Document:

Exhibit 4.02

CUSIP NO. 52517P2M2

ISIN NO. US52517P2M27

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $1,306,000

  
	
  No. R-1

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

BUFFERED RETURN ENHANCED NOTES LINKED TO A
BASKET OF TEN

COMMODITIES AND TWO COMMODITY INDICES
 DUE DECEMBER 21, 2010

THIS NOTE IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE DEPOSITORY.  UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE
& CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS
EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM (A “CERTIFICATED
NOTE”), THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY.

 

 

LEHMAN
BROTHERS HOLDINGS INC., a corporation duly organized and existing under the
laws of the State of Delaware (herein called the “Company,” which term includes
any successor corporation under the Indenture referred to on the reverse
hereof), for value received, hereby
promises to pay to CEDE & Co., or registered assigns, on the Maturity Date,
an amount
equal to the Redemption Amount at Maturity.

The “Maturity Date” is December 21, 2010, or if such day is
not a Business Day, on the next following Business Day.

The “Valuation
Date” is December 14, 2010, or if such day is not a Valuation Business Day, the
immediately preceding Valuation Business Day; provided that if a Disruption
Event is in effect on the scheduled Valuation Date, the Valuation Date may be
postponed.

The “Redemption Amount at Maturity” for each $1,000 note
will be a single U.S. dollar payment on the Maturity Date equal to:

(A)            the sum of $1,000 plus the
product of $1,000 times the Basket Return times the Upside Participation Rate,
if the Final Basket Level is greater than the Initial Basket Level;

(B)              $1,000, if the Final
Basket Level is equal to or less than the Initial Basket Level but greater than
or equal to the Buffer Level; or

(C)              the sum of $1,000 plus the
product of $1,000 times the sum of the Basket Return plus the Protection
Percentage, if the Final Basket Level is less than the Buffer Level.

The “Component Commodities” and “Commodity Weightings” are
as follows:

	
  Component Commodities

  	
   

  	
  Component

  Weighting

  	
   

  
	
  Light sweet
  crude oil (“Crude Oil”)

  	
   

  	
   

  	
  15

  	
  %

  	
   

  
	
  Henry Hub
  natural gas (“Natural Gas”)

  	
   

  	
   

  	
  10

  	
  %

  	
   

  
	
  Reformulated
  gasoline blendstock for oxygen blending (“RBOB Gasoline”)

  	
   

  	
   

  	
  5

  	
  %

  	
   

  
	
  No. 2 fuel
  heating oil (“Heating Oil”)

  	
   

  	
   

  	
  5

  	
  %

  	
   

  
	
  High Grade
  Primary Aluminium (“Aluminum”)

  	
   

  	
   

  	
  7

  	
  %

  	
   

  
	
  Copper — Grade A
  (“Copper”)

  	
   

  	
   

  	
  7

  	
  %

  	
   

  
	
  Primary Nickel
  (“Nickel”)

  	
   

  	
   

  	
  6

  	
  %

  	
   

  
	
  Special High Grade Zinc (“Zinc”)

  	
   

  	
   

  	
  5

  	
  %

  	
   

  
	
  Standard Lead (“Lead”)

  	
   

  	
   

  	
  5

  	
  %

  	
   

  
	
  Gold (“Gold”)

  	
   

  	
   

  	
  5

  	
  %

  	
   

  

 

 2
 

 

	
  Component Commodities

  	
   

  	
  Component

  Weighting

  	
   

  
	
  S&P GSCI
  Livestock Index Excess Return (“GSCI® Livestock”) calculated and
  published by the Index Sponsor, subject to adjustment in accordance with
  Index Adjustment below

  	
   

  	
   

  	
  10

  	
  %

  	
   

  
	
  S&P GSCI
  Agriculture Index Excess Return (“GSCI® Agriculture”) calculated and
  published by the Index Sponsor, subject to adjustment in accordance with
  Index Adjustment below

  	
   

  	
   

  	
  20

  	
  %

  	
   

  

The “Upside
Participation Rate” is 196%.

The “Protection Percentage” is 20.0%.

The “Buffer Level” is the product of 80.0% times the
Initial Basket Level.

The “Basket Return” is a quotient, the numerator of which
is the difference of the Final Basket Level minus the Initial Basket Level and
the denominator of which is the Initial Basket Level, expressed as a percentage
rounded to three decimal places.

The “Final Basket Level” is the product of 100 times the
sum of 1 plus the sum of the Weighted Component Commodity Returns.

The “Initial Basket Level” is set to 100 on the Trade Date.

The “Trade Date” is the June 14, 2007.

The “Issue Date” is June 21, 2007.

The “Weighted Component Commodity Returns” are, for each
Component Commodity, the product of the Component Weighting times a quotient,
the numerator of which is the difference of the Final Commodity Price minus the
Initial Commodity Price and the denominator of which is the Initial Commodity Price
for such Component Commodity.

The “Initial Commodity Prices” for each Component Commodity
are as follows:

	
  Component

  Commodity

  	
   

  	
  Initial Commodity

  Price

  	
   

  
	
  Crude Oil

  	
   

  	
  US$67.65

  	
   

  
	
  Natural Gas

  	
   

  	
  US$7.808

  	
   

  
	
  RBOB Gasoline

  	
   

  	
  US$2.2247

  	
   

  
	
  Heating Oil

  	
   

  	
  US$2.0161

  	
   

  
	
  Aluminum

  	
   

  	
  US$2,650.5

  	
   

  
	
  Copper

  	
   

  	
  US$7,372

  	
   

  

 

 3
 

 

	
  Nickel

  	
   

  	
  US
  $41,100

  	
   

  
	
  Zinc

  	
   

  	
  US$3,700.5

  	
   

  
	
  Lead

  	
   

  	
  US$2,335.5

  	
   

  
	
  Gold

  	
   

  	
  US$653.25

  	
   

  
	
  GSCI® Livestock

  	
   

  	
  374.8589

  	
   

  
	
  GSCI®
  Agriculture

  	
   

  	
  68.18523

  	
   

  

The “Final
Commodity Price” is, for each Component Commodity, the Commodity Price on the
Valuation Date.

The “Commodity Price” for each Component Commodity is as
follows:

	
  Component Commodity

  	
   

  	
  Commodity Price

  
	
  Crude Oil

  Natural Gas

  RBOB

  Gasoline

  Heating Oil

  	
   

  	
  For each of Crude Oil, Natural Gas, RBOB Gasoline
  and Heating Oil, the official settlement price of the first nearby month
  futures contract (or, in the case of the last trading day of the first nearby
  month contract, the second nearby month contract) for that Component
  Commodity, expressed (a) in the case of Crude Oil, as the U.S. dollar price
  per barrel, (b) in the case of Natural Gas, as the U.S. dollar price per
  million British thermal units (Btu), and (c) in the case of RBOB Gasoline and
  Heating Oil, as the U.S. dollar price per gallon, in each case as made public
  by the Relevant Exchange for that Component Commodity (subject to the
  occurrence of a Disruption Event).

  
	
   

  	
   

  	
   

  
	
  Aluminum

  Copper

  Nickel

  	
   

  	
  For each of Aluminum, Copper, Nickel, Zinc and Lead,
  the official settlement price of that Component 

  

 

 4
 

 

	
  Zinc

  Lead

  	
   

  	
  Commodity for cash delivery, expressed as the U.S.
  dollar price per metric ton of the Component Commodity, as made public by the
  Relevant Exchange for that Component Commodity (subject to the occurrence of
  a Disruption Event).

  
	
   

  	
   

  	
   

  
	
  Gold

  	
   

  	
  The official afternoon fixing price of Gold, stated
  in U.S. dollars per troy ounce, as calculated and quoted by the London
  Bullion Market Association (the “LBMA”) (subject to the occurrence of
  a Disruption Event).

  
	
   

  	
   

  	
   

  
	
  GSCI® Livestock

  GSCI® Agriculture

  	
   

  	
  For each of GSCI® Livestock and GSCI® Agriculture
  (each an “Index” and collectively the “Indices”), the closing
  level of that Index, as determined and published by the Index Sponsor (subject
  to the occurrence of a Disruption Event), rounded to four decimal places.

  

The “Relevant
Exchange” for each Component Commodity is as follows:

	
  Component Commodity

  	
   

  	
  Relevant Exchange

  
	
  Crude Oil

  	
   

  	
  The NYMEX Division, or its successor, of the New
  York Mercantile Exchange, Inc. (“NYMEX”)

  
	
  Natural Gas

  	
   

  	
  NYMEX

  
	
  RBOB Gasoline

  	
   

  	
  NYMEX

  
	
  Heating Oil

  	
   

  	
  NYMEX

  
	
  Aluminum

  	
   

  	
  London Metal Exchange (“LME”)

  
	
  Copper

  	
   

  	
  LME

  
	
  Nickel

  	
   

  	
  LME

  
	
  Zinc

  	
   

  	
  LME

  
	
  Lead

  	
   

  	
  LME

  
	
  Gold

  	
   

  	
  The market in London on which members of the LBMA
  quote prices for the buying and selling of Gold.

  

 

 5

A “Valuation
Business Day” is a day, as determined in good faith by the Calculation Agent,
on which (a) the Relevant Exchange for each Component Commodity and (b) each
organized exchange or market of trading for any Index Contract, is scheduled to
be (or, but for the occurrence of a Disruption Event, would have been) open for
trading during its regular trading session (notwithstanding the Relevant
Exchange or organized exchange or market, as applicable, closing prior to its
scheduled closing time).

The “Index
Sponsor” is Standard & Poor’s, a division of the McGraw-Hill Companies.

If a
Disruption Event identified in clauses (A), (B) or (C) below relating to one or
more Component Commodities (other than the Indices) is in effect on the
scheduled Valuation Date, the Calculation Agent will calculate the Final Basket
Level using:

•                                            for each such Component
Commodity that did not suffer a Disruption Event on the scheduled Valuation
Date, the Final Commodity Price for that Component Commodity on the scheduled
Valuation Date, and

•                                            for each such Component
Commodity that did suffer a Disruption Event on the scheduled Valuation Date,
the Final Commodity Price on the immediately succeeding trading day for such
Component Commodity on which no Disruption Event occurs or is continuing with
respect to such Component Commodity;

provided however that if a
Disruption Event has occurred or is continuing with respect to a Component
Commodity on each of the three scheduled trading days following the scheduled
Valuation Date, then (a) that third scheduled trading day shall be deemed the
Valuation Date for the affected Component Commodity; and (b) the Calculation
Agent will determine the Final Commodity Price for the affected Component
Commodity on such day in its sole and absolute discretion taking into account
the latest available quotation for the Commodity Price for the affected
Component Commodity and any other information that in good faith it deems
relevant.

If a
Disruption Event identified in clauses (D) or (E) below relating to one or more
Component Commodities (other than Gold or the Indices) is in effect on the
Valuation Date, the Calculation Agent will determine the Final Commodity Price
for the affected Component Commodity on the scheduled Valuation Date in its
sole and absolute discretion taking into account the latest available quotation
for the Commodity Price for the affected Component Commodity and any other
information that in good faith it deems relevant.

With
respect to any Component Commodity that is an Index, if a Disruption Event
relating to one or more futures contracts then included in the Index or any
Successor Index (each such contract, an “Index Contract”) is in effect on the
scheduled Valuation Date, the Calculation Agent will calculate the Final
Commodity Price for such Index or Successor Index in

 6
 

good faith in accordance with the
formula for and method of calculating the Index or Successor Index last in
effect prior to commencement of the Disruption Event, using:

•                                            for each Index Contract
that did not suffer a Disruption Event on the scheduled Valuation Date, the
settlement price on the applicable organized exchange or market of trading for
such Index Contract on the scheduled Valuation Date, and

•                                            for each Index Contract
that did suffer a Disruption Event on the scheduled Valuation Date, the
settlement price on the organized exchange or market of trading for such Index
Contract on the immediately succeeding trading day on which no Disruption Event
occurs or is continuing  with respect to
such Index Contract;

provided however that if a
Disruption Event has occurred or is continuing with respect to such Index
Contract on each of the three scheduled trading days following the scheduled
Valuation Date, then (a) that third scheduled trading day shall be deemed the Valuation
Date for such Index Contract and (b) the Calculation Agent will determine the
price for such Index Contract on such day in its sole and absolute discretion
taking into account the latest available quotation for the price for such Index
Contract and any other information that in good faith it deems relevant.

A “Disruption
Event” (a) for a Component Commodity other than an Index, any of the following
events with respect to that Component Commodity or (b) with respect to an Index
any of the following events with respect to an Index Contract, in each case as
determined in good faith by the Calculation Agent:

(A)                              the suspension of or
material limitation on trading in the Component Commodity or Index Contract, or
futures contracts or options related to the Component Commodity or Index
Contract, on the Relevant Exchange for that Component Commodity or organized
exchange or market of trading for that Index Contract;

(B)                              either (i) the failure of
trading to commence, or permanent discontinuance of trading, in the Component
Commodity or Index Contract, or futures contracts or options related to the
Component Commodity or Index Contract, on the Relevant Exchange for that
Component Commodity or organized exchange or market of trading for that Index
Contract, or (ii) the disappearance of, or of trading in, the Component
Commodity or Index Contract;

(C)                              the failure of the
Relevant Exchange for the Component Commodity or organized exchange or market
of trading for that Index Contract to publish the official daily settlement
price of the Component Commodity or Index Contract for that day (or the
information necessary for determining the settlement price); and solely with
respect to Component Commodities other than Gold or any Index (or any Index
Contract then comprising an Index or any Successor Index),

 7
 

 

(D)                               the occurrence since the
Trade Date of a material change in the content, composition, or constitution of
the Component Commodity; or

(E)                                 the occurrence since the
Trade Date of a material change in the formula for or the method of calculating
the settlement price of the Component Commodity.

For the
purpose of determining whether a Disruption Event for a Component Commodity or
an Index Contract has occurred:

(1)                                  a limitation on the hours
in a trading day and/or number of days of trading will not constitute a
Disruption Event if it results from an announced change in the regular business
hours of the Relevant Exchange for the Component Commodity or organized
exchange or market of trading for that Index Contract;

(2)                                  a suspension in trading in
a Component Commodity on the Relevant Exchange for that Component Commodity or
in an Index Contract on the organized exchange or market of trading for that
Index Contract (without taking into account any extended or after-hours trading
session), by reason of a price change reflecting the maximum permitted price
change from the previous trading day’s settlement price will constitute a
Disruption Event; and

(3)                                  a suspension of or
material limitation on trading on a Relevant Exchange for a Component Commodity
or an organized exchange or market of trading for an Index Contract will not
include any time when the Relevant Exchange for that Component Commodity or an
organized exchange or market of trading for that Index Contract is closed for
trading under ordinary circumstances.

For
purposes of calculating the Final Basket Level in the event of a Disruption
Event relating to one or more Component Commodities or Index Contracts in
accordance with the above, “trading day” means a day, as determined in good
faith by the Calculation Agent, on which trading is generally conducted on the
Relevant Exchange applicable to the affected Component Commodity or on the
organized exchange or market of trading for the affected Index Contract.

If an
Index Unavailability Event is in effect on the scheduled Valuation Date (and no
Disruption Event is then in effect), the Calculation Agent will determine the
Final Commodity Price for the affected Index on the Valuation Date in good
faith in accordance with the formula for and method of calculating the Index
last in effect prior to commencement of the Index Unavailability Event, using
the closing price for each Index Contract most recently constituting the Index
on the organized exchange or market of trading for that Index Contract.

An “Index
Unavailability Event” means that an Index is not calculated and published by
the Index Sponsor or any Successor Index is not calculated and published by the
sponsors thereof.

 8
 

 

If the Index Sponsor discontinues publication of an Index and the Index
Sponsor or another entity publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to the
discontinued Index (such index, a “Successor Index”), then the Final Commodity
Price for such Index will be determined by reference to the level of such
Successor Index at the close of trading on the organized exchange or market of
trading for any futures contract (or any combination thereof) included in the
Successor Index last to close on the Valuation Date; provided, however, that
the Calculation Agent, in its sole discretion, may make such adjustments as it
deems necessary to the level of the Successor Index so that the level of the
Successor Index reflects the same level as that of the discontinued Index
before it was discontinued.  Upon any
selection by the Calculation Agent of a Successor Index, the Calculation agent
will cause written notice thereof to be promptly furnished to the trustee, to
the Issuer and to the holders of the notes.

If the Index Sponsor discontinues publication of an Index prior to, and
such discontinuation is continuing on, the Valuation Date, and the Calculation
Agent determines, in its sole discretion, that no Successor Index is available
at such time, then the Calculation Agent will determine the Final Commodity
Price for such Index on the Valuation Date. 
The Final Commodity Price for such Index will be computed by the
Calculation Agent in accordance with the formula for and method of calculating
the Index last in effect prior to such discontinuation, using the settlement
prices at the close of trading on the Valuation Date on the organized exchange
or market of trading for any futures contract (or any combination thereof) then
included in the Index (or, if trading in any such futures contract has been
materially suspended or materially limited, its good faith estimate of the
settlement price that would have prevailed but for such suspension or
limitation).

If at any time the method of calculating an Index or a Successor Index,
or the level thereof, is, in the good faith judgment of the Calculation Agent,
changed or modified in a material respect, the Calculation Agent may (but is
not obligated to) make such adjustments to the Index or Successor Index or their
respective methods of calculation as, in the good faith judgment of the
Calculation Agent, may be necessary in order to arrive at a level of a
commodity index comparable to the Index or such Successor Index, as the case
may be, as if such changes or modifications had not been made, and the
Calculation Agent will calculate the Final Commodity Price for such Index or
Successor Index with reference to the Index or such Successor Index as
adjusted.  Accordingly, if the method of
calculating the Index or a Successor Index is modified or rebased so that the
level of the Index or Successor Index is a fraction or multiple of what it
would have been if it had not been modified or rebased, then the Calculation
Agent will adjust the level of the Index or Successor Index in order to arrive
at a level of the Index or Successor Index as if it has not been modified or
rebased.

The “Calculation Agent” means
Lehman Brothers Commodity Services Inc, the determinations and calculations of
which will be binding absent manifest error.

Except as provided below, any
Redemption Amount at Maturity may, at the option of the Company, be made by
check mailed to the person entitled thereto at such person’s address as it
appears on the registry books of the Company.

 9
 

 

Payment of any Redemption
Amount at Maturity will be made in immediately available funds in accordance
with the normal procedures of the Trustee (or any duly appointed Paying Agent).

The Company will pay any
administrative costs imposed by banks in making payments in immediately
available funds, but any tax, assessment or governmental charge imposed upon
payments hereunder, including, without limitation, any withholding tax, will be
borne by the Holder hereof.

References herein to “U.S.
dollars” or “U.S.$” or “$” or “USD” are to the coin or currency of the United
States as at the time of payment is legal tender for the payment of public and
private debts.

REFERENCE
IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE
HEREOF.  SUCH FURTHER PROVISIONS SHALL
FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

This Note shall not be valid or
become obligatory for any purpose until the certificate of authentication
hereon shall have been signed by the Trustee under the Indenture.

 10

 

IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this instrument to be signed by its Chairman of the Board, its
President, its Vice Chairman, its Chief Financial Officer, one of its Vice
Presidents or its Treasurer, by manual or facsimile signature under its
corporate seal, attested by its Secretary or one of its Assistant Secretaries
by manual or facsimile signature.

Dated:  June 21, 2007

	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cindy Buckholz

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  

 

 

 

 

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

This is one of the
Securities of the series designated herein referred to in the within-mentioned
Indenture.

CITIBANK, N.A.
   as Trustee

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  

 

 

 11

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I
 BUFFERED RETURN ENHANCED NOTES LINKED
TO A BASKET OF 

TEN COMMODITIES AND TWO COMMODITY INDICES  
 DUE 
DECEMBER 21, 2010

Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series I, Buffered Return Enhanced Notes Linked to a
Basket of Ten Commodities and Two Commodity Indices (herein called the “Notes”).  The
Notes are one of an indefinite number of series of debt securities of the
Company (collectively, the “Securities”) issued or issuable under and pursuant
to an indenture dated as of September 1, 1987, as amended and supplemented (the
“Indenture”), duly executed and delivered by the Company and Citibank, N.A., as
Trustee (herein called the “Trustee”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities.  The separate series of Securities may be
issued in various aggregate principal amounts, may mature at different times,
may bear interest (if any) at different rates, may be subject to different
redemption provisions or repurchase rights (if any), may be subject to
different sinking, purchase or analogous funds (if any), may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided.

Section 2.  Principal
Amount for Indenture Purposes.  For
the purpose of determining whether Holders of the requisite amount of Notes of
this series outstanding under the Indenture have made a demand, given a notice
or waiver or taken any other action, the principal amount of this Note will be
deemed to be the principal amount of this Note then outstanding.

Section 3.  Modification
and Waivers.  The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
Holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the Redemption Amount at Maturity or the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon or reduce any premium or other amount payable on redemption, or make
the Redemption Amount at Maturity or the principal amount thereof, premium or
other amount payable, if any, or interest thereon payable in any coin or
currency other than that herein above provided, without the consent of the
Holder of each Security so affected, or (ii) change the place of payment on any
Security, or impair the right to institute suit for payment on any Security, or
reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Security so affected. 
It is also provided in the Indenture that, prior to any declaration
accelerating the 

 

maturity
of any series of Securities, the holders of a majority in aggregate principal
amount of the Securities of such series Outstanding may on behalf of the
holders of all the Securities of such series waive any past default or Event of
Default under the Indenture with respect to such series and its consequences,
except a default in the payment of interest, if any, on the Redemption Amount
at Maturity or the principal amount, or premium, if any, on any of the
Securities of such series, or in the payment of any sinking fund installment or
analogous obligation with respect to Securities of such series.  Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Note and any Notes of this series which may be
issued in exchange or substitution herefor, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes of this series.

Section 4.  Obligations
Unconditional.  No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay any Redemption Amount at Maturity on this Note at the place, at the
respective times, at the rate, and in the coin or currency herein prescribed.

Section 5.  Defeasance.  The Indenture contains provisions for the
discharge of the Indenture and defeasance at any time of the indebtedness on
this Note upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.

Section 6.  Authorized
Form and Denominations.  The Notes of
this series are issuable in registered form, without coupons.  Each Note will be issued initially as either
a Global Security or a Certificated Note, at the option of the Company, in
denominations of $1,000 or whole multiples of $1,000, either at the office or
agency to be designated and maintained by the Company for such purpose in the
Borough of Manhattan, New York City, pursuant to the provisions of the
Indenture or at any of such other offices or agencies as may be designated and
maintained by the Company for such purpose pursuant to the provisions of the
Indenture, and in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge, except for any tax or
other governmental charges imposed in connection therewith.  Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series of a different
authorized denomination, except that Global Securities will not be exchangeable
for Certificated Notes of this series.

Section 7.  Registration
of Transfer.  As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Notes of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the
Depository shall no longer be eligible under the Indenture, the Company shall
appoint a successor Depository.  If a
successor Depository for the Notes of this series is not appointed by the
Company within 90 days after the Company receives 

 

such
notice or becomes aware of such ineligibility, the Company will issue, and the
Trustee will authenticate and deliver, Notes of this series in definitive form
in an aggregate principal amount equal to the principal amount of this Note.

No service charge shall
be made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.

Prior to due presentment
of this Note for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, and neither the
Company nor the Trustee nor any agent of the Company or of the Trustee shall be
affected by any notice to the contrary.

Section 8.  Events of Default.  If an Event of Default with respect to Notes
of this series shall occur and be continuing, the amount that may be declared
due and payable upon any acceleration of the notes will be determined by the
Calculation Agent for the period from and including the Issue Date to but
excluding the date of early repayment and will equal, for each note, the
Redemption Amount at Maturity, calculated as the date of early repayment were
the Maturity Date. If a bankruptcy proceeding is commenced in respect of Lehman
Brothers Holdings, the claim of the beneficial owner of a note for the period
from and including the Issue Date to but excluding the date of early repayment
will be capped at the Redemption Amount at Maturity, calculated as though the
date of the commencement of the proceeding were the Maturity Date.

Section 9.  No Recourse Against Certain Persons.  No recourse for the payment of the Redemption
Amount at Maturity or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any Indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

Section 10.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.

Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.Exhibit
10.1

 

 

 

 

 

 

 

STOCK PURCHASE AGREEMENT

BY AND AMONG

MTR GAMING GROUP, INC.,

A DELAWARE CORPORATION,

AND

TLC CASINO ENTERPRISES, INC.

A NEVADA CORPORATION

DATED AS OF JUNE 26, 2007

FOR THE PURCHASE AND SALE
OF

100% OF THE STOCK OF

SPEAKEASY GAMING OF FREMONT,
INC.

AND

SPEAKEASY FREMONT STREET
EXPERIENCE OPERATING COMPANY

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE
AGREEMENT is dated as of June 26, 2007 (this “Agreement”) by and among MTR
Gaming Group, Inc., a Delaware corporation (“Seller”), and TLC Casino
Enterprises, Inc., a Nevada corporation (“Purchaser”). Each of Purchaser and
Seller is deemed a “Party” to this Agreement and hereinafter may collectively
be referred to as the “Parties.”

RECITALS

A.            Seller owns 100% of the issued and outstanding shares of
common stock of Speakeasy Gaming of Fremont, Inc., a Nevada corporation (“SGF”),
and 100% of the issued and outstanding shares of common stock of Speakeasy
Fremont Street Experience Operating Company, a Nevada corporation (“FSE”)
(collectively, the “Shares”).

B.            SGF owns and operates the casino facility known as Binion’s
Gambling Hall and Hotel located in Las Vegas, Nevada (the “Property”).

C.            Seller wishes to sell, and Purchaser wishes to purchase,
the Shares subject to the terms and conditions set forth in this Agreement.

D.            Capitalized terms used in this Agreement are defined
either where used in this Agreement or in the Glossary attached as Exhibit A
to this Agreement.

NOW, THEREFORE, in
consideration of the foregoing and the representations, warranties, covenants
and agreements as set forth herein, and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the Parties, intending
to be legally bound, hereby agree as follows:

ARTICLE I

PURCHASE OF THE SHARES

SECTION 1.1. 
PURCHASE OF THE SHARES. Seller hereby agrees to sell and Purchaser
hereby agrees to purchase the Shares, upon the terms and subject to the
conditions set forth in this Agreement, for a purchase price of Thirty-Two
Million Dollars ($32,000,000) (the “Purchase Price”), in cash or immediately
available funds, of which (a) Five Hundred Thousand Dollars ($500,000)
shall to be paid to Seller upon the execution and delivery of this Agreement,
subject to adjustment pursuant to Section 1.4 (the “Deposit”), which
amount shall be non-refundable except as provided in Section 9.2  hereof; and (b) Thirty-Two Million Dollars
($32,000,000) less the Deposit shall be paid by Purchaser to Seller at the
Closing as defined below, provided, however, that the amount paid to Seller
pursuant to Section 1.1(b) shall be adjusted at the Closing pursuant to
the provisions of Sections 4.5, 4.6, and 7.2 of this
Agreement. The Deposit shall be placed in escrow with Nevada Title Company (the
“Escrow Agent”) in form and substance satisfactory to Seller, Purchaser and the
Escrow Agent.

SECTION 1.2.  PURCHASE PRICE ADJUSTMENT.

(a)           Within ninety (90) days of the
Closing Date (or on the same date Seller publicly releases its audited
financial statements dated as of and for the year ended December 31, 2007, 

whichever occurs later),
Seller shall provide to Purchaser (i) a final closing balance sheet for SGF as
of the Closing Date prepared in accordance with generally accepted accounting
principles (“GAAP”) consistent with the accounting principles used in the
preparation of Seller’s financial statements dated as of December 31, 2006,
which balance sheet must be audited by Seller’s independent auditors if the
Closing Date occurs on or before December 31, 2007 or reviewed by a nationally
recognized independent auditing firm of Seller’s choosing if the Closing Date
occurs after December 31, 2007 (the “Final Closing Balance Sheet”), and (ii)
based on such Final Closing Balance Sheet, a calculation of Adjusted Net
Working Capital of SGF (as defined below) as of the Closing Date, determined as
provided in this Section 1.2.  If
and to the extent that the Adjusted Net Working Capital of SGF (as defined
below) as of the Closing Date, as reflected in the Final Closing Balance Sheet
and determined in accordance with this Section 1.2, exceeds zero,
Purchaser shall pay such excess to Seller as additional Purchase Price, payable
by wire transfer of immediately available funds to Seller within ten (10)
Business Days following the final determination of Adjusted Net Working Capital
as provided in this Section 1.2. 
If and to the extent that the Adjusted Net Working Capital of SGF as of
the Closing Date, as reflected in the Final Closing Balance Sheet and
determined in accordance with this Section 1.2, is less than zero,
Seller shall pay such deficiency to Purchaser, payable by wire transfer of
immediately available funds to Seller within ten (10) business days following
the final determination of Adjusted Net Working Capital as provided in this Section
1.2.  For purposes of this Agreement,
the term Adjusted Net Working Capital shall mean Current Assets minus House
Funds (as defined in Section 7.2) minus Current Liabilities.

(b)           For purposes of this Agreement, the
term “Current Assets” means, with respect to the financial information of SGF,
the aggregate of the following assets to the extent that such assets are
classified as current under GAAP and are acquired by Purchaser pursuant to the
terms of this Agreement: (i) cash plus cash equivalents; (ii) marketable
securities; (iii) accounts receivable generated in the ordinary course of
business, less a reasonable reserve for doubtful accounts consistent with past
practices; (iv) inventories held for use in the ordinary course of business
(excluding any inventories that are obsolete or otherwise unusable in the
business); (v) prepaid expenses; and (vi) all other assets of any kind
classified as current under GAAP. 
Current Assets shall not include any amounts due from HHLV Management
Company LLC or any affiliate of Harrah’s Entertainment pursuant to the Joint
Operating License Agreement, as amended, dated March 10, 2004 and the Purchase
and Sale Agreement, as amended, by and among Seller, HHLV and SGF, dated as of
February 9, 2004.

(c)           For purposes of this Agreement, the
term “Current Liabilities” means with respect to the financial information of
SGF, the aggregate of the following liabilities (without duplication) to the
extent that such liabilities are assumed by Purchaser in accordance with the
terms of this Agreement:  (i) all
accounts payable; (ii) all accrued liabilities of any kind shown on a balance
sheet prepared in accordance with GAAP, including but not limited to contingent
obligations, accrued vacation pay, accrued employee bonuses, litigation
reserves, liabilities for outstanding gaming chips and accrued payroll and
related liabilities and accrued gaming tax for the current fiscal year; and
(iii) all other liabilities of any kind classified as current under GAAP.  Notwithstanding anything in this Agreement to
the contrary, the term Current Liabilities shall not include progressive
liabilities described in Section 4.6. Notwithstanding anything to the
contrary in Section 1.2(b) or this Section 1.2(c), for the
purpose of determining Adjusted Net Working Capital, “Current Assets” shall not
include any assets or any portion of any assets that are not 

 2
 

realizable by
Purchaser within twelve (12) months following the Closing Date, “Current
Liabilities” shall not include any liabilities that are not being assumed by
Purchaser, including without limitation, the Pre-existing Claims as defined in Section
4.4, and neither “Current Assets” nor “Current Liabilities” shall include
assets or liabilities that constitute intercompany accounts.

(d)           After Seller has provided the Final
Closing Balance Sheet and the calculation of Adjusted Net Working Capital as
provided by Section 1.2(a), Purchaser will have thirty (30) days to
accept or object to the determination of Adjusted Net Working Capital.  If Purchaser accepts the determination of
Adjusted Net Working Capital as provided by Seller, either Seller or Purchaser
will pay the other Party the amount required to be paid by Section 1.2(a)
within ten (10) calendar days of such acceptance. If Purchaser objects to the
determination of Adjusted Net Working Capital, then the Parties shall attempt
to resolve any differences in determining Adjusted Net Working Capital for a
period of at least twenty (20) calendar days. 
If the Parties are unable to resolve such differences, then the Parties
shall jointly select an independent auditor of recognized national standing
(who is not rendering, and during the preceding two (2) year period has not
rendered, services to Seller or Purchaser or any of their respective
Affiliates) to make a final determination of Adjusted Net Working Capital of
SGF as of the Closing Date.  If Seller
and Purchaser are unable to jointly select such independent auditor within ten
(10) calendar days after the end of the twenty (20) calendar day described
above, each Party shall select an independent auditor of recognized national
standing and each such selected independent auditor shall select a third
independent auditor of recognized national standing (who is not rendering, and
during the preceding two (2) year period has not rendered, services to Seller
or Purchaser or any of their respective Affiliates) (such selected independent
auditor whether pursuant to this or the preceding sentence, the “Auditor”). In
connection with the resolution of any dispute regarding Adjusted Net Working
Capital, each Auditor shall have access to all documents, records, workpapers,
facilities and personnel reasonably necessary to perform its function as the
Auditor. Seller and Purchaser shall use their reasonable best efforts to cause
the Auditor to make its determination within thirty (30) calendar days after its
selection. The determination by the Auditor of the Adjusted Net Working Capital
of SGF as of the Closing Date shall be final, binding and conclusive on the
Parties. The fees and expenses of the Auditor shall be borne by Seller and
Purchaser equally, unless the Auditor makes a final determination of Adjusted
Net Working Capital that is more than (i) 10% less than the Adjusted Net
Working Capital initially determined by Seller, in which case the fees and
expenses of the Auditor shall be borne entirely by Seller or (ii) 10% more than
the Adjusted Net Working Capital initially determined by Seller, in which case
the fees and expenses of the Auditor shall be borne entirely by Purchaser.

SECTION 1.3.  CREDIT FOR REPAIRS. At Closing, Seller shall
pay Purchaser, or, at Seller’s election, reduce the Purchase Price by, One
Million Five Hundred Thousand Dollars ($1,500,000) as consideration for
Purchaser’s agreement to accept the real and personal property owned by SGF “as
is” and “where is” with no duty to make any capital expenditures with respect
to such real and personal property prior to Closing, except for ordinary
maintenance in the ordinary course of business consistent with past practice;
notwithstanding the foregoing, if Seller is required in the ordinary course of
business to repair or replace the Property’s roof or chillers prior to Closing,
then Seller shall be entitled to a credit for the actual cost of such repairs
or 

 3
 

replacements, up
to $1,500,000, provided that Purchaser consents in writing, in advance, which
consent will not be unreasonably withheld, to the expenditures proposed by
Seller.

SECTION 1.4.  CLOSING. 
The transactions contemplated by this Agreement shall take place at a
closing (the “Closing”), to be held at such place as the Parties may mutually
agree, upon a date that is on or prior to six (6) months following the
execution and delivery of this Agreement, which date may be extended by
Purchaser for up to two (2) additional periods of three (3) months each,
provided Purchaser (a) has complied with all of its obligations under this
Agreement but has not been successful, despite its best efforts, to obtain the
approvals required by Sections  8.1(b) and 8.2(j) hereof
(the “Closing Date”); and (b) increases the Deposit by  paying Seller an additional $200,000 for each
three (3)-month extension.

SECTION 1.5.  CLOSING DELIVERIES.

(a)           On the Closing Date, Seller will
deliver to Purchaser:

(i)            a wire transfer of
immediately available funds in the amount provided by Section 1.3 to an
account designated by Purchaser in writing at least three (3) Business Days
prior to the Closing;

(ii)           certificates
representing all of the Shares, duly endorsed in blank (or accompanied by duly
executed stock powers), with signatures guaranteed by a commercial bank, for transfer
to Purchaser;

(iii)          the resignations of
all directors and officers of SGF and FSE;

(iv)          the certificate
required by Section 8.2(c);

(v)           the surveys and
title policies required pursuant to Section 8.2(g); and

(vi)          evidence
satisfactory to Purchaser of the release of SGF and its properties  from all liabilities and obligations pursuant
to that certain Fifth Amended and Restated Credit Agreement dated as of
September 22, 2006, as amended, by and between Seller and its subsidiaries,
including SGF, and Wells Fargo National Association (the “Credit Agreement”).

(b)           Purchaser will deliver to Seller (or
the Escrow Agent, if applicable) on the Closing Date:

(i)            a wire transfer of
immediately available funds in the amount provided by Section 1.1(b), as
adjusted pursuant to this Agreement, to an account designated by Seller in
writing at least three (3) Business Days prior to the Closing; and

(ii)           the certificate
required by Section 8.3(c).

(c)           Notwithstanding anything to the
contrary in this Agreement, Seller shall retain the account receivable
currently due to Seller, SGF or FSE from HHLV Management Company LLC or any
affiliate of Harrah’s Entertainment pursuant to the Joint Operating License
Agreement, as amended, dated March 10, 2004 and the Purchase and Sale
Agreement, as amended, by and 

 4
 

among Seller, HHLV
and SGF, dated as of February 9, 2004, but Purchaser shall be entitled to any
right to indemnification from HHLV Management Company or any affiliate of
Harrah’s Entertainment pursuant to such agreements pertaining to matters for
which Seller is liable to Purchaser pursuant to the terms of this Agreement.

SECTION 1.6.  TIME. 
As to all periods set forth in this Agreement, time shall be of the
essence.

ARTICLE
II

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in
the disclosure schedule delivered by Seller to Purchaser prior to the execution
of this Agreement, a copy of which is attached hereto as Exhibit B,
(the “Seller Disclosure Schedule”) (each section of which qualifies the
correspondingly numbered representation and warranty or covenant to the extent
specified therein), Seller hereby represents and warrants to Purchaser as
follows, as of the date hereof and as of the Closing Date:

SECTION 2.1.  ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.

(a)           Each of SGF and FSE is a Nevada
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
conducted and proposed by SGF and FSE to be conducted.

(b)           Neither SGF nor FSE have any
subsidiaries.  Except as provided in Section
2.1.(b) of the Seller Disclosure Schedule, neither SGF nor FSE own,
directly or indirectly, beneficially or of record, any shares of capital stock
or any other security of any other entity or any other investment in any other
entity.

(c)           Each of SGF and FSE is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing does not
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on SGF or FSE. As used in this Agreement, “Material
Adverse Effect” means any material adverse change in, or material adverse
effect on, the business, financial condition, prospects or operations of a
Person (as hereinafter defined), taken as a whole; provided, however, that any
adverse effect on a Person resulting from the execution of this Agreement, the
announcement of this Agreement and the transactions contemplated hereby, or a
change in financial condition not materially inconsistent with projections
Seller has provided to Purchaser prior to the date hereof shall be excluded
from the determination of Material Adverse Effect. “Person” means a natural
person or any partnership, limited liability company, trust, estate,
association, corporation, custodian, nominee or any other individual or entity
in its own or any representative, capacity or any other entity.

(d)           Seller has delivered to Purchaser a
true and correct copy of the Certificate of Incorporation and Bylaws of each of
SGF and FSE (collectively, the “Organizational 

 5
 

Documents”), in
each case as amended to the date of this Agreement. Neither SGF nor FSE is in
violation of its Organizational Documents in a manner that does or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. True and complete copies of all minute books of each of SGF and
FSE have been made available to Purchaser.

SECTION 2.2.  CAPITALIZATION; OWNERSHIP.

(a)           The authorized capital stock of SGF
consists of: 75,000 shares of common stock, no par value, of which 100 shares
are issued and outstanding and none of which are held in SGF’s treasury.  All of the issued and outstanding shares of
SGF have been validly issued and are duly authorized, fully paid, and
non-assessable.  Except as set forth
above, there are outstanding (i) no other shares of capital stock or other
voting securities of SGF; (ii) no securities of SGF convertible into or
exchangeable for shares of capital stock or voting securities of SGF;
(iii) no options or other rights to acquire from SGF, and no obligations
of SGF to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of SGF; and
(iv) no equity equivalents, interests in the ownership or earnings of SGF
or other similar rights (including stock appreciation
rights) (collectively, the “SGF Securities”).  There are no outstanding obligations of SGF
to repurchase, redeem or otherwise acquire any SGF Securities.

(b)           The authorized capital stock of FSE
consists of: 75,000 shares of common stock, no par value, of which 100 shares
are issued and outstanding and none of which are held in FSE’s treasury.  All of the issued and outstanding shares of
FSE have been validly issued and are duly authorized, fully paid, and
non-assessable.  Except as set forth
above, as of the date hereof, there are outstanding (i) no shares of
capital stock or other voting securities of FSE; (ii) no securities of FSE
convertible into or exchangeable for shares of capital stock or voting
securities of FSE; (iii) no options or other rights to acquire from FSE,
and no obligations of FSE to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of FSE; and (iv) no equity equivalents, interests in the
ownership or earnings of FSE or other similar rights (including stock
appreciation rights) (collectively, the “FSE Securities”) .  There are no outstanding obligations of FSE
to repurchase, redeem or otherwise acquire any FSE Securities.

(c)           Seller owns all of the SGF Securities
and the FSE Securities outstanding, free and clear of any liens, encumbrances,
and restrictions on transfer of any nature, except for liens, encumbrances, and
restrictions imposed pursuant to the Credit Agreement, all of which will be
released as of the Closing.

SECTION 2.3.  AUTHORITY RELATIVE TO THIS AGREEMENT.

(a)           Seller has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby.  No other corporate proceedings
on the part of Seller, including, without limitation, approval of Seller’s
stockholders, are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby.  This
Agreement has been duly and validly executed and delivered by Seller and,
assuming the due and valid authorization, execution and delivery by Purchaser,
constitutes a valid, legal and binding agreement of Seller, enforceable 

 6
 

against Seller in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar Laws affecting creditors’ rights
generally and general principles of equity.

(b)           The Board of Directors of Seller (the
“Seller Board”) has duly and validly authorized and approved the execution
and delivery of this Agreement, the performance of Seller’s obligations
hereunder, and the consummation of the transactions contemplated hereby.

SECTION 2.4.  CONSENTS AND APPROVALS; NO VIOLATIONS.

(a)           Except for such filings, permits,
authorizations, consents and approvals as may be required by or under federal
and state securities Laws, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the “HSR Act”), the City of Las Vegas, Nevada, the State of
Nevada, or any Governmental Entity (as defined below) with regulatory
control or jurisdiction over liquor operations or the conduct of lawful gaming
or gambling, including, without limitation, the Nevada State Gaming Control
Board and the Nevada Gaming Commission (each, a “Gaming Authority”), no filing
with or notice to, and no permit, authorization, consent or approval of, any
court or tribunal or administrative, legislative, governmental or regulatory
body, agency or authority, including any Gaming Authority (a “Governmental
Entity”), is necessary for the execution and delivery by Seller of this
Agreement or the consummation by Seller of the transactions contemplated
hereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not and
would not reasonably be expected to, individually or in the aggregate,
(i) materially impair, materially delay or prevent the performance of this
Agreement or (ii) materially impair the ability of SGF or FSE to conduct
their respective businesses in a substantially similar manner as conducted by
SGF and FSE prior to the Closing.

(b)           Except as described in Section
2.4(b) of the Seller Disclosure Schedule, neither the execution,
delivery and performance of this Agreement by Seller nor the consummation by
Seller of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective certificate or articles
of incorporation or bylaws (or similar governing documents) of Seller, SGF
or FSE; (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or lien
(other than Permitted Exceptions as defined in Section 2.8(b) of
the Seller Disclosure Schedule)) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Seller, SGF or FSE is a
party or by which any of them or any of their respective properties or assets
may be bound (collectively, the “Contracts”); or (iii) assuming compliance
with the matters referred to in Section 2.4(a), violate any Law
(including any Gaming Law) applicable to SGF or FSE or any of their
respective properties or assets or any Permit (as defined herein) applicable to
Seller, SGF or FSE, except in the case of (ii) or (iii) for
violations, breaches or defaults that do not or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on SGF or FSE, or do not or would not reasonably be expected to materially
impair, materially delay or prevent the performance of this Agreement.

 7
 

SECTION 2.5.  BALANCE SHEET
AND FINANCIAL STATEMENTS.  Seller
has provided Purchaser with audited balance sheets of SGF as of, and the
related audited/statements of income and retained earnings, stockholders’
equity and cash flow, for each of the years ended December 31, 2004, 2005, and
2006 (the “Historical Financial Statements”), and the unaudited balance sheets
of SGF as of March 31, 2007 (the “March Balance Sheets”), and the related
unaudited consolidated statements of income and retained earnings, stockholders’
equity and cash flow for the three (3)-month period ended March 31, 2007 (the “Balance
Sheet Date”) (collectively, the “Interim Financial Statements” and together
with the Historical Financial Statements, the “Financial Statements”).  Except as disclosed in the Seller Disclosure
Schedule, the Financial Statements were prepared in accordance with GAAP and
present fairly in all material respects the information purported to be
presented therein, subject (in the case of the Interim Financial Statements) to
normal year-end accounting adjustments and the absence of footnote
disclosure.  All of FSE’s material assets
and material liabilities are set forth in Section 2.5 of the Seller
Disclosure Schedule.  No contributions,
payments, or other amounts that are due or otherwise outstanding to Fremont
Street Experience, LLC are delinquent or past due.

SECTION 2.6.  NO
UNDISCLOSED LIABILITIES.  Except as and
to the extent set forth on the unaudited balance sheets of SGF and FSE as of
March 31, 2007, including the notes thereto, neither SGF nor FSE has any
liabilities of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on a balance sheet or in notes thereto
prepared in accordance with GAAP, except for liabilities incurred in the
ordinary course of business since March 31, 2007 that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect
on SGF or FSE.

SECTION 2.7.  ABSENCE OF
CERTAIN CHANGES OR EVENTS. As of the date hereof, except as disclosed in the
Seller Disclosure Schedule, since March 31, 2007, SGF and FSE have conducted
their businesses only in the ordinary course consistent with past practice and,
since such date, there has not been (i) any event, development, state of
affairs or condition, or series or combination of events, developments, states
of affairs or conditions, that, individually or in the aggregate, has had or
would be reasonably likely to have a Material Adverse Effect on SGF or FSE,
or that would reasonably be expected to materially impair, materially delay or
prevent the performance of this Agreement; (ii)
any material damage, destruction or loss (whether or not covered by insurance)
with respect to SGF, FSE, or the Property; (iii) any material change by either
SGF or FSE in its accounting methods, principles or practices; (iv) any
revaluation by either SGF or FSE of any of its material assets; (v) any
issuance or the authorization of any issuance of any common stock or other
equity interest in respect of, in lieu of or in substitution for, shares of SGF’s
or FSE’s capital stock; (vi) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any officers
or key employees of SGF or FSE other than increases that would not be material,
individually or in the aggregate, with respect to such officers or employees
receiving such benefit or compensation (based on a comparison to benefits and
compensation received in the year ended December 31, 2006); (vii) any entry
into, renewal, modification or extension of, any Material Contract (as defined
herein), or any other material Contract between SGF or FSE, on the one hand,
and with any other party, on the other hand, except for such Material Contract
or other Contract made in the ordinary course of business consistent with past
practice or as contemplated by this 

 8
 

Agreement; (viii) any settlement of pending or threatened material
litigation involving SGF, FSE, or the Property (whether brought by a private
party or a Governmental Entity); or (ix) any event or development that would,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the performance of this Agreement by the Company.

SECTION 2.8.  REAL
PROPERTY.

(a)           Section 2.8(a) of the Seller
Disclosure Schedule identifies all real property owned or used by SGF and FSE
(each such property, a “Company Owned Property”) and all real property on which
any casino operations, casino support operations, office or administrative
operations are conducted or that are otherwise material to the operation of SGF’s
or FSE’s business and leased or operated by SGF or FSE (each such leased
property, a “Company Leased Property”). Company Owned Property and Company
Leased Property is referred to herein collectively as the “Company Real
Property.”

(b)           SGF and FSE have fee simple title to
(or a valid license to use) each Company Owned Property, and a valid leasehold
interest in each Company Leased Property. To the knowledge of Seller, such
title is good and marketable title and the only liens, encumbrances,
restrictions, leases, options to purchase, options to lease, covenants,
assessments, defects, claims or exceptions with respect to the Company Owned
Property or the Company Leased Property are (i) the exceptions described in the
Lease Documents (as defined below); (ii) liens or other exceptions to title set
forth in the applicable Title Policies (as defined below) or in the public
title records; or (iii) set forth on Section 2.8(b) of the Seller
Disclosure Schedule (collectively the “Permitted Exceptions”). For purposes of
this Agreement, “Title Policies” means such valid owner’s and lessee’s policies
of title insurance covering the Company Owned Property or Company Leased
Property (as the case may be) as have been issued to SGF or FSE and are in full
force and effect on the date hereof. Section 2.8(b) of the Seller
Disclosure Schedule identifies each Company Real Property for which the Company
possesses survey(s) (each, a “Survey”) and identifies the Company Real Property
that is the subject of each such Title Policy and Survey.

(c)           True, correct and complete copies of
the documents under which the Company Leased Property is leased (the “Lease
Documents”) have been provided to Purchaser. The Lease Documents are unmodified
and in full force and effect, and there are no other agreements, written or
oral, between SGF or FSE otherwise relating to the use and occupancy of the
Company Leased Property. None of Seller, SGF or FSE or, to Seller’s knowledge,
any other party, is in material default under the Lease Documents, and, to
Seller’s knowledge, no defaults (whether or not subsequently cured) by SGF or
FSE or any other party have been alleged in writing thereunder. To the
knowledge of Seller, (i) no landlord named in any of the Lease Documents is in
default thereunder, and (ii) no defaults (whether or not subsequently cured) by
such landlord have been alleged thereunder.

(d)           To the knowledge of Seller, except as
disclosed in Section 2.8(d) of the Seller Disclosure Schedule, no
Company Real Property is in material violation of any applicable Laws,
regulations or restrictions.

 

 9

(e)           Except as set forth in Section
2.8(e) of the Seller Disclosure Schedule, none of Seller, SGF, nor FSE has
received any written notice of, or has any knowledge of, any action, proceeding
or litigation pending, or, to the knowledge of Seller, threatened (i) to take
all or any portion of the Company Real Property, or any interest therein, by
eminent domain; (ii) to modify the zoning of, or other governmental rules or
restrictions applicable to, the Company Real Property or the use or development
thereof; (iii) otherwise relating to the Company Real Property or the interests
of SGF or FSE therein, that would, individually or in the aggregate, be
reasonably be expected to have a Material Adverse Effect on the ability of SGF
or FSE to use, own, improve, develop and/or operate any individual Company
Owned Property or Company Leased Property.

(f)            Except as set forth in Section
2.8(f) of the Seller Disclosure Schedule, to the knowledge of Seller, no
portion of the Company Real Property or the roads immediately adjacent to and
currently utilized to access the Company Real Property: (i) was the former site
of any public or private landfill, dump site, retention basin or settling pond;
(ii) was the former site of any oil or gas drilling operations; (iii) was the
former site of any experimentation, processing, refining, reprocessing,
recovery or manufacturing operation for any petrochemicals; or (iv) based on
title reports and surveys, is in a flood zone.

(g)           The parcels constituting the Company
Owned Property are assessed separately from all other adjacent property not
constituting the Company Owned Property for purposes of real property taxes
assessed to, or paid by, the Company. To the knowledge of Seller, each of the
parcels of the Company Owned Property complies with all applicable subdivision,
land parcelization and local governmental taxation or separate assessment
requirements, without reliance on property not constituting Company Real
Property.

(h)           Except as disclosed in Section
2.8(h) of the Seller Disclosure Schedule, the Company Real Property is
connected to and/or serviced by water, sewage disposal, gas and electricity
facilities that are adequate for the current use of such Company Real Property
and all material systems (including, without limitation, heating, air
conditioning, electrical, plumbing and fire/life safety systems) for the
current use of the Company Real Property are operable and in good condition
(ordinary wear and tear excepted), except to the extent that the lack of any
such system or the failure of the property to be in good condition would not
reasonably be expected to be materially adverse to any individual Company Owned
Property or Company Leased Property.

(i)            There are no commitments to or
agreements with any Governmental Entity or agency (federal, state or local)
affecting the use or ownership of the Company Real Property that are not
described in the Seller Disclosure Schedule.

(j)            Except as set forth in Section
2.8(j) of the Seller Disclosure Schedule, none of Seller, SGF or FSE is a
party to any Contract outstanding for the sale, exchange, encumbrance, lease or
transfer of any of the Company Real Property, or any portion of it, or the
businesses operated by SGF or FSE thereon. Except as set forth in the Seller
Disclosure Schedule, there are no material agreements relating to the use and
occupancy of the Company Owned Property.

(k)           Seller has delivered or made
available for review to Purchaser copies of (i) all Title Policies and/or any
updated preliminary title reports, commitments or lender’s policies of 

 10
 

title insurance in
Seller’s possession or control relating to the Company Real Property, (ii) all
Surveys and (iii) all building condition or engineering property reports with
respect to the Company Real Property that Seller has in its possession.

(l)            Each of SGF and FSE has obtained all
appropriate certificates of occupancy, easements and rights of way, including
proofs of dedication, required to use and operate the Company Real Property in
the manner in which the Company Real Property is currently being used and
operated, except for such certificates, easements or rights of way that are
ministerial in nature and normally issued in due course upon the application
therefor without further action of the applicant. True and complete copies of
all such certificates, permits and licenses have been provided to Purchaser.
Each of SGF and FSE has all approvals, permits and licenses (including without
limitation all Environmental Permits) necessary to own and operate the Company
Real Property as currently owned and operated, except for such approvals,
permits and licenses required by any Gaming Laws, and no such approvals,
permits or licenses necessary to own and operate the Company Real Property
(except for such approvals, permits or licenses that are ministerial in nature
and are normally issued in due course upon the application therefor without any
further action by the applicant or which are required under Section 2.16
hereof) will be required (i) as a result of the transactions contemplated by this
Agreement or (ii) for SGF and FSE to continue to own and operate the Company
Real Property in the same manner as of the date of this Agreement.

(m)          Section 2.8(m) of the Seller
Disclosure Schedule lists all guarantees executed by Seller with respect to the
Company Leased Property (the “Lease Guarantees”).

SECTION 2.9.  TITLE TO PERSONAL PROPERTY; LIENS. Each of
SGF and FSE has sufficiently good and valid title to, or an adequate leasehold
interest in, its tangible personal properties and assets in order to allow it
to conduct, and continue to conduct, its business as and where currently
conducted. All security interests, mortgages, leases or other monetary liens or
encumbrances with respect to any such slot machines or other tangible personal
property or assets are disclosed in Section 2.9 of the Seller Disclosure
Schedule. Such tangible personal assets and properties are sufficiently free of
non-monetary Liens and encumbrances to allow each of SGF and FSE to conduct,
and continue to conduct, its business as and where currently conducted and the
consummation of the transactions contemplated by this Agreement will not alter
or impair such ability in any material respect.

SECTION 2.10.  INTELLECTUAL PROPERTY.

(a)           Section 2.10(a) of the Seller
Disclosure Schedule sets forth a true and complete list of all domestic and
foreign registered patents and patent applications, registered marks (including
trademarks, service marks, and other registrable identifiers) and trademark
applications, material unregistered or common law marks, registered trade
names, registered domain names, (including without limitation all registered
marks, trademark applications, material unregistered or common law marks,
registered trade names, or registered domain names comprising the term BINION,
BINION’S, or other such marks, applications or names using the formative “Binion”
therein),  registered copyrights,
copyright applications, and registered designs that are owned or used by either
SGF or FSE (collectively,
the “Registered Intellectual Property”). With regard to the material Registered
Intellectual Property, all material application, 

 11
 

maintenance, renewal or other similar fees have been properly paid and
are current, and all registrations, applications and filings are valid and remain
in full force and effect.

(b)           Either SGF or FSE owns or has the
defensible right to use, whether through ownership, licensing or otherwise,
free and clear of any encumbrances, to the Registered Intellectual Property and
to all unregistered marks and source identifiers (including without limitation
all unregistered marks, common law marks, or source identifiers comprising the
term BINION, BINION’S, or other such marks, applications or names using the
formative “Binion” therein), trade secrets, copyrights, computer software
programs and applications (whether in source or object code forms) and related
documentation, know-how, information, proprietary rights and processes used in
the businesses of SGF and FSE in substantially the same manner as such businesses
are conducted on the date hereof (collectively with the Registered Intellectual
Property, the “Intellectual Property”). Except as set forth in Section
2.10(b) of the Seller Disclosure Schedule, neither SGF or FSE has licensed
Intellectual Property owned by either SGF or FSE to any third party, does not
have any shared ownership interest with a third party in any Intellectual
Property owned by either SGF or FSE, nor has it licensed or purchased any
Intellectual Property from any third party under any arrangement requiring
continuing royalty, license or other payments.

(c)           Except as set forth in Section
2.10(c) of the Seller Disclosure Schedule and except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the validity or value of any Intellectual Property, (i) no
written claim of invalidity or conflicting ownership rights with respect to any
Intellectual Property has been made by a current or former employee, consultant
or third party and no such Intellectual Property is the subject of any pending
or, to Seller’s knowledge, threatened action, suit, claim, investigation,
arbitration or other proceeding; (ii) no Person has given written notice to
Seller, SGF, or FSE, or Seller, SGF or FSE are otherwise not aware of any
potential claim, that the use of any Intellectual Property by SGF or FSE or any
licensee is infringing or has infringed any domestic or foreign patent,
trademark, service mark, trade name, copyright, design right or other
intellectual property rights of any third party, or that Seller, SGF, or FSE or
any licensee has misappropriated or improperly used or disclosed any trade
secret, confidential information or know-how; (iii) (A) neither SGF nor FSE has
performed prior acts or is engaged
in current conduct or use, or (B) to the knowledge of Seller, there exists no
prior act or current use by any third party, that would void or invalidate any
Intellectual Property; and (iv) the execution, delivery and performance
of this Agreement by Seller and the consummation of the transactions
contemplated hereby and thereby will not breach, violate or conflict with any
instrument or agreement to which Seller, SGF, or FSE is a party and that
concerns any Intellectual Property, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any of the
Intellectual Property or impair the right of Purchaser to make, use, sell,
license or dispose of, or to bring any action for the infringement of, any
Intellectual Property.

(d)           Notwithstanding the foregoing, with
respect to SGF’s rights to the use of the BINION’S name, Seller and SGF
represent and warrant only that SGF’s rights are set forth in the Intellectual
Property License Agreement entered by and between HHLV Management Company LLC
and SGF and dated as of March 10, 2004, and that such Intellectual Property
License Agreement remains in full force and effect, binding on the parties
thereto, and that no breach by 

 12
 

SGF, or claim of
breach, exists that could give rise to termination of the Intellectual Property
License Agreement by HHLV Management Company.

(e)           “Speakeasy” is a registered trademark of Seller.   Purchaser acknowledges that Seller is not
conveying any interest in or right to use the Speakeasy mark, except that Seller
hereby grants Purchaser a limited, non-transferable license to use the word
Speakeasy solely in connection with the corporate names of SGF and FSE, which
names Purchaser shall change as soon as practicable after Closing (but in no
event longer than 60 days) to a name that does not include the Speakeasy mark.

SECTION 2.11.  AGREEMENTS, CONTRACTS AND COMMITMENTS.

(a)           Except as disclosed in Section
2.11(a) of the Seller Disclosure Schedule or as contemplated by this
Agreement, neither SGE nor FSE is a party to any oral or written (i) contract,
agreement, or instrument relating to indebtedness in an amount exceeding
$50,000; (ii) partnership, joint venture or limited liability or management or
operating agreement with any Person; (iii) contract relating to any merger,
stock purchase, consolidation, business combination, share exchange, business
acquisition, or for the purchase, acquisition, sale or disposition of any
assets of SGF or FSE outside the ordinary course of business, other than any
confidentiality agreement entered into in connection therewith; (iv) other
contract to be performed after the date hereof that would be a “material
contract” (as defined in Item 601 (b)(10) of Regulation S-K of the SEC); (v)
contract relating to any “strategic alliances” (i.e., cross-marketing, affinity
relationships, etc.); (vi) contract that restricts (geographically or
otherwise) the conduct of any line of business by SGF or FSE, or contains a
non-compete or exclusivity provision; (vii) contract that involves annual expenditures
in excess of $50,000 and is not cancelable within twelve (12) months,
including, without limitation, any lease or similar Contract involving the use
of Company Leased Property; or (viii) contract that is between (A) SGF or FSE,
on the one hand, and (B) any of its executive officers or directors (or any
relative or immediate family member of any executive officer or director of SGF
or FSE), on the other hand (individually, a “Material Contract” and
collectively, “Material Contracts”).

(b)           Except as disclosed in Section
2.11(b) of the Seller Disclosure Schedule, (i) each Material Contract is
valid and binding upon SGF or FSE, as the case may be (and, to Seller’s
knowledge, on all other parties thereto), in accordance with its terms and is
in full force and effect; (ii) each of SGF and FSE has in all material respects
performed all obligations required to be performed by it as of the date hereof
under each Material Contract and, to Seller’s knowledge, each other party to
each Material Contract has in all material respects performed all obligations
required to be performed by it under such Material Contract; (iii) there is no
breach or violation of or default by SGF or FSE under any of the Material
Contracts, whether or not such breach, violation or default has been waived;
and (iv) no event has occurred with respect to SGF or FSE that, with notice or
lapse of time or both, would constitute a breach, violation or default of, or
give rise to a right of termination, modification, cancellation, foreclosure, imposition
of a lien, prepayment or acceleration under, any of the Material Contracts,
except for such breaches, violations, defaults, terminations, modifications,
cancellations, foreclosures, impositions of a Lien, prepayments or
accelerations referred to in clause (ii), (iii) or (iv), alone or in the
aggregate with any other such breaches, violations, defaults, terminations,
modifications, cancellations, 

 13
 

foreclosures,
impositions of a lien, prepayments or accelerations referred to in clause (ii),
(iii) or (iv), would be reasonably likely to have a  Material Adverse Effect.

SECTION 2.12.  LITIGATION. Except as disclosed in Section
2.12 of the Seller Disclosure Schedule, (a) there is no action, suit or
proceeding, claim, arbitration or investigation against Seller, SGF, or FSE
pending, or as to which Seller, SGF, or FSE has received any written notice of
assertion or, to the knowledge of Seller, threatened against, Seller, SGF or
FSE or any property or asset of SGF or FSE, before any court, arbitrator, or administrative,
governmental or regulatory authority or body, domestic or foreign, or for which
SGF or FSE is obligated to indemnify a third party, that, individually or in
the aggregate, would be reasonably likely to (i) be material to the SGF, FSE,
or the Property or (ii) prevent the consummation of the transactions
contemplated by this Agreement; and (b) there is no judgment, order, injunction
or decree of any Governmental Entity outstanding against the Seller, SGF or FSE
that would be reasonably likely to have any effect referred to in clauses (i)
or (ii) above.

SECTION 2.13.  ENVIRONMENTAL MATTERS. Except as set forth in
the Environmental Reports (as defined below) listed on Section 2.13 of
the Seller Disclosure Schedule:

(a)           Each of SGF and FSE is now and always
has been in compliance with all Environmental Laws in all material respects.

(b)           Each of SGF and FSE holds all
Environmental Permits necessary to conduct their current operations, all the
Environmental Permits are in full force and effect, and each of SGF and FSE is
now and always has been in compliance with all the Environmental Permits,
except where any failure to comply, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect.

(c)           Neither SGF nor FSE, and to the
knowledge of Seller, no third party, has used, generated, treated, stored,
transported, disposed of, released or handled any Hazardous Substances and, to
the knowledge of Seller, no Hazardous Substance is otherwise existing on,
under, about, or emanating from or to, any property that has been owned, leased
or operated by either SGF or FSE except in compliance in all material respects
with all applicable Environmental Laws. SGF and FSE have complied in all
material respects with any asbestos abatement or lead-based paint removal
program required under Environmental Laws. For the avoidance of doubt, Seller provides
no representation or warranty with respect to the abatement of asbestos or
removal of lead-based paint that is not required by Environmental Laws in
effect on the date hereof, but that may be required in the future due to the
actions of Purchaser.

(d)           Neither SGF nor FSE has received any
notice of alleged, actual or potential responsibility for, or any inquiry or
investigation regarding, any release or threatened release of Hazardous
Substances or alleged violation of, or non-compliance with, any Environmental
Law, nor, to the knowledge of Seller, is there any information that could
reasonably likely form the basis of any such notice or any claim.

(e)           Neither SGF nor FSE (i) has entered
into or agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to compliance with Environmental 

 14
 

Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Substances and, to the knowledge
of Seller, SGF, or FSE, no investigation, litigation or other proceeding is
pending or threatened in writing with respect thereto, or (ii) has received written
notice from any third party of any pending or threatened claim by such third
party against SGF or FSE for any liability under any Environmental Law (or
otherwise relating to any Hazardous Substance) arising under any indemnity or
other agreement.

(f)            None of the real property owned or
leased by SGF or FSE is listed or, to the knowledge of Seller, is proposed for
listing on the “National Priorities List” under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended as of the date
hereof, or any similar state or foreign list of sites requiring investigation
or cleanup.

(g)           There is no site to which SGF or FSE
has transported or arranged for the transport of any Hazardous Substances that,
to the knowledge of Seller, is the subject of any environmental action.

(h)           True, complete and correct copies of
the written reports, and all parts thereof, of all environmental audits or
assessments that have been conducted by (or on behalf or for the benefit of)
SGF or FSE respecting any Company Real Property, or such other reports, if any,
conducted by third parties with respect to any Company Real Property that are
in the possession or control of Seller, SGF, or FSE, have been provided to
Purchaser (“Environmental Reports”).  To
Seller’s knowledge and belief, there are no material environmental conditions
with respect to the Company Real Property that are not reflected in the
Environmental Reports.

SECTION 2.14.  EMPLOYEE BENEFIT PLANS.

(a)           Section 2.14(a) of the Seller
Disclosure Schedule sets forth an accurate and complete list of all (i) “employee
welfare benefit plans” (“Company Welfare Plans”), within the meaning of Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations thereunder (“ERISA”); (ii) “employee pension benefit
plans” (“Company Pension Plans”), within the meaning of Section 3(2) of ERISA;
(iii) bonus, stock option, stock purchase, restricted stock, incentive, fringe
benefit, “voluntary employees’ beneficiary associations” (“VEBAs”), under
Section 501(c)(9) of the Code, profit-sharing, pension or retirement, deferred
compensation, medical, life insurance, disability, accident, salary
continuation, severance, accrued leave, vacation, sick pay, sick leave,
supplemental retirement and unemployment benefit plans, programs, arrangements,
commitments and/or practices (whether or not insured); and (iv) employee
benefit provisions in employment or consulting contracts, termination and
severance contracts or agreements, in each case for active, retired or former
employees or directors, whether or not any such plans, programs, arrangements,
commitments, contracts, agreements and/or practices (referred to in (i), (ii),
(iii) or (iv) above) are in writing or are otherwise exempt from the provisions
of ERISA, that are maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by SGF or FSE (including, for this purpose and for
the purpose of all of the representations in this Section 2.14, all
employers (whether or not incorporated) that would be treated together with SGF
or FSE as a single employer within the meaning of Section 414 of the Code (“ERISA
Affiliate”) (all of the foregoing plans, programs, 

 15
 

arrangements,
commitments, practices, contracts and agreements referred to in (i), (ii),
(iii) and (iv) above are collectively referred to as “Company Benefit Plans”).
Neither SGF, FSE nor, any other Person or entity, has any legally enforceable
commitment to modify, change or terminate any Company Benefit Plan, other than
with respect to a modification, change or termination required by ERISA or the
Code.  In addition, neither SGF, FSE, nor
any ERISA Affiliate has any announced plan or legally binding commitment to
create any additional Company Benefit Plans.

With respect to each
Company Benefit Plan, Seller has delivered to Purchaser true, correct and
complete copies of (A) each Company Benefit Plan (or, if not written a written
summary of its material terms), (B) the most recent summaries and summary plan
descriptions, including any summary of material modifications; (C) the most
recent annual reports (Form 5500 or 990 series) filed with the IRS with respect
to such Company Benefit Plan (and, if the most recent annual report is a Form
5500R, the most recent Form 5500C filed with respect to such Company Benefit
Plan); (D) the most recent actuarial report or other financial statement, if
any, relating to such Company Benefit Plan; (E) the most recent determination
or opinion letter, if any, issued by the IRS with respect to any Company
Benefit Plan and any pending request for such a determination letter; (F) the
most recent nondiscrimination tests performed under the Code (including 401(k)
and 401(m) tests) for each Company Benefit Plan; and (G) any filings under the
IRS’ Employee Plans Compliance Resolution System Program or any of its
predecessors or the Department of Labor Delinquent Filer Program.

(b)           Each Company
Benefit Plan (including any related trust) complies in all material respects
with the requirements of applicable Law, including ERISA and the Code and has
been administered in all material respects in accordance with its terms and all
applicable Laws, including ERISA and the Code, and all contributions required
to be made under the terms of any of the Company Benefit Plans as of the date
of this Agreement have been timely made in accordance with the provisions of
the Company Benefit Plan and all applicable laws and regulations or, if not yet
due, have been properly reflected on the most recent consolidated balance sheet
filed. All such contributions have been and are deductible for income tax
purposes and no such contributions or deductions have been challenged or
disallowed by any Government Entity or any other tribunal.  With respect to the Company Benefit Plans, no
event has occurred and there exists no condition or set of circumstances in
connection with which the Company could be subject to any material liability
(other than for liabilities with respect to routine benefit claims) under the terms of, or with
respect to, such Company Benefit Plans, ERISA, the Code or any other applicable
Law.

(c)           (i) Each Company Pension Plan that is
a Company Benefit Plan and that is intended to qualify under Section 401(a) of
the Code, has either received a favorable determination letter from the IRS as
to its qualified status or the remedial amendment period for such Company
Pension Plan has not yet expired, and each trust established in connection with
any Company Benefit Plan that intended to be exempt from federal income
taxation under Section 501(a) of the Code is so exempt, and each VEBA that is a
Company Benefit Plan has been determined by the IRS to be exempt from federal
income tax under Section 501(c)(9) of the Code, and to Seller’s knowledge, no
fact or event has occurred that could adversely affect the qualified status of
any such Company Pension Plan or the exempt status of any such trust or VEBA;
(ii) to Seller’s knowledge, neither SGF, FSE, any ERISA Affiliate nor any other
plan “fiduciary” or “party in interest” (as such terms are defined in Sections
3(21) and 3(14) of ERISA) of any Company Benefit Plan has engaged in any
transaction in violation of Sections 404 or 406 of ERISA or any “prohibited
transaction”, as such term is defined in Section 4975 of the Code, for which no
exemption exists under Section 408 of ERISA, Section 4975 of 

 16
 

the Code or
otherwise, or has otherwise violated the provisions of Part 4 of Title I,
Subtitle B of ERISA and neither SGF nor FSE has knowingly participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of
any Company Benefit Plan; (iii) each Company Benefit Plan can be amended,
terminated or otherwise discontinued after the Closing Date in accordance with
its terms, without material liability (other than (A) liability for ordinary
administrative expenses typically incurred in a termination event or (B) if
such plan is subject to Part 2 of Subtitle B of Title I of ERISA, liability for
the accrued benefits as of the date of such termination (if and to the extent
required by ERISA) to the extent that either there are sufficient assets set
aside in a trust or insurance contract to satisfy such liability or such
liability is reflected on the most recent consolidated balance sheet filed);
(iv) no suit, administrative proceeding, action or other litigation has been
brought or is threatened, against or with respect to any Company Benefit Plan,
the assets of the trust or funds under any Company Benefit Plan, the sponsor or
administrator of any Company Benefit Plan or any fiduciary of any Company
Benefit Plan, including any audit or inquiry by the IRS or United States
Department of Labor (other than routine benefits claims) that could result in
material liability to SGF or FSE or any ERISA Affiliate; (v) no Company Benefit
Plan is subject to Part 3 of Title I, Subtitle B of ERISA, Title IV of ERISA or
Section 412 of the Code (other than a “multiemployer pension plan” (as defined
in Section 3(37) of ERISA)) (“Multiemployer Plan”) and neither SGF nor FSE nor
any ERISA Affiliate has sponsored or contributed to or been required to
contribute to any Company Benefit Plan that is subject to Part 3 of Title I,
Subtitle B of ERISA, Title IV of ERISA or Section 412 of the Code (other than a
Multiemployer Plan), (vi) no material liability under Title IV of ERISA has
been incurred by SGF or FSE or any ERISA Affiliate that has not been satisfied
in full and no condition exists that presents a material risk to SGF or FSE or
any ERISA Affiliate of incurring or being subject (whether primarily, jointly
or secondarily) to a material liability thereunder, (vii) none of the assets of
SGF or FSE or any ERISA Affiliate is, or may reasonably be expected to become,
the subject of any material Lien arising under Section 302 of ERISA or Section
412(n) of the Code; (viii) neither SGF nor FSE nor any ERISA Affiliate has any
material liability under ERISA Section 502; (ix) with respect to each Company
Benefit Plan, all material tax, annual reporting and other governmental filings
required by ERISA and the Code have been timely filed with the appropriate
Governmental Entity and material notices and disclosures have been timely
provided to participants; (x) no assets of any Company Benefit Plan are subject
to a material amount of Tax as unrelated business taxable income under Section
511 of the Code; and (xi) no excise tax in a material amount could be imposed
upon SGF or FSE under Chapter 43 of the Code.

(d)           With respect to each Company Benefit
Plan that is a Multiemployer Plan, (i) neither SGF nor FSE nor any ERISA
Affiliate has incurred any withdrawal liability under Section 4201 of ERISA nor
does SGF or FSE or any ERISA Affiliate expect to withdraw in a “complete withdrawal”
or “partial withdrawal” within the meaning of Sections 4203 and 4205 of ERISA;
(ii) all contributions required to be made to any such Multiemployer Plan have
been timely made; and (iii) no such Multiemployer Plan has been terminated or
has been in or is about to be in reorganization under ERISA so as to result
directly or indirectly in any increase in contributions under Section 4243 of
ERISA or in liability contingent or otherwise to SGF or FSE or any ERISA
Affiliate.

(e)           Except as disclosed in Section
2.14(e) of the Seller Disclosure Schedule no amount that could be received
(whether in cash or property or the vesting of property) as a result 

 17
 

of the
consummation of the transactions contemplated by this Agreement by any
employee, officer or director of SGF or FSE who is a “disqualified individual”
(as such term is defined in proposed Treasury Regulation Section 1.280G-1) is
or will be subject to Section 280G of the Code and no Company Benefit Plan
provides for payment by SGF or FSE of any amount, either alone or in
combination with other amounts, for which deduction by SGF or FSE would be
disallowed under Section 162(m) of the Code or otherwise.

(f)            Except as required by Law or as set
forth in the Seller Disclosure Schedule, no Company Benefit Plan provides any
of the following retiree or post-employment benefits to any Person: medical,
disability, life insurance benefits and/or other welfare benefits and neither
SGF nor FSE has any obligation to provide any such benefits. SGF and FSE and
each ERISA Affiliate and each Company Benefit Plan that is considered a group
health plan are in material compliance with (i) the requirements of the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended and the regulations
(including proposed regulations) thereunder and any similar state Law and (ii)
the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996, as amended, and the regulations (including the
proposed regulations) thereunder.

(g)           All obligations or liabilities
incurred with respect to each Company Benefit Plan that is an “employee welfare
benefit plan” within the meaning of Section 3(l) of ERISA are fully and
completely insured by an insurance policy issued by an insurance company
licensed to sell insurance products in the applicable state.  With respect to any insurance policy that
has, or does, provide insurance for benefits under any Company Benefit Plan,
(i) there will be no material liability of the SGF, FSE or the Purchaser in the
nature of a retroactive or retrospective rate adjustment, loss sharing
arrangement, or other actual or contingent liability as of the Closing Date,
nor would there be any such liability if such insurance policy were terminated
on the Closing Date, (ii) each such insurance policy may be terminated by SGF,
FSE or the Purchaser without penalty upon no more than 30 days notice and
without causing SGF, FSE or the Purchaser to incur any additional liability,
and (iii) no insurance company issuing any such policy is in receivership,
conservatorship, liquidation, or similar proceeding and, to the best knowledge
of the Seller, after diligent investigation, no such proceedings with respect
to any insurer are imminent.

(h)           SGF and FSE and any ERISA Affiliate
have in all respects performed all obligations required to be performed by them
under ERISA, the Code and any other applicable state, federal or foreign law
and under the terms of each Company Benefit Plan.  Neither SGF, FSE, any ERISA Affiliate nor
Seller has any knowledge of or has received written notice of the existence of
any material default or violation by any other party of any of such laws,
terms, or requirements applicable to any of the Company Benefit Plans.  In addition, neither SGF, FSE, any ERISA
Affiliate nor Seller has knowledge of and or has received written notice of any
pending investigation or pending enforcement action by the Pension Benefit
Guaranty Corporation (“PBGC”), the Department of Labor, the IRS or any other
governmental agency with respect to any Company Benefit Plan. Seller has
delivered to Purchaser copies of all correspondence with the IRS, the
Department of Labor, the PBGC, or any other federal or state government agency
regarding any Company Benefit Plan.

 

 18

(i)            Neither SGF, FSE nor any ERISA
Affiliate has engaged in any transaction that may result in the imposition of
any excise tax under Sections 4971 through 4980E of the Code, or otherwise
incurred a liability for any excise tax, other than excise taxes that have been
paid or have otherwise been disclosed as set forth on the Seller Disclosure
Schedule.

(j)            Neither SGF, FSE nor any ERISA
Affiliate has engaged in, or has entered into any arrangement pursuant to which
any Person or entity is contractually bound to enter into, any transaction that
could result in imposition upon either SGF, FSE, any ERISA Affiliate or
Purchaser of either an excise tax under Section 4975 of the Code or civil
liability under Section 502(i) or Section 502(l) of ERISA.

(k)           Neither the execution and delivery of
this agreement by Seller nor the consummation of the transactions contemplated
hereby will result in the acceleration or creation of any rights of any person
to benefits under any Company Benefit Plan (including, without limitation, the
acceleration of the vesting or the exercisability of any rights).

SECTION 2.15.  LABOR AND OTHER EMPLOYMENT MATTERS.

(a)           Each of SGF and FSE is in material
compliance with all applicable Laws respecting labor, employment, fair
employment practices, terms and conditions of employment, workers’
compensation, occupational safety, plant closings, and wages and hours. None of
SGF or FSE is liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other governmentally mandated benefits or obligations for employees
(other than routine payments to be made in the normal course of business and
consistent with past practice). Except as set forth in Section 2.15(a)
of the Seller Disclosure Schedule, none of SGF nor FSE is a party to any
collective bargaining or other labor union contract, agreement or other
instrument applicable to Persons employed by SGF or FSE, and no collective
bargaining agreement or other labor union contract, agreement or other
instrument is being negotiated by SGF or FSE. There is no labor dispute,
strike, slowdown or work stoppage against SGF or FSE pending or, to the
knowledge of Seller, threatened which may interfere in any material respect with
the respective business activities of SGF or FSE. To the knowledge of Seller,
no labor union or similar organization has otherwise been certified to
represent any Persons employed by SGF or FSE or has applied to represent such
employees or is attempting to organize so as to represent such employees.
Neither SGF or FSE has committed any unfair labor practices in connection with
the operation of their respective businesses, and there is no charge or
complaint against SGF or FSE by the National Labor Relations Board or any
comparable state or foreign agency pending or, to the knowledge of Seller,
threatened, except where such unfair labor practice, charge or complaint would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect. Neither SGF nor FSE is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it or amounts required to be
reimbursed to such employees. Each of SGF and FSE has withheld all amounts
required by Law or by agreement to be withheld from the wages, salaries, and
other payments to employees, and is not liable for any arrears of wages or any
Taxes or any penalty for failure to comply with any of the foregoing. There are
no material pending claims against SGF or FSE under any workers’ compensation
plan or policy or for long term disability. Except as set forth in Section
2.15(a) of the Seller Disclosure Schedule, there are no material
controversies pending or, 

 19
 

to the knowledge
of Seller, threatened, between either SGF or FSE and any of their current or
former employees, which controversies have or could reasonably be expected to
result in an action, suit, proceeding, claim, arbitration or investigation
before any Governmental Entity. To Seller’s knowledge, no employee of SGF or
FSE is in any material respect in violation of any term of any employment
contract, agreement or other instrument, non-disclosure agreement,
noncompetition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by SGF or FSE because
of the nature of the business conducted or presently proposed to be conducted
by it or to the use of trade secrets or proprietary information of others. No
key employee of SGF or FSE has given notice that such employee intends to
terminate his or her employment with SGF or FSE.

(b)           The Company has identified in Section
2.l5(b) of the Seller Disclosure Schedule and has made available to
Purchaser true and complete copies as in effect as of the date of this
Agreement of (i) all severance and employment agreements with directors,
officers or employees of or consultants to SGF or FSE; (ii) all severance
programs and policies of SGF and FSE with or relating to its employees; and
(iii) all plans, programs, agreements and other arrangements of SGF and FSE
with or relating to its directors, officers, employees or consultants which
contain change in control provisions. Except as set forth in Section 2.l5(b)
of the Seller Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will (either alone or in conjunction with any other event, such as
termination of employment) (A) result in any payment (including, without
limitation, severance, unemployment compensation, parachute or otherwise)
becoming due to any director or any employee of SGF or FSE under any Company
Benefit Plan or otherwise; (B) significantly increase any benefits otherwise
payable under any Company Benefit Plan; or (C) result in any acceleration of
the time of payment or vesting of any material benefits. No individual who is a
party to an employment agreement listed in Section 2.15(b) of the Seller
Disclosure Schedule or any agreement incorporating change in control provisions
with SGF or FSE has terminated employment or been terminated, nor, to the
knowledge of Seller, has any event occurred that could give rise to a
termination event, in either case under circumstances that have given, or could
give, rise to a severance obligation on the part of SGF or FSE under such
agreement. Section 2.15(b) sets forth Seller’s best estimates of the
amounts payable to the employees listed therein, as a result of the transactions
contemplated by this Agreement or any subsequent employment termination based
on compensation data applicable as of the date of this Agreement.

(c)           There are no pending claims (other
than claims for benefits in the ordinary course), lawsuits or arbitrations that
have been asserted or instituted against any Company Benefit Plan, any
fiduciaries thereof with respect to their duties to the Company Benefit Plans
or the assets of any of the trusts thereunder, nor are any such claims,
lawsuits or arbitrations, to the knowledge of Seller, threatened, that could
reasonably be expected to result in any material liability of SGF or FSE to the
Department of Treasury, the Department of Labor or any Multiemployer Plan.

SECTION 2.16.  COMPLIANCE WITH GAMING LAWS

(a)           Each of SGF and FSE, and, to the
knowledge of Seller, each of their respective directors, officers and Persons
performing management functions similar to officers hold all 

 20
 

permits,
registrations, findings of suitability, licenses, variances, exemptions, certificates
of occupancy, orders and approvals of all Governmental Entities (including
without limitation all authorizations under any applicable Gaming Laws),
necessary to conduct the business and operations of SGF and FSE as currently
conducted and as proposed to be conducted, each of which is in full force and
effect in all material respects (each, a “Company Permit” and collectively, the
“Company Permits”) and no event has occurred that could reasonably be likely to
result in the revocation, non-renewal, modification, suspension, conditioning,
limitation or termination of any Company Permit that currently is in effect.
Each of SGF and FSE, and, to the knowledge of Seller, each of their respective
directors, officers and Persons performing management functions similar to
officers are in compliance with the terms of the Company Permits in all
material respects. Except as disclosed in Section 2.16(a) of the Seller
Disclosure Schedule, the businesses of SGF and FSE are not being conducted in
material violation of any Law (including, without limitation, any applicable
Gaming Laws). None of Seller, SGF, or FSE has received any written notice of
any investigation or review by any Governmental Entity with respect to SGF or
FSE that is pending, and, to the knowledge of Seller, except for routine,
periodic investigations and audits by Gaming Authorities, no investigation or
review is threatened.

(b)           Except as disclosed in Section
2.16(b) of the Seller Disclosure Schedule, neither SGF nor FSE, nor, to the
knowledge of Seller, any of their respective directors, officers, key employees
or persons performing management functions similar to officers has received any
written claim, demand, notice, complaint, court order or administrative order
from any Governmental Entity in the past three years under, or relating to any
violation of any applicable Gaming Laws that resulted in any fines or
penalties. Neither SGF nor FSE has suffered a suspension or revocation of any
Company Permit held under any applicable Gaming Laws.

SECTION 2.17.  INSURANCE. Seller, SGF, and FSE maintain in
full force and effect   fire and
casualty, general liability, business interruption, product liability, and
sprinkler and water damage insurance policies, with extended coverage, normal
and customary for the business and operations conducted by SGF and FSE (the “Insurance
Policies”), each of which is listed in Section 2.17 of the Seller
Disclosure Schedule. Each of such Insurance Policies is in full force and
effect and neither SGF nor FSE maintains any self-insurance practices. Upon
request, Seller will provide to Purchaser accurate and complete copies of any
Insurance Policy.

SECTION 2.18.  TAXES.  Except as set forth in Section
2.18 of the Seller Disclosure Schedule:

(a)           Copies of Tax Returns, Audit Reports,
Other Relevant Tax Documents.  Upon
Purchaser’s reasonable request, Seller shall deliver or cause to be delivered
to Purchaser complete and correct copies of: (i) all Tax Returns filed by or in
respect Seller, SGF and FSE to the extent that such Tax Returns relate to SGF
and FSE; (ii) any and all audit reports relating to Taxes and issued by or with
respect to SGF and FSE on or after the dates of their respective formations;
and (iii) any and all revenue agent examination reports, information document
requests, notices of proposed deficiencies, notices of deficiency, protests,
petitions, settlement agreements, closing agreements, private letter ruling
requests and technical advice memoranda received by, submitted by, or agreed to
by, or on behalf of, SGF or FSE, or to which either SGF or FSE is subject.

 21
 

(b)           Filing of Tax Returns; Payment of
Taxes; Related Matters.

(i)            All Tax Returns
required to be filed by or with respect to SGF or FSE (including, to the extent
applicable, any consolidated federal income Tax Return of each of SGF or FSE
and any state, local or other Tax Return that includes either SGF or FSE on a
consolidated, combined or unitary basis) have been timely filed and all such
Tax Returns are true, correct, and complete in all material respects;

(ii)           All Taxes due and
payable by or attributable to each of SGF and 
FSE for any period preceding the Closing Date, including, but not
limited to any Tax due arising out of the transactions contemplated by this
Agreement, (whether or not a Tax Return is due by the Closing Date), have been
paid, properly accrued or otherwise adequately reserved on the Final Closing
Balance Sheet, or will be accrued on the books and records of SGF and FSE, as
applicable from time to time, in accordance with past custom and practice,
through the Closing Date with statements thereof made available to Purchaser.

(iii)          Each of SGF and FSE
has disclosed on each Tax Return filed by or in respect of such corporation all
positions taken thereon that could give rise to a substantial understatement
penalty of federal income Taxes within the meaning of Code Section 6662 or any
similar provisions of any other Tax Law;

(iv)          Each of SGF and FSE
has timely paid all required current estimated payments of Taxes in amounts
sufficient to avoid interest charges and underpayment penalties;

(v)           There are no Tax
liens upon any assets of either SGF or FSE, other than liens for sales and
payroll Taxes not yet due and payable and liens for non-delinquent current real
property taxes;

(vi)          Except with respect
to Seller’s fiscal year 2006 federal income Tax Return, neither SGF nor FSE
currently is the beneficiary of any extension of time to file any Tax Return,
and there are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which either SGF or FSE
may be subject or will cause Purchaser to be subject to;

(vii)         Each of SGF and FSE
has complied with all requirements relating to the withholding of Taxes
(including withholding and reporting requirements under Code Sections 1441
through 1464, 3401 through 3406, 6041, and 6049) and has within the times and
in the manner prescribed by Law paid over such amounts to the proper taxing
authorities in connection with any amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and all
Forms W-2 and 1099 (and state Law counterparts thereof) required with respect
thereto have been properly completed and timely filed; and

(viii)        Neither SGF nor FSE
is doing business in or engaged in a trade or business in any jurisdiction in
which it has not filed all required Tax Returns, and no written notice or
inquiry has been received from any jurisdiction in which Tax Returns have not
been filed by either SGF nor FSE to the effect that the filing of Tax Returns
may be required;

 22
 

(c)           Audit Related Matters.

(i)            There are no pending or, threatened
actions or suits, whether in the form of an audit or an administrative,
judicial or other proceeding, for the assessment or collection of Taxes against
either SGF or FSE or (insofar as either relates to the activities or income of
either or could result in liability of either SGF or FSE on the basis of joint
and/or several liability) any Person that was included in the filing of a Tax
Return with each of SGF or FSE on a consolidated, combined or unitary basis;

(ii)           No adjustment
relating to the Tax Returns filed or to be filed by or with respect to SGF or
FSE (including, to the extent applicable, any consolidated federal income Tax
Return of each of SGF and FSE and any state, local or other Tax Return that
includes either SGF or FSE on a consolidated, combined or unitary basis) have
been proposed in writing or informally by any Governmental Entity (insofar as
either relates to the activities or income of either SGF or FSE or could result
in liability of either SGF or FSE on the basis of joint and/or several
liability) and no basis exists for any such adjustment;

(iii)          Neither SGF nor
FSE, nor Seller with respect to SGF or FSE, has received from any taxing
authority any (A) notice indicating an intent to open an audit or other review;
(B) request for information relating to Taxes; or (C) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted, or assessed
against either SGF or FSE;

(iv)          There are no
outstanding agreements extending or waiving the statutory period of limitation
applicable to any claim for the collection or assessment or reassessment of
Taxes due from either SGF or FSE for any taxable period;

(v)           There is no power of
attorney currently in force with respect to any matter relating to Taxes of
either SGF or FSE; and

(vi)          With respect to any
past audit, review or examination by any relevant taxing authority of issues
relating to Taxes of either SGF or FSE, no issue raised or addressed therein is
reasonably expected to recur in a later taxable period of either corporation.

(d)           General Affiliate Group Tax
Matters.

(i)            Neither SGF nor FSE
has been a member of an Affiliated Group filing a consolidated federal income
Tax Return other than a group the common parent of which is Seller;

(ii)           Seller has filed a
consolidated federal income Tax Return with each of SGF and FSE for the tax
year immediately preceding the current taxable year and is eligible to make a
§338(h)(10) Election;

(iii)          Each of SGF and FSE
are both (A) wholly owned corporate subsidiaries of Seller, and (B) members of
a consolidated group, within the meaning of Treas. Reg. §1.1502-1(h), for which
Seller is the common parent;

 23
 

(iv)          There is no excess
loss account, as that term is defined in Treas. Reg. Sec. 1.1502-19, with
respect to the ownership of either SGF or FSE;

(1)           Each Affiliated Group has filed all
income Tax Returns that it was required to file for each taxable period during
which either SGF or FSE was a member of the group;

(2)           All such Tax Returns were true,
correct and complete in all material respects;

(3)           All income Taxes owed by any
Affiliated Group (whether or not shown on any Tax Return) have been paid or
accrued for each taxable period during which either SGF or FSE was a member of
the group;

(v)           Neither Seller, nor
its directors or officers, or any employee responsible for Tax matters of
Seller or either SGF or FSE expects any authority to assess any additional
income Taxes against any Affiliated Group for any taxable period during which
either SGF or FSE was a member of the group;

(1)           There is no dispute or claim
concerning any income Tax Liability of any Affiliated Group for any taxable
period during which either SGF or FSE was a member of the group that either (A)
was claimed or raised by any authority in writing, or (B) as to which Seller or
any member of Seller’s Board or any of its officers (and employees responsible
for Tax matters) had knowledge based upon personal contact with any agent of
such authority or otherwise; or

(2)           No Affiliated Group has waived any
statute of limitations in respect of any income Taxes or agreed to any
extension of time with respect to an income Tax assessment or deficiency for
any taxable period during which either SGF or FSE was a member of the group.

(e)           General Tax Matters.

(i)            None of Seller,
SGF, FSE, nor any of member of their Affiliated Group have made any payments,
is obligated to make any payments, nor is a party to any agreement that under
certain circumstances could result, separately or in the aggregate, in the
actual or deemed payment by the Purchaser or either SGF or FSE of any payment
that will not be deductible under Code Sections 162(a), 162(m), 280G (“excess
parachute payments”), or 404 or that could give rise to any amounts subject to
excise tax under Code Section 4999, as such provisions are currently written;

(ii)           Neither SGF nor FSE
has any obligation to pay compensation subject to Code Section 409A pursuant to
a deferred compensation plan that does not comply with the requirements of Code
Section 409A;

(iii)          Neither SGF nor FSE
has been a United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified 

 24
 

in Code Section
897(c)(1)(A)(ii), and, the Seller is not a foreign person within the meaning of
Code Section 1445;

(iv)          Neither SGF nor FSE
has distributed stock of another Person or had its stock distributed by another
Person in a transaction that was purported or intended to be governed in whole
or in part by Code Sections 355 or 361;

(v)           Neither SGF nor FSE
was acquired in a qualified stock purchase under Code Section 338(d)(3) and no
elections under Code Section 338(g), protective carryover basis elections, or
offset prohibition elections are applicable to either SGF or FSE;

(vi)          Neither SGF nor FSE
is an S corporation within the meaning of Code Section 1361(a)(1), and neither
SGF nor FSE had outstanding liabilities for Taxes under Code Sections 1363(d),
1374, or 1375;

(vii)         Neither SGF nor FSE
has issued or assumed any indebtedness that is subject to Code Section 279;

(viii)        Neither SGF nor FSE
has been at any time a member of any partnership or joint venture (other than
the Fremont Street Experience Limited Liability Company) or the holder of a
beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired;

(ix)           Neither SGF nor FSE
owns any stock, securities, partnership interests, limited liability company
interest, or other form of equity interest in any other Person (other than the
Fremont Street Experience Limited Liability Company);

(x)            There are no
written proposed reassessments of any property owned by either Company or other
similar proposals that could increase the amount of any Tax to which the
Purchaser or either Company would be subject;

(xi)           Neither SGF nor FSE
(A) is a party to, or bound by, any Tax allocation or Tax sharing agreement or
(B) has any current or potential obligation for the Taxes of any Person under
Treasury Regulations Section 1.1502-6(c), as a transferee or successor, by
contract or otherwise;

(xii)          Since the date set
forth in the March Balance Sheets, neither SGF nor FSE has incurred any
liability for Taxes arising from any transactions outside the ordinary course
of business;

(xiii)         Neither SGF nor FSE
has consummated, participated in, or served as either a “tax shelter organizer”
or a “tax shelter promoter” in respect of any “tax shelter transaction” as such
terms are defined in Code Sections 6011, 6111, and 6662 prior to the amendment
of the American Jobs Creation Act of 2004;

(xiv)        Neither SGF nor FSE
(A) has consummated, (B) has “participated” or is currently “participating” in,
or (C) is or was a “material advisor” in respect of (x) a “tax shelter 

 25
 

transaction”, (y)
a “listed transaction” or (z) a “reportable transaction”, as such terms are
defined in Code Sections 6011, 6012, 6111, 6662, 6662A, or 6707A;

(xv)         Neither SGF nor FSE
has any elections in effect under Code Sections 108, 441, 472, 1017, 1033 or
4797;

(xvi)        No income under any
arrangement or understanding to which either SGF nor FSE is a party will be
attributed to such corporation that is not represented by income to which such
corporation is legally entitled;

(xvii)       Neither SGF nor FSE
is subject to any accumulated earnings Tax, personal holding company Tax or
similar Tax;

(xviii)      Neither SGF nor FSE
owns property that is (i) property required to be treated as owned by another
person or entity pursuant to the provisions of Code Section 168(f)(8), (ii)
constitutes tax-exempt use property within the meaning of Code Section
168(h)(1) of the Code,  (iii) is
tax-exempt bond financed property within the meaning of Code Section 168(g),
(iv) is subject to Code Section 168(g)(1)(A), (v) is limited use property
within the meaning of Revenue Procedure 76-30, (vi) directly or indirectly
secures any debt the interest which is tax exempt under Code Section 103 or
(vii) is subject to a lease under Code Section 7701(h);

(xix)         Neither SGF nor FSE,
has, at any time (A) owned any assets outside of the United States; (B)
conducted a trade or business outside of the United States; (C) owned an equity
or creditor interest in any entity that either (x) owned assets or (y)
conducted a trade or business outside the United States; or (D) participated in
or cooperated with an international boycott within the meaning of Code Section
999;

(xx)          Neither SGF nor FSE
has:

(1)           any income reportable for a period
ending after the Closing Date but attributable to a transaction (e.g., an
installment sale) occurring in, or a change in accounting method made for, a
period ending on or prior to the Closing Date that resulted in a deferred
reporting of income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction);

(2)           agreed to make or is required to make
any adjustment under Code Section 481(a);

(3)           any deferred gain or loss arising out
of any deferred intercompany transaction;

(4)           any intercompany transaction or
excess loss account described in Code Section 1502 (or any corresponding or
similar provision of state, local, or foreign income Tax law);

(5)           or will be required to include any
item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending 

 26
 

after the Closing Date as
a result of (A) any closing agreement described in Code Section 7121 executed
on or before the Closing Date or (B) any installment sale or open transaction
disposition made on or before the Closing Date.

(f)            Section 2.18 of Seller
Disclosure Schedule:

(i)            Indicates the most
recent Tax Return for each relevant jurisdiction for which an audit has been
completed affecting either SGF or FSE;

(ii)           Indicates all Tax
Returns of Seller (as such Tax Returns relates to either SGF or FSE), SGF, or
FSE that are currently the subject of audit, examination, or review;

(iii)          Sets forth the
amount of any net operating loss of SGF or FSE, except as is retained or used
by Seller as contemplated by Section 10.9 of this Agreement;

(iv)          Sets forth the
amount of any (A) net capital loss; (B) unused investment; (C) unused foreign
tax or tax credit; (D) excess charitable contribution; or (E) other Tax credit
allocable to SGF or FSE or either of such corporation’s assets;

(v)           Sets forth any
applicable limitation on the use of any of the attributes set forth in the
preceding two subsections (e.g., net operating loss, net capital loss, unused
investment, etc.) whether by reason of Code Sections 269, 382, 383, or 384,
state, foreign, local law, or otherwise; and

(vi)          Lists all material
Tax elections currently in effect for each of SGF and FSE.

SECTION 2.19.  BROKERS AND INVESTMENT BANKERS. Seller
represents and warrants to Purchaser, that it has not been represented by any
broker or investment banker in connection with this Agreement or the
transactions contemplated by this Agreement other than those set forth in Section
2.11 of the Seller Disclosure Schedule. 
Seller will indemnify and hold Purchaser harmless from any claim by any
broker, agent or finder purporting to have acted on behalf of Seller.

SECTION 2.20.  DISCLOSURE.  To Seller’s knowledge, neither this Agreement
nor any of the exhibits hereto contains any untrue statement of a material fact
or omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading.

ARTICLE
III

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Except as set forth in
the disclosure schedule delivered by Purchaser to Seller prior to the execution
of this Agreement, a copy of which is attached hereto as Exhibit C (the “Purchaser
Disclosure Schedule”) (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein), Purchaser hereby represents and warrants to Seller as follows as of
the date hereof:

 

 27

SECTION 3.1.  ORGANIZATION.

(a)           Purchaser is a Nevada corporation
duly organized, validly existing and in good standing under the Laws of the
State of Nevada and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted
or proposed by Purchaser to be conducted.

SECTION 3.2.  AUTHORITY RELATIVE TO THIS AGREEMENT.

(a)           Purchaser has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.  No
other proceedings on the part of Purchaser are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly and validly
executed and delivered by Purchaser and, assuming the due and valid
authorization, execution and delivery hereof by Seller, constitutes a valid,
legal and binding agreement of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors’ rights
generally and general principles of equity.

(b)           The Purchaser has duly and validly
authorized the execution and delivery of this Agreement and approved the
consummation of the transactions contemplated hereby.

SECTION 3.3.  CONSENTS AND APPROVALS; NO VIOLATIONS.  Except for such filings, permits,
authorizations, consents and approvals as may be required by or under, any
applicable requirements of federal or state securities laws, the HSR Act, any
Gaming Authority, or the City of Las Vegas, Nevada, any filings, permits,
authorization, consents and approvals relating or applicable to Seller, SGF, or
FSE, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery by Purchaser of this Agreement or the consummation by Purchaser of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not and would not reasonably be expected to, individually or
in the aggregate, materially impair, materially delay or prevent the
performance of this Agreement.  Neither
the execution, delivery and performance of this Agreement by Purchaser nor the
consummation by Purchaser of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of the
respective articles of incorporation or bylaws (or similar governing documents) of
Purchaser; (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or lien
under, any of the terms, conditions or provisions of any contract to which
Purchaser is a party or by which any of them or any of their respective
properties or assets may be bound; or (c) violate any Law (including any
Gaming Law) applicable to Purchaser, except in the case of (a) or
(b) for violations, breaches or defaults that do not or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Purchaser.

SECTION 3.4.  LITIGATION. 
Except as disclosed in Section 3.4 of the Purchaser Disclosure
Schedule there is no Claim pending or, to Purchaser’s knowledge, threatened
against Purchaser or any of its properties or assets, including by or before
any Governmental Entity, that 

 28
 

questions the
validity of this Agreement or any action to be taken by Seller in connection
with the consummation of the transactions contemplated hereby or could
otherwise prevent or delay the consummation of the transactions contemplated by
this Agreement.

SECTION 3.5.  COMPLIANCE WITH APPLICABLE LAW.  Purchaser holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of the businesses of Purchaser (the “Purchaser
Permits”), except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals that do not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Purchaser.  Purchaser and each of its “key employees” (as
defined under applicable Gaming Law) are in compliance with the terms of
the Purchaser Permits, except where the failure to so comply does not or would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Purchaser.  The
businesses of Purchaser are not being conducted in violation of any Law
applicable to Purchaser, except for violations or possible violations that do
not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Purchaser.  To Purchaser’s knowledge, no investigation or
review by any Governmental Entity, including any Gaming Authority, with respect
to Purchaser is pending or threatened, nor, to Purchaser’s knowledge, has any
Governmental Entity, including any Gaming Authority, indicated an intention to
conduct the same, other than, in each case, those that Purchaser reasonably
believes do not or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Purchaser. Purchaser has no
knowledge of any fact or circumstance that would cause any Gaming Authority or
other Governmental Entity with authority over SGF’s or FSE’s operations or
proposed operations to deny Purchaser any license or permit.

SECTION 3.6.  BROKERS, INVESTMENT BANKERS, AND FINANCIAL
ADVISORS.  Purchaser represents and
warrants to Seller that it has not been represented by any broker, investment
banker, or financial advisor in connection with this Agreement or the
transactions contemplated by this Agreement other than Rock Creek Capital Advisors,
LLC.  Purchaser will pay any fees owed to
Rock Creek Capital Advisors, LLC in connection with the transactions
contemplated by this Agreement and will indemnify and hold Seller harmless from
any claim by any broker, agent, finder, or financial advisor purporting to have
acted on behalf of Purchaser.

SECTION 3.7.  SUFFICIENT FUNDS.  Purchaser has the current capacity to finance
the purchase of the Shares as contemplated by this Agreement.

SECTION 3.8. 
LICENSING.  Purchaser has
been found suitable and registered as a holding company by the Nevada Gaming
Commission and such finding of suitability and registration is in good
standing.

SECTION 3.9.  GOOD
MORAL CHARACTER.  Purchaser’s
owner has been previously found by the Nevada Gaming Commission, by implication,
to possess good character, honesty and integrity pursuant to NRS 463.170(2)(a).

 29
 

ARTICLE
IV

COVENANTS

SECTION 4.1.  FURTHER ASSURANCES.  Each Party agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.

SECTION 4.2.  PROPRIETARY INFORMATION.  Each Party shall keep and retain in confidence
and shall not use for any purpose other than to evaluate the transactions
contemplated under this Agreement any and all of the confidential and
proprietary information respecting the other Party set forth or referenced in
the schedules or otherwise provided to the receiving Party by the disclosing
party in connection with or in anticipation of the Closing, irrespective of the
form in which it is delivered or when delivered (the “Proprietary Information”).  The preceding requirement shall not apply to
Proprietary Information that (a) a Party was in the possession of, or was
rightfully known by, the receiving Party or its representatives,  without an obligation to maintain its confidentiality prior
to receipt from the disclosing Party or its representatives, (b) is or becomes
generally known to the public without violation of this Agreement, (c) is
obtained by the receiving Party or its representatives in good faith from a
third party having the right to disclose it without an obligation of confidentiality,
or (d) is independently developed by the receiving Party or its representatives
without the participation of individuals who have had access to the Proprietary
Information.  In the event the Agreement
is terminated prior to Closing for any reason, the receiving Party agrees to
either return to the disclosing party all of the Proprietary Information
subject to this Section 4.2 (including all copies) in its possession or
under its control or to purge, shred or otherwise destroy all such Proprietary
Information not returned, at the option of the disclosing Party.  The receiving Party shall, and shall cause
each of its representatives to, keep and maintain all Proprietary Information
subject to this Section 4.2 confidential in any case in which the
Closing does not occur and not avail itself of or use any of such Proprietary
Information for its own benefit.  The
receiving Party shall promptly certify its compliance with the foregoing in the
event of any termination of the Agreement.

SECTION 4.3.  EXPENSES AND FEES.  Except as otherwise provided herein, each
Party shall pay its own expenses in connection with the transactions
contemplated herein.

SECTION 4.4.  DISPOSITION OF PRE-EXISTING CLAIMS.
Notwithstanding the purchase of all of the capital stock of SGF and FSE by
Purchaser, Seller agrees and covenants that it will, at Seller’s sole expense
(including any related legal fees), vigorously defend or, at Seller’s election,
resolve (a) the litigation currently pending in Clark County, Nevada in which
an affiliate of Harrah’s Entertainment claims it is entitled to receive an
additional payment of $5,000,000 from Seller (the “Harrah’s Claim”); (b) the
arbitration demand pertaining to approximately $20,000 for vacation pay
allegedly owed by Horseshoe Operating Company to the Culinary Workers Union;
(c) the claim pertaining to an alleged wrongful termination of employment of
Ms. Georgina Smith; (d) the potential claim for additional gaming taxes
disclosed in connection with Section 2.16 of the Seller Disclosure Schedule;
(e) the additional tax attributable to a change in the unemployment tax rate as
described in Section 2.6 of the Seller Disclosure Schedule; (f) any
rental payments due under the Main Street Lease as described in 

 30
 

Section 2.8(c)
of the Seller Disclosure Schedule for any period prior to Closing; and (g) any
other operating expense, tax or other similar claim arising from acts or
omissions of SGF or FSE prior to the Closing (collectively, the “Pre-existing
Claims”).  Seller agrees that it will
indemnify Purchaser for any Loss incurred by Purchaser arising from the
Pre-existing Claims, and shall be solely responsible for paying any amounts
owed to third parties arising from the Pre-existing Claims, regardless of the
indemnity basket described in Section 5.3.  Seller shall retain any recovery on its
counterclaims with respect to the Pre-existing Claims.

SECTION 4.5.  PROJECT CAPITAL EXPENDITURES. Purchaser
agrees to reasonably consider reimbursement of Seller for any Project Capital
Expenditures (as defined below) incurred by Seller and/or SGF with respect to
the business and operations of SGF from and after the date hereof, provided
that Purchaser consents in writing, in advance, to each such Project Capital
Expenditure (such consent to include Purchaser’s approval of the work to be
done and/or items to be purchased, the budget and the contractor with respect
thereto), and, provided further, that Purchaser’s obligations under this Section
4.5 shall be payable only upon, and simultaneously with, the Closing of the
transactions contemplated by this Agreement and, provided further, that
notwithstanding anything to the contrary in this Agreement, Purchaser’s consent
with respect to any Project Capital Expenditures shall be required and
obtained, for the purposes of this Section 4.5, only to the extent
permitted or not prohibited by Law, including Nevada Gaming Commission
Regulation 8.060 or any other applicable Gaming Law. “Project Capital
Expenditures” means each of the expenditures listed on Section 4.5
of the Seller Disclosure Schedule, and all other expenditures for new
equipment, fixtures and other capital improvements (excluding maintenance
expenses) with respect to the business operations of SGF; provided however,
that Purchaser will not be obligated to reimburse Seller for any Project
Capital Expenditures listed on Section 4.5 of the Seller Disclosure
Schedule unless Purchaser has consented to such expenditure as contemplated by
the first sentence of this Section 4.5.

SECTION 4.6.  ADJUSTMENTS FOR PROGRESSIVE LIABILITIES. At
the Closing, Seller shall pay Purchaser an amount equal to the amount shown as
of the Transfer Time (as defined in Section 7.2) on:

(a)           SGF’s in-house progressive slot
machine meters as of the Transfer Time (if not removed by the vendor at or
before the Transfer Time);

(b)           table games with an in-house
progressive jackpot feature as of the Transfer Time; and

(c)           any other games with an in-house
progressive feature as of the Transfer Time.

SECTION 4.7.  NO NEGOTIATIONS.  Seller will not, directly or indirectly,
through any officer, director, agent, member, shareholder, affiliate or
otherwise, solicit, initiate, or encourage submission of any proposal or offer
from any person or entity (including any of its officers, directors, partners,
employees, or agents) relating to any liquidation, dissolution,
recapitalization, merger, consolidation, or acquisition or purchase of all or
part of SGF’s or FSE’s assets or properties, or any equity interest in SGF or
FSE, or other similar transaction or business combination involving SGF or FSE
or their assets or their respective businesses, or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or 

 31
 

otherwise
cooperate in any way with, or assist, participate in, facilitate, or encourage,
any effort or attempt by any other person or entity to do or seek any of the
foregoing.  Seller will promptly notify
Purchaser if any such proposal or offer, or any inquiry from or contact with
any Person with respect thereto, is made and will promptly provide Purchaser
with such information regarding such proposal, offer, inquiry, or contact as
Purchaser may request.  The restrictions
of this Section 4.7 shall not apply to transactions involving the
securities of Seller provided that no such transaction shall amend, modify or
affect the terms of this Agreement.

SECTION 4.8.  RELEASE OF LEASE GUARANTEES.  Seller shall exert commercially reasonable
efforts to obtain releases of the Lease Guarantees.  Purchaser shall reasonably cooperate with
Seller’s efforts to obtain such releases, it being understood that Purchaser or
one or more Affiliates of Purchaser (but in no event a natural Person) may be
required to guarantee the leases in lieu of Seller; provided, however, that in
no event shall Purchaser or any of its Affiliates be required to provide any
additional consideration to the lessors in connection with obtaining the
releases.  In the alternative, Seller
shall exert commercially reasonable efforts to obtain the consent of the
requisite lenders under the Credit Agreement for Seller to consummate the
transactions contemplated by this Agreement absent such releases.

SECTION 4.9.  RELEASE OF SGF FROM GUARANTY. Immediately
after Closing, Seller shall deliver to Wells Fargo Bank, N.A., as trustee under
the indentures governing Seller’s Senior Notes due 2010 and Senior Subordinated
Notes due 2012, all documents, certificates, supplemental indentures and
opinions of counsel required pursuant to such indentures to remove SGF as a
guarantor under such indentures.

SECTION 4.10.  RENT PAYMENTS.  From and after the Closing, for so long as
Seller is a guarantor with respect to a Company Leased Property, Purchaser
shall promptly pay all rent in accordance with the Lease Documents and shall not
suffer a default or take any other action under any such lease that will result
in a claim against Seller by landlord under such lease pursuant to the
corresponding Lease Guaranty.

SECTION 4.11.  COLLECTIVE BARGAINING AGREEMENT WITH CULINARY
WORKERS.  If an extension or replacement
of the collective bargaining agreement by and between Horseshoe Operating
Company dba Horseshoe Hotel & Casino (aka Binion’s Gambling Hall and Hotel)
and the Local Joint Executive Board of Las Vegas, on behalf of Culinary Workers
Union, Local No. 226, and Bartenders Union, Local No. 165 (the “Culinary
Workers Union CBA”), is executed and delivered before the Closing Date, and the
terms and conditions of such agreement provide for additional compensation to
be paid to SGF’s employees retroactively, Seller shall be responsible for any
additional compensation required by such agreement for any period of time prior
to the Closing Date. If the Culinary Workers Union CBA is executed and
delivered after the Closing Date, and the terms and conditions of such
agreement provide for additional compensation to be paid to SGF’s employees
retroactively, Seller shall be responsible for any additional compensation
required by such agreement for any period of time prior to the Closing Date,
except to the extent such additional compensation is greater than the
compensation required to be paid under such agreement during the twelve (12)
month period following the Closing, in which case Purchaser shall be
responsible for such additional amount for the period from the retroactive date
until the Closing Date.

 32
 

SECTION 4.12.  SEVERANCE/CHANGE IN CONTROL BENEFITS.  If Seller terminates any SGF or FSE employee
identified in Section 2.11(a)(viii) or Section 2.15(b) of the
Seller Disclosure Schedule prior to Closing or Purchaser terminates any such
SGF or FSE employee within thirty (30) days after Closing, Seller shall be
solely responsible for any severance benefits or other amounts required to be
paid by SGF or FSE to any such employee as a result of any written agreement
between such employee and SGF nor FSE. Whether or not any such employee is
terminated, Seller shall be solely responsible for any change of control
benefits or other amounts required to be paid by SGF or FSE to any such
employee as a result of the transactions contemplated by this Agreement.  If Seller becomes obligated to make any such
payments or other amounts pursuant to this Section 4.12, any such
payments or amounts shall be deemed added to the losses set forth in the
projections Seller has provided to Purchaser prior to the date hereof.

SECTION 4.13.  CONSENT TO RELEASE.  Notwithstanding anything to the contrary in
this Agreement, in connection with any settlement of the Harrah’s Claims, none
of Seller, SGF or FSE shall enter into any release with HHLV Management Company
LLC or any affiliate of Harrah’s Entertainment that terminates or otherwise
limits the rights of Seller, SGF, and FSE to seek indemnification for certain
environmental claims as contemplated by the Joint Operating License Agreement,
as amended, dated March 10, 2004, or the Purchase and Sale Agreement, as
amended, by and among Seller, HHLV and SGF, dated as of February 9, 2004,
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld, conditioned, or delayed.

ARTICLE V

INDEMNIFICATION

SECTION 5.1.  INDEMNIFICATION BY PURCHASER.

(a)           Subject to the limits set forth in
this Article V, Purchaser agrees to indemnify, defend and hold Seller
and its officers, directors and agents harmless from and in respect of any and
all losses, damages, liability, costs and expenses (including, without
limitation, reasonable expenses of investigation and defense fees and
disbursements of counsel and other professionals) (collectively, “Losses” or
individually, a “Loss”), arising directly or indirectly out of or directly or
indirectly due to any inaccuracy of any representation or the breach of any
warranty, covenant, undertaking or other agreement of Purchaser contained in
this Agreement, including the Exhibits and Schedules attached hereto and
incorporated by reference herein as set forth in Section 11.5 hereof.

(b)           Seller has delivered to Purchaser
copies of the Lease Guarantees. 
Purchaser agrees to indemnify, defend and hold Seller and its officers,
directors, agents and Affiliates harmless from and in respect of any and all
Losses relating to matters occurring from and after the Closing Date and
arising directly or indirectly out of or directly or indirectly due to any
Claim by any landlord who is a beneficiary under a Lease Guaranty.  Seller’s rights and Purchaser’s obligations
under this Section 5.1(b) shall not be subject to any of the limitations
set forth in this Article V.

 33
 

SECTION 5.2.  INDEMNIFICATION BY SELLER.  Subject to the limits set forth in this Article
V, Seller agrees to indemnify, defend and hold Purchaser and its officers,
directors and agents harmless from and in respect of any and all Losses arising
directly or indirectly out of or directly or indirectly due to any inaccuracy
of any representation or the breach of any warranty, covenant, undertaking or
other agreement of Purchaser contained in this Agreement, including the
Exhibits and Schedules attached hereto and incorporated by reference herein as
set forth in Section 11.5 hereof. 
Seller also agrees to indemnify, defend and hold Purchaser and its
officers, directors and agents, harmless from and in respect of any and all
Losses, including reasonable attorney’s fees, arising directly or indirectly
out of any tax matters as provided in Article X.

SECTION 5.3.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND COVENANTS; LIMITATIONS ON INDEMNITY.

(a)           The representations and warranties of
the Parties contained in this Agreement or in any instrument delivered pursuant
to this Agreement will survive the Closing Date and will remain in full force
and effect thereafter for a period of twenty-four (24) months from the Closing
Date; provided, however, that such representations or warranties shall survive
(if at all) beyond such period with respect to any inaccuracy therein or breach
thereof, notice of which shall have been duly given within such time period in
accordance with this Article V; and (ii) the representations and
warranties in Section 2.2 (Capitalization; Ownership), Section 2.14
(Employee Benefit Plans), Section 2.18 (Taxes), and the undertaking in Section
4.9 (release of SGF from guarantees under indentures) shall survive until
the date that is one (1) month after the expiration of the applicable statute
of limitations. Anything to the contrary contained herein notwithstanding,
Purchaser shall not be entitled to recover Losses from Seller nor shall Seller
be entitled to recover Losses from Purchaser unless and until the total of all
claims for Losses with respect to any inaccuracy or breach of any such
representations or warranties or breach of any covenants, undertakings or other
agreements exceeds Three Hundred Thousand Dollars ($300,000) in the
aggregate.  If the total amount of such
Losses exceeds Three Hundred Thousand Dollars ($300,000), then the Party
entitled to recover hereunder shall be entitled to recover the full amount of
such losses and not merely the portion of such damages exceeding Three Hundred
Thousand Dollars ($300,000); provided, however, that the aggregate amount of Losses
that may be recovered by Purchaser from Seller shall not exceed Seven Million
Five Hundred Thousand Dollars ($7,500,000).

(b)           For purposes of determining
indemnification under this Article V for any breach of representation,
warranty, covenant or agreement, including claims for Losses that count toward
the indemnity basket provided in Section 5.3(a), any materiality
(including any “Material Adverse Change” or “Material Adverse Effect”) or
knowledge qualifier shall be disregarded, except knowledge qualifiers with
respect to “investigations” or “threatened” matters.

(c)           The Three Hundred Thousand Dollar
($300,000) indemnity basket provided in Section 5.3(a) will not apply to
any Loss based on any breach by Seller of any of the representations and
warranties under Section 2.2 (Capitalization; Ownership), Section
2.13 (Environmental Matters), Section 2.14 (Employee Benefit Plans),
and Section 2.18 (Taxes) or any intentional or deliberate
misrepresentation or omission by Seller.

 34
 

(d)           Notwithstanding anything to the
contrary in this Agreement, including without limitation, Section 5.3 or
Section 9.2 hereof, the sole remedy of Seller for any breach of any
representation, warranty, covenant or agreement under this Agreement involving
the failure or inability of Purchaser to close the transactions contemplated by
this Agreement by the Closing Date will be the forfeiture of the Deposit,
absent fraud.

SECTION 5.4.  NOTICE AND OPPORTUNITY TO DEFEND.  If an event occurs which a Party asserts is
an indemnifiable event pursuant to Section 5.1 or 5.2, the Party
seeking indemnification (the “Indemnitee”) shall promptly notify the other
Party obligated to provide indemnification (the “Indemnifying Party”).  If such event involves (a) any claim or (b)
the commencement of any action or proceeding by a third Person, the Indemnitee
will give such Indemnifying Party prompt written notice of such claim or the
commencement of such action or proceeding; provided, however, that the
Indemnitee’s failure to provide prompt notice as provided herein will relieve
the Indemnifying Party of its obligations hereunder only to the extent that
such failure prejudices the Indemnifying Party hereunder.  If any such action is brought against any
Indemnitee and it notifies the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to participate therein and, to the
extent that it wishes, to assume the defense thereof, with counsel reasonably
satisfactory to the Indemnitee.  Notwithstanding
anything to the contrary in this Agreement, after notice from the Indemnifying
Party to the Indemnitee of such election to so assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnitee for any legal expenses
of other counsel or any other expenses subsequently incurred by the Indemnitee
in connection with the defense thereof, unless the named parties to such action
or proceeding include both one or more Indemnifying Parties and an Indemnitee,
and the Indemnitee has been advised in writing by counsel that there is a
non-waivable conflict of interest that precludes the same counsel from
representing the Indemnitee and the Indemnifying Party, in which event such
Indemnitee shall be entitled, at the Indemnifying Party’s cost, risk and
expense, to separate counsel of its own choosing.  The Indemnitee agrees to cooperate fully with
the Indemnifying Party and its counsel in the defense against any such asserted
liability. The Indemnitee shall have the right to participate at its own
expense in the defense of such asserted liability.  In no event shall an Indemnifying Party be
liable for any settlement effected by the Indemnitee without the written
consent of the Indemnifying Party, which will not be unreasonably withheld.  In no event shall an Indemnifying Party effect
any settlement without the written consent of the Indemnitee, which will not be
unreasonably withheld.

SECTION 5.5.  MITIGATION OF LOSS.  Each Indemnitee is obligated to use
reasonable efforts to mitigate to the fullest extent practicable the amount of
any Loss for which it is entitled to seek indemnification hereunder, provided,
however, that nothing in this Section 5.5 shall require Seller or
Purchaser to pursue insurance claims, establish reserves, seek contribution
from SGF or FSE, or take any other similar action; provided, however, that if
the Loss that is subject to any such claim is or may be covered, in whole or in
part, by any insurance policy purchased by Seller prior to the date of
execution of this Agreement, Purchaser must make, or cause to be made, all
reasonable claims for insurance under such insurance policy that may be
applicable to the matter giving rise to such claim, to the same extent that it
would if such Loss were not subject to indemnification hereunder, before
proceeding to collection of any such claim for indemnification against
Seller.  The amount of the Loss subject
to indemnification under Section 5.1(a) shall be calculated net of any
amounts recovered by Purchaser or its Affiliates 

 35
 

under any
insurance policy as provided in this Section 5.5 (net of all direct
unreimbursed collection expenses).

SECTION 5.6.  SUBROGATION. 
Upon making any payment of Losses of the Indemnitee, the Indemnifying
Party will, to the extent of such payment, be subrogated to all rights of the
Indemnitee against any third party in respect of the Loss to which the payment
relates (excluding insurers for policies purchased and maintained by
Purchaser); provided, however, that until the Indemnitee recovers full payment
of its Loss, any and all claims of the Indemnifying Party against any such
third party on account of such payment are hereby made expressly subordinated
and subjected in right of payment of the Indemnitee’s rights against such third
party.  Without limiting the generality
of any other provision hereof, each such Indemnitee and Indemnifying Party will
duly execute upon request all instruments reasonably necessary to evidence and
perfect the above described subrogation and subordination rights.

SECTION 5.7.  INVESTIGATION.  The representations, warranties, covenants
and obligations of the Parties, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
with the knowledge of, the other Party, any of the other Indemnitees or any of
their representatives.

ARTICLE VI

PRE-CLOSING COVENANTS OF SELLER

SECTION 6.1.  OPERATION OF BUSINESS.  Unless Seller first obtains a written waiver
or consent from Purchaser, Seller agrees that, from the date of execution of
this Agreement until the Closing (the “Pre-Closing Period”):

(a)           Each of SGF and FSE will conduct its
operations exclusively in the ordinary course of business and consistent with
past practice and use its best efforts to preserve intact its current business
organization, and maintain its relations and goodwill with all professionals,
suppliers, creditors, licensors, licensees, employees, regulators and other
Persons having business relationships with SGF or FSE.

(b)           Seller will confer regularly with
Purchaser concerning operational matters of SGF and FSE, to the extent
permitted by Nevada Gaming Commission Regulation 8.060, or any other applicable
Gaming Law, and will report to Purchaser at least once each month concerning
the status of SGF’s and FSE’s business, condition, assets, liabilities,
operations, financial performance and prospects, which report shall include
copies of the unaudited financial statements for each of SGF and FSE for the
prior month as well as any interim period, in each case prepared consistent
with the methods and accounting principles in effect prior to the execution of
this Agreement;

(c)           Neither SGF and FSE will form any
subsidiary or acquire any equity interest or other interest in any other
Person;

(d)           Each of SGF and FSE will pay and/or
accrue any debts and applicable taxes when due and pay or perform other
obligations when due, subject to good faith disputes thereof;

 36
 

(e)           Each of SGF and FSE will give all
notices and other information required prior to the Closing Date to be given to
the employees of SGF and FSE and to any applicable Government Entity pursuant
to applicable Law in connection with the transactions provided for in this
Agreement;

(f)            Neither SGF nor FSE will amend or
otherwise change its Organizational Documents;

(g)           Neither SGF nor FSE will issue, sell,
pledge, dispose of, grant, transfer, encumber or authorize the issuance, sale,
pledge, disposition, grant, transfer or encumbrance of any shares of its
capital stock or any other equity interest in such corporation, including any
securities convertible or exchangeable or exercisable for any shares of such
capital stock;

(h)           Neither SGF nor FSE will declare, set
aside, make or pay any dividend, distribution (whether payable in cash,
securities or property or any combination thereof), contribution, loan or any
other payment out of the ordinary course of business with respect to any class
of its capital stock;

(i)            Neither SGF nor FSE will increase
the compensation or benefits payable or to become payable to its directors,
officers or employees or grant any rights to severance, retention or
termination pay to or enter into any employment or severance agreement with,
any director, officer or employee or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, compensation, pension,
retirement, savings, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, policy or arrangement for
the benefit or welfare of any directors, officers or current or former
employees, including any Company Benefit Plan, except (i) to the extent
required by applicable Law; (ii) pursuant to any Company Benefit Plans in
effect as of the date of this Agreement consistent with past practices; (iii)
for salary and other benefit increases, grants, payments or modifications made
in the ordinary course of business consistent with past practice to employees
other than officers of SGF or FSE; and (iv) any bonuses, severance benefits or
other similar payments paid in full by SGF or FSE prior to the Closing Date;

(j)            Neither SGF nor FSE will sell,
transfer or otherwise dispose of any properties or assets with the fair market
value in excess of $100,000 except for sales of current assets in the ordinary
course of business and consistent with past practice;

(k)           Neither SGF nor FSE will incur or
assume any indebtedness greater than $100,000, except as will be repaid in full
prior to or at the Closing by Seller, SGF, or FSE or as to which SGF and FSE
will be released at the Closing;

(l)            Neither SGF nor FSE will pay,
discharge or satisfy any material claims or liabilities other than in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in the financial statements of SGF or FSE;

(m)          Neither SGF nor FSE will fail to
maintain any existing insurance coverage in all material respects of all types
in effect as of the date hereof;

 37
 

(n)           Neither SGF nor FSE will make any
change with respect to accounting policies or procedures, other than required
by GAAP or any Governmental Entity, or in the ordinary course of business and
consistent with past practice;

(o)           Neither SGF nor FSE will enter into,
cancel, terminate or adversely modify or amend any Material Contract, or waive,
release, assign, settle or compromise any material rights or claims, or any
material litigation or arbitration;

(p)           Neither SGF nor FSE will take, or
agree to commit to take, any action that would make any representation or warranty
of SGF or FSE contained herein inaccurate in any respect at, or as of any time
prior to, the Closing so as to cause the conditions to Purchaser to consummate
the transactions contemplated herein not to be satisfied;

(q)           Neither SGF nor FSE will substantially
change the manner in which SGF or FSE will administer the Company Benefit Plans
or make any changes that would materially impact the cost of administration of
the Company Benefit Plans; or

(r)            Neither SGF nor FSE will enter into
any agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize or announce an intention to do any of the forgoing.

SECTION 6.2.  FILINGS AND CONSENTS.

(a)           Seller agrees that each filing or
notice required to be made or given (pursuant to any applicable legal
requirement, order or contract, or otherwise) by Seller, SGF, or FSE in
connection with the execution and delivery of this Agreement or in connection
with the consummation or performance of the transactions contemplated hereby
shall be made or given as promptly as practicable after the date of this
Agreement.

(b)           Seller shall obtain or cause to be
obtained each consent or estoppel letter required to be obtained, if any,
(pursuant to any applicable legal requirement, order or contract, or otherwise)
by Seller, SGF, or FSE, including, without limitation, any consent required
under any leases governing Company Leased Property, in connection with the
execution and delivery of this Agreement or in connection with the consummation
or performance of the transactions contemplated hereby as promptly as
practicable after the date of this Agreement and each of such consents shall
remain in full force and effect through the Closing Date.

(c)           Seller shall promptly deliver to
Purchaser a copy of each filing made, each notice given and each consent
obtained by Seller, SGF, or FSE during the Pre-Closing Period.

(d)           During the Pre-Closing Period, Seller
and its representatives shall cooperate with Purchaser and its representatives,
and prepare and make available such documents and take such other actions as
Purchaser may request in good faith.

SECTION 6.3.  NOTIFICATION.

(a)           During the Pre-Closing Period, Seller
shall promptly notify Purchaser of:

 

 38

(i)            the discovery by
Seller of any event, condition, fact or circumstance that occurred or existed
on or prior to the date of this Agreement and that caused or constitutes a
breach of any representation or warranty made by Seller in this Agreement;

(ii)           any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a breach of any
representation or warranty made by Seller in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;

(iii)          any breach of any
covenant or obligation of Seller; and

(iv)          any event,
condition, fact or circumstance that may make the timely satisfaction of any of
the conditions set forth in Article VIII impossible or unlikely.

(b)           Seller shall have the obligation to
supplement any section of the schedules prior to Closing with respect to any
transaction permitted under Section 6.1 or any matter described in Section
6.3(a) above that occurs during the Pre-Closing Period.  Such supplementation is not a waiver by
Purchaser of any breach of a representation or warranty as to the matter so
supplemented.

SECTION 6.4.  BEST EFFORTS. 
During the Pre-Closing Period, Seller shall use its best efforts to
cause the conditions applicable to Seller set forth in Article VIII to
be satisfied on a timely basis, and shall not take any action or omit to take
any action, the taking or omission of which would or could reasonably be
expected to result in any of the representations and warranties set forth in Article
II of this Agreement becoming untrue, or in any of the conditions of
Closing set forth in Article VIII not being satisfied.

SECTION 6.5.  CONFIDENTIALITY; PUBLICITY.  During the Pre-Closing Period:

(a)           Seller, Purchaser and their
respective representatives shall keep strictly confidential the existence and
terms of this Agreement prior to the issuance or dissemination of any mutually
agreed upon press release or other disclosure of the transactions contemplated
hereunder.

(b)           None of Seller, Purchaser nor their
respective representatives shall issue or disseminate any press release or
other publicity or otherwise make any disclosure of any nature regarding the
transactions contemplated by this Agreement, except as required by federal
securities Laws or other applicable Laws and except as otherwise agreed by the
Parties, provided that upon the execution of this Agreement, the Parties will
be permitted to announce the transaction, subject to each Party’s approval of
the content of such announcement, such approval not to be unreasonably withheld.

(c)           If Seller is required by Law to make
any disclosure regarding the transactions contemplated by this Agreement,
Seller shall advise Purchaser at least two (2) Business Days prior to making
such disclosure, of the nature and content of the intended disclosure.

 39
 

(d)           Purchaser acknowledges that Seller’s
securities are publicly traded and the Parties agree that Seller shall be
permitted to make such public announcements and include in its periodic filings
with the Securities and Exchange Commission such information concerning the
transaction as its outside securities counsel deems is required.  Purchaser agrees that while in possession of
material non-public information concerning Seller, Purchaser will not trade in
the securities of Seller nor tip or advise others with respect to such trading.

(e)           Notwithstanding anything in this Section
6.5 to the contrary, Seller acknowledges that it may not disclose the
existence and terms of this Agreement in violation of Section 4.7.

SECTION 6.6.  ACCESS TO INFORMATION. Upon reasonable
notice, Seller shall (and shall cause SGF and FSE, and its and their respective
representatives, to) (i) provide Purchaser’s representatives reasonable access,
during normal business hours, to all of SGF’s and FSE’s personnel (subject to
the limitations in this Section 6.6), properties, books, contracts,
commitments and records (other than those that Seller, SGF, or FSE may not
provide due to confidentiality agreements) and (ii) furnish promptly to
Purchaser’s representatives (A) copies of all monthly financial reports and
development reports prepared by Seller in the ordinary course of business
relating to SGF or FSE; and (B) all other information concerning SGF’s or FSE’s
business, properties and personnel as Purchaser may reasonably request, in each
case, so long as such actions (1) do not materially interfere with the business
of Seller, SGF, or FSE; (2) would not, after consultation with counsel, violate
any Law in such counsel’s reasonable judgment; and (3) do not comprise
strategic marketing materials in the form of names and/or addresses of
customers of Seller, SGF, or FSE or the means by which Seller, SGF, or FSE
determines when and how to solicit such customers by direct mail offers.
Notwithstanding the foregoing, none of Seller, SGF nor FSE shall be required to
provide any information that it reasonably believes (after consultation with
outside legal counsel) it may not provide to Purchaser by reason of applicable
Law, or constitutes information protected by the attorney/client and/or
attorney work product privilege. No information or knowledge obtained in any
investigation pursuant to this Section 6.6 shall affect or be deemed to
modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the Parties to consummate the transactions
contemplated herein. Purchaser shall have access to the General Manager of the
Property and each employee of the Property other than the General Manager so
long as Purchaser shall have provided prior notice to Seller and an opportunity
to participate in any communication or meeting with the General Manager or such
employee.  Purchaser agrees that Seller
shall have the right to reschedule the time and place of any such communication
or meeting as reasonably necessary to allow Seller or any of its
representatives to participate.

SECTION 6.7.  DOMAIN NAMES. 
Prior to Closing, Seller shall assign (or cause to be assigned) the
domain names listed on Section 2.10 of the Seller Disclosure Schedule to
SGF.

ARTICLE
VII

PRE-CLOSING COVENANTS

SECTION 7.1.  BEST EFFORTS. 
During the Pre-Closing Period, neither Seller nor Purchaser shall take
any action or omit to take any action, the taking or omission of which would or
could reasonably be expected to result in any of the representations and
warranties set forth in 

 40
 

Article II
or Article III of this Agreement becoming untrue or in any of the
conditions of closing set forth in Article II or Article VIII not
being satisfied. Within twenty-one (21) calendar days after the execution of
this Agreement, Purchaser shall apply for, and shall use its best efforts to
obtain promptly, the approval of the transactions contemplated by this
Agreement by the Nevada State Gaming Control Board, the Nevada Gaming
Commission, and to the extent applicable, the City of Las Vegas, Nevada.

SECTION 7.2.  HOUSE FUNDS. Prior to Closing, Purchaser and
Seller shall mutually agree upon a procedure for counting and determining all
House Funds (as defined below) as of 11:59:59 P.M. Las Vegas time on the date
immediately preceding the Closing Date (the “Transfer Time”), and Purchaser
shall deliver to Seller, at the Closing, an amount equal to the House Funds so
determined. “House Funds” means all cash and cash equivalents located at any
property owned or leased by SGF, including without limitation, cash, negotiable
instruments, and other cash equivalents located in cages, drop boxes, slot
machines and other gaming devices, cash on hand for any SGF petty cash fund and
cashiers’ banks, coins and slot hoppers, carousels, slot vault, counting rooms,
and poker bank, and the funds in any bank accounts maintained by SGF.

ARTICLE
VIII

CONDITIONS

SECTION 8.1.  CONDITIONS TO EACH PARTY’S OBLIGATION TO
EFFECT THE CLOSING.  The obligations of
Seller, on the one hand, and Purchaser, on the other, to consummate the Closing
are subject to the satisfaction (or, if permissible, waiver by the Party for
whose benefit such conditions exist) of the following conditions:

(a)           No court, arbitrator or Government
Entity shall have issued any order, decree or ruling, and there shall not be
any statute, rule or regulation, restraining, enjoining or prohibiting the
consummation of the transactions contemplated by this Agreement; provided that
the Parties shall have used their best efforts to cause any such order, decree,
statute, rule or regulation to be vacated or lifted;

(b)           All consents, approvals, findings of
suitability, licenses, permits, orders or authorizations of and registrations,
declarations or filings with any Governmental Entity with jurisdiction and
respect of the Gaming Laws applicable to Seller, SGF, FSE, the Property, or
Purchaser, in each case, required or necessary in connection with the
transactions contemplated by this Agreement (including, but not limited to,
approval, licensing or registration of Purchaser and any of its officers and/or
stockholders, if necessary), shall have been obtained and made and shall be in
full force and effect.

SECTION 8.2.  CONDITIONS TO THE OBLIGATIONS OF
PURCHASER.  The obligations of Purchaser
to consummate the transactions contemplated hereby are subject to the
satisfaction (or waiver by Purchaser) of the following further conditions:

(a)           the representations and warranties of
Seller, SGF, and FSE set forth in Article II that are qualified by
materiality shall be true and correct and the representations and warranties 

 41
 

of Seller, SGF,
and FSE that are not so qualified shall be true and correct in all material
respects on and as of the Closing with the same force and effect as if made on
and as of the Closing, and each of Seller, SGF, and FSE shall in all material
respects have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing (other than those representations and warranties that address matters
only as of a particular date or only with respect to a specific period of time
which need to be true and accurate only as of such date or with respect to such
period);

(b)           Seller shall have performed in all
material respects the obligations hereunder required to be performed by them at
or prior to the Closing Date;

(c)           Purchaser shall have received a
certificate signed by the chief executive officer and the chief financial
officer of Seller, dated as of the Closing Date, to the effect that, to the
best of his or her knowledge, the conditions set forth in Section 8.2(a)
and 8.2(b) have been satisfied in all material respects; and (ii) a
certificate of a separate executive of Seller certifying that such officer was
duly authorized to sign the certificate in his or her capacity as stated in the
officer’s certificate;

(d)           Purchaser shall have received the
written resignations of each board member and officer of each of SGF and FSE to
be effective on the Closing Date;

(e)           Seller shall have provided a release
satisfactory to Purchaser providing for the release of any encumbrance on the
shares of SGF’s or FSE’s capital stock being purchased by Purchaser pursuant to
this Agreement;

(f)            Seller shall have obtained all
required consents from any third parties with respect to any Material Contracts
whose terms require the obtaining of such consents,  including, without limitation, any leases
governing any Company Leased Property;

(g)           Seller shall have delivered to Purchaser,
at Seller’s sole cost and expense (i) a survey for each Company Owned Property
(other than a licensed property) and each property ground leased by Seller
(such survey, form of survey certificate and date of such survey to be
reasonably satisfactory to Purchaser) and (ii) a title policy for each Company
Owned Property (other than a licensed property) and each property ground leased
by Seller (such policies to be ALTA extended owner’s or leasehold (as
applicable)), together with copies of the underlying documents referenced in
each such title policy.  The issuer,
reinsures, form of policy, endorsements, and scheduled exceptions for each such
title policy shall all be reasonably satisfactory to Purchaser.  In the case where Seller possesses a valid
Title Policy, the requirements set forth herein may be satisfied, at the sole
discretion of Purchaser, by obtaining an endorsement to such Title Policy
dating down the coverage thereunder to the date of the Closing.

(h)           there shall have been no Material
Adverse Effect with respect to SGF’s or FSE’s business, condition (financial or
otherwise), assets, liabilities, operations or financial performance since the
date of this Agreement;

 42
 

(i)            there shall have been no
distributions, payments or similar transfers of money by SGF or FSE to Seller
or to any members of Seller’s Affiliated Group, except for distributions,
payments or transfers made in the ordinary course consistent with past
practice;

(j)            The Nevada State Gaming Control
Board and the Nevada Gaming Commission, and to the extent applicable and
required, the City of Las Vegas, Nevada, shall have approved the transactions
contemplated hereby;

(k)           SGF and its properties shall have
been released from all liabilities and obligations pursuant to the Credit
Agreement;

(l)            SGF shall have paid, in full, any
and all Taxes claimed to be due by the Nevada unemployment tax division,
including, but not limited to, those amounts set forth as an additional Tax in Section
2.18 of the Seller Disclosure Schedule; provided, however, that Seller may, in the alternative, agree to
allocate such amounts from the Purchase Price and place them in an interest
bearing escrow account pending payment as and when such amounts may become due
from time to time in whole or in part, with all interest on such amounts
being the sole property of Seller;

(m)          Seller shall have delivered to
Purchaser a receipt or certificate for each of SGF and FSE from the Nevada
Department of Taxation showing that all state and local taxes have been paid by
each of them; provided, however, that if Seller is unable to deliver such
receipt or certificate by the Closing Date solely due to the unemployment tax
matter disclosed in Section 2.18 of the Seller Disclosure Schedule or
government delay unrelated to any tax payment issue, Purchaser shall waive this
condition to Closing (although such waiver shall not constitute a waiver of
Purchaser’s rights to indemnification hereunder). Notwithstanding the
foregoing, Purchaser will not be required to waive this condition until the Closing
Date as described in Section 1.4, even if all other conditions to
Closing have been satisfied by Seller; and

SECTION 8.3.  CONDITIONS TO THE OBLIGATIONS OF SELLER.  The obligations of Seller to consummate the
transactions contemplated hereby are subject to the satisfaction (or waiver by
Seller) of the following conditions:

(a)           the representations and warranties of
Purchaser set forth in Article III that are qualified by materiality
shall be true and correct and the representations and warranties of Purchaser
that are not so qualified shall be true and correct in all material respects on
and as of the Closing with the same force and effect as if made on and as of
the Closing, and Purchaser shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Closing (other than those
representations and warranties that address matters only as of a particular
date or only with respect to a specific period of time which need to be true
and accurate only as of such date or with respect to such period);

(b)           The Purchaser shall have performed
all of the obligations hereunder required to be performed by the Purchaser, at
or prior to the Closing Date;

(c)           Seller shall have received (i) a
certificate signed by the chief executive officer and the chief financial
officer of Purchaser, dated as of the Closing Date, to and the effect that, to
the best of his or her knowledge, the conditions set forth in Section 8.3(a)
and 8.3(b) have been 

 43
 

satisfied and (ii)
a certificate of the secretary or assistant secretary of the Purchaser
certifying that such officer was authorized under the bylaws of Purchaser to
sign the certificate in his or her capacity as stated in the officer’s
certificate;

(d)           the requirements of Section 7.2
of the Agreement shall have been fulfilled; and

(e)           Seller shall have obtained the
releases of the Lease Guarantees, or, in the alternative, the lenders under the
Credit Agreement shall have consented to Seller closing the transactions
contemplated by this Agreement absent such releases on terms acceptable to
Seller in its sole and absolute discretion.

ARTICLE
IX

TERMINATION

SECTION 9.1.  TERMINATION. 
This Agreement may be terminated and the transactions contemplated
hereby abandoned:

(a)           by mutual written consent of Seller
and Purchaser;

(b)           by either Seller or Purchaser if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement and such order, decree,
ruling or any other action shall have become final and non-appealable;

(c)           by Seller if there shall have been
any material breach of a representation and warranty or obligation of Purchaser
hereunder and, if such breach is curable, such default shall not have been
remedied within ten (10) days after receipt by Purchaser of notice in writing
from Seller specifying such breach and requesting that it be remedied;

(d)           by Purchaser if there shall have been
any material breach of a representation and warranty or obligation of Seller
hereunder (other than Section 4.7) and, if such breach is curable, such
default shall not have been remedied within ten (10) days after receipt by
Seller of notice in writing from Purchaser specifying such breach and
requesting that it be remedied, including, without limitation, any agreement by
Seller, SGF, or FSE to amend any collective bargaining agreement covering more than
20 employees of SGF or FSE that is not rationally related to market rates for
comparable properties in downtown Las Vegas, Nevada;

(e)           by Purchaser if Seller breaches Section
4.7;

(f)            by either Seller or Purchaser if the
Nevada State Gaming Control Board or the Nevada Gaming Commission shall not
have approved the transactions contemplated by this Agreement prior to the
Closing Date;

(g)           by either
Seller or Purchaser if the Closing has not otherwise occurred on or before the Closing Date;

 44
 

(h)           by Purchaser,
if the costs associated with the remediation of any non-asbestos environmental
matters set forth in the Phase II (defined below) are estimated in such
Phase II to be:

(i)            greater
than $2,000,000; or

(ii)           equal
to or less than $2,000,000 and Seller does not agree to reduce the Purchase
Price by the amount of such estimate.

For
purposes of this Section 9.1(h), Purchaser shall obtain a Phase I
Environmental Site Assessment & Limited Asbestos Survey (“Phase I”) of the
Company Real Property, and, if recommended by the consultant who performed the
Phase I, a Phase II Environmental Site Assessment & Limited Asbestos Survey
(“Phase II”); or

(i)            by Purchaser, if (i) there are any
material defects in the physical condition of the Company Real Property or the
improvements located on the Company Real Property, except as set forth in Section
2.8 of the Seller Disclosure Schedule or except to the extent that any such
defect or defects would not be reasonably expected to have a Material Adverse
Effect on the Company Real Property; or (ii) there are any material defects in
the physical condition or operability of the tangible personal assets and
properties described in Section 2.9 that would impair the use of such
assets and properties as and where such assets and properties are currently
used in any material respects, except as set forth in Section 2.9 of the
Seller Disclosure Schedule or except to the extent that any such defect or
defects would not be reasonably expected to have a Material Adverse Effect on
SGF or FSE. Purchaser may not terminate this Agreement pursuant to this Section
9.1(i) unless Purchaser notifies Seller in writing of its election to
terminate this Agreement pursuant to Section 9.1(i) within 90 days after
the date of this Agreement.

SECTION 9.2.  EFFECT OF TERMINATION.

(a)           If this Agreement is terminated by
Seller or Purchaser by reason of Section 9.1(a), (b), (c),
(f) or (g), provided that, with respect to a termination by
reason of Section 9.1(g), the failure to close the transactions
contemplated by this Agreement on or before the Closing Date was not the result
of Seller’s failure to fulfill any closing condition under this Agreement,
Seller may retain the Deposit as liquidated damages, which payment the Parties
acknowledge shall be in full and complete satisfaction of any and all claims
for damages and shall be the sole and exclusive remedy under this Agreement,
except in the event of a fraudulent or willful breach of any representations,
warranties, covenants or agreements by Purchaser, in which case Seller shall
have all remedies available at law or in equity with respect thereto.

(b)           If this Agreement is terminated by
Purchaser pursuant to Section 9.1(d) or (e), or by Seller or
Purchaser pursuant to Section 9.1(g) as the result of Seller’s failure
to fulfill any closing condition under this Agreement, Purchaser shall be
entitled to receive a return of the Deposit plus an amount equal to $500,000,
which payments the Parties acknowledge and agree shall be in full and complete
satisfaction of any and all claims for damages and shall be the sole and
exclusive remedy under this Agreement, except in the event of a fraudulent or
willful breach of the representations, warranties, covenants or agreements
contained herein by Seller, in which case Purchaser shall have all remedies
available at law or in equity with respect thereto.

 45
 

(c)           If this Agreement is terminated by
Seller other than pursuant to Section 9.1(a), (b),  (c), (f),
or (g), or Seller breaches Section 4.7, and prior to the nine (9)
month anniversary of such termination or breach, whichever is applicable,
Seller, SGF or FSE enters into any agreement with a Person other than the
Purchaser relating to the liquidation, dissolution, recapitalization, merger,
consolidation, or acquisition or purchase of all or part of SGF’s or FSE’s
assets or properties, or any equity interest in SGF or FSE, or other similar
transaction or business combination involving SGF or FSE or their assets or
their respective businesses, Purchaser shall be entitled to receive, in addition
to the return of the Deposit provided in Section 9.2(b), an amount equal
to $5,000,000, which payments the Parties acknowledge and agree shall be in
full and complete satisfaction of any and all claims for damages and shall be
the sole and exclusive remedy under this Agreement, except in the event of a
fraudulent or willful breach of the representations, warranties, covenants or
agreements contained herein by Seller, in which case Purchaser shall have all
remedies available at law or in equity with respect thereto.  Notwithstanding the foregoing, Purchaser may
elect to pursue its right to specific enforcement as provided in Section 9.3
in lieu of liquidated damages under this Section 9.2(c).

(d)           If this Agreement is terminated by
Purchaser pursuant to Section 9.1(h), Purchaser shall be entitled to
receive a return of the Deposit plus $200,000, which payments the Parties
acknowledge and agree shall be in full and complete satisfaction of any and all
claims for damages and shall be the sole and exclusive remedy under this
Agreement, except in the event of a fraudulent or willful breach of the
representations, warranties, covenants or agreements contained herein by
Seller, in which case Purchaser shall have all remedies available at Law or in
equity with respect thereto.

(e)           If this Agreement is terminated by
Purchaser pursuant to Section 9.1(i), Purchaser shall be entitled to
receive a return of 50% of the Deposit, which payment the Parties acknowledge
and agree shall be in full and complete satisfaction of any and all claims for
damages and shall be the sole and exclusive remedy under this Agreement, except
in the event of a fraudulent or willful breach of the representations,
warranties, covenants or agreements contained herein by Seller, in which case Purchaser
shall have all remedies available at law or in equity with respect thereto.

(f)            Notwithstanding any other provision
of this Section 9.2, if this Agreement is terminated by Seller or
Purchaser pursuant to Section 9.1(g) due to Seller’s failure to satisfy Section
8.3(e), Purchaser shall be entitled to receive a return of the Deposit,
which payment the Parties acknowledge and agree shall be in full and complete
satisfaction of any and all claims for damages and shall be the sole and
exclusive remedy under this Agreement, except in the event of a fraudulent or
willful breach of the representations, warranties, covenants or agreements
contained herein by Seller, in which case Purchaser shall have all remedies
available at Law or in equity with respect thereto.

SECTION 9.3.  SPECIFIC PERFORMANCE.  Purchaser will have the right to obtain
specific performance of Seller’s obligations to close in the event Seller fails
to close this Agreement in accordance with the provisions hereof and this
Agreement has not been terminated pursuant to Section 9.1; provided,
however, that Purchaser is not in material breach of this Agreement.  Purchaser must file and serve an action
within ten (10) Business Days of the Closing Date or waive any right to seek
specific performance.

 46
 

ARTICLE X

TAX MATTERS

SECTION 10.1.  Indemnification and Allocation of
Liabilities.

(a)           Tax Indemnification.  Seller shall indemnify and hold harmless
Purchaser, its successors, heirs and assigns, and Affiliates, stockholders,
officers and directors, from and against, without duplication on an after-tax
basis, all losses or liabilities incurred by it or them directly and indirectly
with respect to, in connection with, or arising from:

(i)            any and all Taxes
(or the non-payment thereof) of Seller and all members of its Affiliated Group,
including SGF and FSE, for all Pre-Closing Tax Periods, and the portion of any
Straddle Tax Period that ends on the Closing Date, as determined in Section
10.1(c);

(ii)           any and all Taxes
(or the non-payment thereof) of any member of an affiliated, consolidated,
combined, or unitary group of which either SGF or FSE (or any predecessor of
any of the foregoing) is or was a member, including pursuant to Treas. Reg.
Sec. 1.1502-6 or any analogous state, local or foreign Law or regulation,
during any Pre-Closing Tax Periods, and the portion of any Straddle Tax Period
that ends on the Closing Date as determined in Section 10.1(c);

(iii)          any breach of any
representation, warranty, or covenant relating to or with respect to Taxes which
includes but is not limited to the provisions set forth in Section 2.18
and this Article X;

(iv)          a reduction of Tax
attributes of either SGF or FSE (as owned by Purchaser) as a result of any
action or inaction involving the Seller or any Affiliates of Seller, other than
as contemplated by Section 10.9 of this Agreement; and

(v)           any and all Taxes
(or the non-payment thereof) of any Person (other than SGF or FSE) imposed on
either SGF or FSE as a transferee or successor by contract or pursuant to any
Law, rule or regulation, which Taxes relate to an event or transaction
occurring on or before the Closing Date.

(b)           Procedure for Reimbursement.  Seller shall fully reimburse Purchaser for
any Taxes of Purchaser or the SGF or FSE, which are the responsibility of
Seller pursuant to this Section 10.1 pursuant to the provisions set
forth in Section 10.05 (“Timing and Treatment of Payments”).

(c)           Straddle Tax Period.  For purposes of this Article X,
whenever it is necessary to determine the amount of Taxes (or the non-payment
thereof) of either SGF or FSE for a Straddle Tax Period, the determination of
the Taxes for the portion of the Straddle Tax Period beginning prior to the
Closing Date and ending on the Closing Date, and beginning the day after the
Closing Date, shall be determined:

(i)            in the case of
Taxes that are either (A) based upon or related to income or receipts, or (B)
imposed in connection with any distribution, sale or other transfer or
assignment 

 47
 

of property, by
assuming that SGF or FSE had a taxable year or period which ended at the close
of the Closing Date and closing the books of SGF or FSE as of such date (and
for such purpose the taxable period of any partnership, joint venture or other
pass-through entity in which SGF or FSE holds a beneficial interest shall be
deemed to terminate at such time), except that exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a time basis; and

(ii)           in the case of
Taxes not described in clause (i) that are imposed on a periodic basis and
measured by the level of any item, shall be deemed to be the amount of such
Taxes (including any minimum) for the entire period (or, in the case of such
Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of which
is the number of calendar days in the period determined in clause (1) above and
the denominator of which is the number of calendar days in the entire Straddle
Tax Period.  In the case of any Tax based
upon or measured by capital (including net worth or long-term debt) or
intangibles, any amount thereof required to be allocated under this subsection
shall be computed by reference to the level of such items on the Closing
Date.  All determinations necessary to
effect the foregoing allocations shall be made in a manner consistent with
prior practice of the Company.

(iii)          For the avoidance
of doubt, any Taxes resulting from an election under Code Section 338(h)(10)
shall be the responsibility of Seller.

(d)           Responsibility for Filing Tax
Returns for Periods through the Closing Date.

(i)            Seller shall
include the income of SGF or FSE (including any deferred items triggered into
income by Treas. Reg. Sec. 1.1502-13 and any excess loss account taken into
income under Treas. Reg. Sec. 1.1502-19) on Seller’s consolidated federal
income Tax Returns for all periods through the Closing Date and pay any federal
income Taxes attributable to such income. 
For all taxable periods ending on or before the Closing Date, Seller
shall cause SGF and FSE to join in Seller’s consolidated federal income tax
return and, in jurisdictions requiring separate reporting from Seller, to file
separate company state and local income Tax Returns.  All such Tax Returns shall be prepared and
filed in a manner consistent with prior practice, except as required by a
change in applicable Law.  Purchaser
shall have the right to review and comment on any such Tax Returns prepared by
Seller to the extent that such Tax Returns pertain to SGF or FSE.

(ii)           Purchaser shall
cause each of SGF and FSE to furnish information to Seller as reasonably
requested by Seller to allow Seller to satisfy its obligations under this Section
10.1 in accordance with past custom and practice.  SGF, FSE and Purchaser shall consult and
reasonably cooperate with Seller as to any elections to be made on returns of
SGF or FSE for periods ending on or before the Closing Date.

(iii)          Purchaser shall
cause Seller, SGF and FSE to file income Tax Returns for all periods other than
periods ending on or before the Closing Date.

(e)           Tax Cooperation and Exchange of
Information.

 

 48

(i)            General.  Purchaser and Seller shall provide each other
with such cooperation and information as either of them reasonably may request
of the other (and Purchaser shall cause SGF and FSE to provide such cooperation
and information) in filing any Tax Return, amended Tax Return, or claim for
refund, determining a liability for Taxes or a right to a refund of Taxes or
participating in or conducting any audit or other proceeding in respect of
Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase any part of the assets of SGF or FSE or the
equity of either SGF or FSE.  Such
cooperation and information shall include providing copies of relevant Tax
Returns or portions thereof, together with related work papers and documents
relating to rulings or other determinations by Governmental Entities.  Purchaser and Seller shall make themselves
(and their respective employees) reasonably available on a mutually convenient
basis to provide explanations of any documents or information provided under
this Section 10.1.

(ii)           Retention
of Information.  Each of Purchaser
and Seller shall retain all Tax Returns, work papers and all material records
or other documents in its possession (or in the possession of its Affiliates) relating
to Tax matters of SGF and FSE for any Straddle Tax Period and for all
Pre-Closing Tax Periods until the later of (A) the expiration of the
statute of limitations of the taxable periods to which such Tax Returns and
other documents relate, without regard to extensions or (B) six years
following the due date (without extension) for such Tax Returns.  After such time, before Seller shall dispose
of any such documents in its possession (or in the possession of its
Affiliates), Purchaser shall be given an opportunity, after 90 days prior
written notice, to remove and retain all or any part of such documents as
Purchaser may select (at such other Party’s expense).  Any information
obtained under this Section 10.1 shall be kept confidential, except as
may be otherwise necessary in connection with the filing of Tax Returns or
claims for refund or in conducting an audit or other proceeding.

(iii)          Cooperation. 
Purchaser and Seller further agree, upon request, to use commercially
reasonable efforts to obtain any certificate or other document from any
Governmental Entity or any other Person as may be necessary to mitigate, reduce
or eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).  Seller agrees, upon request, to assist
Purchaser, SGF and FSE in obtaining the lowest available unemployment Tax rate,
including any assistance that would allow Purchaser, SGF or FSE to take
advantage of SGF and FSE’s historical operations prior to the Closing.

(iv)          Filings.  Purchaser and Seller agree, upon request, to
provide the other Party with all information that either Party may be required
to report pursuant to Code Section 6043, Code Section 6043A, or any other
Section of the Code and all Treasury Regulations promulgated thereunder.

SECTION 10.2.  338(H)(10) ELECTION.

(a)           Election.  At Purchaser’s option, Purchaser and Seller
shall join in making an election under Code Section 338(h)(10) (and any
corresponding election under state, local, or foreign tax law) (collectively a “§338(h)(10)
Election”) with respect to the purchase and sale of the stock of SGF and
FSE hereunder.  Seller will pay any Tax
attributable to the making of the §338(h)(10) Election and will indemnify
Purchaser and SGF and FSE against any Adverse 

 49
 

Consequences
arising out of any failure to pay such Tax. 
If Purchaser does not cause Purchaser and Seller to join in making a
§338(h)(10) Election as contemplated by the first sentence of this Section,
then, upon Purchaser’s request, Seller shall provide Purchaser, within thirty
(30) days of Purchaser’s request, the Tax basis in each asset of SGF and FSE as
of the Closing, and the Tax basis in each asset owned by any subsidiary of such
corporation as of the Closing.

(b)           Form 8023.  Within ninety (90) days following the Closing
Date, Purchaser shall prepare Form 8023 and submit the form to Seller for its
approval, which shall not be unreasonably withheld.  If Purchaser has failed to provide Form 8023
to Seller within ninety (90) days of the Closing Date, then Seller may (but
shall have no obligation to) prepare such form and submit such form to
Purchaser for its approval, which approval shall not be unreasonably withheld.

(c)           Allocation of Purchase Price.  The Parties agree that the Purchase Price and
the liabilities of SGF and FSE (plus other relevant items) will be allocated to
the assets of SGF and FSE for all purposes (including Tax and financial
accounting purposes) as shown on the allocation schedule (the “Allocation
Schedule”) prepared by Purchaser and delivered to Seller no later than
three (3) months after Closing in a manner consistent with Code Sections 338
and 1060 and the regulations thereunder, subject to Seller’s approval, which
approval shall not be unreasonably withheld. 
At any time after the execution of this Agreement, Purchaser may submit
to Seller one or more proposed Allocation Schedules.  Within twenty (20) days after Seller’s
receipt of any proposed Allocation Schedule, Seller shall advise Purchaser, in
writing, of Seller’s objection, if any, to any particular allocation, and the
reason related thereto.  If Seller and
Purchaser cannot agree on the proper allocation, then such allocation shall be
made by an independent accounting firm selected by Purchaser.  Purchaser, SGF and FSE and Seller shall
timely file all Tax Returns (including Form 8883, amended returns and claims
for refund) and information reports in a manner consistent with such
allocation.

(d)           Tax Indemnification.  Without limiting the obligations of Seller
pursuant to this Article X, if a §338(h)(10) Election is made with
respect to the acquisition of SGF and FSE, then Purchaser and Seller
acknowledge that if Purchaser had purchased the assets of SGF and FSE directly,
rather than their outstanding stock, and Purchaser had neither assumed nor
purchased such assets “subject to” any Tax obligations of SGF and FSE or
Seller, then Purchaser would not have any obligation for the Taxes of SGF and
FSE or Seller for the period ending as of Closing.  Purchaser and Seller intend and agree that
the Tax indemnification obligations of Seller set forth in this Article X
shall be applied to indemnify and hold Purchaser and SGF and FSE harmless, at a
minimum, from the same Taxes that would have remained the obligation of Seller,
if the Parties had effected the transactions contemplated by this Agreement as
a direct purchase of assets by Purchaser from SGF and FSE and SGF and FSE had
been liquidated, with Seller succeeding to SGF’s and FSE’s pre-Closing Tax
Liabilities, including the Tax Liabilities arising from such sale and
liquidation. Provided that Seller cooperates with Purchaser’s request to make a
§338(h)(10) Election, Seller shall have no obligation to indemnify Purchaser
from any loss of tax benefits arising from an inability to make an effective
§338(h)(10) Election unless such inability is due to (i) Seller’s breach of Section
2.18(d)(ii) or (ii) Seller’s failure to satisfy any covenant set forth in
this Article X.

SECTION 10.3.  RETURNS AND PAYMENTS.

 50
 

(a)           After the Closing, Seller shall
prepare and file or otherwise furnish in proper form, in a manner consistent
with past practice of SGF and FSE (subject to any departure required to comply
with applicable Law) to the appropriate Governmental Entity at its own cost (or
cause to be prepared and filed or so furnished) in a timely manner all income
Tax Returns relating to SGF and FSE with respect to any Pre-Closing Tax
Period.  Purchaser shall cause to be
prepared and filed all (i) Tax Returns, other than income Tax Returns, with respect
to any Pre-Closing Period that are due after the Closing Date, and (ii) Tax
Returns relating to SGF and FSE for any Straddle Tax Periods and Post-Closing
Tax Periods.  With respect to any such
income Tax Return relating to SGF and FSE that include any Pre-Closing Tax
Period, Seller shall provide Purchaser and its authorized representatives with
a copy of such completed Tax Return (or portions thereof relating to SGF and
FSE), together with appropriate supporting information and schedules, as soon as
reasonably practicable prior to the due date (including any extension hereof)
for the filing of such Tax Return, and Purchaser and its authorized
representatives shall have the right to review, comment, and consent (which
consent may not be unreasonably withheld) on such Tax Return (or portion
thereof) and statement prior to the filing of such Tax Return.

(b)           Seller shall pay all Taxes with
respect to SGF and FSE due and payable for any Pre-Closing Tax Period and the
portion of any Straddle Tax Period which includes the period that ends on the
Closing Date, and Purchaser shall pay or cause to be paid all Taxes due and
payable for any Post-Closing Tax Period.

SECTION 10.4.  TRANSFER TAXES.  Seller will pay, and will indemnify and hold
Purchaser harmless against, any real property transfer or gains tax, stamp tax,
stock transfer tax, sales, use, documentary, excise taxes and fees or other
similar Tax imposed on Purchaser or SGF or FSE as a result of the transactions
contemplated by this Agreement including any penalties, interest, and additions
(collectively, the “Transfer Taxes”). 
Seller, after the review and consent by Purchaser, shall file such
applications and documents as shall permit any such Transfer Taxes to be
assessed and paid on or prior to the Closing Date in accordance with any
available pre-sale filing procedure.

SECTION 10.5.  TIMING AND TREATMENT OF PAYMENTS.

(a)           Payment by Seller of any amounts due
under this Article X shall be made at the earlier of (i) at
least three (3) Business Days before the due date of the applicable Tax Return
required to be filed by Purchaser for which Seller is responsible under this Article
X, (ii) within three (3) Business Days following the earlier of the
establishment of Seller’s responsibility that an indemnity amount is payable to
Purchaser pursuant to this Article X, or following the payment of Taxes
by the Purchaser or SGF or FSE.

(b)           Notwithstanding subsection (a) above,
if liability under this Article X related to costs or expenses
other than Taxes, payment by Seller of any amounts due under this Article X
shall be made within five (5) Business Days after the date Purchaser notifies
Seller that Seller has a liability for a determinable amount under this Article X
and is provided with calculations or other materials supporting such liability.

 51
 

(c)           Purchaser and Seller agree that any
payments made under this Article X will be treated by the Parties on
their Tax Returns as an adjustment to the Purchase Price.

SECTION 10.6.  SURVIVAL. 
Notwithstanding any provisions of this Agreement to the contrary, this Article
X shall survive and shall remain in effect until one (1) month after the
expiration of all applicable statute of limitations and shall survive any
corporate reorganization, dissolution or liquidation of Seller, Purchaser or
SGF or FSE.  Notwithstanding anything to
the contrary in this Agreement, including the limitations set forth in Article
V of this Agreement, the Tax indemnification obligations of Seller are not
subject to any threshold requirement relating to the amount to be reimbursed or
any ceiling on the maximum amount subject to indemnification, and Purchaser
shall not be treated as having assumed the risk of any Taxes by reason of the
closing of the transaction or by reason of any knowledge that Purchaser had or
should have had about Seller’s or either SGF’s and FSE’s Tax obligations,
notwithstanding any other provision of this Agreement to the contrary.

SECTION 10.7.  OTHER TAX MATTERS.

(a)           Termination of Tax Sharing
Agreements.  If applicable, any and
all Tax sharing agreements or similar agreements with respect to or involving
SGF or FSE shall be terminated as of the Closing Date and, after the Closing
Date, none of Purchaser, SGF, or FSE shall be bound by such agreements or have
any liability thereunder.

(b)           Prior Consents Required.  Except as otherwise required by Law, or with
the consent of Purchaser which shall not be unreasonably withheld, delayed or
conditioned, Seller agrees that neither it nor its Affiliates (including SGF
and FSE prior to the Closing as well as any member of Seller’s Affiliated Group
or its combined, consolidated or unitary group) shall file or amend any Tax
Return, file any claim for refund, change any method of Tax accounting,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to either SGF or FSE, enter into any closing agreement, settle or
compromise any federal, state, local or foreign Tax liability or claim regarding
either SGF or FSE, or make or change any Tax election with respect to any Tax
period, in each case that may result in any increased Tax liability of, or loss
of Tax benefits by, the Purchaser or either SGF or FSE.  Nothing in this Article X shall prohibit
Purchaser (or either SGF or FSE, if directed by Purchaser) to amend, refile, or
otherwise modify (or grant an extension of any statute of limitations with
respect to) any Tax Return relating in whole or in part to either SGF or FSE
with respect to any taxable year or period ending on or before the Closing Date
or with respect to any Straddle Tax Period provided such amendment, refiling,
modification, or extension will not have an adverse affect on the liability of
the Seller or either SGF or FSE for which Seller is liable pursuant to this
Agreement.

SECTION 10.8.  AUDITS. 
Seller shall allow Purchaser and SGF and FSE to participate in any audit
or assessment of Seller’s consolidated federal income Tax Returns to the extent
that such returns relate to Purchaser or either SGF or FSE.  Seller shall not settle any such audit in a
manner that would adversely affect Purchaser or either SGF or FSE after the
Closing Date without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld.  
Seller shall promptly inform Purchaser in writing of the occurrence of
any event or circumstance in any such Tax audit or contested Tax proceeding,
and shall provide Purchaser 

 52
 

and either SGF or
FSE with a copy of all correspondence received in such Tax audit or Tax
proceeding.

SECTION 10.9.  UTILIZATION OF LOSSES BY SELLER.  Notwithstanding any provision in this
Agreement to the contrary, Seller shall be entitled to use the net operating
losses incurred by SGF and FSE prior to the Closing Date to reduce the
consolidated taxable income of the consolidated group of which Seller is the
common parent.

ARTICLE
XI

MISCELLANEOUS

SECTION 11.1.  GOVERNING LAW AND CONSENT TO
JURISDICTION.  The Laws of the State of
Nevada (irrespective of its choice of law principles) shall govern all issues
concerning the validity of this Agreement, the construction of its terms and
the interpretation and enforcement of the right and duties of the Parties.  Each Party irrevocably submits to the
exclusive jurisdiction of the courts of the State of Nevada and the Federal
courts of the United States of America located in Nevada (and the Nevada state
and Federal courts having jurisdiction over appeals therefrom) in respect of
the transaction contemplated by this Agreement, the other agreements and
documents referred to herein and the transactions contemplated by this
Agreement and such other documents and agreements.

SECTION 11.2.  AMENDMENT AND MODIFICATION.  Subject to applicable Law, this Agreement may
be amended, modified and supplemented in any and all respects only by written
agreement duly executed and delivered by all of the Parties.

SECTION 11.3.  NOTICES. 
All notices, consents and other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered by hand
or by Federal Express or a similar overnight courier; (b) five (5) days after
being deposited in any United States Post Office enclosed in a postage prepaid,
registered or certified envelope addressed; or (c) when successfully transmitted
by telecopier (with a confirming copy of such communication to be sent as
provided in clauses (a) or (b) above), to the receiving Party at the address or
telecopier number set forth below (or at such other address or telecopier
number for a Party as shall be specified by like notice); provided however,
that any notice of change of address or telecopier number shall be effective
only upon receipt:

(a)           If to Seller, to:

MTR Gaming Group,
Inc.

State Route 2
South

P.O. Box 356

Chester, WV 26034

Telephone: 
(304) 387-8300

Facsimile: 
(304) 387-8304

Attn:  Edson R. Arneault, President

 53
 

With a copy (which shall
not constitute notice) to:

Ruben & Aronson, LLP

4800 Montgomery Lane

Suite 150

Bethesda, MD 20814

Telephone: 
(301) 951-9696

Facsimile: 
(301) 951-9636

Email: RRuben@RandAlaw.com

Attn:  Robert L. Ruben, Esq.

(b)           If to Purchaser, to:

TLC Casino Enterprises, Inc.

c/o Four Queens Hotel & Casino

202 Fremont Street

Las Vegas, NV 89101

Telephone: 
(702) 387-5155

Facsimile: 
(702) 387-5103

Attn: Terry Caudill

With
a copy (which shall not constitute notice) to:

Snell & Wilmer L.L.P.

400 E. Van Buren

Phoenix, AZ 85004

Telephone: 
(602) 382 - 6554

Facsimile: 
(602) 382 — 6070

Attn:  William A. Kastin, Esq.

SECTION 11.4.  COUNTERPARTS. 
This Agreement may be executed in multiple counterparts, all of which
shall together be considered one and the same agreement.

SECTION 11.5.  INCORPORATION BY REFERENCE.  The Preamble and Recitals to this Agreement
and the Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.

SECTION 11.6.  ENTIRE AGREEMENT; THIRD PARTY
BENEFICIARIES.  This Agreement (including
the documents incorporated herein by reference in Section 11.5 hereof
and other documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes any prior agreements and understandings, both
written and oral, among the Parties with respect to the subject matter hereof
and (b) except as expressly provided herein, are not intended to confer upon
any Person other than the Parties herein any rights or remedies hereunder.

SECTION 11.7.  SERVICE OF PROCESS.  Each Party irrevocably consents to the
service of process outside the territorial jurisdiction of the courts referred
to in Section 11.1 hereof in any such action or proceeding by mailing
copies thereof by registered United States mail, postage prepaid, return
receipt requested, to its address as specified in or pursuant to Section
11.3 hereof.  However, the foregoing
shall not limit the right of a Party to effect service of process on the other
Party by any other legally available method.

 54
 

SECTION 11.8.  SPECIFIC PERFORMANCE.  Seller acknowledges and agrees that, in the
event of any breach of this Agreement by Seller, Purchaser would be irreparably
and immediately harmed and could not be made whole by monetary damages.  It is accordingly agreed that Purchaser will
be entitled to compel specific performance of this Agreement in any action
instituted in accordance with Section 11.1.

SECTION 11.9.  MEDIATION; ARBITRATION.

(a)           All claims, disputes and other
matters in controversy (herein called a “dispute”) arising directly or
indirectly out of or related to this Agreement, or the breach thereof, whether
contractual or noncontractual, other than as specifically provided elsewhere in
this Agreement, or and whether during the term or after the termination of this
Agreement, shall be resolved exclusively according to the procedures set forth
in this Section 11.9.

(b)           Neither Party shall commence an
arbitration proceeding pursuant to the provisions of Section 11.9(c)
unless such Party shall first give a written notice (a “Dispute Notice”) to the
other Party setting forth the nature of the dispute.  The Parties shall attempt in good faith to
resolve the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association “AAA” in effect on the date of the Dispute
Notice.  If the Parties cannot agree on
the selection of a mediator within twenty (20) days after delivery of the
Dispute Notice, the mediator will be selected by the AAA.  If the dispute has not been resolved by
mediation as provided above within sixty (60) days after delivery of the
Dispute Notice, then the dispute shall be determined by arbitration in
accordance with the provisions of Section 11.9(c) hereof.

(c)           Any dispute that is not settled
through mediation as provided in Section 11.9(b) shall be resolved by
arbitration in Las Vegas, Nevada, governed by the Federal Arbitration Act, 9
U.S.C. § 1 et seq, and administered by the AAA under its Commercial Arbitration
Rules in effect on the date of the Dispute Notice as modified by the provisions
of this Section 11.9(c).  If the
claim in dispute does not exceed $1,000,000, there shall be a single arbitrator
appointed according to this Section 11.9(c).  If the claim in dispute equals or exceeds
$1,000,000, the arbitration panel shall consist of three (3) members one of
whom shall be selected by each party and the third, who shall serve as
chairman, shall be selected according to the same process used in selecting a
single arbitrator in this Section 11.9(c).  Persons eligible to be selected as an
arbitrator shall be limited to (i) retired judges of the Federal District Court
or (ii) lawyers with excellent academic and professional credentials who are or
have been a partner in a highly respected law firm for at least 10 years
specializing in either general commercial litigation or general corporate and
commercial matters and who have had both training and experience as an
arbitrator.  Each Party shall be entitled
to strike on a peremptory basis, for any reason or no reason, any or all of the
names of potential arbitrators on the list submitted to the Parties by the AAA
as being qualified in accordance with the criteria set forth herein.  If the Parties cannot agree on a mutually
acceptable single arbitrator from the one or more lists submitted by the AAA,
the AAA shall designate three persons who, in its opinion, meet the criteria set
forth herein, which designees may not include persons named on any list
previously submitted by the AAA.  Each
Party shall be entitled to strike one of such three designees on a peremptory
basis, indicating its order of preference with respect to the remaining
designees, and the selection of the arbitrator shall be made from among such
designee(s) which have not been so stricken by either Party in accordance with
their indicated order of mutual preference to the extent possible.  The 

 55
 

arbitrator shall
base the award on applicable Law and judicial precedent and, unless both
Parties agree otherwise, shall include in such award the findings of fact and
conclusions of Law upon which the award is based.  Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.

(d)           Notwithstanding the foregoing, if the
dispute is determined by a single arbitrator, or in the event the Parties agree
to a panel of three arbitrators to be selected in accordance with the
applicable AAA rules, and if the dispute is determined by less than the
unanimous decision of the three arbitrators, then upon the application by
either Party to a court for an order confirming, modifying or vacating the
award, the court shall have the power to review whether, as a matter of Law
based on the findings of fact determined by the arbitrator, the award should be
confirmed, modified or vacated in order to correct any errors of Law made by
the arbitrator.  In order to effectuate
such judicial review limited to issues of Law, the Parties agree (and shall
stipulate to the court) that the findings of fact made by the arbitrator shall
be final and binding on the Parties and shall serve as the facts to be
submitted to and relied on by the court in determining the extent to which the
award should be confirmed, modified or vacated.

(e)           If either Party fails to proceed with
mediation or arbitration as provided herein or unsuccessfully seeks to stay
such mediation or arbitration, or fails to comply with any arbitration award,
or is unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other Party shall be entitled to be
awarded costs, including reasonable attorneys’ fees, paid or incurred by such
other Party in successfully compelling such arbitration or defending against
the attempt to stay, vacate or modify such arbitration award and/or
successfully defending or enforcing the award.

(f)            All applicable statutes of
limitations and defenses based upon the passage of time shall be tolled while
the procedures specified in this Section 11.9 are pending.  The Parties will take such action, if any,
required to effectuate such tolling.

SECTION 11.10.  ASSIGNMENT. 
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either Party (whether by operation of Law or
otherwise) without the prior written consent of the other Party; provided,
however, that Purchaser may assign its rights under this Agreement without the
consent of the Seller if such assignment is made prior to the Closing Date to
an Affiliate of Purchaser and Purchaser remains bound by its obligations under
this Agreement.  Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the Parties and their respective permitted heirs, successors and
assigns.

SECTION 11.11.  WAIVERS. 
Except as otherwise provided in this Agreement, any failure of either
Party to comply with any obligation, covenant, agreement or condition herein
may be waived by the Party or Parties entitled to the benefits thereof only by
a written instrument signed by the Party granting such waiver, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.

SECTION 11.12.  ATTORNEY FEES.  Notwithstanding any provision in this
Agreement to the contrary, in the event of a dispute with respect to the
subject matter of this Agreement, the 

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prevailing Party
in any proceeding, including arbitration commenced to resolve such disputes,
shall be entitled to an award of its reasonable attorney fees and court or
arbitration costs incurred in resolving or settling the dispute, in addition to
any and all other damages or relief which the court or arbitrator may deem
proper.

SECTION 11.13.  NO TRIAL BY JURY. Each Party acknowledges and
agrees that any controversy that may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each Party hereby
irrevocably and unconditionally waives any right it may have to a trial by jury
in respect of any litigation directly or indirectly arising out of or relating
to this Agreement and any of the agreements delivered in connection herewith or
the transactions contemplated hereby or thereby.  Each Party certifies and acknowledges that
(a) no representative, agent or attorney of any other Party has
represented, expressly or otherwise, that such other Party would not, in the
event of litigation, seek to enforce either of such waivers, (b) it
understands and has considered the implications of such waivers, (c) it
makes such waivers voluntarily, and (d) it has been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 11.13.

[Remainder of the Page Blank]

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IN WITNESS WHEREOF, each
of the Parties has caused this Agreement to be duly executed with legal and
binding effect by their respective authorized officers, in their individual
capacity, as of the date first written above.

	
  MTR GAMING GROUP, INC.,

  	
   

  	
   

  	
   

  	
   

  
	
  a Delaware corporation

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Edson R. Arneault

  	
   

  	
  June 26, 2007

  	
   

  	
   

  
	
  By:

  	
   

  	
  Edson R. Arneault

  	
   

  	
  Date

  	
   

  	
   

  
	
  Its:

  	
   

  	
  President

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TLC CASINO ENTERPRISES, INC.

  	
   

  	
   

  	
   

  	
   

  
	
  a Nevada corporation

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Perry L. Caudill

  	
   

  	
  June 26, 2007

  	
   

  	
   

  
	
  By:

  	
   

  	
  Perry L. Caudill

  	
   

  	
  Date

  	
   

  	
   

  
	
  Its

  	
   

  	
  President

  	
   

  	
   

  	
   

  	
   

  

 

 

 58

EXHIBIT A

GLOSSARY OF DEFINED TERMS

“AAA” is defined in Section 11.9(b).

“Adverse Consequences” means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees including court costs and reasonable
attorneys’ fees and expenses.

“Affiliate” means any Person directly or indirectly
controlling, controlled by, or under common control with another Person. “Control,”
“controlled” and “controlling” means the power to direct or cause the direction
of the management and policies of a Person and shall be deemed to exist if any
Person directly or indirectly owns, controls, or holds the power to vote  [25%] or more of the voting securities of
such other Person.

“Affiliated Group” means any affiliated group within
the meaning of Code Section 1504(a) or any similar group defined under a
similar provision of state, local or foreign law of which either Company has
been a member.

“Agreement” is defined in the Recitals.

“Allocation Schedule” is defined in Section 10.2(c).

“Auditor” is defined in Section 1.2(d).

“Balance Sheet Date” means March 31, 2007.

“Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in Las Vegas, Nevada are
authorized or required by law to close.

“Closing Date” means a date that is on or prior to six
months following the execution and delivery of this Agreement, which date may
be extended by Purchaser for up to two additional periods of three months each,
provided Purchaser has complied with all of its obligations under this
Agreement but has not been successful, despite its best efforts, to obtain the
approvals required by Section 8.1(b) and Section 8.2(i) hereof.

“Closing” is defined in Section 1.4.

“Code” means the Internal Revenue Code of 1986, as
amended, or any corresponding provision of any succeeding law.

“Company Benefit Plan is defined in Section 2.14(a).

“Company Leased Property” means all real property on
which any casino operations, casino support operations, office or
administrative operations are conducted or that are otherwise material to the
operation of SGF’s or FSE’s business and leased or operated by SGF or FSE.

“Company Owned Property” means all real property owned
or used by SGF and FSE.

 1
 

“Company Pension Plans” is defined in Section
2.14(a).

“Company Permit”
or “Company Permits” means all permits, registrations, findings of suitability,
licenses, variances, exemptions, certificates of occupancy, orders and
approvals of all Governmental Entities (including without limitation all
authorizations under any applicable Gaming Laws), necessary to conduct the
business and operations of SGF and FSE as currently conducted and as proposed
to be conducted, each of which is in full force and effect in all material
respects. 

“Company Real Property” means all Company Owned
Property and Company Leased Property.

“Company Welfare Plans” is defined in Section
2.14(a).

“Contract” means any agreement, contract, lease, power
of attorney, note, loan, evidence of indebtedness, purchase order, letter of
credit, settlement agreement, franchise agreement, undertaking, covenant not to
compete, employment agreement, license, instrument, obligation, commitment,
understanding, policy, purchase and sales order, quotation and other executory
commitment to which any Person is a party or to which any of the assets of such
Person are subject, whether oral or written, express or implied.

“Credit Agreement” means that certain Fifth Amended
and Restated Credit Agreement dated as of September 22, 2006, as amended, by
and between Seller and its subsidiaries, including SGF, and Wells Fargo
National Association.

“Current Assets” means, subject to Section 1.2(c),
with respect to the financial information of SGF, the aggregate of the
following assets to the extent that such assets are classified as current under
GAAP and are acquired by Purchaser pursuant to the terms of this
Agreement:  (i) cash plus cash
equivalents; (ii) marketable securities; (iii) accounts receivable generated in
the ordinary course of business, less a reasonable reserve for doubtful
accounts consistent with past practices; (iv) inventories held for use in the
ordinary course of business (excluding any inventories that are obsolete or
otherwise unusable in the business); (v) prepaid expenses; and (vi) all other
assets of any kind classified as current under GAAP.

“Current Liabilities” means, subject to Section
1.2(c), with respect to the financial information of SGF, the aggregate of
the following liabilities (without duplication) to the extent that such
liabilities are assumed by Purchaser in accordance with the terms of this
Agreement:  (a) all accounts payable; (b)
all accrued liabilities of any kind shown on a balance sheet prepared in
accordance with GAAP, including but not limited to contingent obligations,
accrued vacation pay, accrued employee bonuses, litigation reserves,
liabilities for outstanding gaming chips and accrued payroll and related
liabilities and accrued gaming tax for the current fiscal year; and (c) all
other liabilities of any kind classified as current under GAAP.

“Deposit” means Five Hundred Thousand Dollars
($500,000) paid to Seller upon the execution and delivery of this Agreement as
an inducement to enter into this Agreement, and any amounts added pursuant to Section
1.4(b).

“Dispute” is defined in Section 11.9(a).

“Dispute Notice” is defined in Section 11.9(b).

“ERISA Affiliate” is defined in Section 2.14(a).

“ERISA” is defined in Section 2.14(a).

 2
 

“Final Closing Balance Sheet” means a final closing
balance sheet for SGF as of the Closing Date audited by Seller’s independent
auditors and prepared in accordance with GAAP consistent with the accounting
principles used in the preparation of Seller’s financial statements dated as of
December 31, 2006.

“Financial Statements” is defined in Section 2.5.

“FSE Securities” is defined in Section 2.2(b).

“FSE” means Speakeasy Fremont Street Experience
Operating Company, a Nevada corporation.

“GAAP” means generally accepted accounting principles.

“Gaming Authority” means any Governmental
Entity with regulatory control or jurisdiction over liquor operations or
the conduct of lawful gaming or gambling, including, without limitation, the
Nevada State Gaming Control Board, the Nevada Gaming Commission and the City of
Las Vegas, Nevada.

“Gaming Law” means any federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, registration,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition or limitation placed thereon
and including any liquor laws, governing or relating to the current or
contemplated casino and gaming activities and operations of the Property,
including without limitation, the provisions of the Municipal Code of the City
of Las Vegas, Nevada concerning liquor and gaming, the Nevada Gaming Control
Act and the regulations promulgated thereunder by the Nevada Gaming Commission,
in each case as amended from time to time.

“Governmental Entity” means any court or tribunal or
administrative, legislative, governmental or regulatory body, agency or
authority, including any Gaming Authority as well as the Internal Revenue
Service or any taxing authority (whether domestic or foreign), including
without limitation, any state, local or foreign government or any subdivision
or taxing agency thereof (including a United States possession).

“Harrah’s Claims” is defined in Section 4.4.

“Historical Financial Statements” is defined in Section
2.5.

“House Funds” is defined in Section 7.2.

“HSR Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

“Indemnifying Party” is defined in Section 5.4.

“Indemnitee” is defined in Section 5.4.

“Insurance Policies” means all fire and casualty,
general liability, business interruption, product liability, and sprinkler and
water damage insurance policies, with extended coverage, normal and customary
for the business and operations conducted by SGF and FSE.

“Intellectual Property” is defined in Section 2.10.

“Interim Financial Statements” is defined in Section
2.5.

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“knowledge” means, when used in the phrase “to the
knowledge of Seller” or “to Seller’s knowledge” and words of similar import,
the actual knowledge of all principal officers and managers involved in the
operation of the Property, after due inquiry.

“Law” means any
foreign or domestic law, statute, code, ordinance, rule, regulation, order, judgment,
writ, stipulation, award, injunction, decree or arbitration award, policies,
guidance, court decision, rule of common law or finding.

“Lease Documents” means true, correct and complete
copies of the documents under which the Company Leased Property is leased.

“Lease Guarantees” is defined in Section 2.8(m)

“Loss” and “Losses” is defined in Section 5.1(a).

“March Balance Sheets” means the unaudited balance
sheets of SGF and FSE as of March 31, 2007.

“Material Adverse Effect” means any material adverse
change in the business, financial condition, prospects or operations of a
Person (as hereinafter defined), taken as a whole; provided, however, that any
adverse effect on a Person resulting from the execution of this Agreement, the
announcement of this Agreement and the transactions contemplated hereby shall
be excluded from the determination of Material Adverse Change.

“Material Contract” or “Material Contracts” is defined
in Section 2.11(a).

“Multiemployer Plan” is defined in Section 2.14(c).

“National Priorities” is defined in Section
2.13(f).

“Organizational Documents” means true and correct
copies of the Certificate of Incorporation and Bylaws of each of SGF and FSE.

“Party” or “Parties” is defined in the Recitals to
this Agreement.

“Person” means a natural person or any partnership,
limited liability company, trust, estate, association, corporation, custodian,
nominee or any other individual or entity in its own or any representative,
capacity or any other entity.

“Post-Closing Tax Period” means a taxable period that
commences after the Closing Date.

“Pre-Closing Period” means from the date of execution
of this Agreement until the Closing.

“Pre-Closing Tax Period” means a taxable period that
ends on or before the Closing Date.

“Project Capital Expenditures” is defined in Section
4.5.

“Property” means the casino facility known as Binion’s
Gambling Hall and Hotel located in Las Vegas, Nevada.

“Proprietary Information” is defined in Section 4.2.

“Purchaser” means TLC Casino Enterprises, Inc., a
Nevada corporation.

“Purchase Price” is defined in Section 1.1.

 4
 

“Purchaser Disclosure Schedule” means the disclosure
schedule delivered by Purchaser to Seller prior to the execution of this
Agreement, a copy of which is attached hereto as Exhibit C.

“Purchaser Permits” is defined in Section 3.5.

“Seller Board” means the Board of Directors of Seller.

“Seller Disclosure Schedule” means the disclosure
schedule delivered by Seller to Purchaser prior to the execution of this
Agreement, a copy of which is attached hereto as Exhibit B.

“SGF Securities” is defined in Section 2.2(a).

“SGF” means Speakeasy Gaming of Fremont, Inc., a
Nevada corporation.

“Shares” means 100% of the issued and outstanding
shares of common stock of SGF, and 100% of the issued and outstanding shares of
common stock of FSE.

“Straddle Tax Period” means a taxable period that
includes but does not end on the Closing Date.

“Survey” means as defined in Section 2.8(b).

“Tax” or “Taxes” means any (i) federal, state, local
or foreign income, gross receipts, franchise, estimated, alternative minimum,
add-on minimum, sales, use, transfer, registration, gaming, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, environmental, customs, duties, real property, personal property,
capital stock, social security, unemployment, disability, payroll, license,
employee or withholding, or other tax, charge, levy, assessment, or fee of any
kind whatsoever, whether computed on a separate or consolidated, unitary or
combined basis or in any other manner, including any interest, penalties,
additions to tax or additional amounts in respect of the foregoing; (ii)
liability for the payment of any amounts of the type described in clause (i)
arising as a result of being (or ceasing to be) a member of any Affiliated
Group (or being included (or required to be included) in any Tax Return
relating thereto); and (iii) liability for the payment of any amounts of the
type described in clause (i) as a result of any express or implied obligation,
by contract or pursuant to Law, to indemnify or otherwise assume or succeed to
the liability of any other person.

“Tax Return” means any returns, declarations, reports,
bills, claims for refund, information returns (including where permitted or
required, any consolidated, combined or unitary returns) or other documents
(including any related or supporting schedules, statements or information)
filed or required to be filed in connection with the determination, assessment
or collection of any Taxes or in connection with the administration of any
statutes, laws, rules, regulations, orders or awards of any Governmental Entity
relating to any Taxes.

“Title Policies” means as defined in Section 2.8(b).

“Transfer Taxes” is defined in Section 10.4.

“Transfer Time” is defined in Section 7.2.

“Treasury Regulations” or “Regulation” means the
temporary and final regulations promulgated under the Code.

“VEBAs” is defined in Section 2.14(a).

“§338(h)(10) Election” is defined in Section
10.2(a).

 

 5

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