obligations shall be paid to the selling Partner. After the closing, the selling Partner shall have no further interest in the assets, profits or management of the Partnership and shall not be responsible for any of the obligations or losses of the Partnership, and all obligations of the Partnership to the selling Partner, including all Capital Accounts, loans and advances, shall be deemed satisfied and discharged. After the closing of the purchase of Project Property pursuant to this Section 26, the buying Partner shall save, protect, defend, indemnify, and hold harmless the selling Partner from all debts and liabilities owed by the Partnership to third parties, but the selling Partner shall not be relieved of any Continuing Liabilities. Costs of sale of Project Property, including recording fees, escrow costs, if any, and other fees (but not attorneys' fees) shall be divided equally between the Partners. A Partner selling its Project Property shall deliver all appropriate documents of transfer at closing and shall convey its Buy/Sell Property to the buying Partner, or its nominee, free and clear of all liens, claims, - 76 - encumbrances or other charges of any kind whatsoever. In the event the Project Property is conveyed to a nominee of the buying Partner, the admission of such nominee to the Partnership as a successor to the selling Partner shall occur, and for all purposes shall be deemed to have occurred immediately prior to the Transfer by the selling Partner of its Partnership Interest. (e) If the buying Partner shall fail to close a purchase pursuant to this Section 26, the selling Partner may, in addition to any other rights hereunder, elect to purchase the buying Partner's Project Property at the Buy/Sell Price established hereunder, with closing to occur on a date selected by the selling Partner that is no later than sixty (60) days after the buying Partner's default. 27. Waiver (a) Each Partner hereby acknowledges and agrees that any exercise of the dilution pursuant to Section 23, the Unsuitability Redemption pursuant to Section 24, the Appraisal Buyout pursuant to Section 25, or the Buy/Sell pursuant to Section 26, for any reason or at any time in accordance with the terms of such Sections shall not be delayed, enjoined or otherwise postponed or restrained by an assertion that such action is in bad faith or a breach of any fiduciary or other Partnership duty, but, following the completion of any such exercise of rights, each Partner shall retain its right to bring an action for damages with respect to any claim of bad faith or breach of fiduciary or other Partnership duty as a result of any exercise of a dilution pursuant to Section 23, an Unsuitability Redemption pursuant to Section 24, an Appraisal Buyout pursuant to Section 25, or a Buy/Sell pursuant to Section 26. (b) Each Partner hereby acknowledges and agrees that any Partner or any Affiliate of a Partner who is a party to any agreement with the Partnership or any Partner may take any separate action or actions as it shall determine in its sole discretion to be in its own best interest with respect to the Partnership or such Partner in connection with any of its roles with respect to the Partnership, and that such Partner or Affiliate shall not be deemed to have acted in bad faith or to have breached any fiduciary or other Partnership duty for so acting in its best interest. Each Partner hereby expressly waives any claim of bad faith or breach of fiduciary or other Partnership duty as a result of any such action or actions which any Partner or Affiliate of a Partner who is party to a - 77 - contract with the Partnership or any Partner may take in its own best interest in any such separate roles. 28. Gambling Qualifications in Missouri (a) All Partners, and all Persons owning directly or indirectly any ownership interest, security interest, otherwise being the legal or Beneficial Owner of any Holding Entity, and their successors and assigns, who are required to be licensed, permitted or determined suitable or otherwise approved pursuant to applicable law or by the Missouri Gaming Commission, shall be so licensed, permitted or determined suitable or otherwise approved prior to their admission to, and at all times during their participation in, or association with, the Partnership or any Holding Entity. (b)(i) If any Partner, or any Holding Entity of any Partner or its Project Property, suffers a Missouri Gaming Commission Unsuitability Determination, all disbursements of Distributable Cash and Net Proceeds of Sale or Financing/Refinancing by the Partnership to the affected Partner (or the Partner whose Holding Entity suffers the Unsuitability Determination) (other than in repayment of Default Loans, to the extent lawful), shall be suspended and escrowed, and such Partner shall be subject to any other penalties or provisions to the extent and for so long as provided by applicable law, regulations, rules or orders; (ii) In any such case, the Partner in which such Holding Entity owns a direct or indirect interest and each intervening Holding Entity shall enforce all provisions of their formative documents which provide for the suspension of dividends and/or distributions to the unsuitable Holding Entity. (iii) In the case of a Missouri Gaming Commission Unsuitability Determination of a Partner, the remaining Partner shall be entitled to purchase such Partner's Project Property in accordance with Section 24; and (iv) In the case of a Missouri Gaming Commission Unsuitability Determination of a Holding Entity, the Partner (or its Affiliate (Controlled)) in which such Holding Entity has a direct or indirect interest shall redeem such Holding Entity within thirty (30) days of such Unsuitability Determination or such lesser period of time as may be required by law. If for any reason such - 78 - Partner or its Affiliate (Controlled) fails to redeem the ownership interest of such Holding Entity, the remaining Partner may purchase the Project Property of such Partner in accordance with Section 24. (c) Notwithstanding any provision herein to the contrary, the Partner with respect to which a Missouri Gaming Commission Unsuitability Determination was made, or the Partner or its Affiliate (Controlled) having a Holding Entity with respect to which an Unsuitability Determination was made, to the extent permitted by applicable law, regulations, rules or orders, shall have the right to appeal such Unsuitability Determination to the Missouri Gaming Commission, and provided that there is no intervening adverse consequence to the Partnership or the remaining Partner and the operation of such Partner's Operating Lease Premises is not suspended or impaired, such Unsuitability Determination shall not be invoked by the remaining Partner until such Unsuitability Determination has become final. 29. Other Gambling Qualifications (a) If any Partner reasonably determines that its affiliation with another Partner, or any of such Partner's or such Partner's Affiliate (Controlled)'s Holding Entities, will threaten any gambling permit, approval, or other entitlement that such affected Partner or any of its Affiliates (Controlled) hold or apply for in any state other than the State because of an Unsuitability Determination as to such Person, such Partner may invoke the Buy/Sell remedy set forth in Section 26, with respect to (i) the objectionable Partner, or (ii) in the case of an objectionable Holding Entity, the Partner in which (or in the Affiliate (Controlled) of which) such objectionable Holding Entity directly or indirectly owns an interest. (b) Without limiting reasonableness to such circumstance, the Partners agree that such determination shall be reasonable if based upon: (i) any written communication or Unsuitability Determination from a gambling commission or authority of another state; or (ii) evidence which, if true, would violate any law, rule or regulation administered by or be likely to result in an Unsuitability Determination by any such gambling commission or authority, so long as such evidence is not induced in bad faith by its recipient, or (iii) even if such evidence is induced in bad faith by its recipient, such evidence is true and accurate. To the extent that notice and cure remedies are made - 79 - available by such state and may be pursued without risk to the affected Partner, the Buy/Sell remedy may not be initiated unless cure is not effected within the time permitted by such state. If notice and cure remedies are not prohibited or specified by such state, the Buy/Sell remedy may not be initiated until sixty (60) days following notice of a final Unsuitability Determination by such state gambling commission or authority provided that: (i) such Unsuitability Determination is curable, (ii) cure has been initiated and is being diligently and expeditiously pursued, and (iii) such cure remedies may be pursued without material adverse effect to the affected Partner. 30. Lender Suitability (a) If any lender to the Partnership or any lender to a Holding Entity of the Partnership (other than a Holding Entity which is exempt from a suitability determination by, or is otherwise determined suitable or approved by the Missouri Gaming Commission) becomes subject to an Unsuitability Determination by the Missouri Gaming Commission, the result of which is to threaten the revocation, suspension, termination or rescission of any permit, approval, entitlement or license granted by the Missouri Gaming Commission to or for the benefit of the Partnership or its Partners, or any Affiliate (Wholly Owned) of Players' Parent or HEI, or result in any other penalty to the Partnership or its Partners and any such Affiliate (Wholly Owned), and if the Unsuitability Determination is not cured in accordance with applicable laws, regulations, rules or orders, then to the extent and so long as provided by applicable laws, regulations, rules or orders: (i) all payments to such lender shall be suspended and escrowed; (ii) such lender shall immediately divest itself of all loans made to the Partnership or such Holding Entity; and (iii) such lender shall be subject to any other remedies as shall be required by applicable laws, regulations, rules or orders. If, notwithstanding the application of, or failing the enforcement of, the preceding sentence, the Holding Entity has not satisfactorily complied with the requirements of applicable gambling laws, regulations, rules or orders, as to eliminate such lender unsuitability, the Project Property of the Partner owned in whole or in part by such Holding Entity shall be subject to redemption in the manner set forth in Section 24. (b) If any Partner reasonably determines that the existence of a loan from a lender to the Partnership will threaten any gambling license, permit, approval, or - 80 - other entitlement that such affected Partner or any Affiliates (Wholly Owned) of Players' Parent or HEI, as the case may be, holds or applies for in any other jurisdiction, the affected Partner may, at no cost to the Partnership or the other Partner: (i) require the Partnership to exercise any redemption rights in any loan documents with such lender and redeem such loan so long as such Partner makes a loan to the Partnership (with the same security, interest and maturity provisions as the redeemed loan) of the funds necessary to effect such redemption or procures a loan for the Partnership (with the same interest, security and maturity provisions as the redeemed loan) from a suitable lender and so long as such loan is in compliance with the Partnership's loan documents and this Agreement; (ii) require the Partnership to exercise any rights in any loan documents with such lender to procure a suitable lender or lenders that will assume and accept the rights and obligations of the objectionable lender; or (iii) with the consent of such lender, if required in any loan documents with such lender, procure a suitable lender or lenders that assume and accept the rights and obligations of the objectionable lender. 31. Covenants (a) Prohibited Payments Each Partner agrees that it and its Affiliates will conduct their activities, and will cause any activities conducted on their behalf to be conducted, in a lawful manner and specifically will not engage in the following transactions: (i) payments or offers of payment, directly or indirectly, to any domestic or foreign government official or employee in order to obtain business, retain business or direct business to others, or for the purpose of inducing such government official or employee to fail to perform or to perform improperly his official functions; (ii) receive, pay or offer anything of value, directly or indirectly, from or to any private party in the form of a commercial bribe, influence payment or kickback for any such purpose; or (iii) use, directly or indirectly, any funds or other assets of the Partnership for any unlawful purpose including, without limitation, political contributions in violation of applicable laws, regulations, rules or orders. - 81 - (b) Securities Law Requirements The Partners acknowledge that HEI and Players' Parent are publicly held corporations, and that trading in the securities of such corporations based upon non-public information or unauthorized disclosure or other use of material developments could expose HEI and Players' Parent to liability. The Partners shall take appropriate precautions to inform its employees and agents of such fact and to prevent such persons from making such disclosure. (c) Regulatory Information Each Partner shall provide to the Partnership or regulatory agency, as the case may be, as required by applicable laws, regulations, rules or orders, all information pertaining to the Partnership, the Shoreside Complex, and each Partner's officers, directors, shareholders, financial sources, and associations as shall be required by any Federal or state securities law or any regulatory authority with jurisdiction over the Partnership, the Shoreside Complex, or any Partner or any Affiliates of such Person including regulatory authorities in the states of Missouri, Nevada, New Jersey, Louisiana, or any other jurisdiction. (d) Confidentiality Any information in connection with the Shoreside Complex in the possession of any Partner which has not been generally disclosed to the public shall be held in confidence and shall not be disclosed to any Person other than Partners, employees, attorneys, agents, or lenders of Partners and their Affiliates (Wholly Owned), except as may be required by any regulatory authority having jurisdiction or by any other applicable laws, regulations, rules or orders of any governmental entity. Any disclosure of confidential information to any employee, attorney, agent or lender shall be kept in confidence and delivered to such Persons subject to a written confidentiality agreement benefiting the Partnership, in the form of Exhibit M, except as may be required by any regulatory authority having jurisdiction or by any other applicable laws, regulations, rules or orders of any governmental entity. (e) Holding Entity Requirements (i) Harrah's, Players and any additional or substitute Partner shall incorporate provisions into their articles of incorporation, charters, partnership - 82 - agreements or other formative documents substantially similar to and no less restrictive than those contained in Exhibit O. Each Partner shall assure that each Holding Entity (but excluding any Holding Entity that is exempt from a suitability determination by the Missouri Gaming Commission, or has been otherwise approved or excused from approval by such Commission) at no cost to any other Partner shall incorporate provisions into their articles of incorporation, charters, partnership agreements or other formative documents similar to and no less restrictive than those contained in the form of Exhibit O; provided that in no event shall any Holding Entity whose equity securities are publicly traded pursuant to the Securities Exchange Act of 1934, as amended, and traded on the New York Stock Exchange, the American Stock Exchange or NASDAQ be required to include in its formative documents Section (B) of the first Section of Exhibit O or the last Section of Exhibit O. Each Partner shall assure that any provisions required of any of its Holding Entities by this Section 31(e) are enforced and that each of such Holding Entities shall not amend such provisions in any manner which makes such provisions less restrictive than the provisions contained in Exhibit O without the approval of the Partnership. Each Partner has delivered, or, as to any Holding Entity other than a Partner, not later than thirty (30) days after the Effective Date, will deliver to the Partnership a copy of the formative documents of its Holding Entities containing the provisions required by this Section 31(e) certified by a secretary, partner or other authorized Person, as being true and correct and adopted in accordance with its formative documents. Players' Parent shall not be required to comply with the above provisions of this Section 31(e)(i), and shall be deemed to have satisfied this Section 31(e)(i) by maintaining in effect the restrictions and rights referred to in its stock certificate, a copy of which is attached as Exhibit U, which shall be continuously certified by its Secretary as being true and correct, adopted and in effect in accordance with its formative documents. (ii) Each Partner shall assure that any evidence of ownership of each Holding Entity that is an Affiliate (Controlled) of such Partner (other than a - 83 - Holding Entity that is exempt from a suitability determination by the Missouri Gaming Commission or has been otherwise approved or excused from, or is not subject to, approval by such Commission) shall contain a legend substantially similar to and no less restrictive than those contained in the form of Exhibit N. Each Partner shall use reasonable efforts to assure that any evidence of ownership of any of its other Holding Entities shall contain a legend substantially similar to and no less restrictive than the provisions contained in the form of Exhibit N. In no event shall the legend requirements of this Section 31(e)(ii) apply to any evidence of ownership of any Holding Entity which is publicly traded pursuant to the Securities Exchange Act of 1934, as amended, and traded on the New York Stock Exchange, the American Stock Exchange, or NASDAQ Stock Exchange. (iii) Without diminishing the rights of the Partners or the Partnership under Sections 28 and/or 29, each Partner shall at its sole cost and expense remove any Person within its chain of ownership or within the chain of ownership of any Affiliate (Wholly Owned) that is lessee of an Operating Lease who is determined by the Missouri Gaming Commission, as part of the initial determination of suitability of such Person, to be unsuitable. The other Partner shall bear no cost of removal of any such Partner. Each Partner agrees to comply with any requirements of any Missouri Gaming Commission in connection with any such removal. (f) Lender Requirements Harrah's, Players and any additional or substitute Partners shall assure that any loan documents evidencing loans for borrowed money from any lender to such entity or to its Affiliate (Wholly Owned) that is tenant under an Operating Lease, or to any of their respective Holding Entities, shall include provisions similar to and no less restrictive than the provisions in the form of Exhibit P, or otherwise sufficient to permit such entity to comply with Section 30. - 84 - (g) Post-Purchase Non-Competition Following the purchase by any Partner of another Partner's Project Property: (i) the selling Partner and all of the selling Partner's Affiliates (Controlled) shall thereafter be prohibited, for a period of twenty (20) years following the purchase, from participation in casino and gambling operations, as to which Section 8(d) had previously imposed a right of first refusal; until the earliest of: (w) the date upon which the purchaser or its nominee is issued a license from the Missouri Gaming Commission to conduct gambling activity at the Operating Lease Premises of the seller on substantially the same terms as the seller; (x) the date upon which an Unsuitability Determination is made by the Missouri Gaming Commission as to the purchaser and its nominee; (y) the date upon which the purchaser and, if applicable, its nominee, withdraw their applications to the Missouri Gaming Commission for such license; and (z) the expiration of ten (10) years following the purchase, this prohibition shall apply throughout the State to any new or pending license application of the selling Partner and all Affiliates (Controlled) of such Partner (and such prohibition shall survive such purchase and any resulting dissolution of the Partnership); and (ii) the purchasing Partner and all of its Affiliates (Controlled) shall be free of any covenants under Section 8(d). The foregoing prohibition shall not apply to the acquisition by a Partner or its Affiliate (Controlled) of a Person having casinos or other gambling operations both in the St. Louis, Missouri Metropolitan Statistical Areas and in two or more other locations or to the acquisition of a Partner and/or its Affiliates (Controlled) by any such Person. 32. Valuation and Appraisal Procedures (a) Voluntary Appraisal Upon an election of any Partner to exercise its Appraisal Buyout rights pursuant to Section 25, or upon the commencement of an Unsuitability Redemption pursuant to Section 24, the Partners shall promptly attempt, in good faith, to agree upon the Fair Market Value of all Project Property, as the case may be, for a period of fifteen (15) days from Notice of a Partner to exercise its rights pursuant to Section 25 [Appraisal Buyout] or from the commencement of an Unsuitability Redemption pursuant to Section 24, before resorting to the appraisal procedure established by Section 9(n). - 85 - (b) Continued Use of Appraisal If Fair Market Value shall have been established for any Project Property under this Agreement after the Opening Date, the Fair Market Value for such asset or assets shall be used for purposes of any subsequent election pursuant to Sections 24 [Unsuitability Redemption] or 25 [Appraisal Buyout] hereof for a period of twelve (12) months after the date such Fair Market Value was established. 33. Miscellaneous (a) This Agreement (and the other agreements referred to herein among the Partners and their Affiliates) embodies the entire understanding and agreement of the parties to this Agreement relating to the subject matter of this Agreement and any promise, condition, representation or warranty, express or implied, not set forth in this Agreement shall not bind any party with respect to the subject matter of this Agreement. (b) A waiver at any time of compliance with any of the terms and conditions of this Agreement shall not be considered a modification, cancellation or waiver of such terms and conditions or of any preceding or succeeding breach of this Agreement unless expressly so stated. (c) If any provision of this Agreement is held to be invalid, such provision shall not affect the remaining provisions of this Agreement which shall continue in full force and effect. (d) Wherever used in this Agreement, the masculine, feminine and neuter pronouns shall be fully interchangeable, and the singular shall include the plural where the context so requires and vice versa. (e) Each party hereby waives any right to partition or the right to take any other action which might otherwise be available to such party for the purpose of severing its relationship with the Partnership or such party's interest in the property held by the Partnership from the interests of the other parties until the end of the combined terms of this Partnership and all successor Partnerships reconstituted pursuant to Section 10 of this Agreement; provided, however, that this provision shall not limit a Partner's rights pursuant to Section 10 of this Agreement. (f) Any statutory references in this Agreement shall include a reference to any successor to such statute and/or to the referenced provision of such statute. - 86 - (g) If any Notice, payment, closing or other action is to occur by the terms of this Agreement on a day that is a Saturday, Sunday or a legal holiday under the laws of the United States of America, such action shall be taken on the closest day thereafter that is not a Saturday, Sunday or such legal holiday. (h) This Agreement and the Partnership are and shall be governed by the laws of the State of Missouri without regard to conflict of law principles. 34. Binding Effect This Agreement shall, subject to the provisions of Section 9 of this Agreement, inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives, successors and assigns. - 87 - IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto effective as of the day and year set forth above. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. HARRAH'S MARYLAND HEIGHTS CORPORATION, a Nevada corporation By: /s/ Martin Boscaccy ----------------------------------- Name: Martin Boscaccy ---------------------------- Title: Authorized Representative --------------------------- PLAYERS MH, L.P., a Missouri limited partnership By: PLAYERS MARYLAND HEIGHTS, INC., a Missouri corporation, its sole General Partner By: /s/ Steven P. Perskie ------------------------------- Name: Steven P. Perskie ------------------------ Title: Secretary ----------------------- - 88 - EXHIBIT H Prohibited Person As used herein a Prohibited Person shall mean: (i) the following company and individuals; (ii) their respective Affiliates (Controlled), spouses, children, parents and siblings; and (iii) any Person in which any of them separately, or in the aggregate, hold Voting Power: 1. Donald Trump 2. Robert E. Woolley 3. Lou Walter 4. Bass PLC EXHIBIT H (Page 1 of 1) EX-10.2 3 GUARANTY GUARANTY Players International, Inc., a Nevada corporation ("Players"), makes this Guaranty for the sole and expressly limited purpose of making the guarantees, representations, warranties, and covenants contained in this Guaranty and hereby guarantees unconditionally payment of (i) Players MH, L.P.'s Initial Capital Contributions pursuant to Section 4 of that certain Partnership Agreement of Riverside Joint Venture (the "Agreement") to which this Guaranty is attached; and (ii) any amounts necessary to satisfy any indemnity obligations pursuant to Section 14(e)(iii) of the Agreement; and (iii) the obligations of Players and its Affiliates (Controlled) under Sections 8(d) and 31(g) of the Agreement (the "Players Guaranteed Obligations"). Players hereby makes the representations and warranties set forth in Section 14.1 of the Agreement. Except as specifically set forth in this Guaranty, the foregoing guarantor shall have no obligation or liability under this Guaranty. The Players Guaranteed Obligations may be extended or renewed, and Players will be bound under this Guaranty notwithstanding any extension, renewal, or alteration of the Players Guaranteed Obligations. Players hereby waives presentation of, demand of, and protest of the Players Guaranteed Obligations and waives notice of protest for nonpayment. This Guaranty shall not be affected by: (a) the failure of any party to assert any claim or demand or to enforce any right or remedy against Players MH, L.P. under the Agreement, (b) any extension or renewal of any provision of any thereof, (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Agreement, or (d) the failure of any party to exercise any right or remedy against any other guarantor of any of the Players Guaranteed Obligations. Players further agrees that this Guaranty constitutes a guarantee of payment when due and not of collection and waives any right to require that any resort be had by any party to any of the security held for payment of any of the Players Guaranteed Obligations or to any balance of any deposit account or credit on the books of any party in favor of any Person. The obligations of Players shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise of any of the Players Guaranteed Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Players Guaranteed Obligations, discharge of Players MH, L.P. from obligations in a bankruptcy or similar proceeding or otherwise. Without limiting the generality of the foregoing, the obligations of Players shall not be discharged or impaired or otherwise affected by its failure to assert any claim or demand or to enforce any remedy under the Agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of any of the Players Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of Players or which would otherwise operate as a discharge of Players as a matter of law or equity. Players further agrees that this Guaranty shall continue to be effective or to be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Players Guaranteed Obligations is rescinded or must otherwise be restored by any party upon the bankruptcy or reorganization of Players or otherwise. Upon payment by Players of any sum as provided above so long as any of the Players Guaranteed Obligations shall remain outstanding hereunder, all rights of Players against Players MH, L.P. arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Players Guaranteed Obligations. No delay or omission by the Partners or the Partnership to exercise any right under this Guaranty shall impair any such right, nor shall it be construed to be a waiver thereof. No amendment, modification, termination or waiver of any provision of any guarantee, or consent to any departure by Players therefrom, shall in any event be effective without the written concurrence of all Partners. No waiver of any single breach of default under this Guaranty shall be deemed a waiver of any other breach or default. The Players Guaranteed Obligations may be enforced only by the Partners other than Players MH, L.P. and by any Indemnified Persons and shall not benefit or be enforceable by third parties. The Players Guaranteed Obligations shall exclude liability for tort claims of third parties. PLAYERS INTERNATIONAL, INC., a Nevada corporation By: /s/ Steven P. Perskie ------------------------------ Its: Vice President ------------------------------ EX-10.3 4 MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT FOR THE HARRAH'S-PLAYERS RIVERSIDE COMPLEX BY AND BETWEEN RIVERSIDE JOINT VENTURE AND HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY Dated: November 2, 1995 MANAGEMENT AGREEMENT TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS............................................................................................ 1 1.1 Definitions.......................................................................... 1 ARTICLE 2 SCOPE OF AGREEMENT..................................................................................... 14 2.1 Subject Matter....................................................................... 14 2.2 Development.......................................................................... 14 2.3 Grant and Acceptance of Management Responsibility.................................... 14 2.4 Funding.............................................................................. 14 ARTICLE 3 TERM................................................................................................... 14 3.1 Term................................................................................. 14 ARTICLE 4 COVENANTS OF OWNER..................................................................................... 15 4.1 Licensing and Permitting............................................................. 15 4.2 Title/Quiet Enjoyment................................................................ 16 ARTICLE 5 PRE-OPENING............................................................................................ 16 5.1 Pre-Opening Budget................................................................... 16 5.2 Payment of Pre-Opening Expenses...................................................... 16 5.3 Pre-Opening Hiring and Training of Employees......................................... 17 5.4 Pre-Opening Inspection............................................................... 17 5.5 Opening.............................................................................. 17 ARTICLE 6 STANDARDS AND MANAGER'S CONTROL........................................................................ 18 6.1 Harrah's Operational Standards....................................................... 18 6.2 Manager's Obligations................................................................ 18 6.3 Owner's Obligations.................................................................. 20 6.4 Manager's Control.................................................................... 21 ARTICLE 7 OPERATION OF THE ENTERTAINMENT FACILITY................................................................ 21 7.1 Permits.............................................................................. 21
- ii - 7.2 Equipment and Supplies............................................................... 21 7.3 Employees............................................................................ 21 7.4 Marketing and Advertising............................................................ 23 7.5 Maintenance and Repairs.............................................................. 23 7.6 Capital Replacements/Improvements.................................................... 24 7.7 Emergency Expenditures............................................................... 24 7.8 Compliance with Legal Requirements................................................... 24 ARTICLE 8 FISCAL MATTERS......................................................................................... 25 8.1 Accounting Matters and Fiscal Periods................................................ 25 8.2 Operating Budget/Annual Plan......................................................... 26 8.2.1 Fiscal Authority and Constraint............................................. 26 8.2.2 Food and Beverage Pricing/Advertising and Marketing......................... 26 8.2.3 Compliance.................................................................. 26 8.2.4 Adjustment to Annual Plan................................................... 27 8.3 Bank Accounts........................................................................ 28 ARTICLE 9 FEES TO MANAGER........................................................................................ 29 9.1 Management Fees...................................................................... 29 9.1.1 Base Management Fee......................................................... 29 9.1.2 Incentive Management Fee.................................................... 29 9.1.3 Payment..................................................................... 30 9.2 Accounting Fee....................................................................... 30 ARTICLE 10 DISBURSEMENTS.......................................................................................... 30 10.1 Priority of Disbursements............................................................ 30 10.2 Adjustment to Bank Account........................................................... 30 10.3 Payment of Ownership Costs........................................................... 30 10.4 Payment of Sales and Other Operational Taxes......................................... 31 ARTICLE 11 HARRAH'S SERVICES...................................................................................... 31 11.1 Nature of Services................................................................... 31 ARTICLE 12 SYSTEM MARK SIGNS AND SYSTEM MARKS..................................................................... 32 12.1 Signs................................................................................ 33 12.2 Harrah's System Marks................................................................ 33 12.3 Litigation........................................................................... 34 12.4 Players' System Marks................................................................ 34
- iii - ARTICLE 13 INSURANCE.............................................................................................. 35 13.1 Insurance Coverage................................................................... 35 13.2 Failure to Obtain - Self Help........................................................ 35 ARTICLE 14 INDEMNITY AND RELATED MATTERS.......................................................................... 35 14.1 Scope................................................................................ 35 14.2 Defense.............................................................................. 36 ARTICLE 15 DAMAGE TO AND DESTRUCTION OF THE ENTERTAINMENT FACILITY................................................ 37 15.1 Obligation to Restore................................................................ 37 15.2 Termination Option................................................................... 37 ARTICLE 16 CONDEMNATION........................................................................................... 38 16.1 Termination.......................................................................... 38 16.2 Restoration and Continuation......................................................... 39 ARTICLE 17 DEFAULT AND TERMINATION................................................................................ 39 17.1 Events of Default.................................................................... 39 17.2 Termination/Damages.................................................................. 41 ARTICLE 18 NOTICES................................................................................................ 43 18.1 Procedure............................................................................ 43 ARTICLE 19 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS............................................................ 44 19.1 Relationship......................................................................... 44 19.2 Contractual Authority................................................................ 44 19.3 Further Actions...................................................................... 44 ARTICLE 20 APPLICABLE LAW AND ARBITRATION......................................................................... 44 20.1 Scope................................................................................ 44 20.2 Arbitration.......................................................................... 45 20.2.1 Matters Subject to Arbitration.............................................. 45 20.2.2 The Accountants............................................................. 45 20.2.3 Arbitration Procedures...................................................... 46 ARTICLE 21 - iv -
SUCCESSORS AND ASSIGNS.......................................................................................... 46 21.1 Assignment by Manager................................................................ 47 21.2 Assignment or Transfer of Title by Owner............................................. 47 21.3 Binding Effect....................................................................... 48 ARTICLE 22 SHORT FORM OF AGREEMENT......................................................................................... 48 22.1 Memorandum of Agreement............................................................. 48 ARTICLE 23 FORCE MAJEURE................................................................................................... 48 23.1 Operation of Entertainment Facility.................................................. 48 23.2 Extension of Time.................................................................... 48 ARTICLE 24 TERMINATION..................................................................................................... 49 24.1 Surviving Obligations................................................................ 49 24.2 Termination/Expiration............................................................... 49 ARTICLE 25 GENERAL PROVISIONS.............................................................................................. 53 25.1 Authorization........................................................................ 53 25.2 Interest............................................................................. 53 25.3 Formalities.......................................................................... 53 25.4 Documents............................................................................ 53 25.5 Personal Service Contract............................................................ 53 25.6 Exhibits............................................................................. 53
- v - TABLE OF EXHIBITS EXHIBIT A Current Form of Operating Statement EXHIBIT B Permitted Exceptions EXHIBIT C Owner's Insurance Requirements EXHIBIT D Harrah's Financial Reporting and Accounting Policies Manual EXHIBIT E Short Form of Management Agreement EXHIBIT F Irrevocable Banking Instructions EXHIBIT G Pre-Opening Budget EXHIBIT H Variable Expenses EXHIBIT I Pre-Opening Account Funding Schedule EXHIBIT J Entertainment Facility Allocation Policies EXHIBIT K Harrah's Operational Standards EXHIBIT L Key Personnel - vi - MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT ("Agreement") is made and entered into as of the 2nd day of November, 1995, by and between RIVERSIDE JOINT VENTURE, a Missouri general partnership (hereinafter referred to as "Owner"), and HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY, a corporation organized and existing under the laws of the State of Nevada, with principal offices at 219 North Center Street, Reno, Nevada (hereinafter referred to as "Manager"); WITNESSETH: WHEREAS, Owner is desirous of having Manager operate Owner's Entertainment Facility to be constructed on the Site; and WHEREAS, Manager is desirous of operating the Entertainment Facility; NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, Owner and Manager agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. As used herein the following terms shall have the respective meanings indicated below: (a) Accountants - the accounting firm selected pursuant to Article 20.2.2 of this Agreement. (b) Accounting Fee - as defined in Article 9.2. (c) Adjusted Gross Revenues - Gross Revenues less: (i) any gratuities or service charges added to a customer's bill; (ii) any credits or refunds made to customers, guests or patrons, provided that any refunds made pursuant to invocation of Harrah's 100% guaranty by any customer of the Entertainment Facility shall be an Operating Cost rather than an adjustment to Gross Revenues; (iii) any sums and credits (other than those already excluded from Gross Revenues) received by Owner for lost or damaged merchandise; (iv) any sales taxes, excise taxes, use taxes, gross receipts taxes, admission taxes, entertainment taxes, tourist taxes or charges, and similar charges required by law to be collected from patrons or guests or as part of the sale price for goods, services or entertainment which must be remitted to governmental authorities; (v) any proceeds from the sale or other disposition of the Entertainment Facility, Furnishings and Equipment or other assets; (vi) any fire and extended coverage insurance proceeds or other insurance proceeds payable in connection with any casualty loss (except for business interruption, increased cost of operations, use, occupancy or similar insurance proceeds); (vii) any condemnation awards (except awards for temporary takings [i.e., condemnations of twelve (12) months or less]); and (viii) any proceeds of financing or refinancing of the Entertainment Facility. (d) Annual Plan - the Annual Plan adopted by Owner pursuant to Section 7(l) of Owner's Partnership Agreement, as modified from time to time. (e) Architect - Wittenberg, Delony & Davidson, Inc.; 320 West Capital Avenue, Suite 840; Little Rock, Arkansas, 72201. (f) Authorized Mortgage - mortgage(s), deed(s) of trust, security agreements, or other forms of agreements securing payment of indebtedness, the proceeds of which are used solely to construct, improve, restore, or repair the Entertainment Facility, with a lien or equivalent security interest against the Entertainment Facility. (g) Bank Account(s) - as defined in Article 8.3(a). (h) Base Management Fee - as defined in Article 9.1.1. (i) Building - all buildings, structures and improvements to be located on the Site and all fixtures and equipment attached to, forming a part of and necessary for the operation of such buildings, structures and improvements as a hotel having 300 guest rooms, more or less, each with bath, and entertainment complex (including, - 2 - without limitation, heating, lighting, sanitary, air-conditioning, laundry, refrigeration, kitchen, elevator and similar items), and all: (i) restaurants, bars, banquet, meeting and other public areas; (ii) commercial space, including concessions and shops; (iii) storage and service areas; (iv) health club facilities; (v) parking facilities; (vi) office facilities; (vii) permanently affixed signage; and (viii) other buildings, facilities and appurtenances, as may now or hereafter, replace, be attached to and form a part of the Building or otherwise be located on the Site; but excluding: (i) the Excursion Gambling Boats; and (ii) the Excursion Gambling Support Facilities. (j) Capital Replacement - any alteration or addition to, or rebuilding or renovation of the Building, including any addition to and replacement of Furnishings and Equipment, the cost of which is capitalized and amortized, rather than being expensed. (k) Compensation - the direct salaries and wages paid to, or accrued for the benefit of any employee, including incentive compensation, together with all fringe benefits payable to or accrued for the benefit of such executive or other employee, including employee meals, employer's contribution under F.I.C.A., unemployment compensation or other employment taxes, pension fund contributions, workers' compensation, group life, accident and health insurance premiums and costs, and profit sharing, severance, retirement, disability and other similar benefits. It is anticipated that: (i) Manager will lease employees to Harrah's (LLC) (which, as tenant under an Operating Lease, will operate Excursion Gambling Boats and Excursion Gambling Boat Support Facilities); (ii) certain employees will perform - 3 - services for both the Entertainment Facility and such Excursion Gambling Boats and Excursion Gambling Boat Support Facilities ("Shared Employees"); and (iii) the Compensation line item of each Operating Budget will include an allocated portion of Compensation of Shared Employees. If Owner determines that the use of Shared Employees is not cost effective, it shall be entitled, by written notice to Manager, effective ninety (90) days after the date of its receipt, to have all employees of the Entertainment Facility, work solely at the Entertainment Facility, and all employees of the Excursion Gambling Boat(s) and Excursion Gambling Boat Support Facilities operated by Harrah's (LLC) work solely thereat. In such event: (i) the Operating Budget for the Fiscal Year within which such change is effected shall, without the need for further approval by Owner, be automatically increased to include additional Compensation occasioned by the elimination of sharing of Shared Employees; and (ii) any administrative or supervisory services performed jointly for the Entertainment Facility and such Excursion Gambling Boats shall thereafter be an Administrative Service Fee established under Article 11.1(a), and Owner shall, in the event of a dispute, be entitled, by notice to Manager given, within ten (10) days after notice from Manager to Owner of any such Operating Budget increase, to arbitrate under Article 20.2 both: (i) the reasonableness of Manager's determination of (x) the number and (y) Compensation of additional employees required to exclusively serve the Entertainment Facility; and (ii) the reasonableness of the amount of any Administrative Service Fee established under Article 11.1(a). (l) Completion - the date upon which Manager receives (i) an architect's certificate from the Architect or any replacement architect having responsibility for the supervision of construction, equipping and furnishing of the Entertainment Facility and the connection of the Excursion Gambling Boats thereto, certifying that the Entertainment Facility, Excursion Gambling Boats and Excursion Gambling Support Facilities, including all private and public areas, have been fully constructed, substantially in accordance with the Plans and Specifications; (ii) a - 4 - permanent or temporary certificate of occupancy from the government authority or authorities pursuant to whose jurisdiction the Entertainment Facility and Excursion Gambling Boats and Excursion Gambling Support Facilities have been constructed, permitting the use and operation of all portions of the Entertainment Facility, Excursion Gambling Boats and Excursion Gambling Support Facilities in accordance with this Agreement; and (iii) certificates of such professional designers, inspectors or consultants or opinions of counsel, as Manager may determine to be appropriate, verifying construction and furnishing of the Entertainment Facility, Excursion Gambling Boats and Excursion Gambling Support Facilities in compliance with all Legal Requirements. The qualification of the Entertainment Facility as "Complete" shall not limit the obligation of Owner to complete any items or correct any deficiencies noted by the Architect or Manager at the time of Pre-Opening Inspection, or thereafter discovered. (m) Defaulting Party - as defined in Article 17.1. (n) Deficiencies - any failure: (i) of the Entertainment Facility, Excursion Gambling Boats and/or Excursion Gambling Support Facilities to be constructed in substantial compliance with the Plans and Specifications; or (ii) of the hotel portion of the Building to be equipped with Furnishings and Equipment, Operating Equipment or Operating Supplies that comply with Harrah's Operational Standards. (o) Department - those general divisional categories shown in the Annual Plan (e.g. rooms department or food department), but shall not mean or refer to the subcategories (e.g. linen replacement and uniforms) appearing in each such divisional category. (p) Development Period - the period between the Effective Date and the Opening Date. (q) Effective Date - November 3, 1995. (r) Emergency - any condition or state of affairs involving any of the following, or the imminent threat of any of the following: (i) personal injury to a significant - 5 - number of the guests or employees of the Entertainment Facility; (ii) damage to or destruction of the structural integrity and/or function of the Entertainment Facility, or any material portion thereof or system therein; and (iii) closure of the Entertainment Facility or any material portion thereof by any governmental agency or authority. An Emergency shall automatically terminate upon the termination or resolution of such actual or threatened condition(s). (s) Entertainment Facility - a collective term for the Site, the Building, the Furnishings and Equipment, the Operating Equipment and the Operating Supplies. (t) Event of Default - as defined in Article 17.1. (u) Excursion Gambling Boats - the boats, ferries or other floating facilities located adjacent to or within the Building (including, without limitation, the Excursion Gambling Boat Support Areas) and licensed by the Missouri Gaming Commission (or its successor) for the conduct of gambling games (as defined from time to time by Mo.R.S.ss.ss.313.800, et seq.). There shall be two (2) Excursion Gambling Boats on the Site, one operated by Players (or its permitted assignee), and one operated by Manager (or its permitted assignee); both under lease from Owner pursuant to an Operating Lease. (v) Excursion Gambling Support Facilities - those portions of the Building set aside for use as: (i) a gift shop; (ii) offices; (iii) a ticketing facility; or (iv) a specialty restaurant, serving each of the Exclusion Gambling Boats, and separately leased to the owners pursuant to an Operating Lease. (w) Fiscal Period, Fiscal Month, Fiscal Quarter, Fiscal Year - as defined in Article 8.1(c). (x) Furnishings and Equipment - all furniture, furnishings and equipment (excepting Operating Equipment) required for the operation of the Entertainment Facility in accordance with the standards set forth in this Agreement, including, without limitation: - 6 - (i) guestroom furnishings and equipment such as beds, bureaus, mirrors, desks, televisions, chairs, sofas and other items required by Harrah's Operational Standards; (ii) office furnishings and equipment; (iii) specialized equipment necessary for the operation of any portion of the Building as an Entertainment Facility, including equipment for kitchens, laundries, dry cleaning facilities, cocktail lounges, restaurants, public rooms, commercial and parking facilities, and recreational facilities; and (iv) all other furnishings and equipment hereafter located and installed in or about the Building which are used in the operation of the Building as a hotel in accordance with the standards set forth in this Agreement. (y) Gross Revenues - all revenues and income of any nature derived directly or indirectly from the Entertainment Facility or from the use or operation thereof, including without limitation room sales, food and beverage sales, telephone, telegraph, satellite or cable video and telex revenues, gift shop sales, parking sales, and the actual cash proceeds of business interruption, increased cost of operation, use, occupancy or similar insurance. (z) Ground Lease - that certain ground lease of a portion of the Site (described therein) by and between Harrah's (LLC) and Owner dated November 3, 1995, to be evidenced by a short form of ground lease to be recorded in the public records of St. Louis County, Missouri. (aa) Harrah's (LLC) - Harrah's Maryland Heights LLC, a Delaware limited liability company. (ab) Harrah's (Maryland) - Harrah's Maryland Heights Corporation, a Nevada corporation. (ac) Harrah's Operational Standards - those rules of operation and other operational standards and policies, all as may be amended or modified from time to time by Manager, which are applied to the operation of hotels and entertainment facilities in the Harrah's System. Harrah's Operational Standards currently in effect for the - 7 - Entertainment Facility are attached as Exhibit K. Certain of Harrah's Operational Standards, designated as "Minimum Standards" on Exhibit K (the "Minimum Standards"), shall not be reduced to a lesser standard of quality or quantity, as the case may be, than is set forth in Exhibit K. Modifications of Harrah's Operational Standards shall be advised to Owner no less than thirty (30) days before they become effective. Any Furnishings and Equipment, Operating Equipment or Operating Supplies specified by Manager for inclusion in the Entertainment Facility shall be deemed, while in new condition, to comply with Harrah's Operational Standards then in effect. The interpretation and application of Harrah's Operational Standards by Manager shall be binding upon Owner for all purposes unless arbitrary or capricious. Harrah's Operational Standards shall be adopted and amended for all hotels in the Harrah's System of like character and market on a non-discriminatory basis. (ad) Harrah's Services - as defined in Article 11. (ae) Harrah's System - a collective term for the services provided to the public by Harrah's Las Vegas, a Nevada corporation, and Manager's Affiliates, through operation or license of facilities under the name Harrah's(R). (af) Harrah's System Marks - the name and mark Harrah's(R), and all other service marks, trademarks, copyrights, tradenames, patents or similar rights or registrations now or hereafter held or applied for in connection therewith. (ag) Hotel Revenues - Adjusted Gross Revenues derived from room sales and sales of telephone, telegraph, satellite or cable video and telex, room service or other incidental charges incurred by hotel guests and charged to their hotel room folio. (ah) Impositions - shall mean and include: (i) all ad valorem taxes, water and sewer use charges or assessments, stand pipe charges and assessments, or other charges or assessments imposed upon the real and personal property comprising the Entertainment Facility; and - 8 - (ii) any other charge or assessment imposed by governmental or quasi governmental authority or by any other entity empowered by law to assess charges against the Entertainment Facility, with or without lien rights for the enforcement thereof, including, without limitation: (A) regular and special assessments payable to the Howard Bend Levee District for administration, maintenance and improvement of levees; and (B) special assessments payable to the City of Maryland Heights for the payment of annual principal and interest on bonds issued to finance extension of the Earth City Expressway. (ai) Incentive Management Fee - as defined in Article 9.1.2 (aj) Index - the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, all items, (1982-84=100), or any successor or replacement index thereto. If the Index shall, after the date hereof, be converted to a different standard reference base or shall otherwise be revised, any determination hereunder which uses the Index shall be made with the use of such conversion factor, formula or table for converting the Index as may be published by the Bureau of Labor Statistics, or, if said Bureau shall not publish the same, then with the use of such conversion factor, formula or table as may be published by Prentice Hall, Inc., or, failing such publication, by any other nationally recognized publisher of similar statistical information. If the Index shall cease to be published, then for the purpose of this Agreement there shall be substituted for the Index such other similar index as Manager shall reasonably determine which measures changes in the relative purchasing power of United States currency over the term of this Agreement. (ak) Institutional Investor or Institutional Lender - an Institutional Investor, as defined in Owner's Partnership Agreement. (al) Interest Rate - the Prime Rate as defined in Owner's Partnership Agreement. (am) Key Personnel - as defined in Article 5.3. - 9 - (an) Legal Requirements - as defined in Article 7.8. (ao) Licenses and Permits - as defined in Article 4.1. (ap) Management Fee(s) - as defined in Article 9.1. (aq) Manager's Affiliate - Harrah's Entertainment, Inc., and any of its direct or remote wholly-owned subsidiaries, determined at the time of application of the contract provision using this term. (ar) Minimum Balance - the amount of cash which Manager, from time to time, determines to be necessary to pay estimated Operating Costs of the Entertainment Facility for each such succeeding Fiscal Month during the Term, plus any reserves that Manager determines to be necessary to pay Operating Costs (or Ownership Costs paid by Manager under this Agreement) that are paid less frequently than monthly or on a non-recurring basis. (as) Non-Defaulting Party - as defined in Article 17.1. (at) Opening Date - the date upon which Manager first opens the Entertainment Facility to the public and commences business thereat. The parties shall confirm the Opening Date in an amendment to this Agreement. (au) Operating Agreements - all agreements for the delivery of goods and/or services to the Entertainment Facility. (av) Operating Budget - the Budget adopted by Owner as part of its Annual Plan, pursuant to Section 7(l) of Owner's Partnership Agreement, as modified from time to time. (aw) Operating Costs - the following costs and expenses charged as a cost of operation under Standard Accounting Principles: (i) the cost of replacement of Operating Supplies and Operating Equipment in the ordinary course of Entertainment Facility operations; (ii) the cost of Compensation; (iii) the cost of advertising and promotion for the Entertainment Facility; (iv) the cost of employee training programs; (v) the cost of utilities and energy; - 10 - (vi) the fees for Licenses and Permits required for the operation of the Entertainment Facility; (vii) all expenditures made by Manager for maintenance and repairs to keep the Entertainment Facility in good condition and repair pursuant to Article 7.5; (viii) the Management Fees (Base Management Fee and Incentive Management Fee payable pursuant to Article 9); (ix) the Accounting Fee payable pursuant to Article 9.2; and (x) Service Fees payable pursuant to Article 11.1. (ax) Operating Cost Savings - as defined in Article 9.1.2. (ay) Operating Equipment - all equipment other than Furnishings and Equipment required for the operation of an Entertainment Facility, including chinaware, glassware, linens, silverware, utensils, uniforms, and all other similar items. (az) Operating Lease - as defined in Owner's Partnership Agreement. (ba) Operating Supplies - food and beverages and other consumable items used in the operation of an Entertainment Facility, such as fuel, soap, cleaning materials, matches, stationery and all other similar items. (bb) Owner's Accountant(s) - the certified public accounting firm selected by Owner under Owner's Partnership Agreement. (bc) Owner's Partnership Agreement - that certain general partnership agreement dated November 2, 1995 by and between Players and Harrah's (Maryland), as same may be amended from time to time by Players and Harrah's (Maryland). (bd) Ownership Costs - shall be defined as: (i) debt service (interest and principal) relating to the Entertainment Facility, whether unsecured or secured by any mortgage or deed of trust; (ii) Impositions; (iii) construction and Capital Replacement and improvement expenditures under Articles 2.2, 7.5, 7.6, 15 and 16; (iv) audit, legal and other professional or special fees; (v) insurance premiums; - 11 - (vi) costs of leasing or purchasing any Furnishings and Equipment or other goods incorporated into or used in connection with the Entertainment Facility; (vii) uninsured liabilities relating to injury to persons or property incurred by Manager in connection with the operation of the Entertainment Facility; and (viii) such other costs or expenses which are normally treated as capital expenditures under Standard Accounting Principles. (be) Permitted Exceptions - (i) any Authorized Mortgage; (ii) liens for Impositions not yet delinquent; (iii) undetermined or inchoate liens or charges for labor or materials supplied to the Entertainment Facility in connection with the construction or operation thereof, which have not been filed or recorded in the public records and the payment for which is not yet delinquent; and (iv) easements, restrictions, rights of way or other title matters which do not, in the aggregate or individually, impair the use of the Entertainment Facility for its intended purpose or adversely affect the amount of fees payable to Manager hereunder. Permitted Exceptions shall, without limiting the foregoing, include all of those matters listed in Exhibit B to this Agreement. (bf) Plans and Specifications - a collective term for all designs, layouts, drawings, plans, specifications and decor and concept themes pertaining to the Entertainment Facility which are prepared by Owner. Until modified with approval of Harrah's (Maryland) and Players, the Plans and Specifications shall mean the Plans and Specifications identified in Exhibit E to Owner's Partnership Agreement. (bg) Players - Players MH, L.P., a Missouri limited partnership. (bh) Players' Affiliate(s) - Players International, Inc. and any of its direct or remote subsidiaries, determined at the time of application of the contract provision using this term. (bi) Players' License - that certain License Agreement of even date herewith, pursuant to which Players has authorized the use of the Players' System Marks by Manager - 12 - and Owner for the purpose of identifying and advertising the Entertainment Facility. (bj) Players' System Marks - all service marks, trademarks, copyrights, tradenames, patents, or similar rights or registrations now or hereafter held or applied for in connection with the operation of casinos or hotels by Players International, Inc. and Players' Affiliates. (bk) Pre-Opening Account - as defined in Article 5.2. (bl) Pre-Opening Budget - the budget of Pre-Opening Expenses for the Entertainment Facility attached as Exhibit G. (bm) Pre-Opening Expenses - expenses which Manager anticipates to be necessary or desirable in order to prepare the Entertainment Facility for opening to the public, including without limitation, cash for disbursements, initial Operating Equipment and Operating Supplies, hiring, relocation, training and housing of employees (whether on or off Site), advertising and promotion, office overhead and office space (whether on or off Site), and travel and business entertainment (including opening celebrations and ceremonies), but excluding all other Construction Costs (as defined in Owner's Partnership Agreement), including, without limitation, Furnishings and Equipment, whether or not included in the Cost Budget of Owner (as defined in the Owner's Partnership Agreement). (bn) Pre-Opening Inspection - as described in Article 5.4. (bo) Present Value - shall mean the present value of the stream of Management Fees payable hereunder had there had been no Event of Default, computed using a reasonable per annum discount rate, compounded semi-annually from the respective dates upon which Management Fees would be paid; determined by agreement between Players and Manager or by arbitration pursuant to Article 20. (bp) Service Fees - as defined in Article 11. (bq) Site - the Project Site as defined in Owner's Partnership Agreement. (br) Standard Accounting Principles - the Uniform System of Accounts for Hotels (Eighth Revised Edition 1986) adopted by the Hotel Association of New York - 13 - City, Inc. and the American Hotel & Motel Association, as further revised from time to time, or to the extent not therein addressed, United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles board of the American Institute of Certified Public Accountants, and statements and pronouncements of the financial Accounting Standards Board, or in the event such Accounting Principles Board and Financial Accounting Standards Board are no longer in existence or no longer publish such principles, opinions and statements, in such other opinions, statements and pronouncements of such other entity as is approved by a significant element of the accounting profession. Standard Accounting Principles shall be applied in the manner set forth in Harrah's Financial Reporting and Accounting Policies Manual, a copy of which is attached at Exhibit D. (bs) Term - as defined in Article 3.1. (bt) Variable Expenses - the expenses identified in Exhibit H. (bu) Year - each twelve (12) month period following the Opening Date. ARTICLE 2 SCOPE OF AGREEMENT 2.1 Subject Matter. The subject matter of this Agreement is the Entertainment Facility to be constructed, furnished and equipped by Owner on the Site. The Entertainment Facility is to be operated under the name and style Riverport Casino Center, and the hotel to be constructed within the Entertainment Facility (the "Hotel") is to be operated under the name and style Harrah's(R)- Riverport Casino Center Hotel. 2.2 Development. Owner agrees that it shall, at its sole cost, acquire and maintain fee simple title or a leasehold estate pursuant to the Ground Lease, as the case may be, to the Site and provide for and complete construction, furnishing and equipping of, the Entertainment Facility, Excursion Gambling Boats and Excursion Gambling Support Facilities, as the case may be, and deliver to Manager, for management and operation, the completed Entertainment Facility. 2.3 Grant and Acceptance of Management Responsibility. Owner grants to Manager the sole and exclusive right to supervise and direct pre-opening activities and, following the Opening - 14 - Date, the management and operation of the Entertainment Facility for the account of Owner subject to the terms of this Agreement. Manager accepts said grant and agrees that it will supervise and direct the management and operation of the Entertainment Facility subject to the terms of this Agreement. 2.4 Funding. Owner agrees to provide all funds, both initially and throughout the term of this Agreement, as shall be necessary to perform and satisfy Owner's covenants and responsibilities under this Agreement. ARTICLE 3 TERM 3.1 Term. The term ("Term") of this Agreement shall begin on the Effective Date and shall continue until December 31, 2005. Manager shall have the option to extend the term for fourteen (14) consecutive periods of five (5) years each. Manager shall be deemed to have exercised its option to extend the term of this Agreement for each extension period unless it shall have delivered to Owner written notice to the contrary at least one hundred twenty (120) days prior to the date of expiration of the then current period of the term. The word "Term" shall mean the initial term and all extension periods exercised or deemed to have been exercised by Manager, provided that, solely for the purpose of determining damages pursuant to Article 17 of this Agreement and measurement of loss for loss of income insurance purposes, the word "Term" shall mean the initial period plus all possible extension periods, whether or not then exercised by Manager. The Term of this Agreement may be terminated in the event that Manager's rights are acquired by Players and payment therefor is made pursuant to the provisions of Owner's Partnership Agreement, or this Agreement is terminated for the reasons set forth herein. ARTICLE 4 COVENANTS OF OWNER 4.1 Licensing and Permitting. Owner shall, on or before the Opening Date, have obtained, and throughout the Term, shall maintain all necessary enabling legislation and governmental and local authority decrees, acts, orders, consents, licenses and permits, including without limitation, restaurant and alcoholic beverage licenses required to enable Owner to own the Entertainment Facility, and Manager to operate the Entertainment Facility (including without limitation, all - 15 - guest rooms, health club facilities, entertainment facilities, parking facilities, kitchens, laundry, restaurant, and alcoholic beverage facilities), excluding any such Licenses that are required, by applicable Legal Requirements, to be applied for and held by Manager (collectively, the "Licenses and Permits"). Manager shall, on or before the Opening Date, have obtained and throughout the Term shall manage all Licenses and Permits required to be obtained and maintained by Manager. Owner and Manager shall use their best efforts to obtain a 3:00 A.M. alcoholic beverage license for the Entertainment Facility. 4.2 Title/Quiet Enjoyment. Owner represents and covenants that it has acquired fee simple title to or leased the Site pursuant to the Ground Lease, and, throughout the Term, will maintain, fee simple title and its leasehold estate pursuant to the Ground Lease, in the Entertainment Facility, Excursion Gambling Boats and Excursion Gambling Support Facilities, as the case may be, subject only to the Permitted Exceptions and the provisions of Article 21.2 of this Agreement. Owner covenants, during the Term, that Manager shall and may peaceably and quietly operate the Entertainment Facility in accordance with the terms of this Agreement, free from molestation, eviction and disturbance by Owner or by any other person or entity. Owner shall, at Owner's expense, undertake and prosecute all actions, judicial or otherwise, required to assure such quiet and peaceable operation by Manager. ARTICLE 5 PRE-OPENING 5.1 Pre-Opening Budget. Exhibit G is the Pre-Opening Budget for the Entertainment Facility approved by Owner. Manager is authorized, for and on behalf of Owner and at Owner's expense, to take all actions which it deems necessary or desirable to implement, perform or cause the performance of the items identified in the Pre-Opening Budget. Expenditures in excess of the Pre-Opening Budget shall be made only with the prior written approval by Owner of a modification to the Pre-Opening Budget. 5.2 Payment of Pre-Opening Expenses. Owner shall, at the time of commencement of construction of the Entertainment Facility, establish a bank account, pursuant to a Banking Resolution in the form attached as Exhibit F, (the sole signatories of which shall be designees of Manager) in the amount of THREE HUNDRED THOUSAND and 00/100 DOLLARS ($300,000) - 16 - (the "Pre-Opening Account"). Thereafter, the Pre-Opening Account shall be funded according to the schedule attached as Exhibit I. Manager shall pay Pre-Opening Expenses from the Pre-Opening Account, and may pay such amount, if funds in the Pre-Opening Account should be exhausted, from its own funds, on behalf of Owner. Owner shall, in such case, reimburse the Pre-Opening Account or Manager, as the case may be, on demand, for all amounts paid from the Pre-Opening Account or from Manager's own funds (together with interest on any portion thereof advanced by Manager from its funds at the Interest Rate plus eight percent (8%) per year from the date of advancement until the date of repayment). All Pre-Opening Expenses advanced or incurred by Manager shall be itemized, scheduled and submitted to Owner along with each demand for payment. Reimbursement shall be made by Owner to Manager within ten (10) days after the date of submission of each such schedule. 5.3 Pre-Opening Hiring and Training of Employees. Manager agrees, at Owner's cost, to recruit, relocate, hire and train employees to manage and operate the Entertainment Facility in accordance with Harrah's Operational Standards. To the extent pre-completion occupancy is permitted by applicable insurance policies and Licenses and Permits for the Building, pre-opening recruiting, hiring and training may be conducted at the Entertainment Facility during the Development Period (unless and until Owner determines and advises Manager in writing that such activities unreasonably interfere with the Completion of the Entertainment Facility) and employees involved in such recruiting, hiring and training may be housed at the Entertainment Facility. The persons holding positions of employment identified in Exhibit L (collectively, "Key Personnel") and all department heads, such as department engineer, head housekeeper, front office manager and other similar employees, may be hired and assigned to the Entertainment Facility at such time during the Development Period as Manager, in its discretion, deems necessary. 5.4 Pre-Opening Inspection. A pre-opening inspection (the "Pre-Opening Inspection") shall be conducted jointly by Owner and Manager upon Completion to detect and to note any Deficiencies. Owner agrees to take all measures reasonably necessary to remedy any Deficiencies as promptly as practicable following the Pre-Opening Inspection, but in all events, within the time established by any governmental regulatory authority or insurance underwriter. 5.5 Opening. Owner shall determine the Opening Date of the Entertainment Facility. - 17 - ARTICLE 6 STANDARDS AND MANAGER'S CONTROL 6.1 Harrah's Operational Standards. Manager shall operate the Entertainment Facility in accordance with Harrah's Operational Standards, but only if required funds are made available by Owner, and, provided that, if Harrah's Operational Standards are violative of Legal Requirements, Legal Requirements shall be the controlling standard. 6.2 Manager's Obligations. Manager shall have the obligation and the sole and exclusive authority, throughout the Term, to: (a) hire, supervise, establish levels of Compensation for, negotiate collective bargaining agreements with (if applicable), establish labor polices with respect to, and discharge (as it deems appropriate), all employees at the Entertainment Facility, as more particularly provided in Article 7.3; (b) determine the terms of guest admittance to the Entertainment Facility, provided that in making such determination, Manager shall endeavor to treat each of the Operating Lease lessees, and any guests, customers or patrons referred by either of them, on an equal and non-discriminatory basis applying the policies set forth in Exhibit J. (c) implement the advertising and marketing plan for the Entertainment Facility described in the Annual Plan: (d) select suppliers of goods and services for the Entertainment Facility (except with respect to the construction, equipping and furnishing of the Entertainment Facility and Capital Replacements or improvements which shall be undertaken by Owner, as more particularly provided in Articles 2.2, 7.6, 15 and 16 of this Agreement); (e) control and manage the Bank Accounts established by Owner for the Entertainment Facility, as more particularly provided in Article 8.3; (f) perform operational accounting (but not ownership accounting) for the Entertainment Facility, as more particularly provided in Article 8.1; (g) retain and supervise legal counsel and other professional consultants, as Manager may deem necessary and proper to the performance of this Agreement; - 18 - (h) supervise and effect, or cause to be effected maintenance and repairs, pursuant to Article 7.5; (i) enter into, on Owner's behalf, and as Owner's authorized agent, any contracts necessary or convenient to the accomplishment of this Agreement and any leases of the Entertainment Facility that are approved by Owner; (j) collect and disburse Gross Revenues of the Entertainment Facility on behalf of Owner, as more particularly provided in Article 10; (k) operate the Entertainment Facility in accordance with the Minimum Standards; and (l) develop and implement Emergency procedures for the Entertainment Facility, Excursion Gambling Boats, and Excursion Gambling Boat Support Facilities and for obtaining approval for said procedures from the Bridgeton-Pattonville Terrace Fire District, the Maryland Heights Police Department and other appropriate public safety agencies. In this regard, Manager may assume the role of "Executive Command" in the event of an Emergency and supervise and implement Emergency procedures. Players' personnel will provide necessary assistance to the Manager in the execution of its duties as Executive Command. At no time will Players change, modify, add to or delete any element of the Manager's Emergency procedures without written approval from the Manager. During an Emergency, Players will be subordinate to Manager, and at no time, with regard to Emergency procedures, will Players' personnel countermand, disregard or fail to execute a directive from the Manager. Manager's Emergency procedures shall terminate, as to any particular Emergency, upon the cessation of such Emergency. Manager shall have the option, at its election, and authority to: (a) supervise and effect or cause to be effected any Capital Replacements or improvements required by any emergency condition or Legal Requirements, as provided in Articles 7.7 and/or 7.8; or (b) make any other expenditures required of Owner under this Agreement; and in both such cases, to recover, as a reimbursable expense, the cost thereof with interest from the date of advancement to the date of repayment at the Interest Rate from Owner on demand. Manager shall in no event be obligated to expend its funds or incur any liability in the performance of its obligations under this Agreement, and Manager's obligations shall be excused - 19 - to the extent that: (i) Owner fails to provide all funds required for Manager to perform such obligations within the time period provided by this Agreement; or (ii) performing this Agreement would require Manager to incur any liability; or (iii) if any act or omission of Owner impairs the ability of Manager to perform any obligation under this Agreement. 6.3 Owner's Obligations. Owner shall have the sole responsibility and obligation throughout the Term, unless Players and Harrah's (Maryland), as partners of Owner, unanimously elect not to do so, to: (a) provide all funds required by Manager for the operation of the Entertainment Facility, as and when required by this Agreement; (b) except for transfers permitted by Article 21.2, maintain good and sufficient record and marketable fee simple title and leasehold estate pursuant to the Ground Lease, as the case may be, to the Entertainment Facility, and assure Manager's quiet enjoyment of the Entertainment Facility, free from all exceptions other than Permitted Exceptions and free from interference by any party having rights under any Permitted Exception; (c) obtain, maintain, pay for and provide evidence to Manager of all insurance required by Article 13; (d) construct, equip, furnish, refurbish, reconstruct and improve the Entertainment Facility as from time to time required by the terms of this Agreement (including, without limitation, Articles 2.2, 7.6, 15, and 16); (e) obtain and maintain all Licenses and Permits required for its continued legal existence, authorization to conduct business, ownership of the Entertainment Facility, and continued operation of all facilities at the Entertainment Facility, as more particularly provided in Article 4.1; (f) pay all Impositions assessed against the Entertainment Facility as same become due and before any action is commenced to enforce the collection or foreclosure of the lien thereof; (g) pay all indebtedness from time to time encumbering or relating to the Entertainment Facility as and when same becomes due and payable and before any - 20 - action is commenced against Manager, Owner, or the Entertainment Facility for the nonpayment thereof; (h) enforce all agreements in effect for the benefit of the Entertainment Facility, including the Permitted Exceptions which, if not enforced, may have an adverse effect upon Manager's enjoyment of Manager's rights or Manager's ability to perform Manager's obligations under this Agreement; and (i) establish the Operating Budgets and Annual Plans (as well as all modifications thereto) in a timely manner. 6.4 Manager's Control. Manager will have uninterrupted control over the day to day operation of the Entertainment Facility. Owner agrees not to interfere or involve itself in any way with the day-to-day operation of the Entertainment Facility. ARTICLE 7 OPERATION OF THE ENTERTAINMENT FACILITY 7.1 Permits. Manager agrees to use all reasonable efforts within its control to comply with any conditions or requirements set out in or imposed by law in connection with any Hotel Licenses and Permits, for so long as the expense of such compliance shall be paid for by Owner. 7.2 Equipment and Supplies. Manager shall be responsible and authorized to obtain, on behalf of Owner and at Owner's cost, subject to the fiscal limitations of this Agreement, all Operating Supplies, Operating Equipment and alcoholic beverage inventories necessary or advisable in connection with the operation of the Entertainment Facility, except that Owner shall be solely responsible to supply initial Operating Supplies, Operating Equipment and Furnishings and Equipment, and such Capital Replacements as from time to time are required to comply with Harrah's Operational Standards. 7.3 Employees (a) Authority of Manager. Manager will hire, supervise, direct, discharge and determine the Compensation and terms of employment of all employees working in the Entertainment Facility. Manager, in the exercise of its discretion, is to be the sole judge of the fitness and qualification of all employees and is vested with absolute discretion in the hiring, supervising, directing, discharging and - 21 - determining the Compensation of all employees. All employees, other than any employees who are, by Legal Requirement or any License or Permit, required to be in the employ of Owner, shall be employed by Manager. Owner shall not interfere with or give orders or instructions to any employees at the Entertainment Facility. Manager shall be the sole and exclusive bargaining agent with respect to all collective bargaining agreements and other employee matters with full power and authority to negotiate collective bargaining agreements (which may extend beyond the Term and exceed the Compensation authorized by the then current Annual Plan) and to settle all employee grievances and claims. Owner shall not be entitled to participate in labor negotiations or claims. Manager will, however, keep Owner advised of the results of such negotiations and claims. Owner shall have the right to approve any collective bargaining agreement which may be negotiated, so long as such approval does not interfere with Manager's rights, as exclusive bargaining agent, and Manager's obligation to bargain in good faith with a labor organization. Manager will provide Owner copies of any rulings or settlements which may be entered into. (b) Employee Discount. Employees of Manager who are not based in Maryland Heights may be provided with complimentary rooms and food whenever said employees are on the premises or in the vicinity of the Entertainment Facility performing services for the Entertainment Facility as an Operating Cost of the Entertainment Facility. Housing for the Director of Hotel Operations and his family, whether on or off Site, shall be at Manager's election and shall be an Operating Cost of the Entertainment Facility. Further, the Director of Hotel Operations and his family, if living on-Site, shall be granted complimentary food and beverages when such is customary in Manager's practice and policy. Manager shall be entitled to extend discounted or complimentary rooms to employees of Manager, Manager's Affiliates, Players' and Players' Affiliates, on a non- discriminatory basis, in accordance with Manager's customary practices, provided - 22 - that complimentary rooms shall not be given to any such employee if such action would be likely, at the time approved, to displace a customer. (c) Employee Cost Indemnity. Owner shall be solely responsible for and shall pay, reimburse, indemnify, defend and hold Manager harmless from and against any and all expenses, costs, liabilities and claims related or incidental to any employees at the Entertainment Facility (including, by way of example only, all salaries, vacation, sick leave, severance or termination benefits, pension plan liabilities, savings and retirement plan contributions, workers' compensation benefits or claims, health, disability or life insurance contributions, state, federal or local payroll or other employer paid or collected taxes, injury, discrimination, back pay, grievance or wrongful termination awards and any other costs and benefit for Entertainment Facility employees (however designated), unless caused by the gross negligence or wilful misconduct of Key Personnel. (d) Professional Consultants. The cost, fees, compensation or other expenses of any persons engaged by Owner to perform duties of a special nature, related to the Entertainment Facility, such as attorneys, accountants and the like (whether independent contractors or employees of Manager or Manager's Affiliates), shall be an Operating Cost, and in each instance, the Operating Budget shall automatically increase by the amount of such cost. 7.4 Marketing and Advertising. Manager shall, and is authorized to, advertise and promote the business of the Entertainment Facility, and implement and supervise the advertising and marketing program therefor adopted by Owner as part of the Annual Plan. 7.5 Maintenance and Repairs Manager shall make or cause to be made all ordinary repairs and maintenance, as well as maintain, repair replace or add all Operating Equipment and Operating Supplies, in the normal and ordinary course of operation of the Entertainment Facility, including, without limitation, any such repairs, maintenance, replacement or addition as shall be required to comply with Harrah's Operational Standards. - 23 - 7.6 Capital Replacements/Improvements. Owner shall effect and expend such amounts for all Capital Replacements and improvements as shall be required, in the course of operation of the Entertainment Facility, to maintain the Entertainment Facility in compliance with all Legal Requirements, and, to the extent not violative of Legal Requirements, Harrah's Operational Standards, including, without limitation, Manager's recommended programs for renovation, modernization and improvement intended to keep the Entertainment Facility competitive in its market. Design and installation of Capital Replacements shall be effected in a time period and subject to such conditions as Manager may establish to minimize interference with or disruption of ongoing Entertainment Facility operations. 7.7 Emergency Expenditures. If Manager determines that an Emergency exists, Manager is authorized to take all steps and to make all expenditures from the Bank Accounts, as it deems necessary to repair and correct any such condition, regardless whether provisions have been made in the Annual Plan for any such expenditures, and the cost thereof shall be paid as an Operating Cost or, if Gross Revenues are insufficient to repay such expenditure in the Fiscal Month when it is made, reimbursed by Owner, on demand, and in each instance, the Operating Budget shall automatically increase by the amount of such cost. 7.8 Compliance with Legal Requirements. If, at any time, repairs to or additions, changes or corrections in the Entertainment Facility of any nature shall be required by reason of any laws, ordinances, rules or regulations now or hereafter in force, or by order of any governmental or municipal power, department, agency, authority or officer ("Legal Requirements"), such repairs, additions, changes or corrections may, whether or not provided for in the Annual Plan, be made by or at the direction of Manager if not made by Owner in time to avoid any fine or adverse consequence to the operation of the Entertainment Facility and paid for from the Bank Accounts, and the cost thereof shall be paid as an Operating Cost or, if Gross Revenues are insufficient to repay such expenditure in the Fiscal Month when it is made, reimbursed by Owner, on demand, and in each instance, the Operating Budget shall automatically increase by the amount of such cost. - 24 - ARTICLE 8 FISCAL MATTERS 8.1 Accounting Matters and Fiscal Periods (a) Complete and accurate books and records reflecting Entertainment Facility operations shall be kept by Manager in accordance with Standard Accounting Principles and shall be maintained either at the Entertainment Facility or at the national or any regional office of Manager or Manager's Affiliate, at Manager's option. Owner shall be solely responsible to maintain ownership level books and accounts reflecting Ownership Costs, the costs of Owner's sales and marketing programs, and Owner's tax and accounting matters. Owner's Accountant(s) shall have the right and privilege of examining the books and records maintained by Manager during normal working hours (Monday-Friday) upon no less than forty eight (48) hours advance written notice. (b) A certified audit of the Entertainment Facility operations shall (at Owner's election to be effected by written notice to Manager given on or before the end of any Fiscal Year) be performed within ninety (90) days after the end of such Fiscal Year, and upon termination or expiration of this Agreement. Such audit shall be performed by Owner's Accountants. The determination of such accounting shall, unless appealed to arbitration by Manager, be conclusive and binding on the parties as to all matters properly addressed thereby, and Owner and/or Manager shall, promptly upon receipt thereof, adjust between them, any over or underpayment made or received by either of them, as the case may be, during the audited period. The cost of accounting services delivered in connection with such audit shall be an Ownership Cost. (c) The fiscal accounting periods (the "Fiscal Periods") for the Entertainment Facility shall be the calendar year ("Fiscal Year"), calendar quarter ("Fiscal Quarter"), and calendar month ("Fiscal Month"). On or before the twenty-fifth (25th) day of the calendar month next following the close of a Fiscal Month, Manager shall furnish Owner with a detailed operating statement setting forth the results of Entertainment Facility operations. There is attached hereto as Exhibit A a form of the operating statement currently utilized by Manager which reflects the results - 25 - of the prior Fiscal Month of operations as well as the cumulative fiscal year-to-date results of operations. The form of the operating statement may be modified from time to time by Manager at its discretion, so long as it remains consistent with Standard Accounting Principles. 8.2 Operating Budget/Annual Plan 8.2.1 Fiscal Authority and Constraint. The Annual Plan and Operating Budget for the Entertainment Facility shall be that adopted by Owner pursuant to Section 7(l) of Owner's Partnership Agreement and shall, when adopted, establish and limit Manager's authority to expend monies for the Entertainment Facility, except as otherwise provided in this Article. 8.2.2 Food and Beverage Pricing/Advertising and Marketing. Owner and Manager recognize that administration of: (i) hotel room pricing; (ii) food and beverage menu pricing; and (iii) marketing and promotion; of the Entertainment Facility often require prompt adjustment to changing circumstances, including without limitation, availability of new products and services, changes in public tastes, changes in the costs of goods and services, and changes in the competitive environment. In order to facilitate flexibility in the administration of such features of the Annual Plan, Owner delegates to Manager and the general manager of Players' Operating Lease premises, the authority, by joint written agreement, to modify such elements of an Annual Plan without need for a meeting or further approval under Owner's Partnership Agreement. 8.2.3 Compliance. Manager shall be permitted to reallocate part or all of the amount budgeted by an Operating Budget with respect to any line item to another line item in the same Department, but may not reallocate from one Department to another Department. Manager shall also be entitled to make expenditures not authorized under the then applicable Annual Plan to pay for: (a) emergencies as provided in Article 7.7; (b) compliance with Legal Requirements as provided in Article 7.8; (c) the actual cost of any utilities, fuel, Licenses or Permits, insurance required by this Agreement or otherwise secured by Owner, or Impositions; (d) uninsured liabilities, including without limitation, uninsurable claims (such as employee claims, environmental and civil rights claims), the amount of any uninsured or deductible portion of any insured claim, and any assessments relating to health or other insurance programs having cost-plus or self insurance features; - 26 - (e) additional Compensation due pursuant to any collective bargaining agreement negotiated with a union; (f) additional Ownership Costs incurred by Owner after approval of an Annual Plan; (g) any deficiencies assessed by a taxing authority; (h) additional costs permitted by Article 8.2.4; and in each such instance, the amount of the Operating Budget shall automatically increase by the amount of such cost. 8.2.4 Adjustment to Annual Plan. If Manager encounters circumstances which require unbudgeted and unexpected expenditures not foreseen at the time of preparation of the Annual Plan and which Manager deems reasonably necessary, in addition to and without limiting the instances described in Article 8.2.3, and including, without limitation, expenditures that Manager deems necessary for the continued operation of the Entertainment Facility in accordance with Harrah's Operational Standards, as determined by Manager, in good faith, Manager may, without Owner's approval, make such expenditures for so long as the same will not, based upon Manager's reasonable expectations, cause Manager to exceed one hundred and five percent (105%) of the amount budgeted for any Department or, if greater, with respect to Variable Expenses for any Department, such Variable Expenses will not, based upon Manager's reasonable expectations, cause Manager to exceed an amount such that the ratio of the amount so expended to the revenues of the affected Department exceeds the ratio (expressed as a percentage) of the Variable Expenses budgeted to the revenues forecasted, rounded up to the next full percentage point. If Manager expects that such future expenditures will cause Manager to exceed (i) one hundred and five percent (105%) of the amount budgeted for such Department or, if greater, (ii) an amount such that the ratio of the amount of Variable Expenses so expended to the revenues of a Department will exceed the ratio (expressed as a percentage) of the Variable Expenses budgeted to the revenues of such Department forecasted, rounded up to the next full percentage - 27 - point, Manager shall have the right, from time to time during such Fiscal Year; to submit a revision to the Operating Budget contained within the Annual Plan to Owner for approval. Owner will review all proposed revisions to an Operating Budget in the same manner as the Operating Budget contained within the initial Annual Plan. If Owner shall disapprove or raise any objections to any items contained in revisions to an Operating Budget, Manager shall be entitled to arbitrate such disapproval or obligations under this Agreement. 8.3 Bank Accounts (a) Owner shall establish account(s) in its name at a bank (with retail offices in the immediate geographic vicinity of the Entertainment Facility) (the "Bank Account(s)") as Manager determines to be necessary or convenient for the operation of the Entertainment Facility. Manager's designees shall be the only signatories authorized to draw upon the Bank Account(s). Before the Opening Date, Owner shall deposit in the Bank Account(s) ONE MILLION FOUR HUNDRED THOUSAND DOLLARS ($1,400,000) (the "Minimum Balance"). This Minimum Balance shall serve as working capital for Entertainment Facility Operating Costs and Impositions. The Minimum Balance may be increased by Manager, at any time during the first twelve (12) Fiscal Months after the Opening Date, to reflect unanticipated working capital needs revealed by the experience of actual Entertainment Facility operations, and again at the time of each anniversary of the Opening Date. Owner shall furnish Manager immediately, upon demand, with sufficient funds to make up any deficiency in the Minimum Balance (as so adjusted). (b) Manager shall have absolute control of the Bank Account(s). All Gross Revenues of the Entertainment Facility shall pass through the Bank Accounts. (c) Manager shall be entitled to maintain separate or commingled payroll accounts or petty cash funds and to make payments therefrom as customary in Manager's business practices. - 28 - ARTICLE 9 FEES TO MANAGER 9.1 Management Fees. The Management Fees shall have two components: (i) a Base Management Fee, as described in Article 9.1.1; and (ii) an Incentive Management Fee as described in Article 9.1.2. 9.1.1 Base Management Fee. Owner agrees to pay to Manager a base management fee (the "Base Management Fee") equal to three percent (3%) of Hotel Revenues. The Base Management Fee shall be paid monthly, in arrears, following the Opening Date, on the first day of the immediately ensuing Fiscal Month. 9.1.2 Incentive Management Fee. Owner agrees to pay Manager an incentive management fee (the "Incentive Management Fee") based upon the success of Manager in operating the Entertainment Facility in a manner which results in Operating Costs not exceeding the amount set forth within the Operating Budget for such Fiscal Year taken as a whole, and not on a line item or Departmental basis, as the same may be modified pursuant to this Agreement (either by amendment or by increase to include any unbudgeted costs [pursuant to Articles 7.7, 7.8, 8.2.3 and/or 8.2.4] expended by Manager pursuant to the authority of this Agreement). The Incentive Management Fee shall equal the greater of: (i) one percent (1.0%) of Hotel Revenues or (ii) fifty percent (50%) of the Operating Cost savings realized by Manager, measured by the difference between (x) the actual Operating Costs incurred by Manager in the operation of the Entertainment Facility for each Fiscal Year and (y) the authorized Operating Cost of the Entertainment Facility for such Fiscal Year established by the Operating Budget adopted pursuant to Section 7(l) of Owner's Partnership Agreement, modified as provided in Articles 7.7, 7.8, 8.2.3 and/or 8.2.4 of this Agreement (such difference being the "Operating Cost Savings"). The Incentive Management Fee shall be earned and paid annually, within 10 days after Manager's close of the accounting books and records for the Entertainment Facility for such Fiscal Year. In the case of any partial Fiscal Year, the Operating Budget shall be prorated equitably and actual Operating Costs shall include only those reasonably allocable to the portion of such Fiscal Year that the Entertainment Facility was operated by Manager, which allocation shall be determined by arbitration under this Agreement if Owner and Manager do not agree. 9.1.3 Payment. Manager shall be authorized to pay the Management Fee (as well as the - 29 - Accounting Fee provided for in Article 9.2, Service Fees provided for in Article 11 and any other amounts payable to Manager pursuant to the terms of this Agreement) to itself directly by withdrawal from the Bank Account. The Management Fee, Accounting Fee, Service Fees, and reimbursable amounts for the final Fiscal Month of the Term shall be paid on or before termination. 9.2 Accounting Fee. Owner shall pay to Manager an annual accounting fee (the "Accounting Fee") equal to ONE HUNDRED THIRTY THOUSAND DOLLARS ($130,000) per Fiscal Year. This fee shall compensate Manager for the performance of operations and fixed asset accounting and reporting required by this Agreement. The Accounting Fee shall be payable in equal monthly installments, in arrears, at the time of each payment of the Management Fee. The Accounting Fee shall be increased annually, at the time of each anniversary of the Effective Date, to reflect increases in the Consumer Price Index from the Effective Date to the date of adjustment. ARTICLE 10 DISBURSEMENTS 10.1 Priority of Disbursements. As and when received by Manager, Gross Revenues shall be deposited in the Bank Account(s) created pursuant to Article 8.3 of this Agreement. There shall, in turn, be disbursed by Manager, from the Bank Account, all Operating Costs and Impositions for the Entertainment Facility (including, without limitation, Ownership Costs which Manager may pay under this Agreement), as bills are received for payment or amounts become due, and to the extent funds are adequate and available. 10.2 Adjustment to Bank Account. After the disbursements pursuant to Article 10.1, and establishment of any reserves for future disbursements as Manager deems necessary, taking into account anticipated cash flow from, and Operating Costs at, the Entertainment Facility, any excess funds remaining in the Bank Account over the Minimum Balance shall monthly be disbursed to Owner. Correspondingly, and without limiting Owner's obligation to, at all times, provide any funds required by this Agreement, any deficiency of the Bank Account below the Minimum Balance shall immediately be provided by Owner. 10.3 Payment of Ownership Costs. Owner shall pay for all Ownership Costs (and, should Gross Revenues be insufficient to pay for same, all Operating Costs as provided in Article 10.2) - 30 - as same become due and payable and before any interest or penalty may attach for non-payment thereof or action be commenced against the Entertainment Facility, Owner or Manager for enforcement thereof. 10.4 Payment of Sales and Other Operational Taxes. Manager shall be responsible to file all necessary returns and remit from Gross Revenues to the governmental authorities having jurisdiction over the Entertainment Facility, all sales taxes, excise taxes, use taxes, gross receipts taxes, admission taxes, entertainment taxes, tourist taxes and similar taxes and charges required by law to be collected from patrons or guests as part of the sales price for goods, services or entertainment at the Entertainment Facility. Manager or Owner may contest the amount of any such taxes, provided that no penalty, interest, lien or other detriment to Owner, Manager or the Entertainment Facility results. Manager shall have no liability for the payment of any fines, penalties, interest or other charges ("assessments") for any under or over payment or miscalculation of such taxes unless caused by the gross negligence or wilful misconduct of Manager's Key Personnel charged to administer such payments, recognizing that the manner of calculating and reporting such taxes is often vague and subject to broad administrative discretion. All costs of any tax contest and all assessments of such taxes or charges shall be Ownership Costs under this Agreement. Owner shall pay to Manager any sales, gross receipts or similar tax imposed upon Manager, calculated on any payment or payments to Manager required of Owner under this Agreement, unless the tax is an alternative to an income tax otherwise payable by Manager. Any such payment shall be made at the time of each payment to Manager, or, if not so paid, within ten (10) days of any request by Manager therefor. ARTICLE 11 HARRAH'S SERVICES 11.1 Nature of Services. The services described in this Article 11.1 ("Harrah's Services") shall be provided by Manager and accepted by Owner, with individual charges ("Service Fees") to accrue commencing as of the Opening Date. It is understood that the Service Fees for Harrah's Services shall be due and payable monthly and shall be subject to increase or decrease as - 31 - hereinafter set forth. The presently established charges are listed below in connection with each service to be provided: (a) Administrative Service Fee - If and to the extent that common services are provided to the Entertainment Facility and to the Excursion Gambling Boats of Harrah's (LLC) following termination of the use of Shared Employees pursuant to Article 1.1(k), including by way of example, supervisory services, executive management, or administrative services such as check processing or accounting, then the cost of such services shall be established in the Operating Budget as an Administrative Service Fee, rather than as Compensation. If such event occurs in the course of a Fiscal Year, as contemplated by Article 1.1(k), then the Operating Budget shall automatically be increased to include the amount of such Administrative Service Fee agreed between Owner or Manager, or if not agreed within the first thirty (30) days of the ninety (90) day period described in Article 1.1(k), by Arbitration under Article 20 (in which case only the amount agreed by Owner shall be effective pending such arbitration, subject to retroactive adjustment, with interest at the Interest Rate plus eight percent (8.0%), if a higher Administrative Service Fee is approved by the Arbitrator). (b) Reservation Fee: $2.50 per guest room reservation at the hotel made through Harrah's telephone reservation system, increased annually on each anniversary of the Effective Date to reflect increases in the Consumer Price Index from the Effective Date to the date of adjustment. The Reservation Fee charged under this Agreement will be no more than the prevailing charge to participating Harrah's hotels. ARTICLE 12 SYSTEM MARK SIGNS AND SYSTEM MARKS 12.1 Signs. Owner agrees to install and maintain, subject to applicable Legal Requirements: (i) all Harrah's System Mark signs, Operating Equipment and Operating Supplies; and (ii) all Players' System Mark signs, Operating Equipment and Operating Supplies as provided in Section 7(m) of Owner's Partnership Agreement. The hotel at the Entertainment Facility shall be - 32 - identified as the Harrah's(R)-Riverport Casino Center Hotel. Stationery and front desk signage shall indicate that the hotel is owned by a general partnership, whose partners are Players and Harrah's (Maryland). Owner is solely responsible for all costs of purchasing, leasing, transporting, constructing and/or installing the required Harrah's System Mark signs, Operating Equipment and Operating Supplies, Players' System Mark signs, Operating Equipment and Operating Supplies, as well as for all costs of dismantling and removing such signs at the end of the term or earlier termination hereof. 12.2 Harrah's System Marks. It is understood that no rights or interests in the name Harrah's(R) or any other Harrah's System Marks are being granted by this Agreement. Owner agrees to recognize the exclusive right of ownership of Harrah's Las Vegas in and to Harrah's System Marks. Manager agrees that the hotel within the Entertainment Facility will, from and after the Opening Date, and subject to Owner's compliance with all of its obligations under this Agreement, be operated by Manager under the Harrah's(R) brand name utilizing Harrah's System Marks. Manager represents that, as a wholly owned subsidiary of Harrah's Las Vegas, it has the right to use Harrah's System Marks in connection with the hotel. Owner acknowledges and agrees that the use of the Harrah's System Marks in connection with the operation and management of the Entertainment Facility is vested solely in Manager. Owner disclaims any right or interest in Harrah's System Marks, regardless of the legal protection afforded thereto. Owner covenants that, in the event of expiration or termination of this Agreement, whether as a result of default by Manager, Owner or otherwise, Owner shall not, without the express prior written consent of Harrah's Las Vegas, hold itself out as, or continue operation of the Entertainment Facility using the Harrah's System Marks, and that, unless Harrah's Las Vegas shall have so consented to the continued use thereof, Harrah's Las Vegas and its designated contractors may enter the Entertainment Facility and may, at Owner's expense, remove all signs, furnishings, printed material, emblems, slogans or other distinguishing characteristics which are now or may hereafter be connected or identified with the Harrah's System or bear Harrah's System Marks. Upon the expiration or earlier termination of this Agreement for any reason, Owner shall likewise remove and discontinue the use of any and all items of Operating Equipment and any Operating Supplies that bear any Harrah's System Mark. - 33 - Owner shall not convey such property to any person or entity unless such person or entity is specifically authorized in writing by Harrah's Las Vegas (whether under license from Manager or otherwise) to use property bearing any Harrah's System Marks. Owner shall not use the name Harrah's(R), any other Harrah's System Mark, or any variant thereof in the name of any partnership, corporation or other business entity, nor allow the use thereof by others, without the express prior written consent of Harrah's Las Vegas. Owner shall not make reference to the name "Harrah's", any other Harrah's System Mark, or any variant thereof, directly or indirectly, in connection with a public sale or private placement of securities or other comparable means of financing without obtaining, in each instance the prior written approval of Harrah's Las Vegas. 12.3 Litigation. Owner and Manager agree that, in the event Owner and/or Manager is or are the subject of any litigation or action brought by any party seeking to restrain the use by Owner or Manager, or either of them, of any Harrah's System Mark used by Manager for or on or in connection with the Entertainment Facility, any such litigation or action shall be defended entirely by and at the expense of Manager or Harrah's Las Vegas, notwithstanding that Manager or Harrah's Las Vegas may not be named as a party thereto. Owner shall not have the right to bring suit against any user of any of the Harrah's System Marks. In all cases, the conduct of any suit, whether brought by Manager or instituted against Owner and/or Manager or Harrah's Las Vegas shall be under the absolute control of counsel to be nominated and retained by Manager or Harrah's Las Vegas, notwithstanding that Manager may not be a party to such suit. Manager agrees and covenants to defend and hold Owner harmless from and to indemnify Owner against any judgments or awards of any court or administrative agency of competent jurisdiction, whether such awards be in the form of damages, costs or otherwise, imposed against Owner and arising from the use by Manager of any Harrah's System Marks or similar rights or registrations for or on or in connection with the Entertainment Facility in accordance with the terms of this Agreement. 12.4 Players' System Marks. Manager's and Owner's right to use the Players' System Marks at the Entertainment Facility shall be subject to the terms and conditions of the Players' License. - 34 - Owner and Manager agree to perform all of their respective obligations under the Players' License. ARTICLE 13 INSURANCE 13.1 Insurance Coverage. Owner agrees to procure and maintain, at its expense and at all times during the term hereof, all insurance coverage required by Exhibit C attached hereto and made a part hereof. 13.2 Failure to Obtain - Self Help If Owner should, at any time, fail to obtain or maintain all insurance required by this Article 13, or to provide Manager with satisfactory evidence that such insurance remains in full force and effect, then, without limiting Manager's other remedies for such default, Manager shall be entitled to secure substitute insurance, and the cost thereof shall, immediately upon demand, be paid as an Operating Cost or, if Gross Revenues are insufficient to any such expenditure in the month when made, reimbursed by Owner to Manager on demand. ARTICLE 14 INDEMNITY AND RELATED MATTERS 14.1 Scope (a) Owner agrees to indemnify and hold Manager and its officers, directors, employees, agents or independent contractors ("Indemnified Persons") free and harmless from any liability for injury to persons or damage to property by reason of any cause whatsoever, either in and about the Entertainment Facility or elsewhere, including, without limitation, any such loss, cost or damage occurring as a result of the performance of this Agreement by Manager, its agents, employees or independent contractors, irrespective of whether negligence on the part of any Indemnified Person is involved, provided, however, that, as to Shared Employees, this indemnification shall only extend to acts or omissions of such individuals occurring while they are engaged in the performance of work for the Entertainment Facility. - 35 - (b) Owner agrees to reimburse each Indemnified Person, upon demand, for any money or other property which such Indemnified Person is required or authorized by this Agreement to pay out for any reason whatsoever, whether the payment is for Operating Costs, Ownership Costs or any other costs, charges or debts incurred or assumed by an Indemnified Person, Owner or any other party, or for judgments, settlements or expenses in defense of any claim, civil or criminal action, proceeding, charge or prosecution made, instituted or maintained against an Indemnified Person, Owner and/or others, jointly or severally, affecting or because of the condition or use of the Entertainment Facility or other areas, or acts or failure to act of an Indemnified Person, Owner, employees, agents or independent contractors of Owner, or arising out of or based upon any Legal Requirement, contract or award (including without limitation any such matter relating to the hours of employment, working conditions, wages and/or compensation of employees or former employees of Owner, or any severance or termination benefits of such employees), or for any other cause in connection with the Entertainment Facility. (c) Notwithstanding the foregoing, Owner shall not be liable to indemnify and hold the Indemnified Persons harmless from any such liability not covered by insurance which results solely from the proven gross negligence or willful misconduct of the Key Personnel or the Memphis based officers of Harrah's Entertainment, Inc. or its subsidiaries, while present at, and/or specifically directing activities at, the Entertainment Facility. 14.2 Defense. Owner agrees to defend, promptly and diligently, at Owner's expense, any claim, action or proceeding brought against Indemnified Persons or Owner, jointly or severally, arising out of or connected with any of the matters referred to in Article 14.1, and to hold harmless and fully indemnify each Indemnified Person from any judgment, liability, loss or settlement on account thereof. Defense of any such claim shall be accepted within ten (10) days after the date tendered, or if sooner, when the first action in response to any such claim is required. Defense shall be with counsel approved by the Indemnified Person. Failure to accept - 36 - any tender of a claim in writing within such period shall entitle an Indemnified Person to conduct such defense and/or settle any such matter at Owner's sole cost and expense. The allegation of facts which would excuse Owner's indemnification obligation pursuant to 14.1(c) shall not excuse Owner's defense obligation, and such obligation shall continue until gross negligence or wilful misconduct of the type described in Article 14.1(c) is proven, by final unappealable judgment, to have been the sole cause of liability (in which case Owner shall be entitled to reimbursement from the Indemnified Person of all reasonable attorneys fees and costs incurred in such defense). ARTICLE 15 DAMAGE TO AND DESTRUCTION OF THE ENTERTAINMENT FACILITY 15.1 Obligation to Restore. At its cost, Owner agrees, subject to the provisions of this Article 15, to repair, restore, rebuild or replace any damage to, or impairment or destruction of, the Entertainment Facility from fire or other casualty. 15.2 Termination Option. In the event the Building shall be destroyed or substantially destroyed during the term of this Agreement by fire or other casualty and Owner shall have maintained insurance as required by Article 13 of this Agreement and shall not have committed or omitted or suffered any other to commit or omit any act or omission resulting in any denial of coverage or payment thereunder, then Owner shall have the right and option, upon notice served upon the Manager within sixty (60) days after such fire or other casualty, to terminate this Agreement. In the event of any such permitted termination by Owner, Manager shall not be entitled to receive from Owner damages described in Article 17.2, but shall be paid any other amounts due or owing with respect to events occurring prior to or in connection with termination of this Agreement (and Owner's obligations with regard thereto shall survive such termination). If this Agreement is so terminated and the Entertainment Facility is, at any time within the five (5) year period following such casualty, nonetheless reconstructed and/or repaired by Owner for use as an Entertainment Facility (including a hotel), Manager shall have the option to re-institute this Agreement as to the reconstructed or repaired Entertainment Facility for the unexpired portion of the Term. If Owner fails to serve such notice within the time aforesaid, or if Owner shall not have maintained adequate insurance as required by Article 13 or shall have caused or suffered to occur - 37 - any commission or omission resulting in any denial of coverage or payment, Owner shall be obligated, at its cost, to repair, restore, rebuild or replace such damage, impairment or destruction. If Owner, for any reason, fails to complete any obligatory repair, restoration, rebuilding or replacement in a continuous and expeditious manner after the proceeds of insurance in respect of the fire or other casualty are made available by the insurer, Manager may, at its election, terminate this Agreement due to Owner's default, and collect the damages provided in Article 17.2, by delivery of written notice to Owner and without any other notice or opportunity by Owner to cure such default. ARTICLE 16 CONDEMNATION 16.1 Termination. If the whole of the Entertainment Facility shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition or like proceeding by any competent authority for any public or quasi-public use or purpose, or if such a portion thereof shall be taken or condemned as to make it imprudent or unreasonable, in Owner's opinion (noticed to Manager in writing on or before the effective date of such condemnation), to use the remaining portion as an Entertainment Facility (including the hotel) for the use made immediately preceding such taking or condemnation, then, in either of such events, this Agreement shall cease and terminate as of the date of such taking or condemnation. Manager shall not, in such event, be entitled to receive the damages provided in Article 17.2 of this Agreement, but shall be paid any other amounts due or owing to Manager with respect to events occurring prior to or in connection with termination of this Agreement (and Owner's obligations with regard thereto shall survive termination). To the extent not theretofore paid by Owner, any amounts due and owing to Manager with respect to events occurring prior to or in connection with the termination of this Agreement, shall be paid from the first proceeds of any award for such condemnation. Should any such award be inadequate, applied to reduction of any debt encumbering the Entertainment Facility, or otherwise applied to other purposes, Owner's obligation to pay amounts due Manager shall continue unabated and shall not be limited to the amount of the award made available to Owner. - 38 - If this Agreement is so terminated, and the Entertainment Facility is nonetheless reconfigured and/or reconstructed by Owner, at any time within the five (5) year period following such taking or condemnation, Manager shall have the option to reinstate this Agreement as to the restored Entertainment Facility for the unexpired portion of the Term. 16.2 Restoration and Continuation. If only a part of the Entertainment Facility is taken or condemned, and the taking or condemnation of such part does not make it unreasonable or imprudent, in the opinion of Owner (noticed to Manager in writing on or before the effective date of such condemnation), to operate the remainder as an Entertainment Facility (including the hotel), this Agreement shall not terminate. Out of any award to Owner, so much thereof as shall be reasonably necessary to reconstruct the Entertainment Facility, or any part thereof, or to reconfigure the Entertainment Facility, or any part thereof, so as to render the Entertainment Facility (including the hotel) a complete and satisfactory architectural unit of the same size and class as it was immediately preceding the taking or condemnation shall be made available for that purpose. The balance of the award, if any, after deduction of bona fide costs of restoration by Owner, and any sums then due Manager, shall be fairly and equitably apportioned between Owner and Manager so as to compensate Owner and Manager for any loss of income resulting or to result from the taking or condemnation. Failure of Owner to effect repair and restoration of the Entertainment Facility in a continuous and expeditious manner after the award of the condemnor is made available in respect of any partial condemnation which Owner has not deemed sufficient to render further operation of the Entertainment Facility unreasonable or imprudent, shall be an Event of Default entitling Manager to terminate this Agreement and collect the damages provided in Article 17.2 without further notice or opportunity by Owner to cure such default. ARTICLE 17 DEFAULT AND TERMINATION 17.1 Events of Default. It shall be an event of default hereunder (an "Event of Default") if any one or more of the following events shall occur: (a) if there should occur a breach, default or noncompliance by a party hereto with any covenants, obligations or agreements to be performed by a party under this - 39 - Agreement (except for matters described in Article 17.1(c) and (d)), followed by written notice of such breach, default or non-compliance from the Non-Defaulting Party to such Defaulting Party and failure of such Defaulting Party to remedy or correct such breach, default or non-compliance within thirty (30) days after receipt of such notice, provided that, if such breach, default or non-compliance is other than payment of money, failure to insure, or violation of Article 21.1 and 21.2, and is also of a nature such that it cannot reasonably be cured within such thirty (30) day period, then an Event of Default shall not be deemed to have occurred for so long as the Defaulting Party commences the curing of such default within such thirty (30) day period, pursues the completion thereof with diligence and continuity, and completes such cure within ninety (90) days of such notice; or, (b) if Owner should fail to effect any required reconstruction of the Building following casualty or partial condemnation, as and within the time provided in Articles 15 and 16 of this Agreement; (c) if: (i) a party shall voluntarily or involuntarily be dissolved; apply for or consent to the appointment of a receiver, trustee or liquidator of all or a substantial part of its assets; file a voluntary petition in bankruptcy (or have filed against it any such petition which shall not have been dismissed within sixty (60) days after filing) or otherwise seek protection of state laws for the relief of debtors; admit in writing its inability to pay its debts as they become due; make a general assignment for the benefit of creditors; file a petition (or have filed against it any such petition which shall not have been dismissed within sixty (60) days after filing) or an answer seeking to be reorganized or arrangement with creditors or to take advantage of any insolvency law or file an answer admitting the material allegations of any petition filed against it in any bankruptcy, reorganization or insolvency proceeding; or - 40 - (ii) an order, judgment or decree shall be entered by any court of competent jurisdiction, on the application of any one or more creditors of such party, adjudicating such party a bankrupt or insolvent or approving a petition seeking reorganization or appointing a receiver, trustee or liquidator of all or a substantial part of its assets, and such order, judgment or decree shall become final; or (iii) a party shall be directly or indirectly owned or controlled by another company or entity and an event described in Sub-article (c)(i) or (ii) shall occur with respect to any company or entity owning or controlling such party; or (d) (i) if Owner passes title to the Entertainment Facility or any part thereof in lieu of foreclosure of any lien or other security interest in the Entertainment Facility; or (ii) if an action to foreclose any mortgage, deed of trust or other security interest in the Entertainment Facility or any part thereof is instituted against Owner and is not discharged or dismissed within thirty (30) days thereafter. The party responsible for the occurrence of an Event of Default or on account of whom an Event of Default shall have occurred shall be called the Defaulting Party. The remaining party, as to such Event of Default, shall be called the Non-Defaulting Party. The waiver of any one Event of Default shall not be construed as the waiver of any other Event of Default. No waiver shall be effective unless embodied in a writing signed by the Non-Defaulting Party. 17.2 Termination/Damages (a) If an Event of Default occurs and has not been cured within any cure period allowed above, this Agreement shall terminate at the election of the Non-Defaulting Party. Notice of termination or suit for specific performance, as appropriate, may be given or commenced at any time after expiration of the applicable cure period, if any, and prior to the curing of such Event of Default, - 41 - and any termination shall be effective as of the date specified in such notice of termination, which such date shall be not less than ten (10) and not more than forty five (45) days after the date of such notice. Owner's and Manager's indemnification and defense obligations and Owner's obligation to maintain insurance after termination (with respect to occurrences before termination) and to pay for all costs of operating the Entertainment Facility prior to or in connection with termination shall be in addition to and shall survive termination of this Agreement and payment of damages therefor. (b) If this Agreement is terminated as a result of an Event of Default by Owner, then: (i) if such Event of Default was caused: (A) solely by the act or omission of Harrah's (Maryland) as partner of Owner or lessee of an Operating Lease; or (B) the joint act or omission of Harrah's (Maryland) and Players or a Players' Affiliate as co-partners of Owner; or (C) by a title matter that was not created or after the date hereof suffered by Owner; or (D) by a failure of Owner to secure the Licenses and Permits required to construct or operate the Entertainment Facility, then Manager shall be entitled to no remedy other than termination or suit for specific performance as provided in Article 17.2(a). (ii) if such Event of Default was caused solely by the act or omission of Players or a Players' Affiliate, as partner of Owner or lessee of an Operating Lease, then it is the intent of the parties that the remedies under the Owner's Partnership Agreement may be invoked by Harrah's (Maryland) and that Manager shall receive from Players, damages for such Event of Default (which may be directly enforced or offset by Harrah's (Maryland) against the Appraisal Buyout Price paid by Harrah's (Maryland) under Section 25 of Owner's Partnership Agreement) equal to: (i) the average annual Management Fees earned by Manager under this Agreement over the two (2) twelve (12) full Fiscal Month periods preceding termination or, prior to the twenty-fifth (25th) full Fiscal Month - 42 - following the Opening Date, (ii) Two Hundred Eighty-Five Thousand Dollars ($285,000). If Manager's Affiliate elects the Buy/Sell remedy under Section 26 of Owner's Partnership Agreement, it is the intent of the parties that (i) if Harrah's (Maryland) shall be the purchaser, Harrah's (Maryland) shall be entitled to offset against the Buy/Sell Price the damages above specified; and (ii) if Harrah's (Maryland) shall be the seller, the Fair Market Value of the Management Agreement, which must be purchased by Players will equal the damages above specified. (c) If there is an Event of Default by Manager, there shall be no remedy against Manager other than termination of this Agreement without damages or suit for specific performance. ARTICLE 18 NOTICES 18.1 Procedure. All notices or other communications provided for in this Agreement shall be in writing and shall be personally served, sent by Federal Express or comparable express courier, or sent by postage prepaid certified mail to the following addresses until such time as written notice, as provided hereby, of a change of address with a new address to be used thereafter is delivered the other party: Owner: Riverside Joint Venture Players International, Inc. 2900 Paradise Road, Suite 135 Las Vegas, NV 89109 Manager: Harrah's Maryland Heights Operating Company 1023 Cherry Road Memphis, TN 38117 Attn: General Counsel Such notice shall be effective upon receipt. - 43 - ARTICLE 19 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS 19.1 Relationship. Manager and Owner shall not, by virtue of this Agreement, be construed as joint venturers or partners of each other and neither shall have the power to bind or obligate the other except as set forth in this Agreement. 19.2 Contractual Authority. Manager is authorized to make, enter into and perform in the name of, for the account of, on behalf of and at the expense of Owner any contracts and agreements deemed necessary by Manager to carry out and place in effect the terms and conditions of this Agreement. Manager shall contract in a commercially reasonable manner; however, Manager shall not be obligated to obtain Owner's approval of individual contracts or agreements unless otherwise expressly provided in this Agreement. 19.3 Further Actions. Owner agrees to execute all contracts, agreements and documents and to take all actions reasonably necessary (unless another standard is provided) to comply with the provisions of this Agreement and the intent hereof. ARTICLE 20 APPLICABLE LAW AND ARBITRATION 20.1 Scope. The interpretation, validity and performance of this Agreement shall be governed by the laws of the State of Missouri. If any court or appropriate judicial authority shall hold or declare that the law of another jurisdiction is applicable, this Agreement shall remain enforceable under the law of that jurisdiction. If any of the terms and provisions hereof shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall in no event affect any of the other terms or provisions hereof, all such other terms and provisions to be valid and enforceable to the fullest extent permitted by law. 20.2 Arbitration 20.2.1 Matters Subject to Arbitration. In case of a dispute with respect to any of the following matters, either party may submit such matter to arbitration which shall be conducted by the Accountants: (a) computation of (but not entitlement to) the Management Fees, Service Fees or damages payable under Article 17.2(b); (b) modifications to an Annual Plan or Operating Budget requested by Manager; - 44 - (c) results of any audit by Owner's Accountant; (d) adjustment of any amounts required to be adjusted to reflect changes in the Index; (e) determination of whether, and to what extent, Manager has operated the Entertainment Facility at a cost that entitles it to Incentive Management Fee, including, without limitation, any disagreement over: (i) the allocation of budgeted Operating Costs to any portion of a Fiscal Year; or (ii) the amount of Operating Cost Savings; (f) determination of the amount of additional employees (and resulting increase in Compensation) and Administrative Service Fee reasonably chargeable to Owner by reason of a termination of sharing of Shared Employees. The decision of the Accountants shall be binding on the parties. 20.2.2 The Accountants. The Accountants shall be one of three firms of certified public accountants of recognized standing in the casino-hotel industry. Until otherwise agreed by the parties, the Accountants shall be one of Deloitte & Touche, Coopers & Lybrand, and KPMG Peat Marwick. The party desiring to submit any matter to arbitration shall do so by written notice to the other party, which notice shall set forth the items to be arbitrated and such party's choice of one of the three firms of accountants designated above. The party receiving such notice shall, within fifteen (15) days after receipt of such notice, either approve such choice or designate one of the remaining two firms by written notice back to the first party, and the first party shall, within fifteen (15) days after receipt of such notice, either approve such choice or disapprove the same. For so long as Players is a Partner of Owner and not in default under Owner's Partnership Agreement, the accounting firm representing the Owner shall be chosen by Players. If both parties shall have approved one of the three firms designated above, then such firm shall be the Accountants for the purpose of arbitrating the dispute; otherwise the third firm, which was not designated by either party shall be the Accountants for such purpose. The Accountants shall be required to render a decision in accordance with the procedures described in Article 20.2.3 within - 45 - thirty (30) days after being notified of their selection. The fees and expenses of the Accountants will be paid by the non-prevailing party. 20.2.3 Arbitration Procedures. In all arbitration proceedings submitted to the Accountants, the Accountants shall be required to agree upon and approve the substantive position advocated by Owner or Manager with respect to each disputed item. Any decision rendered by the Accountants that does not adopt the substantive position advocated by Owner or Manager shall be beyond the scope of authority granted to the Accountants and consequently may be overturned by either party. All proceedings by the Accountants shall be conducted in accordance with the Uniform Arbitration Act as adopted in the State of Missouri, except to the extent the provisions of such Act are modified by this Agreement or the mutual agreement of the parties. Unless otherwise agreed, all arbitration proceedings shall be conducted at the Entertainment Facility. Arbitration of any dispute over an expenditure within a proposed Annual Plan or any revision thereof for goods and services that Manager determines to be necessary for compliance with Harrah's Operational Standards shall be limited to whether the proposed expenditure is reasonable, considering the cost for which goods or services meeting Harrah's Operational Standards may be obtained in the St. Louis, Missouri market (or, in the case of specialized goods or services, the applicable market for such goods or services). The substance of Harrah's Operational Standards or Manager's determination of the manner of their implementation shall not be arbitrated but shall remain within the sole discretion of the Manager and its Affiliates. ARTICLE 21 SUCCESSORS AND ASSIGNS 21.1 Assignment by Manager. Any act of, or with respect to, Manager that would constitute a "Transfer" within the meaning of Owner's Partnership Agreement, shall constitute an assignment hereunder. Owner's consent shall not be required for Manager to assign any of its obligations or interests as Manager hereunder to any Manager Affiliate or to any party who is a permitted transferee (or wholly owned affiliate of such transferee) of the Project Property held by Harrah's (Maryland) under Owner's Partnership Agreement, provided that any such assignee is bound by the terms and conditions of this Agreement. Owner's advance written consent shall be required for any other assignment of the obligations of Manager under this Agreement, except - 46 - for transactions which are excluded from the definition of "Transfer" in Section 4.125 of Owner's Partnership Agreement. Manager shall be released from liability hereunder upon the conclusion of any permitted assignment. Manager may, further, at all times without obtaining any consent from Owner, assign, pledge, encumber and/or hypothecate all of Manager's rights, fees (earned and unearned), interest in insurance, condemnation awards, indemnities and other proceeds as security for a loan, and, in any such case, the assignee shall hold and be entitled to enforce such rights and receive such fees and/or payments without counterclaim, defense or setoff by Owner, Owner agreeing to look solely to Manager and not to any such assignee in regard to any claim which it may have under this Agreement. Notwithstanding the foregoing, Owner shall have no obligation to assure the payment to any such assignee, of any amounts received by Manager from the Entertainment Facility. Nothing herein shall impair Owner's right to terminate the Agreement as provided herein. 21.2 Assignment or Transfer of Title by Owner. Any Transfer of Project Property or any interest in a Holding Entity (as such terms are defined in Owner's Partnership Agreement) by Players in violation of Owner's Partnership Agreement shall be an Event of Default under this Agreement entitling Manager to terminate this Agreement and receive damages from Players specified in Section 17.2. Any Transfer of Project Property or any interest in a Holding Entity (as such terms are defined in Owner's Partnership Agreement) by Harrah's (Maryland) in violation of Owner's Partnership Agreement shall be an Event of Default under this Agreement entitling Owner to terminate this Agreement. Any Transfer of the Entertainment Facility by Owner without the advance written approval of Manager shall entitle Manager to terminate this Agreement by notice to Owner but not to collect damages from Owner. Any transferee of the Entertainment Facility shall, by acceptance of title, be deemed to have assumed all obligations of Owner under this Agreement and shall deliver a written agreement so evidencing, upon demand, in form satisfactory to Manager. No transfer of any legal or beneficial interest in the Entertainment Facility shall relieve Owner or Players of its obligations under this Agreement. - 47 - 21.3 Binding Effect. The terms, provisions, covenants, undertakings, agreements, obligations and conditions of this Agreement shall be binding upon and shall inure to the benefit of the permitted successors in interest and the permitted assigns of the parties hereto with the same effect as if mentioned in each instance where the party hereto is named or referred to, except that no assignment, transfer, sale, pledge, encumbrance, mortgage, lease or sublease by or through Owner in violation of the provisions of this Agreement shall vest any rights under this Agreement in the assignee, transferee, purchaser, secured party, mortgagee, pledgee, lessee, sublessee or occupant. ARTICLE 22 SHORT FORM OF AGREEMENT 22.1 Memorandum of Agreement. On the Effective Date, Owner and Manager shall execute, acknowledge and record a Short Form of this Agreement in the public records for the County of St. Louis, Missouri, in the form attached as Exhibit E. ARTICLE 23 FORCE MAJEURE 23.1 Operation of Entertainment Facility. If it becomes necessary, in Manager's opinion, to cease operation of the Entertainment Facility because of an Emergency, then, in such event, Manager may close and cease operation of all or part of the Entertainment Facility, reopening and commencing operation when Manager deems in good faith that such Emergency has ended, provided that the Term has not theretofore expired. Manager shall have no obligation to reopen the Entertainment Facility if there shall be less than ninety (90) days remaining unexpired in the Term at the time of such event. Manager shall also be entitled, in the event of any labor organizational activity, picketing or unrest, to designate specific entrances to the Entertainment Facility as separate entrances for each of the separate businesses conducted on Excursion Gambling Boats and the Entertainment Facility in order to avoid tainting all entrances to the Entertainment Facility and harm to the operation of the businesses that are not the target of such activity. 23.2 Extension of Time. It is further understood and agreed that, with respect to any obligation to be performed under this Agreement by a party during the Term (except for defaults in the - 48 - nature of failure to make any required payment or maintain required insurance, or transfer or assignment in violation of Article 21.2), such party shall not be in default for failure so to do when and only for so long as such performance is prevented by any force majeure cause beyond the reasonable control of such party such as strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply or inability, by the exercise of reasonable diligence, to obtain supplies, parts or employees necessary to perform such obligation, or war or other emergency. Notwithstanding the foregoing, a failure by Owner to perform Owner's obligations due to a lack of finances or due to a strike, lockout or failure of supply caused by the wrongful act or omission of Owner, or its partners, or their affiliates that operate the Excursion Gambling Boats or Excursion Gambling Boat Support Facilities, shall not be deemed to be a cause beyond Owner's reasonable control. The time within which such obligation shall be performed may be extended only for a period equivalent to the delay caused by such force majeure. ARTICLE 24 TERMINATION 24.1 Surviving Obligations. In the event of any termination or expiration of this Agreement, Owner shall remain liable to pay all fees and other amounts due to Manager for periods through termination, to maintain insurance for the benefit of and indemnify Manager with respect to all occurrences before termination, and to reimburse Manager for all expenses incurred by Manager before or in connection with such termination or expiration. Manager's indemnity obligations shall also survive termination or expiration of this Agreement. 24.2 Termination/Expiration. In connection with the expiration and/or termination of this Agreement: (a) Manager shall: (i) deliver possession of the Entertainment Facility to Owner or Owner's designated agents or employees subject to rights of all parties in possession, in "as is" condition, without recourse or any warranty whatsoever; - 49 - (ii) deliver to Owner any written Operating Agreements with respect to the Entertainment Facility which have not theretofore been delivered to Owner; (iii) prepare and furnish to Owner a list of guest room reservations for the hotel within the Entertainment Facility and a list (with copies) of all room allocation and Entertainment Facility service agreements for the Entertainment Facility (which have not theretofore been furnished to Owner) for all periods after expiration or termination; (iv) advise all Entertainment Facility purveyors by mail of the change of control of the Entertainment Facility; (v) permit Owner to have an observer at the Entertainment Facility to coordinate the turnover of Entertainment Facility operations for a period of seven (7) days prior to expiration or termination, provided that such observer shall not participate in the operation or management of the Entertainment Facility, give any direction to or contact any Entertainment Facility employee or otherwise interfere with Manager's operation of the Entertainment Facility, as determined by Manager's general manager, in his sole discretion. If such observer shall be deemed by any of Manager's Key Personnel to interfere with Entertainment Facility operations, then such observer may be required to leave the Entertainment Facility immediately upon notice from Manager; (vi) deliver to Owner records of the Entertainment Facility pertaining to: (1) accounts payable outstanding and unpaid at termination or expiration, provided that Manager shall, to the extent funds are made available therefor by Owner and amounts due are then known, pay all accounts payable through and including the date of expiration or termination; (2) accounts receivable outstanding and uncollected at termination or expiration, all of which Owner agrees shall be accounted for by - 50 - Owner when collected by Owner or Manager as Gross Revenues under this Management Agreement; and (3) employees who are hired by Owner and remain at the Entertainment Facility following termination or expiration of the Management Agreement (to the extent the information in such files is not deemed confidential by Manager). (vii) After deducting therefrom any amounts due and payable under this Agreement and not theretofore paid, Manager shall disburse the balance, if any, remaining in the Bank Account(s) after termination or expiration of this Agreement to Owner. (b) Owner shall be solely responsible for and shall pay all costs of: (i) cancelling any Operating Agreements which Owner does not wish to continue after such termination or expiration; or (ii) assuming and continuing performance under any such Operating Agreements which Owner desires to retain in effect. (c) Owner shall, without limiting Owner's obligation as employer, be solely responsible and shall pay for all severance or other termination benefits due any employee of Manager whose services are terminated; (d) Owner shall, in the event of termination of this Agreement in connection with any termination involving a change of hotel brand identification or affiliation, as of the date of termination or expiration: (i) cooperate in the removal of all signage identifying the Entertainment Facility as a Harrah's(R) hotel or containing any Harrah's System Mark and, in the case of any such signage supplied pursuant to an advertising contract (as in the case of billboard advertisements) pay all costs necessary to repaint or otherwise re-identify the Entertainment Facility and remove any Harrah's System Marks from such advertisement; - 51 - (ii) cease use of any Harrah's System Mark at the Entertainment Facility and shall destroy any personal property bearing such designation unless otherwise authorized in writing by Manager; (iii) cause the telephone number and all telephone advertisements for the Entertainment Facility to be changed to different telephone numbers to de-identify the Entertainment Facility as a Harrah's(R) hotel; and (iv) cooperate with Manager and the supplier thereof to permit the removal of any proprietary system owned by or licensed solely to Manager or Manager's Affiliates at the Entertainment Facility and shall not move or disturb such equipment and shall be solely responsible for any damage to such system for any period after termination or expiration of this Agreement during which the equipment is stored at the Entertainment Facility, provided however, that such equipment shall, subject to force majeure, be removed from the Entertainment Facility within ten (10) days after termination or expiration of this Agreement, and provided further that Owner shall not be responsible for any damage to such equipment caused by the parties effecting its removal. (e) Owner shall, after termination or expiration, continue to honor all guest room reservations, room allocation agreements, and other advance bookings in accordance with their terms and if requested by the party holding same, cancel any such agreement and refund any deposit made therefore (which has either been delivered or credited by Manager to Owner on termination or expiration of this Agreement or received directly by Owner or its employees, agents or independent contractors), should any such party request cancellation and refund because the Entertainment Facility is no longer a Harrah's(R)hotel; and (f) Owner shall, without limiting the foregoing, indemnify, defend and hold Manager harmless from and against all loss, cost, claim or damage relating to events arising at the Entertainment Facility or its operation or ownership: (i) before termination - 52 - (except for matters excluded by Article 14.1(c)); and (ii) after termination or expiration of this Agreement, without regard to Article 14.1(c). The foregoing shall be covenants running with the Entertainment Facility, shall survive termination or expiration of this Agreement, and shall be specifically enforceable by Manager and Owner. ARTICLE 25 GENERAL PROVISIONS 25.1 Authorization. Owner represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. Manager represents it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. On request, each party shall furnish the other evidence of such authority. 25.2 Interest. Any amount payable to Manager which shall not be paid when due shall accrue interest at the lesser of: (a) the highest legal limit, or (b) eight percent (8%) over the Interest Rate. 25.3 Formalities. Any change to or modification of this Agreement must be in writing signed by both parties hereto. This Agreement shall be executed in one or more counterparts, each of which shall be deemed an original. The captions for each Article are intended for convenience only. 25.4 Documents. Throughout the term hereof, Owner shall furnish Manager copies of all documents, as-built plans of the Entertainment Facility, warranties and guaranties, paid property tax and insurance statements, all financing documents (including notes and mortgages) relating to the Entertainment Facility and such other documents pertaining to the Entertainment Facility as Manager shall request. 25.5 Personal Service Contract. This Agreement shall be construed as a personal service contract which may not be assigned by Owner or Owner's representatives in any bankruptcy, receivership, insolvency or similar proceedings. 25.6 Exhibits. All Exhibits referred to in and attached to this Agreement are, by such reference, intended to be incorporated within and made a part of this Agreement. - 53 - IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement effective as of the day and year first above written. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. OWNER: RIVERSIDE JOINT VENTURE By: HARRAH'S MARYLAND HEIGHTS CORPORATION, a Nevada corporation, its General Partner By: /s/ Martin Boscaccy -------------------------------------- Its: Authorized Representative -------------------------------------- By: PLAYERS MH, L.P., a Missouri limited partnership, its General Partner By: PLAYERS MARYLAND HEIGHTS, INC., a Missouri corporation, its sole General Partner By: /s/ Steven P. Perskie ----------------------------- Its: Secretary ---------------------------- MANAGER: HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY, a Nevada corporation By: /s/ Martin Boscaccy ------------------------------------- Its: Authorized Representative ------------------------------------ - 54 - EX-10.4 5 LICENSE AGREEMENT LICENSE AGREEMENT This is an agreement among Players International, Inc. ("Licensor"), a Nevada corporation, Riverside Joint Venture ("Riverside"), a Missouri general partnership and Harrah's Maryland Heights Operating Company ("Harrah's"), a Nevada corporation (Riverside and Harrah's will be referred to as "Licensees" herein). WHEREAS, Licensor is the owner of the trademark and service mark PLAYERS(R) alone and together with other word(s) and design(s) ("the PLAYERS marks") in connection with gambling, entertainment and related goods and services; and WHEREAS, Licensor is the owner of U.S. Trademark and Service Mark Registrations and Applications listed on Exhibit A attached hereto; and WHEREAS, Licensor desires that Licensees use the PLAYERS marks in connection with the ownership by Riverside and management by Harrah's of a hotel and restaurant facility in Maryland Heights, Missouri (the "Entertainment Facilities"), as more particularly described in Riverside's partnership agreement dated November 2, 1995 (the "Partnership Agreement"), and in a certain management agreement between Harrah's and Riverside dated November 3, 1995 (the "Management Agreement"; the Management Agreement and the Partnership Agreement are sometimes referred to herein as the "Operating Agreements"); and WHEREAS, Licensor is willing to grant Licensees a license to use the PLAYERS marks on and in connection with said services for the Entertainment Facilities, under the terms set forth below; and NOW THEREFORE, in consideration of the mutual promises and covenants herein and other good and valuable consideration, the parties agree as follows: 1. Licensor warrants that Licensor is the owner of the PLAYERS(R) marks as used in connection with gambling, entertainment and related goods and services, and that Licensor is the owner of the U.S. Trademark and Service Mark Registrations and Applications listed on Exhibit A and that such registrations are valid and subsisting. Licensees acknowledge such ownership. 2. In consideration of the agreements of Licensees set forth herein, and the payment by Licensees to Licensor of $1.00 per year during the term hereof, Licensor hereby grants to Licensees a nonexclusive license to use, under the terms set forth herein, the PLAYERS marks in connection with Licensees' identification and/or operation of the Entertainment Facilities as contemplated under the Operating Agreements. This License does not include the right to otherwise use the PLAYERS marks. No sublicenses shall be granted by Licensees except in furtherance of this Agreement. 3. Licensees agree that all signs, advertisements, printed materials and other uses of the PLAYERS marks will at all times fully comply with all written specifications provided to Licensees by Licensor during the term of this License Agreement. 4. For purposes of ensuring compliance with this agreement and Licensor's specifications, Licensees agree that Licensor may enter onto and inspect Entertainment Facilities during normal business hours at mutually convenient times, upon prior written request by Licensor, such requests not to exceed six per year. 5. In the event that Licensor notifies Licensees in writing that Licensees have failed to meet the specifications then in effect and provided to Licensees pursuant to paragraph 3, or approvals provided by Licensor to Licensees, Licensees shall have thirty days -2- in which to correct such failure. If the failure is not corrected within thirty days, such failure shall constitute a default under this Agreement and shall permit either the termination hereof or seeking of special performance hereof by Licensor. 6. Licensees agree to submit all sign designs, advertising and promotional materials which bear or include the PLAYERS marks to Licensor for review and approval prior to use, display or distribution of such materials by Licensees. Licensees agree not to use, display or distribute any advertising or promotional materials hearing the PLAYERS marks which have not been approved by Licensor. 7. Licensees agree not to use the Player's marks, other than in connection with the Entertainment Facilities. 8. Licensees agree to notify Licensor promptly of any unauthorized use of the PLAYERS marks by others, infringement, unfair competition, passing off, misappropriation or unfair trade practice in connection with the PLAYERS marks which come to Licensees attention. Licensor agrees to take all reasonable steps necessary to half such unauthorized use, infringement, unfair competition, passing off, misappropriation or unfair trade practice including legal actions. All actions taken under this clause of the Agreement shall be at Licensor's discretion, expense and under Licensor's control. Licensees agree to fully cooperate with Licensor in connection therewith. 9. Licensor agrees to fully indemnify, defend and hold Licensees harmless (including attorneys' fee): (i) for any claim, threat, demand or action against Licensees arising out of any Licensor's breach of this Agreement or Licensor's warranties; and/or (ii) if Licensees are made a party to any lawsuit or proceeding by virtue of their status as Licensees. -3- 10. Licensees acknowledge and agree that any use of the PLAYERS mark other than in accordance with the terms of this License will entitle Licensor to terminate this Agreement or seek specific performance or an injunction as its sole and exclusive remedies. 11. Unless terminated by Licensor, or as otherwise agreed in writing by the parties hereto, this license shall commence on the date hereof and remain in effect until the earliest to occur of the date on which: an affiliate of Licensor shall no longer be a partner in Riverside; an affiliate of Licensor shall not operate a riverboat or other gaming facility adjacent to the Entertainment Facilities; Riverside shall no longer own or operate the Entertainment Facilities; Harrah's or an affiliate of Harrah's shall no longer manage the Entertainment Facilities; or cessation of operations at the Entertainment Facilities, or as the parties may agree in writing. 12. All notices to be given under the terms of this agreement shall be by first class mail, postage prepaid, addressed as follows: To Licensor: Players International, Inc. 3900 Paradise Road, Suite 135 Las Vegas, NV 89109 Attn: General Counsel With a copy to: Melvyn J. Tarnopol, Esq. Horn, Goldberg, Gorny, Daniels, Plackter & Weiss 1300 Atlantic Avenue, Suite 500 Atlantic City, NJ 08401 To Licensees: Riverside Joint Venture c/o Players International, Inc. 3900 Paradise Road, Suite 135 Las Vegas, NV 89109 -and- -4- Harrah's Maryland Heights Operating Company 1023 Cherry Road Memphis, Tennessee 38117 Attn: General Counsel Any party may change its address for the giving of notices, by written notice to all other parties in compliance with the foregoing provisions. Counsel for any party may give notice on behalf of such counsel's client. 13. This Agreement is binding upon the parties hereto, and on their respective successors and assigns. This Agreement may not be assigned, in whole or in part, without the written consent of Licensor. 14. The parties acknowledge that they have read this Agreement, that they understand it, and they agree to be bound by its terms and conditions. This Agreement may not be modified except in a writing signed by both parties. 15. This Agreement shall be governed by the law of the State of Missouri. 16. No modification or amendment of this Agreement shall be effective unless set forth in writing and signed by duly authorized representatives of all parties hereto. 17. If any provision of this Agreement is declared or found to be illegal, unenforceable or void, this Agreement shall be construed as if not containing that provision, the rest of the Agreement shall remain in full force and effect, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. 18. This Agreement may be signed in counterparts. -5- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth below: PLAYERS INTERNATIONAL, INC. November 2, 1995 By: /s/ Steven P. Perskie - -------------------- ---------------------- Date Name: Steven P. Perskie Title: Vice President RIVERSIDE JOINT VENTURE By: Players MH, L.P. By: Players Maryland Heights, Inc., general partner November 2, 1995 By: /s/ Steven P. Perskie - -------------------- ---------------------- Date Name: Steven P. Perskie Title: Secretary By: Harrah's Maryland Heights Corporation, general partner November 2, 1995 By: /s/ Martin P. Boscaccy - -------------------- ----------------------- Date Name: Martin P. Boscaccy Title: Authorized Representative -6- EX-10.5 6 LEASE GROUND LEASE BETWEEN HARRAH'S MARYLAND HEIGHTS LLC and RIVERSIDE JOINT VENTURE TABLE OF CONTENTS 1. LEASE OF PREMISES................................................. 1 2. GENERAL DEFINITIONS............................................... 2 2.1 Accounting Principles.................................... 2 2.2 Additional Rent.......................................... 2 2.3 Business Day............................................. 2 2.4 Casualty................................................. 2 2.5 City..................................................... 2 2.6 Commencement Date........................................ 2 2.7 Commencement Date (Percentage Rent)...................... 2 2.8 Condemnation............................................. 2 2.9 Consumer Price Index..................................... 2 2.10 County................................................... 2 2.11 Default.................................................. 2 2.12 Depository............................................... 3 2.13 Environmental Law........................................ 3 2.14 Estoppel Certificate..................................... 3 2.15 Fee Estate............................................... 3 2.16 Fee Mortgage............................................. 3 2.17 Fee Mortgagee............................................ 3 2.18 Fiscal Month............................................. 3 2.19 Fiscal Year.............................................. 3 2.20 Fixed Rent............................................... 3 2.21 Gambling or Gambling Activity............................ 3 2.22 Gaming Equipment......................................... 3 2.23 Government............................................... 3 2.24 Harrah's Lease........................................... 3 2.25 Harrah's Management Agreement............................ 4 2.26 Hazardous Materials...................................... 4 2.27 Impositions.............................................. 4 2.28 Indemnify................................................ 4 2.29 Indemnitee............................................... 5 2.30 Indemnitor............................................... 5 2.31 Institutional Lender..................................... 5 2.32 Insubstantial Condemnation............................... 5 2.33 Joint Venture Agreement.................................. 5 2.34 Landlord................................................. 5 2.35 Law(s)................................................... 5 2.36 Leasehold Estate......................................... 5 2.37 Mandated Alterations..................................... 5 2.38 Missouri Gambling Law.................................... 6 2.39 Missouri Gaming Commission............................... 6 2.40 Monetary Default......................................... 6 2.41 Monthly Statement........................................ 6 i 2.42 Mortgage................................................ 6 2.43 Mortgagee............................................... 6 2.44 Net Gaming Revenue...................................... 6 2.45 Non-Monetary Default.................................... 6 2.46 Notice.................................................. 6 2.47 Notice of Default....................................... 6 2.48 Operating Covenant Default.............................. 6 2.49 Percentage Rent......................................... 6 2.50 Permitted Exceptions.................................... 7 2.51 Person.................................................. 7 2.52 Personal Default........................................ 7 2.53 Plans and Specifications................................ 7 2.54 Players' Lease.......................................... 7 2.55 Players' Lease Commencement Date........................ 7 2.56 Players' Premises....................................... 7 2.57 Prime Mortgage.......................................... 8 2.58 Prime Mortgagee......................................... 8 2.59 Prime Mortgagee's Agent................................. 8 2.60 Prime Rate.............................................. 8 2.61 Prohibited Liens........................................ 8 2.62 Prohibited Person (Landlord)............................ 8 2.63 Prohibited Person (Tenant).............................. 9 2.64 Qualified Arbitrator.................................... 9 2.65 Reciprocal Easement Agreement........................... 9 2.66 Rent.................................................... 9 2.67 Shoreside Complex....................................... 9 2.68 State................................................... 9 2.69 State Revenue Reports................................... 9 2.70 State Revenue Audits.................................... 9 2.71 Sublease................................................ 10 2.72 Substantial Condemnation................................ 10 2.73 Subtenant............................................... 10 2.74 Temporary Condemnation.................................. 10 2.75 Tenant's Property....................................... 10 2.76 Termination Date........................................ 10 2.77 Transfer................................................ 10 2.78 Unavoidable Delay....................................... 10 2.79 Waiver of Subrogation................................... 11 3. TERM............................................................. 11 3.1 Term.................................................... 11 3.2 Confirmation of Dates................................... 11 4. DEVELOPMENT AND CONSTRUCTION OF THE SHORESIDE COMPLEX............ 11 4.1 Tenant's Obligation to Construct Shoreside Complex...... 11 4.2 Construction Bonds and Permit Fees...................... 12 4.3 Cooperation by Landlord................................. 12 ii 4.4 Title to Shoreside Complex and Tenant's Property........ 12 5. RENT............................................................. 12 5.1 Fixed Rent.............................................. 12 5.2 No Improvements Rent.................................... 13 5.3 Means of Payment........................................ 13 5.4 Percentage Rent......................................... 13 5.4.1 Reporting and Payment........................ 13 5.4.2 Accounting Records........................... 14 5.4.3 Landlord's Right to Audit.................... 14 5.4.4 Confidentiality.............................. 15 5.4.5 Substitute Percentage Rent................... 15 5.4.6 Assignment of Percentage Rent to Landlord.... 15 5.5 Additional Rent........................................ 16 5.6 No Conditional Payment................................. 16 5.7 Interest on Overdue Rent............................... 16 6. ADDITIONAL PAYMENTS BY TENANT; IMPOSITIONS...................... 16 6.1 Landlord's Net Return.................................. 16 6.2 Impositions............................................ 17 6.3 Assessments in Installments............................ 17 6.4 Combined Tax Lots...................................... 17 6.5 Direct Payment by Landlord............................. 18 6.6 Utilities.............................................. 18 7. USE............................................................. 18 7.1 Permitted Uses......................................... 18 7.2 Tenant's Failure to Operate the Business............... 18 8. LAWS............................................................ 18 8.1 Compliance with Law.................................... 18 8.2 Licenses and Permits................................... 18 8.3 Environmental Matters.................................. 19 8.3.1 Compliance.................................. 19 8.3.2 No Violations............................... 19 8.3.3 Cost of Compliance.......................... 19 8.3.4 Remediation................................. 19 8.4 Disclosure............................................. 19 8.4.1 Reports..................................... 20 8.4.2 Notices..................................... 20 8.4.3 Environmental Audits........................ 20 8.4.4 Orders...................................... 20 8.4.5 Pleadings................................... 20 8.5 Indemnification........................................ 20 8.6 Tenant's Further Responsibility at Termination or Expiration of Lease......................... 21 8.6.1 Surrender................................... 21 8.6.2 Storage Tanks............................... 21 iii 8.7 Landlord's Environmental Remedies....................... 21 8.7.1 Inspection Rights............................ 21 8.7.2 Self Help.................................... 21 8.7.3 Hazardous Material Release................... 21 8.7.4 Clean Up..................................... 21 8.7.5 Landlord Participation....................... 22 8.7.6 Fees and Expenses............................ 22 8.8 Landlord's Indemnity.................................... 22 9. MAINTENANCE AND ALTERATIONS...................................... 22 9.1 Obligation to Maintain.................................. 22 9.2 Tenant's Right to Perform Alterations................... 22 10. PROHIBITED LIENS................................................. 23 10.1 Tenant's Covenant....................................... 23 10.2 Protection of Landlord.................................. 23 11. INDEMNIFICATION; LIABILITY OF LANDLORD........................... 23 11.1 Mutual Indemnity Obligations............................ 23 11.2 Liability of Landlord................................... 24 11.3 Indemnification Procedures.............................. 24 11.3.1 Prompt Notice................................ 24 11.3.2 Selection of Counsel......................... 24 11.3.3 Settlement................................... 24 11.3.4 Insurance Proceeds........................... 25 12. RIGHT OF CONTEST................................................. 25 13. INSURANCE........................................................ 25 13.1 Tenant to Insure........................................ 25 14. DAMAGE OR DESTRUCTION............................................ 26 14.1 Notice; No Rent Abatement; Restoration Obligations...... 26 14.2 Lease Termination for Casualty.......................... 26 15. CONDEMNATION..................................................... 26 15.1 Substantial Condemnation................................ 26 15.2 Insubstantial Condemnation.............................. 26 15.3 Other Governmental Action............................... 27 15.4 Settlement or Compromise................................ 27 15.5 Prompt Notice........................................... 27 16. TRANSFERS........................................................ 27 16.1 By Tenant............................................... 27 16.2 By Landlord............................................. 27 17. MORTGAGES........................................................ 27 iv 17.1 Landlord's Rights....................................... 27 17.2 Tenant's Rights......................................... 28 17.3 Effect of a Prime Mortgage.............................. 28 17.4 Sale and Leaseback...................................... 28 17.5 Modifications Required by Prime Mortgagee............... 28 17.6 Further Assurances...................................... 29 17.7 Protection of Fee Mortgagees............................ 29 17.8 Foreclosure............................................. 29 18. NOTICE TO LANDLORD OF PRIME MORTGAGES............................ 29 18.1 Initial Notice.......................................... 29 18.2 Change of Address....................................... 29 18.3 Termination of Prime Mortgagee's Rights................. 29 18.4 Transfer of Fee Estate.................................. 29 18.5 Landlord's Acknowledgment of Prime Mortgagee............ 30 19. PROTECTION OF PRIME MORTGAGEES................................... 30 19.1 Cancellation, Surrender, Amendment, Etc................. 30 19.2 Copies of Notices....................................... 30 19.3 Tenant's Cure Period Expiration Notice.................. 30 19.4 Right to Perform Covenants and Agreements............... 30 19.5 Transfer of Tenant's Rights............................. 31 19.6 Notice of Default and Mortgagee's Cure Rights........... 31 19.6.1 Monetary Defaults and Non-Monetary Defaults Curable Without obtaining Possession........ 31 19.6.2 Other Non-Monetary Defaults Curable Without Obtaining Possession........................ 31 19.6.3 Defaults Curable Only by Obtaining Possession and Personal Defaults............ 32 19.6.3.1 During Cure Period.......................... 32 19.6.3.2 Further Cure Obligations.................... 32 19.6.3.3 Law Limitation.............................. 32 19.6.3.4 Operating Covenant Default.................. 32 19.7 Effect of Cure......................................... 33 19.8 Quiet Enjoyment........................................ 33 19.9 Subordinate Liens Affecting Leasehold Estate........... 33 19.10 Prime Mortgagee's Right to Enter Premises.............. 33 19.11 Rights of Prime Mortgagee Upon Acquiring Control....... 33 20. PRIME MORTGAGEE'S RIGHT TO A NEW LEASE.......................... 34 20.1 New Lease.............................................. 34 20.2 Form and Priority...................................... 34 20.3 Pendency of Dispute.................................... 34 20.4 Assignment of Certain Items............................ 34 20.5 Preservation of Subleases.............................. 34 v 21. INTERACTION OF MORTGAGES WITH OTHER ESTATES AND PARTIES.......................................................... 35 21.1 Prime Mortgages and Fee Mortgages....................... 35 21.2 Prime Mortgagee's Agent................................. 35 21.3 Interaction Between Lease and Prime Mortgage............ 35 21.4 Conflicts Between Mortgagees............................ 35 21.5 No Merger............................................... 36 22. BANKRUPTCY....................................................... 36 22.1 Affecting Tenant........................................ 36 22.2 Affecting Landlord...................................... 37 22.2.1 Tenant's Election..................... 37 22.2.2 Continuation of Lease................. 37 22.2.3 Assumption of Lease................... 37 22.2.4 Continuation of Prime Mortgages....... 37 23. QUIET ENJOYMENT.................................................. 37 24. FORCE MAJEURE.................................................... 37 25. ACCESS........................................................... 38 26. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS................... 38 26.1 Landlord's Option....................................... 38 26.2 Reimbursement by Tenant................................. 38 27. DEFAULT BY TENANT; REMEDIES...................................... 38 27.1 Definition of Event of Defaults......................... 38 27.1.1 Players' Lease Default....................... 38 27.1.2 Monetary Default............................. 39 27.1.3 Operating Covenant Default................... 39 27.1.4 Non-Monetary Default......................... 39 27.1.5 Reciprocal Easement Default.................. 40 27.2 Remedies................................................ 40 27.2.1 Assignment of Remedies....................... 40 27.3 Re-entry................................................ 40 27.4 Damages................................................. 40 27.5 Injunctive Relief....................................... 41 27.6 Pending Dispute Regarding Event of Default.............. 41 27.7 Arbitration............................................. 42 27.7.1 Voluntary Appointment........................ 42 27.7.2 Appointment by Arbitrators................... 42 27.7.3 Failure to Appoint........................... 42 27.7.4 Fees and Expenses............................ 42 27.7.5 Proceedings.................................. 42 27.7.6 Arbitration Decisions........................ 42 vi 28. TERMINATION...................................................... 43 28.1 Rights on Termination................................... 43 28.2 Possession.............................................. 43 28.3 Documentation........................................... 43 28.4 Miscellaneous Assignments............................... 43 28.5 Termination of Memorandum of Lease...................... 43 28.6 Restoration............................................. 43 28.7 Personal Property and Equipment......................... 43 29. NO BROKER........................................................ 44 30. WAIVERS.......................................................... 44 30.1 No Waiver by Silence.................................... 44 30.2 Waiver of Trial by Jury................................. 44 31. MEMORANDUM OF LEASE.............................................. 44 32. ESTOPPEL CERTIFICATES............................................ 45 32.1 Rights of Each Party.................................... 45 33. MISCELLANEOUS.................................................... 45 33.1 Reasonableness.......................................... 45 33.2 Documents in Recordable Form............................ 45 33.3 Further Assurances...................................... 45 33.4 No Third Party Beneficiaries............................ 45 33.5 Interpretation.......................................... 45 33.6 Captions................................................ 46 33.7 Cumulative Remedies..................................... 46 33.8 Right of Injunction..................................... 46 33.9 Entire Agreement........................................ 46 33.10 Amendment............................................... 46 33.11 Partial Invalidity...................................... 46 33.12 Successors and Assigns.................................. 46 33.13 Governing Law........................................... 46 33.14 Obligation to Perform................................... 46 33.15 Counterparts............................................ 47 33.16 Time Periods............................................ 47 33.17 Rule Against Perpetuities............................... 47 33.18 No Agency or Partnership................................ 47 34. NOTICES.......................................................... 47 35. GAMING LICENSE................................................... 48 36. RECIPROCAL EASEMENT AGREEMENT.................................... 48 37. JOINT VENTURE AGREEMENT.......................................... 49 vii 38. SURVIVAL......................................................... 49 LIST OF EXHIBITS EXHIBIT A-1 Land Description EXHIBIT A-2 Easements and Rights Appurtenant to Premises EXHIBIT B Form of Estoppel Certificate EXHIBIT C Permitted Exceptions EXHIBIT D Form of Reciprocal Easement Agreement EXHIBIT E Standards of Operation EXHIBIT F Tenant's Insurance Requirements EXHIBIT G Transferee Criteria EXHIBIT H Form of Memorandum of Lease viii GROUND LEASE THIS GROUND LEASE (the "Lease") is made as of this 3rd day of November, 1995 (the "Commencement Date"), by and between HARRAH'S MARYLAND HEIGHTS LLC, a Delaware limited liability company ("Landlord"), and RIVERSIDE JOINT VENTURE, a Missouri general partnership ("Tenant"). R E C I T A L S A. Harrah's Maryland Heights Corporation, a Nevada corporation ("HMHC"), an affiliate of Landlord, and Players MH, L.P., a Missouri limited partnership ("Players") are partners in Tenant which is developing the Shoreside Complex for floating gambling facilities in Maryland Heights, Missouri. B. Landlord is owner of fee simple absolute title to the land described in Exhibit A-1, (which includes a portion of the land on which the Shoreside Complex is to be developed by Tenant), together with: (a) all easements and rights appurtenant thereto, including without limitation, those set forth in Exhibit A-2 hereto; (b) all right, title and interest of Landlord, if any, in and to the land lying in the bed of any street or highway in front of or adjoining such land; and (c) riparian rights associated with such land; (all, collectively, the "Premises"), subject to the Permitted Exceptions. C. Landlord desires to lease the Premises to Tenant, and Tenant desires to lease the Premises from Landlord. D. Following the Commencement Date, Tenant intends to construct the Shoreside Complex on the Premises and on land owned in fee by Tenant, and located adjacent to the Premises (the "Venture Premises"). E. The parties desire to enter into this Lease to set forth their rights and obligations relating to the Premises and the Shoreside Complex. NOW, THEREFORE, IN CONSIDERATION OF THE COVENANTS AND AGREEMENTS OF THE PARTIES CONTAINED IN THIS LEASE, AND IN CONSIDERATION OF THE RECITALS SET FORTH ABOVE (WHICH ARE INCORPORATED BY REFERENCE IN THIS LEASE), AND IN EXCHANGE FOR TEN DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF ALL OF WHICH ARE CONCLUSIVELY ACKNOWLEDGED BY BOTH PARTIES, LANDLORD AND TENANT AGREE AS FOLLOWS: 1. LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant and Tenant hereby takes, leases and hires the Premises from Landlord, all subject only to the Permitted Exceptions. The Premises 1 are leased to Tenant for the Term defined in this Lease, upon all the terms and conditions of this Lease. 2. GENERAL DEFINITIONS. The following general definitions shall apply throughout the Lease, in addition to other definitions appearing at other locations in this Lease. 2.1 Accounting Principles. Accounting principles and practices set forth in the Audit and Accounting Guide for Audits of Casinos with changes through May, 1994, prepared by the American Institute of Certified Public Accountants, as from time to time amended, and, to the extent not therein addressed, United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession as in effect from time to time, consistently applied. 2.2 Additional Rent. Payments to be paid by Tenant to Landlord pursuant to this Lease, other than Fixed Rent, Percentage Rent and Substitute Percentage Rent. 2.3 Business Day. A day on which banks in the State are generally open for the conduct, with bank personnel, of regular banking business. 2.4 Casualty. Damage or destruction affecting the Premises and/or the Shoreside Complex. 2.5 City. The City of Maryland Heights, a municipal corporation, and any successor Government entity. 2.6 Commencement Date. The date on which this Lease is executed. 2.7 Commencement Date (Percentage Rent). As said term is defined in Section 2.8 of the Players' Lease. 2.8 Condemnation. A taking of the Premises or the Shoreside Complex, in whole or in part, by condemnation or by exercise of any right of eminent domain, or by any similar proceeding or act of any Government or any voluntary sale in lieu of such proceeding. 2.9 Consumer Price Index. The Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, United States City Average, all items (1982-1984 = 100). If such index is no longer published, then Landlord shall designate a successor or replacement index of substantially equivalent reliability and objectivity. The Consumer Price Index in effect for any given date shall be deemed to refer to the Consumer Price Index last published before such date. 2 2.10 County. St. Louis County, Missouri, and any successor Government entity. 2.11 Default. A Monetary Default, Non-Monetary Default or Operating Covenant Default. Each and every covenant of Tenant under this Lease, if not performed by Tenant, shall give rise to a Default as to which Tenant and (other than for Personal Defaults) Prime Mortgagees shall have the cure rights provided for in this Lease. 2.12 Depository. An Institutional Lender, designated by Tenant or by its highest priority Prime Mortgagee to act as "Depository" where expressly provided for in this Lease. 2.13 Environmental Law. Any applicable federal, state, or local law, regulation, ordinance, order, judgment, or decree pertaining to Hazardous Materials or to the protection of the environment, as such are now in effect or may hereafter be enacted or revised. 2.14 Estoppel Certificate. A written statement containing all (or, at the option of the Requesting Party, only some) of the statements set forth in the form attached as Exhibit B and containing such additional information relating to this Lease and the Premises as the Requesting Party shall reasonably specify. 2.15 Fee Estate. Landlord's fee estate in the Premises or any part of the Premises or any direct or indirect interest in such fee estate. The Fee Estate is subject to this Lease. 2.16 Fee Mortgage. Any mortgage, deed of trust, deed to secure debt, assignment, security interest, pledge, financing statement or any other instrument(s) or agreement(s) intended to grant security encumbering the Fee Estate for any obligation, as entered into, renewed, modified, amended, extended or assigned from time to time during the Term. 2.17 Fee Mortgagee. Any holder of a Fee Mortgage. 2.18 Fiscal Month. Each calendar month. 2.19 Fiscal Year. Each calendar year. 2.20 Fixed Rent. Shall have the meaning set forth in Section hereof. 2.21 Gambling or Gambling Activity. Being engaged in the business of operating "gambling games", as defined in the Missouri Gambling Law. 2.22 Gaming Equipment. Tenant's or Subtenant's equipment constituting wagering devices used in connection with the operation of Players' Excursion Gambling Boats (as defined in the Missouri Gambling Law) on the Premises including baccarat, bingo, twenty-one, poker, craps and other table games, slot machines, video games, roulette wheel, klondike table, punchboard, faro layout, keno layout, numbers ticket, push card, jar ticket and pull tab, or other wagering devices now or hereafter authorized by the Missouri Gaming Commission. 2.23 Government. Each governmental authority, department, agency, bureau or other entity or instrumentality having jurisdiction over the Premises, including the federal 3 government of the United States, the State, the County, the City and all other governmental or quasi-governmental authorities and subdivisions thereof having jurisdiction over the Premises or any portion thereof. 2.24 Harrah's Lease. That certain sublease of even date herewith of a portion of the Shoreside Complex by and between Tenant and Landlord (as Subtenant), as the same may be hereafter amended from time to time. 2.25 Harrah's Management Agreement. That certain Management Agreement of even date herewith by and between Harrah's Maryland Heights Operating Company, a Nevada corporation and Tenant. 2.26 Hazardous Materials. Any substance or matter including, without limitation, petroleum products and waste oil, (i) whose concentration in air, water, groundwater, or soil exceeds levels set forth in any Environmental Law, or (ii) for which any federal, state, or local agency orders or otherwise requires removal, treatment, monitoring, or remediation. 2.27 Impositions. Ad valorem taxes, special and general assessments, water rents, rates and charges, commercial rent taxes, sewer rents and charges, license and permit fees, charges for public utilities, levee district taxes and assessments, and all other impositions and charges of every kind and nature whether or not particularized by name, and whether general or special, ordinary or extraordinary, foreseen or unforeseen which at any time during the Term may be created, assessed, levied, confirmed, adjudged, imposed or charged upon or with respect to the Premises, the Shoreside Complex, Lot 1 of Riverport Tract 7 (to the extent of the proportionate benefit to the Premises) which shall be one hundred percent (100%) so long as no development occurs on Lot 1 of Riverport Tract 7 and if development does occur on Lot 1 of Riverport Tract 7, Landlord and Tenant shall mutually agree as to the amount of such proportionate benefit and failing such agreement such proportionate benefit shall be determined by arbitration pursuant to the provisions of Section 27.7 hereof, or any of Tenant's Property by or for the benefit of any Government with respect to any period during the Term together with any taxes and assessments that may be levied, assessed or imposed by the State or by any political or taxing subdivision of the State upon the gross income arising from any Rent or in lieu of or as a substitute, in whole or in part, for taxes and assessments imposed upon or related to the Premises and commonly known as real estate taxes, and together with all assessments made pursuant to all recorded protective covenants, indentures or reciprocal easement agreements to the extent the Premises or the Shoreside Complex are proportionately benefitted by such protective covenants, indentures or reciprocal easements. The term "Impositions" shall, however, not include any of the following, all of which Landlord shall pay before delinquent or payable only with a penalty: (a) any franchise, income, excess profits, estate, inheritance, succession, transfer, gift, corporation, business, capital levy, or profits tax, or license fee, of Landlord, (b) if the Premises is part of a Combined Tax Lot, any taxes and other Impositions reasonably allocable to any portion of such Combined Tax Lot other than the Premises, or Shoreside Complex, in accordance with the applicable provisions of this Lease, (c) the incremental portion of any of the items listed in this paragraph that would not have been levied, imposed or assessed but for any sale or other direct or indirect transfer of the Fee Estate or of any interest in Landlord during the Term, and (d) interest, penalties and other charges with respect to items "a" through "c". 4 2.28 Indemnify. The duty of an Indemnitor to indemnify the Indemnitee (and its partners and their Affiliates [the terms "Affiliate" or "Affiliates" as used herein shall have the same meanings as said terms have in the Joint Venture Agreement] and their respective officers, directors, agents and employees) and defend and hold the Indemnitee (and its partners and Affiliates and their respective officers, directors, agents and employees) harmless from and against any and all loss, cost, claims, liability, penalties, judgments, damage or other injury, detriment, or expense (including reasonable attorneys' fees, court costs, interest and penalties) reasonably incurred or suffered by the Indemnitee (and its partners and Affiliates and their respective officers, directors, agents and employees) on account of the matter that is the subject of such indemnification or in enforcing the Indemnitor's indemnity. 2.29 Indemnitee. A Person that is entitled to be Indemnified pursuant to this Lease. 2.30 Indemnitor. A Person that is obligated to Indemnify another party pursuant to this Lease. 2.31 Institutional Lender. A national bank, commercial state bank, savings bank, trust company, insurance company, pension, welfare or retirement fund or system, real estate investment trust, federal or state agency regularly making or guaranteeing mortgage loans, any other entity actively engaged in commercial real estate financing and having total assets of at least $50,000,000 (adjusted annually on each anniversary of the Commencement Date of this Lease to reflect increases in the Consumer Price Index), or a corporation that is a wholly-owned subsidiary of any of the foregoing entities, including any of the foregoing when acting as trustee or agent for other lender(s), whether or not such other lender(s) are themselves Institutional Lenders. The fact that a particular entity (or any Affiliate of such entity) is an Affiliate or partner of the then Tenant under this Lease shall preclude such entity from being an Institutional Lender and/or a Prime Mortgagee. 2.32 Insubstantial Condemnation. A Condemnation other than a Substantial Condemnation. 2.33 Joint Venture Agreement. That certain general partnership agreement of Tenant dated November 2, 1995. 2.34 Landlord. The Landlord named in the opening paragraph of this Lease and shall, throughout the Term, be limited to mean and refer to only the owner of the Fee Estate. 2.35 Law(s). Laws, ordinances, requirements, orders, directives, rules and regulations of any Government affecting the development, improvement, alteration, use, maintenance, operation or occupancy of the Premises or the Shoreside Complex, whether in force at the Commencement Date or passed, enacted or imposed at some time thereafter, subject in all cases, however, to all applicable waivers, variances and exemptions limiting the application of the foregoing, and including without limitation, the restrictions or other requirements of any applicable permit of any Government. 2.36 Leasehold Estate. Tenant's leasehold estate arising under this Lease, upon and subject to all the terms and conditions of this Lease, and any legal or beneficial interest in 5 such leasehold estate (other than stock of a company whose stock is listed and traded on the New York or NASDAQ Exchange). 2.37 Mandated Alterations. Repairs, additions, replacements or alterations mandated by Laws imposed, modified, interpreted or otherwise rendered more burdensome after the Commencement Date, including "retro-fitting" and structural alterations, whether or not such Laws could reasonably have been foreseen at the Commencement Date. 2.38 Missouri Gambling Law. State statutory Law regulating the conduct of gambling and related activities on the Premises, which law is presently codified as Sections 313.800 through 313.850, Revised Statutes of Missouri (1994), and as such law may be amended from time to time, and all rules and regulations adopted pursuant to any such law. 2.39 Missouri Gaming Commission. The Missouri Gaming Commission, or any successor commission or authority which has jurisdiction to license and regulate gambling on the Premises pursuant to Missouri Gambling Law. 2.40 Monetary Default. A failure by Tenant to pay any Rent or other amount owed by Tenant under this Lease, when and as required to be paid pursuant to this Lease. 2.41 Monthly Statement. A financial statement of the occupant of Players' Premises, delivered to Landlord on the twentieth calendar day of every Fiscal Month, beginning on the Commencement Date (Percentage Rent), reporting Net Gaming Revenue of the Premises for the immediately preceding Fiscal Month, certified to be complete, true and accurate, and to have been prepared in accordance with Accounting Standards by such Subtenant's authorized financial officer, and which shall include and have attached thereto all State Revenue Reports for such Fiscal Month. 2.42 Mortgage. A Fee Mortgage or a Prime Mortgage. 2.43 Mortgagee. The holder of a Mortgage. 2.44 Net Gaming Revenue. "Adjusted gross receipts" as said term is defined under Missouri Gambling Law as now enacted or as hereafter amended. 2.45 Non-Monetary Default. A failure by Tenant to perform any obligation of Tenant under this Lease, other than a Monetary Default or an Operating Covenant Default. 2.46 Notice. A notice, demand, request, election, designation, or consent, including any of the foregoing relating to an Event of Default or alleged Event of Default, that is permitted, required or desired to be given by either party in connection with this Lease. 2.47 Notice of Default. A Notice from Landlord to Tenant claiming or giving Notice of an Event of Default or alleged Event of Default by Tenant. 2.48 Operating Covenant Default. As defined in Section 7.2 of this Lease. 6 2.49 Percentage Rent. An amount equal to the following percentages of Net Gaming Revenue derived from Players' Premises for the twelve (12) month period following the Commencement Date (Percentage Rent) and for each twelve (12) month period thereafter during the Term (each of such twelve-month periods being herein referred to as a "Percentage Rent Year"): (i) Two percent (2%) of the first Fifty Million Dollars ($50,000,000) of Net Gaming Revenue; and (ii) Three percent (3%) of Net Gaming Revenue exceeding Fifty Million Dollars ($50,000,000) up to and including One Hundred Million Dollars ($100,000,000), and (iii) Four percent (4%) of Net Gaming Revenue in excess of One Hundred Million Dollars ($100,000,000). If the term "adjusted gross receipts," as defined under the Missouri Gambling Law, is changed, the percentages applicable to such changed definition as provided in this Section 2.49 hereof shall be adjusted by agreement of the parties, to preserve the same payment of Percentage Rent that would have been due had there been no such change. If the parties fail to agree upon such percentage prior to the effective date of the change to such definition, then such percentages shall be determined by arbitration in accordance with Section 27.7 hereof, which arbitration shall be held pursuant to the provisions of Section 27.7 hereof in lieu of the arbitration provided for in the Players' Lease so long as Landlord is Harrah's Maryland Heights LLC or an Affiliate thereof. 2.50 Permitted Exceptions. (i) all matters described on Exhibit C hereto; (ii) all liens, encumbrances, and other title matters created or suffered to exist by Tenant; (iii) all matters created or suffered after the date of this Lease by Landlord with Tenant's consent; (iv) all terms and conditions of Government licenses, permits or approvals relating to the Shoreside Complex, as a whole or in part, including, without limitation, the Premises. 2.51 Person. an individual, corporation, association, partnership, limited partnership, limited liability company, trust, unincorporated organization or other entity. 2.52 Personal Default. Any Non-Monetary Default by Tenant that is not reasonably susceptible of cure by a Prime Mortgagee, such as bankruptcy, insolvency, a prohibited transfer, failure to deliver financial information relating to Tenant (to the extent, if any, that any of the foregoing actually constitute(s) a Non-Monetary Default under this Lease), and any other Non-Monetary Default that by its nature relates only to Tenant or its Affiliates or can reasonably be performed only by Tenant or its affiliates. The financial condition of any Prime Mortgagee shall not be considered in determining whether a Default is a Personal Default. Any Default that can be cured by the payment of money is not a Personal Default. 2.53 Plans and Specifications. Tenant's Plans and Specifications for the Shoreside Complex agreed upon in accordance with the Joint Venture Agreement. 7 2.54 Players' Lease. That certain sublease of a portion of the Shoreside Complex by and between Players and Tenant of even date herewith, as the same may be hereafter amended from time to time. 2.55 Players' Lease Commencement Date. As defined in Section 2.7 of the Players' Lease. 2.56 Players' Premises. The Premises leased to Players under the Players' Lease. 2.57 Prime Mortgage. A mortgage, deed of trust, deed to secure debt, assignment, security interest, pledge, financing statement or any other instrument(s) or agreement(s) intended to grant security encumbering the Leasehold Estate, for any obligation (including a purchase-money or other promissory note) as entered into, renewed, modified, consolidated, amended, extended or assigned from time to time during the Term. A "Prime Mortgage" also includes certain agreements entered into in connection with a "sale and leaseback" transaction, as described in Section of this Lease. 2.58 Prime Mortgagee. The holder of a Prime Mortgage. Neither Tenant nor any "Holding Entity" (as defined in the Joint Venture Agreement) may be, or have the right of, a Prime Mortgagee under this Lease. 2.59 Prime Mortgagee's Agent. Any agent, designee or nominee of a Prime Mortgagee, provided that such agent, designee or nominee is a wholly owned subsidiary of the Prime Mortgagee. A Prime Mortgagee that is not an Institutional Lender shall not be entitled to designate a Prime Mortgagee's Agent. 2.60 Prime Rate. The prime rate (or base rate) of interest for corporate loans that is reported in the Money Rates Column of The Wall Street Journal published on the Business Day for which the rate is applicable (or the next preceding Business Day, if the applicable day is not a Business Day) as having been the rate in effect for corporate loans at large U.S. money center commercial banks (whether or not such rate has actually been charged by any such bank). If The Wall Street Journal ceases publication of the Prime Rate, the prime rate (or base rate) from time to time announced by Bankers Trust Company, New York, New York, or its successor (whether or not such rate has actually been charged by such bank), or, if Bankers Trust Company discontinues the practice of announcing the Prime Rate, the "Prime Rate" shall mean the highest rate charged by such bank on short term, unsecured loans to its most credit-worthy large corporate borrowers. If The Wall Street Journal: (a) publishes more than one Prime Rate, the higher or highest rate shall apply, or (b) publishes a retraction or correction of any such rate, the rate reported in such retraction or correction shall apply. If the Prime Rate changes, interest rates in this Lease which are based on the Prime Rate shall change, effective as of the first day of each calendar month, to reflect the Prime Rate in effect on the last day of the preceding calendar month. Notwithstanding anything to the contrary in this Section, the Prime Rate shall never exceed the highest rate of interest legally permitted to be charged in the State (without imposition of penalties for criminal usury [the "Criminal Usury Rate"]) in transactions of the character of this Lease between parties of a character similar to Landlord and Tenant. 8 2.61 Prohibited Liens. A mortgage, ship mortgage or other consensual lien or judgment lien and any maritime, seaman's, mechanic's, vendor's, laborer's or material supplier's statutory lien or other similar lien arising by reason of work, labor, services, equipment or materials supplied, or claimed to have been supplied, to Tenant or any Subtenant, which lien either: (a) is filed against the Fee Estate or (b) is filed against the Leasehold Estate or a lesser estate and, upon termination of this Lease, would under the law of the State attach to the Fee Estate. 2.62 Prohibited Person (Landlord). Any Person or any Affiliate of such Person as to which there has been an Unsuitability Determination, in accordance with the procedures set forth in the Joint Venture Agreement whether or not the Partnership still exists or remains the Tenant hereunder. Landlord shall provide each Subtenant under the Harrah's Lease and the Players' Lease with at least thirty (30) days prior Notice of any proposed transfer of Landlord's Estate or any interest therein (excluding, however, the creation or transfer of any easement), together with such documentation and information regarding the proposed transferee as each Subtenant conducting Gambling Activity shall reasonably request, to enable such Subtenant to confirm that the proposed transferee is not a Prohibited Person (Landlord). 2.63 Prohibited Person (Tenant). At any time after Tenant is no longer Riverside Joint Venture (the "Partnership"), any Person or Affiliate of such Person that, in Landlord's reasonable judgment would or could, if such Person owned an interest in the Leasehold Estate or lesser estate, endanger any gaming license(s) held by an Affiliate of Landlord. At any time after Tenant is no longer the Partnership, Tenant shall provide Landlord with at least thirty (30) days prior Notice of any proposed transfer of Tenant's Leasehold Estate or any lesser estate, or interest in any of them, together with such documentation and information regarding the proposed transferee as Landlord shall reasonably request, to enable Landlord to confirm that the proposed transferee is not a Prohibited Person (Tenant). Failure of Landlord to object to such Person within thirty (30) days of receipt of said Notice, documentation and information shall be deemed agreement that such Person is not a Prohibited Person (Tenant). 2.64 Qualified Arbitrator. A partner or other individual designated by Landlord or Tenant, as the case may be, who: (i) is employed by a disinterested, reputable and nationally recognized certified public accounting firm or has comparable qualifications; and (ii) has at least ten (10) years' experience in the financial reporting and valuation of casino properties. 2.65 Reciprocal Easement Agreement. The Reciprocal Easement Agreement between Landlord and Tenant to be entered into contemporaneously herewith in the form attached hereto as Exhibit D. 2.66 Rent. Additional Rent, Fixed Rent, Percentage Rent and Substitute Percentage Rent. 2.67 Shoreside Complex. All buildings and improvements constructed by Tenant on the Premises and on the Venture Premises in accordance with this Lease. The initial improvements comprising the Shoreside Complex are described in the Plans and Specifications. 9 2.68 State. The State of Missouri. 2.69 State Revenue Reports. The daily tax remittal form required to be submitted by a person or entity engaged in Gambling Activity to the Missouri Gaming Commission pursuant to the Missouri Gambling Law, reporting Net Gaming Revenue from the Premises. 2.70 State Revenue Audits. The quarterly external audit of Net Gaming Revenue prepared for the benefit of the Missouri Gaming Commission pursuant to the Missouri Gambling Law. 2.71 Sublease. Any sublease of the Premises or any part of the Premises, or any other agreement or arrangement (including a license agreement) made by Tenant granting any third party the right to occupy, use or possess any portion of the Premises. The term "Sublease" includes a management agreement or similar agreement and any concessionaire and license agreements that Tenant elects to treat as Subleases. The term "Sublease" includes the Harrah's Lease, the Players' Lease and the Harrah's Management Agreement. 2.72 Substantial Condemnation. A Condemnation that (i) results in the Appraisal Buyout of Players or HMHC's interest under the Joint Venture Agreement, or (ii) renders the continued operation of the Players' Premises, as a whole, economically unfeasible as determined in accordance with the Joint Venture Agreement, or (iii) after Tenant is no longer the Partnership a Condemnation of the Players Premises or Shoreside Complex which renders the Players Premises unusable as Excursion Gambling Boats as reasonably determined by Landlord. 2.73 Subtenant. Any person having rights of occupancy, use or possession under a sublease or license, including, without limitation, Harrah's Lease, Players' Lease and the Harrah's Management Agreement. 2.74 Temporary Condemnation. A Condemnation relating to the temporary right to use or occupy the Premises or Shoreside Complex or any part of the Premises or Shoreside Complex. 2.75 Tenant's Property. All personal property purchased or leased by Tenant or a Subtenant for use in connection with the Premises including, without limitation, any Subtenant's Gaming Equipment. 2.76 Termination Date. The date when this Lease terminates or expires, whether pursuant to the expiration or termination of the Term, Condemnation, Casualty or an Event of Default. 2.77 Transfer. The assignment, sublease, pledge, mortgaging, encumbering or other form of disposition, voluntarily or involuntarily, directly or indirectly of any right to possession of, or legal or beneficial interest in and to, the Leasehold Estate (or the Tenant) or the Fee Estate (or the Landlord), as the case may be, including without limitation a transfer of Capital Stock (as defined in the Joint Venture Agreement) in any direct or remote parent entity of Landlord or Tenant (or its partners). Transfer shall not include the sale, on a 10 national exchange such as the New York or NASDAQ Stock Exchange, of publicly held shares of Harrah's Entertainment, Inc. or Players International, Inc. 2.78 Unavoidable Delay. Delay in the performance of any obligation or, where specifically provided for, a Prime Mortgagee's exercise of Mortgagee's Cure Rights under this Lease, (excluding in any case any obligation to pay money) arising from or on account of any cause whatsoever beyond the reasonable control of the Person required or entitled to perform, including strikes, labor troubles, litigation, Casualty, Condemnation, accidents, Laws, governmental preemption, failure or refusal of a governmental body to issue a required permit or license, war, riots, and other causes beyond such party's reasonable control, whether similar or dissimilar to the causes specifically enumerated in this Section. In no event shall Unavoidable Delay be deemed to include any delay caused by an unwillingness or inability to make a payment required by this Lease, or the wrongful act or omission to act of the Person invoking this definition. 2.79 Waiver of Subrogation. A provision in, or endorsement to, any insurance policy required by this Lease, by which the insurance carrier agrees to waive all rights of recovery by way of subrogation against either party to this Lease in connection with any loss covered by such insurance policy. 3. TERM. 3.1 Term. The term of this Lease (the "Term") shall commence on the Commencement Date and expire 11:59 p.m. on the last day of the Fiscal Month that includes the date eighty (80) years after the Players' Lease Commencement Date. 3.2 Confirmation of Dates. Promptly after the occurrence of any date relevant to the calculation of Rent, or to the determination of the Term, the parties shall enter into a certificate, in recordable form reasonably satisfactory to both of them, memorializing such date. The failure of the parties to enter into any such certificate shall not, however, invalidate or in any way diminish the effectiveness of the actual date(s) to be set forth in the certificate. If Landlord and Tenant disagree as to whether any such date has occurred, then Tenant may pay Rent and otherwise perform under this Lease based on Tenant's own determination of such date(s) unless and until such date(s) are otherwise determined by the final judgment of a court of competent jurisdiction provided that Tenant shall escrow in an interest bearing federally insured account with a disinterested national bank with offices in St. Louis, Missouri or the registry of the court hearing such dispute, any additional amounts claimed by Landlord. If a national bank is used as escrow agent, it shall act only in accordance with this Section, as modified or supplemented by: (i) joint written instruction of Landlord and Tenant; or (ii) a final, unappealable order of the court hearing such dispute; and shall be fully exonerated from liability to Landlord or Tenant for any act or omission other than its gross negligence or wilful misconduct. To the extent that any such court accepts Landlord's position and rejects Tenant's, the court or escrow agent, as the case may be, shall within five (5) Business Days after the court's order becomes final and unappealable, remit to Landlord an amount equal to any previous underpayments of Rent, together with interest earned thereon, and the remainder, if any, of the escrow account shall be disbursed to Tenant. If the court accepts Tenant's 11 position and rejects Landlord's, the court or escrow agent, as the case may be, shall within five (5) Business Days after entry of the court's final, unappealable order remit to Tenant all the monies in the escrow account, including interest. Failure of Tenant to establish such escrow account or to escrow disputed amounts therein shall be a failure to cure a Monetary Default. Notwithstanding the foregoing, Tenant's obligation to establish the foregoing escrow account shall be deemed satisfied if Players establishes and maintains such an escrow account as provided in the Players' Lease. 4. DEVELOPMENT AND CONSTRUCTION OF THE SHORESIDE COMPLEX. 4.1 Tenant's Obligation to Construct Shoreside Complex. Tenant shall commence construction, and where appropriate, alteration and renovation of the Shoreside Complex in accordance with the terms and provisions of the Joint Venture Agreement, and shall enforce (unless waived in writing by both partners of the Partnership) the construction covenants of the Players' Lease and the Harrah's Lease and complete such construction, alteration and renovation within three (3) years following the Commencement Date, which completion date shall be extended so long as Tenant is pursuing construction with due diligence and in good faith and such delay does not adversely affect the zoning or other permits relating to the Shoreside Complex and otherwise has no material adverse effect on the Shoreside Complex. 4.2 Construction Bonds and Permit Fees. Tenant shall pay, discharge or bond or insure against all Prohibited Liens arising from construction of the Shoreside Complex, all in accordance with the provisions of this Lease regarding Prohibited Liens. Tenant shall obtain and pay for all permits and approvals required by Law in order for Tenant to construct the Shoreside Complex. 4.3 Cooperation by Landlord. Upon Tenant's request, Landlord shall, without cost to Landlord, promptly join in and execute any instruments including, but not limited to, applications for building permits, demolition permits, alteration permits, appropriate consents, zoning, rezoning or use approvals, amendments and variances, easements, encumbrances, and/or liens (excluding Mortgages) against the Premises or the Shoreside Complex (Fee Estate and Leasehold Estate), and such other instruments as Tenant may from time to time request to enable Tenant from time to time to use, develop, improve, and construct the Shoreside Complex and other improvements on the Premises in accordance with this Lease, provided each of the foregoing is in reasonable and customary form and does not cause the Fee Estate to be encumbered as security for any obligation and does not otherwise expose the Fee Estate to any material risk of forfeiture during the Term. Tenant shall reimburse Landlord's reasonable attorneys' fees incurred by Landlord in performing under this Section. Landlord agrees not to oppose or object to any applications filed by Tenant with any Government in connection with development, operation or alteration of the Shoreside Complex and other improvements located on the Premises. 4.4 Title to Shoreside Complex and Tenant's Property. The Shoreside Complex and Tenant's Property shall at all times during the Term be owned or leased by, and shall belong to Tenant or Subtenant. Tenant or Subtenant, in the case of its Tenant's Property only, shall have title to or lease such property throughout the Term. All the benefits and 12 burdens of ownership of Tenant's Property shall be and remain in Tenant during the Term. The Shoreside Complex and any Tenant's Property affixed to the Premises or left in the Premises and not removed by Tenant within thirty (30) days after the expiration or termination of the Term shall automatically and without need for any further action or the execution of any further documents become the property of Landlord. After the Term, the Shoreside Complex shall be owned by, and shall belong to Landlord. 5. RENT. 5.1 Fixed Rent. Throughout the Term, Tenant shall pay Landlord, without notice or demand, in lawful money of the United States of America, at the office of Landlord or at such other place as Landlord shall designate a net annual rental (the "Fixed Rent") of ONE AND 00/100 DOLLAR ($1.00) per Fiscal Year, payable in advance on the first day of each Fiscal Year. 5.2 No Improvements Rent. Landlord acknowledges that it is being adequately compensated by the payment by Tenant of Fixed Rent and Percentage Rent hereunder and the parties expressly intend, that construction of the Shoreside Complex and Landlord's succession to Tenant's and Subtenant's interests in the Shoreside Complex and Tenant's Property upon the termination or expiration hereof shall not be construed to be Rent payable to Landlord under the Lease. 5.3 Means of Payment. Tenant shall pay all Percentage Rent payable to Landlord by wire transfer to Landlord's bank account, which Landlord shall identify to Tenant (and Landlord shall have the right to change from time to time by at least thirty (30) days' Notice to Tenant). All other Rent shall be payable by company check of Tenant. 5.4 Percentage Rent. Beginning on the twentieth calendar day of each Fiscal Month following the Commencement Date (Percentage Rent) and continuing throughout the Term, Tenant shall pay, or shall cause the Subtenant occupying Players' Premises to pay, Landlord the Percentage Rent from business conducted at Players' Premises. Landlord may be required by Missouri Gambling Law to be licensed, permitted or otherwise approved by the Missouri Gaming Commission to lawfully receive Percentage Rent (such license, permit or approval is herein referred to as a "Percentage Rent Approval"). If Percentage Rent may not lawfully be paid because of the denial, revocation, suspension or other failure of a Percentage Rent Approval unless the Missouri Gaming Commission permits the payment by Tenant to Landlord of Approved Substitute Percentage Rent (hereinafter defined), Tenant shall, during such period, continue to calculate and report Percentage Rent to Landlord and Tenant shall deposit the amount of Percentage Rent so reported into an escrow account (established and governed in the manner described in Section 3.2) on the twentieth calendar day of each Fiscal Month. If Percentage Rent Approval is subsequently obtained, then, within thirty (30) days after Notice to Tenant of such event (rather than a court order as provided in Section 3.2), Tenant's obligation to pay Percentage Rent shall be reinstated and, to the extent lawful, funds in the aforementioned escrow account, with interest thereon, shall be immediately paid to 13 Landlord. In no event shall any failure of a Percentage Rent Approval that is caused by any act or omission of Tenant excuse Tenant's obligation to pay Percentage Rent. Failure of Tenant to establish such escrow account shall be a Monetary Default. 5.4.1 Reporting and Payment. Percentage Rent shall be determined based upon Net Gaming Revenue from the Premises reported in the State Revenue Reports and State Revenue Audits of Tenant or the occupant of Players' Premises, subject to the right of Landlord (as provided in Section 5.4.3) to independently audit the books and records of Tenant or such occupant, as the case may be, and collect any additional amounts which such audit may reflect to be due and owing under this Lease. On the twentieth (20th) calendar day of each Fiscal Month following the Commencement Date (Percentage Rent), Tenant shall, or shall cause the occupant of the Players' Premises to: (i) deliver to Landlord the Monthly Statement along with copies of all State Revenue Reports and State Revenue Audits relating to the immediately preceding Fiscal Month (or the Fiscal Quarter containing such Fiscal Month) which Tenant or the occupant of the Players' Premises is required to submit to the Missouri Gaming Commission (specifically including the daily tax remittals, quarterly audit required by ss.313.825 RSMo. and the monthly return required by 11 CSR 45-11.040); and (ii) pay the Percentage Rent (or Substitute Percentage Rent, as the case may be) for the immediately preceding Fiscal Month in the manner set forth in Sections 5.3, 5.4 and 5.4.5 of this Lease. If the Missouri Gaming Commission redetermines Net Gaming Revenue, Landlord shall automatically be entitled to additional Percentage Rent hereunder (or Tenant shall be entitled to a reduction of Percentage Rent) based upon such redetermination applicable to the Percentage Rent Year for which such Percentage Rent should have been paid. Tenant shall pay, or shall cause the occupant of the Players' Premises to pay the additional Percentage Rent, in the manner set forth in Section 5.3, within five (5) Business Days after the Missouri Gaming Commission provides Notice of such redetermination to Tenant or the occupant of the Players' Premises and if reduction of Percentage Rent is required by such redetermination, Tenant may deduct such amount from ensuing Percentage Rent payment(s). 5.4.2 Accounting Records. Tenant shall maintain, or shall cause the occupant of Players' Premises to maintain, (at the Premises or at Players' financial offices in Las Vegas, Nevada, or elsewhere, identified to Landlord in writing) accounting books and records in accordance with the Accounting Principles and the Missouri Gambling Law, sufficient to enable Tenant and Landlord to calculate Percentage Rent. Tenant shall preserve, or shall cause the occupant of Players' Premises to preserve books and records relating to each Percentage Rent Year for at least three (3) years after the end of such Percentage Rent Year. If at the conclusion of such period a dispute is pending between Landlord and Tenant regarding the amount of Rent due under this Lease, then Tenant shall continue to preserve, or 14 shall cause the occupant of Players' Premises to preserve such records pending the final disposition of such dispute. 5.4.3 Landlord's Right to Audit. Within (and in no event later than) one hundred eighty (180) days after the end of each Percentage Rent Year, and more frequently if Landlord should reasonably believe that Tenant's or such occupant's reporting is not true and accurate, Landlord shall be entitled to cause a certified public accounting firm designated by Landlord to audit the books and records relevant to the calculation of Net Gaming Revenue reported by Tenant or such occupant during the preceding Percentage Rent Year. Any audit shall be performed in a reasonable manner, during ordinary business hours and without unreasonably interfering with Tenant's or such occupant's business. If such audit reveals that Net Gaming Revenue was understated, then within five (5) Business Days after receipt of the auditor's report, Tenant shall pay, or cause to be paid the net additional Percentage Rent due on account of the audit corrections. If such audit reveals that Net Gaming Revenue was overstated, then Tenant shall be entitled to a credit against the next payment(s) of Percentage Rent under this Lease in an amount equal to the previous overpayment revealed by the audit corrections. Any adjusting payment on account of previous overpayment or underpayment shall bear interest at the Prime Rate from the date it would have been paid (or the date of Tenant's previous overpayment, if applicable) had Tenant's or such occupant's reports and monthly returns been correct until the date actually paid or credited. If Percentage Rent was understated by more than three percent (3%) for the period audited, then Tenant shall pay, or cause such occupant to pay the reasonable cost of such audit; otherwise the audit shall be conducted at Landlord's expense. The rights provided herein shall survive the termination or expiration of the Term for three full Fiscal Years (plus any partial Fiscal Year remaining in the year of termination or expiration of this Lease, as the case may be). 5.4.4 Confidentiality. Landlord shall preserve the confidentiality of all information obtained hereunder relating to Net Gaming Revenue from Players' Premises, except in any litigation or arbitration proceedings between the parties, when compelled by judicial or administrative order, or when advised by counsel that disclosure is required to comply with applicable securities Law. 5.4.5 Substitute Percentage Rent. After the Commencement Date (Percentage Rent), with respect to any period from the date an Operating Covenant Default has occurred and Landlord has given Tenant Notice of such Operating Covenant Default and continuing until such Operating Covenant Default is cured (such period during which an Operating Covenant Default has occurred and is continuing being referred to as a "Substitute Period"), Tenant shall pay, or cause the occupant of the Players' Premises to pay, during any Substitute Period arising due to an Operating Covenant Default, an amount (the "Default Substitute Percentage Rent") equal to the greater of (A) Percentage Rent allocable to such Substitute Period and (B) Average Percentage Rent (hereinafter defined). After the Commencement Date (Percentage Rent), with respect to any period from the date Landlord has failed to receive its Percentage Rent Approval (or such Percentage Rent Approval is revoked or suspended) and the Missouri Gaming Commission (or other gaming authority whose actions have led to an Unsuitability Determination affecting Landlord) permits payment of Approved Substitute Percentage Rent (hereinafter defined) by Tenant to Landlord (such period during which Landlord no longer has its Percentage Rent Approval also being referred to as a 15 "Substitute Period"), Tenant shall pay during any Substitute Period arising due to Landlord's failure to have Percentage Rent Approval an amount equal to Average Percentage Rent, but in no event shall Average Percentage Rent exceed the Percentage Rent otherwise allocable to such Substitute Period (the "Approved Substitute Percentage Rent", such Default Substitute Percentage Rent and Approved Substitute Percentage Rent being sometimes hereinafter collectively referred to as the "Substitute Percentage Rent"). "Average Percentage Rent" is a daily amount equal to the Percentage Rent payable for the two preceding Percentage Rent Years divided by 730, which daily amount is then multiplied by the number of days in a Substitute Period, provided that if the Premises have been operating for fewer than two full Percentage Rent Years, the daily amount shall equal the Percentage Rent payable for the period from the Commencement Date (Percentage Rent) through the day preceding the commencement of a Substitute Period divided by the number of days in such measuring period and further provided that if a Substitute Period has previously occurred during the applicable measuring period for Average Percentage Rent, Landlord shall reasonably adjust the amount to be used as the daily amount for Average Percentage Rent to reflect an average daily Percentage Rent during periods of operation in accordance with Section 7.1. 5.4.6 Assignment of Percentage Rent to Landlord. Tenant hereby assigns to Landlord all of its right, title and interest in and to and with respect to the Percentage Rent payable under the Players' Lease and its rights under the Parent Guaranty (as defined in the Players Lease) and any other Sublease of Players' Premises (which for purposes hereof shall include Substitute Percentage Rent), including without limitation Tenant's right to receive all Percentage Rent, Substitute Percentage Rent and all reports and returns under Section 5.2.1 of the Players' Lease, Tenant's right to audit books and records pursuant to Section 5.2.3 thereof, the rights to enforce payment of Percentage Rent and Substitute Percentage Rent in Landlord's own name or in the name of Tenant and all other remedies of Tenant on a Default in the payment of Percentage Rent and Substitute Percentage Rent afforded Tenant under the Players' Lease or such other Lease. Tenant also hereby assigns to Landlord the rights in all insurance proceeds payable with respect to the Termination Payment (as defined in the Players Lease) and Tenant agrees to direct Players to name Harrah's as the insured in the insurance policy insuring the Termination Payment. So long as Players performs its obligations under the Players' Lease, Tenant's obligations under Sections 5.4, 5.4.1, 5.4.2 and 5.4.5 hereof shall be deemed satisfied. 5.5 Additional Rent. In addition to Fixed Rent and Percentage Rent, Tenant shall pay Landlord, as additional rent under this Lease, all Additional Rent, as and when same is due any payable and before any interest or penalty may attach for nonpayment thereof. 5.6 No Conditional Payment. No payment by any party of a lesser amount than the total of all sums due hereunder shall be deemed to be other than on account of the sums then due, applied in inverse priority of their due dates, nor shall any endorsement or statement on any check, other payment or accompanying letter or other communication or notice be deemed an accord and satisfaction. Any party may accept such payment in cash or negotiate such check or other payment without prejudice to that party's right to recover the balance of such sums or to pursue any other remedy provided in this Lease or otherwise available, regardless of whether that party makes any notation on such instrument of payment or 16 otherwise notifies the other party that such acceptance, cashing or negotiation is without prejudice to any of that party's rights. 5.7 Interest on Overdue Rent. Unless otherwise provided herein, all Rent (other than Percentage Rent, Approved Substitute Percentage Rent and Default Substitute Percentage Rent, which shall be due as provided in Section 5.4.1) owed by Tenant to Landlord shall be due ten (10) calendar days from the date the Landlord renders statements of account or invoices therefor. If any Rent (including, without limitation, Percentage Rent, Approved Substitute Percentage Rent and Default Substitute Percentage Rent) is not received by Landlord within one Business Day after the date due, Tenant agrees to pay to Landlord, interest at the Prime Rate plus eight percent (8%) but not in excess of the Criminal Usury Rate (the "Default Rate") on the overdue amount from the date such obligation was due until paid. 6. ADDITIONAL PAYMENTS BY TENANT; IMPOSITIONS. 6.1 Landlord's Net Return. The parties intend that this Lease shall constitute a "net lease," so that the Fixed Rent, Percentage Rent and Substitute Percentage Rent shall provide Landlord with "net" return for the Term, free of any expenses or charges with respect to the Premises, except as specifically provided in this Lease. Accordingly, Tenant shall pay as Additional Rent and discharge, before failure to pay the same shall create a material risk of forfeiture or give rise to a penalty, each and every item of expense, of every kind and nature whatsoever, related to or arising from the Premises, or by reason of or in any manner connected with or arising from the development, leasing, operation, management, maintenance, repair, use or occupancy of the Premises, the Shoreside Complex, Tenant's Property or any portion thereof. Notwithstanding anything to the contrary in this Lease, Tenant shall not be required to pay any of the following incurred by Landlord: (a) principal, interest, or other charges payable under any Fee Mortgage; (b) depreciation, amortization, financing or refinancing costs incurred by Landlord with respect to the Fee Estate or the Premises; (c) consulting, overhead, travel, legal, staff, and other similar costs incidental to Landlord's ownership of the Premises, other than reasonable attorneys' fees incurred by Landlord and payable by Tenant pursuant to express provisions of this Lease; and (d) any costs arising from or pursuant to any instrument or agreement affecting the Premises that is not a Permitted Exception and to which Landlord is a party and Tenant is not a party. 6.2 Impositions. For any period within the Term (with daily proration for periods partially within the Term and partially outside the Term), Tenant shall pay and discharge, before failure to pay the same shall create a material risk of forfeiture or give rise to a penalty, all Impositions. Landlord shall arrange for direct billing of all Impositions to Tenant. Tenant shall also pay all interest and penalties assessed by any Government on account of late payment of any Imposition, unless Tenant has not received notice of such Imposition due to Landlord's failure to arrange for such direct billing. 6.3 Assessments in Installments. To the extent that may be permitted by law, Tenant shall have the right to apply for conversion of any assessment to cause it to be payable 17 in installments. After such conversion, Tenant shall pay and discharge only such installments of such assessment as shall become due and payable during the Term. 6.4 Combined Tax Lots. If, as of the Commencement Date, the Premises are part of a tax lot (a "Combined Tax Lot") that includes any land or improvements other than the Premises, then the parties shall diligently and expeditiously cooperate (including by bringing such proceedings as may be necessary), all at Landlord's expense, including Tenant's reasonable attorneys' fees, to cause the Combined Tax Lot to be divided so that the Premises (including the Fee Estate and the Leasehold Estate) shall be a single separate tax lot that is no longer a Combined Tax Lot. Pending such division of the Combined Tax Lot: (a) each party shall promptly provide the other with a copy of any tax bill received by such party relating to the Combined Tax Lot; (b) Tenant shall pay a portion of the Impositions assessed with respect to the Combined Tax Lot equal to the estimated assessment of the Premises [which shall include, without limitation, one hundred percent (100%) of Impositions attributable to the Shoreside Complex and other improvements made by Tenant or any Subtenant] divided by the assessment of the Combined Tax Lot; (c) the estimated assessment for the Premises shall be determined, to the extent possible, based on preliminary information from the tax assessment authorities and otherwise by Tenant, in consultation with Landlord (and, in any event, when the assessment of the Premises has been determined the parties shall make such adjusting payments [with interest at the Prime Rate] as shall be appropriate to compensate for errors in the estimated payments previously made); and (d) if Tenant fails to pay its share of taxes and charges for the Combined Tax Lot before delinquency and such failure continues for ten (10) Business Days after Notice from Landlord, then Landlord shall in addition to all other remedies provided in this Lease be entitled to pay Tenant's unpaid Impositions with respect to the Combined Tax Lot, and Tenant shall promptly upon demand reimburse Landlord's advances made on Tenant's account. 6.5 Direct Payment by Landlord. If any Imposition or other item of Rent required to be paid by Tenant is required by applicable Laws to be paid directly by Landlord, then: (a) Landlord appoints Tenant as Landlord's attorney in fact for the purpose of making such payment; and (b) if the Person entitled to receive such payment refuses to accept it from Tenant, then Tenant shall give Landlord Notice of such fact no later than ten (10) days prior to the date such payment is due, shall accompany such Notice with such payment and shall include in such Notice reasonable instructions as to the further remittance of such payment. Landlord shall with reasonable promptness comply with Tenant's reasonable instructions and shall assume responsibility for interest and penalties resulting from Landlord's failure to do so. 6.6 Utilities. Tenant shall pay all fuel, gas, light, power, water, sewage, garbage disposal, telephone and other utility charges, and the expenses of installation, maintenance, use and service in connection with the foregoing, relating to the Premises, the Venture Premises or the Shoreside Complex during the Term. 18 7. USE. 7.1 Permitted Uses. After the Commencement Date (Percentage Rent) Tenant shall or shall cause the occupant thereof to, except as herein otherwise specifically provided, continuously occupy and use the Players' Premises for the conduct of Gambling Activity as required by Section 7.1 of the Players' Lease. The remainder of the Shoreside Complex shall be used in a manner that will comply with all Permitted Exceptions. 7.2 Tenant's Failure to Operate the Business. In the event neither Tenant nor an occupant of the Players' Premises at any time after the Commencement Date (Percentage Rent) shall continuously operate, or cause to be operated the Players' Premises in the manner set forth in Section 7.1 and Exhibit E hereto, or shall vacate the Players' Premises prior to the expiration of the Term hereof, the parties agree that irreparable harm and damages, which damages are not readily ascertainable, shall be caused to Landlord. The parties therefore agree that in such event Landlord, at its option, shall be entitled to the rights and remedies provided in Section 27.2 of this Lease. 8. LAWS. 8.1 Compliance with Law. During the Term, Tenant shall, at its own expense, observe and comply with all Laws affecting the Premises and/or the Shoreside Complex. Notwithstanding the foregoing, Tenant shall have the right to contest any such Laws in accordance with this Lease. Tenant shall (so long as HMHC is a partner in Tenant and is prepared to meet its obligations under the Joint Venture Agreement) make any Mandated Alterations with respect to the Premises and/or the Shoreside Complex required by Law arising during the Term. 8.2 Licenses and Permits. Tenant shall procure, in a timely manner, every permit, license, certificate or other authorization required in connection with the lawful and proper maintenance, operation, use and occupancy of the Premises or required in connection with any improvements erected on the Premises or with respect to the Shoreside Complex and comply with all such permits, licenses, certificates and other authorizations, unless Tenant is prevented from so performing by the acts or omissions of HMHC. 8.3 Environmental Matters. 8.3.1 Compliance. All activities upon the Premises shall comply with Environmental Law. 8.3.2 No Violations. Tenant shall not cause or permit any Hazardous Materials to be brought upon, stored, handled, used, generated, released into the environment, or disposed of, on, under, from, or about the Premises (which for purposes of this Section shall include, without limitation, subsurface soil and groundwater) without the prior written consent of Landlord. Landlord may, in its sole discretion, place such conditions as Landlord deems appropriate with respect to such Hazardous Materials and may further require that Tenant demonstrate to the Landlord that such Hazardous Materials are necessary or useful to 19 Tenant's business and will be generated, stored, handled, used, and disposed of in a manner that complies with Environmental Law and with good business practices. Tenant acknowledges and agrees that Landlord may reasonably utilize an environmental consultant to assist in determining conditions of approval and monitoring in connection with the presence, storage, generation, handling, or use of Hazardous Materials on or about the Premises by Tenant or Tenants' agents, employees, invitees or Subtenants. 8.3.3 Cost of Compliance. If the presence of any Hazardous Materials (other than Preexisting Hazardous Materials [hereinafter defined]) on, under, from, or about the Premises results in (i) injury to any individual, (ii) injury to or contamination of the Premises, or (iii) injury to or contamination of any real or personal property wherever situated, then Tenant, at its sole cost and expense, shall promptly take all actions necessary to return the Premises to the condition existing prior to the introduction of such Hazardous Materials to the Premises and to remedy or repair any such injury or contamination. Without limiting any other rights or remedies of Landlord under this Lease or at law or in equity, Tenant shall pay the cost of any cleanup work performed on, under, or about the Premises as required by this Lease or Environmental Law in connection with the investigation, monitoring, removal, and disposal of such Hazardous Materials. 8.3.4 Remediation. Notwithstanding any other provision of this Section, Tenant shall not, without Landlord's prior written consent which consent shall not unreasonably be withheld, take any remedial action in response to the presence of any Hazardous Materials on, under, from, or about the Premises, or enter into any settlement agreement, consent decree, or other compromise with any governmental agency with respect to any Hazardous Materials claims; provided, however, Landlord's prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under, from, or about the Premises (i) poses an immediate threat to the health, safety, or welfare of any individual, or (ii) is of such a nature that an immediate remedial response is necessary or appropriate and it is not possible to obtain Landlord's prior written consent before such response. 8.4 Disclosure. Tenant shall promptly notify Landlord of, and shall promptly provide Landlord with true, correct, complete, and legible copies of, all of the following relating to the Premises or to Tenant's activities at the Premises: 8.4.1 Reports. Reports and other documents filed by Tenant with any governmental agency or body pursuant to Environmental Law including, without limitation, all permit applications, permits, monitoring reports, workplace exposure and community exposure warnings or notices, and environmental audits or assessments relating to water discharges, air pollution, waste generation or disposal, underground or aboveground storage tanks, or Hazardous Materials; 8.4.2 Notices. All correspondence, notices, information requests, complaints, pleadings, legal documents, and other documents received by Tenant from any Government agency related to Hazardous Materials; 20 8.4.3 Environmental Audits. All environmental audits or assessments (even those which may be characterized as confidential); 8.4.4 Orders. All orders, reports, notices, listings, and correspondence (including those which may be considered confidential) of or concerning the release, investigation, compliance, cleanup, remedial or corrective action, or abatement of Hazardous Materials, whether or not required by Environmental Law; and 8.4.5 Pleadings. All correspondence, notices, information requests, complaints, pleadings, and legal documents filed against Tenant related to Tenant's use, handling, storage, or disposal of Hazardous Materials. 8.5 Indemnification. To the fullest extent permitted by law, Tenant hereby agrees to indemnify, hold harmless, protect and defend (with attorneys reasonably acceptable to Landlord) Landlord and any successors to all or any portion of Landlord's interest in the Premises and their respective directors, officers, partners, beneficiaries, employees, authorized agents, affiliates, representatives, and mortgagees from and against any and all liabilities, losses, damages (including, without limitation, damages for the loss or restriction on use of rentable or usable space or any amenity of the Premises), diminution in the value of the Premises, judgments, fines, demands, claims, recoveries, deficiencies, costs, and expenses (including, without limitation, reasonable attorneys' fees, disbursements and court costs, and all other professional or consultant's expenses), whether foreseeable or unforeseeable, arising directly or indirectly out of: (i) the breach by Tenant of any of its covenants or representations made or to be made pursuant to Sections 8.3, 8.4 and, this Section 8.5 and 8.6 hereof, or (ii) the presence (except for Preexisting Hazardous Materials), use, handling, generation, storage, treatment, or on-site or off-site disposal or transportation of Hazardous Materials on, into, from, under or about the Premises by Tenant or Tenant's agents, employees, invitees or Subtenants, and specifically including, without limitation, the cost of any required or necessary repair, restoration, clean-up (including, but not limited to, the costs of investigation, monitoring, and removal of Hazardous Materials [except for Preexisting Hazardous Materials]) or detoxification of the Premises or other property where such Hazardous Materials have come to be located, and the preparation of any closure or other required plans, whether such action is required or necessary during the term of this Lease or after the expiration of this Lease. 8.6 Tenant's Further Responsibility at Termination or Expiration of Lease. 8.6.1 Surrender. Promptly upon the expiration or sooner termination of this Lease, Tenant shall represent to Landlord in writing that (i) Tenant has made a diligent effort to determine whether any Hazardous Materials are on, under, or about the Premises as a result of any acts or omissions of Tenant or Tenant's agents, employees, invitees or Subtenants, and (ii) no such Hazardous Materials exist on, under, or about the Premises other than as specifically identified to Landlord by Tenant in writing. 21 8.6.2 Storage Tanks. Any and all underground or aboveground storage tanks on the Premises, along with their respective piping, pumps, dispensing equipment, and dispensing islands, are not fixtures but are part of Tenant's Property. Tenant shall remove all such property from the Premises upon termination of this Lease. Such removal shall comply with Environmental Law. Any agreement by Landlord that Tenant may abandon such Tenant's Property on the Premises must be in writing. 8.7 Landlord's Environmental Remedies. 8.7.1 Inspection Rights. Landlord shall have the right, but not the obligation, subject to the provisions of Article 25 hereof, to inspect, investigate, sample, and monitor the Premises at any time to determine whether Tenant is complying with the terms of this Article, and in connection therewith, Tenant shall provide Landlord with full access to all relevant facilities, records, and personnel. 8.7.2 Self Help. If Tenant is not in compliance with any of the provisions of this Article, or in the event of a release of Hazardous Material (other than Preexisting Hazardous Materials) on, under, from, or about the Premises, Landlord shall have the right, but not the obligation, to immediately enter upon the Premises and to discharge Tenant's obligations under this Article at Tenant's expense, including without limitation, the taking of emergency or long-term remedial action. Landlord shall endeavor to minimize interference with Tenant's business but shall not be liable for any such interference. 8.7.3 Hazardous Material Release. If Landlord has a good-faith reason to believe that Tenant or Tenant's agents, employees, invitees or Subtenants may have caused or permitted the release of a Hazardous Material on, under, from or about the Premises, then Landlord may require Tenant, at Tenant's sole cost and expense, to conduct monitoring activities on or about the Premises reasonably satisfactory to Landlord concerning such release of Hazardous Materials on, under, from or about the Premises. 8.7.4 Clean Up. If Tenant, pursuant to Section 8.6.1, discloses the existence of Hazardous Materials on, under, from, or about the Premises, or if Landlord at any time discovers or is informed that Hazardous Materials (other than Preexisting Hazardous Materials) have been released, disposed of, spilled, or leaked on, under, from, or about the Premises, Tenant shall, at Landlord's request, immediately prepare and submit to Landlord within thirty (30) days after such request a comprehensive plan, subject to Landlord's approval, specifying the actions to be taken by Tenant to return the Premises to the condition existing prior to the introduction of such Hazardous Materials. Landlord, in its sole discretion, may retain a consultant, which shall be at Tenant's sole cost and expense, to review and comment upon such plan. Upon Landlord's approval of such clean-up plan, Tenant shall, at Tenant's sole cost and expense, implement such plan and proceed to clean up such Hazardous Materials as soon as reasonably possible, but in any event within the time period prescribed by any Government authority in accordance with Environmental Law and as required by such plan and this Lease. Tenant acknowledges that Landlord's review of and comments upon such plan will not prevent any governmental agency with appropriate jurisdiction from imposing further or other requirements. All such cleanups and remedial actions shall be at Tenant's sole cost and expense. 22 8.7.5 Landlord Participation. Landlord, at Tenant's sole cost and expense, shall have the right, but not the obligation, to join and participate in any legal or administrative proceedings or actions involving Tenant in connection with any claims, demands, or causes of action arising out of the storage, generation, handling, use, or disposal of Hazardous Materials (other than Preexisting Hazardous Materials) on, under, from, or about the Premises. 8.7.6 Fees and Expenses. All sums reasonably disbursed, deposited, or incurred by Landlord in connection with its rights and remedies under this Article, including without limitation, all costs, expenses, and actual attorneys' and consultants' fees, shall be due and payable by Tenant to Landlord as an item of Additional Rent, on demand by Landlord, together with interest thereon at the Default Rate from the date 30 days after the date of such demand until paid by Tenant. 8.8 Landlord's Indemnity. Landlord and Tenant are each in possession of a copy of the Phase I Environmental Assessment Report dated October 17, 1995 performed by Espey, Huston & Associates, Inc. (the "Assessment"). To the best knowledge of Landlord, based solely on the Assessment, there are no Hazardous Materials on the Premises. Landlord shall defend, fully indemnify and hold free and harmless Tenant from and against all claims, judgments, damages, penalties, fines, costs, liabilities or losses and costs of remediation, if any, that arise after the Commencement Date, and that are imposed on or paid by or asserted against Tenant by reason of or on account of Hazardous Materials which were present at any time or times on the Premises prior to the Commencement Date (the "Preexisting Hazardous Materials"). 9. MAINTENANCE AND ALTERATIONS. 9.1 Obligation to Maintain. During the Term, Tenant shall keep and maintain the Premises and the Shoreside Complex in good order, condition and repair and for so long as Tenant is the Partnership in accordance with the provisions of the Joint Venture Agreement and the provisions of Article 28 of this Lease, subject to Casualty and Condemnation (governed by the separate applicable provisions of this Lease), reasonable wear and tear, and any other conditions that Tenant is not required to repair pursuant to this Lease. 9.2 Tenant's Right to Perform Alterations. At Tenant's sole cost and expense, Tenant shall be entitled but not required to make and from time to time alter, modify or reconstruct, any improvements, repairs, or alterations to the Premises without Landlord's consent subject to the provisions of this Lease, as Tenant shall consider necessary or appropriate. Tenant shall perform all construction work in connection with any improvement, repair or alteration to the Premises or the Shoreside Complex in compliance with all Laws and Permitted Exceptions. 23 10. PROHIBITED LIENS. 10.1 Tenant's Covenant. Tenant shall provide Landlord a performance and payment bond, satisfactory to Landlord, naming Landlord as a dual obligee for all construction work undertaken on the Premises. Tenant shall not suffer or permit any Prohibited Lien to be filed. If a Prohibited Lien is filed then Tenant shall, within thirty (30) days after receiving Notice of such filing (but in any case within fifteen (15) days after receipt of Notice of commencement of foreclosure proceedings), commence and then prosecute appropriate action to cause such Prohibited Lien to be paid, discharged or bonded (by issuance to Landlord of a title insurance endorsement insuring against all loss or damage arising pursuant to such Prohibited Lien). Nothing in this Lease shall be construed to restrict Tenant's right to contest the validity of any Prohibited Lien and to pursue Tenant's position to a final judicial determination provided that an appropriate and adequate title insurance endorsement is issued to Landlord to assure that there may be no forfeiture (including any judicial or foreclosure sale) of the Leasehold Estate or the Fee Estate. 10.2 Protection of Landlord. Notice is hereby given that Landlord shall not be liable for any labor or materials furnished or to be furnished to Tenant or any Subtenant upon credit, and that no mechanic's or other lien for any such labor or materials shall attach to or affect the Fee Estate. Nothing in this Lease shall be deemed or construed in any way to constitute Landlord's consent or request, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer, equipment or material supplier for the performance of any labor or the furnishing of any materials or equipment for any improvement, alteration or repair of, or to, the Premises, or any part of the Premises, nor as giving Tenant or any Subtenant any right, power or authority to contract for, or permit the rendering of, any services, or the furnishing of any materials that would give rise to the filing of any liens against the Fee Estate. Tenant shall Indemnify Landlord against any work performed on the Premises and/or the Shoreside Complex for or by Tenant or any Subtenant. 11. INDEMNIFICATION; LIABILITY OF LANDLORD. 11.1 Mutual Indemnity Obligations. Landlord and Tenant shall each Indemnify the other against: (a) any wrongful act, wrongful omission or negligence of the Indemnitor (and, in the case of Tenant, that of any Subtenants) or its or their partners, directors, officers, or employees; and (b) any breach or default by the Indemnitor under this Lease. In addition to and without limiting the generality of the foregoing indemnity, Tenant shall Indemnify Landlord against all the following matters (except to the extent any claim arises from any wrongful act, wrongful omission or gross negligence of Landlord): (x) the conduct, management or occupancy of or from any work or activity performed in and on the Premises and/or the Shoreside Complex during the Term; (y) the condition of the Premises and the Shoreside Complex or any adjoining street, curb or sidewalk, or of any vaults, tunnels, passageways or space under, adjoining or appurtenant thereto; and (z) any accident, injury or damage whatsoever caused to any individual or property occurring during the Term, in or on the Premises, the Shoreside Complex or upon or under any adjoining sidewalks or appurtenant street, curb, vaults, tunnel, passageway or space. Furthermore, Tenant agrees to pay, and to Indemnify Landlord against, reasonable legal costs, including reasonable counsel fees and 24 disbursements, incurred by Landlord in obtaining possession of the Premises and the Shoreside Complex if Tenant fails to surrender possession upon the expiration or earlier termination of the Term. Notwithstanding anything to the contrary in this Lease, Tenant shall not be required to Indemnify Landlord from or against Landlord's intentional acts or omissions or gross negligence. 11.2 Liability of Landlord. Tenant is and shall be in exclusive control and possession of the Premises and Shoreside Complex during the Term as provided in this Lease. Subject to Section 11.1, Landlord shall not be liable for any injury or damage to any property or to any individual occurring on or about the Premises or the Shoreside Complex. Furthermore, subject to Section , Landlord shall not be liable for any injury or damage to any property of Tenant, Subtenants or of any other person, during the Term. The provisions of this Lease permitting Landlord to enter and inspect the Premises and Shoreside Complex are intended to allow Landlord to be informed as to whether Tenant and Subtenants are complying with the agreements, terms, covenants and conditions of this Lease, and to the extent permitted by this Lease, to perform such acts required by this Lease as Tenant or Subtenants shall fail to perform. Such provisions shall not be construed to impose upon Landlord any liability to third parties. 11.3 Indemnification Procedures. Wherever this Lease requires an Indemnitor to Indemnify an Indemnitee, the following procedures and requirements shall apply: 11.3.1 Prompt Notice. The Indemnitee shall give the Indemnitor prompt Notice of any claim. To the extent, and only to the extent, that both (a) the Indemnitee fails to give prompt Notice and (b) the Indemnitor is thereby prejudiced, the Indemnitor shall be relieved of its indemnity obligations under this Lease. 11.3.2 Selection of Counsel. The Indemnitor shall be entitled to select counsel (reasonably acceptable to the Indemnitee, but counsel to the Indemnitor's insurance carrier shall be deemed satisfactory). Notwithstanding anything to the contrary in the preceding sentence, the Indemnitee, unless the Indemnitee or an Affiliate of the Indemnitee has previously approved the selection of counsel as a partner of Indemnitor, shall be entitled to select the Indemnitee's own counsel and be represented by such counsel, and if the Indemnitee selects its own counsel, then such counsel shall consult and reasonably cooperate with the Indemnitor's counsel and the Indemnitor and the Indemnitee shall each pay fifty percent (50%) of the reasonable attorneys' fees of the Indemnitee's counsel. 11.3.3 Settlement. The Indemnitor may, with the consent of the Indemnitee, not to be unreasonably withheld, settle the claim, except that no consent by the Indemnitee shall be required as to any settlement by which (x) the Indemnitor procures (by payment, settlement, or otherwise) a release of the Indemnitee pursuant to which the Indemnitee is not required to make any payment whatsoever to the third party making the claim, (y) neither the Indemnitee nor the Indemnitor acting on behalf of the Indemnitee makes any admission of liability, and (z) the continued effectiveness of this Lease is not jeopardized in any way. 11.3.4 Insurance Proceeds. The Indemnitor's obligations shall be reduced by net insurance proceeds paid to an insured person or entity in satisfaction of an Indemnitee's 25 liability to such person or entity or by net insurance proceeds actually collected by the Indemnitee on account of the loss. 12. RIGHT OF CONTEST. Tenant shall have the right to contest, at its sole expense, by appropriate legal proceedings diligently conducted in good faith, the amount or validity of any Imposition or Prohibited Lien; the valuation, assessment or reassessment (whether proposed or final) of the Premises or Shoreside Complex for purposes of real estate taxes; the validity of any Law or the application of any Law to the Premises or Shoreside Complex. Tenant may defer payment of the contested Imposition, Prohibited Lien or compliance with the contested Law pending the outcome of such contest, provided that such deferral does not subject the Premises to risk of imminent forfeiture or Landlord to any risk of criminal liability; that any Prohibited Lien is bonded pending such contest and thereafter removed permanently as required by Section 10.1 hereof. Landlord shall not be required to join in any such contest proceedings unless a Law shall require that such proceedings be brought in the name of Landlord as owner of the Fee Estate. In such case, Landlord shall cooperate with Tenant so as to permit such proceedings to be brought in Landlord's name. In addition to, and without limiting, Landlord's obligations under the preceding sentence, Landlord appoints Tenant as Landlord's attorney-in-fact, irrevocably, with full power of substitution, to execute and deliver any documentation, and to otherwise act on Landlord's behalf to the full extent Landlord could and in Landlord's place and stead, in any such proceeding. This appointment is coupled with an interest and is irrevocable. Tenant shall pay all costs and expenses (including attorneys' fees) incident to such proceedings. Tenant shall Indemnify Landlord against such contest. Tenant shall be entitled to any refund of any Imposition (and penalties and interest paid by Tenant) based upon Tenant's prior overpayment of such Imposition, whether such refund is made during or after the Term. Upon termination of Tenant's contest of an Imposition, Tenant shall pay the amount of such Imposition (if any) as has been finally determined in such proceedings to be due, together with any costs, interest, penalties or other liabilities in connection with such Imposition. Upon final termination of Tenant's contest of a Law, Tenant shall comply with such final determination. Provided no Event of Default has occurred, Landlord shall not enter any objection to any contest proceeding undertaken by Tenant pursuant to this Article. Provided no Event of Default has occurred, Tenant's right to contest any Imposition or the valuation, assessment or reassessment of the Premises for tax purposes shall be to the exclusion of Landlord, and Landlord shall have no right to contest the foregoing without Tenant's consent, not to be unreasonably withheld. 13. INSURANCE. 13.1 Tenant to Insure. Tenant shall, at Tenant's sole cost and expense, during the Term, obtain and maintain the insurance specified on Exhibit F to this Lease. 26 14. DAMAGE OR DESTRUCTION. 14.1 Notice; No Rent Abatement; Restoration Obligations. Tenant shall promptly give Landlord Notice of any Casualty. There shall be no abatement or reduction of Rent on account of a Casualty. Except as otherwise set forth below, Tenant shall restore the Shoreside Complex as provided in the Joint Venture Agreement, the Players' Lease and the Harrah's Lease unless the Partnership is no longer the Tenant in which case Tenant shall restore the Shoreside Complex as nearly as may be practicable to its condition, quality, and class immediately prior to such Casualty. 14.2 Lease Termination for Casualty. This Lease shall not, so long as no Default has occurred and is then continuing, terminate or be terminated by reason of any Casualty unless Tenant determines not to restore the Premises and/or Shoreside Complex or sufficient portion thereof to continue operation of the Premises. It shall be a condition of Tenant's right to agree to a termination of this Lease that all Prime Mortgagee(s) whose Prime Mortgage(s) grant them the power to withhold consent to such termination shall have consented to or joined in such termination agreement. If Tenant and the other parties so agree, Tenant shall have the right to terminate this Lease, subject to the Reciprocal Easement Agreement, upon the date specified in Tenant's Notice to Landlord, whereupon Tenant shall remove Tenant's Property, demolish damaged improvements and restore the Premises as nearly as possible to their condition prior to construction of the Shoreside Complex and surrender the Premises to Landlord; all casualty or hazard insurance proceeds from any insurance carried by either Landlord or Tenant with respect to the Premises or Shoreside Complex shall be paid to the Tenant and shall be distributed in accordance with the terms of the Joint Venture Agreement. Notwithstanding the foregoing, if this Lease is terminated as aforesaid within the last three (3) years of the Term hereof such insurance proceeds shall be payable to Landlord. 15. CONDEMNATION. 15.1 Substantial Condemnation. If a Substantial Condemnation of the Premises or the Shoreside Complex shall occur, then this Lease shall terminate as of the effective date of such Substantial Condemnation, and the Rent shall be apportioned accordingly. The proceeds of the Substantial Condemnation shall be allocated between Landlord and Tenant as follows: first, Landlord shall be entitled to receive such portion of the award, as shall equal the book value of the Premises taken plus the present value of Percentage Rent that would have been paid but for such termination; and second, Tenant shall be entitled to receive the entire remaining balance of any such award or awards. All determinations of value required by the preceding sentences shall be made as if the Condemnation had never occurred, the Leasehold Estate had not been terminated, and the Lease had continued for the remainder of the Term. 15.2 Insubstantial Condemnation. If an Insubstantial Condemnation shall occur, then any award or awards shall be applied in accordance with the provisions of the Joint Venture Agreement and after dissolution of the Partnership or the Partnership no longer is the Tenant first to reconfiguration and reconstruction of any remaining part of the improvements not so taken. Tenant shall perform such repair, restoration or reconstruction in accordance with applicable requirements of this Lease. The balance of any such award or awards remaining 27 after the repair, restoration or reconstruction shall be distributed to Landlord and Tenant as if they were proceeds of a Substantial Condemnation affecting only the portion of the Premises taken. 15.3 Other Governmental Action. In the event of any action by any Government not resulting in a Condemnation but creating a right to compensation, such as the changing of the grade of any street, then this Lease shall continue in full force and effect without reduction or abatement of Rent and Tenant shall be entitled to receive the award or payment made in connection with such action. Notwithstanding the foregoing, Landlord shall be entitled to receive such award or payment if such right to compensation is established within the last three (3) years of the Term. 15.4 Settlement or Compromise. Neither Landlord or Tenant shall settle or compromise any Condemnation award without consent by the other party and by any Subtenant whose Sublease provides for such right of consent. 15.5 Prompt Notice. If either party becomes aware of any Condemnation or threatened or contemplated Condemnation, then such party shall promptly give Notice thereof to the other party. 16. TRANSFERS. 16.1 By Tenant. For so long as the Partnership is Tenant and HMHC is a partner thereof, Tenant shall only Transfer all or part of the Leasehold Estate in accordance with the provisions of the Joint Venture Agreement. If the Partnership is no longer Tenant, Tenant shall not Transfer, except as is provided under Section 17.2, all or part of the Leasehold Estate without Landlord's consent, which consent shall not be unreasonably withheld. Tenant agrees, without limiting the exercise of Landlord's reason, that Landlord would be reasonable in not consenting to any Transfer to a Transferee that is (i) a Prohibited Person (Tenant), or (ii) for the period (the "Prohibition Period") ending on the seventh anniversary of the Effective Date (as defined in the Joint Venture Agreement) a Prohibited Person (as defined in the Joint Venture Agreement) or (iii) fails to satisfy the criteria established in Exhibit G. Except as is provided under 17.2, any Transfer in the nature of an assignment shall require the assignee to assume all obligations of Tenant under this Lease in writing in form and substance reasonably acceptable to Landlord. 16.2 By Landlord. Landlord shall not transfer the Fee Estate to a Prohibited Person (Landlord). 17. MORTGAGES. 17.1 Landlord's Rights. Landlord shall have the right to execute and deliver Fee Mortgage(s) at any time and from time to time during the Term, provided that (a) the Fee Mortgage by its terms recites that it is subordinate to this Lease and any and all estates arising from this Lease; and (b) the proposed Fee Mortgagee is not a Prohibited Person (Landlord). 28 Any Fee Mortgage entered into in violation of the preceding sentence shall be null and void. If Landlord executes and delivers a Fee Mortgage, then Landlord shall within ten (10) Business Days provide Tenant with a copy of such Fee Mortgage. If a Fee Mortgagee forecloses under its Fee Mortgage or accepts a deed in lieu of such foreclosure, then this Lease shall continue in full force and effect and Tenant shall attorn to the holder of the Fee Estate as successor Landlord under this Lease (subject to the limitations on such Fee Mortgagee's liability for defaults of its Mortgagor, as are provided in this Lease). Such attornment shall in no way diminish or impair Tenant's rights and remedies against Landlord hereunder or require waiver of any Landlord default. Tenant shall not be required to join in any Fee Mortgage or subordinate this Lease to any Fee Mortgage. 17.2 Tenant's Rights. Tenant shall have the right, without Landlord's consent, to execute and deliver Prime Mortgage(s) to any Institutional Lender(s) encumbering this Lease and the Leasehold Estate, that is not a Prohibited Person (Tenant). Tenant shall not grant a Prime Mortgage to any Person other than an Institutional Lender(s) that is not a Prohibited Person (Tenant) or, during the Prohibition Period to a Prohibited Person, without first obtaining Landlord's prior written consent, which consent shall not unreasonably be withheld. Landlord shall not be required to join in or "subordinate" the Fee Estate to any Prime Mortgage. 17.3 Effect of a Prime Mortgage. Tenant's making of a Prime Mortgage shall not be deemed to constitute an assignment or transfer of the Leasehold Estate, nor shall any Prime Mortgagee, as such, or in the exercise of its rights under this Lease, be deemed to be an assignee or transferee or mortgagee in possession of the Leasehold Estate so as to require such Prime Mortgagee, as such, to assume or otherwise be obligated to perform any of Tenant's obligations under this Lease except when, and then only for so long as, such Prime Mortgagee has entered into possession of the Premises in the exercise of its remedies under its Prime Mortgage (as distinct from its rights under this Lease to cure Defaults or exercise Mortgagee's Cure Rights). No Prime Mortgagee (or purchaser at a foreclosure sale held pursuant to a Prime Mortgage) shall be liable under this Lease unless and until such time as it becomes, and then only for so long as it remains, the owner of the Leasehold Estate. 17.4 Sale and Leaseback. If Tenant sells, assigns, transfers or otherwise conveys the Leasehold Estate to an Institutional Lender and Tenant or an Affiliate of Tenant substantially concurrently enters into or reserves, retains or receives a Sublease of the Premises or similar interest, then: (a) such third party shall be deemed to be a "Prime Mortgagee" and the Sublease shall be deemed to be a "Prime Mortgage"; and (b) such third party shall not be deemed to have assumed or become liable under this Lease except to the extent that such third party has exercised remedies against Tenant under Tenant's Sublease functionally equivalent to foreclosure under a Prime Mortgage or acceptance of an assignment in lieu thereof. 17.5 Modifications Required by Prime Mortgagee. If any Prime Mortgagee or prospective Prime Mortgagee shall require any modification(s) of this Lease (including clarifications and supplements to Mortgagee's Cure Rights), then Landlord shall, at Tenant's request, promptly execute and deliver to Tenant such instruments in recordable form effecting such modification(s) as such Prime Mortgagee or prospective Prime Mortgagee shall require, provided that such modification(s): (i) do not materially adversely affect any of Landlord's 29 rights or materially increase any of Landlord's obligations under this Lease and (ii) are consistent with the customary requirements of Institutional Lenders making loans secured by similar collateral, or are required by banking, insurance or similar laws and regulations setting forth provisions that must appear in a lease in order for such lease to be accepted as security by the Prime Mortgagee or prospective Prime Mortgagee requesting the change. 17.6 Further Assurances. Upon request by Tenant or by any existing or prospective Prime Mortgagee, Landlord shall deliver to the requesting party a separate written instrument in recordable form signed and acknowledged by Landlord setting forth and confirming the rights of Prime Mortgagees under this Lease. 17.7 Protection of Fee Mortgagees. If Tenant shall give Landlord any Notice of Default, then Tenant shall simultaneously give a copy of such Notice of Default to all Fee Mortgagee(s) provided that Tenant shall have received Notice of their names and addresses and their Fee Mortgage(s) shall not have been satisfied or discharged of record. Such Fee Mortgagee(s) shall be permitted to correct or remedy Landlord's alleged breach or default within the same time within which Landlord is permitted to do so, and with like effect as if Landlord had done so. Tenant's failure to give Fee Mortgagee(s) the Notice required by this Section shall not be a Default by Tenant, but no Notice by Tenant of any default by Landlord shall be legally effective against such Fee Mortgagee(s) unless and until Tenant shall have given such Notice to such Fee Mortgagee(s). 17.8 Foreclosure. Notwithstanding anything to the contrary in this Lease, any sale of this Lease and of the Leasehold Estate to a Prime Mortgagee or of the Fee Estate to a Fee Mortgagee in any proceedings for the foreclosure of any Prime Mortgage or Fee Mortgage (as applicable), or any assignment, transfer or conveyance to a Prime Mortgagee or a Fee Mortgagee in lieu of such foreclosure, shall not be deemed to violate this Lease. 18. NOTICE TO LANDLORD OF PRIME MORTGAGES. 18.1 Initial Notice. If Tenant enters into any Prime Mortgage(s), then the Prime Mortgagee(s) thereunder shall be entitled to the Prime Mortgagee protections provided for under this Lease only from and after such time as Tenant or such Prime Mortgagee has given Landlord Notice of the name and address of such Prime Mortgagee, accompanied by a copy of the executed Prime Mortgage. 18.2 Change of Address. Any Prime Mortgagee shall be free to change its name and address from time to time by Notice to Landlord. In the event of a change of name, such Notice may be provided either by the original Prime Mortgagee or by the Prime Mortgagee under its new name, without proof of any kind confirming the change of name. Notice of any change of a Prime Mortgagee's identity or address, or of a transfer of a Prime Mortgage, may be made by any means permitted for the original Notice of the Prime Mortgagee's original name and address. 18.3 Termination of Prime Mortgagee's Rights. If a Prime Mortgagee is entitled to the Prime Mortgagee protections provided for under this Lease, then such entitlement shall not 30 terminate unless and until such time, if any, as the Prime Mortgage shall have been satisfied and discharged of record as evidenced by the written report of a title insurance company licensed in the State or notice to Landlord signed by such Prime Mortgagee. 18.4 Transfer of Fee Estate. Notice to Landlord of the name and address of a Prime Mortgagee shall bind any subsequent holder of the Fee Estate provided that such Prime Mortgagee's Prime Mortgage was recorded before the deed conveying the Fee Estate to such transferee. The foregoing shall not limit the right of any Prime Mortgagee to give any successor Landlord Notice of the name and address of such Prime Mortgagee, and thereby become entitled, as against such successor Landlord, to all the rights and protections of Prime Mortgagees under this Lease. 18.5 Landlord's Acknowledgment of Prime Mortgagee. Landlord shall, upon request, acknowledge receipt of the name and address of any Prime Mortgagee (or proposed Prime Mortgagee) and confirm to such Prime Mortgagee that such Prime Mortgagee is (or would be, upon closing of its loan) a Prime Mortgagee and has (or would have) all the rights of a Prime Mortgagee under this Lease and is (or would be) an Institutional Lender, if applicable. Such acknowledgment shall, if requested, be in recordable form. If Landlord reasonably determines that any purported Prime Mortgagee does not or would not qualify as such or as a permitted Institutional Lender, then Landlord shall promptly give Notice of such determination to Tenant and the purported Prime Mortgagee, which Notice shall specify the reasonable basis for such determination. 19. PROTECTION OF PRIME MORTGAGEES. If Tenant at any time or from time to time enters into any Prime Mortgage(s), then so long as such Prime Mortgagee(s) are entitled to the protections provided for under this Lease: 19.1 Cancellation, Surrender, Amendment, Etc. No voluntary cancellation, termination, surrender, acceptance of surrender, abandonment, amendment, or modification of this Lease shall bind a Prime Mortgagee if done without the prior consent of such Prime Mortgagee, if the Prime Mortgagee requires such consent. 19.2 Copies of Notices. If Landlord shall give any Notice to Tenant (including any Notice of Default and a Notice of termination of this Lease for any reason), then Landlord shall at the same time and by the same means give a copy of such Notice to each Prime Mortgagee. No Notice to Tenant shall be effective unless and until so given to each Prime Mortgagee. No Event of Default or termination of this Lease predicated upon the giving of Notice to Tenant shall be deemed to have occurred unless like Notice shall have been so given to each Prime Mortgagee at the same time and by the same means, which Notice shall describe in reasonable detail the alleged Default. 19.3 Tenant's Cure Period Expiration Notice. If Tenant is in Default under this Lease and the cure period applicable to Tenant expires without cure of Tenant's Default, then Landlord shall promptly give Notice of such fact to each Prime Mortgagee, which Notice 31 shall describe in reasonable detail Tenant's Default (a "Tenant's Cure Period Expiration Notice"). 19.4 Right to Perform Covenants and Agreements. Any Prime Mortgagee shall have the right, but not the obligation, to perform any obligation of Tenant under this Lease and to remedy any Default by Tenant. Landlord shall accept performance by or at the instigation of a Prime Mortgagee in fulfillment of Tenant's obligations, for the account of Tenant and with the same force and effect as if performed by Tenant. No such performance by a Prime Mortgagee shall cause such Prime Mortgagee to become a "mortgagee in possession" or otherwise cause such Prime Mortgagee to be deemed to be in possession of the Premises or bound by this Lease. Notwithstanding the foregoing, in the event a leasehold mortgagee of any Subtenant is undertaking the performance of a Non-Monetary Default or the remedy of a Non-Monetary Default, a Prime Mortgagee shall not have the right to undertake the same as long as such leasehold mortgagee is pursuing the performance of such obligation or remedy of such Non-Monetary Default with due diligence and in good faith. 19.5 Transfer of Tenant's Rights. Tenant may delegate or otherwise transfer to a Prime Mortgagee any or all of Tenant's rights under this Lease, but no such delegation or transfer shall bind Landlord unless and until Landlord shall have received a copy of a written instrument effecting such delegation accompanied by a photocopy of the Prime Mortgagee's fully executed Prime Mortgage. Such delegation or transfer of authority may be effected by the terms of the Prime Mortgage itself, in which case service upon Landlord of an executed counterpart or certified copy of such Prime Mortgage, together with a written notice specifying the provisions of such Prime Mortgage that delegate or transfer such authority to the Prime Mortgagee, shall be sufficient to bind Landlord to such delegation or transfer of rights. 19.6 Notice of Default and Mortgagee's Cure Rights. Upon receiving any Notice of Default, any Prime Mortgagee shall have the same cure period granted to Tenant under this Lease, plus the additional time provided for below, within which to take (if such Prime Mortgagee so elects) whichever of the actions set forth below shall apply with respect to the Default described in such Notice of Default (such actions, "Mortgagee's Cure"; and a Prime Mortgagee's rights to take such actions, "Mortgagee's Cure Rights"): 19.6.1 Monetary Defaults and Non-Monetary Defaults Curable Without Obtaining Possession. In the case of a Monetary Default, or a Non-Monetary Default that is reasonably susceptible of being cured by a Prime Mortgagee without obtaining possession of the Premises, Prime Mortgagee shall be entitled (but not required) to cure such Default within a cure period consisting of Tenant's cure period under this Lease extended through the date sixty (60) days after such Prime Mortgagee shall have received Tenant's Cure Period Expiration Notice as to such Default. If the amount of any Monetary Default has not been finally determined (for example, if a dispute has arisen between Landlord and Tenant regarding the proper amount of Percentage Rent), then in place of curing such Monetary Default a Prime Mortgagee shall be entitled instead to (a) cure such Monetary Default to the extent the amount thereof is not in dispute; and (b) escrow the remaining disputed portion of such Monetary Default into an escrow account established and managed in the manner provided in Section of this Lease. For the purposes of (b) above, in the event an escrow 32 for this purpose is established by Players under Section 3.2 of the Players' Lease, the escrow requirement hereunder shall be deemed to be satisfied. 19.6.2 Other Non-Monetary Defaults Curable Without Obtaining Possession. In the case of any other Non-Monetary Default (other than a Personal Default or a Non-Monetary Default that is not reasonably susceptible of being cured by a Prime Mortgagee without having possession of the Premises), Prime Mortgagee shall be entitled, but not required, to: (x) within a period consisting of Tenant's cure period for the Default, extended through the date ninety (90) days after receipt of the Tenant's Cure Period Expiration Notice as to such Default, advise Landlord of Prime Mortgagee's intention to take all reasonable steps necessary to remedy such Non-Monetary Default, (y) duly commence the cure of such Non-Monetary Default within such extended period, and thereafter diligently prosecute to completion the remedy of such Non-Monetary Default, subject to Unavoidable Delay, and (z) complete such remedy within a reasonable time under the circumstances, subject to Unavoidable Delay. 19.6.3 Defaults Curable Only by Obtaining Possession and Personal Defaults. In the case of a Non-Monetary Default that is not reasonably susceptible of being cured by a Prime Mortgagee without obtaining possession of the Premises (including failure to Complete the Shoreside Complex) or a Personal Default by Tenant, Prime Mortgagee shall be entitled (but not required) to do the following, so long as, with respect to any Defaults other than those referred to in this Section, such Prime Mortgagee has exercised or is exercising the applicable Mortgagee's Cure Rights as defined in this Lease: 19.6.3.1 During Cure Period. At any time during the cure period (if any) that applies to Tenant, extended through the date ninety (90) days after such Prime Mortgagee's receipt of the Tenant's Cure Period Expiration Notice as to such Default, or if no cure period applies to Tenant, then within ninety (90) days after receiving Notice of the Non-Monetary Default, Prime Mortgagee shall be entitled to institute proceedings, and (subject to any stay in any proceedings involving the bankruptcy, insolvency, or reorganization of Tenant or the like, or any injunction, unless such stay or injunction is lifted), diligently prosecute the same to completion subject to Unavoidable Delay to obtain possession of the Premises as mortgagee (including possession by a receiver), or acquire the Leasehold Estate by foreclosure proceedings or otherwise, including delivery of an assignment in lieu of foreclosure (the obtaining of such possession or the completion of such acquisition, "Control of the Premises"). 19.6.3.2 Further Cure Obligations. Upon obtaining Control of the Premises (before or after expiration of any otherwise applicable cure period), Prime Mortgagee shall be entitled (but not required) to proceed with diligence and continuity to cure such Non-Monetary Defaults as are reasonably susceptible of being cured by such Prime Mortgagee (excluding Tenant's Personal Defaults, which Prime Mortgagee shall not be required to cure), subject to Unavoidable Delay. 19.6.3.3 Law Limitation. If a Prime Mortgagee is a Prohibited Person (Tenant) or is otherwise denied the authority by the Missouri Gaming Commission acting pursuant to the Missouri Gambling Law, or pursuant to any other applicable Law, other 33 than a temporary stay of foreclosure in Tenant's Bankruptcy Proceedings, to obtain Control of the Premises, then the extended cure periods applicable to Non-Monetary Defaults that are not reasonably susceptible of cure without obtaining possession of the Premises shall, from and after such date, no longer be applicable to or benefit such Prime Mortgagee unless such Prime Mortgagee transfers its Prime Mortgage to a Prime Mortgagee that is so qualified. 19.6.3.4 Operating Covenant Default. Notwithstanding any provision to the contrary in Sections 19.61, 19.62 or 19.63, owing to the severe impact that an Operating Covenant Default will have on the Shoreside Complex and the Premises, the cure period applicable to an Operating Covenant Default shall be limited to that provided in Section 27.1.3. 19.7 Effect of Cure. A Prime Mortgagee shall not be required to continue to exercise Mortgagee's Cure Rights or otherwise proceed to obtain or to exercise Control of the Premises if and when the Default that such Prime Mortgagee was attempting to cure shall have otherwise been cured. 19.8 Quiet Enjoyment. So long as the time period for a Prime Mortgagee to exercise Mortgagee's Cure Rights with respect to a Non-Monetary Default by Tenant has not expired (and provided that all Monetary Defaults are cured within Prime Mortgagee's cure period provided for under this Lease), Landlord shall not (i) re-enter the Premises, (ii) serve a notice of election to terminate this Lease or (iii) bring a proceeding on account of such Default to (A) dispossess Tenant and/or other occupants of the Premises, (B) re-enter the Premises, (C) terminate this Lease or the Leasehold Estate, or (D) otherwise exercise any other rights or remedies under this Lease by reason of such Default. Nothing in the Prime Mortgagee protections provided for in this Lease shall be construed to either (a) extend the Term beyond the expiration date provided for in this Lease that would have applied if no Default had occurred; (b) require any Prime Mortgagee to cure any Personal Default by Tenant; (c) excuse Tenant or any Subtenant from personal liability for the performance of Lease obligations; or (d) prevent or delay any personal action against Tenant or any Subtenant or any of their respective assets. If however, a Prime Mortgagee shall fail to cure a Default within the time provided to it under this Article 19, Landlord shall be free to exercise all remedies otherwise provided in the Lease or available at law or equity for such Default without further notice or opportunity to Prime Mortgagee to effect cure. 19.9 Subordinate Liens Affecting Leasehold Estate. Provided the Prohibited Lien does not constitute a lien on the Fee Estate, a Prime Mortgagee shall not be required to discharge a Prohibited Lien that is junior in priority to the lien of its Prime Mortgage, except as necessary to prevent such Prohibited Lien from foreclosing upon the Premises prior to the completion of foreclosure of such Prime Mortgagee's Mortgage (and resulting extinguishment of such junior lien). 19.10 Prime Mortgagee's Right to Enter Premises. Subject to constraints of applicable Law, including, without limitation, the Missouri Gambling Law, Landlord and Tenant authorize each Prime Mortgagee to enter the Premises as necessary to effect Mortgagee's Cure and take any action(s) reasonably necessary to effect Mortgagee's Cure. 34 19.11 Rights of Prime Mortgagee Upon Acquiring Control. If any Prime Mortgagee or a purchaser at a foreclosure sale shall acquire Control of the Premises and shall cure all Monetary Defaults and proceed and continue to exercise Mortgagee's Cure Rights and cure all other Defaults in accordance with the provisions of this Lease, then (i) any Personal Defaults by Tenant shall not be asserted against such Prime Mortgagee or any or its direct or remote permitted Transferees; and (ii) Landlord shall recognize any purchaser of the Leasehold Estate pursuant to a foreclosure sale under a Prime Mortgage, or any transferee of the Leasehold Estate under an assignment in lieu of foreclosure, or, if the Prime Mortgagee should be such purchaser or assignee, the Prime Mortgagee and any assignee of the Prime Mortgagee, provided such Person (a) is not a Prohibited Person (Tenant); and (b) assumes in writing all obligations under this Lease. 20. PRIME MORTGAGEE'S RIGHT TO A NEW LEASE. 20.1 New Lease. If this Lease shall terminate before its stated expiration date for any reason other than the failure of a Prime Mortgagee to effect cure of any Default within the cure periods provided in this Lease or pursuant to the provisions of Article and Article hereof, then (in addition to any other or previous Notice required to be given by Landlord to a Prime Mortgagee) Landlord shall, within ten (10) Business Days, give Notice of such termination to each Prime Mortgagee entitled to Prime Mortgagee protections under this Lease. Landlord shall, upon a Prime Mortgagee's request given within sixty (60) days after such Prime Mortgagee's receipt of such notice, enter into (and if Landlord fails to do so, shall be deemed to have entered into) a new lease of the Premises, effective as of the Termination Date, for the remainder of the Term on the same terms and provisions contained in this Lease, but excluding any requirements that have already been performed or no longer apply (a "New Lease"), provided such Prime Mortgagee shall, at the time of execution and delivery of such New Lease, pay to Landlord any and all sums then due under this Lease as if this Lease had not been terminated and cure all Defaults other than Personal Defaults of the Tenant. If a Prime Mortgagee enters into a New Lease, then such Prime Mortgagee shall pay all reasonable expenses, including reasonable attorneys' fees, court costs and disbursements, incurred by Landlord in connection with Tenant's Default and the termination of this Lease, the recovery of possession of the Premises, and the preparation, execution and delivery of the New Lease. The following additional provisions shall apply to any New Lease: 20.2 Form and Priority. Any New Lease shall be in recordable form. Such New Lease shall not be subject to any rights, liens, or interests other than those to which this Lease was subject at the time of its termination or any priority liens established in Tenant's Bankruptcy Proceedings. The provisions of the immediately preceding sentence shall be self- executing. Landlord shall, if requested, execute and deliver such corporate resolutions, partnership certificates and other documents as shall be reasonably necessary to enable the tenant under such New Lease (the "New Tenant") to obtain title insurance with respect to the New Lease, at such New Tenant's expense. 20.3 Pendency of Dispute. If Landlord and the New Tenant disagree regarding any payment due Landlord in connection with execution of a New Lease, then New Tenant (if an Institutional Lender or a Prime Mortgagee's Agent) shall be deemed to have performed its 35 payment obligation if such New Tenant: (a) pays Landlord the full amount not in controversy and (b) escrows any additional sum claimed to be due by Landlord in an escrow account established and governed in the manner established in Section 3.2 hereof. The parties shall cooperate to determine any disputed amount promptly in accordance with the terms of this Lease or the New Lease, whichever applies. 20.4 Assignment of Certain Items. Upon execution of a New Lease, Landlord shall assign to New Tenant all of Landlord's right, title and interest in and to: (a) all moneys (including insurance proceeds and Condemnation awards), if any, then held by, or payable to, Landlord that Tenant would have been entitled to receive but for termination this Lease; and (b) all Subleases, subject to Landlord's assignment of rights under the Players' Lease. 20.5 Preservation of Subleases. Between the Termination Date and the date of execution and delivery of a New Lease, if a Prime Mortgagee shall have requested a New Lease and be entitled to a New Lease under this Article 20, Landlord shall not cancel any Sublease or accept any cancellation, termination or surrender of a Sublease (unless such termination shall be effected as a matter of law upon the termination of this Lease, in which case such Sublease shall, at New Tenant's option, be reinstated upon execution of the New Lease) without the consent of such Prime Mortgagee. 21. INTERACTION OF MORTGAGES WITH OTHER ESTATES AND PARTIES. 21.1 Prime Mortgages and Fee Mortgages. A Prime Mortgage shall not encumber or in any other way affect the Fee Estate or affect, limit or restrict Landlord's rights and remedies under this Lease except as expressly provided in this Lease. Any Fee Mortgage made by Landlord at any time shall be subject to this Lease. Any Fee Mortgagee, and in the event of a foreclosure of a Fee Mortgage or delivery of a deed in lieu of such foreclosure, the Fee Mortgagee or grantee or successful bidder at the foreclosure sale, shall succeed only to the Fee Estate, subject to this Lease (whether this Lease [or a New Lease in substitution therefor] is at the time held by Tenant or by a Prime Mortgagee as New Tenant or pursuant to foreclosure, delivery of an assignment in lieu of foreclosure, or otherwise). Upon a foreclosure under a Prime Mortgage or delivery of an assignment of this Lease in lieu of foreclosure under a Prime Mortgage, the Prime Mortgagee shall succeed only to the Leasehold Estate, and any such foreclosure or assignment in lieu of foreclosure shall not affect the Fee Estate (subject to this Lease) or the rights of any Fee Mortgagees as against Landlord or the Fee Estate (which shall in all events remain subject to this Lease). 21.2 Prime Mortgagee's Agent. Any Prime Mortgagee that is an Institutional Lender may exercise its rights (including Mortgagee's Cure Rights and the right to obtain a New Lease) under this Lease, or perform any action permitted to be taken by a Prime Mortgagee under this Lease, through a Prime Mortgagee's Agent. A Prime Mortgagee's Agent shall be entitled to all the rights, privileges, and protections of Prime Mortgagees under this Lease. 21.3 Interaction Between Lease and Prime Mortgage. If a Prime Mortgagee's Prime Mortgage limits such Prime Mortgagee's exercise of any rights and protections provided for in 36 this Lease, then as between Tenant and such Prime Mortgagee the terms of such Prime Mortgage shall govern. Tenant's default as mortgagor under a Prime Mortgage shall not constitute a Default under this Lease except to the extent that Tenant's actions or failure to act in and of itself constitutes a Default under this Lease. 21.4 Conflicts Between Mortgagees. If more than one Prime Mortgagee desires to exercise Mortgagee's Cure Rights or the right to obtain a New Lease, or if more than one Prime Mortgagee or more than one Fee Mortgagee desires to exercise any other right or privilege provided for Mortgagees under this Lease, then the party against whom such rights or privileges are to be exercised shall be required to recognize either: (a) only the Fee Mortgagee or Prime Mortgagee, as applicable, that desires to exercise such right or privilege and whose Fee Mortgage or Prime Mortgage, as applicable, is most senior in lien (as against other Mortgages of its type [Fee or Prime, as applicable]) or (b) such other Fee Mortgagee or Prime Mortgagee, as applicable, as has been designated in writing by all Fee Mortgagees or Prime Mortgagees, as applicable, to exercise such right or privilege. Priority of Mortgages shall be conclusively evidenced either by (a) the report or certificate of a title insurance company licensed to do business in the State; or (b) joint written instructions of all Prime Mortgagees and/or fee mortgagees, as applicable; or (c) order of court of competent jurisdiction. 21.5 No Merger. Without the written consent of Landlord, Tenant, and all Mortgagees, the Fee Estate and the Leasehold Estate shall remain distinct and separate estates and shall not merge, notwithstanding the acquisition of both the Fee Estate and the Leasehold Estate by Landlord, Tenant, any Mortgagee, or a third party, whether by purchase or otherwise. 22. BANKRUPTCY. 22.1 Affecting Tenant. If Tenant (as debtor in possession) or a trustee in bankruptcy for Tenant rejects this Lease in connection with any proceeding involving Tenant under the United States Bankruptcy Code or any similar state or federal statute for the relief of debtors (a "Bankruptcy Proceeding"), then Landlord agrees for the benefit of each and every Prime Mortgagee that such rejection shall be deemed Tenant's assignment of the Lease and the Leasehold Estate to Tenant's Prime Mortgagee(s), in the nature of an assignment in lieu of foreclosure. Upon such deemed assignment, this Lease shall not terminate and each Prime Mortgagee shall continue to have all the rights of a Prime Mortgagee under this Lease as if the Bankruptcy Proceeding had not occurred, unless such Prime Mortgagee shall reject such deemed assignment by Notice to Landlord within thirty (30) days after receiving Notice of the rejection of this Lease in Bankruptcy Proceedings. If any court of competent jurisdiction shall determine that this Lease shall have been terminated notwithstanding the deemed assignment provided for in place of rejection of this Lease, then Tenant's Prime Mortgagees shall continue to be entitled to a New Lease as provided in Article 20 of this Lease. In the event of an assignment by operation of law or otherwise in a Bankruptcy Proceeding, if Landlord does not or is not permitted to terminate this Lease, the assignee shall provide Landlord with adequate assurance of future performance of all of the terms, covenants 37 and conditions of this Lease, which shall include but not be limited to, assumption of all of the terms, covenants and conditions of this Lease by the assignee and the making by the assignee of the following express covenants to the Landlord: (a) the assignee has sufficient capital to pay the Rent and other amounts due under the Lease for the entire Term or actually pays the Default Substitute Percentage Rent or the Approved Substitute Rent, as the case may be, and performs the other obligations of Tenant under this Lease; (b) the assignee either (i) holds all Government licenses, permits and approvals necessary to operate the Premises in accordance with this Lease; or (ii) is diligently pursuing the obtaining of such licenses, permits and approvals, none of which have been permanently denied; and (c) the assignee is not a Prohibited Person (Tenant). 22.2 Affecting Landlord. If Landlord (as debtor in possession) or a trustee in bankruptcy for Landlord rejects this Lease in connection with any Bankruptcy Proceeding involving Landlord, then: 22.2.1 Tenant's Election. Tenant shall not have the right to elect to treat this Lease as terminated except with the prior written consent of each and every Prime Mortgagee whose recorded Prime Mortgage requires such consent by the applicable Prime Mortgagee. 22.2.2 Continuation of Lease. If Tenant does not properly elect to treat this Lease as terminated, then this Lease shall continue in effect without change upon all the same terms and conditions as are set forth in this Lease, including provisions relating to Rent and New Leases. Thereafter, Tenant and its successors (including Prime Mortgagees) shall be entitled to offset against Rent any damages arising from such rejection, including but not limited to attorneys' fees and expenses reasonably incurred in connection with the rejection of this Lease and adjustment of the parties' subsequent rights and duties among themselves, in accordance with applicable law governing the Bankruptcy Proceeding, and any such offset properly made shall not be a Default. If Tenant claims a greater offset than the offset to which Tenant is lawfully entitled, then the taking of such excessive offset by Tenant shall constitute a Monetary Default as to which Tenant and Prime Mortgagees shall be entitled to Notice and opportunity to cure as provided in this Lease. 22.2.3 Assumption of Lease. If Landlord (as debtor in possession) or a trustee in bankruptcy for Landlord moves to assume this Lease or provides for assumption of this Lease in any Bankruptcy Proceeding involving Landlord, Tenant shall, in addition to all its other rights and remedies, be compensated promptly for all costs and expenses (including but not limited to attorneys' fees and expenses) resulting from or reasonably incurred in connection with the proceedings involving assumption (whether or not such assumption is granted or confirmed), any subsequent proceedings to assign the Lease to another or to reject the Lease, enforcement of rights to cure and to compensation for damages resulting from a 38 breach of the Lease, and adjustment of the parties' subsequent rights and duties among themselves. 22.2.4 Continuation of Prime Mortgages. The lien of any Prime Mortgage that was in effect before the rejection of this Lease shall extend to Tenant's continuing possessory rights with respect to the Premises following such rejection, with the same priority as it would have enjoyed had such rejection not taken place. 23. QUIET ENJOYMENT. There shall be no express or implied covenant of quiet enjoyment by Landlord under this Lease, except for acts or omissions of Landlord itself. 24. FORCE MAJEURE. Tenant's obligation to perform or observe any term, condition, covenant or agreement on Tenant's part to be performed or observed pursuant to this Lease (other than Tenant's obligation to pay any item of Rent when due) shall be suspended during such time as such performance or observance is prevented or delayed by reason of any Unavoidable Delay. 25. ACCESS. Landlord and its agents, representatives and designees shall have the right to enter the Premises and the Shoreside Complex upon reasonable notice to Tenant during regular business hours, and in accordance with Tenant's or Subtenant's reasonable instructions, for the purpose of curing Tenant's or Subtenant's Defaults (provided that Landlord shall have given Tenant or Subtenant prior Notice of such Default in accordance with this Lease) or for purposes relating to the mortgaging or sale of the Fee Estate in compliance with this Lease. In entering the Premises or the Shoreside Complex pursuant to this Article, Landlord and its authorized individuals shall not unreasonably interfere with the conduct of operations thereon by Tenant or any Subtenant and shall comply with Tenant's and such Subtenant's reasonable security procedures. 26. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. 26.1 Landlord's Option. If Tenant shall at any time fail to make when required under the Lease any payment or perform any other act on its part to be made or performed, then Landlord, after ten (10) Business Days' Notice to Tenant, or with such notice (if any) as is reasonably practicable under the circumstances, in case of an emergency, and without waiving or releasing Tenant from any obligation of Tenant or from any default by Tenant and without waiving Landlord's right to take such action as may be permissible under this Lease as a result of such Default, may (but shall be under no obligation to) make such payment or perform such act on Tenant's part to be made or performed pursuant to this Lease. Landlord may enter upon the Premises for such purpose, and take all such action on the Premises, as 39 may be reasonably necessary under the circumstances, but in doing so shall not interfere with the conduct of operations on the Premises by Tenant or any Subtenant and shall comply with Tenant's or Subtenant's reasonable security procedures. 26.2 Reimbursement by Tenant. All reasonable sums paid by Landlord and all costs and expenses reasonably incurred by Landlord, together with reasonable attorneys' fees, in connection with the exercise of Landlord's cure rights under Section 26.1, shall constitute Additional Rent. Tenant shall pay such Additional Rent together with interest thereon at the Default Rate within thirty (30) days after Landlord's demand accompanied by evidence reasonably establishing such costs and expenses in accordance with this Lease. 27. DEFAULT BY TENANT; REMEDIES. 27.1 Definition of Event of Defaults. The term "Event of Default" shall mean and refer to the occurrence of any one or more of the following circumstances: 27.1.1 Players' Lease Default. If the occupant of Players' Premises shall have failed to pay Percentage Rent or Substitute Percentage Rent as and when due in accordance with this Lease, or any other Event of Default (as defined in the Players Lease) shall occur under the Players Lease. 27.1.2 Monetary Default. If any other Monetary Default shall occur and the Monetary Default shall continue for sixty (60) days after Landlord has given Tenant Notice of such Monetary Default, specifying in reasonable detail the amount of money required to be paid by Tenant and the nature of such payment, provided however that if Tenant shall fail on more than two occasions in any Percentage Rent Year to make payment of or cause the occupant of Players' Premises to make payment of Percentage Rent before Landlord gives such Notice (whether or not such payment was made within the aforesaid cure period), the notice and cure period for subsequent payments due hereunder within such Percentage Rent Year and the next Succeeding Percentage Rent Year shall be shortened to ten (10) days. 27.1.3 Operating Covenant Defaults. If Tenant, or the occupant of Players' Premises breaches the provisions of Section 7.2 hereof voluntarily (a "Voluntary Operating Covenant Default") or if Tenant or such occupant is denied (a "Governmental Denial") the necessary Government licenses, permits, certificates or approvals (collectively "Licenses and Approvals") of the Missouri Gaming Commission or any other Government agency to operate the Players Premises and such denial is not rescinded or revoked within seventy-two (72) hours or, if any application for Licenses and Approvals is rejected or if any Licenses and Approvals are rescinded, revoked or suspended for more than seventy-two (72) hours (an "Involuntary Operating Covenant Default") and in the case of a Voluntary Operating Covenant Default such Voluntary Operating Covenant Default is not remedied within thirty (30) days after Landlord has given Tenant notice of such Voluntary Operating Covenant Default in reasonable detail (the "Voluntary Operating Covenant Cure Period") and in the case of an Involuntary Operating Covenant Default such Involuntary Operating Covenant Default is not remedied within the "Appeal Period" (hereinafter defined) (the "Involuntary Operating Covenant Cure Period") provided in the case of a Voluntary Operating Covenant Default or 40 an Involuntary Operating Covenant Default Tenant or such occupant is paying Landlord Default Substitute Percentage Rent during the Voluntary Operating Covenant Cure Period or the Involuntary Operating Covenant Cure Period, as the case may be, subject to the right of a Prime Mortgagee or leasehold mortgage of such occupant to extend the Voluntary Operating Covenant Cure Period or Involuntary Operating Covenant Cure Period, as the case may be, in order to substitute another operator of the Premises, so long as such Mortgagee pays Landlord Default Substitute Percentage Rent and performs the other obligations under this Lease or the applicable Sublease. For purposes hereof, the "Appeal Period" shall be the period during which Tenant or such occupant in good faith and with due diligence pursues a final non-appealable determination concerning the validity of a Governmental Denial. In the event there is an Operating Covenant Default, Tenant hereby assigns to Landlord all of Tenant's rights to enforce like obligations under Section 29.1.3. of the Players' Lease and any other Sublease of Players' Premises in Landlord's own name or in the name of Tenant and all other remedies of Tenant upon the occurrence of an Operating Covenant Default afforded Tenant under the Players' Lease. A Voluntary Operating Covenant Default and an Involuntary Operating Covenant Default are collectively referred to herein as an "Operating Covenant Default". 27.1.4 Non-Monetary Default. If any other Non-Monetary Default shall occur and the Non-Monetary Default shall continue and not be remedied by Tenant within ninety (90) days after Landlord shall have delivered to Tenant a Notice describing the same in reasonable detail, or, in the case of a Non-Monetary Default that cannot with due diligence be cured within ninety (90) days from such Notice, if Tenant shall not (x) within ninety (90) days from Landlord's Notice advise Landlord of Tenant's intention to take all reasonable steps necessary to remedy such Non-Monetary Default, (y) duly commence the cure of such Non-Monetary Default within such period, and then diligently prosecute to completion the remedy of the Non-Monetary Default and (z) complete such remedy within a reasonable time under the circumstances. 27.1.5 Reciprocal Easement Default. An Event of Default (as defined in the Reciprocal Easement Agreement) shall occur under the Reciprocal Easement Agreement. 27.2 Remedies. Subject to the provisions of Section 27.2.1 hereof, upon occurrence of an Event of Default, Landlord may exercise any or all of the following remedies, and any other remedies provided for under this Lease or available by law, all of which shall be cumulative and all of which shall be subject to the rights of Prime Mortgagees under this Lease: (a) Landlord shall have the right (unless such Event of Default is caused solely by the acts or omissions of HMHC) to proceed by appropriate judicial proceedings, either at law or in equity, to enforce performance or observance by Tenant of the applicable provisions of this Lease and/or to recover damages against Tenant for breach of this Lease; and/or (b) Landlord may give Tenant a notice of intention to end the Term at the expiration of thirty (30) days from the date of service of such notice of intention. Upon the expiration of such thirty (30) day period, unless Tenant shall have cured the Event of Default that gave rise to such notice, this Lease, the Leasehold Estate and the Term shall terminate and Landlord shall retake possession of the Premises and all rights of Tenant shall come to an end with the same effect as if that day were the expiration date of this Lease. Tenant shall peaceably and quietly yield up and surrender to Landlord the Premises. 41 27.2.1 Assignment of Remedies. Notwithstanding any provision to the contrary in this Section 27.2 or elsewhere in this Lease, until such time as the Players' Lease is terminated, Landlord's sole remedy upon the occurrence of (a) a Monetary Default by Tenant relating to the payment of Percentage Rent or Substitute Percentage Rent and/or (b) an Operating Covenant Default, shall be to pursue Tenant's remedies under the Players' Lease or any other Sublease of Players' Premises, which remedies Tenant hereby assigns to Landlord. 27.3 Re-entry. Upon the occurrence of an Event of Default, this Lease, at the option of Landlord, shall be terminated and Landlord or Landlord's agents and employees may (to the extent permitted by law and subject to the rights of Prime Mortgagees under this Lease) re-enter the Premises, or any part of the Premises, either by summary dispossess proceedings or by any suitable action or proceeding at law, or by force (to the extent permitted by Laws of the State) or otherwise, without being liable to indictment, prosecution or damages, and may repossess the same, and may remove any individual from the Premises, all so that Landlord may have, hold and enjoy the Premises. 27.4 Damages. In addition to Landlord's other remedies hereunder, if Landlord terminates this Lease by reason of an Event of Default, Tenant shall be liable to Landlord for an amount equal to the excess of (A) the present value as of the date of termination of all installments of Rent through the end of the Term [the amount of Rent to be based upon the average annual Rent paid hereunder for the immediately preceding two (2) years, or if less than two (2) years of the Term has elapsed, based upon the amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00) per year], such present value to be computed using a reasonable per annum discount rate, compounded semiannually, from the respective dates upon which such Rent would be paid, over (B) the present value as of such termination date of the fair market rental value of the Premises through the end of the Term (such fair market rental value shall be reduced to the extent that Tenant and/or any Subtenant fails to surrender its applicable gaming license to the Missouri Gaming Commission and fails to cooperate with Landlord's application to obtain a new gaming license on termination and thereupon a non-gaming use of the Premises [or portion thereof for which a gaming license is not so surrendered] shall be assumed). Such fair market rental value of the Premises is to be determined by mutual agreement of Landlord and Tenant or, if they cannot agree within ten (10) days of such notice, by an arbitration as provided herein. Such present value is to be computed using a reasonable per annum discount rate mutually agreed upon by Landlord and Tenant or, if they cannot agree within ten (10) days, by arbitration as provided herein, compounded semiannually, from the respective dates upon which such Rent would be paid. The above damages shall be reduced by any damages paid to Landlord pursuant to the provisions of the Players' Lease. Landlord shall have no general duty to mitigate the aforesaid damages, but Landlord shall be required to negotiate in good faith with a proposed successor to Tenant which meets the criteria set forth on Exhibit G hereto and which is willing to assume all obligations of Tenant or Tenant's Affiliate under the Joint Venture Agreement and to execute and deliver to Landlord a Lease which is in form identical to this Lease including, without limitation, the same Percentage Rent payable hereunder with the exception of modifications necessitated by the change in the identity of Tenant. 27.5 Injunctive Relief. In the event of any breach or threatened breach by Tenant of any Lease covenants or agreements, Landlord shall be entitled to enjoin such breach or 42 threatened breach. The provisions of this Section shall be construed so as to be consistent with the Law of the State so that remedies of Landlord described in this Lease shall be available to the full extent but only to the extent that they are not invalid or unenforceable under the Law of the State. 27.6 Pending Dispute Regarding Event of Default. Notwithstanding anything to the contrary in the foregoing remedies provided for Landlord under this Lease, if Tenant shall have given Landlord Notice before termination of this Lease that Tenant contests Landlord's determination that an Event of Default has occurred, then Landlord shall not disturb Tenant's possession of the Premises, Tenant shall be entitled to remain in possession of the Premises under this Lease, and the Term shall be deemed to continue, so long as Tenant: (a) continues to pay Landlord the Rent (and to escrow the disputed portion of any Rent into an escrow account established and managed in the manner set forth in Section 3.2); and (b) continues to perform such other obligations under this Lease as are not in dispute; and (c) is prosecuting appropriate judicial proceedings to prevent Landlord from terminating this Lease. If the Subtenant occupying Players' Premises is contesting the same event under the Players' Lease or any other Sublease of Players' Premises then Tenant shall not be entitled to independently invoke this Section, and the outcome of such contest shall be determinative of rights under this Lease. 27.7 Arbitration. Upon the occurrence of a Non-Monetary Default or a Monetary Default, the amount of which is disputed by Tenant, Tenant may, by written notice to Landlord, elect an arbitration which shall be conducted in accordance with the following procedures: 27.7.1 Voluntary Appointment. Landlord and Tenant shall appoint a single Qualified Arbitrator who is not affiliated with either Landlord or Tenant. Such Qualified Arbitrator shall render a decision within thirty (30) days of such appointment. 27.7.2 Appointment by Arbitrators. If Landlord and Tenant cannot agree on a single Qualified Arbitrator within twenty (20) days after an election to submit the matter to arbitration, then Landlord and Tenant shall each appoint one Qualified Arbitrator within ten (10) days following such twenty (20) day period. The two appointed Qualified Arbitrators shall within ten (10) days of such referral appoint a third Qualified Arbitrator, and if such Qualified Arbitrators are not able to agree on such third Qualified Arbitrator, then, on five (5) days' notice in writing to the other Qualified Arbitrator, either Qualified Arbitrator shall apply to the branch of the American Arbitration Association in St. Louis, Missouri to designate and appoint such third Qualified Arbitrator. The three Qualified Arbitrators shall reach a decision within twenty (20) days after the appointment of the third Qualified Arbitrator. 27.7.3 Failure to Appoint. If either Landlord or Tenant fails to appoint a Qualified Arbitrator, then the single Qualified Arbitrator designated by the other party shall act as the sole Qualified Arbitrator and shall be deemed to be the unanimously approved Qualified Arbitrator to resolve such dispute. The decision and award of such sole Qualified Arbitrator shall be binding upon the parties. 43 27.7.4 Fees and Expenses. The fees and expenses of the Qualified Arbitrators shall be paid by the party whose position is not adopted by the Qualified Arbitrators. The award of any Qualified Arbitrators made in accordance with this Section shall be binding on the parties and enforceable in any court of competent jurisdiction. 27.7.5 Proceedings. All proceedings by the Qualified Arbitrators shall be conducted in accordance with the Uniform Arbitration Act as enacted in the State of Missouri, except to the extent the provisions of such Act are modified by this Lease or the mutual agreement of the parties. Unless otherwise agreed, all arbitration proceedings shall be conducted in St. Louis, Missouri. 27.7.6 Arbitration Decisions. In all arbitration proceedings submitted to any Qualified Arbitrators, the Qualified Arbitrators shall be required to agree upon and approve the substantive position advocated by one party with respect to each disputed item. The Qualified Arbitrator(s) shall exclusively determine whether a particular dispute falls within the scope of their authority. There shall be no right to submit a matter to arbitration under this Lease in the event such matter has been or is being arbitrated in accordance with the terms of the Joint Venture Agreement or the Players' Lease, in which case, the outcome of such other arbitration shall be determinative of rights under this Lease. 28. TERMINATION. 28.1 Rights on Termination. Upon the Termination Date, all improvements constituting part of or located on the Premises [other than, subject to the provisions of Section hereof, (i) the portion of any signs bearing any Subtenant's trademarks, servicemarks or other marks owned by a Subtenant, which such Subtenant may remove within thirty (30) days after the Termination Date; (ii) Tenant's Property that is not affixed to the Premises; and (iii) Gaming Equipment shall become Landlord's property unless Landlord requires the Restoration (hereinafter defined) as hereinafter provided and Landlord and Tenant shall have the rights and obligations set forth in this Article. 28.2 Possession. Unless Landlord elects for Tenant to undertake the Restoration, Tenant shall deliver to Landlord possession of the Premises, in its then current condition and state of repair, unless the Termination Date occurs by reason of Casualty or Condemnation whereupon Tenant shall deliver to Landlord possession of the Premises or proceeds of Condemnation, as the case may be, in accordance with the provisions of Section 14.2 or Section 15.1 hereof, as applicable. 28.3 Documentation. If possession of the Premises and/or Shoreside Complex are being returned to Landlord without the Restoration, Tenant shall deliver to Landlord copies or originals of all contracts which shall be terminated at its sole cost and expense on the Termination Date unless otherwise elected, maintenance and service records, plans, specifications, manuals and all other papers and documents that may be necessary or appropriate for the proper operation and management of the Shoreside Complex. 44 28.4 Miscellaneous Assignments. If possession of the Premises and/or Shoreside Complex are being returned to Landlord without the Restoration, Tenant shall assign to Landlord, without recourse, all assignable licenses and permits affecting the Premises and all assignable contracts, warranties and guarantees then in effect relating to the Shoreside Complex. 28.5 Termination of Memorandum of Lease. If the parties shall have entered into and recorded a Memorandum of Lease, then they shall enter into a memorandum, in recordable form reasonably satisfactory to both parties, terminating the Memorandum of Lease. 28.6 Restoration. If Landlord so elects, Landlord may require Tenant (to such extent as Landlord may reasonably require) as of the Termination Date, at Tenant's sole cost and expense, to demolish all improvements on the Premises and restore the Premises as nearly as possible to their condition prior to the construction of the Shoreside Complex (the "Restoration"). 28.7 Personal Property and Equipment. Even if Tenant is not required to effect the Restoration, Tenant shall remove or cause Subtenants to remove all Tenant's Property that is not attached to the Premises. Landlord shall be entitled at its option to assume Tenant's or Subtenant's rights under any leases of Gaming Equipment (which Tenant hereby agrees to assign or caused to be assigned to Landlord). Landlord shall also be entitled at its option to purchase any personal property or equipment that Tenant and/or Subtenants are required to remove pursuant to this Section (other than personal property or equipment bearing any trademark, service mark or other mark owned by a Subtenant or any other affiliate or subsidiary of Subtenant) at its then fair market value, payment to be made by certified check on the Termination Date. Tenant's Property not removed from the Premises at or within thirty (30) days after the Termination Date shall be deemed abandoned and become property of Landlord, without the necessity of any payment from Landlord, and Tenant shall remain liable for the cost of removal of such property and for the cost of repair of any damage to the Shoreside Complex occasioned thereby. 29. NO BROKER. Neither Landlord nor Tenant has engaged the services of a broker, finder or agent in this transaction as it relates to the Premises, and neither has employed, nor authorized any other Person to act in such capacity. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any and all claims, losses, liabilities, damages or expenses (including, without limitation, reasonable attorneys' fees, costs and disbursements incurred in the enforcement of this indemnity) suffered or incurred by the other party as a result of a claim brought by a Person engaged or claiming to be engaged as a finder, broker or agent by the indemnifying party. The foregoing representation, warranty and indemnity shall survive the expiration or earlier termination of this Lease. 45 30. WAIVERS. 30.1 No Waiver by Silence. Failure to complain of any act or omission shall not be deemed a waiver of any of rights under this Lease. No waiver, express or implied, of any breach of any provision of this Lease shall be effective unless set forth in writing signed by the waiving party or be a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. No acceptance by Landlord of any partial payment shall constitute an accord or satisfaction but shall only be deemed a part payment on account. 30.2 Waiver of Trial by Jury. LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, INCLUDING ANY CLAIM OF INJURY OR DAMAGE, AND ANY EMERGENCY OR STATUTORY REMEDY WITH RESPECT TO THE FOREGOING. 31. MEMORANDUM OF LEASE. The parties shall, contemporaneously herewith, execute, acknowledge and deliver duplicate originals of a recordable memorandum of lease (the "Memorandum of Lease") in the form of Exhibit H. 32. ESTOPPEL CERTIFICATES. 32.1 Rights of Each Party. Upon not less than ten (10) Business Days' prior written request (an "Estoppel Certificate Request") by either party to this Lease (the "Requesting Party"), the other party to this Lease (the "Certifying Party") shall execute, acknowledge and deliver to the Requesting Party (or directly to a third party whose name and address are provided by the requesting party [a "Third Party"]) up to four original counterparts of an Estoppel Certificate. An Estoppel Certificate Request shall not be valid unless accompanied by a certificate by the Requesting Party that to the best of the Requesting Party's knowledge the proposed form of Estoppel Certificate is substantially correct and omits no material information required to be disclosed in such Estoppel Certificate. Any Estoppel Certificate may be relied upon by any Third Party to whom an Estoppel Certificate is required to be directed. 33. MISCELLANEOUS. 33.1 Reasonableness. Wherever this Lease states that approval by either party shall not be unreasonably withheld: (a) such approval shall not be unreasonably delayed or conditioned; and (b) no withholding of approval shall be deemed reasonable unless withheld by Notice specifying reasonable grounds, in reasonable detail, for such withholding of 46 approval. Where reasonableness is not specified as the standard for action, a party may act in its sole discretion. 33.2 Documents in Recordable Form. Wherever this Lease requires either party to deliver to the other a document in recordable form, both parties shall be deemed to have consented to the recording of such document, at the sole expense of the party that elects to record it. 33.3 Further Assurances. Each party agrees to execute and deliver such further documents, and perform such further acts, as may be reasonably necessary to achieve the intent of the parties with respect to Tenant's leasing of the Premises from Landlord, as set forth in this Lease. Without limiting the generality of this Section, upon request at any time or from time to time either party shall execute and deliver to the other: (a) additional counterparts of this Lease or any related documents, provided such additional counterparts are prepared at the expense of the party requesting them; and (b) such documentation as any title insurance company shall require to evidence such matters as due formation, authorization and execution of the Lease on the part of the party of whom the request is made. 33.4 No Third Party Beneficiaries. Nothing in this Lease shall be deemed to confer upon any Person (other than Landlord, Tenant, Prime Mortgagees or Fee Mortgagees) any right to insist upon, or to enforce against Landlord or Tenant, the performance or observance by either party of its obligations under this Lease. 33.5 Interpretation. No inference in favor of or against any party shall be drawn from the fact that such party has drafted any portion of this Lease. The parties have both participated substantially in the negotiation, drafting and revision of this Lease with representation by counsel and such other advisers as they have deemed appropriate. Material in brackets constitutes parenthetical material within other parenthetical material and is intended to be part of this Lease. 33.6 Captions. The captions of this Lease are for convenience and reference only and in no way affect this Lease. 33.7 Cumulative Remedies. Except when expressly otherwise provided, the remedies to which either party may resort under this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which such party may lawfully be entitled in the event of any breach or threatened breach by the other party of any provision of this Lease. 33.8 Right of Injunction. In the event of a breach by either party of any of its obligations under this Lease, the other party shall have the right to obtain an injunction, in addition to the rights and remedies provided for under this Lease. 33.9 Entire Agreement. This Lease contains all the terms, covenants and conditions relating to Tenant's leasing of the Premises. 47 33.10 Amendment. Any modification or amendment to this Lease must be in writing signed by Landlord and Tenant and consented to by any Prime Mortgagee(s) and Fee Mortgagee(s) having the right to consent to amendments or modifications of this Lease pursuant to the terms of this Lease. Modifications or amendments of this Lease executed by either party may be exchanged and delivered by facsimile transmission, and shall be effective upon such transmission. The parties shall promptly exchange original signature counterparts of amendments executed by either party and initially exchanged and delivered by facsimile transmission. 33.11 Partial Invalidity. If any term or provision of this Lease or the application of such term or provision to any party or circumstance shall to any extent be invalid or unenforceable, then the remainder of this Lease, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected by such invalidity, and each remaining term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 33.12 Successors and Assigns. This Lease shall bind and benefit Landlord and Tenant and their successors and assigns, but the foregoing shall not limit or supersede any Transfer restrictions contained in this Lease. 33.13 Governing Law. This Lease and its interpretation and performance shall be governed, construed and regulated by the laws of the State, without regard to principles of conflict of laws. 33.14 Obligation to Perform. Wherever this Lease requires either party to perform any obligation, such party shall be entitled to discharge such obligation by causing it to be performed by some other person, but the foregoing shall in no way limit, restrict or excuse Landlord's or Tenant's obligations under this Lease or the restrictions on assignment, conveyance or transfer contained in this Lease. 33.15 Counterparts. This Lease may be executed in counterparts, each of which shall constitute one and the same agreement. 33.16 Time Periods. Whenever this Lease requires either party to perform any action within a specified period, or requires that a particular event occur within a specified period, if the last day of such period is not a Business Day, then the period shall be deemed extended through the close of business on the first Business Day following such period as initially specified. This Section shall in no event delay or defer the effective date of any Rent adjustment or the commencement of any period with respect to which interest on a payment shall accrue. 33.17 Rule Against Perpetuities. If the rule against perpetuities or any rule of law with respect to restrictions on the alienation of property or any other rule of law shall limit the time when any event contemplated by this Lease may occur, the happening of such event shall not be impaired within any period permitted by such rule. Such period with respect to the rule against perpetuities shall expire upon the expiration of twenty (20) years after the death of the last survivor of the following individuals: 48 Emily Rosenberg of Memphis, Tennessee Dylan Loveland of Memphis, Tennessee Dylan Buffalo of Germantown, Tennessee The intent of this provision is to allow to the maximum extent permissible by an applicable rule of law the occurrence of any event contemplated by this Lease. 33.18 No Agency or Partnership. Nothing herein contained shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that no provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of Tenant and Landlord. 34. NOTICES. All Notices and other communications required or permitted to be given or delivered hereunder shall be in writing, addressed to Landlord or Tenant at the addresses set forth below or at such other address as Landlord or Tenant may designate by notice given to the other party in the manner herein provided, and shall be deemed to have been given (a) on the date received if given by United States mail, postage prepaid, registered or certified, return receipt requested, or (b) on the date delivered if given by personal delivery or recognized overnight courier service, provided that delivery is acknowledged in writing by the receiving party or employee of such party: Landlord: HARRAH'S MARYLAND HEIGHTS LLC c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, Tennessee 38117 Attention: General Counsel Fax No.: (901) 762-8776 with a copy to: HARRAH'S ENTERTAINMENT, INC. 1023 Cherry Road Memphis, Tennessee 38117 Attention: Corporate Secretary Fax No.: (901) 762-8735 49 Tenant: RIVERSIDE JOINT VENTURE c/o Players International, Inc. 3900 Paradise Road, Suite 135 Las Vegas,NV 89109 Attention: General Counsel Fax No.: (702) 792-9843 with a copy to: Horn, Goldberg, Gorny, Daniels, Plackter & Weiss Suite 500 Citicenter Building 1300 Atlantic Avenue Atlantic City, NJ 08401-7278 Attention: Melvyn J. Tarnopol, Esq. Fax No.: (609) 348-6834 35. GAMING LICENSE. Landlord shall undertake to obtain and shall maintain all gaming licenses and approvals required by the State to enable Landlord to receive the Percentage Rent. 36. RECIPROCAL EASEMENT AGREEMENT. The parties shall, contemporaneously herewith, execute, acknowledge and deliver the Reciprocal Easement Agreement. 37. JOINT VENTURE AGREEMENT. Landlord acknowledges that the Joint Venture Agreement provides for the purchase of the Fee Estate in connection with the buyout by Players of HMHC's interest under the Joint Venture Agreement for an amount equal to the greater of (i) the cost of the Fee Estate or (ii) fair market value of the Fee Estate and should the Fee Estate become vested in a person or entity other than Landlord such person or entity shall be bound by this Lease pursuant to the provisions of the Joint Venture Agreement to consummate such sale to Players. 38. SURVIVAL. The obligations of the Tenant and Landlord herein which are not fully performed upon the expiration or termination of this Lease shall survive such expiration or termination hereof. 50 THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease on the Commencement Date. "Landlord" HARRAH'S MARYLAND HEIGHTS LLC By: /s/ William S. Rosenberg ----------------------------- William S. Rosenberg, Authorized Representative "Tenant" RIVERSIDE JOINT VENTURE BY: PLAYERS MH, L.P., General Partner BY: PLAYERS MARYLAND HEIGHTS, INC., Its General Partner By: /s/ Steven P. Perskie -------------------------- Steven P. Perskie, Secretary BY: HARRAH'S MARYLAND HEIGHTS CORPORATION, General Partner By: /s/ William S. Rosenberg ----------------------------- William S. Rosenberg, Authorized Representative 51 EX-10.6 7 LEASE AGREEMENT LEASE AGREEMENT BETWEEN RIVERSIDE JOINT VENTURE and PLAYERS MH, L.P. TABLE OF CONTENTS
Section Page 1. LEASE OF PREMISES...................................................................................... 1 2. DEFINITIONS............................................................................................ 1 2.1 Accounting Principles......................................................................... 1 2.2 Additional Rent............................................................................... 2 2.3 Building...................................................................................... 2 2.4 Business Day.................................................................................. 2 2.5 Casualty...................................................................................... 2 2.6 City.......................................................................................... 2 2.7 Commencement Date............................................................................. 2 2.8 Commencement Date (Percentage Rent)........................................................... 2 2.9 Condemnation.................................................................................. 3 2.10 Consumer Price Index.......................................................................... 3 2.11 County........................................................................................ 3 2.12 Default....................................................................................... 3 2.13 Depository.................................................................................... 3 2.14 Entertainment Facilities...................................................................... 3 2.15 Environmental Law............................................................................. 3 2.16 Equipment Liens............................................................................... 3 2.17 Estoppel Certificate.......................................................................... 4 2.18 Fiscal Month.................................................................................. 4 2.19 Fiscal Year................................................................................... 4 2.20 Gaming Equipment.............................................................................. 4 2.21 Government.................................................................................... 4 2.22 Ground Lease.................................................................................. 4 2.23 Harrah's...................................................................................... 4 2.24 Harrah's Premises............................................................................. 4 2.25 Harrah's Lease................................................................................ 5 2.26 Hazardous Materials........................................................................... 5 2.27 Impositions................................................................................... 5 2.28 Indemnify..................................................................................... 5 2.29 Indemnitee.................................................................................... 6 2.30 Indemnitor.................................................................................... 6 2.31 Institutional Lender.......................................................................... 6 2.32 Insubstantial Condemnation.................................................................... 6 2.33 Joint Venture Agreement....................................................................... 6 2.34 Landlord...................................................................................... 6 2.35 Landlord's Estate............................................................................. 6 2.36 Law(s)........................................................................................ 6 2.37 Leasehold Estate.............................................................................. 7 2.38 Leasehold Mortgage............................................................................ 7 2.39 Leasehold Mortgagee........................................................................... 7 - i - 2.40 Leasehold Mortgagee's Agent................................................................... 7 2.41 Mandated Alterations.......................................................................... 7 2.42 Missouri Gambling Law......................................................................... 7 2.43 Missouri Gaming Commission.................................................................... 7 2.44 Monetary Default.............................................................................. 8 2.45 Mortgage...................................................................................... 8 2.46 Mortgagee..................................................................................... 8 2.47 Mortgagor..................................................................................... 8 2.48 Net Gaming Revenue............................................................................ 8 2.49 Non-Monetary Default.......................................................................... 8 2.50 Notice........................................................................................ 8 2.51 Notice of Default............................................................................. 8 2.52 Percentage Rent............................................................................... 8 2.53 Permitted Exceptions.......................................................................... 9 2.54 Person........................................................................................ 9 2.55 Personal Default.............................................................................. 9 2.56 Premises...................................................................................... 9 2.57 Prime Mortgage................................................................................ 9 2.58 Prime Mortgagee............................................................................... 10 2.59 Prime Rate.................................................................................... 10 2.60 Prohibited Liens.............................................................................. 10 2.61 Prohibited Person (Landlord).................................................................. 10 2.62 Prohibited Person (Tenant).................................................................... 11 2.63 Qualified Arbitrator.......................................................................... 11 2.64 Rent.......................................................................................... 11 2.65 Shoreside Complex............................................................................. 11 2.66 Site.......................................................................................... 11 2.67 State......................................................................................... 11 2.68 State Revenue Reports......................................................................... 12 2.69 State Revenue Audits.......................................................................... 12 2.70 Structural Modification....................................................................... 12 2.71 Substantial Completion........................................................................ 12 2.72 Substantial Condemnation...................................................................... 12 2.73 Tenant's Monthly Statement.................................................................... 12 2.74 Tenant's Property............................................................................. 13 2.75 Tenant's Work................................................................................. 13 2.76 Termination Date.............................................................................. 13 2.77 Transfer...................................................................................... 13 2.78 Unavoidable Delay............................................................................. 13 2.79 Venture Default............................................................................... 13 2.80 Waiver of Subrogation......................................................................... 14 3. TERM................................................................................................... 14 3.1 Initial Term.................................................................................. 14 3.2 Confirmation of Dates......................................................................... 14 - ii - 4. DEVELOPMENT AND CONSTRUCTION OF THE PREMISES AND SHORESIDE COMPLEX...................................................................................... 15 4.1 Landlord Construction......................................................................... 15 4.2 Tenant Construction........................................................................... 15 4.3 Title to Shoreside Complex and Tenant's Property.............................................. 15 5. RENT................................................................................................... 15 5.1 Means of Payment.............................................................................. 15 5.2 Percentage Rent............................................................................... 16 5.2.1 Reporting and Payment....................................................... 16 5.2.2 Accounting Records.......................................................... 17 5.2.3 Harrah's Right to Audit..................................................... 17 5.2.4 Confidentiality............................................................. 18 5.2.5 Assignment of Percentage Rent to Harrah's................................... 18 5.2.6 Substitute Percentage Rent.................................................. 19 5.3 Additional Rent............................................................................... 20 5.4 No Allocation to Personal Property............................................................ 20 5.5 No Conditional Payment........................................................................ 20 5.6 Interest on Overdue Rent...................................................................... 20 5.7 Tenant's Licenses............................................................................. 21 5.8 No Offset by Tenant........................................................................... 21 5.9 Restaurant Charges............................................................................ 21 5.10 Hotel Charges................................................................................. 21 6. ADDITIONAL PAYMENTS BY TENANT; IMPOSITIONS............................................................. 22 6.1 Landlord's Net Return......................................................................... 22 6.2 Impositions................................................................................... 22 6.3 Assessments in Installments................................................................... 22 6.4 Combined Tax Lot.............................................................................. 23 6.5 Direct Payment by Landlord.................................................................... 23 6.6 Utilities..................................................................................... 23 6.7 Joint Venture Losses.......................................................................... 23 7. USE.................................................................................................... 24 7.1 Permitted Uses................................................................................ 24 7.2 Tenant's Failure to Operate the Business...................................................... 25 7.3 Exterior Operations/Objects/Regulations....................................................... 25 7.4 Refuse/Deliveries............................................................................. 25 7.5 Interruption of Business...................................................................... 26 8. MARKS AND PUBLICITY.................................................................................... 26 8.1 Exclusive Ownership of Marks.................................................................. 26 8.2 Signs......................................................................................... 26 8.3 Effect of Lease Termination................................................................... 27 9. LAWS................................................................................................... 27 9.1 Compliance with Law........................................................................... 27 - iii - 9.2 Licenses and Permits.......................................................................... 27 9.3 Surrender of Licenses......................................................................... 27 9.4 Environmental Matters......................................................................... 28 9.4.1 Compliance.................................................................. 28 9.4.2 No Violations............................................................... 28 9.4.3 Cost of Compliance.......................................................... 28 9.4.4 Remediation................................................................. 29 9.5 Disclosure.................................................................................... 29 9.5.1 Reports..................................................................... 29 9.5.2 Notices..................................................................... 29 9.5.3 Environmental Audits........................................................ 29 9.5.4 Orders...................................................................... 29 9.5.5 Pleadings................................................................... 29 9.6 Indemnification............................................................................... 30 9.7 Tenant's Further Responsibility at Termination or Expiration of Lease......................... 30 9.7.1 Surrender................................................................... 30 9.7.2 Storage Tanks............................................................... 31 9.8 Landlord's Environmental Remedies............................................................. 31 9.8.1 Inspection Rights........................................................... 31 9.8.2 Self Help................................................................... 31 9.8.3 Hazardous Material Release.................................................. 31 9.8.4 Clean Up.................................................................... 31 9.8.5 Landlord Participation...................................................... 32 9.8.6 Fees and Expenses........................................................... 32 9.9 Landlord's Indemnity.......................................................................... 32 10. MAINTENANCE AND ALTERATIONS............................................................................ 33 10.1 Obligation to Maintain........................................................................ 33 10.2 Tenant's Right to Perform Alterations......................................................... 33 10.3 Plans and Specifications...................................................................... 34 10.4 Shoreside Complex............................................................................. 34 10.5 Excavations/Work on Shoreside Complex......................................................... 34 11. PROHIBITED LIENS....................................................................................... 34 11.1 Tenant's Covenant............................................................................. 34 11.2 Protection of Landlord........................................................................ 35 12. INDEMNIFICATION; LIABILITY OF LANDLORD................................................................. 35 12.1 Mutual Indemnity Obligations.................................................................. 35 12.2 Liability of Landlord......................................................................... 36 12.3 Indemnification Procedures.................................................................... 36 12.3.1 Prompt Notice............................................................... 36 12.3.2 Selection of Counsel........................................................ 36 12.3.3 Settlement.................................................................. 36 12.3.4 Insurance Proceeds.......................................................... 37 13. RIGHT OF CONTEST....................................................................................... 37 - iv - 14. INSURANCE.............................................................................................. 37 14.1 Landlord to Insure............................................................................ 37 14.2 Tenant to Insure.............................................................................. 37 15. DAMAGE OR DESTRUCTION.................................................................................. 38 15.1 Notice; No Rent Abatement; Restoration Obligations............................................ 38 15.2 Lease Termination for Casualty................................................................ 38 15.3 Restoration Work.............................................................................. 39 15.4 Adjustment of Claims; Mortgagees.............................................................. 39 15.5 Termination Payment........................................................................... 40 15.6 Business Interruption and Contractual Liability Insurance..................................... 40 15.7 Depository.................................................................................... 40 16. CONDEMNATION........................................................................................... 41 16.1 Substantial Condemnation...................................................................... 41 16.2 Insubstantial Condemnation.................................................................... 41 16.3 Other Governmental Action..................................................................... 41 17. TRANSFERS.............................................................................................. 41 17.1 By Tenant..................................................................................... 41 17.2 By Landlord................................................................................... 42 18. MORTGAGES.............................................................................................. 42 18.1 Landlord's Rights............................................................................. 42 18.2 Tenant's Rights............................................................................... 42 18.3 Effect of a Leasehold Mortgage................................................................ 42 18.4 Sale and Leaseback............................................................................ 43 18.5 Modifications Required by Leasehold Mortgagee................................................. 43 18.6 Further Assurances............................................................................ 43 18.7 Protection of Prime Mortgagees................................................................ 44 18.8 Foreclosure................................................................................... 44 19. NOTICE TO LANDLORD OF LEASEHOLD MORTGAGES.............................................................. 44 19.1 Initial Notice................................................................................ 44 19.2 Change of Address............................................................................. 44 19.3 Termination of Leasehold Mortgagee's Rights................................................... 44 19.4 Transfer of Landlord's Estate................................................................. 45 19.5 Landlord's Acknowledgment of Leasehold Mortgagee.............................................. 45 20. PROTECTION OF LEASEHOLD MORTGAGEES..................................................................... 45 20.1 Cancellation, Surrender, Amendment, Etc....................................................... 45 20.2 Copies of Notices............................................................................. 45 20.3 Tenant's Cure Period Expiration Notice........................................................ 46 20.4 Right to Perform Covenants and Agreements..................................................... 46 20.5 Transfer of Tenant's Rights................................................................... 46 20.6 Notice of Default and Mortgagee's Cure Rights................................................. 46 - v - 20.6.1 Monetary Defaults and Non-Monetary Defaults Curable Without Obtaining Possession................................................................. 47 20.6.2 Defaults Curable Only by Obtaining Possession and Personal Defaults............................................................................. 47 20.6.2.1 During Cure Period.................................................. 47 20.6.2.2 Further Cure Obligations............................................ 48 20.6.2.3 Law Limitation...................................................... 48 20.6.3 Operating Covenant Default and Venture Default....................................... 48 20.7 Effect of Cure................................................................................ 48 20.8 Quiet Enjoyment............................................................................... 48 20.9 Subordinate Liens Affecting Leasehold Estate.................................................. 49 20.10 Leasehold Mortgagee's Right to Enter Premises................................................. 49 20.11 Rights of Leasehold Mortgagee Upon Acquiring Control.......................................... 49 21. LEASEHOLD MORTGAGEE'S RIGHT TO A NEW LEASE............................................................. 50 21.1 New Lease..................................................................................... 50 21.2 Form and Priority............................................................................. 50 21.3 Pendency of Dispute........................................................................... 51 21.4 Preservation of Subleases..................................................................... 51 22. INTERACTION OF MORTGAGES WITH OTHER ESTATES AND PARTIES................................................................................................ 51 22.1 Leasehold Mortgages........................................................................... 51 22.2 Leasehold Mortgagee's Agent................................................................... 51 22.3 Interaction Between Lease and Leasehold Mortgage.............................................. 51 22.4 Conflicts Between Mortgagees.................................................................. 52 22.5 No Merger..................................................................................... 52 23. BANKRUPTCY............................................................................................. 52 23.1 Affecting Tenant.............................................................................. 52 23.2 Affecting Landlord............................................................................ 53 23.2.1 Tenant's Election........................................................... 53 23.2.2 Continuation of Lease....................................................... 54 23.2.3 Assumption of Lease......................................................... 54 23.2.4 Continuation of Leasehold Mortgages......................................... 54 24. QUIET ENJOYMENT AND WARRANTIES......................................................................... 54 25. FORCE MAJEURE.......................................................................................... 55 26. ACCESS................................................................................................. 55 27. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS......................................................... 56 27.1 Landlord's Option............................................................................. 56 27.2 Reimbursement by Tenant....................................................................... 56 - vi - 28. GUARANTY............................................................................................... 57 28.1 Parent Guaranty............................................................................... 57 29. DEFAULT BY TENANT; REMEDIES............................................................................ 57 29.1 Definition of "Event of Default".............................................................. 57 29.1.1 Venture Default............................................................. 57 29.1.2 Monetary Default............................................................ 57 29.1.3 Operating Covenant Defaults................................................. 57 29.1.4 Non-Monetary Default........................................................ 58 29.2 Re-entry...................................................................................... 58 29.3 Damages....................................................................................... 59 29.4 Pending Dispute Regarding Event of Default.................................................... 59 29.5 Injunctive Relief............................................................................. 60 29.6 Arbitration................................................................................... 60 29.6.1 Voluntary Appointment....................................................... 60 29.6.2 Appointment by Arbitrators.................................................. 60 29.6.3 Failure to Appoint.......................................................... 61 29.6.4 Fees and Expenses........................................................... 61 29.6.5 Proceedings................................................................. 61 29.6.6 Arbitration Decisions....................................................... 61 30. TERMINATION............................................................................................ 61 30.1 Rights on Termination......................................................................... 61 30.2 Possession.................................................................................... 62 30.3 Utility and Other Deposits.................................................................... 62 30.4 Miscellaneous Assignments..................................................................... 62 30.5 Termination of Memorandum of Lease............................................................ 62 31. NO BROKER.............................................................................................. 62 32. WAIVERS................................................................................................ 63 32.1 No Waiver by Silence.......................................................................... 63 32.2 Waiver of Trial by Jury....................................................................... 63 33. MEMORANDUM OF LEASE.................................................................................... 63 34. ADMINISTRATION OF LEASE; LANDLORD'S REPRESENTATIVE..................................................... 63 35. ESTOPPEL CERTIFICATES.................................................................................. 63 35.1 Rights of Each Party.......................................................................... 63 35.2 Failure to Execute Estoppel Certificate....................................................... 64 36. MISCELLANEOUS.......................................................................................... 64 36.1 Reasonableness................................................................................ 64 36.2 Documents in Recordable Form.................................................................. 64 36.3 Further Assurances............................................................................ 64 36.4 No Competition................................................................................ 65 - vii - 36.5 No Third Party Beneficiaries.................................................................. 65 36.6 Interpretation................................................................................ 65 36.7 Captions...................................................................................... 65 36.8 Cumulative Remedies........................................................................... 65 36.9 Entire Agreement.............................................................................. 65 36.10 Amendment..................................................................................... 66 36.11 Partial Invalidity............................................................................ 66 36.12 Successors and Assigns........................................................................ 66 36.13 Governing Law................................................................................. 66 36.14 Counterparts.................................................................................. 66 36.15 Time Periods.................................................................................. 66 36.16 Rule Against Perpetuities..................................................................... 66 36.17 No Agency or Partnership...................................................................... 67 36.18 No Suretyship................................................................................. 67 37. NOTICES................................................................................................ 67 38. SURVIVAL............................................................................................... 68
LIST OF EXHIBITS EXHIBIT A Conceptual Design - Building; Conceptual Design - Entertainment Facilities; Conceptual Design - Harrah's Premises EXHIBIT A-1 Tenant's Work - Premises EXHIBIT A-2 Legal Description of Site EXHIBIT B Estoppel Certificate EXHIBIT C Permitted Exceptions EXHIBIT D Shell Condition Criteria EXHIBIT E Common Area Maintenance Charges EXHIBIT F Standards for Operation EXHIBIT G Shoreside Complex Refuse Disposal and Loading Areas EXHIBIT H Landlord's Insurance Requirements EXHIBIT I Tenant's Insurance Requirements EXHIBIT J Transferee Criteria EXHIBIT K Form of Parent Guaranty (Limited) EXHIBIT L Form of Memorandum of Lease EXHIBIT M Form of Parent Guaranty (Unlimited)
- viii - LEASE AGREEMENT THIS LEASE AGREEMENT (the "Lease") is made as of this 3rd day of November, 1995, by and between RIVERSIDE JOINT VENTURE, a Missouri general partnership ("Landlord"), and PLAYERS MH, L.P., a Missouri limited partnership ("Tenant"). R E C I T A L S A. Tenant and Harrah's Maryland Heights Corporation, a Nevada corporation ("HMHC") are partners in Landlord. B. Landlord is constructing the Building which will contain the Premises. C. Following completion of the Building, Tenant desires to lease the Premises from Landlord. D. The parties desire to enter into this Lease to set forth their rights and obligations relating to the Premises, and the Shoreside Complex. AGREEMENT NOW, THEREFORE, IN CONSIDERATION OF THE COVENANTS AND AGREEMENTS OF THE PARTIES CONTAINED IN THIS LEASE, AND IN CONSIDERATION OF THE RECITALS SET FORTH ABOVE (WHICH ARE INCORPORATED BY REFERENCE IN THIS LEASE), AND IN EXCHANGE FOR TEN DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF ALL OF WHICH ARE CONCLUSIVELY ACKNOWLEDGED BY BOTH PARTIES, LANDLORD AND TENANT AGREE AS FOLLOWS: 1. LEASE OF PREMISES. Effective as of the Commencement Date, Landlord leases the Premises to Tenant, and Tenant accepts possession of and leases the Premises from Landlord, for the Term and upon all the terms and conditions of this Lease. 2. DEFINITIONS. The following definitions apply throughout the Lease, in addition to other definitions appearing at other locations in this Lease. 2.1 Accounting Principles. accounting principles and practices set forth in the Audit and Accounting Guide for Audits of Casinos with changes through May, 1994, prepared by the American Institute of Certified Public Accountants, as from time to time amended, and, to the extent not therein addressed, United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession as in effect from time to time, consistently applied. 2.2 Additional Rent. payments to be made by Tenant pursuant to this Lease, other than Percentage Rent. 2.3 Building. the primary building and four (4) "Excursion Gambling Boats" (as defined in the Missouri Gambling Law) to be constructed by Landlord as part of the Shoreside Complex that will contain: (i) the Premises; (ii) Harrah's Premises; and (iii) the Entertainment Facilities. The conceptual design of the Building is shown on the plans attached as Exhibit A. The "as built" configuration of the Building shall be confirmed, at the time of its Substantial Completion, by written addendum to this Lease. - 2 - 2.4 Business Day. a day on which banks in the State are generally open for the conduct, with bank personnel, of regular banking business. 2.5 Casualty. damage or destruction affecting the Premises and/or the Building, and including without limitation, flood conditions interfering with access thereto. 2.6 City. the City of Maryland Heights, a municipal corporation, and any successor Government entity. 2.7 Commencement Date. the day the Premises are first made available by Landlord to Tenant for the commencement of Tenant's Work and installation of Tenant's Property. The Commencement Date shall be determined in good faith by HMHC as the Partner of Landlord charged with primary authority to manage construction of the Shoreside Complex, and is intended to be the date when Tenant's work may commence without undue interference with the construction of the Shoreside Complex and the date when Harrah's (hereinafter defined) will also commence "Tenant's Work" (as defined in the Harrah's Lease) in the Harrah's Premises. 2.8 Commencement Date (Percentage Rent). the date upon which Tenant first accepts wagers or conducts other business at the Premises. 2.9 Condemnation. a taking of the Premises or the Shoreside Complex, in whole or in part, by condemnation or by exercise of any right of eminent domain, or by any similar proceeding or act of any Government or any voluntary sale in lieu of such proceeding. 2.10 Consumer Price Index. The Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, United States City Average, all items (1982-1984 = 100). If such index is no longer published, then Landlord shall designate a successor or replacement index of substantially equivalent reliability and objectivity. The Consumer Price Index in effect for any given date shall be deemed to refer to the Consumer Price Index last published before such date. - 3 - 2.11 County. St. Louis County, Missouri, and any successor Government entity. 2.12 Default. a Monetary Default, Non-Monetary Default, Venture Default or Operating Covenant Default. Each and every covenant of Tenant under this Lease, if not performed by Tenant, shall give rise to a Default. 2.13 Depository. an Institutional Lender, designated by Tenant or its highest priority Leasehold Mortgagee to act as "Depository" to hold insurance proceeds received for damage to Tenant's Property as provided in Section 15.7 of this Lease. 2.14 Entertainment Facilities. the portion of the Building, accessible to both Harrah's Premises and the Premises, to be used by Landlord for hotel, restaurant and entertainment purposes and ancillary purposes related to the operations of the Excursion Gambling Boats of Harrah's and Tenant, and/or such other purposes as Landlord may from time to time determine. The conceptual design of the Entertainment Facilities is shown on the plans attached as Exhibit A. The "as built" configuration of the Entertainment Facilities shall be confirmed, at the time of its Substantial Completion, by written addendum to this Lease. 2.15 Environmental Law. Any applicable federal, state, or local law, regulation, ordinance, order, judgment, or decree pertaining to Hazardous Materials or to the protection of the environment, as such are now in effect or may hereafter be enacted or revised. 2.16 Equipment Liens. purchase-money security interests and finance leases of personal property, other than fixtures, used in connection with the operation of the Premises, such as furniture and equipment, telephone, telecommunications and facsimile transmission equipment, Gaming Equipment, point of sale equipment, televisions, radios, and computer systems, provided that each Equipment Lien encumbers or otherwise relates to only the Tenant's Property financed or otherwise provided by the secured party under such Equipment Lien. The lessor, seller or other secured party under an Equipment Lien may not be an Affiliate of Tenant. - 4 - 2.17 Estoppel Certificate. a written statement in the form attached as Exhibit B, expanded, upon request, to include such additional information relating to this Lease and the Premises as the requesting party shall reasonably specify. 2.18 Fiscal Month. each calendar month. 2.19 Fiscal Year. each calendar year. 2.20 Gaming Equipment. Tenant's equipment constituting wagering devices used in connection with the operation of Tenant's Excursion Gambling Boats on the Premises, whether or not fixtures, including baccarat, bingo, twenty-one, poker, craps and other table games, slot machines, video games, roulette wheel, klondike table, punchboard, faro layout, keno layout, numbers ticket, push card, jar ticket and pull tab, or other wagering devices now or hereafter authorized by the Missouri Gaming Commission. 2.21 Government. each governmental authority, department, agency, bureau or other entity or instrumentality having jurisdiction over the Shoreside Complex, including the federal government of the United States, the State, the County, the City and all other governmental or quasi-governmental authorities and subdivisions thereof having jurisdiction over the Shoreside Complex or any portion thereof. 2.22 Ground Lease. that certain Ground Lease of even date herewith by and between Harrah's and Landlord, as the same may be amended from time to time. 2.23 Harrah's. Harrah's Maryland Heights LLC, a Delaware limited liability company, or, from and after any assignment or transfer of its rights to Percentage Rent hereunder, its successors and assigns. 2.24 Harrah's Premises. the portion of the Building to be leased pursuant to the Harrah's Lease. The conceptual design of Harrah's Premises is shown on the plans attached as - 5 - Exhibit A. The "as built" configuration of Harrah's Premises shall be confirmed, at the time of its Substantial Completion, by written addendum to this Lease. 2.25 Harrah's Lease. that certain lease of Harrah's Premises by and between Harrah's and Landlord, of even date and delivery herewith, as the same may be hereafter amended from time to time. 2.26 Hazardous Materials. Any substance or matter including, without limitation, petroleum products and waste oil, (i) whose concentration in air, water, groundwater, or soil exceeds levels set forth in any Environmental Law, or (ii) for which any federal, state, or local agency orders or otherwise requires removal, treatment, monitoring, or remediation. 2.27 Impositions. ad valorem taxes, special and general assessments, water rents, rates and charges, commercial rent taxes, sewer rents, levee district taxes and assessments, and other impositions and charges of every kind and nature whatsoever with respect to or allocable to the Premises or Tenant's Property, that may be assessed, levied, confirmed, imposed or become a lien on the Premises or otherwise be payable with respect to or allocable to the Premises or the operation thereof by or for the benefit of any Government with respect to any period during the Term together with any taxes and assessments that may be levied, assessed or imposed by any Government upon Rent or in lieu of or as a substitute, in whole or in part, for taxes and assessments imposed upon or related to the Premises and commonly known as real estate taxes. The term "Impositions" shall, however, not include: (a) any franchise, income, excess profits, estate, inheritance, succession, transfer, gift, corporation, business, capital levy, or profits tax, or license fee, of Landlord; (b) if the Premises are part of a Combined Tax Lot, any taxes and other assessments allocated to any portion of such Combined Tax Lot other than the Premises, in accordance with Section 6.4 of this Lease; (c) the incremental portion of any of the items listed in this definition that would not have been levied, imposed or assessed but for any sale or other - 6 - direct or indirect transfer of the Landlord's Estate or of any legal or beneficial interest in Landlord, other than that of Tenant or any Affiliate of Tenant; and (d) interest or other charges with respect to items "a" through "c." 2.28 Indemnify. the duty of an Indemnitor to indemnify an Indemnitee (and its partners and their Affiliates [the terms "Affiliate" or "Affiliates" as used herein shall have the same meaning as said terms have in the Joint Venture Agreement] and their respective officers, directors, agents and employees) and defend and hold the Indemnitee (and its partners and their Affiliates and their respective officers, directors, agents and employees) harmless from and against any and all loss, cost, claims, liability, penalties, judgments, damage or other injury, detriment, or expense (including reasonable attorneys' fees, court costs, interest and penalties) reasonably incurred or suffered by the Indemnitee (and its partners, and their Affiliates and their respective officers, directors, agents and employees) on account of the matter that is the subject of such indemnification or in enforcing the Indemnitor's indemnity. 2.29 Indemnitee. a Person that is entitled to be Indemnified pursuant to this Lease. 2.30 Indemnitor. a Person that is obligated to Indemnify another pursuant to this Lease. 2.31 Institutional Lender. a national bank, commercial state bank, savings bank, trust company, insurance company, pension, welfare or retirement fund or system, real estate investment trust, federal or state agency regularly making or guaranteeing mortgage loans, any other entity actively engaged in commercial real estate financing and having total assets of at least $50,000,000 (adjusted annually on each anniversary of the Commencement Date this Lease to reflect increases in the Consumer Price Index), or a corporation that is a wholly-owned subsidiary of any of the foregoing entities, including any of the foregoing when acting as trustee or agent for other lender(s), whether or not such other lender(s) are themselves Institutional Lenders. The fact that a particular entity (or any Affiliate of such entity) is an Affiliate or partner of the then - 7 - Tenant under this Lease shall preclude such entity from being an Institutional Lender and/or a Leasehold Mortgagee. 2.32 Insubstantial Condemnation. a Condemnation other than a Substantial Condemnation. 2.33 Joint Venture Agreement. that certain general partnership agreement of Landlord dated November 2, 1995. 2.34 Landlord. Riverside Joint Venture, and any successor owner of Landlord's Estate. 2.35 Landlord's Estate. Landlord's fee and leasehold estate (pursuant to the Ground Lease) in and to the Shoreside Complex. 2.36 Law(s). laws, ordinances, requirements, orders, directives, rules and regulations of any Government affecting the development, improvement, alteration, use, maintenance, operation or occupancy of the Premises or the Shoreside Complex, whether in force at the Commencement Date or passed, enacted or imposed at some time thereafter, subject in all cases, however, to all applicable waivers, variances and exemptions limiting the application of the foregoing, and including without limitation, the restrictions or other requirements of any applicable permit of any Government. 2.37 Leasehold Estate. Tenant's leasehold estate arising under this Lease, upon and subject to all the terms and conditions of this Lease, and any legal or beneficial interest in such leasehold estate (other than stock of a company whose stock is listed and traded on the New York or NASDAQ Stock Exchange). 2.38 Leasehold Mortgage. any mortgage, deed of trust, deed to secure debt, assignment, security interest, pledge, financing statement or any other instrument(s) or agreement(s) intended to grant security encumbering all or any part of the Leasehold Estate for any obligation (including a purchase-money or other promissory note) as entered into, renewed, modified, consolidated, - 8 - amended, extended or assigned from time to time during the Term. A "Leasehold Mortgage" also includes certain agreements entered into in connection with a "sale and leaseback" transaction, as described in Section 18.4 of this Lease. 2.39 Leasehold Mortgagee. the holder of a Leasehold Mortgage. Neither Tenant nor any Affiliate of Tenant may be, or have the rights of, a Leasehold Mortgagee under this Lease. 2.40 Leasehold Mortgagee's Agent. an agent, designee or nominee of a Leasehold Mortgagee, provided that such agent, designee or nominee is a wholly owned subsidiary of the Leasehold Mortgagee. A Leasehold Mortgagee that is not an Institutional Lender shall not be entitled to designate a Leasehold Mortgagee's Agent. 2.41 Mandated Alterations. repairs, additions, replacements or alterations mandated by Laws imposed, modified, interpreted or otherwise rendered more burdensome after the issuance of building permits for the Building, including "retro-fitting" and structural alterations, whether or not such Laws could reasonably have been foreseen at the time of issuance of such building permit. 2.42 Missouri Gambling Law. State statutory Law regulating the conduct of gambling and related activities on the Premises, which law is presently codified as Sections 313.800 through 313.850, Revised Statutes of Missouri (1994), and as such law may be amended from time to time, and all rules and regulations adopted pursuant to any such law. 2.43 Missouri Gaming Commission. The Missouri Gaming Commission, or any successor commission or authority which has jurisdiction to license and regulate gambling on the Premises pursuant to Missouri Gambling Law. 2.44 Monetary Default. a failure by Tenant to pay any Rent or other amount owed by Tenant under this Lease, when and as required to be paid pursuant to this Lease. 2.45 Mortgage. a Prime Mortgage or a Leasehold Mortgage. - 9 - 2.46 Mortgagee. the holder of a Mortgage. 2.47 Mortgagor. the grantor of a Mortgage. 2.48 Net Gaming Revenue. "adjusted gross receipts" as said term is defined under Missouri Gambling Law as now enacted or as hereafter amended. 2.49 Non-Monetary Default. a failure by Tenant to perform any obligation of Tenant under this Lease, other than a Monetary Default or an Operating Covenant Default. 2.50 Notice. a notice, demand, request, election, designation, or consent, including any of the foregoing relating to an Event of Default or alleged Event of Default, that is permitted, required or desired to be given by either party in connection with this Lease. 2.51 Notice of Default. a Notice from Landlord to Tenant claiming or giving Notice of an Event of Default or alleged Event of Default by Tenant. 2.52 Percentage Rent. An amount equal to the following percentages of Net Gaming Revenue for the twelve (12) month period following the Commencement Date (Percentage Rent) and for each twelve (12) month period thereafter during the Term (each of such twelve-month periods being herein referred to as a "Percentage Rent Year"): (i) Two percent (2%) of the first Fifty Million Dollars ($50,000,000) of Net Gaming Revenue; and (ii) Three percent (3%) of Net Gaming Revenue exceeding Fifty Million Dollars ($50,000,000) up to and including One Hundred Million Dollars ($100,000,000), and (iii) Four percent (4%) of Net Gaming Revenue in excess of One Hundred Million Dollars ($100,000,000). If the term "adjusted gross receipts," as defined under the Missouri Gambling Law, is changed, the percentages applicable to such changed definition as provided in this Section 2.52 hereof shall - 10 - be adjusted by agreement of the parties, to preserve the same payment of Percentage Rent that would have been due had there been no such change. If the parties fail to agree upon such percentage prior to the effective date of the change to such definition, then such percentages shall be determined by arbitration in accordance with Section 29.6 hereof, unless previously determined by arbitration pursuant to the provisions of the Ground Lease, which arbitration shall be binding on Landlord and Tenant. 2.53 Permitted Exceptions. (i) all matters described on Exhibit C hereto; (ii) all liens, encumbrances, and other title matters created or suffered to exist by Tenant; (iii) all matters created or suffered after the date of this Lease by Landlord (for so long as Tenant or a Leasehold Mortgagee or Leasehold Mortgagee's agent is a partner of Landlord; or otherwise, with Tenant's consent, which consent shall not be unreasonably withheld); (iv) all terms and conditions of Government licenses, permits or approvals relating to the Shoreside Complex, as a whole or in part, including, without limitation, the Premises. 2.54 Person. an individual, corporation, association, partnership, limited partnership, limited liability company, trust, unincorporated organization or other entity. 2.55 Personal Default. any Non-Monetary Default by Tenant that is not reasonably susceptible of cure by a Leasehold Mortgagee, such as bankruptcy, insolvency, a prohibited transfer, failure to deliver financial information relating to Tenant (to the extent, if any, that any of the foregoing actually constitute(s) a Non-Monetary Default under this Lease), and any other Non-Monetary Default that by its nature relates only to Tenant or its Affiliates or can reasonably be performed only by Tenant or its Affiliates. Any Default that may be cured by the payment of money is not a Personal Default. 2.56 Premises. those portions of the Building shown on Exhibit A to this Lease. The conceptual design of the Premises is shown on the plans attached as Exhibit A. The "as built" - 11 - configuration of the Premises shall be confirmed, at the time of its Substantial Completion, by written addendum to this Lease. It is intended, to the extent permitted by Law, that the Premises shall be regarded as real property, subject to the Law affecting real property of the State of Missouri, rather than a ship or vessel subject to maritime law or the Ship Mortgage Act, 46 U.S.C. ss.31301 et seq. (1988). 2.57 Prime Mortgage. a mortgage, deed of trust, deed to secure debt, assignment, security interest, pledge, financing statement or any other instrument(s) or agreement(s) intended to grant security encumbering the Landlord's Estate for any obligation, as entered into, renewed, modified, amended, extended or assigned from time to time before or during the Term. 2.58 Prime Mortgagee. the holder of a Prime Mortgage. 2.59 Prime Rate. the prime rate (or base rate) of interest for corporate loans that is reported in the Money Rates Column of The Wall Street Journal published on the Business Day for which the rate is applicable (or the next preceding Business Day, if the applicable day is not a Business Day), as having been the rate in effect for corporate loans at large U.S. money center commercial banks (whether or not such rate has actually been charged by any such bank). If The Wall Street Journal ceases publication of the Prime Rate, the prime rate (or base rate) from time to time announced by Bankers Trust Company, New York, New York, or its successor (whether or not such rate has actually been charged by such bank), or, if Bankers Trust Company discontinues the practice of announcing the Prime Rate, the "Prime Rate" shall mean the highest rate charged by such bank on short term, unsecured loans to its most creditworthy large corporate borrowers. If The Wall Street Journal: (a) publishes more than one Prime Rate, the higher or highest rate shall apply, or (b) publishes a retraction or correction of any such rate, the rate reported in such retraction or correction shall apply. If the Prime Rate changes, interest rates in this Lease which are based on the Prime Rate shall change, effective as of the first day of each - 12 - calendar month, to reflect the Prime Rate in effect on the last day of the preceding calendar month. Notwithstanding anything to the contrary in this Section, the Prime Rate shall never exceed the highest rate of interest legally permitted to be charged in the State (without imposition of penalties for criminal usury [the "Criminal Usury Rate"]) in transactions of the character of this Lease between parties of a character similar to Landlord and Tenant. 2.60 Prohibited Liens. a mortgage, ship mortgage or other consensual lien or judgment lien, and any maritime, seaman's, mechanic's, vendor's, laborer's or material supplier's statutory lien or other similar lien arising by reason of work, labor, services, equipment or materials supplied, or claimed to have been supplied, to Tenant; which lien either: (a) is filed against the Landlord's Estate or (b) is filed against the Leasehold Estate and, upon termination of this Lease, would under the law of the State attach to the Landlord's Estate or any underlying fee estate. 2.61 Prohibited Person (Landlord). Any Person or any Affiliate of such Person as to which there has been an Unsuitability Determination, in accordance with the procedures set forth in the Joint Venture Agreement whether or not Riverside Joint Venture (the "Venture") still exists or remains the Landlord hereunder. Landlord shall provide Tenant with at least thirty (30) days prior Notice of any proposed transfer of Landlord's Estate or any interest therein (excluding, however, the creation or transfer of any easement), together with such documentation and information regarding the proposed transferee as Tenant shall reasonably request, to enable Tenant to confirm that the proposed transferee is not a Prohibited Person (Landlord). 2.62 Prohibited Person (Tenant). Any Person or Affiliate of such Person as to which there has been an Unsuitability Determination in accordance with the procedures set forth in the Joint Venture Agreement whether or not the Venture still exists or remains the Landlord hereunder. Tenant shall provide Landlord or Harrah's, for so long as HMHC or any Affiliate of HMHC is a partner of Landlord, with at least thirty (30) days prior Notice of any proposed - 13 - transfer of Tenant's Leasehold Estate or any interest therein, together with such documentation and information regarding the proposed transferee as Harrah's shall reasonably request, to enable Harrah's to confirm that the proposed transferee is not a Prohibited Person (Tenant). 2.63 Qualified Arbitrator. A partner or other individual designated by Landlord or Tenant, as the case may be, who: (i) is employed by a disinterested, reputable and nationally recognized certified public accounting firm or has comparable qualifications; and (ii) has at least ten (10) years' experience in the financial reporting and valuation of casino properties. 2.64 Rent. Additional Rent, Percentage Rent and Substitute Percentage Rent. 2.65 Shoreside Complex. the aggregate of: (i) the Site; (ii) the Building; and (iii) all other buildings and improvements constructed by Landlord on the Site, including, without limitation, all parking facilities, roads, driveways and levees. 2.66 Site. The land described in Exhibit A-2, together with all easements and rights appurtenant thereto. A portion of the Site described in the Joint Venture Agreement as the Leased Site is leased pursuant to the Ground Lease, and a portion of the Site is under contract to be owned in fee, by the Landlord and as is defined in the Joint Venture Agreement as the Adjacent Fee Site. 2.67 State. Missouri. 2.68 State Revenue Reports. the daily tax remittal form required to be submitted by Tenant to the Missouri Gaming Commission pursuant to the Missouri Gambling Law, reporting Net Gaming Revenue from the Premises. 2.69 State Revenue Audits. the quarterly external audit of Net Gaming Revenue prepared for the benefit of the Missouri Gaming Commission pursuant to the Missouri Gambling Law. - 14 - 2.70 Structural Modification. any of the following: (i) any modification to the foundation, footings, structural load-bearing walls, joists, beams, columns, floors and roof deck of the Shoreside Complex, unless such structural members only affect Excursion Gambling Boats of Tenant and are not integrally related to the remainder of the Shoreside Complex; (ii) any modification of the exterior appearance of the Shoreside Complex; or (iii) any modification to the electric, gas, water, sewer, telephone or other systems serving both the Excursion Gambling Boats and the Shoreside Complex, if the modification adversely affects the usefulness or cost of operation of such Shoreside Complex systems; or (iv) any other modification to Excursion Gambling Boats which affects the appearance, usefulness or cost of operation of the Shoreside Complex or otherwise adversely affects the Shoreside Complex. 2.71 Substantial Completion. as defined by Section 9.8.1 of American Institute of Architects' Document A-201, General Conditions of the Contract for Construction (1987 Edition) . 2.72 Substantial Condemnation. a Condemnation of the Premises or Shoreside Complex which results in the Landlord determining not to rebuild or reconfigure the Premises in accordance with the terms of the Joint Venture Agreement. After the Landlord is no longer the Venture, Substantial Condemnation shall be a Condemnation of the Premises or Shoreside Complex that renders the Premises unusable as Excursion Gambling Boats, as reasonably determined by Landlord. 2.73 Tenant's Monthly Statement. a financial statement of Tenant, delivered to Landlord on the twentieth calendar day of every Fiscal Month, beginning on the twentieth day of the month next following the month in which the Commencement Date (Percentage Rent) occurs, reporting Net Gaming Revenue of the Premises for the immediately preceding Fiscal Month, certified to be complete, true and accurate, and to have been prepared in accordance with - 15 - Accounting Standards by Tenant's authorized financial officer, and which shall include and have attached thereto all State Revenue Reports for such preceding Fiscal Month. 2.74 Tenant's Property. all personal property purchased or leased by Tenant for use in connection with the Premises including, without limitation, Tenant's Gaming Equipment and Tenant's interest in any leases of personalty ("Equipment Leases"), including, without limitation, leases of Tenant's Gaming Equipment. 2.75 Tenant's Work. the initial interior finish improvements and signs to be installed and affixed by Tenant to the Premises, at Tenant's sole expense, prior to the Commencement Date (Percentage Rent) all as generally described in Exhibit A-1. 2.76 Termination Date. the date when this Lease terminates or expires, whether pursuant to the expiration of the Term, Condemnation, Casualty or an Event of Default. 2.77 Transfer. the assignment, sublease, pledge, mortgaging, encumbering or other form of disposition, voluntarily or involuntarily, directly or indirectly, of any right to possession of, or legal or beneficial interest in and to, the Leasehold Estate (or the Tenant) or the Landlord's Estate (or the Landlord), as the case may be, including without limitation a transfer of Capital Stock (as defined in the Joint Venture Agreement) in any direct or remote parent entity of Landlord (or its Partners) or Tenant. Transfer shall not include the sale, on a national exchange such as the New York or NASDAQ Stock Exchange, of publicly held shares of Harrah's Entertainment, Inc. ("HEI") or Players International, Inc. 2.78 Unavoidable Delay. delay in the performance of any obligation or, where specifically provided for, a Leasehold Mortgagee's exercise of Mortgagee's Cure Rights under this Lease, (excluding in any case any obligation to pay money) arising from or on account of any cause whatsoever beyond the reasonable control of the Person required or entitled to perform, including strikes, labor troubles, litigation, Casualty, Condemnation, accidents, Laws, - 16 - governmental preemption, failure or refusal of a governmental body to issue a required permit or license, war, riots, and other causes beyond such party's reasonable control, whether similar to dissimilar to the causes specifically enumerated in this Section. In no event shall Unavoidable Delay be deemed to include any delay caused by an unwillingness or inability to make a payment required by this Lease, or the wrongful act or omission to act of the Person invoking this definition. 2.79 Venture Default. shall have the meaning ascribed to it in Section 29.1.1 hereof. 2.80 Waiver of Subrogation. a provision in, or endorsement to, any insurance policy required by this Lease, by which the insurance carrier agrees to waive all rights of recovery by way of subrogation against either party to this Lease in connection with any loss covered by such insurance policy. 3. TERM. 3.1 Initial Term. The term of this Lease (the "Term") shall commence on the Commencement Date and expire 11:59 p.m. on the last day of the Fiscal Month that includes the date eighty (80) years after the Commencement Date. 3.2 Confirmation of Dates. Promptly after the occurrence of any date relevant to the calculation of Rent, or to the determination of the Term, the parties shall enter into a certificate, in recordable form reasonably satisfactory to both of them, memorializing such date. The failure of the parties to enter into any such certificate shall not, however, invalidate or in any way diminish the effectiveness of the actual date(s) to be set forth in the certificate. If Landlord and Tenant disagree as to whether any such date has occurred, then Tenant may pay Rent and otherwise perform under this Lease based on Tenant's own determination of such date(s) unless and until such date(s) are otherwise determined by the final judgment of a court of competent jurisdiction provided that Tenant shall escrow in an interest bearing federally insured account with - 17 - a disinterested national bank with offices in St. Louis, Missouri or the registry of the court hearing such dispute, any additional amounts claimed by Landlord. If a national bank is used as escrow agent, it shall act only in accordance with this Section, as modified or supplemented by: (i) joint written instruction of Landlord and Tenant; or (ii) a final, unappealable order of the court hearing such dispute; and shall be fully exonerated from liability to Landlord or Tenant for any act or omission other than its gross negligence or wilful misconduct. To the extent that any such court accepts Landlord's position and rejects Tenant's, the court or escrow agent, as the case may be, shall, within five (5) Business Days after the court's order becomes final and unappealable, remit to Landlord an amount equal to any previous underpayments of Rent, together with interest earned thereon, and the remainder, if any, of the escrow account shall be disbursed to Tenant. If the court accepts Tenant's position and rejects Landlord's, the court or escrow agent, as the case may be, shall within five (5) Business Days after entry of the court's final, unappealable order remit to Tenant all the monies in the escrow account, including interest. Failure of Tenant to establish such escrow account or to escrow disputed amounts therein shall be a failure to cure a Monetary Default. 4. DEVELOPMENT AND CONSTRUCTION OF THE PREMISES AND SHORESIDE COMPLEX. 4.1 Landlord Construction. Landlord shall construct the Shoreside Complex at its sole cost and expense and shall deliver the Premises to Tenant in "Shell" condition in accordance with the criteria set forth on Exhibit D attached hereto. 4.2 Tenant Construction. Tenant shall construct the Tenant's Work and install Tenant's Property in the Premises, at its sole cost and expense, within three hundred sixty-five (365) days after the Commencement Date. - 18 - 4.3 Title to Shoreside Complex and Tenant's Property. Tenant's Property shall at all times during the Term be owned by, and shall belong to, or be leased by, Tenant. Tenant shall have title to or lease the foregoing throughout the Term. All the benefits and burdens of ownership of Tenant's Property shall be and remain in Tenant during the Term. Any Tenant's Property affixed to the Premises or left in the Premises and not removed by Tenant within thirty (30) days after expiration or termination of the Term shall automatically and without the need for any further action or the execution of any further documents become the property of Landlord, except for any Tenant's Property constituting Gaming Equipment. The Shoreside Complex shall at all times during the Term be owned or leased by, and shall belong to, Landlord before, during and after the Term. All the benefits and burdens of ownership of the Shoreside Complex shall be and remain in Landlord before, during and after the Term. 5. RENT. 5.1 Means of Payment. Tenant shall pay Percentage Rent payable to Landlord by wire transfer to the bank account which Landlord shall identify to Tenant upon request (and Landlord shall have the right to change from time to time by at least thirty (30) days' Notice to Tenant), provided that, unless otherwise directed in writing by Landlord and Harrah's, all Percentage Rent shall be payable directly to Harrah's only, provided the assignment of Percentage Rent to Harrah's remains in effect under Section 5.2.5, and to the bank account which Harrah's shall identify to Tenant upon request (and Harrah's shall have the right to change from time to time by at least thirty (30) days' Notice to Tenant). All Rent other than Percentage Rent shall be payable to Landlord by a company check of Tenant. 5.2 Percentage Rent. Beginning on the twentieth calendar day of each Fiscal Month following the Commencement Date (Percentage Rent) and continuing throughout the Term, - 19 - Tenant shall pay Percentage Rent to Landlord or Harrah's, as long as Percentage Rent remains assigned to Harrah's. Landlord and/or Harrah's may be required by Missouri Gambling Law to be licensed, permitted or otherwise approved by the Missouri Gaming Commission to lawfully receive Percentage Rent (such license, permit or approval is herein referred to as a "Percentage Rent Approval"). If Percentage Rent may not lawfully be paid because of the denial, revocation, suspension or other failure of a Percentage Rent Approval unless the Missouri Gaming Commission permits the payment by Tenant to Landlord of Approved Substitute Percentage Rent (hereinafter defined), Tenant shall, during such period, continue to calculate and report Percentage Rent to Landlord (and Harrah's) and Tenant shall deposit the amount of Percentage Rent so reported into an escrow account (established and governed in the manner described in Section 3.2) on or before the twentieth calendar day of each Fiscal Month. If Percentage Rent Approval is subsequently obtained, then, within thirty (30) days after Notice to Tenant of such event (rather than a court order as provided in Section 3.2), Tenant's obligation to pay Percentage Rent shall be reinstated and, to the extent lawful, funds in the aforementioned escrow account, with interest thereon, shall be immediately paid to Harrah's. In no event shall any failure of a Percentage Rent Approval that is caused by any act or omission of Tenant excuse Tenant's obligation to pay Percentage Rent. Failure of Tenant to establish such escrow account shall be a Monetary Default. 5.2.1 Reporting and Payment. Percentage Rent shall be determined based upon Net Gaming Revenue from the Premises reported in Tenant's State Revenue Reports and State Revenue Audits, subject to the right of Landlord (and of Harrah's) (as provided in Section 5.2.3) to independently audit Tenant's books and records and collect any additional amounts which such audit may reflect to be due and owing under this Lease. On the twentieth calendar day of each Fiscal Month following the Commencement Date (Percentage Rent), Tenant shall: - 20 - (i) deliver to Landlord (and Harrah's) Tenant's Monthly Statement along with copies of all State Revenue Reports and State Revenue Audits relating to the immediately preceding Fiscal Month (or the Fiscal Quarter containing such Fiscal Month) which Tenant is required to submit to the Missouri Gaming Commission (specifically including the daily tax remittals, quarterly audit required by ss.313.825 RSMo. and the monthly return required by 11 CSR 45-11.040); and (ii) pay the Percentage Rent (or Substitute Percentage Rent, as the case may be) for the immediately preceding Fiscal Month in the manner set forth in Sections 5.1 and 5.2 of this Lease. If the Missouri Gaming Commission redetermines Net Gaming Revenue, Landlord shall automatically be entitled to additional Percentage Rent hereunder (or Tenant shall be entitled to a reduction of Percentage Rent) based upon such redetermination applicable to the Percentage Rent Year for which such Percentage Rent should have been paid. Tenant shall pay the additional Percentage Rent, in the manner set forth in Section 5.1 within five (5) Business Days after the Missouri Gaming Commission provides Notice of such redetermination to Tenant and if reduction of Percentage Rent is required by such redetermination, Tenant may deduct such amount from ensuing Percentage Rent payment(s). 5.2.2 Accounting Records. Tenant shall maintain (at the Premises or at its financial offices in Las Vegas, Nevada, or elsewhere, identified to Landlord and Harrah's in writing) accounting books and records in accordance with the Accounting Principles and the Missouri Gambling Law, sufficient to enable Tenant, Landlord (and Harrah's) to calculate Percentage Rent. Tenant shall preserve Tenant's books and records relating to each Percentage Rent Year for at least three years after the end of such Percentage Rent Year. If at the conclusion of such period a dispute is pending between Landlord (and/or Harrah's) and Tenant - 21 - regarding the amount of Rent due under this Lease, then Tenant shall continue to preserve such records pending the final disposition of such dispute. 5.2.3 Harrah's Right to Audit. Within (and in no event later than) one hundred eighty (180) days after the end of each Percentage Rent Year, and more frequently if Harrah's should reasonably believe that Tenant's reporting is not true and accurate, Harrah's shall be entitled to cause a certified public accounting firm designated by Harrah's to audit Tenant's books and records relevant to the calculation of Net Gaming Revenue reported by Tenant during the preceding Percentage Rent Year. Any audit shall be performed in a reasonable manner, during ordinary business hours and without unreasonably interfering with Tenant's business. If such audit reveals that Net Gaming Revenue was understated, then within five (5) Business Days after Tenant's receipt of the auditor's report, Tenant shall pay the net additional Percentage Rent due on account of the audit corrections unless Tenant disputes such determination, in which case Tenant shall have the right to require arbitration of such determination in accordance with the provisions of Section 29.6 hereof. If such audit reveals that Net Gaming Revenue was overstated, then Tenant shall be entitled to a credit against the next payment(s) of Percentage Rent under this Lease in an amount equal to the previous overpayment revealed by the audit corrections. Any adjusting payment on account of previous overpayment or underpayment shall bear interest at the Prime Rate from the date it would have been paid (or the date of Tenant's previous overpayment, if applicable) had Tenant's reports and monthly returns been correct until the date actually paid or credited. If Percentage Rent was understated by more than three percent (3%) for the period audited, then Tenant shall pay the reasonable cost of such audit; otherwise the audit shall be conducted at Harrah's expense. The rights provided herein shall survive the termination or expiration of the Term for three full Fiscal Years (plus any partial Fiscal Year remaining in the year of termination or expiration of this Lease, as the case may be). Landlord shall also have - 22 - the rights granted to Harrah's in this Section at such time as the Percentage Rent is no longer assigned to Harrah's. 5.2.4 Confidentiality. Landlord and Harrah's shall preserve the confidentiality of all information obtained hereunder relating to Tenant's Net Gaming Revenue, except in any litigation or arbitration proceedings between the parties, when compelled by judicial or administrative order, or when advised by counsel that disclosure is required to comply with applicable securities Law. 5.2.5 Assignment of Percentage Rent to Harrah's. Landlord and Tenant acknowledge that the rent payable to Harrah's as ground lessor under the Ground Lease includes the Percentage Rent payable under this Lease and it is a condition of the Ground Lease that Landlord assign all of its right, title and interest in and to the Percentage Rent to Harrah's. Landlord hereby assigns to Harrah's all of its right, title and interest in and to and with respect to the Percentage Rent (which for purposes of this Section shall include Substitute Percentage Rent), including without limitation the Landlord's right to receive all Percentage Rent, Substitute Percentage Rent and all Tenant reports and returns under Section 5.2.1, the rights to audit Tenant's books and records pursuant to Section 5.2.3, the rights to enforce payment of the Percentage Rent and Substitute Percentage Rent in Harrah's own name or in the name of Landlord and all other remedies of Landlord based on a Default in the payment of Percentage Rent, and Harrah's shall have such rights under the Parent Guaranty (hereinafter defined) and other security and lien for payment of Percentage Rent as Landlord shall have under this Lease. Landlord hereby directs Tenant to pay all Percentage Rent otherwise payable to Landlord under this Lease directly to Harrah's at such bank account as Harrah's may from time to time specify to Tenant by written Notice to Tenant. If there is an Event of Default based on a Default with respect to Percentage Rent, Harrah's may direct the Landlord to exercise any of Landlord's - 23 - remedies for the benefit of Harrah's, or Harrah's may itself directly enforce such provisions of this Lease and Landlord's rights under the Parent Guaranty. The assignment under this Section is an absolute assignment and not an assignment for security and may not be revoked or amended without the express written consent of Harrah's. Subject to first satisfying all applicable requirements of Missouri Gambling Law, Harrah's may further assign its rights hereunder and may encumber its right to receive payments of Percentage Rent. 5.2.6 Substitute Percentage Rent. After the Commencement Date (Percentage Rent), with respect to any period from the date an Operating Covenant Default has occurred and Landlord has given Tenant Notice of such Operating Covenant Default and continuing until such Operating Covenant Default is cured (such period during which an Operating Covenant Default has occurred and is continuing being referred to as a "Substitute Period"), Tenant shall pay during any Substitute Period arising due to an Operating Covenant Default, an amount (the "Default Substitute Percentage Rent") equal to the greater of (A) Percentage Rent allocable to such Substitute Period and (B) Average Percentage Rent (hereinafter defined). After the Commencement Date (Percentage Rent), with respect to any period from the date Landlord has failed to receive its Percentage Rent Approval (or such Percentage Rent Approval is revoked or suspended) and the Missouri Gaming Commission (or other gaming authority whose actions have led to an Unsuitability Determination affecting Landlord) permits payment of Approved Substitute Percentage Rent by Tenant to Landlord (such period during which Landlord no longer has its Percentage Rent Approval also being referred to as a "Substitute Period"), Tenant shall pay during any Substitute Period arising due to Landlord's failure to have Percentage Rent Approval an amount equal to Average Percentage Rent, but in no event shall Average Percentage Rent exceed the Percentage Rent otherwise allocable to the Substitute Period (the "Approved Substitute Percentage Rent," such Default Substitute Percentage Rent and Approved Substitute Percentage - 24 - Rent being sometimes hereinafter collectively referred to as the "Substitute Percentage Rent"). "Average Percentage Rent" is a daily amount equal to the Percentage Rent payable for the two preceding Percentage Rent Years divided by 730, which daily amount is then multiplied by the number of days in a Substitute Period, provided that if the Premises have been operating for fewer than two full Percentage Rent Years, the daily amount shall equal the Percentage Rent payable for the period from the Commencement Date (Percentage Rent) through the day preceding the commencement of a Substitute Period divided by the number of days in such measuring period and further provided that if a Substitute Period has previously occurred during the applicable measuring period for Average Percentage Rent, Landlord shall reasonably adjust the amount to be used as the daily amount for Average Percentage Rent to reflect an average daily Percentage Rent during periods of operation in accordance with Section 7.1. 5.3 Additional Rent. In addition to Percentage Rent, Tenant shall pay Landlord, as additional rent under this Lease, all Additional Rent, as and when same is due and payable and before any interest or penalty may attach for nonpayment thereof. 5.4 No Allocation to Personal Property. None of the Rent provided for under this Lease is allocable to any personal property included in the Premises, as such term is defined in this Lease. 5.5 No Conditional Payment. No payment by any party of a lesser amount than the total of all sums due hereunder shall be deemed to be other than on account of the sums then due, applied in inverse priority of their due dates, nor shall any endorsement or statement on any check, other payment or accompanying letter or other communication or notice be deemed an accord and satisfaction. Any party may accept such payment in cash or negotiate such check or other payment without prejudice to that party's right to recover the balance of such sums or to pursue any other remedy provided in this Lease or otherwise available, regardless of whether that - 25 - party makes any notation on such instrument of payment or otherwise notifies the other party that such acceptance, cashing or negotiation is without prejudice to any of that party's rights. 5.6 Interest on Overdue Rent. Unless otherwise provided herein, all Rent (other than Percentage Rent, Approved Substitute Percentage Rent and Default Substitute Percentage Rent, which shall be due as provided in Section 5.2.1) owed by Tenant to Landlord shall be due ten (10) calendar days from the date the Landlord renders statements of account or invoices therefor. If any Rent (including, without limitation, Percentage Rent, Approved Substitute Percentage Rent and Default Substitute Percentage Rent) is not received by Landlord or Harrah's, as the case may be, within one Business Day after the date due, Tenant agrees to pay to Landlord or Harrah's, as the case may be, interest at the Prime Rate plus eight percent (8%) but not in excess of the Criminal Usury Rate (the "Default Rate") on the overdue amount from the date such obligation was due until paid. 5.7 Tenant's Licenses. All separate license and permit fees and business taxes imposed or payable with respect to Tenant's operations or the Premises shall at all times be kept current and in full force and effect and shall be paid by Tenant when due. 5.8 No Offset by Tenant. Rent and other charges and payments required to be made by Tenant to Landlord or Harrah's under the provisions of this Lease shall be paid in lawful money of the United States without prior demand, deduction or offset. 5.9 Restaurant Charges. If guests staying at the hotel portion of the Entertainment Facilities charge meals at any restaurant facility located within the Premises, Landlord shall pay to Tenant such restaurant charges that are included in hotel billings, monthly, in arrears, no later than the 20th day of the Fiscal Month following the Fiscal Month in which such charges are billed, or, if such day should be a legal holiday, the next Business Day thereafter. Payment of such sums shall be accompanied by a written itemization, in reasonable detail, of such charges. - 26 - Tenant will accept charges made by guests of such hotel for their account with the hotel for food, beverage and alcoholic beverage service (plus taxes and gratuities related thereto) at restaurants within the Premises in accordance with operating procedures for the authorization thereof from time to time adopted by Landlord and furnished to Tenant. Landlord will make available to Tenant point of sale equipment to provide Tenant direct access to accounts of guests at the hotel and the amount of credit authorized for such guest's account. Tenant shall assume the risk of collection of any such charges and shall reimburse Landlord, as Additional Rent, for any such uncollected charges monthly, in arrears, no later than the twentieth day of the Fiscal Month following the Fiscal Month in which the charges are billed if Landlord has previously paid such restaurant charges to Tenant. 5.10 Hotel Charges. Tenant's use of hotel rooms in the Shoreside Complex, so long as Landlord is the Venture, shall be governed by the Joint Venture Agreement and any agreement entered into by the Venture with a hotel manager. Thereafter, if Tenant desires to reserve guest rooms or other dining/meeting room facilities at the hotel portion of the Entertainment Facilities for the purpose of making such rooms available to its customers, Tenant shall pay Landlord as Additional Rent (by wire transfer to the bank account designated in writing by Landlord's hotel manager) the rack or standard rate for such hotel rooms or facilities no later than 6:00 p.m. on the day for which such hotel rooms or facilities are reserved, or earlier, in accordance with policies adopted by the hotel manager which do not discriminate between the Premises and Harrah's Premises. 6. ADDITIONAL PAYMENTS BY TENANT; IMPOSITIONS. 6.1 Landlord's Net Return. The parties intend that this Lease shall constitute a "net lease," so that the Percentage Rent and Substitute Percentage Rent shall provide Landlord with "net" return for the Term, free of any expenses or charges with respect to the Premises, except - 27 - as specifically provided in this Lease. Tenant recognizes that, as a partner of Landlord, Tenant will be responsible for its percentage share of all liabilities of the Landlord in addition to its responsibility for all liabilities arising out of its operation of the Premises and that its obligations as a partner of Landlord are, pursuant to Sections 6.7 and 29.1.1 cross-defaulted with its obligations under this Lease. Tenant recognizes that any permitted transfer of its Partnership Interest (as defined in the Joint Venture Agreement) or its interest herein which would have the effect of placing such interests in separate entities will not change or affect the cross-default provisions in the immediately preceding sentence. 6.2 Impositions. For any period within the Term (with daily proration for periods partially within the Term and partially outside the Term), Tenant shall pay and discharge, before failure to pay the same shall create a material risk of forfeiture or give rise to a penalty, all Impositions. Tenant shall also pay all interest and penalties assessed by any Government on account of late payment of any Imposition, unless such late payment was caused by Landlord's failure to remit an Imposition (paid to Landlord by Tenant) in accordance with Tenant's reasonable instructions or Landlord's failure to promptly forward Tenant a copy of a tax bill received by Landlord, in which case Landlord shall pay such interest and penalties. 6.3 Assessments in Installments. To the extent that may be permitted by law, Landlord shall have the right to apply for conversion of any assessment to cause it to be payable in installments. After such conversion, Tenant shall pay and discharge only such installments of such assessment as shall become due and payable during the Term. 6.4 Combined Tax Lot. It is likely that the Shoreside Complex and the Premises will be part of a single tax lot (the "Combined Tax Lot"). In such event, Tenant shall pay, as Additional Rent: - 28 - (i) fifty percent (50%) of the Impositions assessed against the Shoreside Complex, as a whole (which payment, so long as there is no severance of Tenant's ownership (as a Partner in the Venture) of the Shoreside Complex, may be made by Tenant paying its fifty percent (50%) share of Landlord's net operating losses pursuant to Section 6.7); and (ii) one hundred percent (100%) of the Impositions assessed against Tenant's Property. Landlord shall provide Tenant a copy of each bill for Impositions as it is received. Landlord shall have the exclusive right to contest Impositions against the Shoreside Complex. Tenant shall have the exclusive right to contest Impositions against Tenant's Property. 6.5 Direct Payment by Landlord. If any Imposition or other item of Rent required to be paid by Tenant is required by applicable Laws to be paid directly by Landlord, then: (a) Landlord appoints Tenant as Landlord's attorney in fact for the purpose of making such payment; and (b) if the Person entitled to receive such payment refuses to accept it from Tenant, then Tenant shall give Landlord Notice of such fact no later than ten (10) days prior to the date such payment is due, shall accompany such Notice with such payment and shall include in such Notice reasonable instructions as to the further remittance of such payment. Landlord shall with reasonable promptness comply with Tenant's reasonable instructions and shall assume responsibility for interest and penalties resulting from Landlord's failure to do so. 6.6 Utilities. Tenant shall pay all fuel, gas, light, power, water, sewage, garbage disposal, telephone and other utility charges, and the expenses of installation, maintenance, use and service in connection with the foregoing, relating to the Premises during the Term. If any such items are not separately metered to Tenant or are otherwise charged to Landlord, Tenant shall on demand reimburse Landlord for all such charges and expenses allocable to the Premises. - 29 - Landlord and Tenant agree to cooperate to install flow meters or retain the services of professional consultants to determine Tenant's usage of any utilities that are not separately metered to the Premises. 6.7 Joint Venture Losses. Commencing on the first day of the second month following the Commencement Date (Percentage Rent) and on the first day of each month thereafter during the Term and the first month after the end of the Term, Tenant shall also pay as Additional Rent hereunder fifty percent (50%) of Landlord's monthly net operating losses (including capital losses) as evidenced by Landlord's monthly operating statement for the immediately preceding Fiscal Month, provided that if a Prime Mortgage shall then be in effect, Tenant shall pay as Additional Rent to Landlord fifty percent (50%) of the principal and interest payment when due under the Prime Mortgage, which payment shall be appropriately credited against the Tenant's fifty percent (50%) share of Landlord's monthly net operating losses as set forth above. Monthly operating statements may be prepared prior to the end of the applicable month based on projected income and expenditures, with appropriate adjustments the following month to reflect actual income and expenditures. If, for any reason, there shall be a severance of Tenant's ownership of the Shoreside Complex (currently, as a partner of the Venture) and Leasehold Estate, then Tenant shall pay, as Additional Rent under this Lease, fifty percent (50%) of the monthly debt service payments (principal and interest) due under any Prime Mortgage to the applicable Prime Mortgagee, provided, that the principal amount secured by such Prime Mortgage does not exceed the amount agreed to by the Venture), as well as fifty percent (50%) of all Common Area Maintenance Charges as defined in and provided under Exhibit E hereto, in lieu of Additional Rent pursuant to the first two sentences of this Section and Tenant shall have the additional rights and Landlord the additional obligations with respect to the Shoreside Complex as are provided in such Exhibit E. - 30 - 7. USE. 7.1 Permitted Uses. Between the Commencement Date and the Commencement Date (Percentage Rent), Tenant may use the Premises only for the purpose of completing Tenant's Work, installing Tenant's Property and conducting pre-opening training activities in accordance with the remaining terms and conditions of this Lease and subject to any limitations imposed by Landlord's insurance policies. After the Commencement Date (Percentage Rent), Tenant shall, except as herein otherwise specifically provided, continuously occupy and operate the Premises as two (2) Excursion Gambling Boats (as defined in the Missouri Gambling Law) with accessory restaurant, ticketing and back of house facilities to at least the standard set forth in Exhibit F. Such operations shall be conducted seven days per week, including holidays, for at least the minimum hours required by the Missouri Gambling Law and Missouri Gaming Commission and otherwise at least one of such casinos shall be operated not less than sixteen (16) hours per day, seven (7) days per week (including holidays). The Premises shall not, at any time, be used in a manner that will violate any Permitted Exception. 7.2 Tenant's Failure to Operate the Business. If Tenant breaches Section 7.1, irreparable harm and damages, which damages are not readily ascertainable, will be caused to Landlord and Harrah's. Tenant agrees that, in such event, Landlord, at its option, shall be entitled to specific performance and to seek injunctive relief in addition to all other rights and remedies. 7.3 Exterior Operations/Objects/Regulations. Tenant shall not outside the boundaries of the Premises: (i) conduct gambling operations; (ii) display, serve or sell food or merchandise; or (iii) allow furniture, equipment or other objects or merchandise to be stored or placed, without the prior written consent of Landlord. Tenant shall also comply with reasonable rules and regulations adopted from time to time by Landlord with respect to the Shoreside Complex, - 31 - including regulations relative to the use of, and payment for, parking areas within the Shoreside Complex. Landlord intends to develop and implement emergency procedures for the Entertainment Facilities, Excursion Gambling Boats and Excursion Gambling Boat Support Facilities and for obtaining approval for said procedures from the Pattonville-Bridgeton Terrace Fire District, the Maryland Heights Police Department and other appropriate public safety agencies. In that regard, Landlord or its Manager of the Shoreside Complex (the "Manager") will assume the role of "Executive Command" in the event of an emergency requiring such, and will be responsible for the execution of emergency procedures. Tenant's personnel, in accordance with the established emergency procedures, will provide necessary assistance to the Landlord or the Manager in the execution of its duties as Executive Command. At no time will Tenant change, modify, add to or delete any element of the established emergency procedures without written approval from the Landlord or the Manager. During an actual emergency, Tenant will be subordinate to Landlord or the Manager, and at no time with regard to emergency procedures, will Tenant's personnel countermand, disregard or fail to execute a directive from the Landlord or the Manager. Tenant agrees to comply with all aspects of the established procedures manual, including, but not limited to, personnel training, rehearsals and on-going drills as may be required by Landlord or the Manager. 7.4 Refuse/Deliveries. Tenant shall be solely responsible for causing all refuse from the Premises to be stored in sealed, watertight containers fashioned to prevent the soiling of the Shoreside Complex and daily removed to the refuse compactor for the Shoreside Complex. Tenant shall effect all deliveries using the loading areas designated on Exhibit G at times and in a manner so as to minimize the disturbance of guests of the Shoreside Complex. - 32 - 7.5 Interruption of Business. Landlord does not warrant the sufficiency of the Shoreside Complex or the Premises for the purposes of Tenant's contemplated operation of its business on the Premises nor the sufficiency of any access thereto or the sufficiency of any utilities or other services provided with respect thereto, nor does Landlord warrant that any of the services or access to be provided to the Premises or the Shoreside Complex, whether under this Lease, the Joint Venture Agreement, or otherwise, will be free from interruption whether caused by war, riots, acts of God, Government action, repairs, mechanical breakdown, improvements, alterations, strikes, picketing, whether legal or illegal, accidents, inability of Landlord or Tenant to obtain fuel or supply, Casualty, Condemnation, litigation, failure or refusal of a governmental body to issue a required permit or license, or any cause or causes beyond the reasonable control of Landlord, whether similar or dissimilar to the causes specifically enumerated in this Section. No failure or delay in furnishing any service or access, whether caused in whole or in part by any one or more of the foregoing causes or otherwise, shall result in any liability of Landlord to Tenant, or be deemed to be an eviction or disturbance of Tenant's use and possession of the Premises, or relieve Tenant from its obligation to pay all Rent when due or from any other obligations of Tenant under this Lease, Tenant's sole remedy in this regard being to look to insurance carried by Tenant in accordance with this Lease with respect to any such risks. 8. MARKS AND PUBLICITY. 8.1 Exclusive Ownership of Marks. Landlord acknowledges and recognizes the exclusive rights of Players International, Inc. ("Players") to the service marks, trademarks, names, copyrights, logos, registrations and patents used in connection with the "Players" casinos, riverboat casinos and casino hotels (collectively, the "Players Marks"). Landlord disclaims any right, title or interest in or to any of the Players Marks by operation of this Lease (recognizing - 33 - that the right of Landlord to use the Players Marks derives exclusively from that certain License Agreement of even date herewith by and among Players, Landlord and Harrah's Maryland Heights Operating Company) (the "Players License"). 8.2 Signs. Tenant shall not display any sign, light, advertisement, banner, flag, or awning (collectively, "signs" or singly, a "sign") in the interior or exterior of the Entertainment Facilities (including without limitation, the roof, windows, walls, columns, and/or other similar areas of the Entertainment Facilities) or the exterior of the Premises without the prior written consent of Landlord. Landlord, Harrah's and Tenant desire to effect a coordinated sign program for the Shoreside Complex that will fairly allocate sign area permitted by Law among the Premises, the Harrah's Premises and the Entertainment Facilities. Any signs installed in violation of the provisions hereof or any sign plan adopted by Landlord, as the same may be modified by Landlord from time to time, may be removed by Landlord without notice and all costs incurred in doing so shall be due and payable by Tenant upon demand, as Additional Rent. If during the Term, Tenant should change the Players Marks and desire to modify the design (but not the area) of signs allocated to it under the sign plan, it may do so, provided that all costs and expense associated therewith shall be paid by Tenant. 8.3 Effect of Lease Termination. Landlord acknowledges that under the terms of the Players License, in the event of any termination of this Lease (including on account of an uncured Default by Tenant): (a) neither Tenant nor Players shall be under any obligation, express or implied, to issue a license to Landlord or any subsequent operator of the Premises to utilize the Players Marks; and (b) Landlord shall not use Players Marks in association with the Premises or the Shoreside Complex. Tenant shall have the right, within thirty (30) days after the termination of this Lease, to remove all Tenant's Property identified with Players Marks, subject - 34 - to the obligation to restore any damage to the Premises or Shoreside Complex caused by the installation or removal thereof. 9. LAWS. 9.1 Compliance with Law. During the Term, Tenant shall, at its own expense, observe and comply with all Laws affecting the Premises. Tenant shall have the right to contest any such Laws only in accordance with Article 13. 9.2 Licenses and Permits. Tenant shall procure, in a timely manner, every permit, license, certificate or other authorization required in connection with the lawful and proper maintenance, operation, use and occupancy of the Premises, completion of Tenant Work or installation of Tenant's Property and shall comply with all such permits, licenses, certificates and other authorizations. 9.3 Surrender of Licenses. To the fullest extent allowed by law, at the expiration or termination of this Lease, Tenant agrees to surrender and/or transfer all permits, licenses, certificates and other authorizations pertaining to the Premises to the Landlord, Landlord's designated successor operator of the Premises or the licensing authority, as required by Law, to permit or facilitate the transfer or reissuance of such licenses and/or permits to Landlord or Landlord's designee, without cost to Landlord or such designee. The provisions hereof shall survive expiration or termination of this Lease. 9.4 Environmental Matters. 9.4.1 Compliance. All activities of Tenant upon the Premises shall comply with Environmental Law, but Tenant shall have no responsibility for activities of others outside the Premises which cause the Premises not to comply with Environmental Laws. Landlord shall also have no responsibility for the activities of others outside the Premises. - 35 - 9.4.2 No Violations. Tenant shall not cause or permit any Hazardous Materials to be brought upon, stored, handled, used, generated, released into the environment, or disposed of, on, under, from, or about the Premises (which for purposes of this Section shall include, without limitation, subsurface soil and groundwater) without the prior written consent of Landlord. Landlord may, in its sole discretion, place such conditions as Landlord deems appropriate with respect to such Hazardous Materials and may further require that Tenant demonstrate to the Landlord that such Hazardous Materials are necessary or useful to Tenant's business and will be generated, stored, handled, used, and disposed of in a manner that complies with Environmental Law and with good business practices. Tenant acknowledges and agrees that Landlord may reasonably utilize an environmental consultant to assist in determining conditions of approval and monitoring in connection with the presence, storage, generation, handling, or use of Hazardous Materials on or about the Premises by Tenant or Tenants' agents, employees, invitees or subtenants. 9.4.3 Cost of Compliance. If the presence of any Hazardous Materials (other than Preexisting Hazardous Materials [hereinafter defined]) on, under, from, or about the Premises results in (i) injury to any individual, (ii) injury to or contamination of the Premises, or (iii) injury to or contamination of any real or personal property wherever situated, then Tenant, at its sole cost and expense, shall promptly take all actions necessary to return the Premises to the condition existing prior to the introduction of such Hazardous Materials to the Premises and to remedy or repair any such injury or contamination. Without limiting any other rights or remedies of Landlord under this Lease or at law or in equity, Tenant shall pay the cost of any cleanup work performed on, under, or about the Premises as required by this Lease or Environmental Law in connection with the investigation, monitoring, removal, and disposal of such Hazardous Materials. - 36 - 9.4.4 Remediation. Notwithstanding any other provision of this Section, Tenant shall not, without Landlord's prior written consent, which consent shall not unreasonably be withheld, take any remedial action in response to the presence of any Hazardous Materials on, under, from, or about the Premises, or enter into any settlement agreement, consent decree, or other compromise with any governmental agency with respect to any Hazardous Materials claims; provided, however, Landlord's prior written consent shall not be necessary in the event that the presence of Hazardous Materials on, under, from, or about the Premises (i) poses an immediate threat to the health, safety, or welfare of any individual, or (ii) is of such a nature that an immediate remedial response is necessary or appropriate and it is not possible to obtain Landlord's prior written consent before such response. 9.5 Disclosure. Tenant shall promptly notify Landlord of, and shall promptly provide Landlord with true, correct, complete, and legible copies of, all of the following relating to the Premises or to Tenant's activities at the Premises: 9.5.1 Reports. Reports and other documents filed by Tenant with any governmental agency or body pursuant to Environmental Law including, without limitation, all permit applications, permits, monitoring reports, workplace exposure and community exposure warnings or notices, and environmental audits or assessments relating to water discharges, air pollution, waste generation or disposal, underground or aboveground storage tanks, or Hazardous Materials; 9.5.2 Notices. All correspondence, notices, information requests, complaints, pleadings, legal documents, and other documents received by Tenant from any Government agency related to Hazardous Materials; 9.5.3 Environmental Audits. All environmental audits or assessments (even those which may be characterized as confidential); - 37 - 9.5.4 Orders. All orders, reports, notices, listings, and correspondence (including those which may be considered confidential) of or concerning the release, investigation, compliance, cleanup, remedial or corrective action, or abatement of Hazardous Materials, whether or not required by Environmental Law; and 9.5.5 Pleadings. All correspondence, notices, information requests, complaints, pleadings, and legal documents filed against Tenant related to Tenant's use, handling, storage, or disposal of Hazardous Materials. 9.6 Indemnification. To the fullest extent permitted by law, Tenant hereby agrees to indemnify, hold harmless, protect and defend (with attorneys reasonably acceptable to Landlord) Landlord and any successors to all or any portion of Landlord's interest in the Premises and their respective directors, officers, partners, beneficiaries, employees, authorized agents, affiliates, representatives, and mortgagees from and against any and all liabilities, losses, damages (including, without limitation, damages for the loss or restriction on use of rentable or usable space or any amenity of the Premises), diminution in the value of the Premises or Shoreside Complex, judgments, fines, demands, claims, recoveries, deficiencies, costs, and expenses (including, without limitation, reasonable attorneys' fees, disbursements and court costs, and all other professional or consultant's expenses), whether foreseeable or unforeseeable, arising directly or indirectly out of: (i) the breach by Tenant of any of its covenants or representations made or to be made pursuant to Sections 9.4, 9.5, and, this Section 9.6 and 9.7 hereof, or (ii) the presence (except for Preexisting Hazardous Materials), use, handling, generation, storage, treatment, or on-site or off-site disposal or transportation of Hazardous Materials on, into, from, under or about the Premises by Tenant or Tenant's agents, employees, invitees or subtenants, - 38 - and specifically including, without limitation, the cost of any required or necessary repair, restoration, clean-up (including, but not limited to, the costs of investigation, monitoring, and removal of Hazardous Materials [except for Preexisting Hazardous Materials]) or detoxification of the Premises or other property where such Hazardous Materials have come to be located, and the preparation of any closure or other required plans, whether such action is required or necessary during the term of this Lease or after the expiration of this Lease. 9.7 Tenant's Further Responsibility at Termination or Expiration of Lease. 9.7.1 Surrender. Promptly upon the expiration or sooner termination of this Lease, Tenant shall represent to Landlord in writing that (i) Tenant has made a diligent effort to determine whether any Hazardous Materials are on, under, or about the Premises as a result of any acts or omissions of Tenant or Tenant's agents, employees, invitees or subtenants, and (ii) no such Hazardous Materials exist on, under, or about the Premises other than as specifically identified to Landlord by Tenant in writing. 9.7.2 Storage Tanks. Any and all underground or aboveground storage tanks on the Premises, along with their respective piping, pumps, dispensing equipment, and dispensing islands, are not fixtures but are part of Tenant's Property. Tenant shall remove all such Tenant's Property from the Premises upon termination of this Lease. Such removal shall comply with Environmental Law. Any agreement by Landlord that Tenant may abandon such Tenant's Property on the Premises must be in writing. 9.8 Landlord's Environmental Remedies. 9.8.1 Inspection Rights. Landlord shall have the right, but not the obligation, subject to the provisions of Article 26 hereof, to inspect, investigate, sample, and monitor the Premises at any time to determine whether Tenant is complying with the terms of this Article, - 39 - and in connection therewith, Tenant shall provide Landlord with full access to all relevant facilities, records, and personnel. 9.8.2 Self Help. If Tenant is not in compliance with any of the provisions of this Article, or in the event of a release of Hazardous Material (other than Preexisting Hazardous Materials) on, under, from, or about the Premises, Landlord shall have the right, but not the obligation, to immediately enter upon the Premises and to discharge Tenant's obligations under this Article at Tenant's expense, including without limitation, the taking of emergency or long-term remedial action. Landlord shall endeavor to minimize interference with Tenant's business but shall not be liable for any such interference. 9.8.3 Hazardous Material Release. If Landlord has a good-faith reason to believe that Tenant or Tenant's agents, employees, invitees or subtenants may have caused or permitted the release of a Hazardous Material on, under, from or about the Premises, then Landlord may require Tenant, at Tenant's sole cost and expense, to conduct monitoring activities on or about the Premises reasonably satisfactory to Landlord concerning such release of Hazardous Materials on, under, from or about the Premises. 9.8.4 Clean Up. If Tenant, pursuant to Section 9.7.1, discloses the existence of Hazardous Materials on, under, from, or about the Premises, or if Landlord at any time discovers or is informed that Hazardous Materials (other than Preexisting Hazardous Materials) have been released, disposed of, spilled, or leaked on, under, from, or about the Premises, Tenant shall, at Landlord's request, immediately prepare and submit to Landlord within thirty (30) days after such request a comprehensive plan, subject to Landlord's approval, specifying the actions to be taken by Tenant to return the Premises to the condition existing prior to the introduction of such Hazardous Materials. Landlord, in its sole discretion, may retain a consultant, which shall be at Tenant's sole cost and expense, to review and comment upon such plan. Upon Landlord's - 40 - approval of such clean-up plan, Tenant shall, at Tenant's sole cost and expense, implement such plan and proceed to clean up such Hazardous Materials as soon as reasonably possible, but in any event within the time period prescribed by any Government authority in accordance with Environmental Law and as required by such plan and this Lease. Tenant acknowledges that Landlord's review of and comments upon such plan will not prevent any governmental agency with appropriate jurisdiction from imposing further or other requirements. All such cleanups and remedial actions shall be at Tenant's sole cost and expense. 9.8.5 Landlord Participation. Landlord, at Tenant's sole cost and expense, shall have the right, but not the obligation, to join and participate in any legal or administrative proceedings or actions involving Tenant in connection with any claims, demands, or causes of action arising out of the storage, generation, handling, use, or disposal of Hazardous Materials (other than Preexisting Hazardous Materials) on, under, from, or about the Premises. 9.8.6 Fees and Expenses. All sums reasonably disbursed, deposited, or incurred by Landlord in connection with its rights and remedies under this Article, including without limitation, all costs, expenses, and actual attorneys' and consultants' fees, shall be due and payable by Tenant to Landlord as an item of Additional Rent, on demand by Landlord, together with interest thereon at the Default Rate from the date thirty (30) days after the date of such demand until paid by Tenant. 9.9 Landlord's Indemnity. Landlord and Tenant are each in possession of a copy of the Phase I Environmental Assessment Report dated October 17, 1995 performed by Espey, Huston & Associates, Inc. (the "Assessment"). To the best knowledge of Landlord, based solely on the Assessment, there are no Hazardous Materials on the Premises. Landlord shall defend, fully indemnify and hold free and harmless Tenant from and against all claims, judgments, damages, penalties, fines, costs, liabilities or losses and costs of remediation, if any, that arise - 41 - after the Commencement Date, and that are imposed on or paid by or asserted against Tenant by reason of or on account of Hazardous Materials which were present at any time or times on the Premises prior to the Commencement Date (the "Preexisting Hazardous Materials"). 10. MAINTENANCE AND ALTERATIONS. 10.1 Obligation to Maintain. Tenant shall provide Landlord a guaranty of Players International, Inc. in the form attached hereto as Exhibit M or a performance and payment bond, satisfactory to Landlord, naming Landlord as a dual obligee for all construction work undertaken on the Premises the cost of which exceeds One Million Dollars ($1,000,000.00). During the Term, Tenant shall keep, maintain, repair, replace, renew and restore Tenant's Work, Tenant's Property and the interior of the Premises in good and serviceable condition consistent with or better than the standard to which Tenant as of the date of this Lease maintains the riverboat casino facility of its Affiliate at Lake Charles, Louisiana, subject to Casualty (governed by the separate applicable provisions of this Lease) and reasonable wear and tear. Tenant shall also operate the Premises for the uses provided in Section 7.1 hereof in accordance with the operating standards set forth on Exhibit F hereto. Tenant's responsibility shall include, without limitation, consumable goods, light fixtures, floor coverings, wall coverings and finishes, interior walls, furniture and furnishings, food preparation areas, appliances, Gaming Equipment, cashier equipment, counting room equipment, ceilings, doors, door frames, windows, window sashes and casements, glass and frames, entrances, exits, signs, locks and closing devices. 10.2 Tenant's Right to Perform Alterations. In addition to Tenant's Work, at Tenant's sole cost and expense, Tenant shall be entitled but not required to make and from time to time alter, modify or reconstruct, any interior improvements to the Premises so long as none of such improvements constitutes a Structural Modification to the Premises without Landlord's consent (except to the extent, if any, expressly provided otherwise in this Lease), as Tenant shall consider - 42 - necessary or appropriate, provided Tenant has furnished Landlord a certificate of the structural engineer for the original construction of the Shoreside Complex or other appropriate civil engineer (or such other structural engineer or other appropriate civil engineer as is approved by Landlord, which approval shall not be unreasonably withheld) that none of such alterations is a Structural Modification. If Landlord disagrees with the determination by such structural engineer as set forth in such certificate, Landlord shall have the right to require arbitration of such determination in accordance with the provisions of Section 29.6 hereof. Tenant shall perform all construction work in connection with any such improvement, repair or alteration to the Premises in compliance with all Laws and Permitted Exceptions, and shall not perform any work on any common systems servicing both the Premises and other portions of the Shoreside Complex without Landlord's advance written consent. 10.3 Plans and Specifications. To the extent that Tenant makes or permits to be made any improvements, repairs or alterations to the Premises (including initial construction of Tenant's Work) Tenant shall obtain as-built plans and specifications for such improvements, repairs or alterations, and promptly upon Substantial Completion of such work, provide Landlord with a true and complete copy of such plans and specification(s) (excluding any portions thereof relating to security devices or procedures which must be maintained confidential to reasonably preserve the security of Tenant's gambling operations). 10.4 Shoreside Complex. Landlord shall be responsible to maintain, repair, replace, renew and restore the Shoreside Complex, excluding the interior of the Premises, Tenant's Work and Tenant's Property at the Premises, and like work and property at Harrah's Premises. Tenant agrees that Tenant and HMHC, as partners of Landlord, shall have the right to determine the appropriate level of maintenance, repair, replacement, renewal and restoration of such portions of the Shoreside Complex and may delegate that determination to Harrah's Maryland Heights - 43 - Management Company or to another management company. Tenant agrees that the determination of Landlord and/or its management company in that regard shall be deemed acceptable to Tenant and shall not be the cause of any right or action by Tenant against Landlord. 10.5 Excavations/Work on Shoreside Complex. If excavation, maintenance, repair, restoration, or construction work shall be conducted upon the Shoreside Complex adjacent to the Premises, Tenant shall afford to the Person causing or authorized to cause such excavation or work, license to enter the Premises, in accordance with Tenant's reasonable instructions and Tenant's reasonable security procedures, to perform such work. Tenant shall not, by reason of any excavations or work described in this Section, have any claim against Landlord for damages or for indemnity or for suspension, diminution, abatement or reduction of any Rent. 11. PROHIBITED LIENS. 11.1 Tenant's Covenant. Tenant shall not suffer or permit any Prohibited Lien to be filed. If a Prohibited Lien is filed then Tenant shall, within thirty (30) days after receiving Notice of such filing (but no later than fifteen (15) days after receipt of Notice of commencement of foreclosure proceedings), commence and then prosecute appropriate action to cause such Prohibited Lien to be paid, discharged or bonded (by issuance to Landlord of a title insurance endorsement insuring against all loss or damage arising pursuant to such Prohibited Lien). Nothing in this Lease shall be construed to restrict Tenant's right to contest the validity of any Prohibited Lien and to pursue Tenant's position to a final judicial determination provided that appropriate and adequate title insurance endorsement is issued to Landlord to assure that there may be no forfeiture (including any judicial or foreclosure sale) of the Leasehold Estate or Landlord's Estate. The mere existence of a Prohibited Lien shall not be construed as a Default under this Lease. - 44 - 11.2 Protection of Landlord. Notice is hereby given that Landlord shall not be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic's or other lien for any such labor or materials shall attach to or affect the Landlord's Estate. Nothing in this Lease shall be deemed or construed in any way to constitute Landlord's consent or request, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer, equipment or material supplier for the performance of any labor or the furnishing of any materials or equipment for any improvement, alteration or repair of, or to, the Premises, or any part of the Premises, nor as giving Tenant any right, power or authority to contract for, or permit the rendering of, any services, or the furnishing of any materials that would give rise to the filing of any liens against the Landlord's Estate. Tenant shall Indemnify Landlord against any work performed on the Premises for or by Tenant. 12. INDEMNIFICATION; LIABILITY OF LANDLORD. 12.1 Mutual Indemnity Obligations. Landlord and Tenant shall each Indemnify the other against any wrongful act, wrongful omission or negligence of the Indemnitor (and, in the case of Tenant, that of any Person occupying the Premises by, through or under Tenant) or its or their partners, directors, officers, or employees. In addition to and without limiting the generality of the foregoing indemnity, Tenant shall Indemnify Landlord against all the following matters (except to the extent any claim arises from any wrongful act, wrongful omission or gross negligence of Landlord): (x) the conduct, management or occupancy of or from any work or activity performed in and on the Premises during the Term; (y) the condition of the Premises; and (z) any accident, injury or damage whatsoever caused to any individual or property occurring during the Term, in or on the Premises. Notwithstanding anything to the contrary in this Lease, Tenant shall not be required to Indemnify Landlord from or against Landlord's intentional acts or omissions or gross negligence nor for any loss or damage to property covered by insurance - 45 - so long as the applicable insurance policy contains a waiver of subrogation provision or endorsement which Landlord agrees to obtain at its sole cost and expense. 12.2 Liability of Landlord. Except as otherwise expressly provided, Tenant is and shall be in exclusive control and possession of the Premises during the Term as provided in this Lease. Subject to Section 12.1, Landlord shall not be liable for any injury or damage to any property or to any individual occurring on or about the Premises. 12.3 Indemnification Procedures. Wherever this Lease requires an Indemnitor to Indemnify an Indemnitee, the following procedures and requirements shall apply: 12.3.1 Prompt Notice. The Indemnitee shall give the Indemnitor prompt Notice of any claim. To the extent, and only to the extent, that both (a) the Indemnitee fails to give prompt Notice and (b) the Indemnitor is thereby prejudiced, the Indemnitor shall be relieved of its indemnity obligations under this Lease. 12.3.2 Selection of Counsel. The Indemnitor shall be entitled to select counsel (reasonably acceptable to the Indemnitee, but counsel to the Indemnitor's insurance carrier shall be deemed satisfactory). Notwithstanding anything to the contrary in the preceding sentence, the Indemnitee, unless the Indemnitee or an Affiliate of Indemnitee has previously approved the selection of counsel as a partner of Indemnitor, shall be entitled to select the Indemnitee's own counsel and be represented by such counsel, and if the Indemnitee selects its own counsel, then such counsel shall consult and reasonably cooperate with the Indemnitor's counsel and the Indemnitor and the Indemnitee shall each pay fifty percent (50%) of the reasonable attorneys' fees of the Indemnitee's counsel. 12.3.3 Settlement. The Indemnitor may, with the consent of the Indemnitee, not to be unreasonably withheld, settle the claim, except that no consent by the Indemnitee shall be required as to any settlement by which (x) the Indemnitor procures (by payment, settlement, or - 46 - otherwise) a release of the Indemnitee pursuant to which the Indemnitee is not required to make any payment whatsoever to the third party making the claim, (y) neither the Indemnitee nor the Indemnitor acting on behalf of the Indemnitee makes any admission of liability, and (z) the continued effectiveness of this Lease is not jeopardized in any way. 12.3.4 Insurance Proceeds. The Indemnitor's obligations shall be reduced by net insurance proceeds actually collected by the Indemnitee on account of the loss. 13. RIGHT OF CONTEST. Tenant shall have the right to contest, at its sole expense, by appropriate legal proceedings diligently conducted in good faith, the amount or validity of any Prohibited Lien; any Impositions assessed against Tenant's Work or Tenant's Property (but not Impositions upon the Shoreside Complex, the right to contest which shall belong exclusively to the Landlord); the validity of any Law or the application of any Law to the Premises; or the validity or merit of any claim against which Tenant is required to Indemnify Landlord under this Lease. Tenant may defer payment of the contested Prohibited Lien or Imposition, or compliance with the contested Law, or performance of any contested indemnity obligation pending the outcome of such contest, provided that such deferral does not subject the Premises or any part of the Shoreside Complex to any material risk of imminent forfeiture or Landlord to any material risk of criminal liability; that any Prohibited Lien is bonded as required by Section 11.1; and that any indemnity claim is continuously, diligently and competently defended as provided in Section 12.3 for the duration of such contest. An Indemnitee shall not be required to join in any such contest proceedings unless a Law shall require that such proceedings be brought in the name of the Indemnitee. In such case, the Indemnitee shall cooperate with Tenant, at Tenant's sole cost and expense, so as to permit such proceedings to be brought in Indemnitee's name. Tenant shall pay all costs and expenses (including attorneys' fees for Tenant and for separate counsel for Indemnitee, if - 47 - Indemnitee is required to join in such contest) incident to such proceedings as they are incurred. Tenant shall Indemnify Indemnitee against such contest. Upon final termination of Tenant's contest of a Law, Tenant shall comply with such final determination. 14. INSURANCE. 14.1 Landlord to Insure. Landlord shall, at Landlord's sole cost and expense, during the Term, maintain insurance coverage for the Shoreside Complex described in Exhibit H. 14.2 Tenant to Insure. Tenant shall, at Tenant's sole cost and expense, during the Term, maintain insurance for the Premises described in Exhibit I. 15. DAMAGE OR DESTRUCTION. 15.1 Notice; No Rent Abatement; Restoration Obligations. Tenant shall promptly give Landlord Notice of any Casualty. There shall be no abatement or reduction of Rent on account of a Casualty. Except as provided in Section 15.2 and for so long as Landlord is the Venture, Landlord shall either elect not to restore or shall restore the damaged Building, as determined under the Joint Venture Agreement, including Tenant's Work, and Tenant shall replace Tenant's Property, in each case as nearly as may be practicable to its condition, quality and class immediately prior to such Casualty, with only such changes (that do not violate other terms and conditions of this Lease) as Landlord (with respect to the Building) and Tenant (with respect to Tenant's Property) may determine. If Landlord is not the Venture, restoration and changes (including without limitation demolition) of the Shoreside Complex shall be left to the sole discretion of the Landlord, subject to (i) Tenant's right to require the Landlord to restore the Premises as nearly as may be practicable to its condition, quality and class prior to such Casualty so long as Tenant pays Landlord, prior to the letting of any contract for restoration, an amount which would, when added to the insurance proceeds expressly allocated by Landlord's property insurer to the Premises, equal the total cost of restoration of the Premises, and (ii) Landlord's sole - 48 - discretion of whether to restore, demolish, or change the remainder of the Shoreside Complex, provided that in such event Tenant shall continue to have access to the Shoreside Complex as provided in Exhibit E hereto. 15.2 Lease Termination for Casualty. This Lease shall not, so long as no Default has occurred and is then continuing, terminate or be terminated by reason of any Casualty unless Landlord determines not to restore the Premises and/or Shoreside Complex or sufficient portion thereof to continue operation of the Premises in accordance with the provisions of Section 15.1 hereof. If Landlord elects not to restore the Shoreside Complex and thereby to terminate this Lease in accordance with Section 15.1 hereof, this Lease shall terminate upon the date specified in Landlord's Notice to Tenant, whereupon Tenant shall remove Tenant's Property and Players Marks and surrender the Premises with all improvements affixed thereto in their then condition to Landlord and all casualty or hazard insurance proceeds from any insurance carried by either Landlord or Tenant with respect to the Premises or Shoreside Complex shall be paid to the Landlord and shall be distributed in accordance with the terms of the Joint Venture Agreement. 15.3 Restoration Work. Landlord and Tenant shall cooperate in scheduling and carrying out their respective restoration work under this Lease and may jointly hire a construction manager to coordinate or supervise their respective work. In order to carry out their respective work: (a) Tenant shall be entitled to use the proceeds of any separate insurance carried by Tenant with respect to damaged Tenant's Property that is not affixed to the Premises and Tenant's Gaming Equipment; and (b) with respect to any insurance for personal property that is affixed (other than Tenant's Gaming Equipment) to the Premises, Landlord shall be entitled to receive all such insurance proceeds. Tenant and Landlord shall each, respectively, be responsible for restoring the property which each respectively is required to restore as set forth above, provided that if the insurance proceeds received by Landlord are insufficient, Landlord's restoration obligations shall - 49 - be limited to such restoration as Landlord reasonably determines, taking into account the insurance proceeds received by Landlord, any additional funds made available by Tenant for this purpose and any additional funds which Landlord shall in its sole determination agree to make available for this purpose. If Landlord and Tenant cannot agree on the proper allocation between them of any insurance proceeds to be received, and including any agreement of Harrah's to the extent it has a separate interest in such insurance proceeds because the Casualty also affects the Harrah's Premises, then this dispute shall be resolved in accordance with the dispute resolution provisions contained in the Joint Venture Agreement. 15.4 Adjustment of Claims; Mortgagees. Landlord shall be solely responsible for the adjustment of any insurance claim with respect to casualty or hazard insurance affecting the Shoreside Complex and Tenant's Work, if affixed to the Premises. Tenant shall be solely responsible for the adjustment of any insurance claim on Tenant's Property to the extent such items (including all of Tenant's Gaming Equipment) are separately insured from the Shoreside Complex and not affixed to the Premises. No Leasehold Mortgagee or Prime Mortgagee shall have a right to adjust any insurance claim or to be paid or receive any insurance proceeds of casualty or hazard insurance or otherwise participate in any settlement, adjustment, arbitration or proceeding with respect to any insurance claims unless: (1) after completion of restoration there are insurance proceeds allocable to its Mortgagor in excess of the costs of restoration and the applicable Mortgagee requires that such excess be paid to the Mortgagee pursuant to the provisions of such Mortgagor's Mortgage in which event such excess proceeds shall be so paid; or (2) this Lease is terminated as set forth above, and then only to the extent insurance proceeds are required to be paid to a Prime Mortgagee pursuant to the express terms of a Mortgage or become distributable to Tenant pursuant to the Joint Venture Agreement, in which event the distribution shall be payable to a Leasehold Mortgagee having a security interest in Tenant's - 50 - Partnership Interest to the extent and in the priority required by the express terms of the Leasehold Mortgage or security agreement and applicable Law and provided the Landlord has received appropriate notice of the Leasehold Mortgagee's claim prior to the distribution. 15.5 Termination Payment. If this Lease is terminated pursuant to the provisions of this Article 15, Tenant shall pay to Landlord within thirty (30) days following such termination the sum of Twelve Million Dollars ($12,000,000.00) [the "Termination Payment"] which Termination Payment the parties recognize is reasonable compensation to Landlord for its loss of Percentage Rent for the remainder of the Term. The Termination Payment represents the discounted present value of the projected Percentage Rent over a period of three (3) years and accordingly the Termination Payment shall be reduced by thirty-three and one-third percent (33 1/3%) as of the first day of each year of the final three (3) years of the Term. Tenant's obligation to pay Landlord the Termination Payment shall survive the termination of this Lease, but shall be limited to the amount of insurance proceeds received by Landlord (as loss payee) under the contractual liability policy required to be carried by Tenant under Section 14.2 hereof. 15.6 Business Interruption and Contractual Liability Insurance. The proceeds of any business interruption insurance in connection with any Casualty shall belong to the party carrying such insurance, and the other party shall have no claim thereto. The proceeds of any insurance in connection with any Casualty or any contractual liability insurance relating to the Termination Payment shall belong to Landlord (and Harrah's), as the exclusive loss payee(s) specified in the policy of insurance, and Tenant and its Leasehold Mortgagees shall have no claim thereto. Tenant may offset first against Additional Rent and then against Percentage Rent the annual premiums paid by Tenant for the contractual liability insurance for the Termination Payment upon providing Landlord a copy of the paid invoice therefor. - 51 - 15.7 Depository. Upon request by any Leasehold Mortgagee (subject to the terms of the applicable Leasehold Mortgage), all proceeds of insurance for Tenant's Property that is not affixed to the Premises (including Tenant's Gaming Equipment), in the event that damage to Tenant's Property, as determined by insurance adjusters is in excess of Five Hundred Thousand Dollars ($500,000), shall be deposited with a Depository, to be disbursed solely for the replacement or repair of Tenant's Property. 16. CONDEMNATION. 16.1 Substantial Condemnation. If a Substantial Condemnation shall occur, then this Lease shall terminate as of the effective date of such Substantial Condemnation, and the Rent shall be apportioned accordingly and paid through the date of termination. The proceeds of the Substantial Condemnation shall be the sole property of Landlord. 16.2 Insubstantial Condemnation. If an Insubstantial Condemnation shall occur, then Landlord shall be entitled to receive any award or awards and any such award or awards shall be applied first to repair, restoration or reconstruction of any remaining part of the improvements not so taken. Landlord shall perform such repair, restoration or reconstruction in accordance with applicable requirements of this Lease, provided that if the award or awards received by Landlord are insufficient, Landlord's obligations hereunder shall be limited to such repair, restoration or reconstruction as Landlord reasonably determines, taking into account the award or awards received by Landlord, any additional funds made available by Tenant for this purpose and any additional funds which Landlord shall in its sole determination agree to make available for this purpose. The balance of any such award or awards remaining after the repair, restoration or reconstruction shall be the sole property of Landlord. 16.3 Other Governmental Action. In the event of any action by any Government not resulting in a Condemnation but creating a right to compensation, such as the changing of the - 52 - grade of any street upon which the Site abuts, then this Lease shall continue in full force and effect without reduction or abatement of Rent and the award or payment made in connection with such action shall be the sole property of Landlord. 17. TRANSFERS. 17.1 By Tenant. For so long as the Venture is Landlord, Tenant shall not Transfer all or part of the Leasehold Estate, other than: (i) a Transfer of Project Property permitted by the Joint Venture Agreement or a Transfer permitted by Section 18.2 hereof; or (ii) with the advance written consent of the Venture. If the Landlord is not the Venture, Tenant shall not Transfer all or part of the Leasehold Estate without Landlord's consent (except as provided in Section 18.2 hereof), which consent shall not unreasonably be withheld. Tenant agrees, without limiting the exercise of Landlord's reason, that Landlord would be reasonable in not consenting to any Transfer to a Transferee that is a Prohibited Person (Tenant) or at any time prior to the seventh anniversary of the Effective Date (as defined in the Joint Venture Agreement) (the "Prohibition Period") a Prohibited Person (as defined in the Joint Venture Agreement) or fails to satisfy the criteria established in Exhibit J. Except as provided in Section 18.2 hereof, any Transfer in the nature of an assignment shall require the assignee to assume all obligations of Tenant under this Lease in writing in a form and substance reasonably acceptable to Landlord. 17.2 By Landlord. Landlord shall not Transfer the Landlord's Estate to a Prohibited Person (Landlord). 18. MORTGAGES. 18.1 Landlord's Rights. Landlord shall have the right to execute and deliver Prime Mortgage(s) at any time and from time to time during the Term, provided that the proposed Prime Mortgagee: (i) is not a Prohibited Person (Landlord); and (ii) Tenant and the Prime Mortgagee enter into a subordination, attornment, recognition and nondisturbance agreement with - 53 - Landlord and the Leasehold Mortgagees in a form reasonably proposed by such Prime Mortgagee (a "SARN Agreement"), pursuant to which the Lease (and any Leasehold Mortgages) shall be subordinated to the Prime Mortgage. Tenant agrees to enter into a SARN Agreement as aforesaid on demand by Landlord or a Prime Mortgagee. 18.2 Tenant's Rights. Tenant shall have the right to execute and deliver Leasehold Mortgage(s) to any Institutional Lender(s), provided that the Institutional Lender(s): (i) is not a Prohibited Person (Tenant); (ii) if then required by the Missouri Gaming Commission, has been determined suitable or otherwise approved or exempted from approval by the Missouri Gaming Commission; (iii) is not an Affiliate of Tenant; (iv) concurrently takes a security interest in Tenant's Partnership Interest (and agrees with Harrah's and Landlord to foreclose both pieces of collateral concurrently, should it elect to foreclose upon any collateral); and (v) executes or consents in writing to any SARN Agreement with a Prime Mortgagee referred to in Section 18.1 only if the Leasehold Mortgage encumbers Tenant's interest under this Lease. Tenant shall not grant a Leasehold Mortgage to any Person other than an Institutional Lender (i) who is a Prohibited Person (Tenant) or (ii) at any time during the Prohibition Period, if then a Prohibited Person or (iii) an Affiliate of Tenant or (iv) any other Person without first obtaining Landlord's prior written consent, which consent shall not unreasonably be withheld. 18.3 Effect of a Leasehold Mortgage. Tenant's making of a Leasehold Mortgage shall not be deemed to constitute an assignment or transfer of the Leasehold Estate, nor shall any Leasehold Mortgagee, as such, or in the exercise of its rights under this Lease, be deemed to be an assignee or transferee or mortgagee in possession of the Leasehold Estate so as to require such Leasehold Mortgagee, as such, to assume or otherwise be obligated to perform any of Tenant's obligations under this Lease except when, and then only for so long as, such Leasehold Mortgagee has entered into possession of the Premises in the exercise of its remedies under its - 54 - Leasehold Mortgage (as distinct from its rights under this Lease to cure Defaults or exercise Mortgagee's Cure Rights). No Leasehold Mortgagee (or purchaser at a foreclosure sale held pursuant to a Leasehold Mortgage) shall be liable under this Lease unless and until such time as it becomes, and then only for so long as it remains, the owner of the Leasehold Estate. 18.4 Sale and Leaseback. If Tenant sells, assigns, transfers or otherwise conveys the Leasehold Estate to an Institutional Lender and Tenant or an Affiliate of Tenant substantially concurrently enters into or reserves, retains or receives a sublease of the Premises or similar interest, then: (a) such third party shall be deemed to be a "Leasehold Mortgagee" and the sublease shall be deemed to be a "Leasehold Mortgage"; and (b) such third party shall not be deemed to have assumed or become liable under this Lease except to the extent that such third party has exercised remedies against Tenant under Tenant's sublease functionally equivalent to foreclosure under a Leasehold Mortgage or acceptance of an assignment in lieu thereof. 18.5 Modifications Required by Leasehold Mortgagee. If any Leasehold Mortgagee or prospective Leasehold Mortgagee shall require any modification(s) of this Lease (including clarifications and supplements to Mortgagee's Cure Rights), then Landlord shall, at Tenant's request, promptly execute and deliver to Tenant such instruments in recordable form effecting such modification(s) as such Leasehold Mortgagee or prospective Leasehold Mortgagee shall require, provided that such modification(s): (i) do not materially adversely affect any of Landlord's or Harrah's rights or materially increase any of Landlord's obligations under this Lease and (ii) are consistent with the customary requirements of Institutional Lenders at the time, making loans secured by similar collateral, or are required by banking, insurance or similar laws and regulations setting forth provisions that must appear in a lease in order for such lease to be accepted as security by the Leasehold Mortgagee or prospective Leasehold Mortgagee requesting the change. - 55 - 18.6 Further Assurances. Upon request by Tenant or by any existing or prospective Leasehold Mortgagee, Landlord shall deliver to the requesting party a separate written instrument in recordable form signed and acknowledged by Landlord setting forth and confirming the rights of Leasehold Mortgagees under this Lease. 18.7 Protection of Prime Mortgagees. If Tenant shall give Landlord any Notice of Default, then Tenant shall simultaneously give a copy of such Notice of Default to all Prime Mortgagee(s) provided that Tenant shall have received Notice of their names and addresses and their Prime Mortgage(s) shall not have been satisfied or discharged of record. Such Prime Mortgagee(s) shall have the same notice and cure rights as are afforded to Leasehold Mortgagees by Article of this Lease and also shall be permitted to correct or remedy any alleged breach or default of Landlord. Tenant's failure to give Prime Mortgagee(s) the Notice required by this Section shall not be a Default by Tenant, but no Notice by Tenant of any default by Landlord shall be legally effective against such Prime Mortgagee(s) unless and until Tenant shall have given such Notice to such Prime Mortgagee(s). 18.8 Foreclosure. Notwithstanding anything to the contrary in this Lease, any sale of this Lease and of the Leasehold Estate or of the Landlord's Estate in any proceedings for the foreclosure of any permitted Leasehold Mortgage or Prime Mortgage (as applicable), or any assignment, transfer or conveyance in lieu of such foreclosure, shall not be deemed to violate this Lease. 19. NOTICE TO LANDLORD OF LEASEHOLD MORTGAGES. 19.1 Initial Notice. If Tenant enters into any Leasehold Mortgage(s), then the Leasehold Mortgagee(s) thereunder shall be entitled to the Leasehold Mortgagee protections provided for under this Lease only from and after such time as Tenant or such Leasehold Mortgagee has given - 56 - Landlord Notice of the name and address of such Leasehold Mortgagee, accompanied by a copy of the executed Leasehold Mortgage. 19.2 Change of Address. Any Leasehold Mortgagee shall be free to change its name and address from time to time by Notice to Landlord. In the event of a change of name, such Notice may be provided either by the original Leasehold Mortgagee or by the Leasehold Mortgagee under its new name, without proof of any kind confirming the change of name. Notice of any change of a Leasehold Mortgagee's identity or address, or of a transfer of a Leasehold Mortgage, may be made by any means permitted for the original Notice of the Leasehold Mortgagee's original name and address. 19.3 Termination of Leasehold Mortgagee's Rights. If a Leasehold Mortgagee is entitled to the Leasehold Mortgagee protections provided for under this Lease, then such entitlement shall not terminate unless and until such time, if any, as the Leasehold Mortgage shall have been satisfied and discharged of record as evidenced by the written report of a title insurance company licensed in the State or Notice to Landlord signed by such Leasehold Mortgagee. 19.4 Transfer of Landlord's Estate. Notice to Landlord of the name and address of a Leasehold Mortgagee shall bind any subsequent holder of the Landlord's Estate provided that such Leasehold Mortgagee's Leasehold Mortgage was recorded before the deed conveying the Landlord's Estate to such transferee. The foregoing shall not limit the right of any Leasehold Mortgagee to give any successor Landlord Notice of the name and address of such Leasehold Mortgagee, and thereby become entitled, as against such successor Landlord, to all the rights and protections of Leasehold Mortgagees under this Lease. 19.5 Landlord's Acknowledgment of Leasehold Mortgagee. Landlord shall, upon request, acknowledge receipt of the name and address of any Leasehold Mortgagee (or proposed - 57 - Leasehold Mortgagee) and confirm to such Leasehold Mortgagee that such Leasehold Mortgagee is (or would be, upon closing of its loan) a Leasehold Mortgagee and has (or would have) all the rights of a Leasehold Mortgagee under this Lease and is (or would be) an Institutional Lender, if applicable. Such acknowledgment shall, if requested, be in recordable form. If Landlord reasonably determines that any purported Leasehold Mortgagee does not or would not qualify as such or as a permitted Institutional Lender or other Leasehold Mortgagee permitted hereunder, then Landlord shall promptly give Notice of such determination to Tenant and the purported Leasehold Mortgagee, which Notice shall specify the reasonable basis for such determination. 20. PROTECTION OF LEASEHOLD MORTGAGEES. If Tenant at any time or from time to time enters into any Leasehold Mortgage(s), then so long as such Leasehold Mortgagee(s) are entitled to the protections provided for under this Lease: 20.1 Cancellation, Surrender, Amendment, Etc. No voluntary cancellation, termination, surrender, acceptance of surrender, abandonment, amendment, or modification of this Lease shall bind a Leasehold Mortgagee if done without the prior consent of such Leasehold Mortgagee, if the Leasehold Mortgagee requires such consent. 20.2 Copies of Notices. If Landlord shall give any Notice to Tenant (including any Notice of Default and a Notice of termination of this Lease for any reason), then Landlord shall at the same time and by the same means give a copy of such Notice to each Leasehold Mortgagee. No Notice to Tenant shall be effective against such Leasehold Mortgagee unless and until so given. 20.3 Tenant's Cure Period Expiration Notice. If Tenant is in Default under this Lease and the cure period applicable to Tenant expires without cure of Tenant's Default, then Landlord - 58 - shall promptly give Notice of such fact to each Leasehold Mortgagee, which Notice shall describe in reasonable detail Tenant's Default (a "Tenant's Cure Period Expiration Notice"). 20.4 Right to Perform Covenants and Agreements. Any Leasehold Mortgagee shall have the right, but not the obligation, to perform any obligation of Tenant under this Lease and to remedy any Default by Tenant. Landlord shall accept performance by or at the instigation of a Leasehold Mortgagee in fulfillment of Tenant's obligations, for the account of Tenant and with the same force and effect as if performed by Tenant. No such performance by a Leasehold Mortgagee shall cause such Leasehold Mortgagee to become a "mortgagee in possession" or otherwise cause such Leasehold Mortgagee to be deemed to be in possession of the Premises or bound by this Lease. 20.5 Transfer of Tenant's Rights. Tenant may delegate or otherwise transfer to a Leasehold Mortgagee any or all of Tenant's rights under this Lease, but no such delegation or transfer shall bind Landlord unless and until Landlord shall have received a copy of a written instrument effecting such delegation accompanied by a photocopy of the Leasehold Mortgagee's fully executed Leasehold Mortgage. Such delegation or transfer of authority may be effected by the terms of the Leasehold Mortgage itself, in which case service upon Landlord of an executed counterpart or certified copy of such Leasehold Mortgage, together with a written notice specifying the provisions of such Leasehold Mortgage that delegate or transfer such authority to the Leasehold Mortgagee, shall be sufficient to bind Landlord to such delegation or transfer of rights. 20.6 Notice of Default and Mortgagee's Cure Rights. Upon receiving any Notice of Default, any Leasehold Mortgagee shall have the same cure period granted to Tenant under this Lease, plus the additional time provided for below, within which to take (if such Leasehold Mortgagee so elects) whichever of the actions set forth below shall apply with respect to the - 59 - Default described in such Notice of Default (such actions, "Mortgagee's Cure"; and a Leasehold Mortgagee's rights to take such actions, "Mortgagee's Cure Rights"): 20.6.1 Monetary Defaults and Non-Monetary Defaults Curable Without Obtaining Possession. In the case of a Monetary Default, or a Non-Monetary Default that is reasonably susceptible of being cured by a Leasehold Mortgagee without obtaining possession of the Premises, Leasehold Mortgagee shall be entitled (but not required) to cure such Default within a cure period consisting of Tenant's cure period under this Lease extended through the date sixty (60) days after such Leasehold Mortgagee shall have received Tenant's Cure Period Expiration Notice as to such Default. If the amount of any Monetary Default has not been finally determined (for example, if a dispute has arisen between Landlord and Tenant regarding the proper amount of Percentage Rent), then in place of curing such Monetary Default a Leasehold Mortgagee shall be entitled instead to (a) cure such Monetary Default to the extent the amount thereof is not in dispute; and (b) escrow the remaining disputed portion of such Monetary Default into an escrow account established and managed in the manner provided in Section 3.2 of this Lease. 20.6.2 Defaults Curable Only by Obtaining Possession and Personal Defaults. In the case of a Non-Monetary Default that is not reasonably susceptible of being cured by a Leasehold Mortgagee without obtaining possession of the Premises (including failure to Complete the Tenant's Work) or a Personal Default by Tenant, Leasehold Mortgagee shall be entitled (but not required) to do the following, so long as, with respect to any Defaults other than those referred to in this Section, such Leasehold Mortgagee has exercised or is exercising the applicable Mortgagee's Cure Rights as defined in this Lease: 20.6.2.1 During Cure Period. At any time during the cure period (if any) that applies to Tenant, extended through the date ninety (90) days after such Leasehold - 60 - Mortgagee's receipt of the Tenant's Cure Period Expiration Notice as to such Default, or if no cure period applies to Tenant, then within ninety (90) days after receiving Notice of the Non-Monetary Default, Leasehold Mortgagee shall be entitled to institute proceedings, and (subject to any stay in any proceedings involving the bankruptcy, insolvency, or reorganization of Tenant or the like, or any injunction, unless such stay or injunction is lifted), diligently prosecute the same to completion, to obtain possession of the Premises as mortgagee (including possession by a receiver), or acquire the Leasehold Estate by foreclosure proceedings or otherwise, including delivery of an assignment in lieu of foreclosure (the obtaining of such possession or the completion of such acquisition, "Control of the Premises"). 20.6.2.2 Further Cure Obligations. Upon obtaining Control of the Premises (before or after expiration of any otherwise applicable cure period), Leasehold Mortgagee shall be entitled (but not required) to proceed with diligence and continuity to cure such Non-Monetary Defaults as are susceptible of being cured by such Leasehold Mortgagee (excluding Tenant's Personal Defaults, which Leasehold Mortgagee shall not be required to cure). A Leasehold Mortgagee having Control of the Premises shall not be bound to complete Tenant's Work by the Commencement Date (Percentage Rent), provided that such Leasehold Mortgagee shall with diligence and continuity prosecute completion of Tenant's Work. 20.6.2.3 Law Limitation. If a Leasehold Mortgagee is a Prohibited Person (Tenant) or is otherwise denied the authority by the Missouri Gaming Commission acting pursuant to the Missouri Gambling Law, or pursuant to any other applicable Law, other than a temporary stay of foreclosure in Tenant's Bankruptcy Proceedings, to obtain Control of the Premises, then the extended cure periods applicable to Non-Monetary Defaults that are not reasonably susceptible of cure without obtaining possession of the Premises shall, from and after - 61 - such date, no longer be applicable to or benefit such Leasehold Mortgagee unless such Leasehold Mortgagee transfers its Leasehold Mortgage to a Leasehold Mortgagee that is so qualified. 20.6.3 Operating Covenant Default and Venture Default. Notwithstanding any provision to the contrary in this Section 20.6, owing to the severe impact that an Operating Covenant Default or a Venture Default will have on the Shoreside Complex and Harrah's Premises, the cure period applicable to an Operating Covenant Default shall be limited to that provided in Section 29.13 and there shall be no further Mortgagee Cure Rights relative to a Venture Default. 20.7 Effect of Cure. A Leasehold Mortgagee shall not be required to continue to exercise Mortgagee's Cure Rights or otherwise proceed to obtain or to exercise Control of the Premises if and when the Default that such Leasehold Mortgagee was attempting to cure shall have been otherwise cured. Upon such cure and the cure of any other Defaults in accordance with this Lease, this Lease shall continue in full force and effect as if no Default(s) had occurred. 20.8 Quiet Enjoyment. So long as the time period for a Leasehold Mortgagee to exercise Mortgagee's Cure Rights with respect to a Non-Monetary Default by Tenant has not expired (and provided that all Monetary Defaults are cured within Leasehold Mortgagee's cure period provided for under this Lease), Landlord shall not (i) re-enter the Premises, (ii) serve a notice of election to terminate this Lease or (iii) bring a proceeding on account of such Default to (A) dispossess Tenant and/or other occupants of the Premises, (B) re-enter the Premises, or (C) terminate this Lease. Nothing in the Leasehold Mortgagee protections provided for in this Lease shall be construed to either (i) extend the Term beyond the expiration date provided for in this Lease that would have applied if no Default had occurred; or (ii) require any Leasehold Mortgagee to cure any Personal Default by Tenant; (iii) excuse Tenant or any guarantor of Tenant from personal liability for the performance of Lease obligations; or (iv) prevent or delay - 62 - any personal action against Tenant or any guarantor of Tenant or any of their other assets. If however, a Leasehold Mortgagee shall fail to cure a Default within the time provided to it under this Article , Landlord shall be free to exercise all remedies otherwise provided in the Lease or available at law or equity for such Default without further notice or opportunity to Leasehold Mortgagee to effect cure. 20.9 Subordinate Liens Affecting Leasehold Estate. Provided the Prohibited Lien does not constitute a lien on Landlord's Estate, a Leasehold Mortgagee shall not be required to discharge a Prohibited Lien that is junior in priority to the lien of its Leasehold Mortgage, except as necessary to prevent such Prohibited Lien from foreclosing upon the Premises prior to the completion of foreclosure of such Leasehold Mortgagee's Mortgage (and resulting extinguishment of such junior lien). 20.10 Leasehold Mortgagee's Right to Enter Premises. Subject to constraints of applicable Law, including, without limitation, the Missouri Gambling Law, Landlord and Tenant authorize each Leasehold Mortgagee to enter the Premises as necessary to effect Mortgagee's Cure and take any action(s) reasonably necessary to effect Mortgagee's Cure. 20.11 Rights of Leasehold Mortgagee Upon Acquiring Control. If any Leasehold Mortgagee or a purchaser at a foreclosure sale shall acquire Control of the Premises and shall cure all Monetary Defaults and proceed and continue to exercise Mortgagee's Cure Rights and cure all other Defaults in accordance with the provisions of this Lease, then (i) any Personal Defaults of its Leasehold Mortgagor shall not be asserted against such Leasehold Mortgagee or any or its direct or remote permitted Transferees; and (ii) Landlord shall recognize any purchaser of the Leasehold Estate pursuant to a foreclosure sale under a Leasehold Mortgage, or any transferee of the Leasehold Estate under an assignment in lieu of foreclosure, or, if the Leasehold Mortgagee should be such purchaser or assignee, the Leasehold Mortgagee and any assignee of - 63 - the Leasehold Mortgagee, provided such Person (a) is not a Prohibited Person (Tenant); (b) assumes in writing all obligations under this Lease; (c) acquires the Partnership Interest of Tenant and assumes all obligations of the Tenant under the Joint Venture Agreement; and (iv) is duly licensed, permitted and approved as lessee and operator of the Premises by all Governments having jurisdiction, including without limitation, the Missouri Gaming Commission. 21. LEASEHOLD MORTGAGEE'S RIGHT TO A NEW LEASE. 21.1 New Lease. If this Lease shall terminate before its stated expiration date for any reason other than the failure of Leasehold Mortgagee to effect cure of any Default within the cure periods provided in this Lease or pursuant to the provisions of Article 15 and Article 16 hereof, then (in addition to any other or previous Notice required to be given by Landlord to a Leasehold Mortgagee) Landlord shall, within ten (10) Business Days, give Notice of such termination to each Leasehold Mortgagee entitled to Leasehold Mortgagee protections under this Lease. Landlord shall, upon a Leasehold Mortgagee's request given within sixty (60) days after such Leasehold Mortgagee's receipt of such notice, enter into (and if Landlord fails to do so, shall be deemed to have entered into) a new lease of the Premises, effective as of the Termination Date, for the remainder of the Term on the same terms and provisions contained in this Lease, but excluding any requirements that have already been performed or no longer apply (a "New Lease"), provided such Leasehold Mortgagee shall, at the time of execution and delivery of such New Lease, pay to Landlord any and all sums then due under this Lease as if this Lease had not been terminated and cure all Defaults other than Personal Defaults of the Tenant. If a Leasehold Mortgagee enters into a New Lease, then such Leasehold Mortgagee shall pay all reasonable expenses, including reasonable attorneys' fees, court costs and disbursements, incurred by Landlord in connection with Tenant's Default and the termination of this Lease, the recovery of - 64 - possession of the Premises, and the preparation, execution and delivery of the New Lease. The following additional provisions shall apply to any New Lease: 21.2 Form and Priority. Any New Lease shall be in recordable form. Such New Lease shall not be subject to any rights, liens, or interests other than those to which this Lease was subject at the time of its termination or any priority liens established in Tenant's Bankruptcy Proceedings. The provisions of the immediately preceding sentence shall be self-executing. Landlord shall, if requested, execute and deliver such corporate resolutions, partnership certificates and other documents as shall be reasonably necessary to enable the tenant under such New Lease (the "New Tenant") to obtain title insurance with respect to the New Lease, at such New Tenant's expense. 21.3 Pendency of Dispute. If Landlord and the New Tenant disagree regarding any payment due Landlord in connection with execution of a New Lease, then New Tenant (if an Institutional Lender or a Leasehold Mortgagee's Agent) shall be deemed to have performed its payment obligation if such New Tenant: (a) pays Landlord the full amount not in controversy; and (b) escrows any additional sum claimed to be due by Landlord in an escrow account established and governed in the manner established in Section 3.2. The parties shall cooperate to determine any disputed amount promptly in accordance with the terms of this Lease or the New Lease, whichever applies. 21.4 Preservation of Subleases. Between the Termination Date and the date of execution and delivery of a New Lease, if a Leasehold Mortgagee shall have requested a New Lease, Landlord shall not cancel any sublease or accept any cancellation, termination or surrender of a sublease (unless such termination shall be effected as a matter of law upon the termination of this Lease, in which case such sublease shall, at New Tenant's option, be reinstated upon execution of the New Lease) without the consent of such Leasehold Mortgagee. - 65 - 22. INTERACTION OF MORTGAGES WITH OTHER ESTATES AND PARTIES. 22.1 Leasehold Mortgages. A Leasehold Mortgage shall not encumber or in any other way affect the Landlord's Estate or affect, limit or restrict Landlord's rights and remedies under this Lease except as expressly provided in this Lease. Upon a foreclosure under a Leasehold Mortgage or delivery of an assignment of this Lease in lieu of foreclosure under a Leasehold Mortgage, the Leasehold Mortgagee shall succeed only to the Leasehold Estate and Tenant's interest in Landlord, and any such foreclosure or assignment in lieu of foreclosure shall not affect the Landlord's Estate (except for Tenant's partnership interest in Landlord and subject to this Lease) or the rights of any Prime Mortgagees as against Landlord or the Landlord's Estate. 22.2 Leasehold Mortgagee's Agent. Any Leasehold Mortgagee that is an Institutional Lender may exercise its rights (including Mortgagee's Cure Rights and the right to obtain a New Lease) under this Lease, or perform any action permitted to be taken by a Leasehold Mortgagee under this Lease, through a Leasehold Mortgagee's Agent. A Leasehold Mortgagee's Agent shall be entitled to all the rights, privileges, and protections of Leasehold Mortgagees under this Lease. 22.3 Interaction Between Lease and Leasehold Mortgage. If a Leasehold Mortgagee's Leasehold Mortgage limits such Leasehold Mortgagee's exercise of any rights and protections provided for in this Lease, the terms of such Leasehold Mortgage shall govern. Tenant's default as Mortgagor under a Leasehold Mortgage shall not constitute a Default under this Lease except to the extent that Tenant's actions or failure to act in and of itself constitutes a Default under this Lease. 22.4 Conflicts Between Mortgagees. If more than one Leasehold Mortgagee desires to exercise Mortgagee's Cure Rights or the right to obtain a New Lease, or if more than one Leasehold Mortgagee or more than one Prime Mortgagee desires to exercise any other right or privilege provided for Mortgagees under this Lease, then the party against whom such rights or - 66 - privileges are to be exercised shall be required to recognize either: (a) only the Prime Mortgagee or Leasehold Mortgagee, as applicable, that desires to exercise such right or privilege and whose Prime Mortgage or Leasehold Mortgage, as applicable, is most senior in lien (as against other Mortgages of its type [Prime or Leasehold, as applicable]) or (b) such other Prime Mortgagee or Leasehold Mortgagee, as applicable, as has been designated in writing by all Prime Mortgagees or Leasehold Mortgagees, as applicable, to exercise such right or privilege. Priority of Mortgages shall be conclusively evidenced either by: (a) the report or certificate of a title insurance company licensed to do business in the State; or (b) joint written instructions of all Leasehold Mortgagees or all Prime Mortgages, as applicable, or (c) order of a court of competent jurisdiction. 22.5 No Merger. Without the written consent of Landlord, Tenant, and all Mortgagees, the Landlord's Estate and the Leasehold Estate shall remain distinct and separate estates and shall not merge, notwithstanding the acquisition of both the Landlord's Estate and the Leasehold Estate by Landlord, Tenant, any Mortgagee, or a third party, whether by purchase or otherwise. 23. BANKRUPTCY. 23.1 Affecting Tenant. If Tenant (as debtor in possession) or a trustee in bankruptcy for Tenant rejects this Lease in connection with any proceeding involving Tenant under the United States Bankruptcy Code or any similar state or federal statute for the relief of debtors (a "Bankruptcy Proceeding"), then Landlord agrees for the benefit of each and every Leasehold Mortgagee that such rejection shall be deemed Tenant's assignment of the Lease and the Leasehold Estate to Tenant's Leasehold Mortgagee(s), in the nature of an assignment in lieu of foreclosure. Upon such deemed assignment, this Lease shall not terminate and each Leasehold Mortgagee shall continue to have all the rights of a Leasehold Mortgagee under this Lease as if the Bankruptcy Proceeding had not occurred, unless such Leasehold Mortgagee shall reject such deemed assignment by Notice to Landlord within thirty (30) days after receiving Notice of the - 67 - rejection of this Lease in Bankruptcy Proceedings. If any court of competent jurisdiction shall determine that this Lease shall have been terminated notwithstanding the deemed assignment provided for in place of rejection of this Lease, then Tenant's Leasehold Mortgagees shall continue to be entitled to a New Lease as provided in Article 21 of this Lease. In the event of an assignment by operation of law or otherwise in a Bankruptcy Proceeding, if Landlord does not or is not permitted to terminate this Lease, the assignee shall provide Landlord with adequate assurance of future performance of all of the terms, covenants and conditions of this Lease, which shall include but not be limited to, assumption of all of the terms, covenants and conditions of this Lease by the assignee and the making by the assignee of the following express covenants to the Landlord: (a) the assignee has acquired the Partnership Interest of Tenant and assumed all obligations with respect thereto and cured all prior Defaults of Tenant thereunder; (b) the assignee has sufficient capital to pay the Rent and other amounts due under the Lease for the entire Term or actually pays the Default Substitute Percentage Rent or the Approved Substitute Percentage Rent, as the case may be, and performs the other obligations of Tenant under this Lease; (c) the assignee either (i) holds all Government licenses, permits and approvals necessary to operate the Premises in accordance with this Lease; or (ii) is diligently pursuing the obtaining of such licenses, permits and approvals, none of which have been permanently denied; and (d) the assignee is not a Prohibited Person (Tenant). 23.2 Affecting Landlord. If Landlord (as debtor in possession) or a trustee in bankruptcy for Landlord rejects this Lease in connection with any Bankruptcy Proceeding involving Landlord, then: - 68 - 23.2.1 Tenant's Election. Tenant shall not have the right to elect to treat this Lease as terminated except with the prior written consent of each and every Leasehold Mortgagee whose recorded Leasehold Mortgage requires such consent by the applicable Leasehold Mortgagee. 23.2.2 Continuation of Lease. If Tenant does not properly elect to treat this Lease as terminated, then this Lease shall continue in effect without change upon all the same terms and conditions as are set forth in this Lease, including provisions relating to Rent and New Leases. Thereafter, Tenant and its successors (including Leasehold Mortgagees) shall be entitled to offset against Rent any damages arising from such rejection, including but not limited to attorneys' fees and expenses reasonably incurred in connection with the rejection of this Lease and adjustment of the parties' subsequent rights and duties among themselves, in accordance with applicable Law governing the Bankruptcy Proceeding, and any such offset properly made shall not be a Default. If Tenant claims a greater offset than the offset to which Tenant is lawfully entitled, then the taking of such excessive offset by Tenant shall constitute a Monetary Default as to which Tenant and Leasehold Mortgagees shall be entitled to Notice and opportunity to cure as provided in this Lease. 23.2.3 Assumption of Lease. If Landlord (as debtor in possession) or a trustee in bankruptcy for Landlord moves to assume this Lease or provides for assumption of this Lease in any Bankruptcy Proceeding involving Landlord, Tenant shall, in addition to all its other rights and remedies, be compensated promptly for all costs and expenses (including but not limited to attorneys' fees and expenses) resulting from or reasonably incurred in connection with the proceedings involving assumption (whether or not such assumption is granted or confirmed), any subsequent proceedings to assign the Lease to another or to reject the Lease, enforcement of - 69 - rights to cure and to compensation for damages resulting from a breach of the Lease, and adjustment of the parties' subsequent rights and duties among themselves. 23.2.4 Continuation of Leasehold Mortgages. The lien of any Leasehold Mortgage that was in effect before the rejection of this Lease shall extend to Tenant's continuing possessory rights with respect to the Premises following such rejection, with the same priority as it would have enjoyed had such rejection not taken place. 24. QUIET ENJOYMENT AND WARRANTIES. Landlord is making no warranties to Tenant concerning the condition of the Premises, including, without limitation, the compliance of the Premises or the Shoreside Complex with any laws, ordinances or regulations, the quality of construction of the improvements to the Premises or the Shoreside Complex or any other warranty whatsoever (subject to the covenant of quiet enjoyment set forth below) and Tenant is leasing the Premises from Landlord "as is" and "where is" and subject to the Permitted Exceptions, provided that Landlord shall enforce all construction warranties and correct any construction deficiencies affecting the Premises to the extent provided in the Joint Venture Agreement. Landlord covenants that, so long as Tenant is not in Default under this Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the Premises for the Term without molestation or disturbance by or from Landlord or anyone claiming by or through Landlord, except Permitted Exceptions and except that Tenant's recourse under this covenant shall, so long as Tenant or an Affiliate of Tenant is a partner of the Venture (the "Venture Period"), be limited to its recovery of title insurance proceeds as a partner of the Landlord, if this Lease is terminated as provided below, or to its recovery of Net Title Insurance Proceeds (as defined below) if this Lease is not so terminated. During the Venture Period, if a title defect shall affect the Premises and/or the Shoreside Complex, which in the Landlord's opinion materially interferes with the use or enjoyment of the Premises and/or the Shoreside - 70 - Complex, then the Landlord shall have the right to terminate this Lease subject to the provisions of Article . If the Landlord determines not to terminate this Lease by reason of such title defect, then the Landlord, after deducting all costs and expenses of reconfiguring, reconstructing or restoring the Premises, shall pay to Tenant such portion (the "Net Title Insurance Proceeds") of the title insurance proceeds received by Landlord by reason of such title defect as are determined by Landlord to represent Tenant's proportionate share thereof. 25. FORCE MAJEURE. Tenant's obligation to perform or observe any term, condition, covenant or agreement on Tenant's part to be performed or observed pursuant to this Lease (other than Tenant's obligation to pay any item of Rent when due) shall be suspended during such time as such performance or observance is prevented or delayed by reason of any Unavoidable Delay. 26. ACCESS. Landlord, Harrah's and their respective agents, representatives and designees shall have the right to enter the Premises upon reasonable notice to Tenant during regular business hours, and in accordance with Tenant's reasonable security procedures, for the purpose of: (i) performing work related to the Shoreside Complex; (ii) curing Tenant's Defaults (provided that Landlord shall have given Tenant prior Notice of such Default in accordance with this Lease); (iii) mortgaging, insuring, obtaining of Government licenses, permits or approval for the Shoreside Complex; or (iv) sale of the Shoreside Complex or the land affected by the Ground Lease. In entering the Premises pursuant to this Article, authorized individuals shall not unreasonably interfere with the conduct of operations on the Premises by Tenant or anyone claiming through Tenant and shall comply with Tenant's reasonable security procedures. - 71 - 27. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. 27.1 Landlord's Option. If Tenant shall at any time fail to make when required under the Lease any payment or perform any other act on its part to be made or performed, then Landlord, after ten (10) Business Days' Notice to Tenant, or with such notice (if any) as is reasonably practicable under the circumstances, in case of an emergency, and without waiving or releasing Tenant from any obligation and without waiving Landlord's right to take such action as may be permissible under this Lease as a result of such Default, may (but shall be under no obligation to) make such payment or perform such act on Tenant's part to be made or performed pursuant to this Lease. Landlord may enter upon the Premises for such purpose, and take all such action on the Premises, as may be reasonably necessary under the circumstances, but in doing so shall not interfere with the conduct of operations on the Premises by Tenant or anyone claiming through Tenant and shall comply with Tenant's reasonable security procedures. 27.2 Reimbursement by Tenant. All costs and expenses reasonably incurred by Landlord, together with reasonable attorneys' fees, in connection with the exercise of Landlord's cure rights under Section 27.1, shall constitute Additional Rent. Tenant shall pay such Additional Rent together with interest thereon at the Default Rate within thirty (30) days after Landlord's demand accompanied by evidence reasonably establishing such costs and expenses, provided Tenant shall have the right to audit such costs and expenses, and if Tenant, in good faith, disputes the accuracy of such costs and expenses, Tenant shall have the right to require arbitration of the amount of such costs and expenses in accordance with the provision of Section 29.6 hereof. Tenant shall also have the right, if in good faith Tenant believes that either no emergency existed or no Default had occurred, to require arbitration (pursuant to the provisions of Section 29.6 hereof) as to whether an emergency existed or a Default had occurred. If the arbitrators uphold Tenant's contention that no emergency existed or no Default had occurred, as the case may be, - 72 - then Landlord shall nonetheless be entitled to reimbursement of reasonable costs and expenses incurred to the extent of the reasonable benefit to Tenant or the Premises. If the arbitrators uphold Landlord's contention that an emergency existed or a Default had occurred, then Landlord shall be entitled to reimbursement of all costs and expenses incurred in good faith whether reasonable or not. 28. GUARANTY. 28.1 Parent Guaranty. Tenant's obligations under this Lease shall be guaranteed by Players International. Inc. (the "Parent Guaranty"), which Parent Guaranty shall be in the form of Exhibit K attached hereto. 29. DEFAULT BY TENANT; REMEDIES. 29.1 Definition of "Event of Default". The term "Event of Default" shall mean and refer to the occurrence of any one or more of the following circumstances: 29.1.1 Venture Default. If an Event of Default by Tenant shall have occurred under the terms and provisions of the Joint Venture Agreement which shall not be subject to any additional cure rights other than those provided in the Joint Venture Agreement (a "Venture Default"). 29.1.2 Monetary Default. If a Monetary Default shall occur and the Monetary Default shall continue for sixty (60) days after Landlord has given Tenant Notice of such Monetary Default, specifying in reasonable detail the amount of money required to be paid by Tenant and the nature of such payment, provided however that if Tenant shall fail on more than two occasions in any Percentage Rent Year to make payment of Percentage Rent or Substitute Percentage Rent before Landlord (or Harrah's) gives such Notice (whether or not such payment was made within the aforesaid cure period), the notice and cure period for subsequent payments - 73 - due hereunder within such Percentage Rent Year and the next succeeding Percentage Rent Year shall be shortened to ten (10) days. 29.1.3 Operating Covenant Defaults. If Tenant breaches the provisions of Section 7.2 hereof voluntarily (a "Voluntary Operating Covenant Default") or if Tenant is denied (a "Governmental Denial") the necessary Government licenses, permits, certificates or approvals (collectively, "Licenses and Approvals") of the Missouri Gaming Commission or any other Government agency to operate the Premises as Excursion Gambling Boats and such denial is not rescinded or revoked within seventy-two (72) hours or, if any application for Licenses and Approvals is rejected or if any Licenses and Approvals are rescinded, revoked or suspended for more than seventy-two (72) hours (an "Involuntary Operating Covenant Default") and in the case of a Voluntary Operating Covenant Default such Voluntary Operating Covenant Default is not remedied within thirty (30) days after Landlord has given Tenant notice of such Voluntary Operating Covenant Default in reasonable detail (the "Voluntary Operating Covenant Cure Period") and in the case of an Involuntary Operating Covenant Default such Involuntary Operating Covenant Default is not remedied within the "Appeal Period" (hereinafter defined) (the "Involuntary Operating Covenant Cure Period") provided in the case of a Voluntary Operating Covenant Default or an Involuntary Operating Covenant Default Tenant is paying Landlord Default Substitute Percentage Rent during the Voluntary Operating Covenant Cure Period or the Involuntary Operating Covenant Cure Period, as the case may be, subject to the right of a Leasehold Mortgagee to extend the Voluntary Operating Covenant Cure Period or Involuntary Operating Covenant Cure Period in order to substitute another operator of the Premises, so long as the Leasehold Mortgagee pays Landlord Default Substitute Percentage Rent and performs Tenant's other obligations under this Lease. For purposes hereof, the "Appeal Period" shall be the period during which Tenant in good faith and with due diligence pursues a final non- - 74 - appealable determination concerning the validity of a Governmental Denial. A Voluntary Operating Covenant Default and an Involuntary Operating Covenant Default are collectively referred to herein as an "Operating Covenant Default." 29.1.4 Non-Monetary Default. If a Non-Monetary Default shall occur and the Non-Monetary Default shall continue and not be remedied by Tenant within ninety (90) days after Landlord shall have delivered to Tenant a Notice describing the same in reasonable detail, or, in the case of a Non-Monetary Default that cannot with due diligence be cured within ninety (90) days from such Notice, if Tenant shall not (x) within ninety (90) days from Landlord's Notice advise Landlord of Tenant's intention to take all reasonable steps necessary to remedy such Non-Monetary Default; (y) duly commence the cure of such Non-Monetary Default within such period, and then diligently prosecute to completion the remedy of the Non-Monetary Default; and (z) complete such remedy within a reasonable time under the circumstances. 29.2 Re-entry. Upon the occurrence of an Event of Default, this Lease, at the option of Landlord, shall be terminated and Landlord or Landlord's agents and employees may (to the extent permitted by law and subject to the rights of Leasehold Mortgagees under this Lease) re-enter the Premises, or any part of the Premises, either by summary dispossess proceedings or by any suitable action or proceeding at law, or by force (to the extent permitted by Law of the State) or otherwise, without being liable to indictment, prosecution or damages, and may repossess the same, and may remove any individual from the Premises, all so that Landlord may have, hold and enjoy the Premises. 29.3 Damages. In addition to Landlord's other remedies hereunder, if Landlord terminates this Lease by reason of an Event of Default, Tenant shall be liable to Landlord for an amount equal to the excess of (A) the present value as of the date of termination of all installments of Rent through the end of the Term [the amount of Rent to be based upon the - 75 - average annual Rent paid hereunder for the immediately preceding two (2) years, or if less than two (2) years of the Term has elapsed, based upon the amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00) per year], such present value to be computed using a reasonable per annum discount rate, compounded semiannually, from the respective dates upon which such Rent would be paid, over (B) the present value as of such termination date of the fair market rental value of the Premises through the end of the Term (such fair market rental value shall be reduced to the extent that Tenant fails to surrender its gaming license to the Missouri Gaming Commission and fails to cooperate with Landlord's application for a new gaming license as provided in Sections and hereof on termination and thereupon a non-gaming use of the Premises shall be assumed). Such fair market rental value of the Premises is to be determined by mutual agreement of Landlord and Tenant or, if they cannot agree within ten (10) days of such notice, by an arbitration as provided herein. Such present value is to be computed using a reasonable per annum discount rate mutually agreed upon by Landlord and Tenant or, if they cannot agree within ten (10) days, by an arbitration as provided herein, compounded semiannually, from the respective dates upon which such Rent would be paid. The above damages shall be increased by an amount equal to all amounts expended by Landlord in curing any preexisting defaults of Tenant under leases of Gaming Equipment or by reason of Tenant's failure to arrange for Landlord to have the legal right to assume said leases should Landlord exercise its option to assume such leases under the provisions of Article hereof. Landlord shall have no general duty to mitigate the aforesaid damages, but Landlord shall be required to negotiate in good faith with a proposed successor to Tenant which meets the criteria set forth on Exhibit J hereto and which is willing to assume all obligations of Tenant or Tenant's Affiliate under the Joint Venture Agreement and to execute and deliver to Landlord a Lease which is in form identical to this Lease (including, without limitation, the same Percentage Rent payable - 76 - hereunder) with the exception of modifications necessitated by the change in the identity of Tenant. 29.4 Pending Dispute Regarding Event of Default. Notwithstanding anything to the contrary in the foregoing remedies provided for Landlord under this Lease, if Tenant shall have given Landlord Notice before termination of this Lease that Tenant contests Landlord's determination that a Voluntary Operating Covenant Default, Involuntary Operating Covenant Default or other Default has occurred or that an Event of Default has occurred, then Landlord shall not disturb Tenant's possession of the Premises, Tenant shall be entitled to remain in possession of the Premises under this Lease, and the Term shall be deemed to continue, so long as Tenant: (a) continues to pay Landlord the Rent (and to escrow the disputed portion of any Rent into an escrow account established and managed in the manner set forth in Section ); (b) continues to perform all other obligations under this Lease as are not in dispute; and (c) is prosecuting appropriate arbitration proceedings to prevent Landlord from terminating this Lease as provided in Section 29.6 hereof. 29.5 Injunctive Relief. In the event of any breach or threatened breach by Tenant of any Lease covenants or agreements, Landlord shall be entitled to enjoin such breach or threatened breach. The provisions of this Section shall be construed so as to be consistent with the Law of the State so that remedies of Landlord described in this Lease shall be available to the full extent but only to the extent that they are not invalid or unenforceable under the Law of the State. 29.6 Arbitration. Upon the occurrence of a Non-Monetary Default or a Monetary Default, the amount of which is disputed by Tenant, Tenant may, by written notice to Landlord, elect an arbitration which shall be conducted in accordance with the following procedures: - 77 - 29.6.1 Voluntary Appointment. Landlord and Tenant shall appoint a single Qualified Arbitrator who is not affiliated with either Landlord or Tenant. Such Qualified Arbitrator shall render a decision within thirty (30) days of such appointment. 29.6.2 Appointment by Arbitrators. If Landlord and Tenant cannot agree on a single Qualified Arbitrator within twenty (20) days after an election to submit the matter to arbitration, then Landlord and Tenant shall each appoint one Qualified Arbitrator within ten (10) days following such twenty (20) day period. The two appointed Qualified Arbitrators shall within ten (10) days of such referral appoint a third Qualified Arbitrator, and if such Qualified Arbitrators are not able to agree on such third Qualified Arbitrator, then, on five (5) days' notice in writing to the other Qualified Arbitrator, either Qualified Arbitrator shall apply to the branch of the American Arbitration Association in St. Louis, Missouri to designate and appoint such third Qualified Arbitrator. The three Qualified Arbitrators shall reach a decision within twenty (20) days after the appointment of the third Qualified Arbitrator. 29.6.3 Failure to Appoint. If either Landlord or Tenant fails to appoint a Qualified Arbitrator, then the single Qualified Arbitrator designated by the other party shall act as the sole Qualified Arbitrator and shall be deemed to be the unanimously approved Qualified Arbitrator to resolve such dispute. The decision and award of such sole Qualified Arbitrator shall be binding upon the parties. 29.6.4 Fees and Expenses. The fees and expenses of the Qualified Arbitrators shall be paid by the party whose position is not adopted by the Qualified Arbitrators. The award of any Qualified Arbitrators made in accordance with this Section shall be binding on the parties and enforceable in any court of competent jurisdiction. 29.6.5 Proceedings. All proceedings by the Qualified Arbitrators shall be conducted in accordance with the Uniform Arbitration Act as enacted in the State of Missouri, - 78 - except to the extent the provisions of such Act are modified by this Lease or the mutual agreement of the parties. Unless otherwise agreed, all arbitration proceedings shall be conducted in St. Louis, Missouri. 29.6.6 Arbitration Decisions. In all arbitration proceedings submitted to any Qualified Arbitrators, the Qualified Arbitrators shall be required to agree upon and approve the substantive position advocated by one party with respect to each disputed item. The Qualified Arbitrator(s) shall exclusively determine whether a particular dispute falls within the scope of their authority. 30. TERMINATION. 30.1 Rights on Termination. Upon the Termination Date, all improvements constituting part of or located on the Premises (other than (i) the portion of any signs bearing any Players Mark, which Tenant may remove; (ii) the Tenant's Property that is not affixed to the Premises; and (iii) Gaming Equipment) shall become Landlord's property, and Landlord and Tenant shall have the additional rights and obligations set forth in this Article , provided that Landlord shall have the option to be exercised by Notice to Tenant at least thirty (30) days before the Termination Date to prospectively assume any leases of Gaming Equipment. A copy of each such lease shall be delivered to Landlord within ten (10) days after its execution. Landlord shall also be entitled at its option on at least thirty (30) days' Notice to purchase any personal property or equipment that Tenant has the right to remove pursuant to this Section (other than personal property or equipment bearing any trademark, service mark or other mark owned by a Tenant or any of its Affiliates) at its then fair market value, payment to be made by certified check on the Termination Date. - 79 - 30.2 Possession. Tenant shall deliver to Landlord possession of the Premises and all affected Tenant's Property (including, without limitation, Tenant's Work), in its then current condition and state of repair. 30.3 Utility and Other Deposits. To the extent that Tenant shall have delivered any deposits to any utility companies or other providers of services for the Premises and such deposits are not separately refunded or credited to Tenant, Landlord shall credit an amount equal to such deposits against any amounts due to Landlord from Tenant, and, if no amounts are due from Tenant, pay such amount to Tenant; in each case within thirty (30) days after the later of: (i) the date that Tenant delivers possession of the Premises to Landlord in accordance herewith; or (ii) the date that all disputes between Landlord and Tenant are finally resolved by voluntary agreement or final and unappealable judicial determination. 30.4 Miscellaneous Assignments. Tenant shall assign to Landlord, without recourse, all assignable warranties and guarantees then in effect relating to Tenant's Property that is acquired by Landlord or Landlord's designee, and shall, at its sole cost and expense, cancel all contracts relating to the Premises other than those contractually and legally assignable contracts that Landlord elects to assume, which shall be assigned to and assumed by Landlord and costs relating thereto apportioned. 30.5 Termination of Memorandum of Lease. If the parties shall have entered into and recorded a Memorandum of Lease, then they shall enter into a memorandum, in recordable form reasonably satisfactory to both parties, terminating the Memorandum of Lease. 31. NO BROKER. Neither Landlord nor Tenant has engaged the services of a broker, finder or agent in this transaction as it relates to the Site, and neither has employed, nor authorized any other Person to act in such capacity. Landlord and Tenant each hereby agree to indemnify and hold the other - 80 - harmless from and against any and all claims, losses, liabilities, damages or expenses (including, without limitation, reasonable attorneys' fees, costs and disbursements incurred in the enforcement of this indemnity) suffered or incurred by the other party as a result of a claim brought by a Person engaged or claiming to be engaged as a finder, broker or agent by the indemnifying party. The foregoing representation, warranty and indemnity shall survive the expiration or earlier termination of this Lease. 32. WAIVERS. 32.1 No Waiver by Silence. Failure to complain of any act or omission shall not be deemed a waiver of any rights under this Lease. No waiver, express or implied, of any breach of any provision of this Lease shall be a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. 32.2 Waiver of Trial by Jury. LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, INCLUDING ANY CLAIM OF INJURY OR DAMAGE, AND ANY EMERGENCY OR STATUTORY REMEDY WITH RESPECT TO THE FOREGOING. 33. MEMORANDUM OF LEASE. The parties shall, contemporaneously herewith, execute, acknowledge and deliver duplicate originals of a recordable memorandum of lease (the "Memorandum of Lease") in the form of Exhibit L. - 81 - 34. ADMINISTRATION OF LEASE; LANDLORD'S REPRESENTATIVE. Landlord will be bound with respect to any matter affecting this Lease by the signature of Landlord's Representative. Landlord's Representative is currently HMHC. Landlord's Representative may be changed from time to time only by Notice to Tenant executed by both Landlord and the current Landlord's Representative designating the name and address of the successor Landlord's Representative. 35. ESTOPPEL CERTIFICATES. 35.1 Rights of Each Party. Upon not less than ten (10) Business Days' prior written request (an "Estoppel Certificate Request") by either party to this Lease (the "Requesting Party"), the other party to this Lease (the "Certifying Party") shall execute, acknowledge and deliver to the Requesting Party (or directly to a third party whose name and address are provided by the requesting party [a "Third Party"]) up to four original counterparts of an Estoppel Certificate in the form attached as Exhibit B. An Estoppel Certificate Request shall not be valid unless accompanied by a certificate by the Requesting Party that to the best of the Requesting Party's knowledge the proposed form of Estoppel Certificate is substantially correct and omits no material information required to be disclosed in such Estoppel Certificate. Any Estoppel Certificate may be relied upon by any Third Party to whom an Estoppel Certificate is required to be directed. 35.2 Failure to Execute Estoppel Certificate. If (i) the Requesting Party delivers an Estoppel Certificate Request to the Certifying Party in accordance with the Notice provisions of this Lease and (ii) ten (10) Business Days have elapsed from the effectiveness of such Estoppel Certificate Request and during such period the Certifying Party has failed to execute and deliver to the Requesting Party (or its attorneys or the Third Party(ies) designated by such Requesting Party) the Estoppel Certificate counterpart(s) provided by the Requesting Party, setting forth with - 82 - reasonable specificity any alleged exceptions to the statements required to be contained in such Estoppel Certificate, then the Certifying Party shall be deemed for all purposes, whether or not this Lease has been terminated or is otherwise in full force and effect, to have executed and delivered to the Third Party and the Requesting Party an Estoppel Certificate, dated as of the effective date of the Estoppel Certificate Request, in the form submitted by the Requesting Party to the Certifying Party. 36. MISCELLANEOUS. 36.1 Reasonableness. Wherever this Lease states that approval by either party shall not be unreasonably withheld: (a) such approval shall not be unreasonably delayed or conditioned; and (b) no withholding of approval shall be deemed reasonable unless withheld by Notice specifying reasonable grounds, in reasonable detail, for such withholding of approval, and indicating specific reasonable changes in the proposal under consideration that would cause such proposal to be acceptable. Where reasonableness is not specified as the standard for action, a party may act in its sole discretion. 36.2 Documents in Recordable Form. Wherever this Lease requires either party to deliver to the other a document in recordable form, both parties shall be deemed to have consented to the recording of such document, at the sole expense of the party that elects to record it. 36.3 Further Assurances. Each party agrees to execute and deliver such further documents, and perform such further acts, as may be reasonably necessary to achieve the intent of the parties with respect to Tenant's leasing of the Premises from Landlord, as set forth in this Lease. Without limiting the generality of this Section, upon request at any time or from time to time either party shall execute and deliver to the other: (a) additional counterparts of this Lease or any related documents, provided such additional counterparts are prepared at the expense of - 83 - the party requesting them; and (b) such documentation as any title insurance company shall require to evidence such matters as due formation, authorization and execution of the Lease on the part of the party of whom the request is made. 36.4 No Competition. Tenant shall be bound by the non-competition provisions of Sections 8(d) and 31(g) of the Joint Venture Agreement which non-competition covenant shall continue to apply whether or not Tenant remains a partner of Landlord and which non-competition covenant shall survive the expiration or termination of this Lease for a period of five (5) years in accordance with the terms of the Joint Venture Agreement. 36.5 No Third Party Beneficiaries. Except for Harrah's rights as assignee of Percentage Rent, as discussed in Section 5.2.5 of this Lease, and as otherwise expressly specified, nothing in this Lease shall be deemed to confer upon any Person (other than Landlord, Tenant, Leasehold Mortgagees, fee mortgagees or Prime Mortgagees) any right to insist upon, or to enforce against Landlord or Tenant, the performance or observance by either party of its obligations under this Lease. 36.6 Interpretation. No inference in favor of or against any party shall be drawn from the fact that such party has drafted any portion of this Lease. The parties have both participated substantially in the negotiation, drafting and revision of this Lease with representation by counsel and such other advisers as they have deemed appropriate. Material in brackets constitutes parenthetical material within other parenthetical material and is intended to be part of this Lease. The words "include" and "including" shall be construed to be followed by the words: "without limitation." 36.7 Captions. The captions of this Lease are for convenience and reference only and in no way affect this Lease. - 84 - 36.8 Cumulative Remedies. The remedies to which either party may resort under this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which such party may lawfully be entitled in the event of any breach or threatened breach by the other party of any provision of this Lease. 36.9 Entire Agreement. This Lease contains all the terms, covenants and conditions relating to Tenant's leasing of the Premises. 36.10 Amendment. Any modification or amendment to this Lease must be in writing signed by Landlord and Tenant and consented to by any Leasehold Mortgagee(s) and Prime Mortgagees having the right to consent to amendments or modifications of this Lease pursuant to the terms of this Lease. Modifications or amendments of this Lease executed by either party may be exchanged and delivered by facsimile transmission, and shall be effective upon such transmission. The parties shall promptly exchange original signature counterparts of amendments executed by either party and initially exchanged and delivered by facsimile transmission. 36.11 Partial Invalidity. If any term or provision of this Lease or the application of such term or provision to any party or circumstance shall to any extent be invalid or unenforceable, then the remainder of this Lease, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected by such invalidity, and each remaining term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 36.12 Successors and Assigns. This Lease shall bind and benefit Landlord and Tenant and their successors and assigns, but the foregoing shall not limit or supersede any Transfer restrictions contained in this Lease. - 85 - 36.13 Governing Law. This Lease and its interpretation and performance shall be governed, construed and regulated by the Law of the State, without regard to principles of conflict of laws. 36.14 Counterparts. This Lease may be executed in counterparts, each of which shall constitute one and the same agreement. 36.15 Time Periods. Whenever this Lease requires either party to perform any action within a specified period, or requires that a particular event occur within a specified period, if the last day of such period is not a Business Day, then the period shall be deemed extended through the close of business on the first Business Day following such period as initially specified. This Section shall in no event delay or defer the effective date of any Rent adjustment or the commencement of any period with respect to which interest on a payment shall accrue. 36.16 Rule Against Perpetuities. If the rule against perpetuities or any rule of law with respect to restrictions on the alienation of property or any other rule of law shall limit the time when any event contemplated by this Lease may occur, the happening of such event shall not be impaired within any period permitted by such rule. Such period with respect to the rule against perpetuities shall expire upon the expiration of twenty (20) years after the death of the last survivor of the following individuals: Emily Rosenberg of Memphis, Tennessee Dylan Loveland of Memphis, Tennessee Dylan Buffalo of Germantown, Tennessee 36.17 No Agency or Partnership. Nothing herein contained shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed - 86 - that no provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of tenant and landlord. 36.18 No Suretyship. It is the express intent of the parties that the fact that Tenant's obligations are cross-defaulted to its obligations under the Joint Venture Agreement and that Tenant is a partner of Landlord in no way constitutes Tenant as a surety in its capacity as Tenant for its obligations as a partner of Landlord. To the extent that a suretyship relationship has been created notwithstanding the express intent of the parties as stated above, Tenant hereby waives the benefit of any suretyship defenses or rights that may have been so created. 37. NOTICES. All Notices and other communications required or permitted to be given or delivered hereunder shall be in writing, addressed to the Landlord or Tenant at the address set forth below or such other address as it may designate by notice given to the other parties in the manner herein provided, and shall be deemed to have been given (a) on the date received if given by United States mail, postage prepaid, registered or certified, return receipt requested, or (b) on the date delivered if given by personal delivery or recognized overnight courier service, provided that delivery is acknowledged in writing by the receiving party or an employee of such party: Landlord: Riverside Joint Venture 1023 Cherry Road Memphis, TN 38117 with a copy to: Harrah's Maryland Heights LLC c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, TN 38117 Attn: General Counsel FAX: (901) 762-8776 - 87 - Tenant: Players MH, L.P. c/o Players International, Inc. 3900 Paradise Road, Suite 135 Las Vegas, NV 89109 Attn: General Counsel FAX: (702) 792-9843 with a copy to: Horn, Goldberg, Gorny, Daniels, Plackter & Weiss Suite 500 Citicenter Building 1300 Atlantic Avenue Atlantic City, NJ 08401-7278 Attn: Melvyn J. Tarnopol, Esq. FAX: (609) 348-6834 38. SURVIVAL. The obligations of the Tenant and Landlord herein which are not fully performed upon the expiration or termination of this Lease shall survive such expiration or termination hereof. - 88 - IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the date hereof. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. "Landlord" RIVERSIDE JOINT VENTURE BY: PLAYERS MH, L.P., General Partner BY: PLAYERS MARYLAND HEIGHTS, INC., Its General Partner By: /s/ Steven P. Perskie ------------------------------ Steven P. Perskie, Secretary BY: HARRAH'S MARYLAND HEIGHTS CORPORATION, General Partner By: /s/ William S. Rosenberg ------------------------------ William S. Rosenberg, Authorized Representative "Tenant" PLAYERS MH, L.P. BY: PLAYERS MARYLAND HEIGHTS, INC., Its General Partner By: /s/ Steven P. Perskie ------------------------------- Steven P. Perskie, Secretary - 89 - EX-10.7 8 PARENT GUARANTY PARENT GUARANTY PLAYERS INTERNATIONAL, INC., a Nevada corporation ("Players"), guarantees unconditionally to Riverside Joint Venture (the "Partnership"), Harrah's Maryland Heights, LLC ("Landlord"), and any successor of the Partnership or Landlord or assignee of the Partnership's or Landlord's rights (collectively and separately the "Benefitted Parties") under that certain Lease (the "Players' Lease") of even date herewith by and between the Partnership, as landlord, and Players MH, L.P., a Missouri limited partnership, as tenant, ("Players LP"), the payment of Players LP's obligations under the Players' Lease (the "Players Guaranteed Obligations"). Landlord is one of the Benefitted Parties hereunder as Ground Lessor to the Partnership and as assignee of all Percentage Rent and Substitute Percentage Rent due to the Partnership under the Players' Lease. Capitalized terms used herein shall have the same definition as are contained in the Players' Lease, unless otherwise defined herein or the content requires otherwise. The amount of this Guaranty shall be limited to the aggregate amount of all dividends and other distributions or payments (for other than value received) made by Players LP or any successor tenant under the Players' Lease to Players and/or any of its Affiliates during the three (3) year period immediately preceding and for all periods following the occurrence of an Event of Default under the Players' Lease until the Event of Default is cured or the Players' Lease is terminated. This Guaranty shall not be deemed satisfied until all obligations of the tenant under the Players' Lease are satisfied or the Players' Lease has terminated or the limited amount of this Guaranty is fully paid. This Guaranty shall be released, prospectively, and also retroactively if there is not then an Event of Default under the Players' Lease at such time as the Benefitted Parties are granted a first priority lien and security interest in all revenues and personal property, (including Tenant's Property and Gaming Equipment, subject, however, to Equipment Liens encumbering such Gaming Equipment) arising from or used in connection with the premises leased pursuant to the Players' Lease, on terms and conditions substantially the same as those contained on the form of the amendment to the Players' Lease attached hereto as Schedule 1. The Players Guaranteed Obligations may be extended or renewed, and Players will be bound under this Guaranty notwithstanding any extension, renewal, or alteration of the Players Guaranteed Obligations. Players hereby waives presentation of, demand of, and protest of the Players Guaranteed Obligations and waives notice of protest for nonpayment. This Guaranty shall not be affected by: (a) the failure of any party to assert any claim or demand or to enforce any right or remedy against Players LP under the Players' Lease, (b) any extension or renewal of any provision of the Players' Lease, (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Players' Lease, or (d) the failure of any party to exercise any right or remedy against any other guarantor of any of the Players Guaranteed Obligations. Players further agrees that this Guaranty constitutes a guarantee of payment when due and not of collection and waives any right to require that any resort be had by any party to any of the security held for payment of any of the Players Guaranteed Obligations or to any balance of any deposit account or credit on the books of any party in favor of any Person. The obligations of Players shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise of any of the Players Guaranteed Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Players Guaranteed Obligations, discharge of Players LP from obligations in a bankruptcy or similar proceeding or otherwise. Without limiting the generality of the foregoing, the obligations of Players shall not be discharged or impaired or otherwise affected by its failure to assert any claim or demand or to enforce any remedy under the Agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of any of the Players Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of Players or which would otherwise operate as a discharge of Players as a matter of law or equity. Players further agrees that this Guaranty shall continue to be effective or to be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Players Guaranteed Obligations is rescinded or must otherwise be restored by any party upon the bankruptcy or reorganization of Players or otherwise. -2- Upon payment by Players of any sum as provided above so long as any of the Players Guaranteed Obligations shall remain outstanding hereunder, all rights of Players against Players LP arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Players Guaranteed Obligations. No delay or omission by the Benefitted Parties to exercise any right under this Guaranty shall impair any such right, nor shall it be construed to be a waiver thereof. No amendment, modification, termination or waiver of any provision of any guarantee, or consent to any departure by Players therefrom, shall in any event be effective without the written concurrence of the then landlord under the Players' Lease. No waiver of any single breach of default under this Guaranty shall be deemed a waiver of any other breach or default. The Players Guaranteed Obligations may be enforced by either of the Benefitted Parties, acting separately (in the case of Landlord those obligations relating to the payment of Percentage Rent or Substitute Percentage Rent), provided that there shall be no double recovery from Players of any amounts guaranteed. PLAYERS INTERNATIONAL, INC. By: /s/ Steven P. Perskie ----------------------- Its: Vice President ----------------------- -3- Schedule 1 AMENDMENT TO LEASE AGREEMENT THIS AMENDMENT TO LEASE AGREEMENT is made this ______ day of _____________________, by and between RIVERSIDE JOINT VENTURE, a Missouri general partnership ("Landlord"), and PLAYERS MH, L.P., a Missouri limited partnership ("Tenant"). BACKGROUND: A. On ________________, 1995, Landlord and Tenant entered into that certain Lease Agreement relating to the property in Maryland Heights, Missouri (the "Lease"). B. Pursuant to Section 28.1 of the Lease, Tenant's parent, Players International, Inc., a Nevada corporation ("Players"), delivered to Landlord and Harrah's Maryland Heights LLC ("Harrah's"), a certain Parent Guaranty bearing the same date as the Lease (the "Guaranty"). C. The Guaranty provides by its terms that Players shall be released therefrom, as provided therein, upon delivery of this Amendment by Tenant. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby mutually acknowledged, the parties hereto agree as follows: 1. Capitalized terms used in this Amendment, unless otherwise defined herein, shall have the same meanings given to them in the Lease. 2. Section 28 of the Lease is hereby deleted in its entirety and replaced in full with the following: "28. LIEN. 28.1 Landlord's Lien. Tenant hereby grants to Landlord a first lien on and security interest in the following: (i) all accounts, accounts receivable -4- income, revenues and the like derived from the operation of the Premises (the "Receivables"); (ii) Tenant's Property (which lien will be subject to the rights of the holders of any Equipment Liens); and (iii) any and all escrow accounts required to be established by Tenant for Landlord's benefit under the terms of this Lease (the "Escrow Accounts"). Such lien shall secure the payment of monies due under this Lease and the performance of the agreements of this Lease by Tenant, and may be enforced after an Event of Default, by attachment pursuant to Missouri law applicable to landlords or pursuant to Article 9 of the Missouri Uniform Commercial Code (the "UCC"). Tenant has executed and delivered herewith or it will do so without demand at the first practicable date that such instruments may be effectively filed, financing statements for purposes of perfecting this lien. Tenant shall also establish the Escrow Accounts as prescribed by Landlord in order to fully perfect Landlord's lien thereon." 3. The Lease is hereby amended by adding thereto a new Section 29.7, as follows: "29.7 Remedies. Upon an Event of Default, Landlord (i) shall be entitled under the UCC to all of Tenant's Receivables and proceeds thereof, including the immediate right to receive payment and the right to immediate payment of the balance of the Escrow Accounts to Landlord; and (ii) may enter the Premises and take possession or assert its rights, under this Section, to such portion of the Premises and Tenant's Property as Landlord may elect, including Tenant's rights under the Gaming Equipment leases (subject to the rights of the holders of the Equipment Liens) (the "UCC Elected Property"). If at the end of ten (10) days, Tenant shall not have fulfilled its obligations under this Lease, then Landlord, at Landlord's option, may proceed to sell all or part of the UCC Elected Property, at a public or private sale, pursuant to the provisions of the UCC, applying the proceeds first to the cost and expense of such sale, storage fees and the cost of preparation of such property for sale and then to the satisfaction of Tenant's obligations to Landlord under this Lease." 4. The parenthetical contained in the first sentence of Section 30.1 shall be restated as follows: "(other than (i) the portion of any signs bearing any "Players" mark, which Tenant may remove; (ii) the Tenant's Property that is not affixed to the Premises; and (iii) Gaming Equipment; provided that any such Tenant's Property or Gaming Equipment that is subject to the lien granted to Landlord pursuant to Section 28 or the option of Landlord to assume same as provided below shall remain subject to that lien until Tenant has paid monies due under this Lease and performed the agreements of Tenant under this Lease or such option to assume)" 5. Except as amended hereby, the Lease remains unmodified and in full force and effect. -5- IN WITNESS WHEREOF, the undersigned have executed this Amendment to lease Agreement the day and year first above written. "Landlord" RIVERSIDE JOINT VENTURE BY: PLAYERS MH, L.P., General Partner BY: PLAYERS MARYLAND HEIGHTS, INC., Its General Partner ATTEST: _____________________ By: _____________________ Its: _____________________ BY: HARRAH'S MARYLAND HEIGHTS CORPORATION, General Partner ATTEST: By: ______________________________ _____________________ Its: ______________________________ "Tenant" PLAYERS MH, L.P. BY: PLAYERS MARYLAND HEIGHTS, INC., Its General Partner ATTEST: By: _____________________ _____________________ Its: _____________________ -6- EX-10.8 9 RIGHT OF FIRST REFUSAL RIGHT OF FIRST REFUSAL TO PURCHASE THIS AGREEMENT (the "Agreement") made and entered into as of this 3rd day of December, 1995 by and between HARRAH'S MARYLAND HEIGHTS LLC, a Delaware limited liability company ("Grantor"), and PLAYERS MH, L.P., a Missouri limited partnership ("Grantee"). STATEMENT OF FACTS A. Grantor is the fee simple owner of certain real property, together with all rights and easements appurtenant thereto, located in the City of Maryland Heights, County of St. Louis, Missouri, and being more particularly described on Exhibit A attached hereto and incorporated herein by this reference ("Harrah's Land"); and B. Grantor's Affiliate Harrah's Maryland Heights Corporation ("HMHC") and Grantee are partners in Riverside Joint Venture (the "Venture") pursuant to the terms of a Partnership Agreement dated November 2, 1995 (the "Joint Venture Agreement") pursuant to which HMHC has obligated Grantor to grant to Grantee the rights contained in this Agreement. C. The Venture is leasing the Harrah's Land pursuant to the terms of a Ground Lease with Grantor as Landlord dated as of November 3, 1995 (the "Ground Lease"). D. The right of first refusal being granted herein is subject to the exceptions provided for in Section 8(d) of the Joint Venture Agreement. NOW, THEREFORE, for and in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto mutually agree as follows: 1. Right of First Refusal to Purchase. Grantor hereby grants to Grantee, the right to purchase (the "Purchase Right") Harrah's Land or any portion thereof at a price equal to any bona fide arm's length written offer that Grantor is willing to accept (the "Offer") received from any person or entity which is not an Affiliate (as defined in the Joint Venture Agreement) of Grantor (the "Third Party") for Harrah's Land or such portion thereof and upon identical terms and conditions of the Offer (including, without limitation, the closing date thereunder) subject and subordinate to any rights of third parties currently existing, and any rights of holders of mortgages, easements or leases (including only the Ground Lease, Harrah's Lease (as defined in the Joint Venture Agreement) and Players' Lease (as defined in the Joint Venture Agreement)) hereafter granted, and other third-party rights approved by Grantee, which approval shall not be conditioned, or unreasonably withheld or delayed. Within ten (10) days of Grantor's receipt of the Offer, Grantor shall provide Grantee with written notice ("Grantor's Notice") of the Offer enclosing a true and correct copy of the Offer. Grantor's Notice shall be accompanied by Grantor's notification to Grantee of Grantor's intent to accept such Offer. Grantor shall record Grantor's Notice with the Recorder of Deeds of St. Louis County, Missouri (without a copy of the Offer) on the same day that Grantor mails Grantor's Notice to Grantee. Grantee shall then have the first option to purchase Harrah's Land or such portion thereof by giving written notice to Grantor of its intention to purchase Harrah's Land or such portion thereof at the same price and on the same terms as the Offer, subject to the provisions of Section 8(d) of the Joint Venture Agreement which option, if exercised, must be exercised by Grantee within thirty (30) days of the date of Grantee's receipt (or refusal to accept delivery of) of Grantor's Notice (the "Acceptance Period"). Grantee shall be deemed to have "exercised" its option if Grantee gives Grantor written notice of its intent to purchase within the Acceptance Period and records such notice with the Recorder of Deeds of St. Louis County, Missouri (the "Acceptance Notice"). If Grantee does not give and record the Acceptance Notice within the Acceptance Period, then Grantor may then, after recording evidence of Grantee's receipt (or refusal to accept delivery of) of Grantor's Notice, proceed to sell Harrah's Land or such portion thereof to the Third Party at the same price and on the same terms set forth in the Offer and the Purchase Right shall be extinguished of record on the date that the deed of conveyance from Grantor to the Third Party is recorded with respect to the property described in such deed. If Grantee does not exercise its option hereunder and Harrah's Land or such portion thereof is not sold pursuant to such Offer or the terms of the Offer are materially changed (which shall constitute a new Offer), so long as the term of this Agreement remains unexpired or has not been terminated, Grantee shall have, upon the same conditions and notice, the continuing first option to purchase Harrah's Land upon the terms of any subsequent offer or offers to purchase or the materially changed Offer. If a portion of the Harrah's Land is so sold, Grantee shall retain the Purchase Right with respect to the remaining portion of the Harrah's Land. In any event and notwithstanding the foregoing, the Purchase Right shall terminate upon the expiration or earlier termination of this Agreement. Notwithstanding the foregoing, the Purchase Right shall not apply to an Exempt Sale or Disposition (as defined in the Joint Venture Agreement) and the Purchase Right shall survive any Exempt Sale or Disposition and shall not be extinguished thereby. 2. Term. The term of this Agreement shall expire upon the earlier to occur of the following dates: (i) the date upon which neither Grantor nor any Affiliate of Grantor remains a partner of the Venture; or (ii) the date upon which the Players Lease (as defined in the Joint Venture Agreement) expires or is otherwise terminated; or (iii) the date upon which the Ground Lease expires or is otherwise terminated. 3. Amendments. No oral amendment of this Agreement shall be binding on the parties hereto. Any modification or amendment of this Agreement must be in writing and signed by Grantor and -2- 4. Recording. This Agreement may be recorded by Grantor or Grantee without the prior written consent of the other party at the expense of the party so recording same. 5. Captions. Any captions contained in this Agreement are for convenience only and shall not be considered as part of this Agreement for purposes of construction of the terms and conditions hereof. 6. Notice. Any notice which may or is required to be given hereunder shall be deemed given when actually received. If such notice is mailed, it shall be deposited, registered or certified, return receipt requested, in the United States mail, or by commercial overnight courier such as Federal Express or Airborne, addressed to the parties at the addresses set forth after their respective names below, or at such different addresses as such party may have designated to the other by notice hereunder. GRANTOR: Harrah's Maryland Heights LLC c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, TN 38117 Attention: General Counsel, Gaming Development GRANTEE: Players MH, L.P. c/o Players International, Inc. 3900 Paradise Road, Suite 135 Las Vegas, NV 89109 Attention: General Counsel 7. Governing Law. This Agreement shall be governed by the laws of the State of Missouri. 8. Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns, except as otherwise provided herein. -3- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GRANTOR HARRAH'S MARYLAND HEIGHTS LLC BY: HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY, its Managing Member By: /s/ William S. Rosenberg ----------------------------- William S. Rosenberg Authorized Representative GRANTEE PLAYERS MH, L.P. BY: PLAYERS MARYLAND HEIGHTS, INC., its general partner By: /s/ Steven P. Perskie ----------------------------- Steven P. Perskie Secretary -4- EX-10.9 10 OPTION AGREEMENT OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") made and entered into as of the 3rd day of November, 1995, by and between RIVERSIDE JOINT VENTURE, a Missouri general partnership ("Venture"), and HARRAH'S MARYLAND HEIGHTS LLC, a Delaware limited liability company ("Harrah's"). STATEMENT OF FACTS A. Harrah's is the owner of certain land (the "Harrah's Property"), located in the City of Maryland Heights, St. Louis County, Missouri, the same being more particularly described in Exhibit A attached to this Agreement and made a part hereof. B. The Venture is the owner of certain land (the "Venture Property") lying adjacent to the Harrah's Property and located in the City of Maryland Heights, St. Louis County, Missouri, the same being more particularly described in Exhibit B attached to this Agreement and made a part hereof. C. The Venture has heretofore entered into a certain Ground Lease with Harrah's dated as of November 3, 1995 (the "Ground Lease") pursuant to which the Venture has leased the Harrah's Property from Harrah's, a Memorandum of which was recorded on November ____, 1995, as Daily No. ______ of the Office of the Recorder of Deeds for St. Louis County, Missouri. D. Harrah's and the Venture have also entered into as of the date hereof a Reciprocal Easement Agreement (the "Reciprocal Easement Agreement") which was recorded on November ____, 1995 as Daily No. ________ of the Office of the Recorder of Deeds for St. Louis County, Missouri granting easement rights over the Harrah's Property to the Venture and over the Venture Property to Harrah's. E. The Venture has agreed to grant Harrah's an option to purchase the Venture Property upon the expiration or termination of the Ground Lease for its Fair Market Value (as defined below). AGREEMENT In consideration of the mutual covenants contained in this Agreement, the parties hereto agree as follows: 1. Option to Purchase. The Venture hereby grants Harrah's an exclusive option to purchase the Venture Property (the "Option") from the Venture, on the terms and subject to the conditions set forth in this Agreement. 2. Consideration; Term. The Venture grants this option to Harrah's in exchange for Ten Dollars ($10.00) and other good and valuable consideration (including without limitation the execution and delivery of the Ground Lease and Reciprocal Easement Agreement), receipt of which is hereby acknowledged. Subject to the terms and conditions set forth herein, the term of this Agreement shall commence on the date hereof and shall terminate sixty (60) days after the expiration or termination of the Ground Lease (the "Expiration Date"). 3. Exercise of Option. So long as Harrah's is not in default under the terms of this Agreement and the term of this Agreement has not expired, Harrah's shall have the right upon the expiration or termination of the Ground Lease (the "Ground Lease Expiration") to exercise the Option. In order to effectively exercise the Option, Harrah's shall simultaneously give the Venture written notice of Harrah's intent to exercise the option. The Option must be exercised, if at all, after the Ground Lease Expiration but prior to the Expiration Date, and if not so exercised this Agreement shall automatically expire and terminate. The date upon which Harrah's exercises the Option by notice to the Venture is hereinafter called the "Exercise Date". 4. Purchase Price. The Purchase Price for the Property (the "Purchase Price") shall be equal to its Fair Market Value (as defined below). "Fair Market Value" as used above shall be determined pursuant to an MAI (or comparable) real estate appraisal as follows: Harrah's and the Venture shall within twenty (20) days following the Exercise Date agree upon a qualified real estate appraiser to determine the Fair Market Value of the Venture Property. If Harrah's and the Venture are unable to agree upon a single real estate appraiser to determine Fair Market Value within such initial twenty (20) day period, then Harrah's and the Venture shall within forty (40) days after the Exercise Date each select a qualified real estate appraiser. The two (2) appraisers selected by Harrah's and the Venture shall select a third qualified appraiser within ten (10) days following their appointment, and the three (3) appraisers shall independently determine the Fair Market Value of the Venture Property and Fair Market Value as used herein shall be one-third of the aggregate sum of the Fair Market Values determined by such appraisers unless the appraisal of one of such appraisers differs by more than ten percent (10%) from the average amount of the other two (2) in which case it will be disregarded and such average amount of the other two (2) appraisals shall be Fair Market Value. The real estate appraiser(s) shall promptly after appointment render a written report to the parties, in customary form which specifies the basis for his (or their) determination. If either party fails to select a real estate appraiser, as provided above, the real estate appraiser selected by the other party shall determine Fair Market Value. If a single real estate appraiser determines Fair Market Value, as provided above, the parties shall share equally the fee and out-of-pocket expenses of such real estate appraiser. If three (3) real estate appraisers determine Fair Market Value, as provided above, then each party shall be responsible for all fees and expenses of the real estate appraiser selected by it, and the parties shall share equally the fee and expenses of the third appraiser selected by the other appraisers. 5. Closing. Harrah's shall purchase the Property "AS IS" and no representations or warranties as to the condition or nature of the Property are made or implied by the Venture under this Agreement. Any monetary encumbrances on the Property shall be removed on or before Closing. Closing pursuant to this Agreement (the "Closing" or "Closing Date") shall be on a date selected by Harrah's, which date shall be a business day which is not sooner than thirty (30) days nor later than sixty (60) days after the Exercise Date at 10:00 a.m., St. Louis -2- time, or on such earlier date or at such different time as the parties shall mutually agree in writing, in the offices of the Harrah's counsel. 6. Closing Terms and Procedures. The Venture shall prepare or cause to be prepared a closing statement to be delivered to Harrah's before Closing reflecting all adjustments, prorations and credits to the Purchase Price made pursuant to this Agreement. At Closing, the Venture shall deliver a special warranty deed conveying the Venture Property to Harrah's free and clear of all encumbrances other than those non-monetary encumbrances noted in the title report received at the time of the Venture's acquisition of the Venture Property, if any, and encumbrances thereafter created or approved by Harrah's or any affiliate of the Venture. At Closing, Harrah's shall deliver the Purchase Price, as adjusted, in the form of cash or by wire transfer, and both parties shall, at Closing, deliver all other documents as shall be reasonably required to fully consummate the transactions described herein. 7. Adjustments, Prorations, Credits and Payments. The following adjustments, prorations and credits to the Purchase Price shall be computed and made as of the Closing and shall be reflected on the closing statement: (a) Real estate taxes and assessments and Levee District taxes and assessments for the then current year and rents and other customary items shall be prorated between the parties. Whenever this Agreement provides that charges or credits shall be prorated as of Closing, the Venture shall be charged or credited, as the case may be, with the day of Closing. (b) Harrah's shall pay all costs of title searches for the Venture Property and the title insurance premium and all other costs and fees related to the issuance of a policy of title insurance covering the Venture Property, the issuance of which in a form satisfactory to Harrah's shall be a condition to Harrah's obligation to close hereunder. (c) The Venture shall furnish Harrah's with a copy of the Venture's existing survey of the Property. In the event Harrah's shall order and obtain an additional survey, Harrah's shall do so at its sole cost and expense. (d) Except as expressly provided herein, each party shall pay its own attorneys' fees and expenses and all other costs and expenses incurred by it in connection with this Agreement and the transactions described herein. 9. Harrah's Default. If Harrah's shall fail to complete the purchase as provided by this Agreement by reason of any default of Harrah's under the terms of this Agreement, and shall fail to cure such default within thirty (30) days after written notice of such default from the Venture, the Venture shall be released from the Venture's obligation to sell the Venture Property to Harrah's and from any other obligation pursuant to this Agreement. 10. Venture's Default. In the event of default by the Venture in performance of its obligations hereunder, Harrah's shall, at Harrah's option, be entitled to all rights and remedies at law or in equity. -3- 11. Assignment. Harrah's shall not, without the prior written consent of the Venture (which consent shall not unreasonably be withheld), sell, assign or transfer, whether by operation of law, merger, acquisition or otherwise, all or any of its rights under this Agreement, except or in connection with a Permitted Transfer of the Project Property as provided in the Partnership Agreement of the Venture. 12. Successors and Assigns. Subject to the restriction on assignment set forth above, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective parties and their successors and assigns in accordance with the terms of this Agreement. 13. Notices. All notices required or permitted to be given pursuant to this Agreement shall be effective only if in writing given as provided in this Section. Notices shall be deemed given and received upon deposit in the United States mail, as registered or certified mail, postage prepaid, return receipt requested, or when delivered personally addressed as follows: If to Venture: Riverside Joint Venture c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, TN 38117 Attention: General Counsel with a copy to: Players MH, L.P. c/o Players International, Inc. 1300 Atlantic Avenue, Suite 800 Atlantic City, NJ 08401 If to Harrah's: Harrah's Maryland Heights LLC c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, TN 38117 Attention: General Counsel or to such other address as the party to receive such notice shall theretofore have furnished to the other party by notice given in accordance with this Section. 14. Entire Agreement. This Agreement is the entire agreement between the parties with respect to the subject matter hereof and sets forth all the terms, covenants, agreements, conditions, undertakings, representations and warranties of the parties and supersedes all prior understandings, inducements, promises, warranties and representations, express or implied, -4- oral or written, and may be amended only by written agreement, signed by both parties to this Agreement. 15. Headings. Section headings are for convenience only and shall not be construed to affect the meaning or scope of any provision of this Agreement. 16. Applicable Law. This Agreement shall be governed, and the rights and liabilities of the parties determined, by the laws of the State of Missouri. 17. Severability. All terms and provisions of this Agreement and all other documents executed in connection herewith and therewith are severable, and any term or provision or the application thereof to any person or situation which may be prohibited or unenforceable by law shall be ineffective to the extent of such prohibition or unenforceability without affecting the remainder of such document, any other application of such term or provision or any other document. 18. Memorandum of Option. Upon the execution hereof, Harrah's and the Venture shall execute and Harrah's shall record in the St. Louis County, Missouri records, at its sole cost and expense, a Memorandum of Option Agreement in the form attached hereto as Exhibit C. 19. Subordination. Harrah's agrees to subordinate its rights under this Agreement to the lien of any institutional lender which secures its loan with a mortgage or deed of trust on the Venture Property consented to by Harrah's or any affiliate of Harrah's. 20. Rule Against Perpetuities. If the rule against perpetuities or any rule of law with respect to restrictions on the alienation of property or any other rule of law shall limit the time when any event contemplated by this Option may occur, the happening of such event shall not be impaired within any period permitted by such rule. Such period with respect to the rule against perpetuities shall expire upon the expiration of twenty (20) years after the death of the last survivor of the following individuals: Emily Rosenberg of Memphis, Tennessee Dylan Loveland of Memphis, Tennessee Dylan Buffalo of Germantown, Tennessee The intent of this provision is to allow to the maximum extent permissible by an applicable rule of law the occurrence of any event contemplated by this Option. -5- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. RIVERSIDE JOINT VENTURE, a Missouri general partnership BY: PLAYERS MH, L.P., its General Partner BY: PLAYERS MARYLAND HEIGHTS, INC., its sole general partner (SEAL) By: /s/ Steven P. Perskie --------------------------------- Steven P. Perskie, Secretary BY: HARRAH'S MARYLAND HEIGHTS CORPORATION, its General Partner (SEAL) By: /s/ William S. Rosenberg --------------------------------------- William S. Rosenberg Title: Authorized Representative HARRAH'S MARYLAND HEIGHTS LLC BY: HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY, its Managing Member (SEAL) By: /s/ William S. Rosenberg --------------------------------------- William S. Rosenberg Title: Authorized Representative -6- EXHIBIT A ("Harrah's Property") The following real estate is located in the County of St. Louis, State of Missouri: Lot 1 of Riverside Center, a subdivision, according to subdivision plat recorded in Plat Book 339, Pages 94 through 97 in the Office of the Recorder of Deeds for St. Louis County, Missouri, as said Lot 1 of Riverside Center has been adjusted pursuant to boundary adjustment plat recorded in Plat Book ____, Page ____ in the Office of the Recorder of Deeds for St. Louis County, Missouri. -7- EXHIBIT B ("Venture Property") The following real estate located in the County of St. Louis, State of Missouri: Lots 3, 4 and 5 of Riverside Center, a subdivision, according to subdivision plat recorded in Plat Book 339, Pages 94 through 97 in the Office of the Recorder of Deeds for St. Louis County, Missouri. -8- EXHIBIT C MEMORANDUM OF OPTION THIS MEMORANDUM OF OPTION AGREEMENT, executed as of this ______ day of November, 1995, by RIVERSIDE JOINT VENTURE, a Missouri general partnership ("Venture") and HARRAH'S MARYLAND HEIGHTS LLC, a Delaware limited liability Company ("Harrah's"). Pursuant to a certain Option Agreement between the Venture and Harrah's dated as of the ______ day of November, 1995 (the "Option Agreement"), Venture has granted and does hereby grant to Harrah's an option to purchase the real property described on Schedule A hereto and incorporated herein (the "Property") for the price and upon such further terms and conditions as are therein provided. The option term commences on the date hereof and terminates sixty (60) days after the date of the expiration or termination of that certain Ground Lease between the Venture and Harrah's of even date, a memorandum of which has been recorded with the Recorder of Deeds of St. Louis County, Missouri on November _____, 1995 as Daily No. _____________, unless earlier terminated as provided in the Option Agreement. IN WITNESS WHEREOF, the parties have executed this Notice of Option Agreement as of the day and year first above written. RIVERSIDE JOINT VENTURE, a Missouri general partnership BY: PLAYERS MH, L.P., its General Partner BY: PLAYERS MARYLAND HEIGHTS, INC., its sole general partner (SEAL) By: ---------------------------------- Steven P. Perskie, Secretary BY: HARRAH'S MARYLAND HEIGHTS CORPORATION, its General Partner (SEAL) By: ------------------------------------------- William S. Rosenberg Authorized Representative -9- HARRAH'S MARYLAND HEIGHTS LLC BY: HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY, its Managing Member (SEAL) By: ------------------------------------- William S. Rosenberg Authorized Representative STATE OF MISSOURI ) ) SS CITY OF ST. LOUIS ) On this _______ day of November, 1995, before me appeared STEVEN P. PERSKIE to me personally known, who, being by me duly sworn, did say that he is the Secretary of PLAYERS MARYLAND HEIGHTS, INC., a Missouri corporation which is the general partner of PLAYERS MH, L.P., a Missouri limited partnership, which in turn is a general partner of RIVERSIDE JOINT VENTURE, a Missouri general partnership, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation for said limited partnership as a general partner of said general partnership, by authority of its Board of Directors and said STEVEN P. PERSKIE acknowledged said instrument to be the free act and deed of said corporation, said limited partnership and said general partnership. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the City and State aforesaid, the day and year first above written. ________________________________ Notary Public My commission expires: -10- STATE OF MISSOURI ) ) SS CITY OF ST. LOUIS ) On this _______ day of November, 1995, before me appeared WILLIAM S. ROSENBERG, to me personally known, who, being by me duly sworn, did say that he is the Authorized Representative of HARRAH'S MARYLAND HEIGHTS CORPORATION, a corporation of the State of Nevada, a general partner of RIVERSIDE JOINT VENTURE, a Missouri general partnership, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation as a general partner of said partnership, by authority of its Board of Directors and said WILLIAM S. ROSENBERG acknowledged said instrument to be the free act and deed of said corporation and said general partnership. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the City and State aforesaid, the day and year first above written. ________________________________ Notary Public My commission expires: STATE OF MISSOURI ) ) SS CITY OF ST. LOUIS ) On this _____ day of November, 1995, before me appeared WILLIAM S. ROSENBERG to me personally known, who, being by me duly sworn, did say that he is the Authorized Representative of HARRAH'S MARYLAND HEIGHTS OPERATING COMPANY, a Nevada corporation which is the Managing Member of HARRAH'S MARYLAND HEIGHTS LLC, a Delaware limited liability company, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation acting as the Managing Member of said limited liability company, and said WILLIAM S. ROSENBERG acknowledged said instrument to be the free act and deed of said limited liability company. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the City and State aforesaid, the day and year first above written. ________________________________ Notary Public My commission expires: -11- Schedule A -12- EX-10.10 11 AGREEMENT DEVELOPMENT AGREEMENT FOR MARYLAND HEIGHTS, MISSOURI RIVERBOAT GAMING PROJECT TABLE OF CONTENTS ARTICLE 1 - RIVERBOAT GAMING PROJECT............................................................................ 2 1.1 City Assistance............................................................................... 2 1.2 Costs......................................................................................... 2 1.3 Designation of Home Dock...................................................................... 2 1.4 Operations.................................................................................... 2 1.5 Missouri Gaming Application................................................................... 2 1.6 City Services................................................................................. 3 1.7 City Taxes.................................................................................... 3 1.8 Litigation Cooperation........................................................................ 3 ARTICLE 2 - EARTH CITY EXPRESSWAY............................................................................... 4 2.1 General....................................................................................... 4 2.2 Road Project.................................................................................. 4 2.3 Responsibility................................................................................ 5 2.4 Partnership Assessment........................................................................ 5 2.5 Partnership Loan.............................................................................. 5 2.6 City Escrow Account........................................................................... 7 2.7 Escrow Agreements and Security Interest....................................................... 7 2.8 Tax Increment Financing....................................................................... 8 2.9 Financing of City Road Project - Road Bonds................................................... 8 A. Issuance of Road Bonds............................................................... 9 B. Sale of Bonds........................................................................ 9 C. Limited Guaranty..................................................................... 10 2.10 Financing of Road Project - Alternate Road Project............................................ 12 A. Identification of Alternate Road Project............................................. 12 B. Election of Alternate Road Project................................................... 12 C. Termination of Agreement............................................................. 14 D. Limitation On Disbursements Until Road Project Elected............................... 14 2.11 Lien on Road Project Improvements............................................................. 14 2.12 Audit and Financial Information............................................................... 15 2.13 No Sharing Of City Tax Revenues............................................................... 15 ARTICLE 3 - REPRESENTATIONS..................................................................................... 15 3.1 City Representations.......................................................................... 15 3.2 Partnership's Representations................................................................. 15 ARTICLE 4 - CONDITIONS PRECEDENT................................................................................ 15 4.1 Conditions to Partnership's Obligations....................................................... 15 ARTICLE 5 - CLOSING............................................................................................. 16 5.1 Closing Date.................................................................................. 16 5.2 Actions to be Taken at the Closing............................................................ 17 i ARTICLE 6 - TERMINATION......................................................................................... 17 6.1 Termination................................................................................... 17 ARTICLE 7 - GENERAL PROVISIONS.................................................................................. 18 7.1 Notices....................................................................................... 18 7.2 Successors and Assigns........................................................................ 19 7.3 Attorneys Fees................................................................................ 19 7.4 Governing Law................................................................................. 19 7.5 Merger........................................................................................ 19 7.6 Amendments.................................................................................... 20 7.7 Multiple Originals............................................................................ 20 7.8 Severability.................................................................................. 20 7.9 Interpretation................................................................................ 20 7.10 Default and Cure Rights....................................................................... 20 7.11 Waiver........................................................................................ 21 7.12 Force Majeure................................................................................. 21 7.13 Third Party Beneficiaries..................................................................... 21
ii DEVELOPMENT AGREEMENT FOR MARYLAND HEIGHTS, MISSOURI RIVERBOAT GAMING PROJECT THIS DEVELOPMENT AGREEMENT FOR THE MARYLAND HEIGHTS, MISSOURI RIVERBOAT GAMING PROJECT (this "Agreement") is entered into on _________________________, 1995 by the City of Maryland Heights, Missouri, a Missouri third class city (the "City") and Riverside Joint Venture, a Missouri general partnership (the "Partnership"). WHEREAS, the Partnership's partners are Harrah's Maryland Heights Corporation, a Nevada corporation ("HMHC") and Players MH, L.P., a Missouri limited partnership ("Players MH"); and WHEREAS, the voters of Maryland Heights on April 6, 1993 approved excursion riverboat gaming in the City; and WHEREAS, the City has granted certain approvals for a project that includes development of a land based facility (the "Land Based Project") on a riverfront development site in Maryland Heights (the "Project Site") which Project Site is described on Exhibit A hereto, in conjunction with the casino(s) operation located on one or more floating vessels or facilities ("Riverboats"); and WHEREAS, the portion of the project that is located on the Riverboats (the "Riverboat Project") includes Riverboats moored at the Project Site (the Land Based Project and the Riverboat Project are collectively referred to as the "Riverboat Gaming Project"); and WHEREAS, HMHC, for itself or another subsidiary of Harrah's Entertainment, Inc., and Players Maryland Heights, Inc. ("PMH") for itself or another subsidiary of Players International, Inc., have each applied to be licensed by the Missouri Gaming Commission to operate up to two Riverboats in connection with the Riverboat Gaming Project and the City has adopted Resolutions 95-417 and 95-418 in support thereof; and WHEREAS, the Harrah's entity to be licensed to operate the Harrah's Riverboat(s) ("Harrah's Operator"), presently contemplated to be Harrah's Maryland Heights LLC, a Delaware limited liability company, and the Players entity to be licensed to operate the Players' Riverboat(s) ("Players' Operator"), presently contemplated to be Players MH, L.P., are hereinafter referred to collectively as the "Operators" and together with HMHC, PHM, Players MH and the Partnership are collectively referred to as the "Companies"; and 1 WHEREAS, the City desires to encourage development of the Project Site and has determined that development of the Project Site will aid the City by creating employment opportunities and tax base; and WHEREAS, the City and the Partnership are entering into this Agreement to set forth certain obligations and responsibilities of the City and the Partnership with respect to development of the Riverboat Gaming Project and their respective obligations with respect to a proposal to extend the Earth City Expressway as described herein (the "Road Project"), which proposal is being investigated by the City; NOW, THEREFORE, in consideration of the covenants contained herein, the City and the Partnership agree as follows: ARTICLE 1 - RIVERBOAT GAMING PROJECT 1.1 City Assistance. The City to the extent permitted by law agrees to pass all zoning, sign and other ordinances, issue all permits and take all other actions necessary to develop and operate the Riverboat Gaming Project subject to: (a) submission to the City of plans and documents in compliance with City building codes and other applicable City ordinances, and (b) compliance with City building codes. The City agrees to act promptly and reasonably with respect to all requests for such approvals and other actions. 1.2 Costs. The Riverboat Gaming Project will be developed at the sole cost of the Partnership and the City is not responsible for paying for construction or operating costs. 1.3 Designation of Home Dock. Pursuant to Chapter 313, RSMo, the Companies agree to designate the City as their "home dock" (as that term is defined in Chapter 313, Revised Statutes of Missouri) with respect to the Riverboat Gaming Project. 1.4 Operations. The Partnership and Operators have the right to establish the hours of operation of the Riverboat Gaming Project from time to time in accordance with the rules of the Missouri Gaming Commission. The City acknowledges the Companies may in the Companies' sole discretion from time to time abandon all or any portion of the Riverboat Gaming Project, or change the nature and character of the Riverboat Gaming Project, including without limitation, the businesses located within the Land Based Project, subject to compliance with applicable zoning laws. 1.5 Missouri Gaming Application. HMHC and PMH have each filed an application with the Missouri Gaming Commission for licenses to own or operate excursion gambling boats at the Riverboat Gaming Project. The City has prepared its Economic Development, Impact and Affirmative Action Plan ("Plan") pursuant to the rules and regulations of the Missouri Gaming Commission ("Commission"). The Plan includes the endorsement by the City of Harrah's Operator and Players' Operator as riverboat gaming operators, and such other information as the City deemed necessary. So long as the Partnership is in compliance with the terms of this 2 Agreement, the City's endorsement may not be altered or withdrawn, and the City agrees to assist the Companies in any reasonable manner, including appearances before the Commission, in connection with Harrah's Operator and Players' Operator efforts to obtain Missouri gaming licenses for the Riverboat Gaming Project. 1.6 City Services. The City agrees to provide the same services to the Riverboat Gaming Project that it provides to other businesses located in the City at no additional or extra charge. The City shall not assess or charge the Companies for utilities, tap-in rights, hook-ups, refuse pick-up or any other charge for City services or City owned services which are not consistent with the charges charged to any other business in the City. 1.7 City Taxes. The City agrees not to impose any Gaming Tax (as defined below). The City also agrees to not impose any taxes on the Companies or their property that operate or are applied in a discriminatory manner (by imposing a burden on Companies in a substantially different manner than the burden imposed on the class of all businesses in the City) or which are not paid by nongaming businesses located in the City. The parties agree that this Section 1.7 does not limit the City's right to receive proceeds from the statewide gaming tax imposed by the state pursuant to Sections 313.800 et seq., R.S.Mo., or substitute state provisions. As used herein "Gaming Tax" means any tax based on adjusted gross receipts, net gaming revenue, admissions tax or any other tax based on gaming, including but not limited to the taxes imposed by the state pursuant to Sections 313.800 et seq., R.S.Mo., or substitute state provisions, but said term does not include income taxes that are also paid by nongaming companies. As used herein the term "Admission Tax" refers to one type of Gaming Tax and refers to the tax imposed by section 313.820, R.S.Mo. 1.8 Litigation Cooperation. In the event that any litigation is filed to stop the Riverboat Gaming Project or which otherwise relates to the Riverboat Gaming Project or in the event that the Companies or their affiliates file litigation against a third party to facilitate the Riverboat Gaming Project (all such litigation is collectively referred to as the "Litigation"), the parties shall cooperate with each other to facilitate a prompt resolution of the litigation that allows the Riverboat Gaming Project to be completed as soon as possible. Subject to the agreement of the parties, such cooperation includes sharing of information, consultation and cooperation with each other concerning prosecution and settlement of the Litigation, and may include sharing of legal expenses and/or use of the same law firm (approved by the Partnership and the City) to represent the Companies and the City in the Litigation. ARTICLE 2 - EARTH CITY EXPRESSWAY 2.1 General. Earth City Expressway currently ends at Prichard Farm Road. The parties hereto have agreed that extension of the Earth City Expressway to Olive Boulevard will benefit the residents of the City and the residents of St. Louis County by providing them with a highway that will give them easier access to Interstate 70 and surrounding areas and will help alleviate traffic congestion on other streets. The City and the Partnership have agreed to cooperate with each other to cause the Earth City Expressway to be extended on the terms and 3 conditions set forth in this Article 2. The City has determined that operation of the Riverboat Gaming Project will cause increased traffic on certain streets in the City and has imposed certain impact fees to be paid by the Partnership as set forth in this Article 2. The City agrees that the obligations of the Partnership with respect to the Road Project as set forth in this Agreement satisfy all requirements under Section V(C) of Ordinance No. 95-974, adopting a PDM planned development district for the Riverboat Gaming Project (the "Zoning Ordinance") and together with the other roadway and infrastructure improvements required by the Zoning Ordinance, satisfy all requirements of the Companies to construct or pay for construction of any roads and/or infrastructure for roads in connection with the Riverboat Gaming Project. 2.2 Road Project. The Road Project to be undertaken is the extension of the Earth City Expressway from Prichard Farm Road to Olive Boulevard. The term "City Road Project" means the Road Project the City has proposed building. The "Alternate Road Project" means the Road Project that would be built by the Road Joint Venture (defined below). The term "Road Project" means either the City Road Project or the Alternate Road Project. As provided in Section 10.B below the City and the Partnership will agree on an election between the City Road Project and the Alternate Road Project, and in no event is the Partnership obligated to provide financing for both projects. The term "Road Project Costs" includes all costs incurred by the City in connection with planning and constructing the Road Project, including but not limited to all planning costs, all financing costs (including the Loan as defined below), all land acquisition costs and all construction costs. Unless the parties otherwise agree, the Road Project shall be of the same quality of construction as the existing Earth City Expressway. The City agrees to proceed with due diligence to complete the Road Project. The financial obligations of the Companies with respect to the Road Project are set forth in this Article 2, and the Companies have no obligation to provide any additional funds for the Road Project. 2.3 Responsibility. The City either by itself or in conjunction with other governmental agencies is responsible for taking all actions necessary to plan and construct the Road Project. 2.4 Partnership Assessment. The City has imposed or hereby imposes a $2,225,000.00 assessment on the Partnership (the "Assessment") as the Companies' share of the Road Project Costs. The Assessment shall be due within 10 days after the later of the effective date of the Zoning Ordinance or the date the U.S. Army Corps of Engineers issues all permits needed for the Riverboat Gaming Project. Subject to Section 2.10D below, the Assessment shall be used by the City to pay for part of the Road Project Costs. The Assessment shall be delivered to an escrow agent selected by the Partnership and approved by the City ("Escrow Agent") to be held in escrow in an Assessment Escrow Account. The Assessment shall be invested in investments (the "Investments") in accordance with the investment guidelines attached hereto as Exhibit B. Subject to Section 2.10D below, the Assessment will be disbursed by the Escrow Agent to pay Road Project Costs upon receipt of a draw request signed by the City Treasurer or other authorized City official summarizing the Road Project Costs to be paid for expenses actually incurred. Fifteen (15) days in advance of each draw, copies of each draw request shall be forwarded to the Partnership and the Partnership shall have the right during such 15 days to 4 object to any such costs which it reasonably believes do not constitute appropriate Road Project Costs, in which event a draw shall not be paid for such costs unless and until the objection is resolved or until the City Attorney provides a legal opinion that such costs are appropriate Road Project Costs under this Agreement and are permissible redevelopment project costs under the tax increment financing statute and the district established pursuant to Section 2.8 below. The Assessment is to be disbursed in full before the Loan (defined below) is disbursed. In the event that actual construction of the Road Project has not commenced within five (5) years after the date of this Agreement, any funds remaining in the Assessment Escrow Account shall be returned to the Partnership. 2.5 Partnership Loan. The Partnership agrees to loan Two Million Two Hundred Twenty Five Thousand Dollars ($2,225,000.00) (the "Loan") to the City to pay for part of the Road Project Costs within 10 days after the last to occur of the following: (i) the effective date of the Zoning Ordinance; (ii) the U.S. Army Corps of Engineers issues all permits needed for the Riverboat Gaming Project, (iii) the City has passed any inducement resolution requested by the Partnership, and (iv) the City has complied with the requirements of Section 2.8 relating to the Loan. The proceeds of the Loan shall be delivered to the Escrow Agent to be held in escrow in a Loan Escrow Account (the "Loan Escrow Account"). The Escrow Agent shall invest the proceeds of the Loan in the Investments until needed. Escrow Agent shall cause all such accrued interest on the proceeds of the Loan to be paid on a quarterly basis to the Partnership. The City agrees to repay the Loan, together with interest on any amount disbursed from the date of disbursement at a rate equal to the average rate of interest earned on the Investments, in full on the earlier of: (a) the date the Road Bonds (as defined below) or TIF Notes (as defined below) are issued, or (b) the date of the fifth anniversary of the Closing (the earlier of said dates is referred to as the "Loan Maturity Date"). After the Assessment has been expended, and subject to Section 2.10D below, the proceeds of the Loan may be disbursed by the Escrow Agent to pay Road Project Costs upon receipt of a draw request signed by the City Treasurer or other authorized City official summarizing the Road Project Costs to be paid for expenses actually incurred. Fifteen (15) days in advance of each draw, copies of each draw request shall be forwarded to the Partnership and the Partnership shall have the right during such 15 days to object to any such costs which it reasonably believes do not constitute appropriate Road Project Costs, in which event a draw shall not be paid for such costs unless and until the objection is resolved or until the City Attorney provides a legal opinion that such costs are appropriate Road Project Costs under this Agreement and are permissible redevelopment project costs under the tax increment financing statute and the district established pursuant to Section 2.8 below. If Escrow Agent still holds any proceeds of the Loan on the Loan Maturity Date, Escrow Agent shall pay such proceeds of the Loan on the Loan Maturity Date to the Partnership, to be applied toward City repayment of the Loan. The Road Bond proceeds or TIF Note proceeds will be used to repay the Loan if the Road Bonds or TIF Notes are issued. In the event that the Road Bonds or TIF Notes have not been issued prior to the Loan Maturity Date, the City agrees to repay the Loan using the monies that the City has agreed to deposit in the City Escrow Account (defined below). At the same time the Loan is made the City shall issue to the Partnership a TIF obligation (issued pursuant to Section 99.835 RSMo., secured by a pledge of funds in the special allocation fund established pursuant to Section 99.845 RSMo. and Section 2.8 of this Agreement) 5 evidencing the Loan and providing for repayment (the "TIF Obligation"). The City grants the Partnership a first lien on the Road Bond or TIF Note proceeds and on the City Escrow Account, the Loan Escrow Account and the Assessment Escrow Account to secure the Loan and agrees to execute all documents necessary to perfect said liens. 2.6 City Escrow Account. The City shall establish an escrow account with the Escrow Agent to be called the "Maryland Heights Earth City Expressway Road Extension Escrow Account" (the "City Escrow Account"). The City agrees to deposit in the City Escrow Account at least thirty percent (30%) of the "City Tax Revenue" prior to the date the Road Bonds or TIF Notes are issued (including a prorated portion for the year in which the Road Bonds or TIF Notes are issued). As used in this Agreement, "City Tax Revenue" shall mean the total revenue received by the City from the Gaming Tax. The City Escrow Account will be disbursed by the Escrow Agent to pay Road Project Costs for expenses actually incurred and to repay the Loan upon receipt of a draw request signed by the City Treasurer or other authorized City official summarizing the Road Project Costs or the Loan to be paid. The City Escrow Account shall be invested in Investments and all earnings thereon shall at the City's option be paid to the City or added to the City Escrow Account. If for any reason, whether voluntary or involuntary, the City deposits less than 30% of all City Tax Revenue into the City Escrow Account, the amount of Road Bonds or TIF Notes that the Partnership has committed to purchase under Sections 2.9 or 2.10 hereof, respectively, shall be reduced dollar for dollar by the amount by which 30% of the City Tax Revenue exceeds the actual amount deposited in the City Escrow Account. 2.7 Escrow Agreements and Security Interest. The City, the Partnership and the Escrow Agent shall each execute escrow agreement(s) (the "Escrow Agreements") substantially in the form attached hereto as Exhibit C governing the escrows established pursuant to Sections 2.4, 2.5 and 2.6. Among other requirements the Escrow Agreements will require that the Escrow Agent provide the City and the Partnership with a quarterly accounting concerning all activity in the escrow funds, and a copy of the draw requests summarizing the Road Project Costs that have been paid. The Escrow Agent shall deduct its fees for administering each escrow from the applicable escrow. Notwithstanding the foregoing, upon establishment of tax increment financing pursuant to Section 2.8 below, the parties hereto may agree to have the City Escrow Account held by the City or by some person or entity other than the Escrow Agent, pursuant to an agreement other than the Escrow Agreement. The City hereby grants the Partnership a security interest in the Assessment Escrow Account, the Loan Escrow Account, the City Escrow Account, the Road Bond Escrow (defined below) and the TIF Note Escrow (defined below) to secure: (1) the City's monetary obligations under this Agreement to the Partnership if this Agreement is terminated pursuant to Section 6.1, and (2) payment of the TIF Obligation, the Road Bonds and the TIF Notes against default thereunder or if prepayment is required because there has been a change in law or other circumstance that would impair the City from receiving and using at least 50% of the Admissions Tax (as existing under state law in effect on the date of this Agreement) and 10% of all other Gaming Tax, as imposed by state law in effect on the date of this Agreement, paid in connection with the Riverboat Gaming Project, for payment of said obligations, and as a result thereof the available revenue is insufficient to pay said obligations. Notwithstanding said security interest, unless this Agreement is terminated pursuant to Section 6.1, or unless the City defaults on its payment obligations to the Partnership, the City may use the funds in said escrow accounts in accordance with the terms of this Agreement to pay Road Project Costs. 6 2.8 Tax Increment Financing. As a condition precedent to the Partnership's obligation to purchase Road Bonds, or the TIF Obligation or TIF Notes pursuant to other sections of this Agreement, the City must pass all ordinances and take all steps necessary to establish tax increment financing pursuant to section 99.800 et seq., RSMo, in order to finance the Road Project, and to undertake the City's obligations contained in this Agreement, including but not limited to its obligations in Sections 2.5, 2.6, 2.7, 2.9 and 2.10 hereof, so that 1) the Loan made pursuant to Section 2.5 shall be a purchase by the Partnership of the TIF Obligation (as defined in Section 2.5) (issued pursuant to Section 99.835, secured by a pledge of the funds in the special allocation fund established pursuant to Section 99.845, RSMo.); 2) the 50% of the total additional revenue deposited pursuant to Section 99.845(3), RSMo, in the special allocation fund shall constitute the amounts deposited in the City Escrow Account pursuant to Section 2.6; 3) the City Escrow Account shall be a segregated account in the special allocation fund; 4) the Road Bonds or the TIF Notes, as applicable, shall be tax increment financing bonds issued pursuant to Section 99.835, RSMo; and 5) the Road Bonds or the TIF Notes, as applicable, will be secured by a pledge of the City Tax Revenue deposited pursuant to Section 2.6 in the special allocation fund established pursuant to Section 99.845, RSMo. The Partnership's obligations under Sections 2.5 (Partnership Loan), 2.9 (Road Bonds) and 2.10 (Alternate Road Project) shall be conditioned upon establishment of a TIF district (including designation of a redevelopment area and adoption of a redevelopment plan and project) in a manner satisfactory to the Partnership. The City hereby acknowledges and agrees that the City Tax Revenue constitutes a tax imposed by the City or other taxing districts which is generated by economic activities in the area of the Riverboat Gaming Project, such that the City Tax Revenue will be subject to the provisions of Section 99.845.3 when tax increment financing is established for an area including the Riverboat Gaming Project. The parties hereto state that establishment of tax increment financing is instrumental to the development of the Riverboat Gaming Project, and the Partnership is taking actions and making expenditures in anticipation that tax increment financing will be adopted. 2.9 Financing of City Road Project - Road Bonds. A. Issuance of Road Bonds. Subject to Section 2.10 below, the City agrees to issue special obligation bonds (the "Road Bonds") to pay the City Road Project Costs, including repayment of the Partnership's Loan. Said Bonds will be TIF bonds or another bond form approved by the Partnership. The amount of the Road Bond issue shall not exceed the total Road Project Costs, plus any Fire Station Costs pursuant to Section 2.9D below, reduced by any balances in the Assessment Escrow Account and by the amount of City Tax Revenue the City has agreed to deposit in the City Escrow Account pursuant to Section 2.6 hereof. The Road Bonds shall be customary municipal bonds that are tax free (state and federal), that are at market rates and carry standard terms approved by the bond underwriter designated by the Partnership so that they are readily marketable. The City agrees to annually appropriate and to grant to the Bond trustee or paying agent a lien on City Tax Revenue (as defined in Section 2.6) in an amount deemed necessary by the Bond underwriter to fully cover all principal and interest payments when due on the Road Bonds, and to fund any sinking funds. The City agrees not to take any actions that would adversely affect its ability to repay any Road Bonds that may hereafter be issued. The City acknowledges that authorizing any additional gaming casinos in the City would adversely affect the City's ability to repay the Road Bonds by reducing the amount of City Tax Revenue the City receives from the Riverboat Gaming Project. 7 B. Sale of Bonds. The City agrees to use its best efforts to engage one or more bond underwriters who will be responsible for finding a buyer or buyers for the Road Bonds. In the event that the City after using its best efforts is unable to find buyers for the Road Bonds, the Partnership agrees to purchase or cause to be purchased by others the Road Bonds, on condition that: (i) the purchase price and face amount of Road Bonds to be purchased by or on behalf of the Partnership shall not exceed Twenty Two Million Dollars ($22,000,000.00) less the amount of City Tax Revenue the City has agreed to deposit in the City Escrow Account pursuant to Section 2.6 hereof; (ii) if the City issues Road Bonds whose total face amount exceeds the amount being purchased by the Partnership, the Partnership's obligation to purchase any such Road Bonds will be contingent on a simultaneous purchase by a third party of all Road Bonds in excess of the amount being purchased by the Partnership, (iii) the Road Bonds shall be of investment quality, (iv) the Partnership, in its sole discretion, must approve the terms of the Road Bonds (including, without limitation, maturity, interest rate, tax exempt status and security) and of all bond documents or other documents relating to the Road Bonds; (v) no Road Bonds shall be issued until after the second anniversary of the later of the date that i) the Riverboat Gaming Project opens for business, and ii) the City makes a deposit of City Tax Revenues into the City Escrow Account; (vi) the City has not entered into any agreements with any other governmental entities which would obligate it to share the City Tax Revenues with any other governmental entity and has agreed not to enter into any such sharing agreement so long as the Road Bonds are outstanding; (vii) the Road Bond proceeds are placed in escrow (the "Road Bond Escrow") and the Partnership receives a first lien on said Road Bond Escrow until it is disbursed to pay Road Project Costs, (viii) the applicable documents contain provisions requiring the City to terminate construction of the Road Project and apply funds held in the Road Bond Escrow toward prepayment of the Road Bonds in the event there is a change in law or other circumstance during construction of the Road Project which reduces the City's share of the Gaming Tax below the amount of Gaming Tax it would receive under State law as in effect on the date this Agreement is signed, and (ix) there has been no change in law or other circumstance that would impair the City from receiving and using at least 50% of the Admissions Tax (as existing under state law in effect on the date of this Agreement) and 10% of all other Gaming Tax, as imposed by state law in effect on the date of this Agreement, paid in connection with the Riverboat Gaming Project, for payment of the Road Bonds, and as a result thereof the available revenue is insufficient to pay the Road Bonds. C. Limited Guaranty. For purposes of this Section 2.9, "Guaranty Year" shall mean any of the five (5) consecutive periods of 365 days each, the first such period commencing on the first day of the first month following the date the City first issues Road Bonds and the last such period expiring on the fifth anniversary thereof. As soon as possible after expiration of each Guaranty Year, the City shall provide the Partnership with a statement of all City Tax Revenue attributable to that Guaranty Year. Provided that the City has then issued Road Bonds, if the total of the City Tax Revenue attributable to any Guaranty Year is less than Four Million Five Hundred Thousand Dollars ($4,500,000.00), the Partnership will pay to the trustee for the Road Bonds for application toward payment of the Road Bonds an amount (the "Guaranty Payment") equal to the lesser of: (a) the amount by which Four Million Five Hundred Thousand Dollars ($4,500,000.00) exceeds the City Tax Revenue attributable to said Guaranty Year, or (b) the amount by which scheduled payments of debt service due on the Road Bonds 8 during said Guaranty Year exceed the City Tax Revenues attributable to said Guaranty Year. Notwithstanding any provision herein to the contrary, if the City Tax Revenue attributable to any Guaranty Year exceeds Four Million Five Hundred Thousand Dollars ($4,500,000), then an amount equalling the difference between such City Tax Revenue and $4,500,000 shall be applied as a credit against any subsequent Guaranty Payments as such payments thereafter come due. It is a condition precedent to the Partnership being obligated under this Guaranty that it approve the terms of the Road Bonds (including, without limitation, maturity, interest rate, tax exempt status and security) and of all bond documents or other documents relating to the Road Bonds. Notwithstanding the foregoing, in the event that the Riverboat Gaming Project is temporarily closed during any Guaranty Year because of force majeure conditions, the guaranty contained in this Section of Four Million Five Hundred Thousand Dollars ($4,500,000.00) (or Road Bond payment, whichever is less) for such Guaranty Year shall be reduced by multiplying it by a fraction in which the numerator is the number of days the Riverboat Gaming Project was open for business in such Guaranty Year and the denominator is the total number of days that it would have been open for business if the force majeure had not occurred. The Partnership's guaranty obligations under this Section 2.9 terminate: (i) in the event that the City defaults under this Agreement and such default is not cured after the Partnership has given notice of the default to the City and the applicable cure period has expired, or (ii) in the event that for any reason the City does not receive at least 50% of the Admissions Tax (as existing under state law in effect on the date of this Agreement) and 10% of all other Gaming Tax, as imposed by state law in effect on the date of this Agreement, paid in connection with the Riverboat Gaming Project, and as a result thereof the Partnership is required to make a payment on its guaranty obligations under this Section 2.9, or (iii) in the event that Harrah's Operator or Players' Operator ceases operating a gaming facility at the Project Site, or (iv) in the event that changes are made to the Missouri Gaming Tax which adversely affects the Partnership's Guaranty obligations, or (v) at the Partnership's option if the Partnership is the sole purchaser of the Road Bonds. If the Partnership is called upon to make a Guaranty Payment with respect to a Guaranty Year(s) and in any later calendar year(s) the City Tax Revenue exceeds Four Million Five Hundred Thousand Dollars ($4,500,000), then to the extent such excess exists and is not required to make scheduled payments on Road Bonds due in the Guaranty Year, such excess shall be used to reimburse the payor of any Guaranty Payments made. D. Fire Station Costs. The City and the Partnership acknowledge and agree that, in addition to the Road Project, the tax increment financing plan adopted pursuant to Section 2.8 hereof may contain as a redevelopment project construction of a new fire station located in the City, in an amount that may equal approximately $1 million (the "Fire Station Costs.") The Fire Station Costs may also be included in determining the issuance amount of the Road Bonds and may be payable from the proceeds of the Road Bonds, provided that such inclusion 1) shall not increase the maximum purchase price and face amount of Road Bonds to be purchased by the Partnership ($22 million less certain amounts) pursuant to Section 2.9B above; 2) shall not affect 9 the right of the Partnership to approve the terms of the Road Bonds as provided in Section 2.9B above, 3) the real estate taxes from all real estate in the TIF District, as well as City Tax Revenue, shall be pledged pursuant to the TIF statute for repayment of the series of Road Bonds issued to pay Fire Station Costs, and 4) the Partnership's obligations with respect to such bonds are subject to all other terms and conditions in this Agreement applicable to the Road Bonds. 2.10 Financing of Road Project - Alternate Road Project. A. Identification of Alternate Road Project. The City has received a proposal (the "River Road Proposal"), made by a joint venture formed by Sverdrup Civil, Inc., Fred Weber, Inc. and Spire Company, LLC (together with any redevelopment corporation formed by such joint venture, called the "Road Joint Venture"), to construct the Road Project along a route differing from the route the City would select if it issued Road Bonds and constructed the City Road Project. In lieu of the obligations of the City and of the Partnership contained in Section 2.9 above regarding issuance and sale of Road Bonds and limited guaranty of certain City Tax Revenue, the parties hereto may elect for the City to complete the Road Project by adopting the River Road Proposal, with any necessary modifications, and for the parties to finance the River Road Proposal as described in this Section 2.10 (the "Alternate Road Project"). Under the Alternate Road Project, the Road Joint Venture will acquire property and construct the Road Project and transfer the completed Road Project to the City or other governmental entities for a fixed price cost, which cost shall be subject to the approval of the Partnership and the City, but which cost in any event is anticipated to be substantially less than the cost of the City Road Project originally contemplated by the City. To pay the purchase price of the Alternate Road Project, the City will first (1) apply the then-remaining balances of the Assessment and the Loan and the City Escrow Accounts; and then (2) issue one or more tax increment financing notes in the amount of the remaining balance of the fixed price cost plus any unpaid balance of the Loan (whether one or more, the "TIF Notes"), to be purchased by the Partnership or its designees. The Partnership, in its sole discretion, has the right to approve the terms of the TIF Notes (including, without limitation, maturity, interest rate, tax exempt status and security). B. Election of Alternate Road Project. The parties may elect the Alternate Road Project as follows: on or before October 31, 1995 (and in all events prior to any issuance of the Road Bonds), either party may give the other party notice that it desires to pursue negotiations for the Alternate Road Project, and the parties shall begin good faith negotiations to determine whether the Alternate Road Project satisfies the parties' requirements and is acceptable. The parties shall have until 5:00 p.m. January 19, 1996 to reach a written agreement that the Alternate Road Project is elected in lieu of the parties' obligations under Section 2.9 of this Agreement, and in no event shall the Partnership be obligated to purchase both TIF Notes and Road Bonds. If no such notice is given, or if the parties cannot reach such agreement on or prior to January 19, 1996, then unless the parties agree otherwise the Alternate Road Project shall be null and void and the City Road Project shall be completed and financed as provided in Section 2.9 above. Notwithstanding any notice to pursue negotiations for the Alternate Road Project, the Partnership shall have the right at any time during those negotiations to give the City notice that the Partnership is going to construct the improvements required by Section V(B)(3) of the Zoning Ordinance, at the location and in the manner mutually agreed upon in writing by the parties, and after giving such notice said improvements shall no longer be part of the Alternate Road Project. 10 The parties acknowledge and agree that at the Partnership's option, the Partnership's agreement to election of the Alternate Road Project may be conditioned on, without limitation, one or more of the following: (1) design of the Road Project in a manner that satisfies (or is sufficient for the City and St. Louis County to eliminate) the requirements contained in Section V(B)(3) of the Zoning Ordinance regarding raising and widening Prichard Farm Road and improving the intersection of Prichard Farm Road and Creve Coeur Mill Road; (2) phasing or staging of the Road Project, including separate construction contracts for different phases, so that the portion or portions of the Road Project near the Project Site as specified by the Partnership can reasonably be completed prior to March 31, 1997 or prior to such other date as the Partnership may specify, and other portions may be completed later; (3) if litigation or other problems or delays with the Alternate Road Project at any time threaten to adversely affect the Riverboat Gaming Project, the Partnership would have the right to terminate the election of the Alternate Road Project, and cause the substitution of the City proposal for the Road Project, with such reimbursement of the City's cost and costs of the Road Joint Venture as are agreed upon by the Partnership and the City; (4) arrangements satisfactory to the Partnership and the City providing for the escrowing of the TIF Note proceeds (the "TIF Note Escrow"), the disbursement of funds, and a lien to the Partnership on the TIF Note Escrow to secure the TIF Notes; and (5) satisfaction of the conditions in Section 2.9B above that are conditions to buying the Road Bonds. C. Termination of Agreement. The parties acknowledge that the TIF Notes may be issued by the City and purchased by the Partnership prior to opening of the Riverboat Gaming Project for gaming, and that this Agreement may be terminated by the Partnership pursuant to Section 6.1 after such issuance and purchase. In such event, the balance of the proceeds of the TIF Notes in escrow shall be disbursed, first to pay any amounts then due and payable for Road Costs or required to be paid for the City to terminate any outstanding contracts with the Road Joint Venture or other third parties in connection with the Road Proposal and the balance shall be applied to payments of the TIF Notes, and to the extent not thereby paid in full, the TIF Notes shall remain outstanding and shall remain payable by the City in accordance with their terms. D. Limitation On Disbursements Until Road Project Elected. Notwithstanding any provision of this Agreement to the contrary, the Partnership's written consent (which may be granted or withheld in the Partnership's sole discretion) shall be required for disbursement of any portion of the Assessment or of the Loan (or of any funds in the City Escrow Account) until the earlier of (i) the date that the Partnership and the City have reached a written agreement pursuant to Section 2.10B to elect the Alternate Road Project, or (ii) January 11 19, 1996, or any earlier date on which the Partnership and the City agree in writing that the Alternate Road Project will not be elected and the City Road Project shall be completed and financed as provided in Section 2.9 above. 2.11 Lien on Road Project Improvements. To the extent permitted by law, the City agrees to grant the Partnership a first lien on the Road Project improvements (the "Road") or, at the Partnership's option, grant the Partnership an option to lease and/or purchase the Road for $1 if the City defaults on the Road Bonds or TIF Notes (such lien or lease/purchase option is referred to as the "Road Lien"). The Road Lien shall secure the City's obligation to repay the Road Bonds or TIF Notes, and may be enforced by the Partnership if the City fails to pay the Road Bonds or TIF Notes in accordance with their terms due to a change in the amount of City Tax Revenues the City is receiving or due to any other reason. The documents evidencing the Road Lien shall be in a form mutually satisfactory to the City and the Partnership. 2.12 Audit and Financial Information. The City agrees to provide the Partnership with copies of any audit reports the City may receive with respect to the Assessment Escrow Account, the Loan Escrow Account and the City Escrow Account. The City also agrees to provide the Partnership with a copy of the City's annual financial report, including, if any, any financial report that the City files with the State of Missouri at the same time it is filed with the state (currently referenced in 15 CSR 40-3.030). The Partnership shall also have the right at its cost to audit any of said escrow accounts at any time. 2.13 No Sharing Of City Tax Revenues. The City agrees that so long as the Road Bonds are outstanding it will not enter into any agreement with any other governmental entity which would obligate it to share the City Tax Revenues with any other governmental entity if as a result thereof the City Tax Revenues would be insufficient to pay the Road Bonds, the TIF Obligation and the TIF Notes. ARTICLE 3 - REPRESENTATIONS 3.1 City Representations. The City represents, warrants and covenants to the Partnership and its permitted assigns that this Agreement is valid, binding upon and enforceable against the City in accordance with its terms. 3.2 Partnership's Representations. The Partnership represents, warrants and covenants to the City that after the respective boards of directors of Harrah's Entertainment, Inc. and Players International, Inc. authorize their respective affiliates to enter into this Agreement, this Agreement will be valid, binding upon and enforceable against the Partnership in accordance with its terms. ARTICLE 4 - CONDITIONS PRECEDENT 4.1 Conditions to Partnership's Obligations. The Partnership's obligations under this Agreement are subject to the satisfaction or removal by the end of the Due Diligence Period (as defined below) of each of the following conditions, any or all of which may be removed only in writing by the Partnership, except the Partnership has agreed to make certain payments before 12 the conditions are satisfied as set forth herein. With respect to the following conditions under Section 4.1, the Due Diligence Period is eighteen (18) months after the day on which the last party signs this Agreement. The conditions to the Partnership's obligations are: a. Authorization for execution of this Agreement in accordance with Section 3.2. b. The Riverboat Gaming Project, including both the Harrah's Operator's casino(s) and the Players Operator's casino(s), has opened for gaming business without restrictions on its operations (other than general restrictions applicable to all casinos in Missouri). c. The City has established tax increment financing pursuant to Section 2.8 If the conditions in Section 4.1(b) are not satisfied during the Due Diligence Period because of pending litigation, administrative proceeding, or unexpired appeal period, the Partnership may at its option extend the Closing Date until the period for appeal has expired or the litigation or administrative proceeding is resolved in a manner reasonably satisfactory to the Partnership. In the event all of the conditions set forth in this Section 4.1 are not satisfied or waived by the Partnership by written notice to City within the Due Diligence Period, the Partnership may by written notice to the City terminate this Agreement at any time during the Due Diligence Period or at any time thereafter prior to Closing. Subject to the first sentence of this paragraph, in the event all of the conditions set forth in this Section 4.1 are not satisfied or waived by the Partnership by written notice to City within the Due Diligence Period, the City may by written notice to the Partnership terminate this Agreement upon the expiration of the Due Diligence Period. Upon termination of this Agreement, both City and the Partnership shall be released and discharged from all further obligations under this Agreement, and neither City nor the Partnership shall be subject to any claim by the other for damages of any kind, except as provided in the next sentence. If the Partnership has paid to the City the Assessment prior to such termination, any balance then remaining in the Assessment Escrow Account shall be paid to the City; if the Partnership has paid the Loan, any funds in the Loan Escrow Account shall be paid to the Partnership, and the City shall repay the Loan to the Partnership in accordance with the terms of the TIF Obligation or, if the TIF Notes have been issued, shall repay the TIF Notes as provided in Section 2.10C above. ARTICLE 5 - CLOSING 5.1 Closing Date. Subject to the terms and conditions of this Agreement and the removal or satisfaction of the contingencies described in Section 4.1 hereof, the documents and actions to implement the consummation of the transactions contemplated by this Agreement (the "Closing") shall occur on a date selected by Partnership, which date shall be no later than 30 calendar days after the Partnership has acknowledged in writing that all conditions in Section 4.1 have been waived or satisfied (the "Closing Date"), or at such other date and time as may be mutually established by the parties. The parties hereto do not contemplate that there will be a formal closing. 13 5.2 Actions to be Taken at the Closing. On or before the Closing: a. The City shall deliver to the Partnership a copy of all City ordinances which relate to the Riverboat Gaming Project and the TIF District accompanied by the certificate of the City Clerk certifying that all such City ordinances have been duly adopted by the City Council, are in full force and effect and have not been modified or repealed, except as set forth in the Certificate. b. The City shall deliver to the Companies (if not previously delivered) all occupancy permits and business and operating licenses needed to occupy and operate the Riverboat Gaming Project. c. The City, the Partnership and the Escrow Agent shall execute the Escrow Agreements (if not previously executed). d. The Partnership shall deliver to the City a certified copy of the Partnership's resolutions authorizing execution of this Agreement accompanied by the certificate of the Partnership certifying that all such resolutions have been duly adopted by the Partnership, are in full force and effect and have not been modified or repealed, except as set forth in the Certificate. e. The parties will take such other actions and will execute and deliver such other instruments, documents, agreements and certificates as are required by the terms of this Agreement or as may be reasonably requested by the Partnership, the Partnership's lender, if any, the Escrow Agent or the City, as the case may be, in connection with the consummation of the transactions contemplated herein. ARTICLE 6 - TERMINATION 6.1 Termination. This Agreement may be terminated by the Partnership at any time before the Closing by giving written notice (the "Termination Notice") to City, for the failure of any of the conditions precedent to Closing set forth in Section 4.1 hereof or if the Partnership determines at any time that it desires to abandon the Riverboat Gaming Project. Upon issuance of the Termination Notice the Partnership shall have no obligation to complete the Riverboat Gaming Project and shall have no obligation to make any payments required by this Agreement, and shall have no other obligations or liability of any kind under this Agreement. If this Agreement is terminated in accordance with this Article 6, it will have no further force or effect and the parties shall have no further rights or obligations to each other under this Agreement, except that any balance remaining in the Loan Escrow Account shall be paid to the Partnership and the City shall repay the Loan to the Partnership, in accordance with the terms of the TIF Obligation or, if the TIF Notes have been issued, shall repay the TIF Notes as provided in Section 2.10C above. ARTICLE 7 - GENERAL PROVISIONS 7.1 Notices. Any notice or other communication required, permitted, or contemplated by this Agreement (a "Notice") must be in writing and may be given by personal delivery, overnight courier service (e.g. Federal Express, Airborne, etc.), or United States Mail, registered 14 or certified mail, return receipt requested. Such notice shall be deemed to have been duly given, delivered or served; (a) if and when personally delivered on the date so delivered, or (b) three (3) days after being mailed by registered or certified mail, postage prepaid, or (c) one (1) business day after being sent if sent by a recognized overnight courier delivery service for next day delivery, costs prepaid, addressed to: The City: City of Maryland Heights Attn: City Clerk 212 Millwell Drive Maryland Heights, Missouri 63043 Fax: (314) 291-3292 The Partnership: Harrah's Maryland Heights Corporation c/o Harrah's Entertainment, Inc. 1023 Cherry Road Memphis, TN 38117 Attention: General Counsel Fax: (901) 762-8776 Players MH, L.P. c/o Players International, Inc. 3900 Paradise Road Suite 135 Las Vegas, NV 89109 Attention: Patrick Madamba, Esq. Fax: (702) 792-9843 Notice given in any other manner will be deemed delivered when actually received by the party to whom the notice is addressed. Any party may change its address by giving the other parties ten days advance written notice of such change. 7.2 Successors and Assigns. The obligations of the Partnership may be performed by one or more entities established by the Partnership for the specific purpose of performing various aspects of the Riverboat Gaming Project; provided, however, the Partnership will remain obligated under this Agreement. The rights and obligations of the Partnership under this Agreement may be assigned in connection with any sale of the Riverboat Gaming Project, or any sale of the stock or assets of any of the Companies, or to any of HMHC, Players MH or the Partnership and/or their affiliates. If the Riverboat Gaming Project is transferred to a licensed gaming operator that assumes the Partnership's obligations under this Agreement, the Partnership shall be deemed released from all obligations under this Agreement that arise after the date this Agreement is assigned to the new owner of the Riverboat Gaming Project. If either partner in the Partnership assigns its interest in the Riverboat Gaming Project to the other or an affiliate of the other, then upon the effective date of the assignment, the assigning entity is released from all 15 obligations under this Agreement and the assignee entity shall be deemed to have assumed all of the assigning entity's obligations under this Agreement. This Agreement is binding upon the parties and their respective successors and assigns. 7.3 Attorneys Fees. If any party institutes litigation to enforce its rights under or relating to a breach of this Agreement, the prevailing party will be entitled to recover from the other party(ies) reasonable attorneys' fees and court costs. 7.4 Governing Law. This Agreement will be construed and interpreted in accordance with the internal laws of the State of Missouri without regard to conflicts of law provisions. 7.5 Merger. This Agreement constitutes the complete and exclusive statement of the agreement between the parties with respect to the development of the Riverboat Gaming Project and the Road Project, except that the City also remains bound by all ordinances it has passed and permits it has issued with respect to the Riverboat Gaming Project. This Agreement sets forth in full all of the Companies' obligations to the City, and the Companies have no obligations that are not set forth in this Agreement. This Agreement supersedes all prior written and oral statements, representations, communications of any type, covenants, conditions, warranties and/or presentations by any of the Companies with respect to the development of the Riverboat Gaming Project and any other gaming projects in Maryland Heights, and by any of the Companies with respect to the Road Project, and no representation, statement, communication of any type, covenant, condition, warranty or presentation by the Companies not contained in this Agreement shall be binding on the Companies or have any force or effect whatsoever. 7.6 Amendments. This Agreement cannot be amended or modified except by a written instrument signed by the City and the Partnership. 7.7 Multiple Originals. This Agreement may be executed in multiple original counterparts. Each counterpart will be deemed an original, and when the counterparts are taken together, they will be deemed to be one and the same instrument. 7.8 Severability. If any provision of this Agreement is held to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability will not affect any other provision of this Agreement. 7.9 Interpretation. Where required for proper interpretation, words in the singular will include the plural, and words of any gender will include all genders. The descriptive headings of the Articles and Sections of this Agreement are for convenience only and will not control or affect the meaning or construction of any of the provisions hereof. 7.10 Default and Cure Rights. Default shall occur under this Agreement if any party fails to perform any obligation, covenant or agreement of this Agreement and fails to timely cure within the applicable cure period set forth below after receiving notice specifying the obligation, covenant or agreement which such party is believed to have failed to perform. A party will not be in default under this Agreement unless an event that would be a default under this Agreement is 16 not cured within 90 days after the defaulting party has received written notice from the nondefaulting party of such an event. However, such cure period will be extended, without further action by the parties, if the nature of the event requires additional time for the cure to be made, provided that the defaulting party initiates cure efforts within said 90-day period and diligently pursues such cure to completion. The Partnership may assign, mortgage or otherwise encumber the Riverboat Gaming Project or any interest therein, or its interests under this Agreement, the Road Bonds, the TIF Notes, or any other instrument entered in connection herewith. In the event of such encumbrance, at the request of any holder of any such encumbrance ("Partnership's Lender") the City shall give the Partnership's Lender a copy of any notice or claim of default served upon the Partnership by the City. The City further agrees that if the Partnership shall have failed to have cured such default within the period provided under this Agreement, then the Partnership's Lender shall have an additional thirty (30) days within which to cure or correct such default (or if such default cannot be cured or corrected within that time, then such additional time as may be necessary if the Partnership's Lender has commenced within such thirty (30) days and is diligently pursuing the remedies or steps necessary to cure or correct such default) before City may exercise any right or remedy which it may have on account of any such default by the Partnership. The parties hereto agree that upon any default hereunder by the Partnership not cured within the periods provided herein, the City may enforce this Agreement through an action for specific performance of the Partnership's obligations hereunder, provided that the parties acknowledge that the Partnership's right and authority to own, construct, lease and operate the Riverboat Gaming Project is independent of this Agreement and that no default, City action or judgment therein shall affect the right to own, construct, lease or operate the Riverboat Gaming Project. 7.11 Waiver. No waiver by any party of any of its rights or remedies under this Agreement will be considered a waiver of any other or subsequent right or remedy. No waiver by any party of any of its rights or remedies under this Agreement will be effective unless evidenced by a written instrument executed by the waiving party. 7.12 Force Majeure. If either the Partnership or the City is delayed, hindered in or prevented from the performance of any act required hereunder by reason of litigation, weather, fire, acts of God, strikes, lock-outs, inability to procure materials, failure of power, riots, insurrection, war or the failure of another party to this Agreement to perform an act required of it which is required in order for the party who was prevented from acting to act and/or other matters beyond the reasonable control of the party who is to act, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay, provided the January 19, 1996 deadline in Section 2.10B may not be extended pursuant to this Section without the written consent of the Partnership. 7.13 Third Party Beneficiaries. Harrah's Operator and the Players' Operator, as well as any successor operator(s) of the casinos, are third party beneficiaries of this Agreement and each may enforce the obligations of the City hereunder. 17 EXECUTED as of the date first above written. "The City" CITY OF MARYLAND HEIGHTS, MISSOURI By: ________________________________ Mayor ATTEST: - ------------------------------ City Clerk APPROVED AS TO FORM - ------------------------------ City Attorney "Partnership" RIVERSIDE JOINT VENTURE By Harrah's Maryland Heights Corporation, Partnership Partner By:________________________ Name:______________________ Title:_____________________ By Players MH, L.P., Partnership Partner By Players Maryland Heights, Inc., General Partner of Players MH, L.P. By:________________________ Name:______________________ Title:_____________________ 18 EX-27 12
5 1000 9-MOS MAR-31-1996 DEC-31-1995 18,881 49,170 5,791 155 2,212 87,136 265,659 15,739 411,910 43,635 150,289 0 149 0 190,321 411,910 0 218,634 0 93,240 89,455 0 11,576 30,425 11,866 18,559 0 0 0 18,559 .57 .57
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