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EXHIBIT 10.4    
  

SECURITY AGREEMENT

Made by

HERBST GAMING, INC.

and

CARDIVAN COMPANY

CORRAL COIN, INC.

CORRAL COUNTRY COIN, INC.

E-T-T, INC.

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

FLAMINGO PARADISE GAMING, LLC

MARKET GAMING, INC.

collectively, as Debtor

to

BANK OF NEW YORK,

as Trustee

Acting on behalf of the Holders of the Notes,

as Secured Party

August 24, 2001  

SECURITY AGREEMENT  

    THIS SECURITY AGREEMENT (this "Agreement") is made as of the 24th day of August, 2001, by Herbst
Gaming, Inc., a Nevada corporation (the "Company") and each of its subsidiaries listed on Schedule A  attached hereto (collectively, the
"Subsidiaries"), to and for the benefit of The Bank of New York, a New York banking
corporation, as trustee under the Indenture ("Trustee") for itself and the holders of the Notes issued under the Indenture (the
"Holders"). The Company and each of the Subsidiaries are individually referred to herein as "Debtor" and collectively, the "Debtors". 

RECITALS  

    A.  Each
Debtor is a party to that certain Indenture, dated as of the date hereof (the "Indenture"), among the Trustee,
the Company, as issuer and the Subsidiaries, each as guarantors, under which the Company has issued $170,000,000 principal amount of its 103/4% Senior Secured Notes due 2008 (the
"Notes"). The Trustee acting on behalf of the Holders is hereinafter referred to as the "Secured Party". 

    B.  As
a condition precedent to the purchase of the Notes under the Indenture, each Debtor must execute and deliver this Agreement granting Secured Party a security
interest in the Collateral (as hereinafter defined). 

    C.  Based
on the foregoing premises, and in order to comply with the terms and conditions of the Indenture and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, each Debtor hereby agrees as follows: 

ARTICLE 1

DEFINITIONS  

    Section 1.01  Definitions.  When used herein, (a) the terms Certificated Security, Chattel
Paper, Deposit Account, Document, Equipment, Financial Asset, Fixture, Goods, Inventory, Instrument, Investment Property, Security, Security Entitlement and Uncertificated Security have the respective
meanings assigned thereto in the Code (as defined below); (b) capitalized terms which are not otherwise defined have the respective meanings assigned thereto in the Indenture; and
(c) the following terms have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms): 

     Account Debtor means the party who is obligated on or under any Account Receivable, Contract Right or General Intangible. 

     Account Receivable means any right of Debtors to payment for goods sold or leased or for services rendered. 

     Code means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that,
if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interests in any Collateral is governed by the Uniform Commercial
Code as in effect in any jurisdiction other than the State of New York, "Code" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or the effect of perfection or non-perfection. 

     Collateral means all property and rights of Debtors in which a security interest is granted hereunder. 

     Computer Hardware and Software means all of Debtors' rights (including rights as licensee and lessee) with respect to (i) computer and other electronic
data processing hardware, including all integrated computer systems, central processing units, memory units, display terminals, printers, computer elements, card readers, tape drives, hard and soft
disk drives, cables, electrical supply hardware, generators, power equalizers, accessories, peripheral devices and other related computer 

 

hardware; (ii) all software programs designed for use on the computers and electronic data processing hardware described in clause (i)  above, including all operating system software, utilities
and application programs in whatsoever form (source code and object code in magnetic tape, disk or hard copy format or
any other listings whatsoever); (iii) any firmware associated with any of the foregoing; and (iv) any documentation for hardware, software and firmware described in  clauses (i), (ii) and (iii) above, including flow
charts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes. 

     Contract Rights means any rights of Debtors (including, without limitation, all rights to payment) under each of the Contract. 

     Contracts means all contracts or other agreements between any Debtor and one or more additional parties, including, without limitation, all of the contracts
described on Exhibit A attached hereto, excluding, however, those certain unassignable contracts
listed on Exhibit B. 

     Event of Default has the meaning set forth in Section 7.01 hereof. 

     Collateral Documents means the Collateral Documents (as defined in the Indenture). 

     FF&E Collateral or FF&E means all of Debtors' furniture, fixtures and equipment as generally described on
Part 1 of Schedule B attached hereto and more specifically described on Part 2 of Schedule A  attached hereto (as may be supplemented,
amended or modified from time to time), whether now or hereafter deemed to be (i) a movable piece of personal property, or
(ii) affixed to the immovable (real) property such that it may be deemed a component part of the immovable (real) property, in each case, under applicable Nevada or federal law, or otherwise,
and, in each such case, together with all substitutions therefor, replacements thereof and additions thereto, and all proceeds of and from any and all of the foregoing,  excluding, however those certain
items of furniture, fixtures and equipment located in or affixed to the Terrible's Hotel & Casino in Las Vegas,
Nevada, as of the date hereof. 

     General Intangibles means all of Debtors' "general intangibles" as defined in the Code and, in any event, includes (without limitation) all of Debtors'
trademarks and goodwill of the business relating thereto, trade names, patents, copyrights, trade secrets, customer lists, inventions, designs, software
programs, mask works, registrations, licenses, franchises, tax refund claims, guarantee claims, security interests, rights to indemnification, all contractual rights and obligations or indebtedness
owing to Debtors from whatever source arising, all things in action, rights represented by judgments, claims arising out of tort and other claims relating to the Collateral (including the right to
assert and otherwise be the proper party of interest to commence and prosecute actions), and all rights in respect of any pension plan or similar arrangement maintained for employees of Debtors. 

     Intellectual Property means all past, present and future: trade secrets and other proprietary information; trademarks, service marks, business names, designs,
logos, indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may
hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs) and copyright registrations or applications for registrations which have heretofore been or
may hereafter be issued throughout the world and all tangible property embodying the copyrights; unpatented inventions (whether or not patentable); patent applications and patents; industrial designs,
industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, specification sheets, source codes, object codes and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and 

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future infringements of any of the foregoing; and all common law and other rights throughout the world in and to all of the foregoing. 

     Non-Tangible Collateral means collectively, Debtors' Accounts Receivable, Contract Rights and General Intangibles. 

     Obligations means (i) the payment when due of indebtedness evidenced by the Notes in the principal sum not to exceed at any time outstanding of
$170,000,000, interest (including post-petition interest) as set forth in the Indenture and the Notes, and premiums, penalties, and late charges thereon; (ii) all other indebtedness
and other sums (including, without limitation, all expenses, attorneys' fees, other fees, indemnifications, reimbursements, damages, other monetary liabilities, and other charges) and obligations that
may or shall become due hereunder or under the Notes, the Indenture or the Collateral Documents; and (iii) any and all renewals, modifications, amendments, extensions for any period,
supplements or restatements of any of the foregoing. 

     Obligor means any Person, other than Debtors, liable (whether directly or indirectly, primarily or secondarily) for the payment or performance of any of the
Obligations whether as maker, co-maker, endorser, guarantor, accommodation party, general partner or otherwise. 

ARTICLE 2

SECURITY INTEREST  

    Section 2.01  Grant of Security Interest.  As security for the prompt and complete payment and
performance of the Obligations, Debtors grant to Secured Party a continuing security interest in, Lien upon, and right of set-off against the following, whether now or hereafter existing
or acquired: 

All
of Debtors' right, title and interest in, to and under the following: 

    (i)  Accounts
Receivable; 

    (ii) Certificated
Securities; 

    (iii) Chattel
Paper; 

    (iv) Computer
Hardware and Software and all rights with respect thereto, including, any and all licenses, options, warranties, service contracts, program services, test
rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements, additions or model conversions of any of the foregoing; 

    (v) all
Contracts, together with all Contract Rights arising thereunder; 

    (vi) Deposit
Accounts; 

    (vii) Documents;

    (viii) Financial
Assets; 

    (ix) General
Intangibles; 

    (x) Goods
(including all of its Equipment, Fixtures and Inventory) and all accessions, additions, attachments, improvements, substitutions and replacements thereto and
therefor; 

    (xi) Instruments; 

    (xii) Intellectual
Property; 

    (xiii) Investment
Property; 

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    (xiv) letters of credit and letter of credit rights; 

    (xv) money
(of every jurisdiction whatsoever); 

    (xvi) proceeds
of any litigation, arbitration or similar proceeding; 

    (xvii) Security
Entitlements; 

    (xviii) Uncertificated
Securities; 

    (xix) the
FF&E, and all indemnities, warranties and guaranties payable by reason of loss or damage to or with respect to any FF&E; and 

    (xx) to
the extent not included in the foregoing, all other personal property of any kind or description, wherever located and whenever acquired; 

together
with all books, records, writings, data bases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of
the foregoing, and all proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing; provided that to the extent
that the provisions of any lease or license of Computer Hardware and Software or Intellectual Property expressly prohibit (which prohibition is enforceable under applicable law) the grant of a
security interest therein, Debtors' rights in such lease or license shall be excluded from the foregoing grant for so long as such prohibition continues, it being understood  that upon request of the
Secured Party, Debtors will in good faith use reasonable efforts to obtain consent for the creation of a security interest in favor of Secured Party in
Debtors' rights under such lease or license. 

Notwithstanding
the foregoing provisions of this Section 2.01, such grant of security interest shall not extend to, and the term "Collateral" shall not include any of the foregoing property
that is, pursuant to mandatory provisions of applicable law, prohibited from being pledged as security or for which necessary gaming approvals have not been received; provided  that, with respect to the
preceding clause, upon the termination of such prohibitions for any reason whatsoever or in the event such prohibitions are or become unenforceable
under applicable law, such foregoing property shall automatically become Collateral hereunder and, provided further, that upon request of the Secured
Party, Debtors will in good faith use reasonable efforts to obtain consent for the creation of a security interest in favor of the Trustee in Debtors' rights under such lease or license.
Notwithstanding the foregoing, so long as no Default or Event of Default shall have occurred, all dividends, distributions, interest and principal payments, cash, instruments, and other property and
proceeds made upon or with respect to or of the Collateral may be used by such Debtors subject to the terms and conditions of the Indenture. Upon the occurrence of a Default or an Event of Default,
all rights of such Debtors to receive all such dividends, distributions, interest and principal payments, cash, instruments and other property and proceeds shall cease, and such dividends,
distributions, interest and principal payments, cash, instruments and other property and proceeds shall be paid or otherwise delivered to the Secured Party. It is expressly contemplated that
additional property may from time to time be pledged, assigned or granted to Secured Party as additional security for the Obligations, and the term "Collateral" as used herein shall be deemed for all
purposes hereof to include all such additional property, together with all other property of the types described above related thereto. 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES  

    In order to induce Secured Party to accept this Agreement, Debtors represent and warrant to Secured Party (which representations and warranties will survive
the creation and payment of the Obligations) that: 

    Section 3.01  Ownership of Collateral; Absence of Encumbrances and Restrictions.  After giving
effect to the use of the proceeds of the Notes, Debtors are, and in the case of property acquired after the date hereof, will be, the sole legal and beneficial owner of the Collateral holding good and
indefeasible title to the same, free and clear of all Liens except for Permitted Liens and the Debtors have full right, power and authority to assign and grant a security interest in the Collateral to
Secured Party as provided herein. 

    Section 3.02  No Required Consent.  Except for such authorizations, consents or approvals
previously obtained and in effect as of the date hereof, no authorization, consent, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other
than the filing of financing statements and the other documents required to perfect or maintain the perfection of the Liens granted hereby) is required for (i) the due execution, delivery and
performance by each Debtor of this Agreement, (ii) the grant by each Debtor of the security interest granted by this Agreement, (iii) the perfection of such security interest or
(iv) the exercise by Secured Party of its rights and remedies under this Agreement, except as may be required by applicable Gaming Laws or in connection with the disposition of Collateral or by
federal or state securities laws or antitrust laws. 

    Section 3.03  Security Interest.  After giving effect to the use of proceeds of the Notes, the
grant of the security interest in and Lien on the Collateral pursuant to this Agreement creates a valid and continuing security interest in and Lien on the Collateral, enforceable against Debtors,
and, upon the filing of financing statements in the office of the Secretary of the State of Nevada, the security interests granted hereby will be perfected, prior to all other Liens, enforceable
against third parties and securing payment of the Obligations. 

    Section 3.04  No Filings By Third Parties.  After giving effect to the use of proceeds of the
Notes, and other than any financing statement or other public notice or recording naming Secured Party as the secured party therein or financing statements with respect to Permitted Liens, no
financing statement or other public notice or recording covering the Collateral is on file in any public office and Debtors have not signed any document or agreement authorizing the filing of any such
financing statement or other public notice or recording so long as any of the Obligations are outstanding. 

    Section 3.05  Name; No Name Changes.  Set forth on Exhibit C  hereto is the true and correct legal name of each of the Debtors, and, except as described on
Exhibit C hereto, none of
the Debtors have, during the preceding five (5) years, entered into any contract, agreement, security instrument or other document
using a name other than, or been known by or otherwise used any name other than, the name used by them herein. 

    Section 3.06  Location of Debtor and Collateral; Intellectual Property.  Debtors' chief executive
office, principal place of business and the locations of their respective records concerning the Collateral are set forth on Exhibit C hereto.
Any Collateral not at such location(s) nevertheless remains subject to Secured Party's security interest. Except as disclosed on Exhibit C  hereto, all tangible Collateral of Debtors are located at
the locations set forth on Exhibit C hereto. Debtors represent
and warrant that they have no Intellectual Property which has been registered or for which applications for registration are pending. 

    Section 3.07  Collateral.  All statements or other information provided by Debtors to Secured
Party describing or with respect to the Collateral is (or, in the case of subsequently furnished 

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information, will be when provided) correct and complete in all material respects. The delivery at any time by Debtors to Secured Party of additional descriptions of Collateral shall constitute a
representation and warranty by Debtors to Secured Party hereunder that the representations and warranties of this Article 3 are correct in all material respects insofar as they would pertain to
such Collateral or the descriptions thereof, except as indicated therein. 

    Section 3.08  Delivery of Documents.  All FF&E Collateral subject to applicable certificate of
title statutes are covered by effective certificates of title which identify the Secured Party's security interest therein and which further provide that such items of FF&E Collateral will not be
subject to any other certificates of title. With respect to any Collateral covered by one or more certificates of title or other documents of title evidencing ownership or possession thereof, each of
such certificates or documents of title shall, after the occurrence of an Event of Default and upon the request of the Secured Party, be delivered to Secured Party (provided that all certificates of
title and documents of title referred to in Article 2 hereof shall be subject to the security interest created by this Agreement irrespective of whether or not such delivery shall have been
made). 

    Section 3.09  Taxpayer Identification Number.  The federal taxpayer identification number of each
Debtor is set forth on Exhibit C hereto. 

ARTICLE 4

COVENANTS AND AGREEMENTS  

    Each Debtor will at all times comply with the covenants and agreements contained in this Article 4, from the date hereof and for so long as any part of
the Obligations are outstanding. 

    Section 4.01  Change in Location of Collateral or Debtor.  Except with respect to Collateral under
repair or temporarily in transit between locations (and in any such case, for a period not to exceed four (4) months), Debtors will not change the location of the Collateral (except for
(a) Collateral held by Secured Party, (b) motor vehicles and rolling stock, and (c) Collateral temporarily in transit between locations) to any state, county or other jurisdiction
in which Secured Party has not already filed a financing statement or taken other necessary steps to perfect or maintain its security interests in the Collateral without Secured Party's prior written
consent and the delivery of such new financing statements or other documentation as may be reasonably necessary or required by Secured Party to ensure the continued perfection and priority of its
security interest in the Collateral. Debtors will not change the location of their respective chief executive office, principal place of business or the locations of Debtors' records concerning the
Collateral unless such Debtor shall have given Secured Party at least thirty (30) days prior written notice thereof and shall have delivered to Secured Party such new financing statements or
other documentation as may be reasonably necessary or required by Secured Party to ensure the continued perfection and priority of its security interest in the Collateral. 

    Section 4.02  Change in a Debtor's Name or Corporate Structure.  Debtors will not change their
respective name, identity, state of organization, or corporate structure (including, without limitation, any merger, consolidation or sale of substantially all of its assets) unless such Debtor shall
have given Secured Party at least thirty (30) days prior written notice thereof and shall have delivered to Secured Party such new financing statements or other documentation as may be
reasonably necessary or required by Secured Party to ensure the continued perfection and priority of its security interest on the Collateral. 

    Section 4.03  Documents; Collateral in Possession of Third Parties.  If certificates of title or
other documents evidencing ownership or possession of the Collateral are issued or outstanding, Debtors will, after the occurrence of an Event of Default and upon the request of the Secured Party,
cause the interest of Secured Party to be properly noted thereon and will, forthwith upon receipt, deliver same to Secured Party. If any material portion of the Collateral is at any time in the
possession or control of 

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any warehouseman, bailee, agent or independent contractor, Debtors shall notify such Person of Secured Party's security interest in such Collateral. Upon Secured Party's request, Debtors shall
instruct any such Person to hold all such Collateral for Secured Party's account subject to Debtors' instructions, or, if an Event of Default shall have occurred, subject to Secured Party's
instructions. 

    Section 4.04  Delivery of Letters of Credit and Instruments.  After the occurrence of an Event of
Default and upon the request of the Secured Party, Debtors will deliver each letter of credit, if any, included in the Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtors. After the occurrence of an Event of Default and upon the request of the Secured Party, if any Non-Tangible Collateral becomes evidenced by a promissory note, trade
acceptance or any other instrument for the payment of money (other than checks or drafts in payment of Non-Tangible Collateral collected by Debtors in the ordinary course of business prior
to notification by Secured Party under Section 7.02(g)), Debtors will immediately deliver such instrument to Secured Party appropriately endorsed and, regardless of the form of presentment,
demand, notice of dishonor, protest and notice of protest with respect thereto, Debtors will remain liable thereon until such instrument is paid in full. 

    Section 4.05  Sale, Disposition or Encumbrance of Collateral.  Except as expressly permitted
pursuant to the provisions of the Indenture and Article 5 of this Agreement or with Secured Party's prior written consent, Debtors will not in any way encumber any of the Collateral (or permit
or suffer any of the Collateral to be encumbered) or sell, assign, substitute, replace, lend, rent, lease or otherwise dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party. 

    Section 4.06  Records and Information.  Each Debtor shall keep accurate and complete records of
the Collateral (including proceeds) owned or controlled by same. Secured Party may at any time upon reasonable prior notice have access during normal business hours to examine, audit, make extracts
from and inspect without hindrance or delay Debtors' records, files and the Collateral. Debtors will promptly provide written notice to Secured Party of all information which in any way relates to or
affects the filing of any financing statement or other public notices or recordings, or the delivery and possession of items of Collateral, for the purpose of perfecting a security interest in the
Collateral. Debtors will also promptly furnish such information as Secured Party may from time to time reasonably request regarding the Collateral or Secured Party's rights or remedies with respect
thereto. 

    Section 4.07  Reimbursement of Expenses.  Each Debtor hereby assumes all liability for the
Collateral, the security interests created hereunder and any use, possession, maintenance, management, enforcement or collection of any or all of the Collateral. Each Debtor agrees to indemnify and
hold Secured Party harmless from and against and covenants to defend Secured Party against any and all losses, damages, claims, costs, penalties, liabilities and expenses, including, without
limitation, court costs and reasonable attorneys' fees, incurred because of, incident to, or with respect to the Collateral (including, without limitation, any use, possession, maintenance or
management thereof, or any injuries to or deaths of Persons or damage to property, except to the extent caused by the gross negligence or willful misconduct of the Secured Party). All amounts for
which Debtors are liable pursuant to this Section 4.07 shall be due and payable by Debtors to Secured Party upon demand. If Debtors fail to make such payment upon demand (or if demand is not
made due to an injunction or stay arising from bankruptcy or other proceedings) and Secured Party pays such amount, the same shall be due and payable by Debtor to Secured Party, plus interest thereon
from the date of Secured Party's demand (or from the date of Secured Party's payment if demand is not made due to such proceedings) at the interest rate applicable to overdue principal as provided in
the Notes. 

    Section 4.08  Further Assurances.  Upon the request of Secured Party, each Debtor shall (at such
Debtor's expense) execute and deliver all such assignments, certificates, financing statements or other documents and give further assurances and do all other acts and things as Secured Party may 

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reasonably request to perfect Secured Party's interest in the Collateral or to protect, enforce or otherwise effect Secured Party's rights and remedies hereunder. 

    Section 4.09  Inventory.  Debtors may use the Inventory in any lawful manner not inconsistent with
this Agreement and the Indenture and with the terms of insurance thereon. 

    Section 4.10  Use, Possession and Control of Collateral.  Debtors will not use any Collateral in
violation in any material respect of any law, statute, ordinance, regulation or administrative order, or suffer it to be so used. Debtors shall procure and maintain in effect all material licenses,
registrations, certificates, permits, approvals and consents required of it by applicable law or any governmental authority in connection with the ownership, delivery, installation, use and/or
operation of the Collateral (including, without limitation, the FF&E). The Collateral will at all times be and remain in the possession and control of Debtors, subject only to Section 4.01 and
Article 5 of this Agreement. 

    Section 4.11  Collateral Attached to Other Property.  In the event that the Collateral may be
considered attached or affixed to any immovable (real) property, Debtors hereby agree that this Agreement may be filed for record in any appropriate records as a financing statement which is a fixture
filing, and the interests granted herein may be further perfected by the filing of a deed of trust (as contemplated by the Indenture). In connection therewith, Debtors will take whatever action is
required by Section 4.08. If one of the Debtors is not the record owner of such immovable (real) property, Debtors will provide Secured Party with any additional security agreements or
financing statements necessary for the perfection of Secured Party's security interest in the Collateral. If the Collateral is wholly or partly affixed to the immovable (real) property or installed in
or affixed to other goods, Debtors will, on demand of Secured Party, use their best efforts to furnish Secured Party with landlord's waivers, signed by all Persons having an interest in the immovable
(real) property or other goods to which the Collateral may have become affixed, permitting the Secured Party to have access to the Collateral at all reasonable times and granting the Secured Party a
reasonable period of time in which to remove the Collateral after the occurrence of an Event of Default. 

ARTICLE 5

MAINTENANCE AND REPAIR; ALTERATION AND ADDITIONS  

    Each Debtor covenants and agree 

    Section 5.01  Maintenance and Repair; Compliance with Law.  

    (a) Debtor,
at its own expense, shall at all times maintain the Collateral in good and safe order, operating condition and repair (ordinary wear and tear excepted),
substantially in conformance with the maintenance and repair standards and procedures as are set forth in the manufacturer's manuals pertaining to same (and in any event to at least as high a standard
of maintenance and repair as Debtor and/or its Affiliates observe with respect to similar equipment owned or leased by Debtor or any such Affiliate) and as otherwise required to enforce claims against
each vendor or manufacturer of each item of Collateral and in compliance in all material respects with applicable laws and the standards imposed by insurance policies required to be maintained under
the Indenture and this Agreement with respect to the Collateral. 

    (b) In
addition, Debtor shall make all necessary or appropriate repairs, replacements, substitutions and modifications in respect of the Collateral (or any component
thereof) which may be required to keep the Collateral in the condition required above. 

    Section 5.02  Alterations.  

    (a) If
any item of Collateral or individual components thereof is required to be altered, added to, replaced, improved or modified in order to comply with applicable
laws (a "Required Alteration"), Debtor shall diligently proceed to make such Required Alterations at its own expense. 

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    (b) Debtor, at its own expense, may make any alteration, addition, replacement, improvement or modification to any item of Collateral (a
"Permitted Alteration"), or remove any part that becomes worn out, broken or obsolete, if Debtor continues to be in compliance with  Section 5.01 above
and such action, when completed, will be of such character as not to adversely affect (i) the current fair market value
of the item of Collateral (ii) the originally anticipated use or function thereof, as applicable, and (iii) the originally anticipated residual value of the item of Collateral. 

    (c) All
Alterations shall be completed in a commercially reasonable manner and shall not, when completed, violate the terms of any restriction, easement, servitude,
condition, covenant or other matter affecting the Collateral. 

    (d) Secured
Party is not responsible for confirming that Alterations were made in conformity with the requirements of this Section 5.02. 

    Section 5.03  Replacement and Substitution.  Debtor may sell or replace Collateral in accordance
with the terms and conditions set forth in the Indenture and this Agreement; provided, however, to the extent Debtor desires to replace Collateral (including gaming equipment) with a fair market value
of $25,000.00 or more, individually, or $100,000.00 or more, in the aggregate, in one transaction or a series of related transactions, Debtor must deliver (i) a replacement notice to Secured
Party at least fifteen (15) days prior to the date of the proposed substitution, (ii) an Officers' Certificate certifying that the replacement item(s) meet the suitability standard set
forth below in this Section 5.03, and (iii) an amended Schedule B reflecting in sufficient detail the specific items of replacement
Collateral. Upon a permitted replacement of Collateral pursuant to this Section 5.03, Trustee, upon Debtor's request, shall execute and deliver
to Debtor any necessary amendments, modifications or terminations to the UCC Financing Statements, Fixture Filings, and other recordings and/or filings made to perfect the interest granted to Secured
Party under this Agreement that may be required to release the replaced item from the terms of this Agreement, all at Debtor's expense. Replacement items of Collateral shall be owned by the Debtor,
and title thereto shall be vested in Debtor upon such permitted replacement. Debtor shall record and/or file any and all UCC Financing Statements, Fixture Filings or other documents (including any
modifications or amendments to same) necessary to perfect Secured Party's Lien on such replacement item or items. Upon such permitted replacement, Schedule B  attached hereto shall be promptly
amended to reflect such replacement. To be suitable as a replacement, such replacement item or items of Collateral must have at least
substantially equivalent fair market value, in Debtor's reasonable business judgment, as the fair market value of the item or items of Collateral being replaced and be free and clear of all Liens
other than Permitted Liens. Debtor acknowledges that, pursuant to Article II above, Secured Party has a valid and binding security interest in and to the proceeds of any and all sales or other
dispositions of the Collateral, and any new items of Collateral purchased with such proceeds. 

    Section 5.04  Maintenance and Repair Reports.  Debtor shall keep maintenance and repair reports as
are customary for owners or operators of casinos, to indicate the nature and date of major work done to (or that affects) the Collateral. Such reports shall be kept on file by Debtor at its offices
during the term of the Indenture, and shall be made available to Secured Party or Trustee upon reasonable request. 

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   ARTICLE 6

RIGHTS, DUTIES AND POWERS OF SECURED PARTY  

    Secured Party shall have the following rights, duties and powers: 

    Section
6.01  Discharge Encumbrances.  After the occurrence of an Event of Default, Secured Party may, at
its option, discharge any taxes, Liens, security interests or other encumbrances at any time levied or placed on the Collateral, and may pay for insurance on the Collateral to the extent required by
this Agreement or the Indenture and not obtained by Debtors. Debtors agree to reimburse Secured Party upon demand for any payment so made, plus interest thereon from the date of Secured Party's demand
at the interest rate applicable to overdue principal as provided in the Notes. 

    Section
6.02  Licenses and Rights to Use Collateral.  After the occurrence of an Event of Default, in
connection with any transfer or sale (to Secured Party or any other Person) of the Collateral, Secured Party is hereby granted a transferable license or other right to use, without any charge, any of
Debtors' Intellectual Property in completing production, advertising or selling such Collateral except any of the foregoing property which is expressly prohibited by its terms from being assigned or
licensed. After the occurrence of an Event of Default, Debtors' rights under all licenses and franchise agreements shall inure to the benefit of Secured Party and any transferee of all or any part of
the Collateral. 

    Section 6.03  Cumulative and Other Rights.  The rights, powers and remedies of Secured Party
hereunder are in addition to all rights, powers and remedies given by law or in equity. The exercise by Secured Party or Trustee of any one or more of the rights, powers and remedies herein shall not
be construed as a waiver of any other rights, powers and remedies, including, without limitation, any other rights of set-off (which set-off rights may be exercised only after
the occurrence and during the continuance of an Event of Default). If any of the Obligations are given in renewal, extension for any period or rearrangement, or applied toward the payment of debt
secured by any Lien, Secured Party shall be, and is hereby, subrogated to all the rights, titles, interests and liens securing the debt so renewed, extended, rearranged or paid. 

    Section 6.04  Disclaimer of Certain Duties.  

    (a) The
powers conferred upon Secured Party by this Agreement are to protect its interest in the Collateral and shall not impose any duty upon Secured Party to exercise
any such powers. Each Debtor
hereby agrees that Secured Party shall not be liable for, nor shall the indebtedness evidenced by the Obligations be diminished by, Secured Party's delay or failure to collect upon, foreclose, sell,
take possession of or otherwise obtain value for the Collateral. Nothing herein shall affect any obligation of Secured Party to the Holders under the Indenture or under applicable law. 

    (b) Except
as may be required by the Indenture, and to the fullest extent permitted by applicable law, Secured Party shall be under no duty whatsoever to make or give
any presentment, notice of dishonor, protest, demand for performance, notice of non-performance, notice of intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps reasonably necessary to preserve any rights against any Obligor, Account Debtor or other Person. Each Debtor waives any right of
marshaling in respect of any and all Collateral, and waives any right to require Secured Party to proceed against any Obligor, Account Debtor or other Person, exhaust any Collateral or enforce any
other remedy which Secured Party now has or may hereafter have against any Obligor or other Person. 

    Section 6.05  Modification of Obligations; Other Security.  Except as specifically provided for in
the Indenture, each Debtor waives (i) any and all notice of acceptance, creation, modification, rearrangement, renewal or extension for any period of any instrument executed by any Obligor in
connection with the Obligations and (ii) any defense of any Obligor by reason of disability, lack of 

10

 

authorization, cessation of the liability of any Obligor or for any other reason. Each Debtor authorizes Secured Party, without notice or demand and without any reservation of rights against such
Debtor and without affecting such Debtor's liability hereunder or on the Obligations, from time to time to (x) after the occurrence of an Event of Default and after the acceleration of the
Notes, apply the Collateral in the manner permitted by this Agreement or the Indenture and (y) after the occurrence of an Event of Default and after the acceleration of the Notes, renew, extend
for any period, accelerate, amend or modify, supplement, enforce, compromise, settle, waive or release the obligations of any Obligor or any instrument or agreement of such other Person with respect
to any or all of the Obligations or Collateral. 

ARTICLE 7

EVENTS OF DEFAULT  

    Section 7.01  Events of Default.  As used in this Agreement, each of the following events shall
constitute an "Event of Default" hereunder: 

    (a) Any
default or breach of any covenant, agreement, condition, representation or warranty contained herein beyond any applicable cure period; 

    (b) The
occurrence of any "Event of Default" under the terms of the Indenture or any other Loan Document; 

    (c) The
value or priority of the security interest created hereby is impaired; 

    (d) Any
license or permit necessary for use and operation of the Collateral or any portion thereof is revoked or any proceeding to revoke the same is commenced or
threatened. 

    Debtor
shall give Trustee and Secured Party prompt written notice of the occurrence of any Event of Default hereunder. 

    Section 7.02  Remedies.  Upon the occurrence and continuance of an Event of Default, Secured Party
may (with no obligation to do so) take any or all of the following actions without notice (except where expressly required below or in the Indenture) or demand to any Debtor: 

    (a) Take
possession of the Collateral, or at Secured Party's request Debtors shall, at Debtors' cost, assemble the Collateral and make it available at a location to be
specified by Secured Party which is reasonably convenient to Debtors and Secured Party. In any event, Debtors shall bear the risk of accidental loss or damage to or diminution in value of the
Collateral, and Secured Party shall have no liability whatsoever for failure to obtain or maintain insurance, nor to determine whether any insurance ever in force is adequate as to amount or as to
risk insured. 

    (b) Sell,
in one or more sales and in one or more parcels, or otherwise dispose of any or all of the Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public or private transaction, at any location as deemed reasonable by Secured Party (including, without limitation, Debtors' premises), for cash at
such price as Secured Party may deem fair, and (unless prohibited by the Code, as adopted in any applicable jurisdiction) Secured Party may be the purchaser of any or all Collateral so sold and may
apply upon the purchase price therefor any Obligations secured hereby. Any such sale or transfer by Secured Party either to itself or to any other Person shall be absolutely free from any claim of
right by Debtors, including any equity or right of redemption, stay or appraisal which any Debtor has or may have under any rule of law, regulation or statute now existing or hereafter adopted. Upon
any such sale or transfer, Secured Party shall have the right to deliver, assign and transfer to the purchaser or transferee thereof the Collateral so sold or transferred. It shall not be necessary
that the Collateral or any part thereof be present at the location of any such sale or transfer. Secured Party may, at its discretion, provide for a public sale, and any such public sale shall be held
at such time or times 

11

 

within ordinary business hours and at such place or places as Secured Party may fix in the notice of such sale. Secured Party shall not be obligated to make any sale pursuant to any such notice.
Secured Party may, without notice or publication, adjourn any public or private sale by announcement at any time and place fixed for such sale, and such sale may be made at any time or place to which
the same may be so adjourned. In the event any sale or transfer hereunder is not completed or is defective in the opinion of Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to cause one or more subsequent sales or transfers to be made hereunder. If only part of the Collateral is sold or transferred such that
the Obligations remain outstanding (in whole or in part), Secured Party's rights and remedies hereunder shall not be exhausted, waived or modified, and Secured Party is specifically empowered to make
one or more successive sales or transfers until all the Collateral shall be sold or transferred and all the Obligations are paid. In the event that Secured Party elects not to sell the Collateral,
Secured Party retains its rights to lease or otherwise dispose of or utilize the Collateral or any part or parts thereof in any manner authorized or permitted by law or in equity, and to apply the
proceeds of the same towards payment of the Obligations. Each and every method of disposition of the Collateral described in this subsection or in subsection (e) shall constitute disposition in
a commercially reasonable manner. 

    (c) Take
possession of all books and records of Debtors pertaining to the Collateral. Secured Party shall have the authority to enter upon any real property or
improvements thereon in order to obtain any such books or records, or any Collateral located thereon, and remove the same therefrom without liability. 

    (d) Apply
proceeds of the disposition of the Collateral to the Obligations in any manner elected by Secured Party and permitted by the Code or otherwise permitted by
law or in equity and in accordance with the provisions of the Indenture. Such application may include, without limitation, the reasonable expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses incurred by Secured Party. 

    (e) Appoint
any Person as agent to perform any act or acts necessary or incident to any sale or transfer by Secured Party of the Collateral. Additionally, any sale or
transfer hereunder may be conducted by an auctioneer or any officer or agent of Secured Party. 

    (f)  Execute,
assign and endorse negotiable and other instruments for the payment of money, documents of title or other evidences of payment, shipment or storage for
any form of Collateral on behalf of and in the name of Debtors; provided, however, Secured Party may specifically disclaim any warranties of title. 

    (g) Notify
or require Debtors to notify Account Debtors that the Non-Tangible Collateral has been assigned to Secured Party and direct such Account Debtors
to make payments on the Non-Tangible Collateral directly to Secured Party. To the extent Secured Party does not so elect, Debtors shall continue to collect the Non-Tangible
Collateral. Secured Party or its designee shall also have the right, in its own name or in the name of Debtors, to do any of the following: (i) to demand, collect, receipt for, settle,
compromise any amounts due, give acquittances for, prosecute or defend any action which may be in relation to any monies due, or to become due by virtue of, the Non-Tangible Collateral;
(ii) to sell, transfer or assign or otherwise deal in the Non-Tangible Collateral or the proceeds thereof or the related goods, as fully and effectively as if Secured Party were the
absolute owner thereof; (iii) to extend the time of payment of any of the Non-Tangible Collateral, to grant waivers and make any allowance or other adjustment with reference
thereto; (iv) to take control of cash and other proceeds of any Collateral; (v) to send a request for verification of the Non-Tangible Collateral to any Account Debtor; and
(vi) to do all other acts and things necessary to carry out the intent of this Agreement. 

12

 

    (h) The Secured Party, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits to foreclose the security interest and sell the
Collateral or any portion thereof under a judgment of a court or courts of competent jurisdiction. For purposes of Nevada executory process procedures, each Debtor acknowledges the Obligations and
does hereby confess judgment in favor of the Secured Party for the full amount of the Obligations. Each Debtor agrees that after an Event of Default the Secured Party may cause the Collateral to be
seized and sold under executory or ordinary process, at the Secured Party's sole option, without appraisement, appraisement hereby being expressly waived, as an entirety or in parcels as the Secured
Party may determine, to the highest bidder for cash, and otherwise exercise the rights, powers and remedies afforded herein and under applicable Nevada law. Any and all declarations of fact made by
authentic act before a Notary Public in the presence of two witnesses by a person declaring that such facts lie within his knowledge shall constitute authentic evidence of such facts for the purpose
of executory process. In the event the Collateral or any part thereof is seized as an incident to an action for the recognition or enforcement of this Agreement by executory process, ordinary process,
sequestration, writ of fieri facias, or otherwise, Debtors and Secured Party agree that the court issuing such order shall, if petitioned for by Secured Party, direct the applicable sheriff to appoint
as a keeper of the Collateral the Secured Party or any agent designated by the Secured Party at the time such seizure is effected. Secured Party shall be entitled to all of the rights and benefits
afforded under applicable Nevada law, as the same may be amended. It is hereby agreed that the keeper shall be entitled to receive as compensation, in excess of its costs and expenses incurred in the
administration or preservation of the Collateral, an amount equal to $250.00 per day, which shall be payable monthly on the first day of each month. The designation of keeper made herein shall not be
deemed to require the Secured Party to provoke the appointment of such a keeper. 

    (i)  Exercise
all other rights and remedies permitted by law or in equity. 

    Section 7.03  Attorney-in-Fact.  Each Debtor hereby irrevocably appoints
Secured Party as such Debtor's attorney-in-fact, with full authority in the place and stead of such Debtor and in the name of such
Debtor or otherwise, from time to time in Secured Party's discretion upon the occurrence of an Event of Default, but at such Debtor's cost and expense and without notice to such Debtor: 

    (a) To
obtain, adjust, sell and cancel any insurance with respect to the Collateral, and endorse any draft drawn by insurers of the Collateral. Secured Party may apply
any proceeds or unearned premiums of such insurance to the Obligations (whether or not due). 

    (b) To
take any action and to execute any assignment, certificate, financing statement, notification, document or instrument which Secured Party may reasonably deem
necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to Debtor representing any payment or
other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. 

    Section 7.04  Account Debtors.  Any payment or settlement of Non-Tangible Collateral
made by an Account Debtor will be, to the extent of such payment or to the extent provided under such settlement, a release, discharge and acquittance of the Account Debtor with respect to such
Non-Tangible Collateral, and Debtors shall take any action as may reasonably be required by Secured Party in connection therewith. No Account Debtor on any Non-Tangible
Collateral will ever be bound to make inquiry as to the termination of this Agreement or the rights of Secured Party to act hereunder, but shall be fully protected by Debtors in making payment
directly to Secured Party. 

    Section 7.05  Liability for Deficiency.  If any sale or other disposition of Collateral by Secured
Party or any other action of Secured Party hereunder results in reduction of the Obligations, such action will not release Debtors from their liability to Secured Party for any unpaid Obligations,
including costs, charges and expenses incurred in the liquidation of Collateral, together with interest 

13

 

thereon at the rate then applicable under the Indenture, and the same shall be immediately due and payable to Secured Party at Secured Party's address set forth in the Indenture. 

    Section 7.06  Reasonable Notice.  If any applicable provision of any law requires Secured Party to
give reasonable notice of any sale or disposition or other action, Debtors hereby agree that ten days' prior written notice shall constitute reasonable notice thereof. Such notice, in the case of
public sale, shall state the time and place fixed for such sale and in the case of private sale, the time after which such sale is to be made. 

    Section 7.07  Non-judicial Enforcement.  Secured Party may enforce its rights
hereunder without prior judicial process or judicial hearing, and to the extent permitted by law Debtors expressly waive any and all legal rights which might otherwise require Secured Party to enforce
its rights by judicial process. 

ARTICLE 8

MISCELLANEOUS PROVISIONS  

    Section 8.01  Notices.  Any notice required or permitted to be given under or in connection with
this Agreement shall be given in accordance with the notice provisions of the Indenture. 

    Section 8.02  Amendments and Waivers.  Secured Party's acceptance of partial or delinquent
payments or any forbearance, failure or delay by Secured Party in exercising any right, power or remedy hereunder shall not be deemed a waiver of any obligation of Debtors or any Obligor, or of any
right, power or remedy of Secured Party, and no partial exercise of any right, power or remedy shall preclude any other or further exercise thereof Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of Default so remedied. Debtors hereby agree that if Secured Party agrees to a waiver of any provision hereunder, or an
exchange of or release of the Collateral or the addition or release of any Obligor or other Person, any such action shall not constitute a waiver of any of Secured Party's other rights or of Debtors'
obligations hereunder. This Agreement may be amended only by an instrument in writing executed jointly by each of the Debtors hereto and Secured Party and may be supplemented only by documents
delivered or to be delivered in accordance with the express terms hereof. 

    Section 8.03  Copy as Financing Statement.  A photocopy or other reproduction of this Agreement or
any financing statement covering the Collateral is sufficient as a financing statement, and the same may be filed with any appropriate filing authority for the purpose of perfecting Secured Party's
security interest in the Collateral. 

    Section 8.04  Possession of Collateral.  Secured Party shall be deemed to have possession of any
Collateral in transit to it or set apart for it (or, in either case, any of its agents, affiliates or correspondents). 

    Section 8.05  Redelivery of Collateral.  If any sale or transfer of Collateral by Secured Party
results in full satisfaction of the Obligations, and after such sale or transfer and discharge there remains a surplus of proceeds, Secured Party will deliver to Debtors such excess proceeds in
accordance with the Indenture; provided, however, that Secured Party shall not be liable for any interest, cost or expense in connection with any reasonable delay in delivering such proceeds to
Debtors. 

    Section 8.06  Governing Law; Jurisdiction.  This Agreement and the security interest granted
hereby shall be construed in accordance with and governed by the laws of the State of New York (except to the extent that the laws of the State of Nevada govern the perfection and priority of the
security interests granted hereby). 

    Section 8.07  Gaming Laws and Regulations.  Each of the provisions of this Agreement is subject
to, and shall be enforced in compliance with, any requirements imposed by any applicable Nevada 

14

 

Gaming Authority. To the extent required under applicable law, the consummation of the transactions contemplated hereby and the exercise of remedies hereunder may be subject to applicable Nevada
gaming law. Due to various legal restrictions, including, without limitation, licensing of operators of gaming facilities and prior approval of the sale or disposition of assets of a licensed gaming
operation, the sale of Collateral (or a portion thereof) may be delayed pending Gaming Authority approval. 

    Section 8.08  Continuing Security Agreement  

    A.  No
action taken or omission to act by Secured Party hereunder, including, without limitation, any action taken or inaction pursuant to Section 7.02 hereof,
shall be deemed to constitute a retention of the Collateral in satisfaction of the Obligations or otherwise to be in full satisfaction of the Obligations, and the Obligations shall remain in full
force and effect, until Secured Party shall have applied payments (including, without limitation, collections from Collateral) towards the Obligations in the full amount then outstanding or until such
subsequent time as is hereinafter provided in subsection (b) below. 

    B.  To
the extent that any payments on the Obligations or proceeds of the Collateral are subsequently invalidated, declared to be fraudulent or preferential set aside
or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by Secured Party, and Secured Party's security interests, rights, powers and remedies hereunder shall continue in full force
and effect. In such event, this Agreement shall be automatically reinstated if it shall theretofore have been terminated pursuant to Section 8.09. 

    Section 8.09  Termination.  The grant of a security interest hereunder and all of Secured Party's
rights, powers and remedies in connection therewith shall unless otherwise provided in the Indenture or this Agreement, remain in full force and effect until (A) payment in full of all amounts
owed under the Notes and the Indenture, and (B) payment and performance of all other Obligations then due and owing under the Indenture, the Notes and the Collateral Documents. Notwithstanding
the foregoing,
the reimbursement and indemnification provisions of Section 4.07 and the provisions of subsection 8.08(b) shall survive the termination of this Agreement. 

    Upon
any termination of this Agreement or release of any Collateral as permitted by the Indenture, the Trustee will, at the expense of Debtors, execute and deliver to Debtors such
documents and take such other actions as Debtors shall reasonably request to evidence the termination of this Agreement or the release of such Collateral, as the case may be. Any such action taken by
the Trustee shall be without warranty by or recourse to the Trustee, except as to the absence of any prior assignments by the Trustee of its interests in the Collateral, and shall be at the expense of
Debtors. 

    Section 8.10  Counterparts; Effectiveness.  This Agreement may be executed in two or more
counterparts. Each counterpart is deemed an original, but all such counterparts taken together constitute one and the same instrument. This Agreement becomes effective upon the execution hereof by
each of the Debtors hereto and delivery of the same to Secured Party, and it is not necessary for Secured Party to execute any acceptance hereof or otherwise signify or express its acceptance hereof. 

    Section 8.11  Indenture.  This Agreement is subject to the terms, conditions and provisions of the
Indenture. To the extent a term or provision of this Agreement conflicts with the Indenture, the Indenture shall control with respect to the subject matter of such term or provision. 

    Section 8.12  Joint and Several Liability.  Each Debtor hereunder shall be jointly and severally
liable for all obligations, conditions, covenants, costs, indemnities, expenses and other liabilities under this Agreement. 

15

 

    Section 8.13  New Trustee.  The Bank of New York is acting hereunder solely in its capacity as
Trustee under the Indenture, and all of the rights of Trustee set forth in the Indenture shall apply to Trustee's actions hereunder. To the extent this agreement contemplates payments by the Secured
Party, the Trustee shall have no liability therefor, such liability continuing to be the liability of Debtors or realized through the value of any collateral for the Obligations. 

    [SIGNATURE
PAGE FOLLOWS] 

16

 

    IN WITNESS WHEREOF, each Debtor has caused this Security Agreement to be executed and delivered as of the date first set forth above. 

	 	 	DEBTORS:
	

 	
 	

Herbst Gaming, Inc.
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	President and CEO
	

 	
 	

E-T-T, Inc.
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	President and CEO
	

 	
 	

Flamingo Paradise Gaming, LLC
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	Managing Member
	

 	
 	

Market Gaming, Inc.
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	President and CEO
	

 	
 	

E-T-T Enterprises L.L.C.
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	Managing Member
	

 	
 	

Cardivan Company
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	President and CEO
	

 	
 	

Corral Coin, Inc.
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	President and CEO
	

 	
 	

Corral Country Coin, Inc.
	

 	
 	

By:	
 	

/s/ Edward J. Herbst

	 	 	Name:	 	Edward J. Herbst
	 	 	Title:	 	President and CEO

17

 
SCHEDULE A
  List of Subsidiaries 

Cardivan
Company, a Nevada corporation

Corral Coin, Inc., a Nevada corporation

Corral Country Coin, Inc., a Nevada corporation

E-T-T, Inc., a Nevada corporation

E-T-T Enterprises L.L.C., a Nevada limited liability company

Flamingo Paradise Gaming, LLC, a Nevada limited liability company

Market Gaming, Inc., a Nevada corporation 

Schedule B
  List of FF&E 

	1.
	General
Description of Categories of FF&E 

Gaming
Equipment: 

Slot
Machines

Table Games

Cage Equipment 

Operating
Equipment: 

Kitchen
Equipment

Audio and Video Systems

CCTV Equipment

Telephone Systems

Computers and Peripherals

Switchgear and Generators

Fire Pumps

HVAC Equipment

Elevators

Escalators

Exterior Signage

Interior Signage 

Furniture
and Furnishings 

Guestrooms

Casino

Food & Beverage

Public Areas

Back of House 

	2.
	Specific
Description 

[to
be attached] 

18

  

 
 

EXHIBIT A    
  

List
of Contracts 

    1.  Trademark
License Agreement dated August 24, 2001, between Herbst Gaming, Inc. as licensee and Terrible Herbst, Inc. as licensor. 

A–1

  

 
 

EXHIBIT B    
  

List
of Slot Route Contracts 

    1.  Gaming
Devices License Agreement between Market Gaming, Inc. and Safeway, Inc. dated August 31, 1998. 

    2.  Gaming
Devices License Agreement between Market Gaming, Inc. and The Vons Company, Inc. dated August 31, 1998. 

    3.  Settlement
Agreement between Cardivan Company and Corral United, Inc., Jackpot Enterprises Inc. and Albertson's, Inc. dated November 18,
1999. 

    4.  License
Agreement (Modified by the Settlement Agreement) between Cardivan Company and Albertson's, Inc. dated September 16, 1998. 

    5.  Agreement
between Cardivan Company and KMART Corporation dated May 1, 1998. 

    6.  License
Agreement, as amended, between Corral Coin, Inc. and Rite Aid Corporation dated March 12, 1999, amendment dated March 27, 2000. 

    7.  License
Agreement, as amended, between Cardivan Company and Rite Aid Corporation dated March 12, 1999, amendment dated March 27, 2000. 

    8.  License
Agreement between Cardivan Company and Waremart, Inc. dated August 12, 1998. 

    9.  License
Agreement between E-T-T, Inc. and Terrible Herbst, Inc. dated December 20, 1999. 

B–1

QuickLinks

EXHIBIT 10.4

EXHIBIT A

EXHIBIT BPrepared by MERRILL CORPORATION

QuickLinks
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EXHIBIT 10.5    
  

COLLATERAL ASSIGNMENT OF CONTRACTS AND DOCUMENTS

    THIS
COLLATERAL ASSIGNMENT OF CONTRACTS AND DOCUMENTS (the "Assignment") is made as of August 24, 2001, by Herbst
Gaming, Inc., a Nevada corporation (the "Company"), E-T-T, Inc., a Nevada corporation, Flamingo Paradise Gaming,
LLC, a Nevada limited liability company, Market Gaming, Inc., a Nevada corporation, E-T-T Enterprises L.L.C., a Nevada limited-liability company, Cardivan Corporation, a
Nevada corporation, Corral Coin, Inc., a Nevada corporation, and Corral Country Coin, Inc., a Nevada corporation (collectively, the
"Guarantors" and, together with the Company, the "Loan Parties"), in favor of The Bank of New York, a
New York banking corporation, as trustee ("Trustee") acting on behalf of the holders of the Notes (the
"Holders") under the Indenture described below. 

Recitals

    A.  The
Loan Parties have entered into an Indenture dated as of August 24, 2001 (as the same may be amended, supplemented, restated or otherwise modified from
time to time, the "Indenture") with the Trustee, pursuant to which the Company has issued $170,000,000 aggregate principal amount of its
103/4% Senior Secured Notes due 2008 (as the same may be amended, supplemented, restated, exchanged, replaced or otherwise modified from time to time, collectively, the
"Notes"). 

    B.  The
parties have entered into this Assignment to evidence the Loan Parties' collateral assignment for security of certain contracts and documents related to the
operations of the Loan Parties. Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Indenture. 

Agreement

    NOW,
THEREFORE, in consideration of the foregoing premises and in order to induce the holders of the Notes to purchase the Notes, the Loan Parties agree as follows: 

    1.  Assignment.  As security for the due and punctual payment and performance of all indebtedness and
obligations of the Company and the Guarantors, now or hereafter due under the Indenture, the Notes or any Collateral Documents, whether or not arising after the commencement of a proceeding under
Bankruptcy Law (including post-petition interest) and whether or not recovery of any such obligation or liability may be barred by a statute of limitations or prescriptive period or such
obligation or liability may otherwise be unenforceable (collectively, the "Obligations"), the Loan Parties hereby assign and transfer to the Trustee and
hereby grant to the Trustee a security interest in all of the Loan Parties' right, title and interest, whether now existing or hereafter arising and whether now owned or hereafter acquired, in and to
(a) all contracts, including without limitation, service agreements, supply agreements and other such contracts and agreements between the Loan Parties and other persons, and all amendments,
modifications, additions and changes thereto, related to the operations of the Loan Parties, (b) all other contracts, agreements, documents and instruments now existing or hereafter arising
related to the operations of the Loan Parties, including without limitation, any and all bonds, permits, licenses and other governmental approvals and (c) all proceeds of the foregoing (all
items described in subsections (a) through (c), collectively, the "Contracts and Documents"). The Contracts and Documents include, without
limitation, those certain material contracts and agreements described in Exhibit A attached hereto as such exhibit may be amended or supplemented
from time to time (the "Major Documents"). 

Notwithstanding
the foregoing, the Contracts and Documents shall not include any license, permit, contract, or document (collectively, the "Excluded
Documents") (a) listed on Exhibit B attached hereto, (b) that, by its terms, cannot be subject to the Lien
created hereby to the extent necessary approvals have not been obtained, (c) that cannot be subject to the Lien created hereby without the approval of the relevant Governmental Authority, to
the extent that such approval has not been obtained, or (d) in 

 

which a Lien may not be granted under applicable law; provided however, that (i) any such Excluded Document now or hereafter acquired or entered
into by the Loan Parties shall automatically become part of the Contracts and Documents when and to the extent it may subsequently be made subject to such a Lien and/or the necessary approval, which
approval the Loan Parties shall use commercially reasonable efforts to obtain, has been obtained and (ii) proceeds of any Excluded Documents, such as proceeds from gaming revenues, shall
nevertheless be subject to the assignment hereunder. 

    2.  Rights of the Loan Parties.  This Assignment is an absolute assignment for security purposes only.
Accordingly, notwithstanding anything to the contrary set forth herein, the Loan Parties are hereby granted a license and shall retain all rights with respect to the Contracts and Documents,
including,
without limitation, the right to enforce all rights of the Loan Parties thereunder, except after the occurrence of a Default or an Event of Default. 

    3.  Representations and Warranties of the Loan Parties.  Each Loan Party represents and warrants to the
Trustee (a) the Contracts and Documents are free of all Liens other than Liens under the Collateral Documents, and (b) that it is not in default and that no event has occurred that with
notice or lapse of time or both would constitute a default by such Loan Party, or to its knowledge any other party, under any of the Contracts and Documents. 

    4.  Covenants of the Loan Parties.  Each Loan Party covenants and agrees in favor of the Trustee that
(a) it will not further assign, encumber or suffer the assignment or encumbrance of any of the Contracts and Documents or the proceeds thereof without the prior written consent of the Holders
as provided in the Indenture pursuant to or as expressly permitted under the Indenture, (b) it will perform and discharge each and every material obligation, covenant and agreement of such Loan
Party under the Major Documents and (c) to the extent prohibited by the Indenture, it will not modify, amend, supplement or in any way join in the release or discharge of any obligations or
rights of such Loan Party under any of the Major Documents in any material way. 

    5.  Limitation of Trustee's Obligations.  Nothing in this Assignment shall constitute an assumption of
any obligation by the Trustee under the Contracts and Documents. The Loan Parties shall continue to be liable for all obligations thereunder, and to take such steps as they deem reasonably necessary
or appropriate to secure performance by all other parties thereto. The Loan Parties shall defend, indemnify and hold the Trustee harmless from and against all losses, costs, liabilities and expenses,
including reasonable attorneys' fees, arising from or related to any failure by the Loan Parties to perform any obligation of the Loan Parties under any of the Contracts and Documents, such indemnity
and hold harmless agreement to survive the payment and performance of the Obligations. 

    6.  Cure by Trustee.  At any time upon and during the continuation of an Event of Default, the Trustee
shall have the right, but shall have no obligation, to take all actions that the Trustee may determine to be necessary or appropriate to cure any default under any of the Contracts and Documents and
to protect the rights of the Loan Parties or the Trustee thereunder, and may do so in the Trustee's name, in the name of the Loan Parties or otherwise. If any such action taken by the Trustee shall
prove to be inadequate or invalid in whole or in part, the Trustee shall not incur any liability on account thereof, and the Loan Parties hereby agree to defend, indemnify and hold the Trustee
harmless from and against all losses, costs, liabilities and expenses, including reasonable attorneys' fees, which the Trustee may incur or to which it may become subject in exercising any of its
rights under this Assignment, except for those arising from the gross negligence or willful misconduct of the Trustee, such indemnity and hold harmless agreement to survive the payment and performance
of the Obligations. 

    7.  Rights and Remedies  

    (a) Upon
the occurrence of an Event of Default under the Indenture irrespective of whether a notice of default has been given with respect to such Event of Default
(unless required by the 

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Indenture or any other Collateral Document), and with or without bringing any action or proceeding, the Trustee may, at its option, succeed to and proceed to enforce all of the rights, interests and
remedies of the Loan Parties under the Contracts and Documents, amend, modify, cancel, terminate or replace the same, reassign the Loan Parties' right, title and interest therein to any other person,
and exercise any and all other rights of the Loan Parties under the Contracts and Documents, either in person or through an agent, receiver or keeper, without further notice to or consent by the Loan
Parties, and without regard to the adequacy of security for the Obligations or the availability of any other remedies. The exercise of any of the foregoing rights or remedies shall not cure or waive
any Event of Default under the Indenture, or waive, modify or affect any notice of default thereunder, or invalidate any act done pursuant to any such notice. In addition to the rights and remedies of
the Trustee as set forth in this Assignment, the Trustee shall be entitled to the benefit of all other rights and remedies set forth in the Indenture, in other Collateral Documents, at law or in
equity. 

    (b) The
provisions of this Subparagraph 7(b) shall, without limiting the generality of any other provision of this Assignment, be applicable in the event any
foreclosure shall take place in Nevada on any right, title or interest of the Loan Parties in and to the Contracts and Documents or any proceeds thereof or, in connection with any foreclosure
hereunder, Nevada law shall otherwise be applicable. Trustee may proceed by a suit or suits at law or in equity to foreclose this Assignment and sell its right, title and interest to the Contracts and
Documents and the proceeds, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. For the purposes of Nevada executory process procedures, the Loan Parties
do hereby acknowledge the Obligations and confess judgment in favor of Trustee for the full amount of such Obligations. The Loan Parties do by these presents consent and agree that during the
continuance of an Event of Default under the Indenture it shall be lawful for Trustee to cause all of its right, title and interest to the Contracts and Documents and the proceeds, or any portion
thereof, to be seized and sold under executory or ordinary process, at Trustee's sole option, without appraisement, appraisement being hereby expressly waived, to the highest bidder, and otherwise
exercise the rights, powers and remedies afforded herein and under applicable Nevada law. Any and all declarations of fact made by authentic act before a Notary Public in the presence of two witnesses
by a person declaring that such facts lie within his knowledge shall constitute authentic evidence of such facts for the purpose of executory process. In the event the Loan Parties' right, title or
interest in and to the Contracts and Documents or any proceeds thereof, or any part thereof, is seized as an incident to an action for the recognition or enforcement of this Assignment by executory
process, ordinary process, sequestration, writ of fieri facias, or otherwise, the Loan Parties and Trustee agree that the court issuing any such order shall, if petitioned for by Trustee, direct the
applicable sheriff or marshal to appoint as a keeper of the Loan Parties' right, title or interest in and to the Contracts and Documents and the proceeds, if applicable, Trustee or any agent
designated by Trustee or any Person named by Trustee at the time such seizure is effected. Trustee shall be entitled to all the rights and benefits afforded under applicable Nevada law as the same may
be amended. It is hereby agreed that the keeper shall be entitled to receive as compensation, in excess of its reasonable costs and expenses incurred in the administration or preservation of the Loan
Parties' right, title or interest in and to the Contracts and Documents and the proceeds, an amount equal to $250.00 per day payable on a monthly basis. The designation of a keeper made herein shall
not be deemed to require Trustee to provoke the appointment of such a keeper. 

    (c) Notwithstanding
any of the foregoing provisions of this Section 7, all of the rights and remedies granted hereunder are subject to any applicable Nevada
laws. 

    8.  Additional Instruments.  With respect to both existing and future Contracts and Documents, the Loan
Parties hereby agree to execute and deliver such additional assignments and other documents as the Trustee may reasonably request in order to implement the purpose and intent of this Assignment. 

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    9.  Miscellaneous.  This Assignment shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, legal representatives, successors and assigns. In any action or proceeding arising from or related to this Assignment, the prevailing party shall be entitled to recover its
reasonable costs and attorneys' fees. The reference to "attorneys' fees" in this Paragraph and in all other places in this Assignment shall include without limitation such reasonable amounts as may
then be charged by the Trustee for legal services furnished by attorneys in the employ of the Trustee, at rates not exceeding those that would be charged by outside attorneys for comparable services.
Except to the extent otherwise provided herein, this Assignment shall be governed by the laws of the State of New York. 

    10.  Gaming Laws and Regulations.  To the extent required under applicable law, the consummation of the
transactions contemplated hereby and the exercise of remedies hereunder may be subject to applicable Nevada Gaming Laws, as amended from time to time. Due to various legal restrictions, including,
without limitation, licensing of operators of gaming facilities and prior approval of the sale or disposition of assets of a licensed gaming operation, the sale of Collateral consisting of gaming
equipment may be denied by the relevant Gaming Authorities or delayed pending Gaming Authority approval. 

    11.  Conflicts with Indenture.  Notwithstanding any other provision of this Assignment, the terms and
provisions of this Assignment shall be subject and subordinate to the terms of the Indenture. To the extent that the Indenture provides the Loan Parties with a particular cure or notice period, or
establishes any limitations or conditions on Trustee's actions with regard to a particular set of facts, the Loan Parties shall be entitled to the same cure periods and notice periods, and Trustee
shall be subject to the same limitations and conditions in place of the cure periods, notice periods, limitations and conditions provided for under the Indenture; provided,
however, such cure periods, notice periods, limitations and conditions shall not be cumulative as between the Indenture and this Assignment. In the event of any conflict or
provisions of this Assignment and those of the Indenture, including, without limitation, any conflicts or inconsistencies in any definitions herein or therein, the provisions or definitions of the
Indenture shall govern. 

    12.  Trustee.  The Bank of New York is acting hereunder solely in its capacity as Trustee under the
Indenture, and all of the rights of Trustee set forth in the Indenture shall apply to Trustee's actions hereunder. To the extent this Assignment contemplates payments by the Trustee, the Trustee shall
have no liability therefor, such liability continuing to be the liability of Loan Parties or realized through the value of any collateral for the obligations under the Indenture. 

 

(Signature Page Follows)

4

 
    IN WITNESS WHEREOF, the parties have executed this Assignment as of the date first above written. 

	HERBST GAMING, INC., a Nevada corporation	 	E-T-T, INC., a Nevada corporation
	

	

 	
 	

 	

 
	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO	 	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO
	

	

 	
 	

 	

 
	FLAMINGO PARADISE GAMING, LLC, a Nevada limited-liability company	 	MARKET GAMING, INC., a Nevada corporation
	

	

 	
 	

 	

 
	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: Managing Member	 	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO
	

	

 	
 	

 	

 
	E-T-T ENTERPRISES L.L.C., a Nevada limited-liability company	 	CARDIVAN CORPORATION, a Nevada corporation
	

	

 	
 	

 	

 
	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: Managing Member	 	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO
	

	

 	
 	

 	

 
	CORRAL COIN, INC., a Nevada corporation	 	CORRAL COUNTRY COIN, INC., a Nevada corporation
	

	

 	
 	

 	

 
	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO	 	By:	/s/ EDWARD J. HERBST   
 Name: Edward J. Herbst

Title: President and CEO

S–1

QuickLinks

EXHIBIT 10.5

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