Document:

Exhibit 10.1

 

EXECUTION COPY

 

AMENDMENT
NO. 4 AND FORBEARANCE

AND
STANDSTILL AGREEMENT

 

THIS AMENDMENT NO. 4 AND FORBEARANCE AND STANDSTILL AGREEMENT (this “Agreement”)
is made and entered into as of the 15th day of May, 2008 by and among each
lender executing a counterpart hereof, WILMINGTON TRUST COMPANY, as
administrative agent (the “Administrative Agent”), HERBST GAMING, INC.
(the “Borrower”) and the Subsidiaries of the Borrower executing a
counterpart hereof (the “Grantors” and, together with the Borrower, the “Loan
Parties”).

 

Statement
of Purpose

 

WHEREAS, reference is made
to the Second Amended and Restated Credit Agreement, dated as of January 3,
2007, among the Borrower, the lenders party thereto (the “Lenders”),
certain other parties and the Administrative Agent (as amended by Amendment No. 1
to Second Amended and Restated Credit Agreement, dated as of August 14,
2007, Amendment No. 2 to Second Amended and Restated Credit Agreement,
dated as of December 14, 2007, and Omnibus Amendment No. 3 and Appointment
and Acceptance, dated as of April 24, 2008, and as further amended,
supplemented and otherwise modified from time to time, the “Credit Agreement”;
capitalized terms used not defined herein (including in Schedule A hereto)
being used herein as therein defined);

 

WHEREAS, each Grantor has guaranteed the Obligations of the Borrower
under the Credit Agreement;

 

WHEREAS, the Borrower has requested that the Administrative Agent and
the Lenders amend the Credit Agreement in certain respects and forbear from
exercising certain rights and remedies under the Credit Agreement and the other
Loan Documents provisionally through the Forbearance Maturity Date (as defined
below) solely in respect of the Financial Statement Default (as defined below)
that has occurred as of the date hereof and the other events set forth in
Schedule A hereto (collectively with the Financial Statement Default, the “Specified
Defaults”); and

 

WHEREAS, the Administrative Agent and the Lenders are willing to amend
the Credit Agreement in certain respects and forbear from exercising certain
rights and remedies under the Credit Agreement and the other Loan Documents
provisionally only through the Forbearance Maturity Date regarding the
Specified Defaults, subject to the express terms and provisions of this
Agreement.

 

Agreement

 

NOW, THEREFORE in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

1.             Acknowledgments by Loan Parties.  To
induce the Administrative Agent and the Lenders to execute this Agreement, each
Loan Party hereby acknowledges, stipulates, represents, warrants and agrees as
follows:

 

(a)           The Financial Statement Default (as defined in Schedule A hereto)
constitutes an Event of Default that has occurred, remains uncured, has not
been waived and is continuing as of the date of this Agreement and cannot be
cured.  Except for the Financial
Statement Default, no other Defaults or Events of Default have occurred and are
continuing as of the date hereof.

 

 

Except as expressly set forth in this
Agreement, the agreements of the Administrative Agent and the Lenders hereunder
to forbear provisionally in the exercise of their respective rights and
remedies under the Credit Agreement and the other Loan Documents in respect of
the Specified Defaults during the Forbearance Period (as defined below) does
not in any manner whatsoever limit any right of any of the Administrative Agent
and the Lenders to insist upon strict compliance by the Loan Parties with this
Agreement or any Loan Document during the Forbearance Period.

 

(b)           To the knowledge of the Loan Parties, immediately prior to executing
this Agreement nothing has occurred that constitutes or otherwise can be construed
or interpreted as a waiver of, or otherwise to limit in any respect, any rights
or remedies the Lenders, the Administrative Agent or any of them have or may
have arising as the result of any Event of Default (including any Specified
Default) that has occurred or that may occur under the Credit Agreement, the
other Loan Documents or applicable law. 
The Administrative Agent’s and the Lender’s actions in entering into
this Agreement are without prejudice to the rights of any of the Administrative
Agent and the Lenders to pursue any and all remedies under the Loan Documents
pursuant to applicable law or in equity available to it in its sole discretion
upon the termination (whether upon expiration thereof, upon acceleration or
otherwise) of this Agreement.

 

(c)           The Revolving Loans outstanding as of the date hereof are in an amount
equal to $98,859,000.  The Swing Line
Loans outstanding as of the date hereof are in an amount equal to $0.  The Term Loans outstanding as of the date
hereof are in an amount equal to $751,762,500. 
The L/C Obligations of the Borrower outstanding as of the date hereof
are in an amount equal to $1,141,000. 
The foregoing amounts do not include interest, fees and expenses and
other amounts that are chargeable or otherwise reimbursable under the Loan
Documents.

 

(d)           All of the assets pledged, assigned, conveyed, mortgaged, hypothecated
or transferred to the Administrative Agent for the benefit of the Lenders
pursuant to the Collateral Documents (including without limitation the Collateral
(including without limitation all proceeds thereof)) are (and shall continue to
be) subject to valid and enforceable liens and security interests of the
Administrative Agent (or, in the case of possessory security interests in
respect of certificated Pledged Securities (as defined in the Pledge Agreement)
or if required by Gaming Laws of Iowa, the predecessor Administrative Agent
under the Credit Agreement (the “Predecessor Agent”)) for the benefit of
the Lenders and the other Secured Parties (as defined in the Credit Agreement),
as collateral security for all of the Obligations, subject to no Liens other
than Liens permitted by Section 7.01 of the Credit Agreement.  Each of the Loan Parties hereby reaffirms and
ratifies its prior conveyance to the Administrative Agent for the benefit of
the Lenders and the other Secured Parties (as defined in the Credit Agreement)
of a continuing security interest in and lien on the Collateral.

 

(e)           The obligations of the Loan Parties under this Agreement of any nature
whatsoever, whether now existing or hereafter arising, are hereby deemed to be “Obligations”
for all purposes of the Credit Agreement and the other Loan Documents.

 

(f)            The Obligations of the Loan Parties under
this Agreement, the Credit Agreement and the other Loan Documents constitute “Senior
Debt” (as such term is defined in the Credit Agreement).

 

(g)           Except as expressly modified by this Agreement or as required by Gaming
Laws in Nevada, Missouri and Iowa, all terms and provisions of the Credit
Agreement and the other Loan Documents are valid and enforceable and remain in
full force and effect according to their respective terms.  Each Grantor, as debtor, grantor, pledgor,
guarantor, assignor, or in other similar capacity in which such party grants
liens or security interests in its properties or otherwise acts as an
accommodation party or guarantor, as the case may be, under the Loan Documents,
hereto hereby (i) agrees that the Credit Agreement as amended hereby is
the Credit Agreement under and for all purposes of the Guaranties and the
Collateral Documents and (ii) confirms that

 

2

 

the obligations of the Loan Parties under the
Loan Documents as modified hereby are entitled to the benefits of the guarantees
set forth in the Guaranties and constitute “Guaranteed Obligations” (as defined
in each of the Guaranties).

 

(h)           The Lenders’ entry into, and covenants to perform in accordance with,
this Agreement and the Lenders’ consummation of the transactions contemplated
hereby constitute “new value” and “reasonably equivalent value”, as those terms
are used in Section 547 and 548 of Title 11 of the United States
Code (the “Bankruptcy Code”), received by the Loan Parties as of the
closing of this Agreement in contemporaneous exchange for the Loan Parties’
entry into, and covenants to perform in accordance with, this Agreement and the
documents executed in connection with this Agreement, and the Loan Parties’
consummation of the transactions contemplated hereby and thereby.

 

(i)            The bank accounts listed in the April 15,
2008 schedule previously disclosed by the Borrower to the Administrative Agent
(the “Existing Bank Accounts”) are the only bank accounts held or owned
by the Loan Parties as of the date hereof and said schedule is accurate and
complete.  Each Loan Party covenants (i) to not establish any new bank account
other than those set forth on said schedule, unless such bank account is established and located in the United States
and either pursuant to applicable law or regulations or in the ordinary course
of business (such new bank accounts, together with the Existing Bank Accounts,
being herein called the “Permitted Bank Accounts”), provided that
the Borrower shall give written notice to the Administrative Agent of any
account so established within five Business Days of the occurrence thereof, and
(ii) to not use amounts held in the Permitted Bank Accounts for any
purpose other than (a) ordinary course funding of the operations of the
Borrower and the other Loan Parties, including without limitation capital
expenditures made in the ordinary course of business, in each case only as
permitted by the Loan Documents, (b) payments of interest, fees and
expenses under the Credit Agreement and (c) payment of fees and expenses
of professionals in connection with any restructuring or reorganization efforts
of the Borrower and the other Loan Parties.

 

2.             Provisional Forbearance and Limited Deferral. 
Subject to the satisfaction of the conditions precedent specified in Section 5
below, but effective as of the date hereof, the Administrative Agent and the
Lenders agree, except as set forth in this Agreement, to forbear provisionally
in the exercise of their respective rights and remedies under the Credit
Agreement and the other Loan Documents in respect of the Specified Defaults
until the date (the “Forbearance Maturity Date”; the period from the
date the conditions precedent specified in Section 5 below are satisfied
until the Forbearance Maturity Date being herein called the “Forbearance
Period”) which is the earliest to occur of:

 

(a)           September 30, 2008;

 

(b)           the occurrence of any Event of Default other than the Specified
Defaults; and

 

(c)           the date on which any breach of any of the conditions or agreements
provided in this Agreement shall occur; it being agreed that the breach of any
such condition or agreement shall constitute an immediate Event of Default
under the Credit Agreement without the requirement of any demand, presentment,
protest or notice of any kind to any Loan Party (all of which each Loan Party
waives);

 

provided that (i) the Revolving Lenders shall
have no obligation to make any further Revolving Loans or other extensions of
credit to any Loan Party, other than in respect of Letters of Credit pursuant
to Section 2.05(c) of the Credit Agreement, (ii) each Loan Party
shall comply with all limitations, restrictions, covenants and prohibitions
that would otherwise be effective or applicable under the Loan Documents, (iii) nothing
herein shall restrict, impair or otherwise affect any of the Administrative
Agent’s or the Lenders’ rights and remedies under any agreement containing
subordination provisions in favor of any of the Administrative Agent or the
Lenders (including without limitation the right to give any payment blockage
notices to any of the trustees in respect of the Subordinated Debt (including
without limitation

 

3

 

any
payment blockage notice based upon any Specified Default)) and (iv) nothing
herein shall be construed as a waiver by the Administrative Agent or any Lender
of any Specified Default.

 

Upon
expiration of the Forbearance Period, the agreement of the Administrative Agent
and the Lenders hereunder to forbear provisionally in the exercise of their respective
rights and remedies under the Credit Agreement and the other Loan Documents in
respect of the Specified Defaults during the Forbearance Period shall
immediately terminate without the requirement of any demand, presentment,
protest or notice of any kind to any Loan Party (all of which each Loan Party
waives).  Each of the Loan Parties agrees
that any of the Administrative Agent and the Lenders may at any time thereafter
proceed to exercise any and of their respective rights and remedies under the Loan
Documents or applicable law, including without limitation their respective
rights and remedies with respect to the Specified Defaults.

 

Any
agreement by any of the Administrative Agent and the Lenders to extend the
Forbearance Period must be set forth in writing and signed by each of the
Administrative Agent and the Requisite Lenders. 
The Administrative Agent and the Lenders are not obligated to extend the
Forbearance Period and may decide to do so (or not to do so) in their sole
discretion.  Each of the Loan Parties
acknowledges that each of the Administrative Agent and the Lenders has not made
any assurances concerning the extension of the Forbearance Period.

 

3.             Amendments to Credit Agreement. 
Subject to the satisfaction of the conditions precedent specified in Section 5
below, but effective (except as otherwise expressly provided in this Section 3)
as of the date hereof, the Credit Agreement shall be amended as follows:

 

(a)           References Generally. 
References in the Credit Agreement (including references to the Credit
Agreement as amended hereby) to “this Agreement” (and indirect references such
as “hereunder”, “hereby”, “herein” and “hereof”) shall be deemed to be
references to the Credit Agreement as amended hereby.

 

(b)           Defined Terms Relating to Pricing. 
Effective as of April 1, 2008, Section 1.01 of the Credit
Agreement is hereby amended to add, replace and otherwise revise (as the case
may be) definitions in alphabetical order as follows:

 

“Applicable
Rate” means, for each Pricing Period, the rates per annum set forth
opposite the Senior Debt to EBITDA Ratio in effect as of the Fiscal Quarter
ending approximately two months prior to the first day of that Pricing Period, provided
that (a) prior to the first day of the Pricing Period beginning April 1,
2008, Pricing Level III shall apply, (b) notwithstanding clause (a) above,
if Borrower fails to deliver a Compliance Certificate in respect of any Fiscal
Quarter prior to the first day of the related Pricing Period, then Pricing
Level III shall apply as of the first Business Day of such Pricing Period until
the date upon which the required Compliance Certificate is delivered:

 

	
  Pricing

  Level

  	
   

  	
  Senior Debt to

  EBITDA Ratio

  	
   

  	
  Base

  Rate +

  	
   

  	
  Eurodollar

  Rate +

  Letters of

  Credit

  	
   

  	
  Revolving

  Commitment

  Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Less than 4.25:1.00

  	
   

  	
  4.25

  	
  %

  	
  5.50

  	
  %

  	
  2.375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  Greater than or equal to 4.25:1.00, but less than 4.50:1.00

  	
   

  	
  4.75

  	
  %

  	
  6.00

  	
  %

  	
  2.400

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  Greater than or equal to 4.50

  	
   

  	
  5.25

  	
  %

  	
  6.50

  	
  %

  	
  2.425

  	
  %

  

 

4

 

“Base
Floor Rate” means a rate equal to 5.25% per annum.

 

“Base Rate” means for any day a fluctuating
rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2
of 1% and (b) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America as its “prime rate”.  The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.  Any change in such
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change.  Notwithstanding the foregoing, the Base Rate
shall not at any time be less than the Base Floor Rate.  As used in this Agreement, the “Base Rate”
shall in all cases mean such rate subject to the Base Floor Rate.

 

“Eurodollar
Floor Rate” means a rate equal to 3.25% per annum.

 

“Eurodollar Rate” means for any Interest
Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the
British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by
Reuters (or other commercially available source providing quotations of BBA
LIBOR as designated by the Administrative Agent from time to time) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, for Dollar deposits (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period.  If such rate is not available at
such time for any reason, then the “Eurodollar Rate” for such Interest Period
shall be the rate per annum determined by the Administrative Agent to be the
rate at which deposits in Dollars for delivery on the first day of such
Interest Period in same day funds in the approximate amount of the Eurodollar
Rate Loan being made, continued or converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of America’s London
Branch to major banks in the London interbank eurodollar market at their
request at approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period. 
Notwithstanding the foregoing, the Eurodollar Rate shall not at any time
be less than the Eurodollar Floor Rate. 
As used in this Agreement, the “Eurodollar Rate” shall in all cases mean
such rate subject to the Eurodollar Floor Rate.

 

(c)           Definition of “Loan Documents”.  The
definition of “Loan Documents” in Section 1.01 of the Credit Agreement is
hereby amended in its entirety to read as follows:

 

“Loan Documents” means this Agreement, each
Note, each Issuer Document, each Secured Swap Contract, the Lead Arranger Fee
Letter, the Administrative Agent Fee Letter, each Guaranty, each Collateral
Document, Amendment No. 1 to the Second Amended and Restated Credit
Agreement dated as of August 14, 2007, Amendment No. 2 to the Second
Amended and Restated Credit Agreement dated as of August 14, 2007, the
Omnibus Amendment No. 3 and Appointment and Acceptance dated as of April 24,
2008 among Bank of America, N.A., Wilmington Trust Company, the Borrower, the
Lenders parties thereto and the Subsidiaries of the Borrower, Amendment No. 4
and Forbearance and Standstill Agreement dated as of May 15, 2008 among
the Borrower, the other Loan Parties, certain Lenders parties thereto and the
Administrative Agent, and any other amendment or certificate executed and/or
delivered pursuant to or in connection with this Agreement.

 

4.             Further Agreements. 
Subject to the satisfaction of the conditions precedent specified in Section 5
below, but effective as of the date hereof, notwithstanding anything in the Credit
Agreement or any other Loan Document to the contrary and in addition to the
terms and provisions thereof and without

 

5

 

affecting in any respect the acknowledgments in Section 1
above and the other acknowledgments and agreements of the Loan Parties under
this Agreement:

 

(a)           The parties hereto hereby agree as follows:

 

(i)            All
accrued interest and fees under the Credit Agreement shall be payable on the
first Business Day of each calendar month (commencing June 2, 2008) and
otherwise in accordance with the terms of the Credit Agreement.

 

(ii)           During
the Forbearance Period, the Default Rate shall not apply and interest in
respect of the Loans shall accrue at the rates set forth in the Credit
Agreement without regard to Section 2.10(b) thereof.

 

(iii)          During
the Forbearance Period, the Borrower shall be entitled to convert Loans into
Eurodollar Rate Loans and continue Loans as Eurodollar Rate Loans in accordance
with Section 2.04 of the Credit Agreement, so long as any such Interest
Period shall end on or before September 30, 2008.

 

(b)           The Loan Parties hereby agree as follows:

 

(i)            None
of the Loan Parties shall make any payment (whether of principal, interest,
fees or any other amount, and whether or not scheduled), nor fund, wholly or in
part, any defeasance trust, on account of or in connection with the
Subordinated Debt, except for the payment of (u) the fees and expenses of
Perella Weinberg Partners LP pursuant to the letter dated May 15, 2008
among Perella Weinberg Partners LP, the Borrower and Rudnick Berlack Israels
LLP, (v) the fees and expenses of Brown Rudnick Berlack Israels LLP
pursuant to the letter dated May 15, 2008 among Brown Rudnick Berlack
Israels LLP and the Borrower, (w) the reasonable fees and expenses of
gaming counsel, (x) the reasonable fees and expenses of any other
professional advisor retained pursuant to subsection (b)(ii) below, (y) the
reasonable fees and expenses of any indenture trustee in respect of the
Subordinated Debt and (z) any payment made not in violation of the terms
of subordination governing such Subordinated Debt (including without limitation
any payment blockage notices delivered thereunder).

 

(ii)           The
terms of all engagement letters or other agreements (including without
limitation any amendments, supplements or other modifications) entered into by
the Borrower or any other Loan Party with counsel for or advisors to the
holders of any Subordinated Debt (including without limitation any consortium
or steering committee in respect thereof) shall be in the form attached hereto
or otherwise in form and substance satisfactory to the Administrative Agent.

 

(iii)          Without
limiting the rights of the Administrative Agent and the Lenders under Section 6.10
of the Credit Agreement, but subject to Section 10.07 of the Credit
Agreement, the Loan Parties shall upon request give the Administrative Agent
and the Lenders and their advisors reasonably full and timely access to the
Loan Parties’ books, records, senior officers, directors, senior level
employees and any advisors hired by the Loan Parties, and shall permit any of
the foregoing Persons to review and copy all books and records (including
without limitation all books and records maintained in electronic format) of
each Loan Party.

 

(iv)          The
Borrower shall pay, within 20 days following receipt of an invoice thereof, all
accrued fees and expenses of the Administrative Agent and the Lenders incurred
in connection with the Credit Agreement and the other Loan Documents in
accordance with the terms of the Credit Agreement and the other Loan
Documents.  Nothing in this Agreement
shall be construed or deemed to waive or limit any obligation of the Borrower
or any of the other Loan Parties to pay fees and expenses (including

 

6

 

without
limitation legal fees) and expenses incurred by the Administrative Agent or any
Lender as provided in Section 10.04 of the Credit Agreement.

 

5.             Conditions.  The agreements set forth in
Sections 2, 3 and 4 above shall become effective, as of the date hereof,
upon satisfaction of the following conditions:

 

(a)           The Administrative Agent shall have received counterparts of this
Agreement, executed and delivered by the Borrower and each other Loan Party,
the Administrative Agent and the Requisite Lenders.

 

(b)           The Borrower shall have executed and delivered an engagement letter
with Houlihan Lokey Howard & Zukin as advisor to the Administrative
Agent.

 

(c)           The Administrative Agent shall have received for the account of each
Lender that, not later than 5:00 p.m. New York City time on Friday, May 16,
2008, shall have executed a counterpart of this Agreement and delivered the
same to the Administrative Agent, a fee in an aggregate amount for all such
executing Lenders equal to $6,388,218.75(1), such forbearance fee to be shared
pro rata among such executing Lenders based on the aggregate Outstanding Amount
of the Term Loans and Revolving Commitments of such executing Lenders as of the
close of business Thursday, May 15, 2008.

 

(d)           The Borrower shall have paid, or concurrently herewith will pay, (i) all
documented fees and expenses of the Administrative Agent and the Lenders
incurred pursuant to the Loan Documents set forth on Schedule B hereto and (ii) to
Milbank, Tweed, Hadley & McCloy LLP a retainer equal to $150,000.

 

(e)           The representations and warranties contained in this Agreement shall be
true and correct and no Default or Event of Default (other than the Financial
Statement Default) shall have occurred and be continuing

 

(f)            The Administrative Agent shall have received
such other documents, certificates and instruments as it or any Lender
reasonably requests through the date of this Agreement.

 

(g)           The Loan Parties shall have received any required approvals of the Iowa
Gaming and Racing Commission.

 

6.             Limited Effect of Agreement. 
Except as expressly provided in this Agreement, the Credit Agreement and
each other Loan Document shall continue to be, and shall remain, in full force
and effect.  This Agreement shall not be
deemed or otherwise construed: (i) to be a waiver of, or consent to or a
modification or amendment of, any other term or condition of the Credit
Agreement or any other Loan Document; (ii) to prejudice any other right or
rights that the Administrative Agent or any Lender, or any of them, may now
have or may have in the future under or in connection with the Credit Agreement
or any other Loan Document, as such documents may be amended, restated or
otherwise modified from time to time; or (iii) to be a commitment or any
other undertaking or expression of any willingness to engage in any further
discussion with any Loan Party or any other Person with respect to any waiver,
amendment, modification or any other change to the Credit Agreement or any
other Loan Document or any rights or remedies arising in favor of the
Administrative Agent and the Lenders, or any of them, under or with respect to
any such documents.  Neither the
requirements of good faith and fair dealing nor any other theory, concept or
argument shall require any Lender to impart upon any Loan Party any further or
greater benefits, to suffer any prejudice or impairment of any kind whatsoever,
or to tolerate any noncompliance with this Agreement and any other Loan
Document.

 

(1) NOTE: The Forbearance Fee is based on 75bps multiplied
by $851,762,500 (which is the total amount of the Loans and LC Obligations on
the date on which this Forbearance Agreement is launched).

 

7

 

7.             Release.  Each Loan Party, on behalf of
itself, and any Person claiming by, through, or under such Loan Party
(collectively, the “Loan Party Group”) acknowledges that it has no
claim, counterclaim, setoff, recoupment, action or cause of action of any kind
or nature whatsoever (“Claims”) against all or any of the Administrative
Agent or any of the Lenders or any of their respective directors, officers,
employees, agents, attorneys, financial advisors, legal representatives,
affiliates, shareholders, partners, successors and assigns (the Administrative
Agent or any of the Lenders and their respective directors, officers,
employees, agents, attorneys, financial advisors, legal representatives,
affiliates, shareholders, partners, successors and assigns are jointly and
severally referred to as the “Lender Group”), that directly or
indirectly arise out of or are based upon or in any manner connected with any “Prior
Event” (as defined below), and each Loan Party on behalf of itself and all the
other members of the Loan Party Group hereby releases each member of the Lender
Group from any liability whatsoever should any Claims nonetheless exist.  As used herein the term “Prior Event”
means any transaction, event, circumstances, action, failure to act or
occurrence of any sort or type, whether known or unknown, which occurred,
existed, was taken, permitted or begun prior to the execution of this Agreement
and occurred, existed, was taken, permitted or begun in accordance with,
pursuant to or by virtue of any terms of the Credit Agreement, this Agreement,
any other Loan Document or any of the transactions contemplated herein or
therein or any oral or written agreement relating to any of the foregoing,
including without limitation any approval or acceptance given or denied.  This Section 7 shall survive the
termination of this Agreement and shall remain in full force and effect even if
any of the conditions set forth in Section 5 above are not satisfied.

 

8.             Representations and Warranties.  By
its execution hereof, each of the Loan Parties hereby certifies that each of
the representations and warranties set forth in the Credit Agreement (as
amended hereby) and the other Loan Documents in respect of such Loan Party is
true and correct in all material respects as of the date hereof as if fully set
forth herein (other than as a result of the occurrence of the Financial
Statement Default and except to the extent such representation or warranty is
expressly stated to have been made as of a specified date, in which case such
representation or warranty shall be true and correct in all material respects
as of such specified date), except for those representations and warranties
listed on Schedule C hereto, and that as of the date hereof no Default or Event
of Default (other than the Financial Statement Default and the Specified
Defaults listed in numbers 3 and 5 of Schedule A hereto) has occurred and is
continuing.

 

9.             Reversal of Payments.  To
the extent any Loan Party makes a payment or payments to the Administrative
Agent or any Lender pursuant to this Agreement or any other Loan Document that
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause
(in each case, in whole or in part), then, to the extent of such payment or
proceeds repaid, the Obligations or part thereof intended to be satisfied shall
be revived and continued in full force and effect as if such payment or
proceeds had not been received by the Administrative Agent or such Lender, as
the case may be.

 

10.           Governing Law; Counterparts; Electronic
Execution; Misc.  This Agreement shall be governed, construed
and interpreted in accordance with the laws of the State of New York applicable
to contracts made and to be performed in such State and shall be subject to Section 10.16
of the Credit Agreement.  The terms of
this Agreement may be waived, altered or amended only by an instrument in
writing duly executed by each Loan Party and the Administrative Agent (with the
consent of the Requisite Lenders).  This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.  Delivery of
an executed counterpart of this Agreement by electronic transmission shall be
as effective as delivery of a manually executed counterpart of this
Agreement.  Except as provided in this
Agreement, the Credit Agreement shall remain unchanged and in full force and
effect.

 

11.           Survival of Obligations.  All
covenants, agreements and other obligations of the Loan Parties under this
Agreement which do not terminate on the Forbearance Maturity Date pursuant to
their

 

8

 

express terms shall survive the occurrence of the
Forbearance Maturity Date and shall thereafter be enforceable against the Loan
Parties according to their terms.

 

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INTENTIONALLY BLANK]

 

9

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the date first above written.

 

 

	
   

  	
  WILMINGTON TRUST COMPANY,

  
	
   

  	
  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James A. Hanley

  
	
   

  	
   

  	
  Name: James A. Hanley

  
	
   

  	
   

  	
  Title: Assistant Vice President

  

 

10

 

	
   

  	
  HERBST GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  FLAMINGO
  PARADISE GAMING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  MARKET
  GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  CARDIVAN
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  CORRAL
  COIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  CORRAL
  COUNTRY COIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Managing Member

  

 

 

	
   

  	
  E-T-T,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  HGI –
  ST. JO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  HGI –
  LAKESIDE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  HGI –
  MARK TWAIN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  THE
  SANDS REGENT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  ZANTE
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  LAST
  CHANCE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  CALIFORNIA
  PROSPECTORS, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Managing Member

  

 

 

	
   

  	
  PLANTATION
  INVESTMENTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  DAYTON
  GAMING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President

  

 

 

	
   

  	
  THE
  PRIMADONNA COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy P. Herbst

  
	
   

  	
   

  	
  Name:

  	
  Timothy
  P. Herbst

  
	
   

  	
   

  	
  Title:

  	
  Managing Member

  

 

 

Schedule A

 

Specified Defaults

 

1.     The
failure of the Loan Parties to deliver on March 31, 2008 an audited
financial statement that is not subject to any “going concern” or like
qualification or exception in accordance with to Section 6.01(a) of
the Credit Agreement (the “Financial Statement Default”).

 

2.     Events of Default pursuant to Sections
6.01(b), (d) and (e) of the Credit Agreement so long as any such
Event of Default is cured within five Business Days after the occurrence
thereof.

 

3.     An Event of Default under Section 6.02(a) of
the Credit Agreement solely with respect to the inability to certify as to
paragraph 3 of the Compliance Certificate as a result of the Financial
Statement Default and the other Specified Defaults set forth herein.

 

4.     An Event of Default under Section 6.04
of the Credit Agreement solely as a result of failure to pay amounts due under
the Senior Subordinated Notes.

 

5.     An Event of Default under Sections 7.12,
7.13 and 7.14 of the Credit Agreement solely with respect to the Fiscal
Quarters ending March 31, 2008 and June 30, 2008.

 

6.     An Event of Default under Section 8.01(e) of
the Credit Agreement solely as a result of failure to (i) file reports
with the Securities and Exchange Commission (“SEC”) within the time
periods specified in the SEC’s rules and regulations and (ii) pay
interest due under the Senior Subordinated Notes, in each case unless such
Event of Default results in the acceleration of any of the Senior Subordinated
Notes.

 

7.     An Event of Default under Section 8.01(g) of
the Credit Agreement solely with respect to the failure to make required
payments under the Senior Subordinated Notes to the extent that such failure is
deemed to mean that the Borrower has become unable or has failed generally to
pay its debts as they become due.

 

8.     An Event of Default under Section 8.01(j) of
the Credit Agreement solely resulting from the succession
to Wilmington Trust Company as administrative agent from the Predecessor Agent.Exhibit 10.2

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE
EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into on May 14, 2008  (the “Effective Date”), between Herbst Gaming, Inc., a Nevada
corporation (together with their successors or assigns as permitted under this
Agreement, collectively, the “Company”), and
Troy D. Herbst, an individual (the “Executive”).

 

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

 

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

 

1.             Definitions

 

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

 

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

 

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

 

(d)           “Cause” shall
mean:

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

2.             Term of Employment

 

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

 

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

 

2

 

3.             Position, Duties and Authorities

 

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

 

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

 

4.             Salary

 

During the
Term of Employment, the Executive shall be paid by the Company a Salary payable
in accordance with the Company’s payroll practices in effect from time to time
at an annualized rate of Nine Hundred Seventy-Three Thousand, Eight Hundred
Forty-Five and 34/100 Dollars ($973,845.34); the Salary is subject to a five
percent (5%) increase on January 1 of each year following the Effective
Date.  The first such increase shall take
effect in January 2009.

 

5.             Employee Benefit Programs

 

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

 

6.             Business Expense Reimbursement
and Perquisites

 

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

 

3

 

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

 

4

 

7.             Termination of Employment

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)           Termination
without Cause.  In the event the Executive’s employment is
terminated by the Company without Cause (which shall not include a termination
pursuant to 

 

5

 

Section 7(a)) (“Termination Without Cause”), the Executive shall be entitled
to those items described in the subparagraphs (i) through (iii) of
this Section 7(c) below. 
Termination Without Cause shall be effective immediately, unless a later
date is stated, upon delivery of a written notice of such termination from the
Company to the Executive.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

8.             Covenants to Protect
Confidential Information

 

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

 

9.             Non-Solicitation

 

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

 

10.           Remedies.

 

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

 

(b)           Nothing herein contained is intended to waive or diminish
any rights the Company may have at law or in equity at any time to protect and
defend its legitimate property interests (including its business relationship
with third parties), the foregoing provisions being intended to be in addition
to and not in derogation or limitation of any other rights the Company may have
at law or equity.

 

7

 

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

 

11.           Indemnification

 

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

 

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

 

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

 

(d)           The Company shall not settle any Proceeding or claim in any
manner that would impose on the Executive any penalty or limitation without the
Executive’s prior written consent. 
Neither the Company nor the Executive will unreasonably withhold its or
the Executive’s consent to any proposed settlement.

 

8

 

12.           Assignability; Binding Nature

 

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

 

13.           Representation

 

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

 

14.           Entire Agreement

 

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

 

15.           Amendment or Waiver

 

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

 

16.           Severability

 

The provisions
of this Agreement shall be severable and the invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect, impair or
render unenforceable this Agreement or any other provision hereof, all of which
shall remain in full 

 

9

 

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

 

17.           Survival

 

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

 

18.           Governing Law

 

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

 

19.           Settlement of Disputes

 

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

 

10

 

20.           Notices

 

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

 

If to the Company or the Board

 

Herbst Gaming, Inc.

3440 West
Russell Road

Las Vegas,
Nevada  89118

Attention:  General Counsel

 

If to the
Executive:

 

Troy D. Herbst

Herbst Gaming, Inc.

3440 West
Russell Road

Las Vegas,
NV  89118

 

21.           Headings

 

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

 

22.           Counterparts

 

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

 

23.           Taxes

 

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

 

24.           Acknowledgment

 

The Executive
acknowledges that he has been given a reasonable period of time to study this
Agreement before signing it and has had an opportunity to secure counsel of his
own.  By the execution of this Agreement,
the Executive certifies that he has fully read and completely understands the
terms, nature and effect of this Agreement. 
The Executive further acknowledges that he is executing this Agreement
freely, knowingly and voluntarily and that the Executive’s execution of this
Agreement is not the result of any fraud, duress, mistake, or undue influence 

 

11

 

whatsoever.  In executing this
Agreement, the Executive does not rely on any inducements, promises, or
representations by the Company other than that which is stated in this
Agreement.

 

25.           Waiver of Jury Trial

 

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

 

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

 

 

	
   

  	
  THE “COMPANY”

  	
  THE “EXECUTIVE”

  
	
   

  	
  Herbst Gaming, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Timothy P. Herbst

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Troy D. Herbst

  
	
  Its:

  	
  Chairman of the Board

  	
   

  	
  Troy D. Herbst

  

 

12

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