Exhibit 10.85


 


FORM OF

INDEMNITY ESCROW AGREEMENT


 


This INDEMNITY ESCROW AGREEMENT (this “Escrow
Agreement”) is entered into as of this       day
of July, 2004 by and between Southern Iowa Gaming Co., an Iowa corporation, St. Joseph Riverboat
Partners, a Missouri general partnership  and
Mark Twain Casino, L.L.C., a
Missouri limited liability company (collectively,
and together with their respective affiliates, “Seller”), Herbst Gaming, Inc., a Nevada corporation, (together with its affiliates, “Buyer”)
and Lawyers Title of Arizona (“Escrow Agent”).


 


Recitals


 


WHEREAS, concurrently herewith, Seller and
Buyer, or their designated affiliates, as the case may be, are entering into
those certain Asset Purchase and Sale Agreements (the “Agreements”),
copies of which are attached hereto as Exhibits A, B and C and by this
reference incorporated herein.


 


WHEREAS, as a material inducement to execute
and deliver the Agreements and as a condition to the consummation of the
transactions contemplated by the Agreements, Seller has agreed to indemnify,
defend and hold harmless the Buyer Indemnitees from and against certain Damages
in accordance with the Agreements.


 


WHEREAS, As security for the Seller’s
indemnity obligations under the Agreements, Seller has agreed to establish an
escrow account for the purposes of providing funding for Seller’s Secured
Indemnity Obligations.


 


WHEREAS, Buyer and Seller now desire to
evidence their agreement regarding the disbursement of the Indemnity Fund (as
defined below) pursuant to the terms of this Escrow Agreement.


 


Agreements


 


NOW THEREFORE, for and in consideration of the mutual covenants and promises contained
herein and in the Agreements, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Escrow Agent,
Seller and Buyer hereby agree as follows:


 


1.                                       Defined
Terms.  Capitalized terms used in
this Escrow Agreement without definition shall have the meanings ascribed to
them in the Agreements, and in the event of any conflict among the Agreements,
the meanings ascribed to them in the Southern Iowa Gaming Agreement that is
attached hereto as Exhibit A.  


 


2.                                       Appointment
of Escrow Agent.  Buyer and Seller
hereby appoint the Escrow Agent to act as escrow agent hereunder and the Escrow
Agent agrees to act as such.


 

















 


Indemnity Escrow Agreement


 


3.                                       Establishment
of the Indemnity Fund. 
(a)  At the Closing, Seller shall deposit (or cause to be
deposited) with the Escrow Agent (A) the sum of $7,187,500 in cash (the “Cash
Security Deposit”) and (B) an irrevocable letter of credit in the amount of
$7,187,500 (the “Seller Letter of Credit”, and together with the Cash
Security Deposit, the “Indemnity Escrow Amount”), in accordance with the
terms of Section 18.4 of each of the Agreements.  The Escrow Agent shall promptly acknowledge in writing to Buyer
and Seller receipt thereof.


 


(b)                                 The
Escrow Agent shall hold the Indemnity Escrow Amount and all interest and other
amounts earned thereon (collectively, as it shall exist from time to time, the
“Indemnity Fund”), in escrow pursuant to the terms hereof.  Upon receipt of any cash representing any
portion of the Escrow Amount, whether on the Effective Date or upon any
drawdown of the Seller Letter of Credit, the Escrow Agent agrees to deposit
such portion of the Indemnity Escrow Amount in a separate special
interest-bearing account in a federally chartered bank with security for the
amount of the Indemnity Escrow Amount in excess of the federally insured amount
(the “Escrow Account”).  At no
time shall any portion of the Indemnity Fund be invested in either Buyer or
Seller, or in any affiliate of either of them.


 


4.                                       Payments
from the Indemnity Fund.  (a)  Buyer shall initiate a claim against the
Indemnity Fund by delivering to the Seller, with a copy to the Escrow Agent, a
written notice (an “Indemnification Notice”, or in the case of an
Unliquidated Claim, an “Unliquidated Claim Notice”), which
Indemnification Notice, or Unliquidated Claim Notice, as the case may be,
shall:


 


(i)                                     state that the
Buyer or the Buyer Indemnitee to which such claim relates is entitled to
indemnification under one or more of the Agreements and has paid or incurred
one or more Damages (each a “Covered Damage”) that satisfy the
indemnification limitation provisions set forth in Section 18.3 of the
relevant Agreement or Agreements;


 


(ii)                                  state in good faith
either (A) in the case of an Indemnification Notice, the aggregate amount of
each such Covered Damage or (B) in the case of an Unliquidated Claim Notice, an
estimate of the aggregate amount of each such Covered Damage (the amount so
stated pursuant to this Section 4(a)(ii), the “Indemnification Amount”);


 


(iii)                               state in good faith the
amount of cash necessary to satisfy such Covered Damages (which in the case of
an Unliquidated Claim Notice shall be 110% of the Indemnification Amount); and


 


(iv)                              specify in reasonable
detail the nature and basis of each such Covered Damage, including the identity
of the parties known to be involved.


 


(b)                                 If
the Seller shall object in good faith to any portion of any Indemnification
Amount specified in any Indemnification Notice, the Seller shall, within thirty
(30) days after receipt (or deemed receipt pursuant to Section 10 hereof)
by the Seller from Buyer of such Indemnification Notice, deliver to the Escrow
Agent, with a copy to Buyer, a certificate, executed by the Seller (a “Certificate
of Objections”),


 


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(i)                                     specifying each
such amount to which the Seller objects in good faith; and


 


(ii)                                  specifying in
reasonable detail the nature and basis for each such good faith objection.


 


(c)                                  If
the Escrow Agent shall not have received a Certificate of Objections objecting
to an Indemnification Amount on or prior to the thirtieth (30th) day after
receipt (or deemed receipt pursuant to Section 10 hereof) by the Seller of
an Indemnification Notice specifying such Indemnification Amount, the Seller
shall be deemed to have acknowledged that the Indemnification Amount claimed on
such Indemnification Notice is correct and final and the Escrow Agent shall
thereafter transfer to or to the order of Buyer out of the Indemnity Fund an
amount of cash equal to the Indemnification Amount set forth in the
Indemnification Notice, provided that no such transfer shall be made with
respect to any Unliquidated Claim Notice unless Buyer shall, within sixty (60)
days after the final determination of the Indemnification Amount estimated in
such Unliquidated Claim Notice, have filed an Indemnification Notice setting
forth the liquidated Indemnification Amount.


 


(d)                                 If
the Escrow Agent receives, on or prior to the thirtieth (30th) day after
receipt (or deemed receipt pursuant to Section 10 hereof) by the Seller of
an Indemnification Notice, a Certificate of Objections objecting to the Indemnification
Amount specified in such Indemnification Notice, or any portion thereof, the
portion not objected to shall be distributed to or upon the order of Buyer out
of the Indemnity Fund and the portion so objected to shall be held by the
Escrow Agent and shall not be released from the Indemnity Fund, except in
accordance with either:


 


(i)                                     a written
memorandum pursuant to Section 5(a) hereof, executed by an authorized
signatory of each of Buyer and the Seller, or


 


(ii)                                  written instructions
executed by an authorized signatory of each of Buyer and the Seller and a copy
of the final judgment of the arbitrator having jurisdiction over the matters
relating to the claim, as provided in Section 5,


 


upon receipt of which the Escrow Agent shall distribute to or upon the
order of Buyer the amount (if any) by which the amount provided for in the
written memorandum or judgment, as the case may be, exceeds the amount not
objected to and previously distributed in accordance with this
Section 4(d).


 


(e)                                  In the event that at the time for any payment
to be made by the Escrow Agent to Buyer pursuant to this Escrow Agreement there
shall be insufficient cash in the Indemnity Fund for such payment to be made,
the Escrow Agent shall make a draw down against the Seller Letter of Credit, in
accordance with the terms thereof, in such amount as shall be necessary to
satisfy such payment obligation, and shall disburse the cash proceeds of such
draw down in accordance with the terms of this Escrow Agreement.  In any event, within two business days prior
to the expiration of the Seller Letter of Credit, if an Indemnification Notice
has been filed and (i) either (A) a Certificate of Objections has been filed
with respect to such Indemnification Notice, but the Damages the subject thereof
have not been resolved, or (B) the


 


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period
for filing a Certificate of Objections has not expired, and (ii) there would be
insufficient cash in the Indemnity Fund to satisfy the sum of the amount of the
Damages specified in such Indemnification Notice plus the aggregate amount of
all Damages that are the subject of previously filed Indemnification Notices
and that have not as of such date been resolved, then the Escrow Agent shall
make a draw down against the Seller Letter of Credit in such an amount as would
be sufficient, when aggregated with the amount of cash then held by the Escrow
Agent in the Indemnity Fund, to permit the payment in cash of all unpaid, and
110% of all unresolved, Damages, and the cash proceeds of such draw down shall
become part of the Indemnity Fund and shall be disbursed in accordance with the
terms of this Escrow Agreement.


 


(f)                                    On
the date that is six (6) months after the Closing Date (the “First Payout
Date”), Escrow Agent shall make a distribution from the cash amounts then held
by the Escrow Agent to Seller and/or permit the Seller to make a reduction in
the face amount of the Seller Letter of Credit, if any, in accordance with the
following:


 


(i)                                     To the extent that
50% of the amount of the Cash Security Deposit as of the Closing Date exceeds
the sum of (x) all amounts theretofore paid out pursuant to this Section 4
(the “First Paid Out Amount”), and (y) 110% of the cumulative
Indemnification Amounts claimed by Buyer in all Indemnification Notices and
Unliquidated Claim Notices that Buyer has delivered to Seller by the First
Payout Date, but which have not already been paid out or otherwise resolved
(such amount, together with the First Paid Out Amount is referred to as “First
Indemnification Amount”), the Escrow Agent shall make a cash distribution
of such excess to the Seller, and the Seller shall be authorized to effect, and
the Escrow Agent shall permit, a reduction in the face amount of the Seller
Letter of Credit by 50% of the face amount as of the Closing Date of the Seller
Letter of Credit.


 


(ii)                                  If, however, the
First Indemnification Amount exceeds 50% of the amount as of the Closing Date
of the Cash Security Deposit but is less than 50% of the amount as of the
Closing Date of the Indemnity Escrow Amount, then no cash distribution shall be
made to Seller, and the Seller shall be authorized to effect, and the Escrow
Agent shall permit, a reduction in the face amount of the Seller Letter of
Credit by an amount equal to the difference of (x) 50% of the face amount as of
the Closing Date of the Seller Letter of Credit, less (y) the amount of any
such excess.


 


(iii)                               If the First
Indemnification Amount exceeds 50% of the amount of the Indemnity Escrow Amount
as of the Closing Date, then the Escrow Agent shall not make any cash
distributions nor shall Seller be authorized to effect, nor shall the Escrow
Agent permit, any reduction in the face amount of the Seller Letter of Credit.


 


(g)                                 On
the date that is one (1) year after the Closing Date (the “Second Payout
Date”), the Escrow Agent shall make a distribution from the cash amounts then
held by the Escrow Agent to Seller and/or permit the Seller to make a reduction
in the face amount of the Seller Letter of Credit, if any, in accordance with
the following:


 


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(i)                                     To the extent that
75% of the amount as of the Closing Date of the Cash Security Deposit exceeds
the sum of (x) all amounts theretofore paid out in satisfaction of Damages pursuant
to this Section 4 (the “Second Paid Out Amount”), and (y) 110% of
the cumulative Indemnification Amounts claimed by Buyer in all Indemnification
Notices and Unliquidated Claim Notices which Buyer has delivered to Seller by
the Second Payout Date, but which have not already been paid out or otherwise
resolved (the said amount, together with Second Paid Out Amount is referred to
as “Second Indemnification Amount”), the Escrow Agent shall make a cash
distribution of such excess to the Seller, and the Seller shall be authorized
to effect, and the Escrow Agent shall permit, a reduction in the face amount of
the Seller Letter of Credit by an amount equal to 25% of the face amount as of
the Closing Date of the Seller Letter of Credit.


 


(ii)                                  If, however, the
Second Indemnification Amount exceeds 75% of the amount as of the Closing Date
of the Cash Security Deposit but is less than 75% of the amount as of the
Closing Date of the Indemnity Escrow Amount, then no cash distribution shall be
made to Seller, and Seller shall be authorized to effect, and the Escrow Agent
shall permit, a reduction in the face amount of the Seller Letter of Credit by
an amount equal to the difference of (x) 25% of the face amount as of the
Closing Date of the Seller Letter of Credit, less (y) the amount of any such
excess.


 


(iii)                               If the Second
Indemnification Amount exceeds 75% of the amount of the Indemnity Escrow Amount
as of the Closing Date, then the Escrow Agent shall not make any distributions
from the Cash Security Deposit nor shall Seller be authorized to effect, nor
shall the Escrow Agent permit, any reduction in the face amount of the Seller
Letter of Credit.


 


(h)                                 On
the date that is eighteen (18) months after the Closing Date (the “Third
Payout Date”), the Escrow Agent shall make distributions from the cash amounts
then held by the Escrow Agent and/or authorize the Seller to make a reduction
in the face amount of the Seller Letter of Credit, if any, in accordance with
the following:


 


(i)                                     To the extent that
the amount of cash then remaining in the Indemnity Fund exceeds 110% of the
cumulative Indemnification Amounts claimed by Buyer in all Indemnification
Notices and Unliquidated Claim Notices which Buyer has delivered to Seller by
the Third Payout Date, but which have not already been paid out or otherwise
resolved by the Third Payout Date (such amount is referred to as “Final
Indemnification Amount”), Escrow Agent shall distribute such excess (A)
first, in satisfaction of all resolved but unpaid Damages, and (B) second
to Seller, and Seller shall be authorized to effect, and the Escrow Agent shall
permit, the cancellation of the Seller Letter of Credit.


 


(ii)                                  If, however, the
Final Indemnification Amount exceeds the amount of cash then remaining in the
Indemnity Fund but is less than the aggregate amount of the Indemnity Fund,
then no distribution of cash shall be made to Seller from the Indemnity Fund,
and the Seller shall be authorized to effect, and


 


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the Escrow Agent shall permit, a reduction in the face amount of the
Seller Letter of Credit by an amount equal to the difference of (x) the face
amount then outstanding of the Seller Letter of Credit, less (y) the amount of
any such excess.


 


(iii)                               If the Final
Indemnification Amount exceeds the amount then remaining in the Indemnity Fund,
then no distribution of cash shall be made to Seller from the Indemnity Fund,
nor shall Seller be authorized to effect, nor shall the Escrow Agent permit,
any reduction in the face amount, or cancellation, of the Seller Letter of
Credit.


 


(i)                                     Upon
the termination of this Escrow Agreement in accordance with Section 9, the
Escrow Agent shall promptly liquidate any investments of the Indemnity Fund and
distribute to the Seller the sum of the resulting cash and other property, and
the Seller shall be authorized to effect, and the Escrow Agent shall permit,
the cancellation of the Seller Letter of Credit.


 


(j)                                     Notwithstanding
any other provision of this Escrow Agreement to the contrary, at any time prior
to the termination of this Escrow Agreement, the Escrow Agent shall, if so
instructed in writing signed by Buyer and the Seller, pay from the Indemnity
Fund, as instructed, to or upon the order of Buyer, as directed in such
writing, the amount of cash or other property so instructed.


 


5.                                       Resolution
of Conflicts.  (a)  In case the Seller shall timely object in
writing to any claim or claims by Buyer made in any Indemnification Notice, as
provided in Section 4(b) hereof, the Seller and Buyer shall attempt in
good faith for forty-five (45) days following delivery of the Certificate of
Objections to agree upon the rights of the respective parties with respect to
each of such claims.  If the Seller and
Buyer should so agree, a memorandum setting forth such agreement shall be
prepared and signed by an authorized signatory of both parties and shall be
delivered to the Escrow Agent.  The
Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute amounts from the Indemnity Fund in accordance with the terms
thereof.


 


(b)                                 If
no such agreement can be reached in accordance with the provisions of
Section 5(a), either Buyer or the Seller may, by written notice to the
other, with a copy to the Escrow Agent, demand arbitration of the matter in
accordance with the provisions of Section 11 of this Escrow Agreement,
unless the amount of the damage or loss is at issue in pending litigation with
a third party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration.  The decision of the arbitrator as to the
validity and amount of any claim in such Indemnification Notice shall be
binding and conclusive upon the parties to this Escrow Agreement, and the Escrow
Agent shall be entitled to act in accordance with such decision and make or
withhold payments out of the Indemnity Fund in accordance therewith.


 


6.                                       Taxes.  (a) 
The parties agree to treat the Indemnity Fund as owned by Seller and not
received by Buyer, in all cases to the extent not paid to Buyer pursuant to
Section 4 hereof, and to file all Tax Returns on a basis consistent with
such treatment.


 


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(b)                                 All
dividends, distributions, interest and gains earned or realized on the amounts
in the Indemnity Fund (“Earnings”) shall be treated as having been
received by Seller for United States federal income tax purposes.  Unless otherwise required by law, the
parties agree that, for United States federal income tax purposes, Seller shall
report Earnings as its income.


 


(c)                                  Any
disbursement of amounts in the Indemnity Fund to Buyer shall be treated for
United States federal income tax purposes as consisting, in part, of imputed
interest on the amount of such payment from the date of this Escrow Agreement
until the date of payment in accordance with the Code and Treasury Regulations
promulgated thereunder.


 


(d)                                 Seller
shall timely file information statements with the IRS (to the extent required
by law).  Seller may require Buyer to
provide Seller with an IRS Form W-9 or W-8BEN, as applicable, and any other
forms and documents that Seller may reasonably request to complete such
information returns and payee statements (collectively, the “Tax Reporting
Documentation”).  The parties hereto
understand that if such Tax Reporting Documentation is not provided to Seller,
then Seller may be required by the Code to withhold a portion of any imputed
interest or other payments made to Buyer. 
All tax withheld pursuant to this subsection (d) shall be treated
as having been paid to the person from whom such amounts were withheld for
purposes of determining any further amounts to which such person is entitled
hereunder.


 


7.                                       Assignment
of Rights to the Indemnity Fund; Assignment of Obligations; Successors.  This Escrow Agreement may not be assigned by
operation of law or otherwise without the express written consent of Buyer and
Seller (which consent may be granted or withheld in their sole discretion), and
any assignment in violation of this requirement shall be void; provided,
however, any corporation or association into which the Escrow Agent may
be converted or merged, or with which it may be consolidated, or to which it
may sell or transfer all or substantially all of its corporate trust business
and assets as a whole or substantially as a whole, or any corporation or
association resulting from any such conversion, sale, merger, consolidation or
transfer to which the Escrow Agent is a party, shall be and become the
successor Escrow Agent under this Escrow Agreement and shall have and succeed
to the rights, powers, duties, immunities and privileges as its predecessor,
without the execution or filing of any instrument or paper or the performance
any further act, provided such corporation or association is a bank or trust company
having a corporate trust office in Phoenix, Arizona and assets in excess of
$100 million.  This Escrow Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns.


 


8.                                       Escrow
Agent.  (a)  Except as expressly contemplated by this
Escrow Agreement or by joint written instructions from Buyer and Seller, the
Escrow Agent shall not sell, transfer or otherwise dispose of, in any manner,
all or any portion of the Indemnity Fund, except pursuant to an order of a
court of competent jurisdiction.


 


(b)                                 The
duties and obligations of the Escrow Agent shall be determined solely by this
Escrow Agreement, and the Escrow Agent shall not be liable except for the
performance or non-performance of such duties and obligations as are
specifically set forth in this Escrow Agreement.


 


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(c)                                  In
the performance of its duties hereunder, the Escrow Agent shall be entitled to
rely upon any document, instrument or signature believed by it in good faith to
be genuine and signed by any party hereto or an authorized officer or agent
thereof and shall not be required to investigate the truth or accuracy of any
statement contained in any such document or instrument.  The Escrow Agent may assume that any person
purporting to give any notice in accordance with the provisions of this Escrow
Agreement has been duly authorized to do so.


 


(d)                                 The
Escrow Agent shall not be liable for any error of judgment, or any action
taken, suffered or omitted to be taken, hereunder while acting in good faith
and in the exercise of reasonable judgment. 
The Escrow Agent may consult with independent counsel of its own choice
and shall have full and complete authorization and protection for any action
taken or suffered by it hereunder in good faith and in accordance with the
reasonable opinion of such counsel.


 


(e)                                  The
Escrow Agent shall have no duty as to the collection or protection of the
Indemnity Fund or income thereon, nor as to the preservation of any rights
pertaining thereto, beyond the safe custody of any such funds actually in its
possession.


 


(f)                                    As
compensation for its services to be rendered under this Escrow Agreement, for
each year or any portion thereof, the Escrow Agent shall receive a fee in the
amount specified in Schedule A to this Escrow Agreement and shall be
reimbursed upon request for all expenses, disbursements and advances, including
reasonable fees of outside counsel, if any, incurred or made by it in
connection with the preparation of this Escrow Agreement and the carrying out
of its duties under this Escrow Agreement. 
All such fees and expenses shall be paid by Seller.


 


(g)                                 The
Escrow Agent may at any time resign by giving thirty (30) days’ prior written
notice of resignation to Buyer and Seller. 
Buyer and Seller may at any time jointly remove the Escrow Agent by
giving twenty (20) days’ prior written notice signed by each of them to the
Escrow Agent.  If the Escrow Agent shall
resign or be removed, a successor Escrow Agent, which shall be a bank, title
insurance company, or trust company having a corporate trust office in Phoenix,
Arizona or St. Joseph, Missouri and assets in excess of $100 million, and which
shall be reasonably acceptable to Buyer, shall be appointed by Seller by written
instrument executed by Seller and Buyer and delivered to the Escrow Agent and
to such successor Escrow Agent and, thereupon, the resignation or removal of
the predecessor Escrow Agent shall become effective and such successor Escrow
Agent, without any further act, deed or conveyance, shall become vested with
all right, title and interest to all cash and property held hereunder by such
predecessor Escrow Agent, and such predecessor Escrow Agent shall, on the
written request of Seller, Buyer or the successor Escrow Agent, execute and
deliver to such successor Escrow Agent all the right, title and interest
hereunder in and to the Indemnity Fund of such predecessor Escrow Agent and all
other rights hereunder of such predecessor Escrow Agent.  If no successor Escrow Agent shall have been
appointed within thirty (30) days of a notice of resignation by the Escrow
Agent, the Escrow Agent’s sole responsibility shall thereafter be to hold the
Indemnity Fund until the earlier of its receipt of designation of a successor
Escrow Agent, a joint written instruction by Buyer and Seller and termination
of this Escrow Agreement in accordance with its terms.


 


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(h)                                 In
the event of any disagreement (other than as evidenced by a Certificate of
Objections) between any of the parties (other than Escrow Agent) to this Escrow
Agreement, or between them or any of them and any other person or entity
resulting in conflicting or adverse claims or demands being made in connection
with the Indemnity Fund, or in the event that Escrow Agent, in good faith,
shall be in doubt as to what action it should take hereunder, Escrow Agent at
its option may refuse to comply with any claims or demands on it, or refuse to
take any other action hereunder, so long as such disagreement continues or such
doubt exists, and, in any such event, Escrow Agent shall not be or become
liable in any way or to any person or entity for its failure or refusal to act,
and Escrow Agent shall be entitled to either;


 


(i)                                     continue
so to refrain from acting until (A) the rights of all parties shall have been
determined by a final and unappealable order of a court of competent
jurisdiction or by a final and unappealable award of arbitrators, or (B) all
differences shall have been resolved by agreement among all of the interested
persons or entities, and Escrow Agent shall have been notified thereof in
writing signed by all such persons or entities, or


 


(ii)                                  file
an interpleader action in any court of competent jurisdiction.


 


(i)                                     Buyer
and Seller shall jointly and severally indemnify, defend and hold the Escrow
Agent harmless from and against any and all loss, damage, tax (other than any
tax associated with the receipt by the Escrow Agent of fees, expenses and other
payments hereunder), liability and expense that may be incurred by Escrow Agent
arising out of or in connection with its duties, obligations or performance as
Escrow Agent hereunder, except as caused by Escrow Agent’s gross negligence or
willful misconduct, including the legal costs and expenses of bringing an
interpleader action pursuant to Section 8(h)(ii) of this Escrow Agreement
and of defending itself against any claim or liability in connection with its
performance or non-performance hereunder. 
The terms of this Section 8(i) shall survive the termination of
this Escrow Agreement and, with respect to claims arising in connection with
Escrow Agent’s duties while acting as such, the resignation or removal of
Escrow Agent.


 


9.                                       Termination.  This Escrow Agreement shall terminate (the “Termination
Date”) on the earlier of: (a) two (2) business days following the
distribution of all amounts that are distributable with respect to the Final
Indemnification Amount set forth in the Final Officer’s Certificate delivered
prior to the date set forth in Section 4(h) hereof, or, if no Final
Officer’s Certificate shall have been delivered prior to the date set forth in
Section 4(h), such date in Section 4(h), and (b) the date on which
there are no funds or other property remaining in the Indemnity Fund.


 


10.                                 Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given (a) upon personal
delivery to the party to be notified or delivery by facsimile (with
acknowledgment of complete transmission), (b) one (1) business day after
the business day of deposit with a nationally recognized overnight courier
service for next day delivery, freight prepaid, or (c) three (3) business
days after deposit with the United States Post Office for delivery by registered
or certified mail, postage prepaid.  Any
such communication shall be addressed to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):


 


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  (i)

  	
   

  	
  If
  to Buyer:

  	
   

  	
  Herbst
  Gaming Inc.

  
	
   

  	
   

  	
   

  	
   

  	
  5195
  Las Vegas Blvd.

  
	
   

  	
   

  	
   

  	
   

  	
  Las
  Vegas, Nevada  89118

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:
  Ed Herbst and Sean Higgins

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  	
   

  	
  Gibson,
  Dunn & Crutcher, LLP

  
	
   

  	
   

  	
   

  	
   

  	
  333
  S. Grand Avenue

  
	
   

  	
   

  	
   

  	
   

  	
  Los
  Angeles, California  90071-3197

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:
  Peter Ziegler

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  If
  to Seller:

  	
   

  	
  to
  the address set forth for such Seller in the relevant Agreement at Exhibit A,
  B or C, as the case may be.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  	
   

  	
  Howard
  Grace

  
	
   

  	
   

  	
   

  	
   

  	
  7575
  North 16th Street

  
	
   

  	
   

  	
   

  	
   

  	
  Suite
  1

  
	
   

  	
   

  	
   

  	
   

  	
  Phoenix,
  Arizona  85020

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  If
  to Escrow Agent:

  	
   

  	
  Lawyers
  Title of Arizona

  
	
   

  	
   

  	
   

  	
   

  	
  1850
  North Central Avenue, Suite 125

  
	
   

  	
   

  	
   

  	
   

  	
  Phoenix,
  Arizona  85004-4590

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:
  Sandy Butler

  



 


11.                                 Arbitration.  Any and all questions,
disputes or controversies arising in connection with this Escrow Agreement
(with the exception of any remedy seeking equitable relief which shall not be
subject to this Section 11), in interpretation, application, performance,
nonperformance of any instructions executed and delivered hereunder
(collectively “Disputes”) shall, at the demand of any party hereto, be
determined by arbitration.  Buyer and
Seller shall appoint a single arbitrator (“Arbitrator”) who is licensed by the
American Arbitration Association (“AAA”) to arbitrate such
Disputes.  In the event Buyer and Seller
cannot agree on the selection of the Arbitrator, each party shall select one
Arbitrator who shall together select the single Arbitrator who shall arbitrate
the matter.  Upon making a determination
with respect to any dispute, the Arbitrator shall submit a written decision on
each such Dispute to Seller and Buyer. 
Any determination by the Arbitrator with respect to any Disputes shall
be final and binding on each party to this Escrow Agreement.  The forum for any arbitration will be Los
Angeles, California.  The arbitration
shall be conducted in accordance with the Commercial Arbitration Rules of the
AAA as in effect for commercial arbitrations conducted by the AAA.  Seller and Buyer agree that the costs of the
Arbitrator shall be borne as determined by the Arbitrator.  Judgment upon the award of the Arbitrator
may be entered in any Court having jurisdiction thereof.


 


12.                                 Governing
Law.  This Escrow Agreement shall be
governed by, and construed in accordance with, the laws of the State of Arizona
applicable to contracts executed and to be performed entirely within that
State.  Any controversy or claim arising
out of or relating to this Escrow Agreement or a breach hereof shall be settled
in accordance with the arbitration provisions set forth in Section 11 of
this Escrow Agreement.


 


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13.                                 Amendments.  This Escrow Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of,
Buyer, Seller and the Escrow Agent or (b) by a waiver in accordance with
Section 14 of this Escrow Agreement.


 


14.                                 Waiver.  Buyer, Seller and the Escrow Agent may
(a) extend the time for the performance of any obligation or other act of
any other party hereto or (b) waive compliance with any agreement or
condition contained herein.  Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by Buyer, in the case of a waiver or extension by Buyer, Seller,
in the case of a waiver or extension by Seller, or the Escrow Agent, in the
case of a waiver or extension by the Escrow Agent.  Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Escrow Agreement.  The failure of any party to assert any of
its rights hereunder shall not constitute a waiver of any of such rights.


 


15.                                 Severability.  In the event that any provision of this
Escrow Agreement or the application thereof, becomes or is declared by a court
of competent jurisdiction to be illegal, void or unenforceable, the remainder
of this Escrow Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto.  Buyer, Seller and the Escrow Agent further
agree to use commercially reasonable efforts to replace such void or
unenforceable provision of this Escrow Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.


 


16.                                 Entire
Agreement; No Third-Party Beneficiaries. 
This Escrow Agreement, the Agreements and the Deposit Escrow Agreement
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Escrow Agreement. 
This Escrow Agreement is not intended to confer upon any Person other
than the parties any rights or remedies.


 


17.                                 Counterparts.  This Escrow Agreement may be executed in one
or more counterparts (including by facsimile), all of which shall be considered
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.


 


***Signature Pages Follow***


 


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IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the date first written above.


 


	
   

  	
  BUYER

  
	
   

  	
   

  
	
   

  	
  Herbst Gaming, Inc.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ESCROW AGENT

  
	
   

  	
   

  	
   

  
	
   

  	
  Lawyer’s Title of Arizona

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							



 

















 


	
   

  	
  SELLER

  
	
   

  	
   

  
	
   

  	
  Southern
  Iowa Gaming Co.,

  
	
   

  	
  an
  Iowa corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  St.
  Joseph Riverboat Partners,

  
	
   

  	
  a
  Missouri general partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Continental
  Gaming, Inc.,

  
	
   

  	
   

  	
  a
  Missouri corporation,

  
	
   

  	
   

  	
  its
  managing partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mark
  Twain Casino, L.L.C.,

  
	
   

  	
  a
  Missouri limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Cardinal
  Gaming, Inc.,

  
	
   

  	
   

  	
  a
  Missouri Corporation, its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							



 

















 


SCHEDULE A


 


1.                                       The
Escrow Agent shall be paid a one-time fee of Three Hundred Dollars ($300.00)
upon receipt of the Cash Security Deposit.


 


2.                                       The
Escrow Agent shall be paid a one-time fee of Twenty Five Dollars ($25.00) with
respect to each check issued by the Escrow Agent in connection with any partial
or full release or payment of cash funds held by the Escrow Agent pursuant to
the terms of this Escrow Agreement.


 


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