Document:

Exhibit 10.17

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on March 7, 2008 (the “Effective Date”), between Herbst Gaming, Inc., a Nevada corporation (together with their successors or assigns as permitted under this Agreement, collectively, the “Company”), and Ferenc B. Szony, an individual (the “Executive”).

 

The Company desires to continue to employ the Executive and to enter into this Agreement embodying the terms of such employment, and the Executive desires to enter into this Agreement and accept such employment.

 

In consideration of the mutual covenants and for other good and valuable consideration, the Company and the Executive (individual a “Party” and together the “Parties”) agree as follows:

 

1.             Definitions

 

(a)           “Salary” shall mean the salary provided for in Section 4 subject to such increases as may be made from time to time.

 

(b)           “Board” shall mean the Board of Directors of the Company.

 

(c)           “Business Day” shall mean any day other than a weekend, a federal or Nevada state holiday or a vacation day for the Executive.

 

(d)           “Cause” shall mean:

 

(i)            the conviction of, or judgment against, the Executive by a civil or criminal court of competent jurisdiction for a felony or any other offense involving embezzlement or misappropriation of funds, or any act of moral turpitude, dishonesty or lack of fidelity;

 

(ii)           the indictment of the Executive by a state or federal grand jury of competent jurisdiction or the filing of a criminal complaint or information, for a felony or any other offense involving embezzlement or misappropriation of funds, or any act of moral turpitude, dishonesty or lack of fidelity;

 

(iii)          the confession by the Executive of embezzlement or misappropriation of funds, or any act of moral turpitude, dishonesty or lack of fidelity;

 

(iv)          the payment (or, by the operation solely of the effect of a deductible, the failure of payment) by a surety or insurer of a claim under a fidelity bond issued for the benefit of the Company reimbursing the Company for a loss due to the wrongful act, or wrongful omission to act, of the Executive;

 

(v)           the denial, revocation or suspension of a license, qualification or certificate of suitability to the Executive by any of the Gaming Authorities; and

 

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(vi)          any action or failure to act by the Executive that the Company reasonably believes, as a result of a communication or action by the Gaming Authorities or on the basis of consultations with its gaming counsel and/or other professional advisors, will likely cause any of the Gaming Authorities to:  (A) fail to license, qualify and/or approve the Company to own and operate a gaming business; (B) grant any such licensing, qualification and/or approval only upon terms and conditions that are unacceptable to the Company; (C) significantly delay any such licensing, qualification and/or approval process; or (D) revoke or suspend any existing license.

 

(e)           “Confidential Information” shall mean information in whatever form, including, without limitation, information that is written, electronically stored, orally transmitted, or memorized, that is, in the Company’s opinion, of commercial value to the Company and that is created, discovered, developed, or otherwise becomes known to the Company, or in which property rights are held, assigned to, or otherwise acquired by or conveyed to the Company, including, without limitation, any idea, knowledge, know-how, process, system, method, technique, research and development, technology, software, technical information, trade secret, trademark, copyrighted material, reports, records, documentation, data, customer or supplier lists, tax or financial information, business or marketing plan, strategy, or forecast.  Confidential Information does not include information that is or becomes generally known within the Company’s industry through no act or omission by the Executive; provided, however, that the compilation, manipulation or other exploitation of generally known information may constitute Confidential Information.

 

(f)            “Disability” shall mean the Executive’s inability, for a period of six (6) consecutive months, to render substantially the services provided for in Section 3 by reason of mental or physical disability, whether resulting from illness, accident or otherwise, where the existence of Disability shall be determined in the sole and absolute discretion of the Company.

 

(g)           “Term of Employment” shall mean the initial period specified in Section 2 and if, but only if, automatically renewed as provided in Section 2, shall include the period of such renewal.

 

2.             Term of Employment

 

(a)           The Company hereby employs the Executive and the Executive hereby accepts employment with the Company, in the position and with the duties and responsibilities as set forth in Section 3 for the Term of Employment, subject to the terms and conditions of this Agreement.

 

(b)           The initial Term of Employment shall commence as of the Effective Date and shall, unless sooner terminated as provided in Section 7 terminate at 11:59 p.m. (Pacific Standard Time) on December 31, 2009; provided that the Term of Employment shall automatically renew for successive one (1) year periods unless (i) it has sooner terminated as provided in Section 7or (ii) either Party has notified the other in writing at least sixty (60) days prior to the otherwise scheduled expiration of the Term of Employment that such Term of Employment shall not so renew.

 

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3.             Position, Duties and Authorities

 

(a)           During the Term of Employment, the Executive shall be employed as President and Chief Operating Officer with the duties, responsibilities and authorities customarily associated with such positions for other businesses of the same size and in the same industry, together with any other duties of a senior executive nature as may be reasonably requested by the Board from time to time, which may include duties for one or more subsidiaries or affiliates of the Company.  In performing the Executive’s duties under this Agreement, the Executive shall perform such duties subject to supervision and in accordance with the policies and directives established by the Board.

 

(b)           The Executive is permitted to engage in charitable, community and business affairs, managing personal investments and serving as a member of boards of directors of industry associations or non-profit or for profit organizations and companies so long as such activities do not materially interfere, in the opinion and reasonable discretion of the Board, with the Executive carrying out his duties and responsibilities under this Agreement.  Thereafter, not less often than on January 1 of each renewal year, the Executive shall disclose in writing to the Board any changes to the information with respect to involvement in such entities or organizations.

 

4.             Salary

 

During the Term of Employment, the Executive shall be paid by the Company a Salary payable in accordance with the Company’s payroll practices in effect from time to time at an annualized rate of Five Hundred Thousand Dollars ($500,000); salary is subject to a five percent (5%) increase on January 1 of each year following Effective Date.  The first such increase shall take effect in January 2009.

 

5.             Employee Benefit Programs

 

During the Term of Employment, the Executive and his dependents shall be entitled to participate in, at the Company’s expense, whatever employee benefit plans the Company endorses to obtain, if the Company in its sole discretion elects to obtain, such as, but not in limitation, medical, surgical, hospitalization, dental and visual insurance coverage.  If the Company obtains an employee benefit plan, the Company will pay all expenses for these insurance program(s) or plan(s).

 

6.             Business Expense Reimbursement and Perquisites

 

(a)           During the Term of Employment, the Executive shall be entitled to receive reimbursement by the Company, upon submission of adequate documentation, for all reasonable out-of-pocket expenses incurred by the Executive in performing services under this Agreement.

 

(b)           During the Term of Employment, the Executive shall be entitled to all other perquisites, incentive compensation and benefits provided to other senior level executives of the Company (as referenced in Exhibit A attached hereto).

 

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7.             Termination of Employment

 

(a)           Termination Due to Death or Disability.  In the event of the cessation of the Executive’s employment under this Agreement due to death or Disability, the Executive or the Executive’s legal representatives, as the case may be, shall be entitled to:

 

(i)            (A) in the case of death, continued Salary at the rate in effect at the time of death for a period of twenty-four (24) months following the month in which such cessation of employment due to death occurs, or (B) in the case of Disability, Salary at the rate in effect at the determination of Disability through the date of such determination of Disability;

 

(ii)           reimbursement for expenses incurred but not yet reimbursed by the Company; and

 

(iii)          any other compensation and benefits to which the Executive or legal representatives may be entitled to under the applicable plans, programs and agreements of the Company.

 

(b)           Termination by the Company for Cause.  At any time after learning of an event constituting Cause, the Company may elect to give the Executive written notice of its intention to terminate for Cause, specifying in such notice the event forming the basis for Cause.  Subject only to the following sentence, termination shall be effective immediately upon delivery of notice hereunder.  If the written notice is of an event constituting Cause under Section 1(d)(i) or 1(d)(v), and if the event is capable of being cured, the Company may allow the Executive to have ten (10) Business Days following actual receipt of the notice of termination in which to cure, so long as the Executive advises the Company in writing within forty-eight (48) hours of receiving the notice of termination of the Executive’s intention to attempt cure. In the event the Executive’s employment is terminated by the Company for Cause, the Executive shall be entitled to:

 

(i)            Salary at the rate in effect at the time of termination through the date of termination of employment;

 

(ii)           reimbursement for expenses incurred but not yet reimbursed by the Company; and

 

(iii)          any other compensation and benefits to which the Executive may be entitled under applicable plans, programs and agreements of the Company.

 

The Executive’s entitlement to the foregoing shall be without prejudice to the right of the Company to claim or sue for any damages or other legal or equitable remedy to which the Company may be entitled as a result of such Cause; provided, however, that offset shall not be available to the Company in any event.

 

(c)           Termination without Cause.  In the event the Executive’s employment is terminated by the Company without Cause (which shall not include a termination pursuant to Section 7(a)) (“Termination Without Cause”), the Executive shall be entitled to those items described in the subparagraphs (i) through (iii) of this Section 7(c) below.  Termination Without 

 

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Cause shall be effective immediately, unless a later date is stated, upon delivery of a written notice of such termination from the Company to the Executive.

 

(i)            an amount equal to twelve (12) months of Salary (the “Salary Termination Payment”).  The Executive may elect, at the Executive’s option to receive the Salary Termination Payment either (A) in equal monthly installments over a one (1) year period commencing on the next regularly scheduled payday upon termination of the Executive’s employment, or (B) in a lump-sum payment within ten (10) Business Days following termination of the Executive’s employment;

 

(ii)           reimbursement for expenses incurred but not yet reimbursed by the Company; and

 

(iii)          any other compensation and benefits to which the Executive may be entitled under applicable plans, programs and agreements of the Company.

 

(d)           Voluntary Termination.  A “Voluntary Termination” shall mean a termination of employment by the Executive on his own initiative.  In the event of a Voluntary Termination, the Executive shall be entitled to:

 

(i)            Salary at the rate in effect at the time of termination through the date of termination of employment;

 

(ii)           reimbursement for expenses incurred but not yet reimbursed by the Company; and

 

(iii)          any other compensation and benefits to which the Executive may be entitled under applicable plans, programs and agreements of the Company.

 

A Voluntary Termination shall not, solely due to a Voluntary Termination, be deemed a breach of this Agreement and shall be effective upon the expiration of sixty (60) days after written notice is delivered to the Company, unless another period of time is agreed to in writing by the Parties.

 

(e)           No Mitigation; No Offset.  In the event of any termination of the Executive’s employment under this Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain.

 

(f)            Nature of Payments.  Any amounts due the Executive under this Agreement in the event of any termination of employment with the Company are (i) in the nature of severance payments, or (ii) liquidated damages that contemplate both direct damages and consequential damages that the Executive may suffer as a result of the termination of employment, or both, and are not in the nature of a penalty.

 

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8.             Covenants to Protect Confidential Information

 

The Executive shall not, during the Term of Employment or anytime thereafter, without prior written consent of the Company, divulge, publish or otherwise disclose to any other person any Confidential Information regarding the Company except in the course of carrying out the Executive’s responsibilities on behalf of the Company (e.g., providing information to the company’s attorneys, accounts, bankers, etc.) or if required to do so pursuant to the order of a court having jurisdiction over the subject matter or a summons, subpoena or order in the nature thereof of any legislative body (including any committee thereof and any litigation or dispute resolution method against the Company related to or arising out of this Agreement) or any governmental or administrative agency.

 

9.             Non-Solicitation

 

Except with the prior written consent of the Board, the Executive shall not solicit customers, clients or employees of the Company or any of its affiliates for a period of twelve (12) months after the date of the expiration or termination of this Agreement.  Without limiting the generality of the foregoing, the Executive will not, for a period of twelve (12) months after the date of the expiration or termination of this Agreement, willfully canvas or solicit any such business in competition with the business of the Company from any customers of the Company with whom the Executive had contact during, or of which the Executive had knowledge solely as a result of, his performance of services for the Company pursuant to this Agreement.  The Executive will not, for a period of twelve (12) months after the date of the expiration or termination of this Agreement, directly or indirectly request, induce or advise any customers of the Company with whom the Executive had contact during the terms of this Agreement to withdraw, curtail or cancel their business with the Company.  The Executive will not, for a period of twelve (12) months after the date of the expiration or termination of this Agreement, induce or attempt to induce any employee of the Company to terminate his or her employment with the Company.

 

10.           Remedies.

 

(a)           The Executive acknowledges and agrees that immediate and irreparable harm, for which damages would be an inadequate remedy, would occur in the event any of the provisions of Section 8 or 9 were not performed in accordance with their specific terms or were otherwise breached.  Accordingly, the Executive agrees that the Company shall be entitled to an injunction or injunctions to prevent breaches of such provisions of this Agreement and to enforce specifically the terms and provisions thereof without the necessity of proving actual damages or securing or posting any bond or providing prior notice, in addition to any other remedy to which it may be entitled at law or equity.

 

(b)           Nothing herein contained is intended to waive or diminish any rights the Company may have at law or in equity at any time to protect and defend its legitimate property interests (including its business relationship with third parties), the foregoing provisions being 

 

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intended to be in addition to and not in derogation or limitation of any other rights the Company may have at law or equity.

 

(c)           The Executive shall have not rights, remedies or claims for damages, at law, in equity or otherwise with respect to any termination of the Executive’s employment by the Company other than as set forth in Section 7.

 

11.           Indemnification

 

(a)           The Company shall indemnify the Executive to the fullest extent permitted by Nevada law in effect as of the date hereof against all costs, expenses, liabilities and losses (including, without limitation, attorneys’ fees, judgments, fines, penalties, ERISA excise taxes and amounts paid in settlement) reasonably incurred by the Executive in connection with a Proceeding.  For the purposes of this Section 11, a “Proceeding” shall mean any action, suit or proceeding by reason of the fact that the Executive is or was an officer, director or employee, trustee or agent of any other entity at the request of the Company.  The indemnification allowed by this Section does not include suits initiated by the Executive against the Company.

 

(b)           The Company shall advance to the Executive all reasonable costs and expenses incurred by the Executive in connection with a Proceeding within twenty (20) days after receipt by the Company of a written request for such advance.  Such request shall include an itemized list of the costs and expenses and an agreement by the Executive to repay the amount of such advance if it is determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Company against such costs and expenses.

 

(c)           The Executive shall not be entitled to indemnification under this Section 11 unless the Executive meets the standard of conduct specified in the Nevada Revised Statutes. Actions that fail to meet the aforementioned standard of conduct shall include, but are not limited to, the failure to act in good faith, failure to act in the best interests of the Company, breach of the duty of loyalty, misappropriation of business opportunities, violation of the provisions of the articles of incorporation or the bylaws of the Company, violation of state or federal securities laws and violation of criminal law.  Notwithstanding the foregoing, to the extent permitted by law, neither Nevada Revised Statute, as amended, Section 78.7502 nor any similar provision shall apply to indemnification under this Section, so that if the Executive in fact meets the applicable standard of conduct, the Executive shall be entitled to such indemnification whether or not the Company (whether by the Board, the stockholders, independent legal counsel or other party) determines that indemnification is proper because the Executive has met such applicable standard of conduct. Neither the failure of the Company to have made such a determination prior to the commencement by the Executive of any suit or arbitration proceeding seeking indemnification, nor a determination by the Company that the Executive has not met such applicable standard of conduct, shall create a presumption that the Executive has not met the applicable standard of conduct.

 

(d)           The Company shall not settle any Proceeding or claim in any manner that would impose on the Executive any penalty or limitation with the Executive’s prior written consent.  Neither the Company nor the Executive will unreasonably withhold its or the Executive’s consent to any proposed settlement.

 

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12.           Assignability; Binding Nature

 

This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs and assigns.  No rights or obligations of the Company under this Agreement may be assigned or transferred by the Executive or the Company except that (i) such rights or obligations of the Company may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law, and (ii) such obligations of the Company may be transferred by the Executive by will or pursuant to the laws of descent or distribution.  The Company shall take all reasonable legal action necessary to effect such assignment and assumption of the Company’s liabilities, obligations and duties under this Agreement in circumstances described in clause (i) of the preceding sentence.

 

13.           Representation

 

The Company and the Executive respectively represent and warrant to each other that each respectively is fully authorized and empowered to enter into this Agreement and that their entering into this Agreement and the performance of their respective obligations under this Agreement will not violate any agreement between the Company or the Executive respectively and any other person, firm or organization or any law or governmental regulation.

 

14.           Entire Agreement

 

This Agreement contains the entire agreement between the Parties and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties relating to the subject matter set forth herein.  The Parties acknowledge and agree that the employment agreement previously entered into between the Parties has been terminated as of the date prior to the Effective Date.

 

15.           Amendment or Waiver

 

This Agreement cannot be changed, modified or amended without the consent in writing of both the Executive and the Company.  No waiver by either Party at any time of any breach by the other Party of any condition or provisions of this Agreement shall be deemed a waiver of a similar or dissimilar condition or provision at the same or at any prior or subsequent time.  Any waiver must be in writing and signed by the Executive or an authorized officer of the Company, as the case may be.

 

16.           Severability

 

The provisions of this Agreement shall be severable and the invalidity, illegality or unenforceability of any provision of this Agreement shall not affect, impair or render unenforceable this Agreement or any other provision hereof, all of which shall remain in full force and effect.  If any provision of this Agreement is adjudicated by a court of competent jurisdiction as invalid, illegal or otherwise unenforceable, but such provision may be made 

 

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enforceable by a limitation or reduction of its scope, the Parties agree to abide by such limitation or reduction as may be necessary so that said provision shall be enforceable to the fullest extent permitted by law.  The Parties further intend to and hereby confer jurisdiction to enforce the covenants contained in Sections 8 and 9 (the “Restrictive Covenants”) upon the courts of any jurisdiction within the geographical scope of such Restrictive Covenants.  If the courts of any one or more of such jurisdictions hold any Restrictive Covenant unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and the Executive that such determination not bar or in any affect the right of the Company to the relief provided for in this Section in the Courts of any other jurisdiction within the geographical scope of such Restrictive Covenant as to breaches of such Restrictive Covenant in such other respective jurisdictions (such Restrictive Covenant as it relates to each jurisdiction being, for this purpose, severable into diverse and independent covenants).

 

17.           Survival

 

The respective rights and obligations of the Parties shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

 

18.           Governing Law

 

This Agreement shall be governed by and construed under the law of the State of Nevada, disregarding any principles of conflicts of law that would otherwise provide for the application of the substantive law of another jurisdiction.  Each Party hereby irrevocably consents to the jurisdiction and venue of the state courts of Clark County, Nevada and the United States district courts with jurisdiction in Nevada with respect to any matter arising out of or relating to this Agreement other than matters that are subject to the arbitrations provisions of Section 19.

 

19.           Settlement of Disputes

 

Except for equitable actions seeking to enforce the provisions of Sections 8 and 9 which may be brought by a court in any competent jurisdiction, in the event a dispute, claim or controversy arises between the Parties relating to the validity, interpretation, performance, termination or breach of this Agreement (collectively, a “Dispute”), the Parties agree to hold a meeting regarding the Dispute, attended by individuals with decision-making authority, to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies.  If, within thirty (30) days after such meeting or after good faith attempts to schedule such a meeting have failed, the Parties have not succeeded in negotiating a resolution of the Dispute, the Dispute shall be resolved through final and binding arbitration to be held in Nevada in accordance with the rules and procedures for employment disputes of the American Arbitration Association. The prevailing party in such proceeding shall be entitled to recover the costs of the arbitration from the other party, including, without limitation, reasonable attorneys’ fees.

 

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20.           Notices

 

Any notice given to either Party shall being writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give notice of:

 

	
 
  	
If to the Company or the Board
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
Herbst Gaming, Inc.
  
	
 
  	
 
  	
3440 West Russell Road
  
	
 
  	
 
  	
Las Vegas, Nevada 89118
  
	
 
  	
 
  	
Attention: Chief Executive Officer
  
	
 
  	
 
  	
 
  
	
 
  	
If to the Executive:
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
Ferenc B. Szony
  
	
 
  	
 
  	
50 N. Sierra #505
  
	
 
  	
 
  	
Reno, Nevada 89501
  
				

 

21.           Headings

 

The headings of the Sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

 

22.           Counterparts

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

23.           Taxes

 

The Salary payable is stated in gross amounts and shall be subject to such withholding taxes and other taxes as may be required by law.

 

24.           Acknowledgment

 

The Executive acknowledges that he has been given a reasonable period of time to study this Agreement before signing it and has had an opportunity to secure counsel of his own.  By the execution of this Agreement, the Executive certifies that he has fully read and completely understands the terms, nature and effect of this Agreement. The Executive further acknowledges that he is executing this Agreement freely, knowingly and voluntarily and that the Executive’s execution of this Agreement is not the result of any fraud, duress, mistake, or undue influence whatsoever.  In executing this Agreement, the Executive does not rely on any inducements, promises, or representations by the Company other than that which is stated in this Agreement.

 

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25.           Waiver of Jury Trial

 

Each Party waives, to the fullest extent permitted by law, any right it may have to a trial by jury in respect of any litigation arising out of or relating to this Agreement and Executive’s employment by the Company. Each Party (i) certifies that no representative, agent or attorney of the other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that he or it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications set forth in this Section.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of Effective Date.

 

 

	
THE “COMPANY”
  	
 
  	
THE “EXECUTIVE”
  
	
Herbst Gaming, Inc.
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
By:
  	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
Its:
  	
 
  	
 
  	
Ferenc B. Szony
  

 

11Exhibit 10.18

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“Agreement”) is made as of this 31st day of December , 2010 by and between Herbst Gaming, LLC, a Nevada limited liability company (the “Company”), and                      (“Indemnitee”).

 

WHEREAS, the Company and Indemnitee recognize the difficulty in obtaining directors’ and officers’ liability insurance, the substantial cost of such insurance and the limitations in the coverage of such insurance;

 

WHEREAS, the Company and Indemnitee further recognize the substantial level of litigation in general, subjecting officers, managers and directors to expensive litigation risks while the availability and coverage of liability insurance is severely limited;

 

WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and other officers, managers and directors of the Company may not be willing to continue to serve as officers, managers and directors without additional protection; and

 

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as officers, managers and directors of the Company and to indemnify its officers, managers and directors so as to provide them with the maximum protection permitted by law.

 

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

 

1.             Indemnification.

 

(a)           Third Party Proceedings.  The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a manager, director, officer, employee, tax matters partner or agent of the Company, or any subsidiary of the Company, on, prior to or following the date of this agreement by reason of any action or inaction on the part of Indemnitee while an officer, manager, director, employee, tax matters partner or agent or by reason of the fact that Indemnitee is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with the action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

 

 

The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and that with respect to any criminal action or proceeding, he or she had no reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

(b)           Proceedings By or in the Right of the Company.  The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a manager, director, officer, employee, tax matters partner or agent of the Company or any subsidiary of the Company, on, prior to or following the date of this agreement by reason of any action or inaction on the part of Indemnitee while an officer, manager or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a manager, director, officer, employee, tax matters partner or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement, in each case, to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its members, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom to be liable to the Company or for amounts paid in settlement to the Company in the performance of Indemnitee’s duty to the Company and its members unless and only to the extent that the court in which such action, suit or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses as the court deems and then only to the extent that the court shall determine.

 

(c)           Obligations under previous Indemnification Agreement.  For purposes of clarification, the Company hereby assumes the obligations of Herbst Gaming, Inc. pursuant to that certain Indemnification Agreement dated as of August 11, 2010 by and among Herbst Gaming, Inc., the Company and Indemnitee.

 

2.             Expenses; Indemnification Procedure.

 

(a)           Advancement of Expenses.  The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action or proceeding referenced in Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any such action or proceeding).  Indemnitee hereby undertakes to repay such amounts advanced if, and to the extent that, it shall ultimately be determined by a court of competent jurisdiction that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.  The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Company.

 

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(b)           Notice/Cooperation by Indemnitee.  Indemnitee shall, as a condition precedent to Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement.  Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee).  Notice shall be deemed received three business days after the date postmarked if sent by domestic certified or registered mail, properly addressed; otherwise notice shall be deemed received when such notice shall actually be received by the Company.  In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

 

(c)           Procedure.  Any indemnification provided for in Section 1 shall be made no later than forty-five (45) days after receipt of the written request of Indemnitee.  If a claim under this Agreement, under any statute or under any provision of the Company’s Articles of Organization or Operating Agreement providing for indemnification is not paid in full by the Company within forty-five (45) days after a written request for payment therefor has first been received by the Company, then Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action.  It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law or this Agreement for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company, and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Subsection 2(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists.  It is the parties intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of its Board of Directors, its independent legal counsel or its members) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law or this Agreement, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of its Board of Directors, its independent legal counsel or its members) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

 

(d)           Notice to Insurers.  If, at the time of the receipt of a notice of a claim pursuant to Section 2(b) hereof, the Company has director and officer liability insurance in effect, then the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or appropriate action to cause such insurers to pay, on behalf of

 

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Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(e)           Selection of Counsel.  If the Company shall be obligated under Section 2(a) hereof to pay the expenses of any proceeding against Indemnitee, then the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do.  After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ Indemnitee’s counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

 

3.             Additional Indemnification Rights; Nonexclusivity.

 

(a)           Scope.  Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Organization, the Company’s Operating Agreement or by statute.  In the event of any change, after the date of this Agreement, in any applicable law, statute or rule which expands the right of a Nevada limited liability company to indemnify a member of its board of directors or an officer, such changes shall be, ipso facto, within the purview of Indemnitee’s rights and Company’s obligations, under this Agreement.  In the event of any change in any applicable law, statute or rule which narrows the right of a Nevada limited liability company to indemnify a member of its Board of Directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties, rights and obligations hereunder.

 

(b)           Nonexclusivity.  The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of Association, its Operating Agreement, any agreement, any vote of members of disinterested directors, Chapter 86 of the Nevada Revised Statutes or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office.  The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity at the time of any action or other covered proceeding.

 

4.             Partial Indemnification.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred by Indemnitee in the investigation,

 

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defense, appeal or settlement of any civil or criminal action or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled.

 

5.             Mutual Acknowledgement.  Both the Company and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise.  Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

 

6.             Directors’ and Officers’ Liability Insurance.  The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers, managers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement.  Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit or if Indemnitee is covered by similar insurance maintained by a subsidiary or parent of the Company.

 

7.             Severability.  Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law.  The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement.  The provisions of this Agreement shall be severable as provided in this Section 7. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

 

8.             Exceptions.  Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

(a)           Excluded Acts. To indemnify Indemnitee for any acts or omissions or transactions from which a director may not be relieved of liability under Chapter 86 of the Nevada Revised Statutes;

 

(b)           Claims Initiated by Indemnitee.  To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a

 

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right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 86.431, Section 86.441 or Section 86.451 of the Nevada Revised Statutes, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit;

 

(c)           Lack of Good Faith.  To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous;

 

(d)           Insured Claims.  To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) which have been paid directly to Indemnitee by an insurance carrier under a policy of director and officer liability insurance maintained by the Company; or

 

(e)           Claims Under Section 16(b).  To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

 

9.             Effectiveness of Agreement.  To the extent that the indemnification permitted under the terms of certain provisions of this Agreement exceeds the scope of the indemnification provided for in Section 86 of the Nevada Revised Statutes, such provisions shall not be effective unless and until the Company’s Articles of Organization or Operating Agreement authorize such additional rights of indemnification.  In all other respects, the balance of this Agreement shall be effective as of the date set forth on the first page and may apply to acts or omissions of Indemnitee which occurred prior to such date if Indemnitee was an manager, officer, director, employee or other agent of the Company, or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, at the time such act or omission occurred.

 

10.           Construction of Certain Phrases.

 

(a)           For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting limited liability company, corporation or other entity, any constituent limited liability company, corporation or other entity (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its managers, directors, officers, employees or agents, so that if Indemnitee is or was a manager, director, officer, employee or agent of such constituent limited liability company, corporation or other entity, or is or was serving at the request of such constituent limited liability company, corporation or other entity as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, then Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving

 

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corporation as Indemnitee would have with respect to such constituent limited liability company, corporation or other entity if its separate existence had continued.

 

(b)           For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a manager, director, officer, employee or agent of the Company which imposes duties on, or involves services by, such manager, director, officer, employee or agent with respect to an employee benefit plan, its participants or its beneficiaries.

 

11.           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original, and all of which shall constitute one and the same agreement.

 

12.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer or agent of the Company or of any other enterprise at the Company’s request.

 

13.           Attorneys Fees.  In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous.  In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were not made in good faith or were frivolous.  In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were not made in good faith or were frivolous.

 

14.           Notice.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt, or (ii) if mailed by domestic certified or registered mail with postage prepaid on the third business day after the date postmarked.  Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

 

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15.           Consent to Jurisdiction.  The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Nevada for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.

 

17.           Choice of Law.  This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of Nevada.

 

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

 

	
 
  	
HERBST GAMING, LLC
  
	
 
  	
3440 West Russell Road
  
	
 
  	
Las Vegas, Nevada 89118
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
 
  
	
 
  	
 
  	
Name: 
  	
David D. Ross
  
	
 
  	
 
  	
Title:
  	
Manager
  
	
 
  	
 
  
	
AGREED TO AND ACCEPTED:
  	
 
  
	
 
  	
 
  
	
INDEMNITEE:
  	
 
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
Name
  	
 
  
	
 
  	
 
  
	
Address:
  	
 
  
					

 

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