Document:

EXHIBIT
10.1

 

CALIPER
LIFE SCIENCES, INC.

 

2009
EQUITY INCENTIVE PLAN

 

Approved by Stockholders: June 2, 2009

Effective Date: June 2, 2009

Termination Date: June 1, 2019

 

1.             DEFINITIONS.

 

Unless otherwise
specified or unless the context otherwise requires, the following terms, as
used in this Caliper Life Sciences, Inc. 2009 Equity Incentive Plan, have
the following meanings:

 

Administrator
means the Board of Directors, unless it has delegated power to act on its
behalf to the Committee, in which case the Administrator means the Committee.

 

Affiliate
means a corporation which, for purposes of Section 424 of the Code, is a
parent or subsidiary of the Company, direct or indirect.

 

Agreement
means an agreement between the Company and a Participant delivered pursuant to
the Plan and pertaining to a Stock Right, in such form as the Administrator
shall approve.

 

Board of Directors
means the Board of Directors of the Company.

 

Cause
means, with respect to a Participant (a) dishonesty with respect to the
Company or any Affiliate, (b) insubordination, substantial malfeasance or
non-feasance of duty, (c) unauthorized disclosure of confidential
information, (d) breach by a Participant of any provision of any
employment, consulting, advisory, nondisclosure, non-competition or similar
agreement between the Participant and the Company or any Affiliate, and (e) conduct
substantially prejudicial to the business of the Company or any Affiliate;
provided, however, that any provision in an agreement between a Participant and
the Company or an Affiliate, which contains a conflicting definition of Cause
for termination and which is in effect at the time of such termination, shall
supersede this definition with respect to that Participant.  The determination of the Administrator as to
the existence of Cause will be conclusive on the Participant and the Company.

 

Code
means the United States Internal Revenue Code of 1986, as amended including any successor statute, regulation
and guidance thereto.

 

Committee
means the committee of the Board of Directors to which the Board of Directors
has delegated power to act under or pursuant to the provisions of the Plan.

 

 

Common Stock
means shares of the Company’s common stock, $.0001 par value per share.

 

Company
means Caliper Life Sciences, Inc., a Delaware corporation.

 

Consultant
means any natural person who is an advisor or consultant that provides
consulting services to the Company or its Affiliates, provided that such
services are not in connection with the offer or sale of securities in a
capital raising transaction, and do not directly or indirectly promote or
maintain a market for the Company’s or its Affiliates’ securities.

 

Disability
or Disabled means permanent and total disability as defined in Section 22(e)(3) of
the Code.

 

Employee
means any employee of the Company or of an Affiliate (including, without
limitation, an employee who is also serving as an officer or director of the
Company or of an Affiliate), designated by the Administrator to be eligible to
be granted one or more Stock Rights under the Plan.

 

Fair Market Value
of a Share of Common Stock means:

 

(1)           If the
Common Stock is listed on a national securities exchange or traded in the
over-the-counter market and sales prices are regularly reported for the Common
Stock, the closing or, if not applicable, the last price of the Common Stock on
the composite tape or other comparable reporting system for the trading day on
the applicable date and if such applicable date is not a trading day, the last
market trading day prior to such date;

 

(2)           If the
Common Stock is not traded on a national securities exchange but is traded on
the over-the-counter market, if sales prices are not regularly reported for the
Common Stock for the trading day referred to in clause (1), and if bid and
asked prices for the Common Stock are regularly reported, the mean between the
bid and the asked price for the Common Stock at the close of trading in the
over-the-counter market for the trading day on which Common Stock was traded on
the applicable date and if such applicable date is not a trading day, the last
market trading day prior to such date; and

 

(3)           If the
Common Stock is neither listed on a national securities exchange nor traded in
the over-the-counter market, such value as the Administrator, in good faith,
shall determine.

 

ISO
means an option meant to qualify as an incentive stock option under Section 422
of the Code.

 

Non-Qualified
Option means an option which is not intended to qualify as an
ISO.

 

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Option
means an ISO or Non-Qualified Option granted under the Plan.

 

Participant
means an Employee, director or Consultant of the Company or an Affiliate to
whom one or more Stock Rights are granted under the Plan.  As used herein, “Participant” shall include “Participant’s
Survivors” where the context requires.

 

Plan
means this Caliper Life Sciences, Inc. 2009 Equity Incentive Plan.

 

Securities Act
means the Securities Act of 1933, as amended.

 

Shares
means shares of the Common Stock as to which Stock Rights have been or may be
granted under the Plan or any shares of capital stock into which the Shares are
changed or for which they are exchanged within the provisions of
Paragraph 3 of the Plan.  The Shares
issued under the Plan may be authorized and unissued shares or shares held by
the Company in its treasury, or both.

 

Stock-Based Award
means a grant by the Company under the Plan of an equity award or an equity
based award which is not an Option or a Stock Grant.

 

Stock Grant
means a grant by the Company of Shares under the Plan.

 

Stock Right
means a right to Shares or the value of Shares of the Company granted pursuant
to the Plan — an ISO, a Non-Qualified Option, a Stock Grant or a Stock-Based
Award.

 

Survivor
means a deceased Participant’s legal representatives and/or any person or
persons who acquired the Participant’s rights to a Stock Right by will or by
the laws of descent and distribution.

 

2.             PURPOSES
OF THE PLAN.

 

The Plan is
intended to encourage ownership of Shares by Employees and directors of and
certain Consultants to the Company and its Affiliates in order to attract and
retain such people, to induce them to work for the benefit of the Company or of
an Affiliate and to provide additional incentive for them to promote the
success of the Company or of an Affiliate. 
The Plan provides for the granting of ISOs, Non-Qualified Options, Stock
Grants and Stock-Based Awards.

 

3.             SHARES
SUBJECT TO THE PLAN.

 

(a)           The
number of Shares which may be issued from time to time pursuant to this Plan
shall be 10,000,000 shares of Common Stock; provided, however, that in no event
shall Stock Rights with respect to more than 2,500,000 shares of Common Stock
be issued pursuant to this Plan as Stock Grants or other Stock-Based Awards
that are deemed to be “full value”

 

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awards, or in each case the equivalent of such number of Shares after
the Administrator, in its sole discretion, has interpreted the effect of any
future stock split, stock dividend, combination, recapitalization or similar
transaction in accordance with Paragraph 24 of this Plan.

 

(b)           If an
Option ceases to be “outstanding”, in whole or in part (other than by
exercise), or if the Company shall reacquire (at not more than its original
issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based
Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise
terminated or results in any Shares not being issued, the unissued or
reacquired Shares which were subject to such Stock Right shall again be
available for issuance from time to time pursuant to this Plan.  Notwithstanding the foregoing, if a Stock
Right is exercised, in whole or in part, by tender of Shares or if the Company’s
or an Affiliate’s tax withholding obligation is satisfied by withholding
Shares, the number of Shares deemed to have been issued under the Plan for
purposes of the limitation set forth in Paragraph 3(a) above shall be the
number of Shares that were subject to the Stock Right or portion thereof, and
not the net number of Shares actually issued.

 

4.             ADMINISTRATION
OF THE PLAN.

 

The Administrator
of the Plan will be the Board of Directors, except to the extent the Board of
Directors delegates its authority to the Committee, in which case the Committee
shall be the Administrator.  Subject to
the provisions of the Plan, the Administrator is authorized to:

 

(a)           Interpret
the provisions of the Plan and all Stock Rights and to make all rules and
determinations which it deems necessary or advisable for the administration of
the Plan;

 

(b)           Determine
which Employees, directors and Consultants shall be granted Stock Rights;

 

(c)           Determine
the number of Shares for which a Stock Right or Stock Rights shall be granted,
provided, however, that in no event shall Stock Rights with respect to more
than  1,500,000  Shares
be granted to any Participant in any fiscal year.

 

(d)           Specify
the terms and conditions upon which a Stock Right or Stock Rights may be
granted; and

 

(e)           Adopt
any sub-plans applicable to residents of any specified jurisdiction as it deems
necessary or appropriate in order to comply with or take advantage of any tax
or other laws applicable to the Company, any Affiliate or to Participants or to
otherwise facilitate the administration of the Plan, which sub-plans may
include additional restrictions or conditions applicable to Stock Rights or
Shares issuable pursuant to a Stock Right;

 

provided, however, that
all such interpretations, rules, determinations, terms and conditions shall be
made and prescribed in the context of not causing any adverse tax consequences
under Section 409A of the Code and preserving the tax status under Section 422
of the Code of those Options which are designated as ISOs.  Subject to the foregoing, the interpretation
and construction by the Administrator of any provisions of the Plan or of any
Stock Right granted under it shall be final, unless otherwise determined by the
Board of Directors, if the

 

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Administrator is the
Committee.  In addition, if the
Administrator is the Committee, the Board of Directors may take any action
under the Plan that would otherwise be the responsibility of the Committee.

 

To the extent
permitted under applicable law, the Board of Directors or the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any portion of its responsibilities
and powers to any other person selected by it. The Board of Directors or the
Committee may revoke any such allocation or delegation at any time.

 

5.             ELIGIBILITY
FOR PARTICIPATION.

 

The Administrator
will, in its sole discretion, name the Participants in the Plan; provided,
however, that each Participant must be an Employee, director or Consultant of
the Company or of an Affiliate at the time a Stock Right is granted.  Notwithstanding the foregoing, the
Administrator may authorize the grant of a Stock Right to a person not then an
Employee, director or Consultant of the Company or of an Affiliate; provided,
however, that the actual grant of such Stock Right shall be conditioned upon
such person becoming eligible to become a Participant at or prior to the time
of the execution of the Agreement evidencing such Stock Right.  ISOs may be granted only to Employees who are
deemed to be residents of the United States for tax purposes.  Non-Qualified Options, Stock Grants and
Stock-Based Awards may be granted to any Employee, director or Consultant of
the Company or an Affiliate.  The
granting of any Stock Right to any individual shall neither entitle that
individual to, nor disqualify him or her from, participation in any other grant
of Stock Rights or any grant under any other benefit plan established by the
Company or any Affiliate for Employees, directors or Consultants.

 

6.             TERMS
AND CONDITIONS OF OPTIONS.

 

Each Option shall
be set forth in writing in an Option Agreement, duly executed by the Company
and, to the extent required by law or requested by the Company, by the
Participant.  The Administrator may
provide that Options be granted subject to such terms and conditions,
consistent with the terms and conditions specifically required under this Plan,
as the Administrator may deem appropriate including, without limitation,
subsequent approval by the shareholders of the Company of this Plan or any
amendments thereto.  The Option
Agreements shall be subject to at least the following terms and conditions:

 

(a)           Non-Qualified
Options:  Each Option intended to be
a Non-Qualified Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards for any such Non-Qualified
Option:

 

(i)            Exercise
Price: Each Option Agreement shall state the exercise price (per share) of
the Shares covered by each Option, which exercise price shall be determined by
the Administrator and shall be at least equal to the Fair Market Value per share of
Common Stock on the date of grant of the Option.

 

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(ii)           Number
of Shares: Each Option Agreement shall state the number of Shares to which
it pertains.

 

(iii)          Option
Periods:  Each Option Agreement shall
state the date or dates on which it first is exercisable and the date after
which it may no longer be exercised, and may provide that the Option rights
accrue or become exercisable in installments over a period of months or years,
or upon the occurrence of certain conditions or the attainment of stated goals
or events.

 

(iv)          Option
Conditions:  Exercise of any Option
may be conditioned upon the Participant’s execution of a Share purchase
agreement in form satisfactory to the Administrator providing for certain
protections for the Company and its other shareholders, including requirements
that:

 

A.            The
Participant’s or the Participant’s Survivors’ right to sell or transfer the
Shares may be restricted; and

 

B.            The
Participant or the Participant’s Survivors may be required to execute letters
of investment intent and must also acknowledge that the Shares will bear
legends noting any applicable restrictions.

 

(v)           Term
of Option.  Each Option shall
terminate not more than ten years from the date of the grant or at such earlier
time as the Option Agreement may provide

 

(b)           ISOs:  Each Option intended to be an ISO shall be
issued only to an Employee who is deemed to be a resident of the United States
for tax purposes, and shall be subject to the following terms and conditions,
with such additional restrictions or changes as the Administrator determines
are appropriate but not in conflict with Section 422 of the Code and
relevant regulations and rulings of the Internal Revenue Service:

 

(i)            Minimum
standards:  The ISO shall meet the
minimum standards required of Non-Qualified Options, as described in Paragraph
6(a) above, except clause (i) thereunder.

 

(ii)           Exercise
Price:  Immediately before the ISO is
granted, if the Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:

 

A.            10% or
less of the total combined voting power of all classes of stock of the
Company or an Affiliate, the exercise price per share of the Shares covered by
each ISO shall not be less than 100% of the Fair Market Value per share of the
Common Stock on the date of grant of the Option; or

 

B.            More
than 10% of the total combined voting power of all classes of stock of the
Company or an Affiliate, the exercise price per share

 

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of the Shares covered
by each ISO shall not be less than 110% of the Fair Market Value per share of
the Common Stock on the date of grant of the Option.

 

(iii)          Term
of Option:  For Participants who own:

 

A.            10% or
less of the total combined voting power of all classes of stock of the
Company or an Affiliate, each ISO shall terminate not more than ten years from
the date of the grant or at such earlier time as the Option Agreement may
provide; or

 

B.            More
than 10% of the total combined voting power of all classes of stock of the
Company or an Affiliate, each ISO shall terminate not more than five years from
the date of the grant or at such earlier time as the Option Agreement may
provide.

 

(iv)          Limitation
on Yearly Exercise:  The Option
Agreements shall restrict the amount of ISOs which may become exercisable in
any calendar year (under this or any other ISO plan of the Company or an
Affiliate) so that the aggregate Fair Market Value (determined on the date each
ISO is granted) of the stock with respect to which ISOs are exercisable for the
first time by the Participant in any calendar year does not exceed $100,000.

 

7.             TERMS
AND CONDITIONS OF STOCK GRANTS.

 

Each offer of a
Stock Grant to a Participant shall state the date prior to which the Stock
Grant must be accepted by the Participant, and the principal terms of each
Stock Grant shall be set forth in an Agreement, duly executed by the Company
and, to the extent required by law or requested by the Company, by the
Participant.  The Agreement shall be in a
form approved by the Administrator and shall contain terms and conditions which
the Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards:

 

(a)           Each
Agreement shall state the purchase price per share, if any, of the Shares
covered by each Stock Grant, which purchase price shall be determined by the
Administrator but shall not be less than the minimum consideration required by
the  Delaware  General  Corporation  Law, if any, on the date of the grant of the Stock Grant;

 

(b)           Each
Agreement shall state the number of Shares to which the Stock Grant pertains;
and

 

(c)           Each
Agreement shall include the terms of any right of the Company to restrict or
reacquire the Shares subject to the Stock Grant, including the time and events
upon which such rights shall accrue and the purchase price therefor, if any.

 

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8.             TERMS
AND CONDITIONS OF OTHER STOCK-BASED AWARDS.

 

The Administrator
shall have the right to grant other Stock-Based Awards based upon the Common
Stock having such terms and conditions as the Administrator may determine,
including, without limitation, the grant of Shares based upon certain
conditions, the grant of securities convertible into Shares and the grant of
stock appreciation rights, phantom stock awards or stock units.  The principal terms of each Stock-Based Award
shall be set forth in an Agreement, duly executed by the Company and, to the
extent required by law or requested by the Company, by the Participant.  The Agreement shall be in a form approved by
the Administrator and shall contain terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company.

 

The Company
intends that the Plan and any Stock-Based Awards granted hereunder be exempt
from the application of Section 409A of the Code or meet the requirements
of paragraphs (2), (3) and (4) of subsection (a) of Section 409A
of the Code, to the extent applicable, and be operated in accordance with Section 409A
so that any compensation deferred under any Stock-Based Award (and applicable
investment earnings) shall not be included in income under Section 409A of
the Code.  Any ambiguities in the Plan
shall be construed to effect the intent as described in this Paragraph 8.

 

9.             EXERCISE
OF OPTIONS AND ISSUE OF SHARES.

 

An Option (or any
part or installment thereof) shall be exercised by giving written notice to the
Company or its designee, together with provision for payment of the aggregate
exercise price in accordance with this Paragraph for the Shares as to which the
Option is being exercised, and upon compliance with any other condition(s) set
forth in the Option Agreement.  Such
notice shall be signed by the person exercising the Option, shall state the
number of Shares with respect to which the Option is being exercised and shall
contain any representation required by the Plan or the Option Agreement.  Payment of the exercise price for the Shares
as to which such Option is being exercised shall be made (a) in United
States dollars in cash or by check, or (b) at the discretion of the
Administrator, through delivery of shares of Common Stock held for at least six months (if required to
avoid negative accounting treatment) having a Fair Market Value equal as
of the date of the exercise to the aggregate cash exercise price for the number
of Shares as to which the Option is being exercised, or (c) at the
discretion of the Administrator, by having the Company retain from the Shares
otherwise issuable upon exercise of the Option, a number of Shares having a
Fair Market Value equal as of the date of exercise to the aggregate exercise
price for the number of Shares as to which the Option is being exercised, or (d) at
the discretion of the Administrator, in accordance with a cashless exercise
program established with a securities brokerage firm, and approved by the
Administrator, or (e) at the discretion of the Administrator, by any
combination of (a), (b), (c) and (d) above or (f) at the
discretion of the Administrator, by payment of such other lawful consideration
as the Administrator may determine.Notwithstanding the foregoing, the
Administrator shall accept only such payment on exercise of an ISO as is
permitted by Section 422 of the Code.

 

The Company shall
then reasonably promptly deliver the Shares as to which such Option was
exercised to the Participant (or to the Participant’s Survivors, as the case
may be).  In

 

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determining what
constitutes “reasonably promptly,” it is expressly understood that the issuance
and delivery of the Shares may be delayed by the Company in order to comply
with any law or regulation (including, without limitation, state securities or “blue
sky” laws) which requires the Company to take any action with respect to the
Shares prior to their issuance.  The
Shares shall, upon delivery, be fully paid, non-assessable Shares.

 

The Administrator
shall have the right to accelerate the date of exercise of any installment of
any Option; provided that the Administrator shall not accelerate the exercise
date of any installment of any Option granted to an Employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to Paragraph 27)
without the prior approval of the Employee if such acceleration would violate
the annual vesting limitation contained in Section 422(d) of the
Code, as described in Paragraph 6(b)(iv).

 

The Administrator
may, in its discretion, amend any term or condition of an outstanding Option
provided (i) such term or condition as amended is permitted by the Plan, (ii) any
such amendment shall be made only with the consent of the Participant to whom the
Option was granted, or in the event of the death of the Participant, the
Participant’s Survivors, if the
amendment is adverse to the Participant, and (iii) any such
amendment of any Option shall be made only after the Administrator determines
whether such amendment would constitute a “modification” of any Option which is
an ISO (as that term is defined in Section 424(h) of the Code) or
would cause any adverse tax consequences for the holder of any Option
including, but not limited to, pursuant to Section 409A of the Code.

 

10.           ACCEPTANCE
OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.

 

A Stock Grant or
Stock-Based Award (or any part or installment thereof) shall be accepted by
executing the applicable Agreement and delivering it to the Company or its
designee, together with provision for payment of the aggregate exercise price,
if any, in accordance with this Paragraph for the Shares as to which such Stock
Grant or Stock-Based Award is being accepted, and upon compliance with any
other conditions set forth in the applicable Agreement.  Payment of the purchase price for the Shares
as to which such Stock Grant or Stock-Based Award is being accepted shall be
made (a) in United States dollars in cash or by check, or (b) at the
discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to
avoid negative accounting treatment) and having a Fair Market Value
equal as of the date of acceptance of the Stock Grant or Stock Based-Award to
the purchase price of the Stock Grant or Stock-Based Award, or (c) at the
discretion of the Administrator, by any combination of (a) and (b) above;
or (d) at the discretion of the Administrator, by payment of such other
lawful consideration as the Administrator may determine.

 

The Company shall
then, if required by the applicable Agreement, reasonably promptly deliver the
Shares as to which such Stock Grant or Stock-Based Award was accepted to the
Participant (or to the Participant’s Survivors, as the case may be), subject to
any escrow provision set forth in the applicable Agreement.  In determining what constitutes “reasonably
promptly,” it is expressly understood that the issuance and delivery of the
Shares may be delayed

 

9

 

by the Company in order
to comply with any law or regulation (including, without limitation, state
securities or “blue sky” laws) which requires the Company to take any action
with respect to the Shares prior to their issuance.

 

The Administrator
may, in its discretion, amend any term or condition of an outstanding Stock
Grant, Stock-Based Award or applicable Agreement provided (i) such term or
condition as amended is permitted by the Plan, (ii) any such amendment
shall be made only with the consent of the Participant to whom the Stock Grant
or Stock-Based Award was made, if the
amendment is adverse to the Participant, and (iii) any such
amendment shall be made only after the Administrator determines whether such
amendment would cause any adverse tax consequences to the Participant,
including, but not limited to, pursuant to Section 409A of the Code.

 

11.           RIGHTS
AS A SHAREHOLDER.

 

No Participant to
whom a Stock Right has been granted shall have rights as a shareholder with
respect to any Shares covered by such Stock Right, except after due exercise of
the Option or acceptance of the Stock Grant or as set forth in any Agreement,
and tender of the aggregate exercise or purchase price, if any, for the Shares
being purchased pursuant to such exercise or acceptance and registration of the
Shares in the Company’s share register in the name of the Participant.

 

12.           ASSIGNABILITY
AND TRANSFERABILITY OF STOCK RIGHTS.

 

By its terms, a
Stock Right granted to a Participant shall not be transferable by the Participant
other than (i) by will or by the laws of descent and distribution, or (ii) as
approved by the Administrator in its discretion and set forth in the applicable
Agreement provided that no Stock Right may be transferred by a Participant for
value.  Notwithstanding the foregoing, an
ISO transferred except in compliance with clause (i) above shall no longer
qualify as an ISO.  The designation of a
beneficiary of a Stock Right by a Participant, with the prior approval of the
Administrator and in such form as the Administrator shall prescribe, shall not
be deemed a transfer prohibited by this Paragraph.  Except as provided above, a Stock Right shall
only be exercisable or may only be accepted, during the Participant’s lifetime,
by such Participant (or by his or her legal representative) and shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar
process.  Any attempted transfer,
assignment, pledge, hypothecation or other disposition of any Stock Right or of
any rights granted thereunder contrary to the provisions of this Plan, or the
levy of any attachment or similar process upon a Stock Right, shall be null and
void.

 

13.           EFFECT
ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR
DISABILITY.

 

Except as
otherwise provided in a Participant’s Option Agreement, in the event of a
termination of service (whether as an Employee, director or Consultant) with
the Company or an Affiliate before the Participant has exercised an Option, the
following rules apply:

 

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(a)           A
Participant who ceases to be an Employee, director or Consultant of the Company
or of an Affiliate (for any reason other than termination for Cause,
Disability, or death for which events there are special rules in
Paragraphs 14, 15, and 16, respectively), may exercise any Option granted to
him or her to the extent that the Option is exercisable on the date of such
termination of service, but only within three months after such date of
termination of service, or such other period of time as the Administrator may
designate in a Participant’s Option Agreement.

 

(b)           Except
as provided in Subparagraph (c) below, or Paragraph 15 or 16, in no event
may an Option intended to be an ISO, be exercised later than three months after
the Participant’s termination of employment.

 

(c)           The
provisions of this Paragraph, and not the provisions of Paragraph 15 or 16,
shall apply to a Participant who subsequently becomes Disabled or dies after
the termination of employment, director status or consultancy; provided,
however, in the case of a Participant’s Disability or death within three months
after the termination of employment, director status or consultancy, the
Participant or the Participant’s Survivors may exercise the Option within one
year after the date of the Participant’s termination of service, but in no
event after the date of expiration of the term of the Option.

 

(d)           Notwithstanding
anything herein to the contrary, if subsequent to a Participant’s termination
of employment, termination of director status or termination of consultancy,
but prior to the exercise of an Option, the Board of Directors determines that,
either prior or subsequent to the Participant’s termination, the Participant
engaged in conduct which would constitute Cause, then such Participant shall
forthwith cease to have any right to exercise any Option.

 

(e)           A
Participant to whom an Option has been granted under the Plan who is absent
from the Company or an Affiliate because of temporary disability (any
disability other than a Disability as defined in Paragraph 1 hereof), or who is
on leave of absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have terminated such
Participant’s employment, director status or consultancy with the Company or
with an Affiliate, except as the Administrator may otherwise expressly provide;
provided, however, that, for ISOs, any leave of absence granted by the
Administrator of greater than ninety days, unless pursuant to a contract or
statute that guarantees the right to reemployment, shall cause such ISO to
become a Non-Qualified Option.

 

(f)            Except
as required by law or as set forth in a Participant’s Option Agreement, Options
granted under the Plan shall not be affected by any change of a Participant’s
status within or among the Company and any Affiliates, so long as the
Participant continues to be an Employee, director or Consultant of the Company
or any Affiliate.

 

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14.           EFFECT
ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE.

 

Except as otherwise
provided in a Participant’s Option Agreement, the following rules apply if
the Participant’s service (whether as an Employee, director or Consultant) with
the Company or an Affiliate is terminated for Cause prior to the time that all
his or her outstanding Options have been exercised:

 

(a)           All
outstanding and unexercised Options as of the time the Participant is notified
his or her service is terminated for Cause will immediately be forfeited.

 

(b)           Cause
is not limited to events which have occurred prior to a Participant’s
termination of service, nor is it necessary that the Administrator’s finding of
Cause occur prior to termination.  If the
Administrator determines, subsequent to a Participant’s termination of service
but prior to the exercise of an Option, that either prior or subsequent to the
Participant’s termination the Participant engaged in conduct which would
constitute Cause, then the right to exercise any Option is forfeited.

 

15.           EFFECT
ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.

 

Except as
otherwise provided in a Participant’s Option Agreement:

 

(a)           A
Participant who ceases to be an Employee, director or Consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant to the extent that the Option has become exercisable but has
not been exercised on the date of Disability.

 

(b)           A
Disabled Participant may exercise such rights only within the period ending one
year after the date of the Participant’s termination due to Disability,
notwithstanding that the Participant might have been able to exercise the
Option as to some or all of the Shares on a later date if the Participant had
not become Disabled and had continued to be an Employee, director or Consultant
or, if earlier, within the originally prescribed term of the Option.  The Administrator shall make the
determination both of whether Disability has occurred and the date of its
occurrence (unless a procedure for such determination is set forth in another
agreement between the Company and such Participant, in which case such
procedure shall be used for such determination).  If requested, the Participant shall be
examined by a physician selected or approved by the Administrator, the cost of
which examination shall be paid for by the Company.

 

16.           EFFECT
ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except as
otherwise provided in a Participant’s Option Agreement:

 

(a)           In
the event of the death of a Participant while the Participant is an Employee,
director or Consultant of the Company or of an Affiliate, such Option may be
exercised by the

 

12

 

Participant’s Survivors to the extent that the Option has become
exercisable but has not been exercised on the date of death

 

(b)           If the Participant’s
Survivors wish to exercise the Option, they must take all necessary steps to
exercise the Option within eighteen months after the date of death of such
Participant, notwithstanding that the decedent might have been able to exercise
the Option as to some or all of the Shares on a later date if he or she had not
died and had continued to be an Employee, director or Consultant or, if
earlier, within the originally prescribed term of the Option.

 

17.           EFFECT
OF TERMINATION OF SERVICE ON UNACCEPTED STOCK GRANTS.

 

In the event of a
termination of service (whether as an Employee, director or Consultant) with
the Company or an Affiliate for any reason before the Participant has accepted
a Stock Grant, such offer shall terminate.

 

For purposes of
this Paragraph 17 and Paragraph 18 below, a Participant to whom a Stock Grant
has been offered and accepted under the Plan who is absent from work with the
Company or with an Affiliate because of temporary disability (any disability
other than a Disability as defined in Paragraph 1 hereof), or who is on leave
of absence for any purpose, shall not, during the period of any such absence,
be deemed, by virtue of such absence alone, to have terminated such Participant’s
employment, director status or consultancy with the Company or with an
Affiliate, except as the Administrator may otherwise expressly provide.

 

In addition, for
purposes of this Paragraph 17 and Paragraph 18 below, any change of employment
or other service within or among the Company and any Affiliates shall not be
treated as a termination of employment, director status or consultancy so long
as the Participant continues to be an Employee, director or Consultant of the
Company or any Affiliate.

 

18.           EFFECT ON STOCK
GRANTS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

 

Except as
otherwise provided in a Participant’s Stock Grant Agreement, in the event of a
termination of service (whether as an Employee, director or Consultant), other
than termination for Cause, Disability, or death for which events there are
special rules in Paragraphs 19, 20, and 21, respectively, before all
forfeiture provisions or Company rights of repurchase shall have lapsed, then
the Company shall have the right to cancel or repurchase that number of Shares
subject to a Stock Grant as to which the Company’s forfeiture or repurchase
rights have not lapsed.

 

13

 

19.           EFFECT
ON STOCK GRANTS OF TERMINATION OF SERVICE FOR CAUSE.

 

Except as
otherwise provided in a Participant’s Stock Grant Agreement, the following rules apply
if the Participant’s service (whether as an Employee, director or Consultant)
with the Company or an Affiliate is terminated for Cause:

 

(a)           All
Shares subject to any Stock Grant that remain subject to forfeiture provisions
or as to which the Company shall have a repurchase right shall be immediately
forfeited to the Company as of the time the Participant is notified his or her
service is terminated for Cause.

 

(b)           Cause
is not limited to events which have occurred prior to a Participant’s
termination of service, nor is it necessary that the Administrator’s finding of
Cause occur prior to termination.  If the
Administrator determines, subsequent to a Participant’s termination of service,
that either prior or subsequent to the Participant’s termination the
Participant engaged in conduct which would constitute Cause, then all Shares
subject to any Stock Grant that remained subject to forfeiture provisions or as
to which the Company had a repurchase right on the date of termination shall be
immediately forfeited to the Company.

 

20.           EFFECT
ON STOCK GRANTS OF TERMINATION OF SERVICE FOR DISABILITY.

 

Except as
otherwise provided in a Participant’s Stock Grant Agreement, the following rules apply
if a Participant ceases to be an Employee, director or Consultant of the
Company or of an Affiliate by reason of Disability:  to the extent the forfeiture provisions or
the Company’s rights of repurchase have not lapsed on the date of Disability,
they shall be exercisable; provided, however, that in the event such forfeiture
provisions or rights of repurchase lapse periodically, such provisions or
rights shall lapse to the extent of a pro rata portion of the Shares subject to
such Stock Grant through the date of Disability as would have lapsed had the
Participant not become Disabled.  The
proration shall be based upon the number of days accrued prior to the date of
Disability.

 

The Administrator
shall make the determination both as to whether Disability has occurred and the
date of its occurrence (unless a procedure for such determination is set forth
in another agreement between the Company and such Participant, in which case
such procedure shall be used for such determination).  If requested, the Participant shall be
examined by a physician selected or approved by the Administrator, the cost of
which examination shall be paid for by the Company.

 

21.           EFFECT
ON STOCK GRANTS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except as
otherwise provided in a Participant’s Stock Grant Agreement, the following rules apply
in the event of the death of a Participant while the Participant is an
Employee, director or Consultant of the Company or of an Affiliate:  to the extent the forfeiture provisions or
the Company’s rights of repurchase have not lapsed on the date of death, they
shall be exercisable; provided, however, that in the event such forfeiture
provisions or rights of repurchase lapse periodically, such provisions or
rights shall lapse to the extent of a pro rata

 

14

 

portion of the Shares
subject to such Stock Grant through the date of death as would have lapsed had
the Participant not died.  The proration
shall be based upon the number of days accrued prior to the Participant’s death.

 

22.           PURCHASE
FOR INVESTMENT.

 

Unless the offering and
sale of the Shares to be issued upon the particular exercise or acceptance of a
Stock Right shall have been effectively registered under the Securities Act,
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:

 

(a)           The
person who exercises or accepts such Stock Right shall warrant to the Company,
prior to the receipt of such Shares, that such person is acquiring such Shares
for his or her own account, for investment, and not with a view to, or for sale
in connection with, the distribution of any such Shares, in which event the
person acquiring such Shares shall be bound by the provisions of the following
legend (or a legend in substantially similar form) which shall be endorsed upon
the certificate evidencing the Shares issued pursuant to such exercise or such
grant:

 

“The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any person,
including a pledgee, unless (1) either (a) a Registration Statement
with respect to such shares shall be effective under the Securities Act of
1933, as amended, or (b) the Company shall have received an opinion of
counsel satisfactory to it that an exemption from registration under such Act
is then available, and (2) there shall have been compliance with all
applicable state securities laws.”

 

(b)           At
the discretion of the Administrator, the Company shall have received an opinion
of its counsel that the Shares may be issued upon such particular exercise or
acceptance in compliance with the Securities Act without registration
thereunder.

 

23.           DISSOLUTION
OR LIQUIDATION OF THE COMPANY.

 

Upon the
dissolution or liquidation of the Company, all Options granted under this Plan
which as of such date shall not have been exercised and all Stock Grants and
Stock-Based Awards which have not been accepted will terminate and become null
and void; provided, however, that if the rights of a Participant or a Participant’s
Survivors have not otherwise terminated and expired, the Participant or the
Participant’s Survivors will have the right immediately prior to such
dissolution or liquidation to exercise or accept any Stock Right to the extent
that the Stock Right is exercisable or subject to acceptance as of the date
immediately prior to such dissolution or liquidation.  Upon the dissolution or liquidation of the
Company, any outstanding Stock-Based Awards shall immediately terminate unless
otherwise determined by the Administrator or specifically provided in the
applicable Agreement.

 

15

 

24.           ADJUSTMENTS.

 

Upon the occurrence of
any of the following events, a Participant’s rights with respect to any Stock
Right granted to him or her hereunder shall be adjusted as hereinafter
provided, unless otherwise specifically provided in a Participant’s Agreement:

 

(a)           Stock
Dividends and Stock Splits.  If (i) the
shares of Common Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any shares of Common
Stock as a stock dividend on its outstanding Common Stock, or (ii) additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Common Stock,
the number of shares of Common Stock deliverable upon the exercise of an Option
or acceptance of a Stock Grant shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made including, in the
exercise or purchase price per share, to reflect such events.  The number of Shares subject to the
limitations in Paragraph 3(a) and 4(c) shall also be proportionately
adjusted upon the occurrence of such events.

 

(b)           Corporate
Transactions.  If the Company is to
be consolidated with or acquired by another entity in a merger, consolidation,
or sale of all or substantially all of the Company’s assets other than a
transaction to merely change the state of incorporation (a “Corporate
Transaction”), the Administrator or the board of directors of any entity
assuming the obligations of the Company hereunder (the “Successor Board”),
shall, as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by substituting on an equitable basis for
the Shares then subject to such Options either the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that such Options must be exercised
(either (A) to the extent then exercisable or, (B) at the discretion
of the Administrator, any such Options being made partially or fully
exercisable for purposes of this Subparagraph), within a specified number of
days of the date of such notice, at the end of which period such Options which
have not been exercised shall terminate; or (iii) terminate such Options
in exchange for payment of an amount equal to the consideration payable upon
consummation of such Corporate Transaction to a holder of the number of shares
of Common Stock into which such Option
would have been exercisable (either (A) to the extent then
exercisable or, (B) at the discretion of the Administrator, any such
Options being made partially or fully exercisable for purposes of this
Subparagraph) less the aggregate exercise price thereof.  For
purposes of determining the payments to be made pursuant to Subclause (iii) above,
in the case of a Corporate Transaction the consideration for which, in whole or
in part, is other than cash, the consideration other than cash shall be valued
at the fair value thereof as determined in good faith by the Board of
Directors.

 

With respect to
outstanding Stock Grants, the Administrator or the Successor Board, shall as to
outstanding Stock Grants make appropriate provision for the continuation of
such Stock Grants on the same terms and conditions by substituting on an
equitable basis for the Shares then subject to such Stock Grants either the
consideration payable with respect to the outstanding Shares of Common Stock in
connection with the Corporate Transaction or securities of any successor or
acquiring entity.  In lieu of the foregoing, in connection with
any Corporate Transaction, the Administrator may provide that, upon
consummation of the Corporate

 

16

 

Transaction,
each outstanding Stock Grant shall be terminated in exchange for payment of an
amount equal to the consideration payable upon consummation of such Corporate
Transaction to a holder of the number of shares of Common Stock comprising such
Stock Grant (to the extent such Stock Grant is no longer subject to any
forfeiture or repurchase rights then in effect or, at the discretion of the
Administrator, all forfeiture and repurchase rights being waived for purposes
of this Subclause).

 

(c)           Recapitalization
or Reorganization.  In the event of a
recapitalization or reorganization of the Company other than a Corporate
Transaction pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock,
a Participant upon exercising an Option or accepting a Stock Grant after the
recapitalization or reorganization shall be entitled to receive for the price
paid upon such exercise or acceptance if any, the number of replacement
securities which would have been received if such Option had been exercised or
Stock Grant accepted prior to such recapitalization or reorganization.

 

(d)           Adjustments
to Stock-Based Awards.  Upon the
happening of any of the events described in Subparagraphs a, b or c above, any
outstanding Stock-Based Award shall be appropriately adjusted to reflect the
events described in such Subparagraphs. 
The Administrator or the Successor Board shall determine the specific
adjustments to be made under this Paragraph 24, including, but not limited to
the effect if any, Corporate Transaction and, subject to Paragraph 4, its
determination shall be conclusive.

 

(e)           Modification
of Options.  Notwithstanding the
foregoing, any adjustments made pursuant to Subparagraph a, b or c above with
respect to Options shall be made only after the Administrator determines
whether such adjustments would constitute a “modification” of any ISOs (as that
term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of Options, including, but not limited
to, pursuant to Section 409A of the Code. 
If the Administrator determines that such adjustments made with respect
to Options would constitute a modification or other adverse tax consequence, it
may refrain from making such adjustments, unless the holder of an Option
specifically agrees in writing that such adjustment be made and such writing
indicates that the holder has full knowledge of the consequences of such “modification”
on his or her income tax treatment with respect to the Option.  This paragraph shall not apply to the
acceleration of the vesting of any ISO that would cause any portion of the ISO
to violate the annual vesting limitation contained in Section 422(d) of
the Code, as described in Paragraph 6b(iv).

 

25.           ISSUANCES
OF SECURITIES.

 

Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to Stock Rights.  Except as expressly provided herein, no
adjustments shall be made for dividends paid in cash or in property (including
without limitation, securities) of the Company prior to any issuance of Shares
pursuant to a Stock Right.

 

17

 

26.           FRACTIONAL
SHARES.

 

No fractional shares
shall be issued under the Plan and the person exercising a Stock Right shall
receive from the Company cash in lieu of such fractional shares equal to the
Fair Market Value thereof.

 

27.           CONVERSION
OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.

 

The Administrator,
at the written request of any Participant, may in its discretion take such
actions as may be necessary to convert such Participant’s ISOs (or any portions
thereof) that have not been exercised on the date of conversion into
Non-Qualified Options at any time prior to the expiration of such ISOs,
regardless of whether the Participant is an Employee of the Company or an
Affiliate at the time of such conversion. 
At the time of such conversion, the Administrator (with the consent of
the Participant) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Administrator in its discretion may determine,
provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give
any Participant the right to have such Participant’s ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. 
The Administrator, with the consent of the Participant, may also
terminate any portion of any ISO that has not been exercised at the time of
such conversion.

 

28.           WITHHOLDING.

 

In the event that
any federal, state, or local income taxes, employment taxes, Federal Insurance
Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by
applicable law or governmental regulation to be withheld from the Participant’s
salary, wages or other remuneration in connection with the exercise or
acceptance of a Stock Right or in connection with a Disqualifying Disposition
(as defined in Paragraph 29) or upon the lapsing of any forfeiture provision or
right of repurchase or for any other reason required by law, the Company may
withhold from the Participant’s compensation, if any, or may require that the
Participant advance in cash to the Company, or to any Affiliate of the Company
which employs or employed the Participant, the statutory minimum amount of such
withholdings unless a different withholding arrangement, including the use of
shares of the Company’s Common Stock or a promissory note, is authorized by the
Administrator (and permitted by law). 
For purposes hereof, the fair market value of the shares withheld for
purposes of payroll withholding shall be determined in the manner set forth
under the definition of Fair Market Value provided in Paragraph 1 above, as of
the most recent practicable date prior to the date of exercise.  If the Fair Market Value of the shares
withheld is less than the amount of payroll withholdings required, the
Participant may be required to advance the difference in cash to the Company or
the Affiliate employer.  The
Administrator in its discretion may condition the exercise of an Option for
less than the then Fair Market Value on the Participant’s payment of such
additional withholding.

 

18

 

29.           NOTICE
TO COMPANY OF DISQUALIFYING DISPOSITION.

 

Each Employee who
receives an ISO must agree to notify the Company in writing immediately after
the Employee makes a Disqualifying Disposition of any Shares acquired pursuant
to the exercise of an ISO.  A
Disqualifying Disposition is defined in Section 424(c) of the Code
and includes any disposition (including any sale or gift) of such Shares before
the later of (a) two years after the date the Employee was granted the
ISO, or (b) one year after the date the Employee acquired Shares by
exercising the ISO, except as otherwise provided in Section 424(c) of
the Code.  If the Employee has died before
such Shares are sold, these holding period requirements do not apply and no
Disqualifying Disposition can occur thereafter.

 

30.           TERM;
TERMINATION OF THE PLAN.

 

The Plan will become
effective on June 2, 2009, subject to approval of the Plan by the shareholders
of the Company, and will terminate on June 1, 2019.  The Plan may be terminated at an earlier date
by vote of the shareholders or the Board of Directors of the Company; provided,
however, that any such earlier termination shall not affect any Agreements
executed prior to the effective date of such termination.  Termination of the Plan shall not affect any Stock Rights theretofore
granted.

 

31.           AMENDMENT
OF THE PLAN AND AGREEMENTS.

 

The Plan may be
amended by the shareholders of the Company. 
The Plan may also be amended by the Administrator, including, without
limitation, to the extent necessary to qualify any or all outstanding Stock
Rights granted under the Plan or Stock Rights to be granted under the Plan for
favorable federal income tax treatment as may be afforded incentive stock
options under Section 422 of the Code (including deferral of taxation upon
exercise), and to the extent necessary to qualify the shares issuable upon
exercise or acceptance of any outstanding Stock Rights granted, or Stock Rights
to be granted, under the Plan for listing on any national securities exchange
or quotation in any national automated quotation system of securities
dealers.  In addition, if NASDAQ amends
its corporate governance rules so that such rules no longer require
stockholder approval of “material amendments” of equity compensation plans,
then, from and after the effective date of such an amendment to the NASDAQ
rules, no amendment of the Plan which (i) materially increases the number
of shares to be issued under the Plan (other than to reflect a reorganization,
stock split, merger, spin-off or similar transaction); (ii) materially
increases the benefits to Participants, including any material change to: (a) permit
a repricing (or decrease in exercise price) of outstanding Options, (b) reduce
the price at which Shares or Options may be offered, or (c) extend the
duration of the Plan; (iii) materially expands the class of Participants
eligible to participate in the Plan; or (iv) expands the types of awards provided
under the Plan shall become effective unless stockholder approval is
obtained.  Any amendment approved by the
Administrator which the Administrator determines is of a scope that requires
shareholder approval shall be subject to obtaining such shareholder
approval.  Any modification or amendment
of the Plan shall not, without the consent of a Participant, adversely affect his or her rights
under a Stock Right previously granted to him or her.  With the consent of the Participant affected,
the Administrator may amend outstanding Agreements in a manner which

 

19

 

may be adverse to the
Participant but which is not inconsistent with the Plan.  In the discretion of the Administrator,
outstanding Agreements may be amended by the Administrator in a manner which is
not adverse to the Participant.

 

32.           EMPLOYMENT
OR OTHER RELATIONSHIP.

 

Nothing in this
Plan or any Agreement shall be deemed to prevent the Company or an Affiliate
from terminating the employment, consultancy or director status of a
Participant, nor to prevent a Participant from terminating his or her own
employment, consultancy or director status or to give any Participant a right
to be retained in employment or other service by the Company or any Affiliate
for any period of time.

 

33.           GOVERNING
LAW.

 

This Plan shall be
construed and enforced in accordance with the law of the State of Delaware.

 

20EXHIBIT 10.1

 

Herbst
Gaming Amended and Restated Lock-Up Agreement

 

As of June 29, 2009

 

To the Consenting Lenders Identified

on the Signature Pages Hereof:

 

This
letter agreement (this “Agreement”) restates and amends the terms and
provisions of a letter agreement dated as of March 9, 2009 (as amended,
supplemented or otherwise modified and in effect as of the date hereof, the “Original
Lock-Up Agreement”).  This Agreement
sets forth the terms on which Consenting Lenders (as defined below) agree,
among other things, to support a restructuring (the “Restructuring”) by
Herbst Gaming, Inc. (the “Company”) and the Guarantor Debtors (as
defined below) and by which the Company and Guarantor Debtors reaffirm their
obligations under the Original Lock-Up Agreement as amended and modified
herein.  Capitalized terms used herein
without definition shall have the meanings ascribed to such terms in the
Debtors’ Joint Plan of Reorganization (the “Plan”) to be filed by the
Company with the United States Bankruptcy Court for the District of Nevada (the
“Bankruptcy Court”) in the pending chapter 11 cases (the “Bankruptcy
Cases”) for the Company and the Guarantor Debtors (collectively, the “Debtors”)
which Bankruptcy Cases were commenced voluntarily on March 22, 2009 (the “Petition
Date”) in the form attached hereto as Exhibit A.

 

For
purposes of this Agreement, (a) “Consenting Lenders” means each of
the lenders under the Company’s Second Amended and Restated Credit Agreement,
dated as of January 3, 2007 (as amended, supplemented or otherwise
modified and in effect as of the date hereof, the “Senior Credit Facility”)
that executed the Original Lock-Up Agreement, as listed on Schedule 1
hereto (other than the Opt-out Consenting Lenders), plus any Opt-in Consenting
Lenders; (b) “Guarantor Debtors” means each of the Company’s
subsidiaries that are guarantors of the Company’s obligations under the Senior
Credit Facility and/or the Senior Subordinated Notes; (c) “Opt-out
Consenting Lenders” means those Consenting Lenders that notify the
Administrative Agent’s counsel as provided in Section 4 on or
before July 7, 2009 that they no longer agree to be a Consenting Lender
and therefore are no longer bound by the Original Lock-Up Agreement or this
Agreement; (d) “Opt-in Consenting Lenders” means each of the
undersigned lenders that execute this Agreement at any time; and (e) “Effective
Date” means June 29, 2009.

 

In
exchange for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Debtors and each Consenting Lender intending
to be legally bound, hereby agree that this Agreement shall restate and amend
the Original Lock-Up Agreement in its entirety 
as follows:

 

1.             The Bankruptcy Case.

 

(a)           The Debtors,
the Consenting Lenders and the THI Parties (as defined therein) were previously
party to the Original Lock-Up Agreement. 
A termination event thereunder was waived on March 20, 2009; such
Original Lock-Up Agreement was terminated with respect to the THI Parties and
amended and waived with respect to the remaining parties on May 28,
2009.  Each of
the parties hereto hereby acknowledges and agrees that as of the date hereof,
the Original Lock-Up Agreement is valid, binding and effective from and
following the date thereof, and that from and following the date hereof, the
Original Lock-Up Agreement shall be amended and restated in its entirety as
provided for herein.

 

(b)           The Debtors
intend to file the Plan, which is in form and substance reasonably satisfactory
to the Consenting Lenders, prior to the hearing on the Disclosure Statement,
subject to (i) further immaterial or ministerial revisions, and (ii) further
material revisions acceptable to Required Consenting Lenders.

 

1

 

(c)           This
Agreement is not and shall not be deemed to be a solicitation for consents to
the Plan.  The solicitation shall not
occur until the Bankruptcy Court has approved a disclosure statement for the
Plan and shall occur in accordance with such solicitation procedures as may be
approved or established by the Bankruptcy Court.

 

2.             The Restructuring; Conversion of Senior
Credit Facility Obligations; Corporate Governance.

 

(a)           As more
fully set forth in the Plan the Restructuring will principally consist of (a) conversion
of all outstanding obligations under the Senior Credit Facility into debt and
equity of the Reorganized Debtors and a newly formed holding company,
Reorganized Herbst Gaming, LLC, (b) termination of all outstanding
obligations under the indentures (the “Indentures”) governing the
Company’s (i) 8 1/8% Senior Subordinated Notes due 2012 and/or (ii) 7%
Senior Subordinated Notes due 2014 (together, the “Senior Subordinated Notes”),
(c) cancellation of 100% of the existing equity in the Company and (d) negotiated
amendments or modifications to, assumptions and assignments of, or rejections
of the Debtors’ executory contracts and unexpired leases, and (e) certain
other matters as set forth in the Plan.

 

(b)           The
outstanding principal balance under the Senior Credit Facility as of the
Petition Date  was $847.96 million.  Pursuant to the Restructuring and as provided
for in the Plan, $350 million of these obligations will be allocated to
Reorganized Herbst Gaming pursuant to a new first priority senior secured bank
loan (the “Reorganized Herbst Gaming Senior Loan”) having the terms set
forth in Exhibit B  attached
hereto; and (ii) the remaining balance of these obligations will be
exchanged for 100% of the new common equity of Reorganized Herbst Gaming (the “Reorganized
Herbst Gaming New Common Equity”). 
The parties shall cooperate to structure the Reorganized Herbst Gaming
Senior Loan and Reorganized Herbst Gaming New Common Equity to be issued under
the Plan in a manner that facilitates and satisfies applicable regulatory
requirements.

 

(c)           During the
Bankruptcy Case, there was created the position of COO/Gaming.  The COO/Gaming is  David D. Ross or, if a replacement is needed,
such replacement shall (i) be reasonable acceptable to Required Consenting
Lenders; (ii) satisfy all applicable requirements under applicable gaming
laws and regulations and, in conjunction with the Company and with the Company’s
full cooperation, file any required applications in connection therewith; (iii) be
reasonably acceptable to the Company’s board of directors; (iv) be
employed by the Company (as a member of the Company’s Office of the CEO and
reporting to the Company’s board of directors) until the Substantial
Consummation Date; (v) not be removed other than for cause and, if removed
for cause, promptly be replaced by an individual reasonably acceptable to
Required Consenting Lenders and the Company’s board of directors; and (vi) be
made available to the Consenting Lenders upon reasonable notice to provide
status reports on operations.

 

(d)           The initial
board of directors of Reorganized Herbst Gaming shall be comprised of directors
selected by the Lenders.  Each director
shall satisfy all applicable requirements under applicable gaming laws and
regulations.  Reorganized Herbst Gaming
will adopt a certificate of organization, an LLC agreement or other governance
documents consistent with applicable securities, bankruptcy and/or state
laws.  Appropriate corporate governance
documents shall be set forth in the definitive documentation.

 

3.             Consultation and Cooperation.

 

(a)           The Debtors and the Consenting
Lenders agree to consult and cooperate with each other in connection with any
analyses, appearances, presentations, briefs, filings, arguments or proposals
made or submitted by any such party to the Bankruptcy Court, other creditor
constituents or other parties with an interest in the Restructuring.

 

(b)           From the
Effective Date until all gaming licenses and approvals are obtained as required
to effectuate the Plan and the Plan is substantially consummated (the “Substantial
Consummation Date”), the Debtors and the Consenting Lenders will (i) work
together in good faith to determine 

 

2

 

the
optimal management of operations, maintenance of working capital and
utilization of excess cash flow of Reorganized Herbst Gaming and (ii) reasonably
cooperate with each other in connection with the management and operations of
Reorganized Herbst Gaming, all in accordance with applicable gaming laws and
regulations.

 

4.             Opt-Out Right of Lenders. Each Consenting Lender under the
Original Lock-Up Agreement shall have the right to no longer be bound by the
Original Lock-Up Agreement and to not enter into this Agreement by notifying
the Administrative Agent’s counsel in writing via facsimile at 212-822-5231 or
electronic mail at achen@milbank.com on or before July 7, 2009 that it no
longer agrees to be a Consenting Lender and therefore is no longer bound by the
Original Lock-Up Agreement or this Agreement (“Opt-out Right”).

 

5.             Effectiveness.  This
Agreement shall become effective as of the Effective Date provided   Consenting Lenders holding in the aggregate
at least a majority in amount of all outstanding Claims under the Senior Credit
Facility remain after the exercise of Opt-out Right by any Opt-out Consenting
Lenders.

 

6.             Pursuit/Support of the Restructuring.

 

(a)           Each of the
Debtors agrees and covenants that it shall (i) use
commercially reasonable efforts to successfully consummate the Restructuring in
the manner and in accordance with the timeline contemplated by this Agreement, (ii) use
commercially reasonable efforts to avoid the occurrence of any of the Agreement
Termination Events set forth in Section 13, (iii) take all
commercially reasonably necessary actions to achieve the expeditious
confirmation and consummation of the Plan, and (iv) use commercially reasonable efforts to maintain the Final Order
Approving Amended and Restated Stipulation Authorizing Use of Cash Collateral
By Debtors, and Granting Adequate Protection (the “Cash Collateral Order”),
dated May 21, 2009, from the Bankruptcy Court granting adequate
protection to the holders of Claims arising
under the Senior Credit Facility.

 

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

 

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

 

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

 

(b)           not object
to the Plan, or take any actions inconsistent with, or that would delay
approval or confirmation of, the Plan, except to the extent that such Plan is
amended or modified in a manner either (i) materially inconsistent with
the Plan attached hereto, or (ii) not reasonably satisfactory to
Consenting Lenders holding at least two-thirds in amount of the total Claims
held by all Consenting Lenders arising under the Senior Credit Facility (“Required
Consenting Lenders”);

 

3

 

(c)           not object
to any Plan Document, or take any actions inconsistent with, or that would
delay approval of, any Plan Document, except to the extent that such Plan
Document is either (i) materially inconsistent with this Agreement, or (ii) not
reasonably satisfactory to Required Consenting Lenders;

 

(d)           take all
reasonable actions necessary or reasonably requested by the Company to support
the Plan and the transactions contemplated thereby, except to the extent that
such Plan or such transactions are either (i) materially inconsistent with
the Plan attached hereto, or (ii) not reasonably satisfactory to Required
Consenting Lenders;

 

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

 

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

 

(g)           promptly
notify the other Consenting Lenders upon the receipt of any written
solicitation or proposal relating to any other plan, sale, proposal or offer of
dissolution, winding up, liquidation, reorganization, merger or restructuring
of the  Debtors, including potential
sales of some or all of the casino and slot assets; and

 

(h)           not to
withdraw or revoke any properly solicited vote to accept the Plan unless (x) the
Plan or any Plan Document is modified in any respect in a manner materially
inconsistent with the Plan attached hereto, or that has not been approved by
Required Consenting Lenders, or (y) this Agreement is terminated in
accordance with its terms.

 

8.             Modification of Plan Documents.

 

(a)           The
Restructuring and the Plan Documents may from time to time be amended or
modified by the Debtors to modify the treatment of certain constituents junior
to the Consenting Lenders under the Plan (each, a “Permitted Plan Amendment”),
if such amendment or modification either (i) does not negatively impact
the Consenting Lenders or (ii) is in writing and consented to by
Consenting Lenders holding at least two-thirds in amount of the total Claims
held by all Consenting Lenders arising under the Senior Credit Facility (the “Required
Consenting Lenders”).

 

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

 

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

 

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

 

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

 

4

 

10.           Representations and Warranties.

 

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

 

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

 

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

 

(d)           (x) Each
of the Consenting Lenders, severally and not jointly, represents and warrants  to each of the Debtors and (y) each of the Debtors
represents and warrants as Debtors in the Chapter 11 Cases and subject to the
provisions of the Bankruptcy Code, only as to itself and not as to each other,
to each Consenting Lender, that the following statements, as applicable, are
true, correct and complete as of the date hereof:

 

(i)            Power and
Authority.  It has all
requisite corporate, partnership or limited liability company power and
authority to abide by  this Agreement
being an amendment to and restatement of the Original Lock-Up Agreement and to
carry out the transactions contemplated hereby, and to perform its obligations
hereunder.

 

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

 

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

 

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

 

(v)           Governmental
Consents.  The performance by
it of this Agreement does not and shall not require any registration or filing
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body, except such
filings as (i) are identified in this Agreement, (ii) may be
necessary and/or 

 

5

 

required
under antitrust laws or the federal securities laws, (iii) may be
necessary and/or required under any gaming laws or regulations of any state, or
(iv) may be necessary and/or required in connection with the approval of
the Disclosure Statement and the confirmation of the Plan.

 

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

 

11.           Survival of Agreement.  Each of the
parties acknowledges and agrees that (i) this Agreement is  in connection with the Restructuring of the
Debtors and amends and restates the Original Lock-Up Agreement; and (ii) the
rights granted in this Agreement are enforceable by each signatory hereto,
except as specifically contemplated by this Agreement.

 

12.           Adequate Protection Payments. 
The Plan as confirmed  shall
provide  that during the period
commencing on the Effective Date and running through the Substantial Consummation
Date, adequate protection payments shall be made to the lenders under the
Senior Credit Facility in an amount equal to the Debtors’ Cash and Cash
Equivalents (as reflected on the Debtors’ balance sheet) in excess of $100
million to be measured (x) initially, 
as of the last day of the third full calendar month following the month
in which the Effective Date occurs and (y)  as of the last day of every
third full calendar month thereafter, and to be paid in each case  on the 30th day after the date on which it is
measured; provided, however, that
such payments shall be reduced by any unpaid restructuring costs for services
rendered by the Debtors’ professionals, that have accrued or otherwise have
been recorded on the Debtors’ balance sheet as of the last day of any fiscal
quarter and are reasonably anticipated to be paid within 45 days thereafter.

 

13.           Termination.

 

(a)           This
Agreement shall automatically terminate upon the occurrence of any of the
following events (the “Agreement Termination Events”), unless such
automatic termination is waived in writing by Required Consenting Lenders
and/or the Debtors, as applicable, within 7 Business Days of the occurrence of
such event; provided, however,
that the waiver of the Debtors, but not the Required Consenting Lenders, shall
be required with respect to any automatic termination to the extent that such
automatic termination occurs pursuant to any of paragraphs (xiii) (resulting
from an announcement by a Consenting Lender) or (xv) below; provided, further, that the
waiver of Required Consenting Lenders, but not the Debtors, shall be required
with respect to any automatic termination to the extent that such automatic
termination occurs pursuant to any of paragraphs (i), (iv), (vi), (x), (xii) or
(xiv) below.

 

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

 

(ii)           The
Disclosure Statement with respect to the Plan shall not have been approved by
the entry of an order of the  Bankruptcy
Court by August 14, 2009;

 

(iii)          The Plan
shall not have been confirmed by the entry of an order by Bankruptcy Court by October 15,
2009;

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(xiv)        Any material
breach of this Agreement by any Debtor; or

 

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

 

(b)           Upon a
termination of this Agreement in accordance with this Section 13,
no party hereto shall have any continuing liability or obligation to any other
party hereunder and the provisions of this Agreement shall have no further
force or effect, except for the provisions in Sections 14 and 17-24,
each of which shall survive termination of this Agreement; provided
that no such termination shall relieve any party from liability for its breach
or non-performance of its obligations hereunder prior to the date of such
termination.

 

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

 

15.           Additional Claims and Interests Subject. 
Nothing in this Agreement shall be deemed to limit or restrict the
ability or right of a Consenting Lender to purchase or take assignment of any
additional Claims (“Additional Claims”) against or interests in any
Debtor or any affiliate of any Debtor; provided, however, 

 

7

 

that in the event a
Consenting Lender purchases or takes assignment of any such Additional Claims
or other interests after the date hereof, such Additional Claims or other
interests shall immediately upon such acquisition become subject to the terms
of this Agreement.

 

16.           Restrictions on Transfer.

 

(a)           Except as
set forth in Section 16(b), each Consenting Lender hereby agrees
that, for so long as this Agreement shall remain in effect, it shall not sell,
transfer or assign all or any of its Claims, as the case may be, or any option
thereon or any right or interest (voting, participation or otherwise) therein
(each, a “Transfer”) without the prior written consent of the Company.

 

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

 

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

 

17.           Entire Agreement.  As of the
date this Agreement becomes effective, this Agreement, including the attachments
hereto, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof, including without limitation the Original Lock-Up
Agreement.

 

18.           Amendment or Waiver.

 

(a)           Except as
provided in Section 8 hereof, this Agreement, including the
attachments hereto, may not be modified, altered, amended, waived or
supplemented except by an agreement in writing by each of the Debtors and
Required Consenting Lenders.

 

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

 

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

 

19.           Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.  Each party agrees
that the Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of or in connection with this Agreement.

 

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

 

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

 

8

 

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

 

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

 

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

 

(a)           If to the Company, at:

 

	
   

  	
  Herbst
  Gaming, Inc.

  
	
   

  	
  3440 West Russell Road

  
	
   

  	
  Las Vegas, Nevada 89118

  
	
   

  	
  Attn: Office of the CEO

  
	
   

  	
  Telephone: (702)
  798-6400

  
	
   

  	
  Facsimile: (702)
  798-8079

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Herbst
  Gaming, Inc.

  
	
   

  	
  3440 West Russell Road

  
	
   

  	
  Las Vegas, Nevada 89118

  
	
   

  	
  Attn: Sean Higgins,
  General Counsel

  
	
   

  	
  Telephone: (702)
  798-6400

  
	
   

  	
  Facsimile: (702)
  798-8079

  
	
   

  	
   

  
	
  and:

  	
   

  
	
   

  	
   

  
	
   

  	
  Gordon Silver Ltd.

  
	
   

  	
  3960 Howard Hughes
  Parkway, Suite 900

  
	
   

  	
  Las Vegas, Nv. 89169

  
	
   

  	
  Attn: Gerald Gordon, Esq.

  
	
   

  	
  Telephone: (702)
  796-5555

  
	
   

  	
  Facsimile: (702)
  369-2666

  

 

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

 

9

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HERBST GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  GUARANTOR DEBTORS:

  
	
   

  	
   

  
	
   

  	
  FLAMINGO PARADISE
  GAMING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Managing Member

  
	
   

  	
   

  
	
   

  	
  MARKET GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  CARDIVAN COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  CORRAL COIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  CORRAL COUNTRY COIN,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
				

 

10

 

	
   

  	
  E-T-T, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  HGI – ST. JO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  HGI – LAKESIDE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  HGI – MARK TWAIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  THE SANDS REGENT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  
	
   

  	
  ZANTE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  LAST CHANCE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  

 

11

 

	
   

  	
  CALIFORNIA
  PROSPECTORS, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy
  Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  PLANTATION INVESTMENTS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  DAYTON GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  THE PRIMADONNA COMPANY,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy Herbst

  
	
   

  	
   

  	
  Name: Troy Herbst

  
	
   

  	
   

  	
  Title: Secretary/Treasurer

  

 

12

 

Accepted and agreed to by the

Consenting Lenders named below:

 

	
  [NAME OF OPT-IN
  CONSENTING LENDER]

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
  Telephone:

  	
   

  	
   

  
	
   

  
	
  Facsimile:

  	
   

  	
   

  
						

 

 

The Consenting Lenders named below is exercising its Opt-out Right:

 

	
  [NAME OF OPT-OUT
  CONSENTING LENDER]

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  
	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
  Telephone:

  	
   

  	
   

  
	
   

  
	
  Facsimile:

  	
   

  	
   

  
						

 

 

 

SCHEDULE 1

 

Consenting Lenders
under the Original Lock-Up Agreement

 

	
  1.

  	
   

  	
  AIG Annuity Insurance
  Company

  
	
  2.

  	
   

  	
  American General Life
  Insurance Company

  
	
  3.

  	
   

  	
  American General Life
  and Accident Insurance Company

  
	
  4.

  	
   

  	
  Ameriprise Certificate
  Company

  
	
  5.

  	
   

  	
  AMMC CLO VI, Limited

  
	
  6.

  	
   

  	
  AMMC VII, Limited

  
	
  7.

  	
   

  	
  AMMC VIII, Limited

  
	
  8.

  	
   

  	
  Atlas Loan Funding
  (CENT I) LLC

  
	
  9.

  	
   

  	
  Avery Point CLO, Ltd.

  
	
  10.

  	
   

  	
  Baltic Funding LLC

  
	
  11.

  	
   

  	
  Bank of Scotland PLC

  
	
  12.

  	
   

  	
  Battery Park High Yield
  Long Short Fund, Ltd.

  
	
  13.

  	
   

  	
  Battery Park High Yield
  Opportunity Fund, Ltd.

  
	
  14.

  	
   

  	
  Battery Park High Yield
  Opportunity Strategic Fund, Ltd.

  
	
  15.

  	
   

  	
  Big Sky III Senior Loan
  Trust

  
	
  16.

  	
   

  	
  Canaras Summit CLO Ltd.

  
	
  17.

  	
   

  	
  Castle Hill I – INGOTS,
  Ltd.

  
	
  18.

  	
   

  	
  Castle Hill II –
  INGOTS, Ltd.

  
	
  19.

  	
   

  	
  Centurion CDO VI, Ltd.

  
	
  20.

  	
   

  	
  Centurion CDO VII,
  Limited

  
	
  21.

  	
   

  	
  Centurion CDO 8,
  Limited

  
	
  22.

  	
   

  	
  Centurion CDO 9, Ltd.

  
	
  23.

  	
   

  	
  Cent CDO 10, Ltd.

  
	
  24.

  	
   

  	
  Cent CDO XI, Limited

  
	
  25.

  	
   

  	
  Cent CDO 12 Limited

  
	
  26.

  	
   

  	
  Cent CDO 14 Limited

  
	
  27.

  	
   

  	
  Cent CDO 15 Limited

  
	
  28.

  	
   

  	
  CIT Lending Services
  Corporation

  
	
  29.

  	
   

  	
  Citigroup Financial
  Products Inc.

  
	
  30.

  	
   

  	
  Clydesdale CLO 2003
  Ltd.

  
	
  31.

  	
   

  	
  Clydesdale CLO 2004,
  Ltd.

  
	
  32.

  	
   

  	
  Clydesdale CLO 2005,
  Ltd.

  
	
  33.

  	
   

  	
  Clydesdale CLO 2006,
  Ltd.

  
	
  34.

  	
   

  	
  Clydesdale CLO 2007,
  Ltd.

  
	
  35.

  	
   

  	
  Clydesdale Strategic
  CLO I, Ltd.

  
	
  36.

  	
   

  	
  Comerica Bank

  
	
  37.

  	
   

  	
  Eaton Vance CDO VII PLC

  
	
  38.

  	
   

  	
  Eaton Vance CDO VIII,
  Ltd.

  
	
  39.

  	
   

  	
  Eaton Vance CDO X PLC

  
	
  40.

  	
   

  	
  Eaton Vance Credit
  Opportunities Fund

  
	
  41.

  	
   

  	
  Eaton Vance
  Institutional Senior Loan Fund

  
	
  42.

  	
   

  	
  Eaton Vance Limited
  Duration Income Fund

  
	
  43.

  	
   

  	
  Eaton Vance Loan
  Opportunities Fund, LTD.

  
	
  44.

  	
   

  	
  Eaton Vance Medallion
  Floating-Rate Income Portfolio

  
	
  45.

  	
   

  	
  Eaton Vance Senior
  Income Trust

  
	
  46.

  	
   

  	
  Eaton Vance Short
  Duration Diversified Income Fund

  
	
  47.

  	
   

  	
  Eaton Vance VT
  Floating-Rate Income Fund

  
	
  48.

  	
   

  	
  Gannett Peak CLO I, Ltd.

  
	
  49.

  	
   

  	
  General Electric
  Capital Corporation

  
	
  50.

  	
   

  	
  Genesis CLO 2007-1 Ltd.

  
	
  51.

  	
   

  	
  Global Leveraged
  Capital Credit Opportunity Fund I

  
	
  52.

  	
   

  	
  Grand Central Asset
  Trust, PFV Series

  
	
  53.

  	
   

  	
  Grand Central Asset Trust, SIL Series

  

 

 

	
  54.

  	
   

  	
  Granite Ventures IV
  Ltd.

  
	
  55.

  	
   

  	
  Grayson & Co

  
	
  56.

  	
   

  	
  Green Island CBNA Loan
  Funding LLC

  
	
  57.

  	
   

  	
  Hamilton Floating Rate
  Fund LLC

  
	
  58.

  	
   

  	
  J.P. Morgan Core Plus
  Bond Fund

  
	
  59.

  	
   

  	
  J.P. Morgan Distressed
  Debt Master Fund, Ltd.

  
	
  60.

  	
   

  	
  Katonah III, Ltd.

  
	
  61.

  	
   

  	
  Loan Funding XI LLC

  
	
  62.

  	
   

  	
  Malibu CBNA Loan
  Funding LLC

  
	
  63.

  	
   

  	
  Nash Point II CLO

  
	
  64.

  	
   

  	
  Nash Point III CLO

  
	
  65.

  	
   

  	
  Nationwide Life
  Insurance Company

  
	
  66.

  	
   

  	
  Nationwide Mutual
  Insurance Company

  
	
  67.

  	
   

  	
  Natixis

  
	
  68.

  	
   

  	
  Nautique Funding II
  Ltd.

  
	
  69.

  	
   

  	
  NCRAM Senior Loan Trust
  2005

  
	
  70.

  	
   

  	
  Newcastle CDO X, Limited

  
	
  71.

  	
   

  	
  Nob Hill CLO, Limited

  
	
  72.

  	
   

  	
  Nob Hill CLO II,
  Limited

  
	
  73.

  	
   

  	
  PPM Monarch Bay Funding
  LLC

  
	
  74.

  	
   

  	
  PPM Shadow Creek
  Funding LLC

  
	
  75.

  	
   

  	
  Race Point IV CLO, Ltd

  
	
  76.

  	
   

  	
  Rampart 2007-2 CLO

  
	
  77.

  	
   

  	
  RiverSource Bond
  Series, Inc. – RiverSource Floating Rate Fund

  
	
  78.

  	
   

  	
  San Gabriel CLO Ltd

  
	
  79.

  	
   

  	
  Sankaty Credit
  Opportunities III, L.P.

  
	
  80.

  	
   

  	
  Sankaty Credit
  Opportunities IV, L.P.

  
	
  81.

  	
   

  	
  Sankaty Credit
  Opportunities (Offshore Master) IV, L.P.

  
	
  82.

  	
   

  	
  Senior Debt Portfolio

  
	
  83.

  	
   

  	
  Sequils-Centurion V,
  Ltd.

  
	
  84.

  	
   

  	
  SERVES 2006-1, Ltd.

  
	
  85.

  	
   

  	
  Shasta CLO Ltd

  
	
  86.

  	
   

  	
  Sierra II CLO Ltd

  
	
  87.

  	
   

  	
  Sky CBNA Loan Funding
  LLC

  
	
  88.

  	
   

  	
  SPCP Group, LLC

  
	
  89.

  	
   

  	
  SSSI CBNA Loan Funding
  LLC

  
	
  90.

  	
   

  	
  SunAmerica Life
  Insurance Company

  
	
  91.

  	
   

  	
  The Variable Annuity
  Life Insurance Company

  
	
  92.

  	
   

  	
  Tralee CDO I Ltd.

  
	
  93.

  	
   

  	
  U.S. Bank National
  Association

  
	
  94.

  	
   

  	
  Western Asset F/R High
  Income Fund LLC

  
	
  95.

  	
   

  	
  Whitney CLO I Ltd

  

 

 

EXHIBIT A

 

Plan

 

[attached]

 

 

EXHIBIT B

 

[REORGANIZED HERBST LLC]

SENIOR SECURED CREDIT FACILITY

 

Summary of Terms and
Conditions

 

I.                                         PARTIES

 

Borrower:                                                                                          [Reorganized Herbst LLC], a [Nevada]
limited liability company (the “Borrower”).

 

Guarantors:                                                                                Each of the Borrower’s existing, and after
acquired or created, direct and indirect subsidiaries (the “Guarantors”;
the Borrower and the Guarantors, collectively, the “Obligors”).

 

Administrative Agent:                       Wilmington Trust Company (“WTC”)
(in such capacity, the “Administrative Agent”).

 

Lenders:                                                                                                A syndicate of banks, financial
institutions and other entities (collectively, the “Lenders”).

 

II.                                     TYPE AND
AMOUNT OF THE FACILITY

 

Type
and Amount:                                         5-year senior secured term loan facility
(the “Facility”) in an aggregate principal amount equal to $350,000,000
(the loans thereunder, the “Loans”).

 

Effective
Date:                                                                The date of the satisfaction of the
conditions precedent referred to below under “Initial Conditions”.

 

Availability:                                                                          The Loans shall be deemed made on the
Effective Date.

 

Amortization:                                                                   None.

 

Purpose:                                                                                               The Loans shall be in partial
satisfaction of the obligations owing by the Obligors to holders of the Second
Amended and Restated Credit Agreement, dated as of January 3, 2007,
between Herbst Gaming, Inc., the lenders party thereto (the “Prepetition
Lenders”), WTC, as administrative agent, and certain other parties (the “Prepetition
Credit Agreement”).

 

III.                                 CERTAIN
PAYMENT PROVISIONS

 

Fees and Interest Rates:              As
set forth on Annex I.

 

Optional
Prepayments:                     Loans may be prepaid in minimum amounts
to be agreed upon.  Optional prepayments
shall be applied ratably to the Loans in the prepaid borrowing and may not be
reborrowed.

 

Mandatory
Prepayments:       The following amounts shall be applied to prepay the
Loans:

 

(a)                                  100% of the net proceeds of any sale or
issuance of equity or incurrence of certain indebtedness by the Borrower or any
of its subsidiaries (subject to customary exceptions to be agreed);

 

 

(b)                                 100% of the net proceeds of any sale or
other disposition (including as a result of casualty or condemnation) by the
Borrower or any of its subsidiaries of any assets exceeding an aggregate amount
to be agreed (except for the sale of inventory in the ordinary course of
business and certain other dispositions to be agreed on and subject to
reinvestment provisions to be agreed);

 

(c)                                  75% of excess cash flow (to be defined in
a mutually satisfactory manner) for each fiscal year of the Borrower; and

 

(d)                                 100% of the net proceeds of any
extraordinary receipts (to be defined in a mutually satisfactory manner).

 

All such amounts shall be
applied to the Loans on a pro rata basis and may not be reborrowed.

 

Prepayment Fee:                                                    All optional prepayments of principal and
mandatory prepayments of principal of the type described in clauses (a) and
(b) above (excluding as a result of casualty or condemnation) shall be
accompanied by a prepayment fee equal to (a) if such prepayment is made on
or prior to the first anniversary of the Effective Date, 3.00% of the principal
prepaid, (b) if such prepayment is made after the first anniversary of the
Effective Date and on or prior to the second anniversary of the Effective Date,
2.00% of the principal prepaid and (c) if such prepayment is made after
the second anniversary of the Effective Date and on or prior to the third
anniversary of the Effective Date, 1.00% of the principal prepaid.

 

IV.                                 COLLATERAL

 

The Facility and any swap
agreement and any cash management arrangements provided by any Lender (or any
affiliate of a Lender) shall be secured by a perfected first priority security
interest in all of the present and future tangible and intangible assets of the
Obligors (including, without limitation, accounts receivable, inventory,
intellectual property, real property (whether owned or leased) and all of the
capital stock of the Guarantors), except for those assets as to which the
Lenders shall determine in their sole discretion that the costs of obtaining
such a security interest are excessive in relation to the value of the security
to be afforded thereby.  The creation and
perfection of any security interest shall be subject to applicable local gaming
laws and regulations.

 

V.                                     CERTAIN
CONDITIONS

 

Initial Conditions:                                               The availability of the Facility shall be
conditioned upon the satisfaction of, among other things, the following conditions:

 

A.                                   Executed Documentation. 
Each Obligor shall have executed and delivered reasonably satisfactory
definitive financing documentation with respect to the Facility (the “Credit
Documentation”, and each document, a “Credit Document”).

 

B.                                     Confirmation of Plan of Reorganization. 
The Lenders shall have received a certified copy of a satisfactory final
order (the “Confirmation Order”), entered by the United States
Bankruptcy Court for the District of Nevada confirming the plan of
reorganization under 

 

 

Chapter 11 of the
Bankruptcy Code (the “Plan of Reorganization”) of Herbst Gaming, Inc.
and its subsidiaries, and authorizing the Obligors to enter into the Credit
Documentation.  The Confirmation Order
shall be in full force and effect and final, and shall not have been modified
or reversed.  All conditions precedent to
the effectiveness of the Plan of Reorganization shall have been (or are
simultaneously being) fulfilled (or waived in accordance with the terms of the
Plan of Reorganization).  The Lenders
shall have received satisfactory evidence that all consents, approvals or
withholding of objections appropriate or necessary to consummate the Plan of
Reorganization and the Credit Documentation have been obtained.

 

C.                                     Legal Opinions. 
The Lenders shall have received such legal opinions (including, without
limitation, opinions from local gaming counsel) as are customary for
transactions of this type.

 

D.                                    Corporate Documents; Officer’s
Certificates.  The Lenders shall have received satisfactory
secretary’s and officer’s certificates and other customary corporate
documentation with respect to the Obligors as the Lenders shall reasonably
request.

 

E.                                      Security Agreement and Related Documents. All documents and instruments required
to perfect the Lenders’ first priority security interest in the collateral
shall have been executed and be in proper form for filing, including, without
limitation, security agreements, mortgages, ship mortgages, trademark security
agreements, Uniform Commercial Code financing statements (including, without
limitation, financing statements necessary to release security interests of any
person other than the Lenders) and account control agreements, and, in
connection with any real estate collateral, the Lenders shall have received reasonably
satisfactory title insurance policies, surveys and other customary
documentation.

 

F.                                      Governmental Authorizations, Consents and
Approvals.  All governmental and third party approvals
necessary in connection with the Plan of Reorganization, the Credit
Documentation and the financing contemplated hereby (including, without
limitation, any approvals needed in connection with local gaming laws or
regulations) shall have been obtained on satisfactory terms and shall be in
full force and effect, and all applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority that
would restrain, prevent or otherwise impose adverse conditions on the
transactions or the financing thereof.

 

G.                                     Insurance.  The Lenders
shall have received certificates of insurance (1) evidencing the existence
of all insurance contemplated by the Credit Documentation (including, without
limitation, flood insurance) and (2) designating the Administrative Agent
as loss payee or additional named insured.

 

H.                                    Satisfaction of Prepetition Credit
Agreement.  The Prepetition Credit Agreement shall have
been satisfied in the manner contemplated by the Plan of Reorganization, and
the Lenders shall have received satisfactory termination and release agreements
with respect to the Prepetition Credit Agreement and all related documents.

 

 

I.                                         Lien Searches. 
The Lenders shall have received the results of recent lien searches in
each relevant jurisdiction with respect to each Obligor, and such searches
revealed no liens on any of the assets of any Obligor except for liens
permitted by the Credit Documentation.

 

J.                                        Material Agreements. 
The Lenders shall be satisfied with all material agreements of the
Obligors.

 

K.                                    Adequate Protection Payments. 
The Lenders shall have received satisfactory evidence that all accrued
and unpaid adequate protection payments payable to the Prepetition Lenders
under the Plan of Organization shall have been paid in full.

 

L.                                      Representations and Warranties; No
Default.  The representations and warranties in the
Credit Documentation shall be true and correct on and as of the Effective Date
and no default or event of default shall be in existence at the time of and
immediately after giving effect to the deemed making of the Loans.

 

M.                                 Fees.  The Lenders
and the Administrative Agent shall have received all fees and expenses required
to be paid.

 

N.                                    Ratings Condition. 
The Facility shall have been rated by each of S&P and Moody’s.

 

O.                                    Other Conditions. 
Other conditions to be reasonably requested by the Administrative Agent
or any Lender.

 

VI.                                 CERTAIN
DOCUMENTATION MATTERS

 

The Credit Documentation
shall contain representations, 
warranties, covenants and events of default customary for financings of
this type and other terms deemed appropriate by the Lenders, including, without
limitation:

 

Representations and

Warranties:                                                                                Organization; powers; authorization;
enforceability; governmental approvals; no conflicts; financial condition; no
material adverse change; property generally; intellectual property; actions,
suits and proceedings; environmental matters; change in disclosed matters;
compliance with laws and agreements; investment company status; taxes; ERISA;
disclosure; use of credit; subsidiaries; restrictions on subsidiaries; real
property; casino leases; and material agreements.

 

Affirmative Covenants:                  Financial statements and other information; notices of
material events; existence; conduct of business; payment of obligations;
maintenance of properties; insurance (including, without limitation, flood
insurance); books and records; inspection rights; compliance with laws; use of
proceeds; subsidiary guarantors; ownership of subsidiaries; and further
assurances.

 

Financial Covenants:                              Minimum interest coverage ratio; maximum
total leverage ratio; and maximum annual capital expenditures.

 

Negative Covenants:                              Limitations on: indebtedness; liens;
fundamental changes; lines of business; investments; restricted payments;
transactions with affiliates; restrictive agreements; and optional prepayment
and modifications of certain documents.

 

 

Events of Default:                                              (i)                                     Nonpayment of principal when due.

 

(ii)                                  Nonpayment of interest, fees or other
amounts after a grace period to be agreed upon.

 

(iii)                               Material inaccuracy of representations
and warranties.

 

(iv)                              Violation of covenants (subject, in the
case of certain covenants, to a grace period to be agreed upon).

 

(v)                                 Cross-default to material indebtedness to
be agreed.

 

(vi)                              Bankruptcy events.

 

(vii)                           Material judgments.

 

(viii)                        ERISA events.

 

(ix)                                Environmental matters.

 

(x)                                   A change in control (the definition of
which is to be agreed).

 

(xi)                                Actual or asserted invalidity of any
security document or security interest.

 

(xii)                             Revocation of casino or gaming licenses
with respect to locations accounting for, in the aggregate, a specified amount
of revenue, subject to a grace period to be agreed upon.

 

(xiii)                          Termination of any material agreement or
material casino lease.

 

Voting:                                                                                                       Amendments and waivers with respect to
the Credit Documentation shall require the approval of Lenders holding not less
than a majority of the aggregate amount of the Loans, except that (a) the
consent of each Lender affected thereby shall be required with respect to (i) reductions
in the amount or extensions of the scheduled date of maturity of any loan, (ii) reductions
in the rate of interest or any fee or extensions of any due date thereof, and (iii) modifications
to the pro rata provisions of the Credit Documentation and (b) the consent
of 100% of the Lenders shall be required with respect to (i) modifications
to any of the voting percentages, (ii) assignments or transfers by any
Obligor of its rights and obligations under any Credit Document, (iii) modifications
to  provisions relating to assignments to
the Obligors and their affiliates, (iv) releases of all or substantially
all of the collateral or liens created by the Credit Documentation (other than
in connection with permitted dispositions), (v) additional obligations
being secured by all or substantially all of the collateral (exceptions to be
agreed upon), (vi) altering the priorities of the obligations entitled to
the benefit of the liens created by the Credit Documentation with respect to
all or substantially all of the collateral, and (vii) releases of all or
substantially all of the Guarantors.

 

Assignments and

Participations:                                                                    The Lenders shall be permitted to assign
all or a portion of their loans with the consent (not to be unreasonably
withheld or delayed) of the Administrative Agent, unless the assignment is to a
Lender, an affiliate thereof or an approved fund.  In the case of partial assignments (other
than to another Lender, an 

 

 

affiliate of a
Lender or an approved fund), the minimum assignment amount shall be $1,000,000,
unless otherwise agreed by the Borrower and the Administrative Agent (consent
not to be unreasonably withheld or delayed). 
No assignment shall be permitted to any Obligor, any affiliate of the
Borrower (other than any Lender or any affiliate thereof), or a natural person
without the consent of each Lender.

 

The Lenders shall also be
permitted to sell participations in their loans (other than to a natural person
or to the Borrower or any of the Borrower’s affiliates or subsidiaries).  Participants shall have the same (but no
greater) benefits as the Lenders with respect to yield protection and increased
cost provisions.  Voting rights of
participants shall be limited to those matters with respect to which the
affirmative vote of the specific Lender from which it purchased its
participation would be required as described under “Voting” above.

 

Pledges of loans in
accordance with applicable law shall be permitted without restriction.  Promissory notes shall be issued under the
Credit Facilities only upon request. The Administrative Agent shall be entitled
to a processing fee of $3,500 from the assignor and/or the assignee in
connection with each assignment (provided that only one such fee shall
be payable in the case of multiple contemporaneous assignments to or by related
approved funds).

 

Any assignment or
participation shall be subject to applicable local gaming laws and regulations.

 

Yield Protection:                                                   The Credit Documentation shall contain
customary provisions (a) protecting the Lenders against increased costs or
loss of yield resulting from changes in reserve, tax, capital adequacy and
other requirements of law and from the imposition of or changes in withholding
or other taxes and (b) indemnifying the Lenders for “breakage costs”
incurred in connection with, among other things, any prepayment of a Eurodollar
Loan (as defined in Annex I) on a day other than the last day of an
interest period with respect thereto.

 

Expenses and

Indemnification:                                                     The Borrower shall pay (a) all
reasonable out-of-pocket expenses of the Administrative Agent and its affiliates
associated with the preparation, execution, delivery and administration of the
Credit Documentation and any amendment or waiver with respect thereto
(including, without limitation, the reasonable fees, disbursements and other
charges of counsel) and (b) all out-of-pocket expenses of the
Administrative Agent and the Lenders (including, without limitation, the fees,
disbursements and other charges of counsel or advisors) in connection with the
enforcement of the Credit Documentation

 

The Administrative Agent
and the Lenders (and their affiliates and their respective officers, directors,
employees, advisors and agents) will have no liability for, and will be
indemnified and held harmless against, any loss, liability, cost or expense
incurred in respect of the financing contemplated hereby, the use or the
proposed use of proceeds thereof, any environmental liability, or any actual or
prospective claim related to the foregoing.

 

Governing Law and Forum:                                              State of New York.

 

Counsel to WTC:                                              Milbank, Tweed,
Hadley & McCloy LLP.

 

 

Annex I

 

Interest and
Certain Fees

 

Interest Rate Options:                         The Borrower may elect that the loans
comprising each borrowing bear interest at a rate per annum equal to:

 

the ABR plus
the Applicable Margin; or

 

the Adjusted LIBO
Rate plus the Applicable Margin.

 

As used herein:

 

“ABR” means the
higher of (i) the rate of interest publicly announced by Bank of America,
N.A. as its prime rate (the “Prime Rate”), (ii) the federal funds
effective rate from time to time plus 0.50%, (iii) 4.00%, and (iv) the
Adjusted LIBO Rate for a one month interest period plus 1.00%.

 

“Adjusted LIBO Rate”
means the LIBO Rate, as adjusted for statutory reserve requirements for
eurocurrency liabilities (if any).

 

“Applicable Margin”
means (a) 6.50%, in the case of ABR Loans (as defined below), and (b) 7.00%,
in the case of Eurodollar Loans (as defined below).

 

“LIBO Rate” means
the higher of (i) the rate for eurodollar deposits in the London interbank
market for a period of one, two, three or six months (or, if agreed to by each
Lender, nine or twelve months), in each case as selected by the Borrower,
appearing on the relevant Reuters screen page and (ii) 3.00%.

 

Interest Payment
Dates:                                                               In the case of loans bearing interest
based upon the ABR (“ABR Loans”), the last business day of each calendar
month.

 

In the case of loans
bearing interest based upon the Adjusted LIBO Rate (“Eurodollar Loans”),
on the last day of each relevant interest period and, in the case of any
interest period longer than three months, on each successive date three months
after the first day of such interest period.

 

Default Rate:                                                                                                                         At any time upon the occurrence and
during the continuation of any event of default, all outstanding loans shall
bear interest at 2.00% above the rate otherwise applicable thereto.  Overdue interest, fees and other amounts
shall bear interest at 2.00% above the rate applicable to ABR Loans.

 

Rate and Fee
Basis:                                                                                      All per annum rates shall be calculated
on the basis of a year of 360 days (or 365/366 days, in the case of ABR Loans
the interest rate payable on which is then based on the Prime Rate) for actual
days elapsed.

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