Exhibit 10.1

 

HERBST GAMING, LLC

 

January 11, 2011

 

David D. Ross

c/o Herbst Gaming

3440 West Russell Road
Las Vegas, Nevada 89118

 

Dear David:

 

This letter (the “Letter Agreement”) confirms our offer of employment with
Herbst Gaming, LLC (the “Company”) under the following terms and conditions and
replaces all previous agreements and understandings, whether written or oral.

 

1.                                       Position and Responsibilities.

 

(a)                                  You will be employed by the Company in the
position of Chief Executive Officer.  Where required by the Company, you will
also provide services at no extra remuneration to any parent, subsidiary,
affiliated or associated companies of the Company (collectively, the “Group”). 
You will be based in the Company’s headquarters but may be required to travel on
business from time to time, as the Company requires.

 

(b)                                 Your hiring and continued employment with
the Company is conditioned upon your continued compliance with all applicable
federal and state laws, rules and regulations, and your maintaining all
necessary licenses, qualifications and certificates of suitability issued by any
gaming authority with jurisdiction over your employment.

 

(c)                                  You shall at all times act in accordance
with all staff manuals, policies and procedures of the Company, including any
amendments, alterations and additions made from time to time thereto.  To the
extent any terms of this Letter Agreement conflict with any terms of any written
manuals, policies and procedures of the Company, the terms of this Letter
Agreement shall govern.

 

(d)                                 You will report directly to the Board of
Directors of the Company (the “Board”).

 

(e)                                  During your employment, you shall devote
your whole time and attention to your duties and responsibilities under this
Letter Agreement. You agree not to accept any outside employment without the
prior written consent of the Company.

 

2.                                       Commencement and Term.

 

(a)                                  Your employment will commence on
December 31, 2010 (the “Effective Date”) and will terminate on the third (3rd)
anniversary thereof (the “Term”), with the understanding that no later than
sixty (60) days prior to the expiration of the Term

 

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you and the Company will commence discussions regarding any future role you may
play with the Company.

 

(b)                                 Notwithstanding the foregoing, all Company
employees are employed on an “at-will” basis.  This means that either you or the
Company can terminate your employment at any time and for any reason, with or
without notice, subject to the provisions of the Executive Severance Agreement
described in Section 6, if and to the extent applicable to any termination. 
Moreover, if you resign during the Term, you will be required to give the
Company [ninety (90)] days notice in writing.  During any notice period the
Company will have the right to discontinue your services and place you in
non-working notice status.

 

3.                                       Remuneration.

 

(a)                                  Your base salary will be six hundred
thousand dollars ($600,000) per year, payable on a bi-monthly basis in
accordance with the Company’s payroll practices in effect from time to time,
subject to the applicable taxes.

 

(b)                                 You will be eligible to receive an annual
bonus, according to the Company’s practices in effect from time to time, and
subject to applicable taxes, which will be determined based on the Company’s
actual performance with respect to specified objectives for the applicable
fiscal year relative to a budget for such fiscal year that has been approved by
the Board in consultation with you, in accordance with the following schedule:

 

Company’s actual performance
with respect to specified metrics
for fiscal year relative to 
budgeted performance

 

Amount of Bonus 
as Percentage of Base Salary

 

 

 

Less than 85% of budgeted performance

 

Zero

 

 

 

At least 85% but less than 100% of budgeted performance

 

Determined based on straight line interpolation of such performance and a bonus
range of greater than zero but less than 75% of base salary

 

 

 

100% of budgeted performance

 

75%

 

 

 

Greater than 100% but less than 125% of budgeted performance

 

Determined based on straight line interpolation of such performance and a bonus
range of 75% to 150% of base salary

 

 

 

One hundred twenty-five percent (125%) or more of budgeted performance

 

150%
(the maximum percentage payable hereunder)

 

The payment of any bonus with respect to a fiscal year is subject to your
continued employment on December 31 of the applicable fiscal year.

 

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(c)                                  Following the adoption of the Herbst
Gaming, LLC 2011 Long Term Incentive Plan, you will be granted options to
purchase a number of Common Units equal to one percent (1%) of the outstanding
Common Units of the Company on the Effective Date and a number of restricted
stock units equal to one percent (1%) of the outstanding Common Units on the
Effective Date.  Such options and restricted stock units will be granted
pursuant to the Herbst Gaming, LLC 2011 Long Term Incentive Plan and shall be
subject to the terms of the plan and a Common Unit Option Award Agreement and a
Restricted Common Unit Award Agreement to be entered into in connection
therewith (collectively, the “Award Agreements”), that shall include, without
limitation, vesting in accordance with the following:

 

(i)                                     fifty percent (50%) of such options and
restricted stock units will vest in equal installments on each of the first
three (3) anniversaries of the Effective Date based on performance objectives to
be established by the Board of Directors of the Company or the compensation
committee thereof, and

 

(ii)                                  fifty percent (50%) of such options and
restricted stock units will vest in equal installments on each of the first
three (3) anniversaries of the Effective Date based on the Executive’s continued
service as of each such anniversary.

 

In the event of a conflict between this Letter Agreement and the foregoing
agreements, the foregoing agreements shall apply.

 

4.                                       Benefits.

 

(a)                                  You will receive paid time off each year to
the same extent as other executives of the Company, which will be accrued
pro-rata on a monthly basis and will be subject to the Company’s policies
regarding paid time off.

 

(b)                                 Subject to you complying with and satisfying
the applicable requirements of the Company plans, you will be entitled to
participate in the Company’s standard medical, dental and life insurance plans
effective the first day of the month following the Effective Date.  The details
of the Company’s benefit plans will be provided to you separately.  The Company
reserves the right to change the terms of or eliminate its benefit programs at
any time, without notice.

 

(c)                                  During the Term of your employment you will
receive an automobile allowance in the amount of $2,167.00 per month in
accordance with the Company’s policies and procedures relating thereto.

 

5.                                       Representations.

 

You represent that you are free to accept employment with the Company without
any contractual restrictions, express or implied, with respect to any of your
prior employers.

 

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6.                                       Executive Severance Agreement and Duty
of Loyalty Agreement.

 

You will be eligible to receive the Severance Package described in the Executive
Severance Agreement that is attached to and made a part of this Letter Agreement
in the event, but only in the event, that your employment is terminated by the
Company without Cause or by you for Good Reason (each as defined therein) prior
to the end to the Term, subject to your execution of and compliance with the
Duty of Loyalty Agreement that is also attached hereto, and subject to the other
terms and conditions set forth in each agreement.

 

7.                                       Severability.

 

If any provision of this Letter Agreement is held by any court of competent
jurisdiction to be invalid or unenforceable, in whole or in part, the remaining
provisions of this Letter Agreement shall continue in full force and effect.

 

8.                                       Entire Agreement.

 

This Letter Agreement, together with the attachments and the Award Agreements,
contains the entire agreement between the parties and supersedes all prior
agreements and understandings, whether written or oral, between the parties
relating to the subject matter set forth herein.  The agreement dated as of
January 1, 2010, between you and Herbst Gaming, Inc. has been terminated as of
the date immediately prior to the Effective Date (or such earlier date as
provided in such agreement), and has been superseded by this Letter Agreement
and any attachments hereto.  No subsequent agreement or representation, and no
change, modification or extension of this Letter Agreement shall be binding on
the Company unless it is set forth in writing signed by you and the Company.
Without limiting the foregoing, any amounts payable to the Executive under the
2010 HGI Management Incentive Plan for the calendar year 2010 shall not be
extinguished by this Letter Agreement.

 

9.                                       Law and Jurisdiction.

 

(a)                                  Your employment with the Company and the
provisions of this Letter Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without regard to any conflict
of law provisions thereof.

 

(b)                                 Unless arbitration is otherwise required by
any other agreement between you and the Company, any action or proceeding
arising out of or relating to this Letter Agreement and your employment with the
Company shall be submitted to the exclusive jurisdiction of the state or federal
courts located in Clark County, Nevada.  You and the Company expressly consent
to the jurisdiction of, and venue in, such courts and specifically waive any
defense of inconvenient forum.  Both parties further waive the right to a trial
by jury, except as such waiver is prohibited by the laws applicable to the
specific action or proceeding.

 

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Please sign, date and return the enclosed duplicate of this Letter Agreement, in
order to acknowledge your agreement to its terms and conditions.

 

Sincerely,

 

Herbst Gaming, LLC

 

 

By:

/s/ DON KORNSTEIN

 

 

Name: Don Kornstein

 

 

Title: Chairman of the Board of Directors

 

 

THE ABOVE REFLECTS MY UNDERSTANDING AND MY AGREEMENT WITH RESPECT TO MY
EMPLOYMENT BY HERBST GAMING, LLC.

 

 

/s/ David D. Ross

 

David D. Ross

 

 

Dated: January 11, 2011

 

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