EXHIBIT 10.1


 


March 9, 2009


 


To the Consenting Parties Identified

on the Signature Pages Hereof:


 


This
letter agreement (this “Agreement”) sets forth the terms on which the
Consenting Parties (as defined below) agree, among other things, to support a
restructuring (the “Restructuring”) by Herbst Gaming, Inc. (the “Company”)
and the Guarantor Debtors (as defined below) in accordance with the term sheet
(the “Term Sheet”) attached hereto as Exhibit A,
as it may be modified in accordance with the terms herein.  Capitalized terms used herein without
definition shall have the meanings ascribed to such terms in the Term Sheet.


 


For
purposes of this Agreement, (a) “Consenting Parties” means (i) each
of the undersigned lenders (each, a “Consenting Lender” and together,
the “Consenting Lenders”) under the Company’s Second Amended and
Restated Credit Agreement, dated as of January 3, 2007, as amended (the “Senior
Credit Facility”), (ii) Edward J. Herbst, Timothy P. Herbst and Troy
D. Herbst (each, an “Existing Equity Holder” and together, the “Existing
Equity Holders”), being the holders of 100% of the issued and outstanding
equity interests in the Company, and (iii) Terrible Herbst, Inc. (“THI”)
and each undersigned person or entity affiliated with THI that is a party to a
Related Party Agreement and any
other person or entity that is affiliated with THI that enters into a new agreement or agreements related
to the operations of the Company (collectively with THI, the “THI Parties”),
(b) “Guarantor Debtors” means each of the Company’s subsidiaries
that are guarantors of the Company’s obligations under the Senior Credit
Facility and/or the Senior Subordinated Notes, and (c) “Debtors”
means, collectively, the Company and the Guarantor Debtors.


 


In
exchange for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Debtors and each Consenting Party intending
to be legally bound, hereby agree as follows:


 


1.             The Restructuring. 
The Restructuring will principally consist of (a) separation of the
Company’s casino and slot machine route businesses into two holding companies, (b) conversion
of all outstanding obligations under the Senior Credit Facility into debt and
equity of the reorganized companies, (c) termination of all outstanding
obligations under the indentures (the “Indentures”) governing the
Company’s (i) 8 1/8% Senior Subordinated Notes due 2012 and/or (ii) 7%
Senior Subordinated Notes due 2014 (together, the “Senior Subordinated Notes”),
(d) cancellation of 100% of the existing equity in the Company, and (e) amendments
or modifications to, or assumptions and


 


2.             assignments of, certain of the Related
Party Agreements, or new agreements to be entered into, and settlements of
claims with the THI Parties in connection with the Related Party Agreements,
all in exchange for 90% of the new equity in the reorganized slot machine route
business, in each case, as set forth in the Term Sheet.  The parties agree that the Restructuring is
to be implemented pursuant to pre-arranged cases for the Debtors (collectively,
the “Bankruptcy Case”) under chapter 11 of the United States Bankruptcy
Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”).


 


3.             The Bankruptcy Case.


 


(a)           The Debtors shall
file voluntary petitions to commence the Bankruptcy Case under chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for the District of
Nevada (the “Bankruptcy Court”). 
On the date that the Bankruptcy Case is commenced, the Debtors shall
file a plan of reorganization in form and substance reasonably satisfactory to (i) Consenting
Lenders holding at least two-thirds in amount of the total Claims held by all
Consenting Lenders arising under the Senior Credit Facility (“Required
Consenting Lenders”) and (ii) the THI Parties (the “Plan”) and
a disclosure statement discussing the Plan in form and substance reasonably 


 


 

















 


satisfactory to (i) Required Consenting Lenders and (ii) the
THI Parties (the “Disclosure Statement”), both of which will incorporate
the terms set forth in the attached Term Sheet.


 


(b)           This Agreement is
not and shall not be deemed to be a solicitation for consents to the Plan.  The acceptance of the Consenting Parties will
not be solicited until after the commencement of the Bankruptcy Case, and such
solicitation shall occur in accordance with such solicitation procedures as may
be approved or established by the Bankruptcy Court.


 


4.             Incorporation of Term Sheet; Consultation
and Cooperation.  The Term Sheet is expressly incorporated
herein by reference and is made part of this Agreement.  The general terms and conditions of the
Restructuring are set forth in the Term Sheet; provided,  however, that the Term
Sheet is supplemented by the terms and conditions of this Agreement.  In the event the terms and conditions as set
forth in the Term Sheet and this Agreement are inconsistent, the terms and
conditions as set forth in the Term Sheet shall govern.  To the extent that any of (i) the Plan,
the Disclosure Statement, or any definitive documents relating thereto
(collectively, the “Plan Documents”) or (ii) any transaction
contemplated by any of the Plan Documents is required under the terms of this
Agreement to be reasonably satisfactory or reasonably acceptable to any of the
Consenting Parties and such Plan Document or transaction is identified,
described or contemplated by the Term Sheet, such Plan Documents and any
transaction contemplated by the Plan Documents shall be deemed to be reasonably
satisfactory or reasonably acceptable to the extent that such Plan Documents or
any transaction contemplated by the Plan Documents are consistent with the
terms specifically identified in the Term Sheet.  To the extent that (x) any documents or
agreements executed by any of the THI Parties and/or Slot Co and/or (y) any
transaction contemplated thereby include terms not specifically identified in
the Term Sheet, such terms must be reasonably acceptable to the THI Parties and
Slot Co.  In addition, the Debtors, the Consenting Lenders and the THI
Parties agree to consult and cooperate with each other in connection with any
analysis, appearances, presentations, briefs, filings, arguments or proposal
made or submitted by any such party to the Bankruptcy Court, other creditor
constituents or other parties with an interest in the Restructuring.


 


5.             Effectiveness. 
This Agreement shall become effective on the date upon which: (i) counterparts
of this Agreement have been duly executed by each of the Debtors, the Existing
Equity Holders, the THI Parties and Consenting Lenders holding in the aggregate
at least two-thirds, or such lesser amount, but not less than a majority, as
may be acceptable to the Company and the THI Parties (an “Acceptable Lesser
Dollar Amount”), in amount of all outstanding Claims under the Senior
Credit Facility and constituting in the aggregate a majority in number, or such
lesser amount as may be acceptable to the Company and the THI Parties (an “Acceptable
Lesser Amount In Number”), of all lenders thereunder; provided, that if
Consenting Lenders holding less than two-thirds, but at least a majority, in
amount of all outstanding claims under the Senior Credit Facility, or
constitute in the aggregate less than a majority in number of all lenders
thereunder, but the Company and the THI Parties nonetheless determine those
amounts to be an Acceptable Lesser Dollar Amount or an Acceptable Lesser Amount
In Number, as applicable, the Company and the THI Parties must notify the
parties in writing of such determination no later than the later of 5:00 p.m.
Prevailing Pacific Time on the next Business Day, or twenty-four (24) hours,
after the Company and the THI Parties have been provided a final tally setting
forth the aggregate holdings, names and number of Consenting Lenders that have
executed this Agreement (with interim tallies setting forth the information
throughout the voting process engaged in by lenders under the Senior Credit
Facility with respect to this Agreement), or this Agreement shall not be
effective as to or binding upon any Consenting Lender or other party; and (ii) such
executed counterparts have been exchanged among the parties to this
Agreement.  This Agreement shall not be
binding on or enforceable against any party and no party shall have any rights
or obligations under this Agreement until this Agreement has become effective in
accordance with this Section 4.


 


6.             Pursuit/Support of the Restructuring.


 


(a)           Each of the Debtors
agrees and covenants that it shall (i) use
commercially reasonable efforts to successfully consummate the Restructuring in
the manner and in accordance with the timeline contemplated by this Agreement, (ii) use
commercially reasonable efforts to avoid the occurrence of any of the Agreement
Termination Events set forth in Section 12, (iii) take all
commercially 


 


 

















 


reasonably necessary actions to achieve
the expeditious confirmation and consummation of the Plan, and (iv) use commercially reasonable efforts
to obtain an order from the Bankruptcy Court granting adequate
protection to the holders of Claims arising
under the Senior Credit Facility on terms set forth in Section 11 (b) below.


 


(b)           Each Consenting
Party (i) agrees to take, or cause to be taken, all actions reasonably
necessary to facilitate, encourage or otherwise support the Restructuring and
the transactions contemplated by the Term Sheet and (ii) agrees not to
take, or cause to be taken, directly or indirectly, any action inconsistent
with the consummation of, or opposing the Restructuring or the transactions
contemplated by the Term Sheet, including without limitation, in the case of
clauses (i) and (ii), the matters set forth in Section 6
hereof, as applicable.  Without limiting
the generality of the foregoing and subject to the terms and conditions of this
Agreement, each Consenting Party agrees to neither take or direct any other
person to take any action to accelerate any obligation of any Debtor owing to
such Consenting Party that is or may become due nor initiate or pursue, or have
initiated or pursued on its behalf, any litigation or proceeding, or any other
rights or remedies of any kind, with respect to any Claim such Consenting Party
may now or hereafter have against any Debtor or any Debtor’s subsidiaries,
affiliates, directors, officers, and/or employees other than to enforce this
Agreement or the Term Sheet.


 


7.             Support of the Plan, Disclosure
Statement and First Day Motions.  Each
Consenting Party agrees that it will take or refrain from taking, as
applicable, the following actions in connection with the Bankruptcy Case:


 


(a)           provided that such
Consenting Party has been properly solicited pursuant to Bankruptcy Code
sections 1125 and 1126, (i) to vote in favor of the Plan in accordance
with the voting procedures established in the Solicitation Materials and (ii) to
the extent such election is available, not to elect on its ballot to preserve
any Claims such Consenting Party may own that may be affected by any releases
provided for under the Plan;


 


(b)           not object to any
Plan Document, except to the extent that such Plan Document is either: (i) materially
inconsistent with the Term Sheet as such Term Sheet may be amended or modified
from time to time in accordance with Section 7(a) hereof, or (ii) not
reasonably satisfactory to Required Consenting Lenders or the THI Parties;


 


(c)           take all reasonable
actions necessary or reasonably requested by the Company to support the Plan
and the transactions contemplated thereby, except to the extent that such Plan
or such transactions are either (i) materially inconsistent with the Term
Sheet, as such Term Sheet may be amended or modified from time to time in
accordance with Section 7(a) hereof, or (ii) not
reasonably satisfactory to Required Consenting Lenders or the THI Parties;


 


(d)           not to take any
actions inconsistent with, or that would delay approval or confirmation of, the
Plan Documents, except to the extent that such Plan Documents are either (i) materially
inconsistent with the Term Sheet, as such Term Sheet may be amended or modified
from time to time in accordance with Section 7(a) hereof, or (ii) not
reasonably satisfactory to Required Consenting Lenders or the THI Parties;


 


(e)           support the release
provisions contained in the Plan;


 


(f)            not to oppose the
Debtors’ request for the entry of customary “first day” orders that are
reasonably satisfactory to Required Consenting Lenders and the THI Parties;


 


(g)           not to directly or
indirectly seek, solicit, encourage or, subject to any applicable fiduciary
duties, participate in any negotiations regarding any other plan, sale,
proposal or offer of dissolution, winding up, liquidation, reorganization, merger
or restructuring of the Company or any Guarantor Debtor (other than as provided
in or contemplated by the Term Sheet or with respect to potential sales of some
or all of the casino assets);


 


 

















 


(h)           promptly notify the
other Consenting Parties upon the receipt of any written solicitation or
proposal relating to any other plan, sale, proposal or offer of dissolution,
winding up, liquidation, reorganization, merger or restructuring of the Company
or any Guarantor Debtor (other than as provided in or contemplated by the Term
Sheet), including potential sales of some or all of the casino assets; and


 


(i)            not to withdraw or
revoke any properly solicited vote to accept the Plan unless (x) the Plan
is modified in any respect in a manner materially inconsistent with the Term
Sheet, as such Term Sheet may be amended or modified from time to time in
accordance with Section 7(a) hereof, or that has not been
approved by Required Consenting Lenders and the THI Parties or (y) this
Agreement is terminated in accordance with its terms.


 


8.             Modification of Plan Documents.


 


(a)           The Term Sheet, the
Restructuring and the Plan Documents may from time to time be amended or
modified by the Debtors to modify the treatment of certain constituents junior
to the Consenting Lenders (other than the THI Parties) under the Plan (each, a “Permitted
Plan Amendment”), if such amendment or modification either (i) does
not negatively impact the Consenting Lenders or the THI Parties or (ii) is
in writing and consented to by Required Consenting Lenders and the THI Parties.


 


(b)           The making of any
Permitted Plan Amendment shall not release any Consenting Party from its
obligations under this Agreement.


 


9.             Cooperation During the Bankruptcy Case
and In Implementation of Plan.  Each of the
Debtors agrees and covenants that it shall:


 


(a)           during the
Bankruptcy Case, cooperate and consult with the Consenting Lenders, the THI
Parties and any consultants or advisors engaged by the Consenting Lenders
and/or the THI Parties regarding the Debtors’ ongoing operations, including
without limitation supplementing the management team for the Debtors’ casino
assets and/or exploring potential sales or other restructuring transactions
with respect to some or all of the casino assets; and


 


(b)           in connection with
the implementation of the Plan, (i) cooperate with any consultants or
advisors engaged by the Consenting Lenders or the THI Parties and (ii) continue
to deliver any diligence information reasonably requested by the Consenting
Lenders or the THI Parties, or their respective consultants or advisors.


 


10.           Representations and Warranties.


 


(a)           Each Consenting
Lender represents and warrants, severally and not jointly, that, as of the date
hereof, such Consenting Lender is the legal owner, beneficial owner and/or holder
of investment and voting authority over, the aggregate amount of obligations
outstanding under the Senior Credit Facility as set forth in the records
maintained by the Senior Credit Facility Agent, and legally or beneficially
owns, or has investment and voting authority over, no other obligations
outstanding under the Senior Credit Facility.


 


(b)           Each Consenting Lender represents and warrants, severally and not
jointly, that such Consenting Lender (i) is a sophisticated investor with
respect to the transactions described in this Agreement with sufficient
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of owning and investing in securities
(including any securities that may be issued in connection with the
transactions contemplated by this Agreement), is making an informed decision
with respect thereto and has made its own analysis and decision to enter this
Agreement and (ii) is an “accredited investor” within the meaning of Rule 501
of the Securities Act of 1933, as amended.


 


 

















 


(c)           Each Consenting
Lender represents and warrants, severally and not jointly, that such Consenting
Lender has not been offered, nor shall such Consenting Lender accept, any
treatment or compensation or the right to participate in any transactions with
any of the Debtors or THI Parties relating to the Plan or the Debtors’
operations that is different than such treatment, compensation or right offered
to all lenders under the terms of this Agreement and the Term Sheet.


 


(d)           Each Existing
Equity Holder represents and warrants, severally and not jointly, that, as of
the date hereof, such Existing Equity Holder is the beneficial owner of and
holds investment and voting authority over the equity interests in the Company
set forth opposite such Existing Equity Holder’s name on the signature pages hereof;
and the Existing Equity Holders further represent and warrant, jointly and
severally, that, as of the date hereof, the equity interests held by the
Existing Equity Holders constitute in the aggregate 100% of the issued and
outstanding capital stock of the Company.


 


(e)           Each THI Party
represents and warrants that (i) such THI Party has no Claims against any
Debtor other than Claims in connection with any of the Related Party Agreements,
and (ii) each Related Party Agreement to which such THI Party is a party
is a legally valid and binding obligation of such party, enforceable against
such party in accordance with its terms.


 


(f)            (x) Each of
the Consenting Parties, severally and not jointly, represents and warrants  to each of the Debtors and (y) each of the Debtors
represents and warrants, only as to itself and not as to each other, to each
Consenting Party, that the following statements, as applicable, are true,
correct and complete as of the date hereof:


 


(i)            Power and Authority.  It has all requisite corporate, partnership,
or limited liability company power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby, and to perform its
obligations hereunder.


 


(ii)           Due Organization.  It is duly organized, validly existing and in
good standing under the laws of its state of organization and it has the
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.


 


(iii)          Authorization.  The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly authorized by
all necessary corporate, partnership or limited liability company action on its
part.


 


(iv)          No Conflicts.  The execution, delivery and performance of
this Agreement does not and shall not:  (i) violate
any provision of law, rule or regulation applicable to it,  except to the extent the failure to comply
therewith could not reasonably be expected to have a material adverse effect on
its ability to perform its obligations hereunder; (ii) violate its
articles or certificate of incorporation, bylaws or other organizational
documents, except as contemplated in the Plan and the Term Sheet; or (iii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation to which it or any of
its subsidiaries is a party, except to the extent such contractual obligation
relates to the filing of a case under the Bankruptcy Code or insolvency of the
Debtors.


 


(v)           Governmental
Consents.  The execution,
delivery and performance by it of this Agreement does not and shall not require
any registration or filing with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body, except such filings as (i) are identified in the Term
Sheet, (ii) may be necessary and/or required under antitrust laws or the
federal securities laws, (iii) may be necessary and/or required under any
gaming laws or regulations of any state, or (iv) may be necessary and/or
required in connection with the commencement of the Bankruptcy Case, the
approval of the Disclosure Statement and confirmation of the Plan.


 


 

















 


(vi)          Binding Obligation.  Subject to the provision of sections 1125 and
1126 of the Bankruptcy Code, this Agreement is a legally valid and binding
obligation of such party, enforceable against such party in accordance with its
terms.


 


(g)           Each THI Party and
each of the Debtors represents and warrants that each of the Related Party
Agreements existing as of the date hereof is listed on the Related Party
Agreements Term Sheet (Exhibit 4 to the Term Sheet).


 


11.           Survival of Agreement. 
Each of the parties acknowledges and agrees that: (i) this
Agreement is being executed in connection with negotiations concerning the
Restructuring of the Debtors and in contemplation of the possible commencement
of the Bankruptcy Case by the Debtors; (ii) the rights granted in this
Agreement are enforceable by each signatory hereto without approval of the
Bankruptcy Court, except as specifically contemplated by this Agreement (iii) the
exercise of such rights will not violate the automatic stay provisions of the
Bankruptcy Code and (iv) each party hereto hereby waives its right to
assert a contrary position in the Bankruptcy Case, if any, with respect to the
foregoing.


 


12.           Pre-Filing Interest Payments; Adequate
Protection Payments; Post-Effective Date Payments; Contract Terms; Bank
Account/Forbearance; Provision of Records.


 


(a)           The Consenting
Parties agree that interest payments to be made to the lenders under the Senior
Credit Facility from the effective date of this Agreement through the Petition
Date shall consist of (i) a payment of interest due under the Senior
Credit Facility on December 1, 2008 ($5,101,752.49), to be paid within two
(2) Business Days after the effective date of this Agreement, (ii) a
payment of $3.0 million as a portion of interest due under the Senior Credit
Facility on January 1, 2009, to be paid within two (2) Business Days
after the effective date of this Agreement, and (iii) a payment in an
amount equal to the Debtors’ Estimated Week Ending Cash Balance (as reflected
on the Herbst Gaming, Inc. Weekly Cash Flow Variance Analysis) in excess
of $100 million as of the close of business on Friday, March 13, 2009, to
be (x) calculated based upon the Herbst Gaming, Inc. Weekly Cash Flow
Variance Analysis (taking full account of all interest payments under (i) and
(ii) above, and any payments to the Debtors’ restructuring professionals
that are expected to be made prior to the Petition Date), and (y) paid on
Wednesday, March 18, 2009.


 


(b)           The Consenting
Parties agree that during the period commencing on the Petition Date and
running through the Effective Date, adequate protection payments shall be made
to the lenders under the Senior Credit Facility in an amount equal to the
Debtors’ Cash and Cash Equivalents (as reflected on the Debtors’ balance sheet)
in excess of $100 million to be measured as of the last day of each fiscal
quarter and to be paid on the 30th day thereafter; provided,
however, that such payments shall be reduced by any unpaid
restructuring costs for services rendered by (i) the Debtors’
professionals, (ii) Milbank (as defined below), (iii) Houlihan,
Lokey, Howard & Zukin, Inc. and (iv) any other professionals
(including without limitation local counsel) that have been engaged by the
steering committee of lenders under the Senior Credit Facility and/or the
Senior Credit Facility Agent, that have accrued or otherwise have been recorded
on the Debtors’ balance sheet as of the last day of any fiscal quarter and are
reasonably anticipated to be paid within 45 days thereafter.  Each of the parties agrees that the parties
will use their commercially reasonable efforts to have the Bankruptcy Court
enter a final order granting the lenders under the Senior Credit Facility the
adequate protection payments described in this Section 11(b) within
45 days after the Petition Date.


 


(c)           The Consenting
Parties agree that the Plan will provide that, during the period commencing on
the Effective Date and running through the Substantial Consummation Date,
adequate protection payments shall be made to the Holders of Senior Credit
Facility Claims (i) in an amount equal to the payments that would be made
under the New Slot Co Bank Loan and the New Slot Co Second Lien Facility as if
those facilities were in effect as of the Effective Date, notwithstanding the
fact that the Substantial Consummation Date may not yet have occurred, provided, however, that (x) such
amount shall not include any cash interest or PIK interest on the New Slot Co
Second Lien 


 


 

















 


Facility, nor shall any such interest on the New Slot Co
Second Lien Facility commence accruing, until the date that is six (6) months
after the Effective Date (the “PIK Date”), provided,
further, that if any required gaming
licenses or approvals with respect to any of (a) Reorganized Herbst
Gaming, its proposed officers, directors, equity holders and other persons
required to file personal applications (each to the extent necessary) or (b) the
non-THI Parties equity holders in Slot Co, the Lender Designee, and lenders of
Slot Co (each to the extent necessary), shall not have been granted by any of
the applicable gaming regulatory authorities to all such entities within one
year of the Effective Date, then all interest on the New Slot Co Second Lien
Facility shall cease accruing and shall only recommence (without any catch up
for lost interest) once all such licenses and approvals are granted, and (y) such
payments shall be made on the last day of the applicable interest period (with
the initial interest period for such payments commencing on the Effective Date
or the PIK Date, as applicable, and ending on the last Business Day of the
third full calendar month following the month in which the Effective Date or
the PIK Date, as applicable, occurs, and with each subsequent interest period
commencing on the last day of the preceding interest period and ending on the
last Business Day of the third full calendar month thereafter); and (ii) under
the Herbst Gaming Amended and Restated Senior Credit Facility, in an amount
equal to the Debtors’ Cash and Cash Equivalents (as reflected on the Debtors’
balance sheet) in excess of $100 million, (1) to be measured (x) initially,
as of the last day of the third full calendar month following the month in
which the Effective Date occurs and (y) as of the last day of every third
full calendar month thereafter, and to be paid in each case on the 30th day after the date on which it is measured.






(1) Such
amount shall be modified to reflect the separation of the Debtors’ casino and
slot machine route businesses as of the later of (i) the Effective Date
and (ii) five days after the date the Company receives gaming regulatory
approval regarding the internal reorganization necessary to implement
separation of the Debtors’ casino and slot machine route businesses.  Following the later of such dates, the cash
sweep will apply only as to the casino business.


 


(d)           For the period from
the Petition Date through the Effective Date, the Debtors shall continue to
honor and perform their obligations with respect to the Related Party
Agreements until such agreements are assumed under the Plan.  In addition, the Consenting Parties agree
that the Confirmation Order will provide that, during the period commencing on
the Effective Date and running through the Substantial Consummation Date, the
economic terms of the Related Party Agreements shall be honored and performed
by the parties thereto as if all assumptions, modifications or other treatments
described in the Related Party Agreements Term Sheet were in effect as of the
Effective Date, notwithstanding the fact that the Substantial Consummation Date
may not yet have occurred.


 


(e)           The Debtors shall,
on or before the date that is ten (10) days after the effective date of
this Agreement, cause all of their Cash in Community Bank of Nevada to be
transferred to the Debtors’ account at U.S. Bank, National Association (“U.S.
Bank”); provided, however, that
as a condition to such transfer, the Senior Credit Facility Agent, U.S. Bank
and the Debtors shall enter into a forbearance agreement with respect to such Cash
that is reasonably acceptable to each such party.


 


(f)            During the period
commencing on the effective date of this Agreement and running through the
Petition Date, the Debtors shall provide to the Consenting Lenders weekly check
and wire transfer records (excluding payroll records).


 


13.           Termination.


 


(a)           This Agreement
shall automatically terminate upon the occurrence of any of the following
events, unless such automatic termination is waived in writing by Required
Consenting Lenders, the 


 


 

















 


Debtors and/or the THI Parties, as applicable, within 5
Business Days of the occurrence of such event; provided,
however, that the waiver of both the Debtors and the THI Parties,
but not the Required Consenting Lenders, shall be required with respect to any
automatic termination to the extent that such automatic termination occurs
pursuant to any of paragraphs (iii), (xx) (resulting from an announcement by a
Consenting Lender) or (xxiii) below; provided, further,
that the waiver of the Required Consenting Lenders and the THI Parties, but not
the Debtors, shall be required with respect to any automatic termination to the
extent that such automatic termination occurs pursuant to any of paragraphs
(i), (iv), (v), (vi), (xi), (xiii), (xvii), (xix) or (xxi) below; provided, still, further,
that the waiver of the Required Consenting Lenders and the Debtors, but not the
THI Parties shall be required with respect to any automatic termination to the
extent that such automatic termination occurs pursuant to any of paragraphs (ii),
(xx) (resulting from an announcement by a THI Party) or (xxii) below; and provided, still,
further, the waiver of only the
Required Consenting Lenders, but not the Debtors or the THI Parties, shall be
required with respect to any automatic termination to the extent that such
automatic termination occurs pursuant to any of paragraphs (vii) or (viii) below:


 


(i)            Drafts of the Plan
and Disclosure Statement are not delivered by the Debtors to Milbank, Tweed,
Hadley & McCloy LLP (“Milbank”) on behalf of the Consenting
Lenders and to Latham & Watkins LLP (“Latham”) on behalf of the
THI Parties within three (3) Business Days of the effective date of this
Agreement;


 


(ii)           Drafts of the
amended, modified or revised Related Party Contracts are not delivered by the
Debtors or the THI Parties to Milbank within three (3) Business Days of
the effective date of this Agreement;


 


(iii)          Drafts of
agreements relating to each of the new Slot Co Bank Loan, New Slot Co Second
Lien Facility, and Herbst Gaming Amended and Restated Senior Credit Facility
are not delivered by the Consenting Lenders to the Debtors and the THI Parties
within three (3) Business Days of the effective date of this Agreement;


 


(iv)          The Plan is not in
form and substance reasonably satisfactory to Required Consenting Lenders and
the THI Parties or the Disclosure Statement is not in form and substance
reasonably satisfactory to Required Consenting Lenders and the THI Parties by March 20,
2009, provided, however, that the
Consenting Parties agree that this Agreement shall not automatically terminate
upon an assertion by Required Consenting Lenders or the THI Parties that the
Disclosure Statement is not reasonably satisfactory in form and substance based
solely on the fact that the Disclosure Statement does not include a liquidation
analysis as of such date;


 


(v)           The Debtors have
not delivered drafts of all anticipated first day motions to Milbank and Latham
within three (3) Business Days of the effective date of this Agreement;


 


(vi)          The Debtors shall
not have used their reasonable best efforts to reach agreement with Required
Consenting Lenders and the THI Parties on the documentation necessary to
commence the Bankruptcy Case to implement the Restructuring contemplated by and
provided for in the Term Sheet on or before March 23, 2009;


 


(vii)         The Bankruptcy Case to implement the
Restructuring contemplated by and provided for in the Term Sheet shall not have
been commenced on or before March 23, 2009;


 


(viii)        In the event the Debtors decide to
seek DIP financing, the Debtors file a motion seeking approval of DIP financing
with anyone other than some or all of the lenders under the Senior Credit
Facility, unless some or all of the lenders under the Senior Credit Facility
have not agreed to provide DIP financing on commercially reasonable terms;


 


 

















 


(ix)           The Disclosure
Statement with respect to the Plan shall not have been approved by the
Bankruptcy Court within  60  days after the Petition Date;


 


(x)            The Plan shall not
have been confirmed by the Bankruptcy Court within 120 days after the Petition
Date;


 


(xi)           The order
confirming the Plan shall not be in form and substance reasonably satisfactory
to Required Consenting Lenders and the THI Parties;


 


(xii)          The Plan shall not
have been substantially consummated within one year of the Effective Date;


 


(xiii)         The Plan is modified in any manner
that is not acceptable to Required Consenting Lenders or the THI Parties or any
other Plan Document is not in form and substance reasonably satisfactory to
Required Consenting Lenders or the THI Parties;


 


(xiv)        The Bankruptcy Case with respect to
any Debtor is dismissed or is converted to a case under Chapter 7 of the
Bankruptcy Code;


 


(xv)         The Bankruptcy Court shall enter an
order appointing (i) a trustee under chapter 7 or chapter 11 of the
Bankruptcy Code, (ii) a responsible officer or (iii) an examiner, in
each case with enlarged powers relating to the operation of the business
(powers beyond those set forth in subclauses (3) and (4) of Section 1106(a))
under Section 1106(b) of the Bankruptcy Code;


 


(xvi)        The orders of the Bankruptcy Court
approving the Disclosure Statement or confirming the Plan or any interim or
final order granting adequate protection to the lenders under the Senior Credit
Facility shall have been stayed, reversed, vacated or otherwise modified, other
than merely ministerial modifications (e.g., with  respect to names, addresses and similar
modifications);


 


(xvii)       Any of the Debtors shall file a
motion or the Bankruptcy Court shall enter an order approving a payment to any
other party (whether in cash or other property or whether as adequate
protection, settlement of a dispute, or otherwise) that would be materially
inconsistent with the treatment of such party under the Term Sheet;


 


(xviii)      Any court shall enter a final,
non-appealable judgment or order declaring this Agreement or any material
portion hereof to be unenforceable;


 


(xix)         The Debtors shall withdraw the Plan
or publicly announce their intention not to support the Plan;


 


(xx)          Any of (i) Consenting
Lenders holding sufficient Claims under the Senior Credit Facility to result in
all other Consenting Lenders holding less than a majority in dollar amount of
all outstanding Claims under the Senior Credit Facility, or (ii) the THI
Parties shall publicly announce their intention not to support the Plan;


 


(xxi)         any material breach of this Agreement
by any Debtor;


 


(xxii)        any material breach of this Agreement
by any of the THI Parties; or


 


(xxiii)       any material breach of this Agreement
by Consenting Lenders holding sufficient Claims under the Senior Credit
Facility to result in all other Consenting Lenders holding less than a majority
in dollar amount of all outstanding Claims under the Senior Credit Facility.


 


 

















 


(b)           Upon a termination
of this Agreement in accordance with this Section 12, no party
hereto shall have any continuing liability or obligation to any other party
hereunder and the provisions of this Agreement shall have no further force or
effect, except for the provisions in Sections 13 and 16-25, each
of which shall survive termination of this Agreement; provided that no
such termination shall relieve any party from liability for its breach or
non-performance of its obligations hereunder prior to the date of such
termination.


 


14.           No Third-Party Beneficiaries. 
This Agreement shall be solely for the benefit of the parties hereto and
no other person or entity shall be a third-party beneficiary hereof.


 


15.           Additional Claims and Interests Subject. 
Nothing in this Agreement shall be deemed to limit or restrict the
ability or right of a Consenting Party to purchase or take assignment of any
additional Claims (“Additional Claims”) against or interests in any
Debtor or any affiliate of any Debtor; provided, however, that in
the event a Consenting Party purchases or takes assignment of any such
Additional Claims or other interests after the date hereof, such Additional
Claims or other interests shall immediately upon such acquisition become
subject to the terms of this Agreement.


 


16.           Restrictions on Transfer.


 


(a)           Except as set forth
in Section 15(b), each Consenting Party hereby agrees that, for so
long as this Agreement shall remain in effect, it shall not sell, transfer or
assign all or any of its Claims, as the case may be, or any option thereon or
any right or interest (voting, participation or otherwise) therein (each, a “Transfer”)
without the prior written consent of the Company.


 


(b)           Notwithstanding the
foregoing, any Consenting Lender may Transfer any or all of its respective
Claims, provided that, as a condition precedent, the transferee thereof agrees
in writing to be bound by the terms of this Agreement.


 


(c)           Any Transfer of any
Claim that does not comply with the foregoing shall be deemed void ab initio.


 


17.           Entire Agreement. 
As of the date this Agreement becomes effective, this Agreement,
including the Term Sheet, constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.


 


18.           Amendment or Waiver.


 


(a)           Except as provided
in Section 7 hereof, this Agreement, including the Term Sheet, may
not be modified, altered, amended, waived or supplemented except by an
agreement in writing signed by each of the Debtors and Required Consenting
Lenders, or the THI Parties, as applicable.


 


(b)           Each of the parties
hereto agrees to negotiate in good faith all amendments and modifications to
this Agreement, including the Term Sheet, as reasonably necessary and
appropriate to consummate the Restructuring.


 


(c)           No waiver of any of
the provisions of this Agreement shall be deemed or constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall any waiver
be deemed a continuing waiver.


 


19.           Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.  Each
party hereby irrevocably submits to the jurisdiction of any New York state
court sitting in the Borough of Manhattan in the City of New York or any
federal court sitting in the Borough of Manhattan in the City of New York in
respect of any suit, action or proceeding arising out of or relating to this
Agreement, and irrevocably accepts for itself and in respect of its property,
generally and unconditionally, jurisdiction of the aforesaid courts.  Each party irrevocably waives, to the fullest
extent it 


 


 

















 


may effectively do
so under applicable law, any objection that it may now or hereafter have to the
laying of venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.  Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against any other party in any other
jurisdiction.  Notwithstanding the
foregoing consent to New York jurisdiction, if the Bankruptcy Case is commenced,
each party agrees that the Bankruptcy Court shall have exclusive jurisdiction
of all matters arising out of or in connection with this Agreement.


 


20.           Counterparts. 
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts and by facsimile, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.


 


21.           Severability. 
Any term or provision of this Agreement, which is invalid or
unenforceable in any jurisdiction, shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only as
broad as is enforceable.


 


22.           Headings.  The headings
of the paragraphs of this Agreement are inserted for convenience only and shall
not affect the interpretation hereof.


 


23.           Prior Negotiations. 
This Agreement supersedes all prior negotiations with respect to the
subject matter hereof but shall not supersede the Definitive Documentation.


 


24.           Notice.  Any notices
or other communications required or permitted under, or otherwise in connection
with, this Agreement shall be in writing and shall be deemed to have been duly
given when delivered in person or upon confirmation of receipt when transmitted
by facsimile transmission or on receipt after dispatch by registered or
certified mail, postage prepaid, or on the next Business Day if transmitted by
national overnight courier, addressed in each case as follows:


 


(a)           If to the Company,
at:


 


Herbst Gaming, Inc.


3440 West Russell Road


Las Vegas, Nevada 89118


Attn:  Office of the CEO


Telephone:  (702) 798-6400


Facsimile:  (702) 798-8079


 


with a copy to:


 


Herbst Gaming, Inc.


3440 West Russell Road


Las Vegas, Nevada 89118


Attn:  Sean Higgins, General
Counsel


Telephone:  (702) 798-6400


Facsimile:  (702) 798-8079


 


(b)           If to a Consenting Party, to the address for such
Consenting Party provided on the signature pages hereof.


 


 
















 


 


Please sign in the space
provided below to indicate your agreement and consent to the terms hereof.


 


Very truly yours,


 


	
  HERBST GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GUARANTOR DEBTORS:

  
	
   

  	
   

  
	
  FLAMINGO PARADISE
  GAMING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  MARKET GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary
  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CARDIVAN COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary
  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CORRAL COIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary
  

  



 

















 


	
  CORRAL COUNTRY COIN,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  E-T-T ENTERPRISES,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  E-T-T, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HGI - ST. JO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HGI - LAKESIDE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HGI - MARK TWAIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  



 

















 


	
  THE SANDS REGENT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ZANTE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
  LAST CHANCE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  CALIFORNIA PROSPECTORS,
  LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PLANTATION INVESTMENTS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  DAYTON GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Secretary

  



 

















 


	
  THE PRIMADONNA COMPANY,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  TROY D. HERBST

  
	
   

  	
  Name:

  	
  Troy
  D. Herbst

  
	
   

  	
  Title:

  	
  Manager

  



 

















 


Accepted and agreed to by the


Consenting Parties named below:


 


CONSENTING LENDERS:


 


 


[NAME OF LENDER]


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
   

  
					



 

















 


EXISTING EQUITY HOLDERS:


EDWARD J. HERBST


 


 


 


	
  By:

  	
  /s/ EDWARD J. HERBST

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  5195
  Las Vegas Blvd. South

  	
   

  
	
   

  	
  Las
  Vegas, Nevade, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares

  	
  100

  	
   

  
	
   

  	
   

  	
   

  
	
  % of Company Equity

  	
  33.3333%

  	
   

  
					



 

















 


EXISTING EQUITY HOLDERS:


TIMOTHY P. HERBST


 


 


 


	
  By:

  	
  /s/ TIMOTHY P. HERBST

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  5195
  Las Vegas Blvd. South

  	
   

  	 

	
   

  	
  Las
  Vegas, Nevade, 89119

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Telephone:

  	
  702-798-6400

  	
   

  	 

	
  Facsimile:

  	
  702-798-8079

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Number of Shares

  	
  100

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  % of Company Equity

  	
  33.3333%

  	
   

  	 

						



 
















 


EXISTING EQUITY HOLDERS:


TROY D. HERBST


 


	
  By:

  	
  /s/ TROY D. HERBST

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares

  	
  100

  
	
   

  	
   

  
	
  % of Company Equity

  	
  33.3333%

  
				



 

















 


THI:


 


TERRIBLE HERBST, INC.


 


	
  By:

  	
  /s/ JERRY E. HERBST

  	
   

  
	
   

  	
  Name:

  	
  Jerry E. Herbst

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  



 


with a copy to:


 


Latham & Watkins LLP


355 South Grand Avenue


Los Angeles, CA 90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 

















 


OTHER THI PARTIES:


 


THE HERBST FAMILY LIMITED
PARTNERSHIP:


 


	
  By:

  	
  /s/ JERRY E. HERBST

  	
   

  
	
   

  	
  Name:

  	
  Jerry E. Herbst

  	
   

  
	
   

  	
  Title:

  	
  Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 


HERBST GRANDCHILDREN’S
TRUST:


 


	
  By:

  	
  /s/ TIMOTHY P. HERBST

  	
   

  
	
   

  	
  Name:

  	
  Timothy P. Herbst

  	
   

  
	
   

  	
  Title:

  	
  Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 

















 


BERRY-HINCKLEY
INDUSTRIES:


 


	
  By:

  	
  /s/ JERRY E. HERBST

  	
   

  
	
   

  	
  Name:

  	
  Jerry E. Herbst

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 


JERRY E. HERBST:


 


	
  By:

  	
  /s/ JERRY E. HERBST

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 

















 


EDWARD J. HERBST:


 


	
  By:

  	
  /s/ EDWARD J. HERBST

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  
				



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 


TIMOTHY P. HERBST:


 


	
  By:

  	
  /s/ TIMOTHY P. HERBST

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  
				



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 

















 


TROY D. HERBST:


 


	
  By:

  	
  /s/ TROY D. HERBST

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  5195 Las Vegas Blvd.
  South

  	
   

  
	
   

  	
  Las
  Vegas, Nevada, 89119

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  702-798-6400

  	
   

  
	
  Facsimile:

  	
  702-798-8079

  	
   

  
				



 


With a copy to:


 


Latham & Watkins
LLP


355 South Grand Avenue


Los Angeles, CA  90071-1560


Telephone:  (213) 485-1234


Facsimile:  (213) 891-8763


Attn:  Robert A. Klyman, Esq.


 
















EXHIBIT A TO AGREEMENT


 


THIS
TERM SHEET DOES NOT CONSTITUTE (NOR SHALL IT BE CONSTRUED AS) AN OFFER WITH
RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS AS TO
ANY PLAN OF REORGANIZATION, IT BEING UNDERSTOOD THAT SUCH AN OFFER OR  SOLICITATION, IF ANY, WILL ONLY BE MADE IN
COMPLIANCE WITH APPLICABLE PROVISIONS OF SECURITIES AND/OR BANKRUPTCY
LAWS.  THIS TERM SHEET DOES NOT ADDRESS
ALL MATERIAL TERMS THAT WOULD BE REQUIRED IN CONNECTION WITH THE RESTRUCTURING
(AS DEFINED HEREIN) AND IS SUBJECT TO THE COMPLETION AND EXECUTION OF
DEFINITIVE DOCUMENTATION.  THIS TERM
SHEET HAS BEEN PRODUCED FOR DISCUSSION AND SETTLEMENT PURPOSES ONLY AND IS
SUBJECT TO THE PROVISIONS OF RULE 408 OF THE FEDERAL RULES OF EVIDENCE AND
OTHER SIMILAR APPLICABLE STATE AND FEDERAL RULES.


 


HERBST
GAMING, INC.


RESTRUCTURING
TERM SHEET


 


MARCH 9,
2009


 


This term sheet (the “Term
Sheet”) outlines a proposed restructuring transaction (the “Restructuring”)
for Herbst Gaming, Inc. (“Herbst Gaming”) and certain of its Affiliates
(collectively, the “Company”) to be implemented pursuant to a
pre-arranged joint plan of reorganization (the “Plan”) under chapter 11
of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy
Code”).  Capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to such terms in Exhibit 1.  Capitalized terms not otherwise defined
herein or in Exhibit 1 shall have the meanings given to such terms
in the Bankruptcy Code.  The terms “include,”
includes,” or “including” are not limiting. 
This Term Sheet does not include a description of all of the terms,
conditions and other provisions that are to be contained in the definitive
documentation governing the Restructuring, which remain subject to discussion
and negotiation.  Any material change to
any provision of this Term Sheet must be reasonably acceptable to each of the
Company, the THI Parties and the Required Consenting Lenders.


 


	
  Structure of the Transaction

  	
   

  	
  The Restructuring will
  principally consist of (a) separation of the Company’s casino and slot
  machine route businesses into two holding companies, (b) conversion of
  all outstanding obligations under the Senior Credit Facility (as defined
  below) into debt and equity of the reorganized companies, (c) termination
  of all outstanding obligations under the indentures governing the Senior
  Subordinated Notes, (d) cancellation of 100% of the existing equity in
  the Company, and (e) amendments or modifications to, or assumptions and
  assignments of, certain of the Related Party Agreements, or new agreements to
  be entered into, and settlements of claims with Terrible Herbst, Inc. (“THI”)
  and each person or entity affiliated with THI that is a party to any Related
  Party Agreement or that enters into a new agreement or agreements related to
  the operations of the Company and is affiliated with THI (collectively with
  THI, the “THI Parties”), all in exchange for an equity position in
  Slot Co (as defined below), in each case, as set forth in more detail herein.

  
	
   

  	
   

  	
   

  
	
  Pre-Arranged Plan

  	
   

  	
  The Restructuring shall
  be implemented pursuant to the Plan. In connection with the negotiation and
  preparation of the Plan and a disclosure statement discussing the Plan (the “Disclosure
  Statement” and, together with the Plan and any definitive documents
  relating thereto, the “Plan Documents”), the Company, certain
  consenting lenders (“Lenders”) under the Senior Credit Facility and
  the THI Parties shall agree upon each of (i) the Petition Date,
  (ii) the date by which the Disclosure Statement shall be approved by the
  Bankruptcy Court, 

  



 

















 


	
   

  	
   

  	
  (iii) the date by
  which the Plan shall be confirmed, (iv) the date by which the confirmed
  Plan shall become effective, and (v) the date by which the confirmed
  plan shall be substantially consummated. The acceptance of the Plan by the
  Lenders and the THI Parties shall not be solicited until after the Petition
  Date.

  
	
   

  	
   

  	
   

  
	
  Separation of Casino and Slot
  Business

  	
   

  	
  The Company’s business
  is comprised of the following two segments: (i) the ownership and
  operation of casinos in Iowa, Missouri and Nevada (the “Casino Business”);
  and (ii) the ownership and operation of gaming machines pursuant to
  agreements with chain stores, restaurants, bars, and convenience stores (the
  “Slot Business”). Under the Restructuring, the Casino Business and the
  Slot Business will be separated from one another and held by two holding
  companies, “Reorganized Herbst Gaming” and “Slot Co”,
  respectively.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Methodology for
  allocation of assets generally between Reorganized Herbst Gaming and Slot Co
  to be determined based on primary use in the Casino Business or the Slot
  Business, or, to the extent applicable, based upon which party is responsible
  for the provision of services related to a particular asset; however, working
  capital (including Cash and taking appropriate account of the Smith contract)
  to be allocated between Reorganized Herbst Gaming and Slot Co in accordance
  with historical practices and consistent with the intent of this Term Sheet.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Overhead allocation to
  be 33.4% at Slot Co and 66.6% at Reorganized Herbst Gaming on the Substantial
  Consummation Date, and to be re-adjusted on an annual basis based upon prior
  year’s consolidated non-fuel revenue. In order to document the overhead
  allocation, the parties shall enter into the Corporate Overhead Allocation
  Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In anticipation of the
  separation of the Casino Business and the Slot Business, there shall be
  created the position of COO/Gaming. The COO/Gaming shall (i) be
  acceptable to Required Consenting Lenders; (ii) satisfy all applicable
  requirements under applicable gaming laws and regulations and, in conjunction
  with the Company and with the Company’s full cooperation, file any required
  applications in connection therewith on or before the Petition Date; (iii) commence
  employment as of the date of approval of such applications by the applicable
  gaming authorities; (iv) be reasonably acceptable to the Company’s board
  of directors; (v) be employed by Herbst Gaming, Inc. (as a member
  of the Company’s Office of the CEO and reporting to the Company’s board of
  directors) until the Substantial Consummation Date; (vi) be employed by
  Reorganized Herbst Gaming as of the Substantial Consummation Date;
  (vii) not be removed other than for cause and, if removed for cause,
  promptly be replaced by an individual reasonably acceptable to Required
  Consenting Lenders and the Company’s board of directors; and (viii) be
  made available to the Consenting Lenders upon reasonable notice to provide
  status reports on operations. For the avoidance of doubt, in the event that
  the Plan shall not have been confirmed by the Bankruptcy Court within 120
  days after the Petition Date, the position of COO/Gaming shall be terminable
  by the Company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The current outstanding
  principal balance under the Senior Credit Facility is $847.96 million.
  Pursuant to the Restructuring, (i) $135 million of these obligations
  will be allocated to Slot Co pursuant to a new first priority senior secured
  bank loan (the “New Slot Co Bank

  



 

















 


	
   

  	
   

  	
  Loan”) having the terms set forth in Exhibit 2
  attached hereto; (ii) $40 million of these obligations will be
  allocated to Slot Co pursuant to a second lien secured bank facility (the “New
  Slot Co Second Lien Facility”) having the terms set forth in
  Exhibit 3 attached hereto; (iii) $475 million of these obligations
  will be allocated to Reorganized Herbst Gaming pursuant to a new credit
  agreement comprising a first lien term loan in the amount of $350 million and
  a second lien term loan in the amount of $125 million on terms to be negotiated
  (the “Herbst Gaming Amended and Restated Senior Credit Facility”); and
  (iv) the remaining balance of these obligations will be exchanged for
  (x) 100% of the new common equity of Reorganized Herbst Gaming (the “Reorganized
  Herbst Gaming New Common Equity”) and (y) 10% of the new common
  equity of Slot Co (the “Slot Co New Common Equity”), with the
  remaining 90% of the Slot Co New Common Equity being provided to the THI
  Parties in exchange for amendments or modifications to, or assignments of,
  certain of the Related Party Agreements, or new agreements to be entered
  into, and settlement of claims by the THI Parties. The parties shall
  cooperate to structure the new common equity to be issued under the Plan in a
  manner that facilitates and satisfies applicable regulatory requirements.
  Additionally, subject to further consideration with respect to regulatory
  requirements and the terms of the Slot Co governance documents, the parties
  will cooperate to find a structure where the 10% of the new common equity of Slot
  Co is held by Reorganized Herbst Gaming (rather than individual Lenders).

  
	
   

  	
   

  	
   

  
	
  Corporate
  Governance

  	
   

  	
  The initial board of
  directors of Reorganized Herbst Gaming shall be comprised of directors
  selected by the Lenders. The initial board of directors of Slot Co shall be
  comprised of four (4) directors selected as follows: one
  (1) director shall be nominated on behalf of the Lenders holding 10% of
  the Slot Co New Common Equity (the “Lender Designee”), and three
  (3) directors shall be selected by the THI Parties. Each director shall
  satisfy all applicable requirements under applicable gaming laws and
  regulations. Each of Reorganized Herbst Gaming and Slot Co will adopt
  by-laws, certificates of incorporation an LLC agreement or other governance
  documents consistent with applicable securities, bankruptcy and/or state
  laws. Appropriate corporate governance documents shall be set forth in the
  Definitive Documentation (as defined below).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The New Slot Co Bank
  Loan will contain a minimum EBITDA covenant of $20.0 million (the “Minimum
  EBITDA Covenant”) which, if breached, will trigger the following
  requirements, the specific details of which shall be (i) agreed upon by
  the Company, the Lenders and the THI Parties and (ii) set forth in the
  Definitive Documentation:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      The board of directors will be expanded
  to five (5) directors, with the additional director (together with the
  Lender Designee, the “Lender Designees”) to be selected by the Lenders
  holding 10% of the Slot Co New Common Equity.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Entry into any new affiliate or related
  party transactions above a threshold amount to be agreed upon by the THI
  Parties and Required Consenting Lenders will require unanimous approval by
  the Lender Designees or the receipt of a fairness opinion from a
  nationally-recognized investment bank reasonably acceptable to the Lender
  Designee, including but not limited to 

  



 

















 


	
   

  	
   

  	
  three (3) nationally-recognized investment
  banks to be agreed upon by the parties.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Slot Co will be prohibited from taking
  any of the following actions unless four (4) of the five
  (5) directors shall approve such action (the “Supermajority
  Requirement”):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Additional incurrences of material
  debt(2);

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Sales or acquisitions of material
  assets;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Approval of operating and capex budgets
  and any material variances therefrom;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Issuance of equity securities;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Changes in senior management; provided,
  that none of Edward J. Herbst, Timothy P. Herbst, Troy D. Herbst or Jerry E.
  Herbst may be removed or replaced other than for cause;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·      Any mergers and any payment of any
  dividends or other distributions (except for tax distributions) to equity
  holders;

  







(2)           For
the avoidance of doubt, a supermajority vote shall not be required for any
decision by Slot Co to pay PIK interest to the extent permitted by the
applicable documents.


 


	
   

  	
   

  	
  The Minimum EBITDA
  Covenant will apply as of the end of the end of the 4th full quarter
  following the Substantial Consummation Date and shall be tested at the end of
  each fiscal quarter thereafter (each, a “Test Period”). If, after any breach
  of the Minimum EBITDA Covenant, Slot Co shall meet the Minimum EBITDA
  Covenant during any Test Period thereafter, the additional Lender Designee
  may be removed by the THI Parties, the requirement for unanimous approval of
  affiliate transactions will lapse and there shall be no Supermajority
  Requirement unless and until there shall be any subsequent breach of the
  Minimum EBITDA Covenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The holders of Slot Co
  New Common Equity will be party to an LLC agreement, the form of which shall
  be included in the Slot Definitive Documentation (as defined below). It is
  anticipated that such agreement will include, among other things,
  (i) restrictions on transfers of Slot Co New Common Equity by Lenders to
  any known competitor or any third party known by the transferor (after
  reasonable inquiry) to have a material interest or material lending stake in
  or material contractual relationship with any known competitor, except in
  each case with the consent of the THI Parties (ii) restrictions on
  transfers of Slot Co New Common Equity that would increase the number of
  holders of Slot Co New Common Equity to a level that would require Slot Co to
  file any reports with the SEC or be a reporting company under the Securities

  



 

















 


	
   

  	
   

  	
  Exchange Act of 1934,
  as amended, (iii) provisions granting the THI parties drag rights,
  (iv) provisions granting the Lenders tag rights, (v) provisions
  ensuring that Slot Co will remain a private company and not subject to SEC
  registration and reporting requirements unless consented to by the THI
  Parties, and (vi) provisions with respect to licensing issues.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the Effective Date
  until all gaming licenses and approvals are obtained as required to
  effectuate the Plan and the Plan is substantially consummated (the “Substantial
  Consummation Date”), the Debtors and the Lenders will (i) work
  together in good faith to determine the optimal management of operations,
  maintenance of working capital and utilization of Excess Cash Flow of
  Reorganized Herbst Gaming, and (ii) reasonably cooperate with each other
  in connection with the management and operations of Reorganized Herbst
  Gaming, all in accordance with applicable gaming laws and regulations.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Beginning on the
  Substantial Consummation Date, Slot Co shall employ Edward J. Herbst, Timothy
  P. Herbst and Troy D. Herbst, with annual aggregate salaries of $2.077
  million, which shall not be decreased, and shall not be increased until the
  New Slot Co Bank Loan and the New Slot Co Second Lien Facility have been paid
  in full.

  
	
   

  	
   

  	
   

  
	
  Definitive
  Documentation

  	
   

  	
  The Company shall
  prepare definitive documentation concerning the separation of the Casino
  Business (the “Casino Definitive Documentation”) and the Slot Business
  (the “Slot Definitive Documentation” and together with the Casino
  Definitive Documentation, the “Definitive Documentation”). The Slot
  Definitive Documentation and the Casino Definitive Documentation will be
  consistent with this Term Sheet.

  
	
   

  	
   

  	
   

  
	
  Separate Plans for Each Entity

  	
   

  	
  The Plan will
  constitute separate plans of reorganization for each of Herbst Gaming and
  each of its subsidiaries that are guarantors of Herbst Gaming’s obligations
  under the Senior Credit Facility, the 8.125% Senior Subordinated Notes, and
  the 7.000% Senior Subordinated Notes (collectively, the “Guarantor Debtors”),
  and none of their bankruptcy estates shall be substantively consolidated.
  Accordingly, a vote on the Restructuring shall be deemed a vote on each plan
  of reorganization of each of Herbst Gaming and the Guarantor Debtors.

  
	
   

  	
   

  	
   

  
	
  Classification and Treatment of
  Claims and Interests

  	
   

  	
  Unclassified
  Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DIP Facility Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In the event a DIP
  Facility is obtained, Allowed DIP Facility Claims shall not be classified
  under the Plan and to the extent not previously repaid, shall be paid in full
  in Cash on the Effective Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Administrative Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Each Holder of an
  Administrative Claim will receive payment in full in Cash of the unpaid
  portion of its Allowed Administrative Claim on the Effective Date or as soon
  thereafter as practicable (or, if not then due, in accordance with its
  terms).

  



 

















 


	
   

  	
   

  	
  Priority Tax Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  On the later of the
  Effective Date or the date on which a Priority Tax Claim becomes an Allowed
  Priority Tax Claim, or, in each such case, as soon as practicable thereafter,
  each Holder of an Allowed Priority Tax Claim due and payable on or prior to
  the Effective Date will receive on account of such Claim, an amount in Cash
  equal to the amount of such Allowed Priority Tax Claim, or shall be provided
  such other treatment as would comply with Bankruptcy Code section
  1129(a)(9)(C).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classified
  Claims and Interests

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 1—Other Priority
  Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 1 shall consist of Other
  Priority Claims against the Debtors.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: The legal, equitable and contractual
  rights of the Holders of Allowed Class 1 Claims will be unaltered by the
  Plan. Unless otherwise agreed to by the Holders of the Allowed Class 1
  Claims and the Debtors, each Holder of an Allowed Class 1 Claim shall
  receive, in full and final satisfaction of such Allowed Class 1 Claim,
  payment of the Allowed Class 1 Claim in full in Cash on the Effective
  Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Voting: Class 1 is an Unimpaired Class,
  and the Holders of Class 1 Claims will be conclusively deemed to have
  accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.
  Therefore, the Holders of Class 1 Claims will not be entitled to vote to
  accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 2—Other Secured
  Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 2 shall consist of Other
  Secured Claims against the Debtors.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: Holders of Allowed Class 2
  Claims will be paid in full in Cash or otherwise left Unimpaired, in full and
  final satisfaction of such Allowed Class 2 Claims.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Voting: Class 2 is an Unimpaired Class,
  and the Holders of Class 2 Claims will be conclusively deemed to have
  accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.
  Therefore, the Holders of Class 2 Claims will not be entitled to vote to
  accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 3—Senior Credit
  Facility Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 3 consists of the Holders
  of Senior Credit Facility Claims against the Debtors. This class includes
  both the Secured and the unsecured Claims, if any, of such Holders.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: On the Substantial Consummation Date,
  Holders of Allowed Class 3 Claims will receive, in full and final
  satisfaction of such Allowed Class 3 Claims, their pro rata share of
  (a) the Reorganized Debtors’ obligations under (i) the Herbst
  Gaming Amended and Restated Senior Credit Facility, (ii) the New Slot Co
  Bank Loan and (iii) the New Slot Co Second Lien Facility, (b) 100%
  of the Reorganized Herbst Gaming New Common Equity (c) 10% of the Slot
  Co New Common Equity, and 

  



 

















 


	
   

  	
   

  	
  (d) any remaining
  value from the realization of the Debtors’ assets, provided,
  however, that all Allowed
  Class 3 Claims shall be subject to any Senior Credit Facility Gift.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  During the period commencing
  on the Effective Date and running through the Substantial Consummation Date,
  adequate protection payments shall be made to the Holders of Senior Credit
  Facility Claims (i) in an amount equal to the payments that would be
  made under the New Slot Co Bank Loan and the New Slot Co Second Lien Facility
  as if those facilities were in effect as of the Effective Date,
  notwithstanding the fact that the Substantial Consummation Date may not yet
  have occurred, provided, however,
  that (x) such amount shall not include any cash interest or PIK interest
  on the New Slot Co Second Lien Facility, nor shall any such interest on the
  New Slot Co Second Lien Facility commence accruing, until the date that is
  six (6) months after the Effective Date (the “PIK Date”), provided, further,
  that if any required gaming licenses or approvals with respect to any of
  (a) Reorganized Herbst Gaming, its proposed officers, directors, equity
  holders and other persons required to file personal applications (each to the
  extent necessary) or (b) the non-THI Parties equity holders in Slot Co,
  the Lender Designee, and lenders of Slot Co (each to the extent necessary),
  shall not have been granted by any of the applicable gaming regulatory
  authorities to all such entities within one year of the Effective Date, then
  all interest on the New Slot Co Second Lien Facility shall cease accruing and
  shall only recommence (without any catch up for lost interest) once all such
  licenses and approvals are granted, and (y) such payments shall be made
  on the last day of the applicable interest period (with the initial interest
  period for such payments commencing on the Effective Date or the PIK Date, as
  applicable, and ending on the last Business Day of the third full calendar
  month following the month in which the Effective Date or the PIK Date, as
  applicable, occurs, and with each subsequent interest period commencing on
  the last day of the preceding interest period and ending on the last Business
  Day of the third full calendar month thereafter); and (ii) under the
  Herbst Gaming Amended and Restated Senior Credit Facility, in an amount equal
  to the Debtors’ Cash and Cash Equivalents (as reflected on the Debtors’
  balance sheet) in excess of $100 million,(3) to be measured
  (x) initially, as of the last day of the third full calendar month
  following the month in which the Effective Date occurs and (y) as of the
  last day of every third full calendar month thereafter, and to be paid in
  each case on the 30th day after the date on which it is measured.

  







(3)           Such amount shall be modified to
reflect the separation of Debtors’ casino and slot machine route businesses as
of the later of (i) the Effective Date and (ii) five days after the
date the Company receives gaming regulatory approval regarding the internal
reorganization necessary to implement separation of the Debtors’ casino and
slot machine route businesses.  Following
the later of such dates, the cash sweep will apply only as to the casino
business.


 


	
   

  	
   

  	
  Voting: Class 3 is Impaired, and Holders
  of Class 3 Claims will be entitled to vote to accept or reject the Plan.

  



 

















 


	
   

  	
   

  	
  Class 4—General Unsecured
  Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 4 will consist of the
  Holders of General Unsecured Claims, other than Class 5, Class 6
  and Class 7 claims.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: On the Substantial Consummation Date,
  Holders of Allowed Class 4 Claims will be paid in full in
  Cash(4) or otherwise left Unimpaired.

  







(4)           Any Cash payment to
Holders of Allowed Class 4 Claims shall be made by the Debtors, first from
unencumbered assets, then, to the extent the Debtors do not have sufficient
unencumbered assets to make such payments, such payments shall, pursuant to the
Senior Credit Facility Gift, be deemed to have been transferred by gift by
Holders of Allowed Class 3 Claims.


 


	
   

  	
   

  	
  Voting: Class 4 is an Unimpaired Class,
  and the Holders of Class 4 Claims will be conclusively deemed to have
  accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.
  Therefore, the Holders of Class 4 Claims will not be entitled to vote to
  accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 5—THI Party Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 5 consists of the Holders
  of THI Party Claims.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: On the Substantial Consummation Date,
  Holders of Class 5 Claims will receive from Holders of Class 3
  Claims, in full and final satisfaction of such Allowed Class 5 Claims,
  and in exchange for amendments or modifications to, or assumptions and
  assignments of, certain of the Related Party Agreements, 90% of the Slot New
  Co Common Equity. Such treatment shall constitute a compromise and
  settlement, pursuant to section 1123(b)(3) of the Bankruptcy Code and
  Bankruptcy Rule 9019, of any and all Claims by any of the THI Parties
  against any Debtor arising under or in connection with the Related Party
  Agreements identified in the Related Party Agreements Term Sheet or
  otherwise, and of any and all claims held by any Debtor against any of the
  THI Parties arising under or in connection with the Related Party Agreements
  or otherwise.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Voting: Class 5 is Impaired, and Holders
  of Class 5 THI Party Claims will be entitled to vote to accept or reject
  the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 6—Senior
  Subordinated Note Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 6 consists of the Holders
  of Senior Subordinated Note Claims against the Debtors.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: On the Substantial Consummation Date,
  all outstanding obligations under the indentures governing the Senior
  Subordinated Notes shall be terminated. Holders of Class 6 Claims shall
  not receive or retain any property on account of their Claims under the Plan.

  



 

















 


	
   

  	
   

  	
  Voting: Holders of Class 6 Claims will
  be conclusively deemed to have rejected the Plan pursuant to section
  1126(g) of the Bankruptcy Code. Therefore, Holders of Class 6
  Claims will not be entitled to vote to accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 7—Intercompany
  Claims

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 7 consists of all
  Intercompany Claims against the Debtors.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: On the Substantial Consummation Date,
  at the option of the Debtors or the Reorganized Debtors, the Intercompany
  Claims of any Debtor against any other Debtor shall either be reinstated, in
  full or in part, or cancelled and discharged, in full or in part, in which
  case such discharged and satisfied portion shall be eliminated and the
  Holders thereof shall not be entitled to, and shall not receive or retain,
  any property or interest in property on account of such portion; provided, however, that, prior to the Substantial
  Consummation Date, the Debtors shall take all necessary steps to ensure that,
  as of the Substantial Consummation Date, there shall be no Intercompany
  Claims of (i) Reorganized Herbst Gaming against Slot Co or
  (ii) Slot Co against Reorganized Herbst Gaming; provided further that
  the treatment of Intercompany Claims shall be reasonably acceptable to
  Required Consenting Lenders and the THI Parties.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Voting: Holders of Class 7 Claims will
  be conclusively deemed to have accepted the Plan pursuant to section
  1126(f) of the Bankruptcy Code. Therefore, Holders of Class 7
  Claims will not be entitled to vote to accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 8—Equity Interests
  in Herbst Gaming

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 8 consists of all Equity
  Interests in Herbst Gaming.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: On the Substantial Consummation Date,
  all Class 8 Equity Interests in Herbst Gaming shall be cancelled.
  Holders of Class 8 Equity Interests shall not receive or retain any
  property on account of their Interests under the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Voting: Holders of Class 8 Interests
  will be conclusively deemed to have rejected the Plan pursuant to section
  1126(g) of the Bankruptcy Code. Therefore, Holders of Class 8
  Interests will not be entitled to vote to accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class 9—Intercompany
  Interests

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Classification: Class 9 consists of all
  Intercompany Interests in the Debtors.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Treatment: Except as otherwise provided in this
  Term Sheet, Class 9 Intercompany Interests shall be retained and the
  legal, equitable, and contractual rights to which the Holders of such
  Intercompany Interest are entitled shall remain unaltered.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Voting: Class 9 is Unimpaired, and the
  Holders of Class 9 Interests will be conclusively deemed to have
  accepted the Plan pursuant to section

  



 

















 


	
   

  	
   

  	
  1126(f) of the
  Bankruptcy Code. Therefore, the Holders of Class 9 Claims will not be
  entitled to vote to accept or reject the Plan.

  
	
   

  	
   

  	
   

  
	
  Means for Implementation of the
  Plan

  	
   

  	
  Extensions
  and Modifications of Related Party Agreements; Slot Business

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Related Party
  Agreements shall be assumed, assumed as modified, rejected, and/or otherwise
  treated as described in the Related Party Agreements Term Sheet attached
  hereto as Exhibit 4, and any and all Claims arising in connection
  with any such assumption, modifications, rejections or other treatment shall
  be classified in Class 5. For the avoidance of doubt, unless otherwise
  expressly set forth on the Related Party Agreements Term Sheet, all terms and
  provisions in each of the Related Party Agreements shall continue to be valid
  and enforceable. Any and all Executory Contracts necessary in connection with
  the ownership and operation of the Slot Business will be assumed and assigned
  by Herbst Gaming to Slot Co (the “Slot Business Executory Contracts”).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Confirmation Order
  will provide that, during the period commencing on the Effective Date and
  running through the Substantial Consummation Date, the economic terms of the
  Related Party Agreements shall be honored and performed by the parties
  thereto as if all assumptions, modifications or other treatments described in
  the Related Party Agreements Term Sheet were in effect as of the Effective
  Date, notwithstanding the fact that the Substantial Consummation Date may not
  yet have occurred.

  
	
   

  	
   

  	
   

  
	
  Release Provisions

  	
   

  	
  Compromise
  and Settlement

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The allowance,
  classification and treatment of all Allowed Claims and Equity Interests and
  their respective distributions and treatments under the Plan take into
  account and/or conform to the relative priority and rights of the Claims and
  Equity Interests in each Class in connection with any contractual, legal
  and equitable subordination rights relating thereto whether arising under
  general principles of equitable subordination, section 510(c) of the
  Bankruptcy Code, or otherwise, including without limitation the subordination
  provisions contained in the Indentures governing the Senior Subordinated
  Notes. As of the Effective Date or the Substantial Consummation Date, as the
  case may be, any and all such rights described in the preceding sentence will
  be settled, compromised and released pursuant to the Plan. In addition, the
  allowance, classification and treatment of Allowed Claims takes into account
  any Causes of Action, whether under the Bankruptcy Code or otherwise under
  applicable law, that may exist (i) between the Debtors, on the one hand,
  and the Releasing Parties, on the other, and (ii) as between the
  Releasing Parties (to the extent set forth in the Third Party Release). As of
  the Effective Date or the Substantial Consummation Date, as the case may be,
  any and all such Causes of Action are settled, compromised and released
  pursuant hereto. The Confirmation Order shall approve the releases by all
  Entities of all such contractual, legal and equitable subordination rights or
  Causes of Action against each such Releasing Party that are satisfied,
  compromised and settled in this manner.

  



 

















 


	
   

  	
   

  	
  Debtor
  Release

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  On the Substantial
  Consummation Date and effective as of the Substantial Consummation Date, for
  the good and valuable consideration provided by each of the Releasing
  Parties, including, but not limited to: (i) the discharge of debt and
  all other good and valuable consideration paid pursuant to the Plan;
  (ii) the obligations of the Releasing Parties to provide the support
  necessary for Consummation of the Plan; and (iii) the services of the
  Debtors’ present and former officers and directors in facilitating the
  expeditious implementation of the Restructuring contemplated by the Plan,
  each of the Debtors and the Reorganized Debtors shall provide a full
  discharge and release to each Releasing Party and each of their respective
  members, officers, directors, agents, financial advisors, attorneys,
  employees, partners, Affiliates and representatives (collectively, the “Debtor
  Releasees” (and each such Debtor Releasee so released shall be deemed
  released and discharged by the Debtors and the Reorganized Debtors)) and
  their respective properties from any and all Causes of Action, whether known
  or unknown, whether for tort, fraud, contract, violations of federal or state
  securities laws, or otherwise, arising from or related in any way to the
  Debtors or Reorganized Debtors, including, without limitation, those that any
  of the Debtors or Reorganized Debtors would have been legally entitled to
  assert in their own right (whether individually or collectively) or that any
  Holder of a Claim or Equity Interest or other Entity would have been legally
  entitled to assert on behalf of any of the Debtors or any of their Estates,
  and further including those in any way related to the Chapter 11 Cases or the
  Plan to the fullest extent of the law; provided,
  however, that the foregoing “Debtor
  Release” shall not operate to waive or release any Releasing Party from
  any Causes of Action (i) expressly set forth in and preserved by the
  Plan, the Plan Supplement or related documents or (ii) arising under the
  Herbst Gaming Amended and Restated Senior Credit Facility or the New Slot Co
  Bank Loan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Third
  Party Release

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  On the Substantial
  Consummation Date and effective as of the Substantial Consummation Date, to
  the extent permitted by law, the Releasing Parties shall provide a full
  discharge and release (and each Entity so released shall be deemed released
  by the Releasing Parties) to the Third Party Releasees and their respective
  property from any and all Causes of Action, whether known or unknown, whether
  for tort, fraud, contract, violations of federal or state securities laws, or
  otherwise, arising from or related in any way to the Debtors, including,
  without limitation, those in any way related to the Chapter 11 Cases or the
  Plan to the fullest extent of the law; provided,
  however, that the foregoing “Third
  Party Release” shall not operate to waive or release any of the Third
  Party Releasees from any Causes of Action (i) expressly set forth in and
  preserved by the Plan, the Plan Supplement or related documents or
  (ii) arising under the Herbst Gaming Amended and Restated Senior Credit
  Facility or the New Slot Co Bank Loan.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Exculpation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Exculpated Parties
  shall neither have, nor incur any liability to any Entity for any prepetition
  or postpetition act taken or omitted to be taken in connection with, or
  related to formulating, negotiating, preparing,

  



 

















 


	
   

  	
   

  	
  disseminating,
  implementing, administering, confirming or effecting the Consummation of the
  Plan, the Disclosure Statement or any contract, instrument, release or other
  agreement or document created or entered into in connection with the Plan or
  any other prepetition or postpetition act taken or omitted to be taken in
  connection with or in contemplation of the restructuring of the Company; provided, however,
  that the foregoing provisions of this release shall have no effect on the
  liability of any Entity that results from any such act or omission that is
  determined in a Final Order to have constituted gross negligence or willful
  misconduct; provided further, that each
  Exculpated Party shall be entitled to rely upon the advice of counsel
  concerning his, her or its duties pursuant to, or in connection with, the
  Plan; provided still further, that the
  foregoing Exculpation shall not apply to any acts or omissions expressly set
  forth in and preserved by the Plan, the Plan Supplement or related documents.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Indemnification

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Under the Plan, all
  indemnification provisions currently in place (whether in the by-laws,
  articles or certificates of incorporation, articles of limited partnership,
  limited liability company agreements, board resolutions (or resolutions of
  similar bodies) or employment contracts) for the current and former
  directors, officers, employees, attorneys, other professionals and agents of
  the Debtors and such current and former directors and officers’ respective
  Affiliates shall be assumed, and shall survive effectiveness of the Plan. All
  indemnification provisions in place on and prior to the Substantial Consummation
  Date for current and former directors and officers of the Debtors and their
  subsidiaries and such current and former directors and officers’ respective
  Affiliates shall (i) survive the Substantial Consummation Date of the
  Plan for Claims related to or in connection with any actions, omissions or
  transactions occurring prior to the Substantial Consummation Date, and
  (ii) remain liabilities of the respective reorganized Debtor.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Director
  and Officer Liability Policy

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Reorganized Herbst
  Gaming will obtain sufficient tail coverage under a directors and officers’
  liability insurance policy for the current and former directors and officers
  for a period of six (6) years. As of the Substantial Consummation Date,
  the Debtors shall assume all of the D&O Liability Insurance Policies
  pursuant to section 365(a) of the Bankruptcy Code. Also as of the
  Substantial Consummation Date, Slot Co will obtain a directors and officers’
  liability insurance policy for its directors and officers in such amount and
  for such duration as the directors and officers of Slot Co may deem to be
  sufficient. Entry of the Confirmation Order will constitute the Bankruptcy
  Court’s approval of the Debtors’ foregoing assumption of each of the D&O
  Liability Insurance Policies. Notwithstanding anything to the contrary
  contained in the Plan, Confirmation of the Plan shall not discharge, impair
  or otherwise modify any indemnity obligations assumed by the foregoing
  assumption of the D&O Liability Insurance Policies, and each such
  indemnity obligation will be deemed and treated as an Executory Contract that
  has been assumed by the Debtors under the Plan as to which no proof of claim
  need be filed.

  



 
















EXHIBIT 1


 


Definitions


 


	
  Term

  	
   

  	
  Definition

  
	
  7.000% Senior
  Subordinated Notes

  	
   

  	
  The 7.000% Senior
  Subordinated Notes due November 1, 2014, issued by Herbst Gaming
  pursuant to that certain Indenture, dated as of November 22, 2004, among
  Herbst Gaming, Inc., a Nevada corporation, the Guarantors (as defined
  therein) and HSBC Bank, National Association, as successor trustee.

  
	
  7.000% Senior
  Subordinated Note Claims

  	
   

  	
  All Claims arising
  under, or in any way related to, the 7.000% Senior Subordinated Notes.

  
	
  8.125% Senior
  Subordinated Notes

  	
   

  	
  The 8.125% Senior
  Subordinated Notes due June 1, 2012, issued by Herbst Gaming pursuant to
  that certain Indenture, dated as of June 11, 2004, among Herbst
  Gaming, Inc., a Nevada corporation, the Guarantors (as defined therein)
  and HSBC Bank, National Association, as successor trustee.

  
	
  8.125% Senior
  Subordinated Note Claims

  	
   

  	
  All Claims arising
  under, or in any way related to the 8.125% Senior Subordinated Notes.

  
	
  Administrative Claim

  	
   

  	
  A Claim for costs and
  expenses of administration of the Estates under sections 503(b),
  507(b) or 1114(e)(2) of the Bankruptcy Code, including, without
  limitation, for: (a) the actual and necessary costs and expenses
  incurred after the Petition Date of preserving the respective Estates and
  operating the businesses of the Debtors; (b) Allowed Claims of retained
  professionals in the Chapter 11 Cases; and (c) all fees and charges
  assessed against the Estates under chapter 123 of title 28 of the United
  States Code, 28 U.S.C. §§ 1911-1930.

  
	
  Affiliate

  	
   

  	
  As defined in section
  101(2) of the Bankruptcy Code.

  
	
  Allowed Claim or
  Allowed Interest

  	
   

  	
  A Claim or Interest
  that is allowed (i) pursuant to the Plan; (ii) in any stipulation
  executed prior to the Confirmation Date and approved by the Bankruptcy Court;
  (iii) in any stipulation with the Debtors or Reorganized Debtors
  executed on or after the Confirmation Date and approved by the Bankruptcy
  Court; or (iv) in or pursuant to any contract, instrument, indenture or
  other agreement entered into or assumed in connection herewith; provided, however, that
  proofs of claim need not and should not be filed with respect to any Claim
  with the Bankruptcy Court; and provided, further,
  that, notwithstanding anything herein to the contrary , by treating a Claim
  as an “Allowed Claim” the Debtors do not waive their rights to contest the
  amount and validity of any disputed, contingent or unliquidated Claim in the
  manner and venue in which such Claim would have been determined, resolved or
  adjudicated if the Chapter 11 Cases had not been commenced.

  
	
  Bankruptcy Code

  	
   

  	
  Chapter 11 of the
  Bankruptcy Code, 11 U.S.C. §§ 101-1532

  
	
  Bankruptcy Court

  	
   

  	
  The United States
  Bankruptcy Court for the District of Nevada, having jurisdiction over the
  Chapter 11 Cases and, to the extent of the withdrawal of any reference under
  section 157 of title 28 of the United States Code and/or the General Order of
  the District Court pursuant to section 151 of title 28 of the United States
  Code, the United States District Court for the District of Nevada.

  
	
  Bankruptcy Rules

  	
   

  	
  The Federal
  Rules of Bankruptcy Procedure, as applicable to the Chapter 11 Cases,
  promulgated under 28 U.S.C. § 2075 and the general, local and chambers
  rules of the Bankruptcy Court.

  
	
  Business Day

  	
   

  	
  Any day, other than a
  Saturday, Sunday or “legal holiday” (as defined in Bankruptcy
  Rule 9006(a)).

  
	
  Cash

  	
   

  	
  The legal tender of the
  United States of America or the equivalent thereof, including bank deposits,
  checks and cash equivalents.

  
	
  Causes of Action

  	
   

  	
  All actions, causes of
  action, Claims, liabilities, obligations, rights, suits, debts, damages,
  judgments, remedies, demands, setoffs, defenses, recoupments, crossclaims,
  counterclaims, third-party claims, indemnity claims, contribution claims or
  any other claims disputed or undisputed, suspected or unsuspected, foreseen
  or unforeseen, direct

  



 

















	
   

  	
   

  	
  or indirect, choate or
  inchoate, existing or hereafter arising, in law, equity or otherwise, based
  in whole or in part upon any act or omission or other event occurring prior
  to the Petition Date or during the course of the Chapter 11 Cases, including
  through the Substantial Consummation Date.

  
	
  Chapter 11 Cases

  	
   

  	
  (a) When used with
  reference to a particular Debtor, the chapter 11 case for that Debtor under
  chapter 11 of the Bankruptcy Code in the Bankruptcy Court and (b) when
  used with reference to all Debtors, the procedurally consolidated chapter 11
  cases for all of the Debtors.

  
	
  Claim

  	
   

  	
  Any claim against a
  Debtor as defined in section 101(5) of the Bankruptcy Code.

  
	
  Class

  	
   

  	
  A category of Holders
  of Claims or Equity Interests pursuant to section 1122(a) of the
  Bankruptcy Code as set forth in this Term Sheet.

  
	
  Company

  	
   

  	
  Herbst Gaming and its
  Affiliates.

  
	
  Confirmation

  	
   

  	
  The entry of the
  Confirmation Order on the docket of the Chapter 11 Cases, subject to all
  conditions specified having been satisfied or waived.

  
	
  Confirmation Date

  	
   

  	
  The date upon which the
  Bankruptcy Court enters the Confirmation Order on the docket of the Chapter
  11 Cases, within the meaning of Bankruptcy Rules 5003 and 9021.

  
	
  Confirmation Order

  	
   

  	
  The order of the
  Bankruptcy Court confirming the Plan pursuant to, among others, section 1129
  of the Bankruptcy Code.

  
	
  Corporate Overhead
  Allocation Agreement

  	
   

  	
  That certain agreement
  to be entered into on the Substantial Consummation Date by Casino Co and Slot
  Co, under which the terms of overhead allocation between Casino Co and Slot
  Co shall be set forth, which shall provide as follows: (i) expiration
  date on December 31 of the first full calendar year following the
  Substantial Consummation Date; (ii) automatic one-year extensions with 6
  months notice required to terminate contract by either party; and
  (iii) Slot Co charges Reorganized Herbst Gaming for its portion of
  overhead costs.

  
	
  Consenting Lenders

  	
   

  	
  Each of the Lenders
  party to the Agreement, dated
            , 2009, among
  Herbst Gaming, the Guarantor Debtors and the Consenting Parties identified
  therein.

  
	
  Consummation

  	
   

  	
  The occurrence of the
  Substantial Consummation Date.

  
	
  Creditor

  	
   

  	
  Any Holder of a Claim.

  
	
  D&O Liability
  Insurance Policies

  	
   

  	
  All insurance policies
  for directors and officers’ liability maintained by the Debtors as of the
  Petition Date.

  
	
  Debtor(s)

  	
   

  	
  Herbst Gaming and the
  Guarantor Debtors, individually and collectively, as the case may be.

  
	
  Debtor Releasees

  	
   

  	
  Each Releasing Party
  and each of their respective members, officers, directors, agents, financial
  advisors, attorneys, employees, partners, Affiliates and representatives.

  
	
  DIP Facility

  	
   

  	
  Any debtor in
  possession credit facility approved by the Bankruptcy Court, which shall
  contain adequate protection provisions satisfactory to the Senior Credit
  Facility Agent. Lenders shall have the right, but not the obligation, to
  provide the DIP Facility on commercially reasonable terms.

  
	
  DIP Facility Claim

  	
   

  	
  Any Claim on account of
  the DIP Facility.

  
	
  Disclosure Statement

  	
   

  	
  The disclosure
  statement for the Plan, as amended, supplemented or modified from time to
  time, describing the Plan, that is prepared and distributed in accordance
  with, among others, sections 1125, 1126(b) and 1145 of the Bankruptcy
  Code, Bankruptcy Rule 3018 and other applicable law.

  
	
  Effective Date

  	
   

  	
  The day that is the 11th day after the
  Confirmation Order is docketed.

  
	
  Entity

  	
   

  	
  An entity as defined in
  section 101(15) of the Bankruptcy Code.

  
	
  Equity Interest

  	
   

  	
  Any share of common
  stock, preferred stock or other instrument evidencing an ownership interest
  in a Debtor, whether or not transferable, and any option, warrant or right,
  contractual or otherwise, to acquire any such interest in a Debtor that
  existed immediately prior to the Substantial Consummation Date; provided, however, that
  Equity Interest does not include any Intercompany Interest.

  
	
  Estate

  	
   

  	
  As to each Debtor, the
  estate created for the Debtor in its Chapter 11 Case pursuant to section 541
  of the Bankruptcy Code.

  
	
  Excess Cash Flow

  	
   

  	
  With respect to any
  period of time within which it is measured, (a) EBITDA minus

  



 

















	
   

  	
   

  	
  (b) the sum,
  without duplication, of (i) capital expenditures during such period
  (excluding the portion thereof financed with the proceeds of new
  indebtedness); (ii) cash interest expense paid or accrued during such
  period; (iii) principal payments during such period paid or payable in
  cash in respect of funded debt and/or capital leases; (iv) income taxes
  deducted in determining combined net income to the extent paid for in cash or
  accrued prior to the date on which the calculation of Excess Cash Flow is
  required to be performed; (v) cash distributions made to the THI Parties
  (or their affiliates) prior to the date on which the calculation Excess Cash
  Flow is required to be performed in respect of income and/or other tax
  liabilities which emanate from Slot Co.; (vi) prepaid rent paid in
  connection with new space lease agreements and/or the extension, modification
  or renewal of existing space lease agreements approved by unanimous board
  consent (provided that for purposes of calculating Excess Cash Flow, prepaid
  rent paid to a THI Party shall be excluded); and, (vii) for avoidance of
  doubt, with respect to any calculation of Excess Cash Flow for the purpose of
  determining a Mandatory Prepayment on the New Slot Co Bank Loan or the New
  Slot Co Second Lien Facility, any interest accrued during the applicable
  period on the New Slot Co Second Lien Facility that is required to be paid in
  cash. Notwithstanding the foregoing, in no event shall Slot Co be required to
  make a Mandatory Prepayment with respect to Excess Cash Flow if (and to the
  extent that) such payment would cause Slot Co’s cash and cash equivalents to
  be less than the Minimum Cash Amount.

   

  The “Minimum Cash
  Amount” means (a) an amount of cash and cash equivalents that the THI
  Parties and Consenting Lenders determine (as contemplated in the Term Sheet)
  will be allocated and assigned to Slot Co as of the PIK Date (with subsequent
  annual adjustments based on a methodology to be agreed by the THI Parties and
  Consenting Lenders, the “Base Amount”) plus (b)  $5 million.

  
	
  Exculpated Parties

  	
   

  	
  (a) The Debtors;
  (b) the Reorganized Debtors; (c) the Releasing Parties; and
  (d) all of the officers, directors, employees, members, attorneys,
  actuaries, financial advisors, accountants, investment bankers, agents,
  professionals, Affiliates, partners and representatives of each of the
  foregoing Entities (whether current or former, in each case in his, her or
  its capacity as such).

  
	
  Executory Contract

  	
   

  	
  A contract to which one
  or more of the Debtors is a party that is subject to assumption or rejection
  under section 365 of the Bankruptcy Code.

  
	
  Final Order

  	
   

  	
  An order or judgment of
  the Bankruptcy Court, or other court of competent jurisdiction, entered on the
  docket of such court, that has not been reversed, rescinded, stayed, modified
  or amended, that is in full force and effect, and with respect to which:
  (a) the time to appeal, seek review or rehearing, or petition for
  certiorari has expired and no timely filed appeal or petition for review,
  rehearing, remand or certiorari is pending; or (b) any appeal taken or
  petition for certiorari filed (i) has been resolved by the highest court
  to which the order or judgment was appealed or from which review, rehearing
  or certiorari was sought or (ii) has not yet been resolved by such
  highest court, but such order has not been stayed pending appeal.
  Notwithstanding any provision to the contrary in this Term Sheet or in the
  Definitive Documentation, the Confirmation Order entered in the Bankruptcy
  Cases shall become a Final Order on the 11th day following
  entry of such Confirmation Order unless any appeal of such Confirmation Order
  is accompanied by a stay pending appeal.

  
	
  General Unsecured Claim

  	
   

  	
  Any unsecured Claim against
  any Debtor that is not an Other Priority Claim, 7.000% Senior Subordinated
  Note Claim, 8.125% Senior Subordinated Note Claim, Related Party Agreement
  Claim, or Intercompany Claim.

  
	
  Herbst Gaming Amended
  and Restated Senior Credit Facility

  	
   

  	
  A new credit agreement
  to be entered into by Reorganized Herbst Gaming as borrower comprising a
  first lien term loan in the amount of $350 million and a second lien term
  loan in the amount of $125 million on terms to be negotiated.

  
	
  Holder

  	
   

  	
  An Entity holding an
  Equity Interest or Claim.

  
	
  Impaired

  	
   

  	
  Claims in an Impaired
  Class.

  



 

















	
  Impaired Class

  	
   

  	
  An impaired
  Class within the meaning of section 1124 of the Bankruptcy Code.

  
	
  Intercompany Claims

  	
   

  	
  Any and all Claims of a
  Debtor against and in another Debtor.

  
	
  Intercompany Interest

  	
   

  	
  An Interest in a Debtor
  held by another Debtor or an Interest in a Debtor held by an Affiliate of the
  Debtors. Intercompany Interests shall not include any Interest held by any
  Debtor or any Affiliate of the Debtors in the Slot Business.

  
	
  New Slot Co Bank Loan

  	
   

  	
  A new first priority
  senior secured bank loan in the amount of $135 million and consistent with
  the New Slot Co Bank Loan Term Sheet.

  
	
  New Slot Co Bank Loan
  Term Sheet

  	
   

  	
  That certain New Slot
  Co Bank Loan Term Sheet attached as Exhibit 2 to this Term Sheet.

  
	
  New Slot Co Second Lien
  Facility

  	
   

  	
  That certain
  pay-in-kind note in the amount of $40 million secured by a second lien
  security interest in all of the assets of Slot Co and consistent with the New
  Slot Co Second Lien Facility Term Sheet.

  
	
  New Slot Co Second Lien
  Facility Term Sheet

  	
   

  	
  That certain New Slot
  Co Second Lien Facility Term Sheet attached as Exhibit 3 to this Term
  Sheet.

  
	
  Other Priority Claims

  	
   

  	
  Any and all Claims
  accorded priority in right of payment under section 507(a) of the Bankruptcy
  Code, other than Priority Tax Claims.

  
	
  Other Secured Claims

  	
   

  	
  Any secured Claim,
  other than a DIP Facility Claim or a Senior Credit Facility Claim.

  
	
  Petition Date

  	
   

  	
  The date on which the
  petition(s) to commence the Chapter 11 Cases is/are filed.

  
	
  Plan

  	
   

  	
  The Debtors’ joint plan
  of reorganization under chapter 11 of the Bankruptcy Code, as it may be
  altered, amended, modified or supplemented from time to time in accordance
  with this Term Sheet and the Bankruptcy Code or the Bankruptcy Rules.

  
	
  Plan Supplement

  	
   

  	
  The compilation of
  documents and forms of documents, schedules and exhibits to be filed no later
  than 5 Business Days prior to the hearing at which the Bankruptcy Court
  considers whether to confirm the Plan, as may thereafter be altered, amended,
  modified or supplemented from time to time in accordance with the terms
  hereof and in accordance with the Bankruptcy Code and the Bankruptcy Rules.

  
	
  Priority Tax Claim

  	
   

  	
  Any and all Claims of a
  governmental unit of the kind specified in section 507(a)(8) of the
  Bankruptcy Code.

  
	
  Related Party
  Agreements

  	
   

  	
  Any agreement by and
  between any Debtor and any of the THI Parties.

  
	
  Related Party
  Agreements Term Sheet

  	
   

  	
  That certain Related
  Party Agreements Term Sheet attached as Exhibit 4 to this Term Sheet.

  
	
  Releasing Parties

  	
   

  	
  Collectively, all
  current and former officers and directors of the Debtors, all current and
  former parties to the Senior Credit Facility and any DIP Facility, the THI
  Parties, all holders of Equity Interests, and each of their respective
  officers, directors, employees, members, attorneys, actuaries, financial
  advisors, accountants, investment bankers, agents, professionals, Affiliates,
  partners and representatives.

  
	
  Reorganized Debtors

  	
   

  	
  (a) Reorganized
  Herbst Gaming, (b) Slot Co and (c) the Guarantor Debtors, as such
  entities exist on or after the Substantial Consummation Date, in each case,
  or any successor thereto, by merger, consolidation, or otherwise.

  
	
  Reorganized Herbst
  Gaming

  	
   

  	
  Herbst Gaming, or any
  successor thereto, by merger, consolidation or otherwise, on or after the
  Substantial Consummation Date.

  
	
  Reorganized Herbst
  Gaming New Common Equity

  	
   

  	
  [XX] shares of common stock in Reorganized
  Herbst Gaming, par value [$.01] per share, to be authorized pursuant to the
  Reorganized Herbst Gaming charter, of which up to [XX]
  shares shall be initially issued on the Substantial Consummation Date
  pursuant to the Plan.

  
	
  Required Consenting
  Lenders

  	
   

  	
  Consenting Lenders
  holding at least two-thirds in amount of the total Claims held by all
  Consenting Lenders arising under the Senior Credit Facility.

  
	
  Secured Claim

  	
   

  	
  A Claim that is
  (i) secured by a valid and unavoidable lien on or security interest in
  property of the Debtors, to the extent of the value of such lien or security
  interest, and (ii) unsecured, to the extent of any deficiency in the
  value of such lien or security interest.

  
	
  Senior Credit Facility

  	
   

  	
  That certain Second
  Amended and Restated Senior Credit Agreement dated as of January 3,
  2007, as amended.

  



 

















	
  Senior Credit Facility
  Agent

  	
   

  	
  Wilmington Trust Company,
  in its capacity as administrative agent under the Senior Credit Facility.

  
	
  Senior Credit Facility
  Claims

  	
   

  	
  All Claims arising
  under, or in any way related to the Senior Credit Facility.

  
	
  Senior Credit Facility
  Gift

  	
   

  	
  The deemed transfer by
  gift under the Plan from Holders of Allowed Class 3 Claims to Holders of
  Class 4 General Unsecured Claims sufficient value to allow the Holders
  of such Claims to receive the treatment described in this Term Sheet. The
  Senior Credit Facility gift shall be subject to revocation by the Consenting
  Lenders on or before the Petition Date to the extent, but only to the extent,
  that there exist any undisclosed contingent liabilities in excess of $10
  million.

  
	
  Senior Subordinated
  Notes

  	
   

  	
  The 7.000% Senior
  Subordinated Notes and the 8.125% Senior Subordinated Notes.

  
	
  Senior Subordinated
  Note Claims

  	
   

  	
  The 7.000% Senior
  Subordinated Note Claims and the 8.125% Senior Subordinated Note Claims.

  
	
  Slot Business Executory
  Contracts

  	
   

  	
  Those Executory
  Contracts to be assumed and assigned by the Debtors to Slot Co.

  
	
  Slot Co

  	
   

  	
  A new Nevada limited
  liability company to be organized pursuant to the Plan.

  
	
  Slot Co New Common
  Equity

  	
   

  	
  Membership Interests in
  Slot Co to be authorized pursuant to the Slot Co operating agreement.

  
	
  Substantial Consummation
  Date

  	
   

  	
  The day that is the
  third Business Day after the Effective Date on which (a) no stay of the
  Confirmation Order is in effect and (b) all conditions precedent to
  substantial consummation of the Plan have been satisfied or waived by the
  Debtors.

  
	
  THI Parties

  	
   

  	
  Terrible
  Herbst, Inc., a Nevada corporation, and any other person or entity,
  other than a Debtor, affiliated with Terrible Herbst, Inc. that is a
  party to a Related Party Agreement, or that enters into a new agreement or
  agreements related to the operations of the Company and is affiliated with
  Terrible Herbst, Inc.

  
	
  THI Party Claims

  	
   

  	
  All Claims arising
  under, or in any way related to the Related Party Agreements.

  
	
  Third Party Releasees

  	
   

  	
  Collectively, each of
  the Debtors, the Reorganized Debtors, each Releasing Party, and each of their
  respective officers, directors, employees, members, attorneys, actuaries,
  financial advisors, accountants, investment bankers, agents, professionals,
  Affiliates, partners and representatives.

  
	
  Unexpired Lease

  	
   

  	
  A lease of
  non-residential real property to which one or more of the Debtors is a party
  that is subject to assumption or rejection under section 365 of the
  Bankruptcy Code.

  
	
  Unimpaired

  	
   

  	
  Unimpaired within the
  meaning of section 1124 of the Bankruptcy Code.

  



 
















EXHIBIT 2


 


New Slot Co Bank
Loan Term Sheet


 


	
  Borrower:

  	
   

  	
  Slot Co

  
	
   

  	
   

  	
   

  
	
  Principal Amount:

  	
   

  	
  $135 million

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  Fifth anniversary of
  the Substantial Consummation Date.

  
	
   

  	
   

  	
   

  
	
  Interest Rate:

  	
   

  	
  Lower of (i) LIBOR:
  LIBOR plus 750 bps (LIBOR floor of 3.5%) of cash pay interest; or (ii) Base
  Rate: Base Rate plus 550 bps (Base Rate floor of 6.0%) of cash pay
  interest. Interest payments will be made quarterly.

  
	
  Ranking:

  	
   

  	
  Senior secured

  
	
   

  	
   

  	
   

  
	
  Security:

  	
   

  	
  First priority security
  interest in substantially all of the assets of Slot Co.

  
	
   

  	
   

  	
   

  
	
  Mandatory Prepayment:

  	
   

  	
  Slot Co required to
  prepay loan within two (2) Business Days of its fiscal year end audit,
  and, in any event, not later than 90 days after the end of each fiscal year
  of Slot Co in an amount equal to 80% of Excess Cash Flow, if any, for such
  fiscal year. Notwithstanding the foregoing, in no event shall Slot Co be
  required to make a Mandatory Prepayment with respect to Excess Cash Flow if
  (and to the extent that) such payment would cause Slot Co’s cash and cash equivalents
  to be less than the Minimum Cash Amount.

  
	
   

  	
   

  	
   

  
	
  Representations, Warranties, 

  Covenants and Defaults:

  	
   

  	
  The form of loan
  agreement shall be included in the Definitive Documentation and shall contain
  representations, warranties, covenants and events of default that are
  customary for financings of this type; provided, however,
  that there shall be (i) no financial maintenance covenants of any kind
  other than the minimum EBITDA covenant discussed in the “Corporate
  Governance” section of the Restructuring Term Sheet to which this term sheet
  is an exhibit (it being understood that breach of such covenant is not an
  event of default), and (ii) no requirements to file any reports with the
  SEC or be a reporting company under the Securities Exchange Act of 1934, as
  amended.

  
	
   

  	
   

  	
   

  
	
  Transferability:

  	
   

  	
  Transfers of claims
  arising under the New Slot Co Bank Loan by any holder shall be conditioned
  upon concurrent transfers by such holder of claims arising under the New Slot
  Co Second Lien Facility.

  
	
   

  	
   

  	
   

  
	
  Other Terms:

  	
   

  	
  Additional terms to be
  negotiated.

  
	
   

  	
   

  	
   

  



 




















EXHIBIT 3


 


New Slot Co Second
Lien Facility Term Sheet


 


	
  Borrower:

  	
   

  	
  Slot Co

  
	
   

  	
   

  	
   

  
	
  Principal Amount:

  	
   

  	
  $40 million

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  Fifth anniversary of
  the Substantial Consummation Date.

  
	
   

  	
   

  	
   

  
	
  Interest Rate:

  	
   

  	
  Lower of (i) LIBOR:
  LIBOR plus 1,200 bps (LIBOR floor of 3.5%) cash pay or PIK (subject to
  reserves for operations to be negotiated, interest shall be in cash to the
  extent that there is sufficient cash flow before any Excess Cash Flow sweep,
  including with respect to the New Slot Co Bank Loan); or (ii) Base
  Rate: Base Rate plus 1,000 bps (Base Rate floor of 6.0%). Interest may
  either be paid in cash or paid in kind at the election of Slot Co; provided
  that interest will be paid in cash if (and limited to the amount that) before
  any Excess Cash Flow sweep, available cash exceeds the Minimum Cash Amount.
  Interest payments will be made or compounded quarterly.

  
	
   

  	
   

  	
   

  
	
  Ranking:

  	
   

  	
  Senior secured

  
	
   

  	
   

  	
   

  
	
  Security:

  	
   

  	
  Second priority
  security interest in substantially all of the assets of Slot Co.

  
	
   

  	
   

  	
   

  
	
  Mandatory Redemption:

  	
   

  	
  Following repayment in
  full of all obligations under the New Slot Co Bank Loan, Slot Co required to
  prepay loan within two (2) Business Days of its fiscal year end audit,
  and, in any event, not later than 90 days after the end of each fiscal year
  of Slot Co in an amount equal to 80% of Excess Cash Flow, if any, for such
  fiscal year. Notwithstanding the foregoing, in no event shall Slot Co be
  required to make a Mandatory Prepayment with respect to Excess Cash Flow if
  (and to the extent that) such payment would cause Slot Co’s cash and cash
  equivalents to be less than the Minimum Cash Amount.

  
	
   

  	
   

  	
   

  
	
  Representations, Warranties,
  Covenants and Defaults:

  	
   

  	
  The form of loan
  agreement shall be included in the Definitive Documentation and shall contain
  representations, warranties, covenants and events of default that are
  customary for financings of this type; provided, however,
  that there shall be (i) no financial maintenance covenants of any kind
  other than the minimum EBITDA covenant discussed in the “Corporate Governance”
  section of the Restructuring Term Sheet to which this term sheet is an
  exhibit (it being understood that breach of such covenant is not an event of
  default), and (ii) no requirements to file any reports with the SEC or
  be a reporting company under the Securities Exchange Act of 1934, as amended.

  
	
   

  	
   

  	
   

  
	
  Transferability:

  	
   

  	
  Transfers of claims
  under the New Slot Co Second Lien Facility shall be conditioned upon
  concurrent transfers by such holder of claims arising under the New Slot Co
  Bank Loan.

  
	
   

  	
   

  	
   

  
	
  Other Terms:

  	
   

  	
  Additional terms to be
  negotiated.

  
	
   

  	
   

  	
   

  



 




















EXHIBIT 4


 


Related Party
Agreements Term Sheet(5)






(5)      Unless otherwise expressly set forth on
this Related Party Agreements Term Sheet, all terms and provisions in each of
the Related Party Agreements shall continue to be valid and enforceable.


 


Terrible’s Town Pahrump 
(The economic terms of each of the following shall be honored and
performed by the parties thereto as if all assumptions, modifications or other
treatments described herein were in effect as of the Effective Date, notwithstanding
the fact that the Substantial Consummation Date may not yet have occurred.)


 


1.                                      T’Town Pahrump Lease
between The Herbst Family Limited Partnership (Lessor) & E-T-T, Inc.
(Lessee) dated July 1, 1996


 


Proposed
Treatment:  Lessee assigns to Herbst
Gaming, Inc. or its subsidiary (which subsidiary shall become a subsidiary
of Reorganized Herbst Gaming) that is the applicable operating entity.  Proposed terms modification as follows:  (i) expiration date of December 31,
2016, resulting in no options to renew; and (ii) monthly rental fee of
$15,000/month through proposed expiration date.


 


2.                                      Terrible’s Town Pahrump
Service Station Lease Agreement between E-T-T, Inc. (Lessor) and Terrible
Herbst, Inc. (Lessee), dated November 16, 1995


 


Proposed
Treatment:  Lessor assigns to Herbst
Gaming, Inc. or its subsidiary (which subsidiary shall become a subsidiary
of Reorganized Herbst Gaming) that is the applicable operating entity.  Proposed terms modification as follows:  (i) expiration date of December 31,
2016, resulting in no options to renew; and (ii) fixed at current amount.


 


Lakeside
Pahrump  (The economic terms of each of
the following shall be honored and performed by the parties thereto as if all
assumptions, modifications or other treatments described herein were in effect as
of the Effective Date, notwithstanding the fact that the Substantial
Consummation Date may not yet have occurred.)


 


Note:  Reorganized Herbst Gaming will own and
operate Lakeside Pahrump, and the property and operations will be in
Reorganized Herbst Gaming upon Substantial Consummation.


 


3.                                      Terrible’s Lakeside
Lease Agreement between E-T-T Enterprises, L.L.C. (Lessor) and E-T-T, Inc.
(Lessee), dated August 1, 1998


 


Proposed
Treatment:  To be terminated.


 


4.                                      Terrible’s Lakeside
Service Station Lease Agreement between E-T-T Enterprises, L.L.C. (Lessor) and
Terrible Herbst, Inc. (Lessee), dated August 1, 1998


 


Proposed
Treatment:  Lessor assigns to Herbst
Gaming, Inc. or its subsidiary (which subsidiary shall become a subsidiary
of Reorganized Herbst Gaming) that is the applicable operating entity.  Proposed terms modification as follows:  (i) expiration date of December 31,
2016; and (ii) fixed at current amount.


 


Headquarters  (The economic terms of each of the following shall be honored and
performed by the parties thereto as if all assumptions, modifications or other
treatments described herein were in effect as of the Effective Date,
notwithstanding the fact that the Substantial Consummation Date may not yet
have occurred.)


 

















Note:  The Russell Road Lease is
a sublease of the Headquarters Lease.


 


5.                                      HGI Headquarters
Lease between The Herbst Family Limited Partnership (Lessor) &
E-T-T Enterprises, L.L.C. (Lessee) dated July 1, 1997


 


Proposed
Treatment:  Lessee assigns to Slot
Co.  Proposed terms modification as
follows:  (i) expiration date of December 31,
2016.


 


6.                                      HGI Headquarters
Sub-lease between Slot Co (Sublessor) and Reorganized Herbst Gaming (Sublessee)
(new document)


 


Proposed
Treatment:  Proposed term modification as
follows:  (i) expiration date of one
year following the Substantial Consummation Date, subject to automatic renewal
unless Slot Co notified by Reorganized Herbst Gaming of non-renewal six months
prior to expiration date; (ii) terms to mirror Corporate Overhead
Allocation Agreement; and (iii) Slot Co will be sublessor and Reorganized
Herbst Gaming will be sublessee.


 


7.                                      Russell Road Service
Station/warehouse Lease between E-T-T Enterprises, L.L.C. (Lessor) &
Terrible Herbst, Inc. (Lessee) dated July 1, 1997


 


Proposed
Treatment:  Lessor assigns to Slot Co.


 


Polaris
Rd.  (The economic terms of each of
the following shall be honored and performed by the parties thereto as if all
assumptions, modifications or other treatments described herein were in effect
as of the Effective Date, notwithstanding the fact that the Substantial
Consummation Date may not yet have occurred.)


 


8.                                      Polaris Rd. Warehouse
Office Space & Warehouse Space  Lease between Herbst Grandchildren’s Trust (Lessor) &
Herbst Gaming, Inc. (Lessee) dated Nov. 27, 2002


 


Proposed
Treatment:  Lessee assigns to Slot
Co.  Proposed terms modification as
follows:  (i) expiration date of December 31,
2016.


 


9.                                      Polaris Rd. Warehouse
Office Space & Warehouse Sub-lease between Slot Co (Sublessor) and
Reorganized Herbst Gaming (Sublessee) (new document)


 


Proposed
Treatment:  (i) expiration date of
one year following the Substantial Consummation Date, subject to automatic
renewal unless Slot Co notified of non-renewal by Reorganized Herbst Gaming six
months prior to expiration date; (ii) terms to mirror Corporate Overhead
Allocation Agreement; and (iii) E-T-T will be sublessor and Reorganized
Herbst Gaming will be sublessee.


 


Searchlight


 


10.                               Terrible’s Searchlight
Lease between Terrible Herbst, Inc. (Lessor) &
E-T-T, Inc. (Lessee) dated July 1, 2002


 


Proposed
Treatment:  Lessee assigns to Herbst
Gaming, Inc. or its subsidiary (which subsidiary shall become a subsidiary
of Reorganized Herbst Gaming) that is the applicable operating entity.  The economic terms of this agreement shall be
honored and performed by the parties thereto as if all assumptions,
modifications or other treatments described herein were in effect as of the
Effective Date, notwithstanding the fact that the Substantial Consummation Date
may not yet have occurred.


 

















Other Agreements


 


11.                               Gaming Device License
Agreement between E-T-T, Inc. & Terrible Herbst, Inc. dated December 20,
1999


 


Proposed
Treatment:  Proposed terms modification
as follows:  (i) all slot machines
priced at $1,200 through proposed expiration date of December 31, 2014; (ii) elimination
of anti-assignment clause following Event of Default under Slot Co debt; and (iii) no
per location minimum payment.  The
economic terms of this agreement shall be honored and performed by the parties
thereto as if all assumptions, modifications or other treatments described
herein were in effect as of the Effective Date, notwithstanding the fact that
the Substantial Consummation Date may not yet have occurred.


 


12.                               Gaming Device License
Agreement between Slot Co Majority Shareholder & Terrible Herbst, Inc.
(new document)


 


Proposed
Treatment:  (i) term from January 1,
2015 through December 31, 2016; (ii) all slot machines priced at
$1,200 through proposed expiration date of December 31, 2016; (iii) elimination
of anti-assignment clause following Event of Default under Slot Co debt; (iv) to
be assigned to Slot Co upon Substantial Consummation Date in exchange for
equity of Slot Co; and (v) no per location minimum payment.  Upon the Substantial Consummation Date, there
will be an assignment of this agreement to Slot Co (new document).  The economic terms of this agreement shall be
effective as of the Substantial Consummation Date.


 


13.                               Shared Services
Agreement between Herbst Gaming, Inc., Terrible Herbst, Inc. &
Berry-Hinckley Industries dated January 1, 2009


 


Proposed
Treatment:  Remains in place.  This agreement shall be assigned to Slot Co
upon the Substantial Consummation Date. 
The economic terms of this agreement shall be honored and performed by
the parties thereto as if all assumptions, modifications or other treatments
described herein were in effect as of the Effective Date, notwithstanding the
fact that the Substantial Consummation Date may not yet have occurred.


 


14.                               Master ATM Agreement
between E-T-T, Inc. & Terrible Herbst, Inc. dated March 1,
2008


 


Proposed
Treatment:  Proposed terms modification
as follows:  (i) expiration date of December 31,
2016; and (ii) all ATMs except casino ATMs stay with Slot Co.  The economic terms of this agreement shall be
honored and performed by the parties thereto as if all assumptions,
modifications or other treatments described herein were in effect as of the
Effective Date, notwithstanding the fact that the Substantial Consummation Date
may not yet have occurred.


 


15.                               Advertising Purchasing Agreement
between Herbst Gaming, Inc. & Terrible Herbst, Inc. dated March 1,
2008


 


Proposed
Treatment:  Proposed terms modification
as follows:  (i) expiration date of
one year following the Substantial Consummation Date; (ii) continuous
one-year extension options available through December 31, 2016,
exercisable at Reorganized Herbst Gaming’s discretion; (iii) monthly fee
at $30,000/month through proposed expiration date; and (iv) lenders retain
assignability rights.  The economic terms
of this agreement shall be honored and performed by the parties thereto as if
all assumptions, modifications or other treatments described herein were in
effect as of the Effective Date, notwithstanding the fact that the Substantial
Consummation Date may not yet have occurred.


 


16.                               Trademark License
Agreement between Terrible Herbst, Inc. & Herbst Gaming, Inc.
dated August 24, 2001


 


Proposed
Treatment: Proposed terms modification as follows:  (i) expiration date December 31,
2016, terminable by Reorganized Herbst Gaming after December 31, 2013 upon
the payment of an early termination fee of $1 million; (ii) $1.73
million/year through proposed expiration date, to be paid monthly in equal
installments; and (iii) one-time bonus of $1.5 million payable on one-year
anniversary of the Effective Date.  The
economic terms of this agreement shall be honored and performed by the parties
thereto as if all assumptions, modifications or other treatments described
herein were in effect as of the 


 

















Effective
Date, notwithstanding the fact that the Substantial Consummation Date may not
yet have occurred.


 


17.                               Trademark License
Agreement between Terrible Herbst, Inc. & Slot Co (new document)


 


Proposed
Treatment:  (i) expiration date of December 31,
2016.  The economic terms of this
agreement shall be effective as of the Substantial Consummation Date.


 


18.                               Non-compete agreements.


 


Each
of Jerry E. Herbst, Timothy P. Herbst, Troy D. Herbst and Edward J. Herbst will
enter into non-competition agreements with Slot Co or Reorganized Herbst
Gaming; such agreements shall expire on the earlier of (i) the repayment
in full of the New Slot Co Bank Loan and the New Slot Co Second Lien Facility
and (ii) December 31, 2016. 
The economic terms of this agreement shall be honored and performed by
the parties thereto as if all assumptions, modifications or other treatments
described herein were in effect as of the Effective Date, notwithstanding the
fact that the Substantial Consummation Date may not yet have occurred.


 


19.                               Deposit Services Agreement between
E-T-T, Inc. & Terrible Herbst, Inc.


 


The
economic terms of this agreement shall be honored and performed by the parties
thereto as if all assumptions, modifications or other treatments described
herein were in effect as of the Effective Date, notwithstanding the fact that
the Substantial Consummation Date may not yet have occurred.