Document:

Exhibit 10.81

 

 

ST. JOSEPH RIVERBOAT GAMING CONTRACT

 

 

 

ASSET PURCHASE AND SALE AGREEMENT

 

THIS
ASSET PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into
as of the Twentieth day of July, 2004 (“Effective Date”), by and between St. Joseph
Riverboat Partners, a Missouri general partnership (“Seller”) and Herbst
Gaming, Inc., a Nevada corporation, or its permitted designee (“Buyer”).

 

WHEREAS,
subject to the terms and conditions set forth in this Agreement, Seller desires
to sell, transfer, assign and convey to Buyer, and Buyer desires to purchase
and acquire from Seller, the operating assets of Seller used in connection with
Seller’s gaming excursion riverboat business (the “Business”) berthed in St.
Joseph, Missouri; and

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration the receipt and
sufficiency of which hereby are acknowledged, Seller and Buyer hereby agree as
follows:

 

1.                                       Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to, or to cause certain of its
subsidiaries to, sell, transfer, assign and convey to Buyer, and Buyer hereby
agrees to purchase and acquire from Seller, all of the following (collectively,
the “Business Assets”):

 

(a)                                  The gaming excursion riverboat, the Biloxi
Bell, II (Official No. 1023167), a
documented vessel operating in St. Joseph, Missouri, together with all fixtures
and improvements located on or used in connection with the riverboat (the
“Biloxi Bell, II”);

 

(b)                                 That certain real estate located in Buchanan
County, Missouri, more particularly described on Exhibit ”A” attached
hereto, generally located as graphically outlined on Exhibit “A-1” attached
hereto, including the improvements located thereon, together with all fixtures
and improvements located on or used in connection with the Business (the “Real
Estate”);

 

(c)                                  All cash on hand and in cage (as calculated
pursuant to Section 13.3, and including the amount of the Final Slot Drop
as (defined in Section 13.4)), plus a credit for the net liability
resulting from chips and tokens on hand (including table inventory, chips and
tokens in service and token-hoppers/reserves) and chips and tokens purchased,
as calculated pursuant to Section 13.2 (“Operating
Cash”), provided that (i) Operating Cash on the Closing Date in
excess of $1,500,000 shall be retained by Seller and, (ii) in the event that
Operating Cash on the Closing Date is less than $1,500,000, Buyer shall be
entitled to deduct the amount of such shortfall from the Purchase Price.

 

 

(d)                                 All owned or leased  slots, video poker, video keno, wheel of
fortune and other video gaming devices, slot stands, black jack tables,
Caribbean Stud tables, roulette tables, crap tables, poker tables, keno, coin
counting and wrapping equipment, and all other gaming equipment and
paraphernalia used or held for use in the Business as itemized on attached
Schedule 1(d) (collectively the “Gaming Equipment”);

 

(e)                                  All tangible personal property used or held
for use in the operation of the Business, including, without limitation,
computer equipment, computer software to the extent owned or assignable under
existing arrangements (provided that, any such rights that are not assignable
are identified on Schedule 2 as “Excluded Assets,” and any obligations
associated therewith shall be deemed to be “Excluded Obligations”), and all
service equipment, kitchen equipment, decorations, china, glasswares, linens,
silverware, owned uniforms, furniture, furnishings and other equipment and
vehicles used or held for use in the Business (the “Personal Property”);

 

(f)                                    All inventories, including all food and
beverages, maintenance and housekeeping supplies, and other supplies of all
kinds, subject to such depletion and including such re-supplies as shall occur
and be made in the ordinary course of business (the “Inventories”);

 

(g)                                 All documents and books and records related
to the Business Assets or the operations of the Business, including, without
limitation, customer lists and player lists, casino files, copies of accounting
records and copies of financial statements (the “Records”);

 

(h)                                 All assignable rights and obligations under
any written or oral contracts, agreements, leases, instruments, or other documents
or commitments, arrangements, undertakings, practices or authorizations related
to the Business Assets or the operations of the Business, except for the
Excluded Obligations (collectively the “Contracts”);

 

(i)                                     All intangible property owned or leased by
Seller required for the operation of the Business, including, without
limitation, goodwill, operating and training manuals, federal, state, and local
certifications and other permits (to the extent assignable), manuals and plans
relating to the Business or its operations, customer lists, supplier lists and
other documents relating to the operation of the Business Assets, mailing lists
used in the Business, and trademarks and trade names used in the Business, (but
specifically excluding the name “Grace” any derivative thereof or any name
which includes the word “Grace” or any derivative thereof) (the “Intangibles”);

 

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2.                                       Excluded Assets. Seller shall not sell, convey, transfer or
assign to Buyer, and Buyer shall not purchase or acquire from Seller, any of
the assets described below, a complete list of which is attached hereto as
Schedule 2 (the “Excluded Assets”), and Buyer shall not assume any
liability or obligation directly or indirectly related thereto:

 

(a)                                  The difference of (i) Operating Cash at
the time of Closing, less (ii) $1,500,000 (unless the amount of the
Operating Cash is less than $1,500,000, in which case Operating Cash shall be
an Excluded Asset);

 

(b)                                 All Seller’s cash, cash equivalents, bank
deposits and similar cash items of Seller or any affiliate of Seller at the
time of Closing which is not included in Operating Cash (as defined in
Section 1(d) above);

 

(c)                                  All 
income taxes refunds, accounts receivable  and intercompany loans payable or receivable,
in each case for periods ending on or prior to the Closing Date;

 

(d)                                 Seller’s corporate records, including, but
not limited to, Seller’s minute book, membership book, financial statements,
income tax returns, and any other record or document that does not relate to
the operational aspect of the Business but excluding the Records (the “Seller
Retained Records”);

 

(e)                                  All items of personal property owned by
guests, employees or other persons furnishing goods or services to the
Business;

 

(f)                                    Refunds, rebates or other claims, or any
interest thereon, for periods ending or events occurring on or prior to the
Closing Date or refunds, rebates or other claims arising from insurance
policies that are terminated by Seller as of the Closing Date;

 

(g)                                 All employee benefit plans of Seller
(collectively “Seller’s Plans”), including, but not limited to, any defined
contribution plan, employee welfare benefit plan, life insurance, death or
dismemberment benefit, hospital and physician benefit and medical, dental and
eye vision plans;

 

(h)                                 The name “Grace”, any derivative thereof or
any name which includes the word “Grace” or any derivative thereof;

 

(i)                                     The art work listed on Schedule 2,
including, without limitation, the bronze statues entitled, respectively, “Sacagawea” (by Pat Mathison) and “Joseph Rubidoux” (by Joe Beeler)
(collectively, the “Bronze Statues”). 
Seller agrees that the Bronze Statues shall, at Buyer’s option, remain
on permanent display at the Business so long as the Buyer (or another entity
owned by

 

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Buyer)
continues to own the Business, provided that Seller shall have the right to
remove the Bronze Statues upon any sale of the Business by Buyer (or another
entity owned by Buyer) or if the Buyer no longer desires to have either of the
Bronze Statues on display at their current locations at the Business.  Seller shall enter into an art loan agreement
with the Buyer incorporating this agreement as of the Closing, which agreement
shall include other customary terms, such as an obligation for the Buyer to
maintain and insure the Bronze Statues while at the Business, and

 

(j)                                     All other assets of Seller that are set forth
on the list of Excluded Assets attached hereto as Schedule 2.

 

3.                                       Purchase Price.  The
total purchase price that shall be paid by Buyer to Seller for the Business
Assets (the “Purchase Price”) shall be Forty Nine Million Five Hundred and Two
Thousand One Hundred and Thirty Seven Dollars ($49,502,137.00), subject to
adjustment based on (i) the provisions of Section 1(d), (ii) the
prorations set forth in Section 10.4, (iii) the provisions of
Sections 13.5, 13.6 and 13.7, and (iv) the Closing Statements. On the
Closing Date, the Purchase Price will be paid in cash or by wire transfer of
immediately available funds to an account to be notified by Seller to Buyer not
less than three (3) business days prior to the Closing Date.

 

3.1                                 Deposit; Option to Deliver Letter of Credit
as Deposit.

 

(a)                                  On the Effective Date, Buyer shall deliver cash
in the amount of One Million Seven Hundred and Two Thousand Dollars
($1,702,000.00) (the “Deposit”) to Lawyers Title of Arizona, 1850 North Central
Avenue, Suite 125, Phoenix, Arizona 85004-4590 (Attention: Sandy Butler)
(“Deposit Holder”).  Deposit Holder shall
invest the Deposit in an interest bearing escrow account (with interest
accruing thereon to the credit of the party hereto that ultimately will receive
the Deposit in accordance with the terms hereof) and shall otherwise hold the
Deposit in accordance with the provisions of this Agreement, Sections 17.2(a) and (b), and
as set forth in the Deposit Escrow Instructions attached hereto as Exhibit “B”. Upon the Closing
hereunder, the Deposit, including all interest earned thereon, shall, at the
option of Buyer, either be applied to the Purchase Price or returned to Buyer.

 

(b)                                 Notwithstanding the
provisions of Section 3.1(a) above, Buyer may initially make the Deposit
by depositing an irrevocable letter of credit in the amount of the Deposit in
favor of the Deposit Holder (“Letter of Credit”) instead of depositing
cash.  The Letter of Credit shall be
issued by Bank of America, N.A., or a comparable bank or financial institution
acceptable to Seller in its sole discretion. 
The Letter of Credit shall be for a minimum term of thirteen (13)
months.  The Letter of Credit shall
provide that it may be

 

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drawn upon by written notice from the  Deposit Holder as
provided for in the Deposit Escrow Agreement. 
Upon any draw on the Letter of Credit, all proceeds therefrom shall be
paid to Deposit Holder and held by Deposit Holder in accordance with the terms of the
Deposit Escrow Agreement.  Buyer
shall have the right to substitute cash at any time for all or part of the
Letter of Credit and thereby may obtain the release or reduction of the Letter
of Credit.  On the Closing Date, or in
the event of the termination of this Agreement by either party for any reason
other than those set forth in Section 17.2(a) or
(b), the Deposit Holder shall surrender the Letter of Credit to
Buyer, and Buyer shall be entitled to cancel the Letter of Credit.

 

3.2                                 Assumed Obligations.

 

a.                                       In addition to the payment of the Purchase
Price, subject to the following sentence, Buyer shall, as part of the Closing
and to the extent the benefits associated with such liabilities, obligations,
contracts, agreements and purchase orders are Business Assets, assume the
specific liabilities, obligations, contracts, agreements and purchase orders
related to the Business as set forth on Schedule 3.2 (collectively, the
“Assumed Obligations”). Buyer shall assume the Assumed Obligations only to the
extent arising or accruing from and after the Closing Date, and Buyer shall
have no duty or obligation whatsoever with respect to any duties or obligations
of Seller arising or accruing before the Closing Date (all of which shall be
the sole responsibility and liability of Seller). Notwithstanding any other
provisions in this Agreement to the contrary, Seller shall have no duty or
obligation whatsoever with respect to any duties or obligations of Buyer or the
Business arising or accruing under any Assumed Obligations after the Closing
Date (all of which shall be the sole responsibility and liability of Buyer).

 

b.                                      Subject to the terms and conditions of this
Agreement and to Seller’s obtaining any consents necessary for any assignments,
in accordance with the terms of this Agreement, Buyer and Seller shall execute
and deliver on the Closing Date an Assignment and Assumption Agreement in the
form of Exhibit ”C” attached
hereto and incorporated herein by this reference, (the “Assignment and
Assumption Agreement”), pursuant to which Buyer shall assume the Assumed
Obligations and Seller shall assign the Assumed Obligations.  On or prior to the Closing Date, Seller shall
use commercially reasonable efforts to obtain the necessary consents or
approvals required in connection with Seller’s assignment of the Assumed
Obligations, provided that Buyer hereby agrees, to the extent necessary, to
cooperate with Seller for such purpose. 
In the event any such

 

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consents
are not obtained prior to the Closing Date, Seller shall continue to use
commercially reasonable efforts to obtain the relevant consents until such
consents are obtained, or until Buyer and Seller reasonably agree that any such
consent will not be obtainable, and Seller will cooperate with Buyer in any
lawful and economically feasible arrangement to provide that Buyer shall
receive the interest of Seller in the benefits associated with such Assumed
Obligations, including performance by Seller, if economically feasible, as
agent; provided that Buyer shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the extent Buyer would have
been responsible therefor hereunder if such consents had been obtained.

 

3.3                                 Excluded Obligations. Notwithstanding any other provision of this
Agreement to the contrary, except for the Assumed Obligations, Buyer shall not
assume or become obligated or liable with respect to any obligation of Seller
that is not set forth on Schedule 3.2, including, without limitation, the
following (collectively, the “Excluded Obligations”):

 

(a)                                  obligations and liabilities of Seller now
existing or that hereafter may exist with respect to any litigation of Seller,
whether or not described on Schedule 5.4;

 

(b)                                 obligations and liabilities accrued as of the
Closing Date to employees and former employees of Seller, including, without
limitation, any compensation, severance pay, accrued vacation time, personal
time, sick-leave time, salary, bonus, fringe benefits of any kind, welfare
benefits, pension benefits, and other benefits or claims, including, without
limitation, welfare payments and obligations under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”);

 

(c)                                  obligations and liabilities of Seller
incurred in connection with or relating to the transfer of the Business Assets,
including, without limitation, state and local gaming fees and taxes, any
federal, state, or local transfer or other tax incurred by reason of such
transfer;

 

(d)                                 liabilities for federal, state, or local
income, sales or other taxes accruing prior to the Closing, including, without
limitation, any taxes due with respect to any period prior to the Closing as a
result of the imposition or enactment with retroactive effect of any increase
or change in the tax rates applicable to the Business or any of the Business
Assets (such as the New Gaming Legislation (as defined in
Section 5.5(a)));

 

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(e)                                  obligations and liabilities of Seller
relating to workers compensation claims, liquor liability claims, employment
practices liability claims and all other claims of employees, agents or
representatives of Seller arising or relating to the period prior to the
Closing Date; and

 

(f)                                    any other obligation or liability of Seller
arising or relating to the period before the Closing Date, other than the
Assumed Obligations.

 

3.4                                 Sales and Transfer Taxes; Gaming Taxes. Seller shall pay all state and local sales
and/or transfer taxes due as a result of the consummation of the sale of the
Business Assets.  Buyer shall be
responsible for and shall pay all gaming taxes related to operations of the
Business from and after the Closing, and shall indemnify and hold Seller
harmless from and against any such gaming taxes. Seller shall be responsible
for and shall pay all gaming taxes related to operations of the Business prior
to the Closing, and shall indemnify and hold Buyer harmless from and against
any such gaming taxes.  Buyer shall, at
the Closing hereunder, provide Seller with a reseller’s certification, or similar
documentation, as required by the State of Missouri and/or any other
jurisdiction imposing a sales or similar type tax on the Business, stating that
Buyer will be liable for such taxes on sales of Inventory occurring after the
Closing so that the Inventory may be sold to Buyer without application of any
sales tax.

 

3.5                                 Employees and Employee Benefits.

 

3.5.1                        Seller agrees that once Buyer has made the
Deposit, Buyer may interview Seller’s key employees and agents in accordance
with this Section 3.5.1. Access to employees and agents of Seller shall be
subject to reasonable notice by Buyer to Seller and the prior approval of Bruce
Schmitter, Seller’s Chief Operating Officer, or a person designated by Bruce
Schmitter to make such approval on behalf of Seller, which approval shall not
be withheld unreasonably.

 

3.5.2                        Buyer agrees that Buyer shall offer
employment commencing on the day after the Closing Date to at least that number
of Seller’s employees such that an insufficient number of employees will
experience an “employment loss” as defined in the U.S. Worker Adjustment and
Retraining Notification Act (“WARN”), as amended, 29 U.S.C. Section 2101,
et. seq., or similar Missouri law, and Seller will not have experienced a
“plant closing” or “mass layoff” as defined in the WARN Act or similar Missouri
law, on account of Buyer’s purchase of the Business Assets to trigger any 60
day notice requirement under the WARN Act on or before the Closing Date. Buyer
shall be solely responsible and liable for providing any required notice of

 

7

 

termination
to Seller’s employees and otherwise complying with the provisions of the WARN
Act or other applicable law.  Buyer
further agrees to retain Robert Little, Nancy Wheatley, A.J. Wiedmaier and Gary
Vos for a period of not less than twelve (12) months from the Closing Date at
the same base salaries and other terms of employment as are in effect at
the Effective Date or if they are not retained for such period to compensate
them as though they were so employed unless they voluntarily terminate their
employment or Buyer terminates their employment for “cause.”

 

3.5.3                        Buyer agrees to the continuation of, or the
replacement with plans providing a comparable benefit to, Seller’s 401(k) plan,
medical, dental and eye vision plans and vacation policy for employees as
described on Schedule 3.5.3 for a period of not less than one (1) year
from the Closing Date.

 

3.6                                 Allocation of Purchase Price. 
Buyer and Seller acknowledge that the purchase and sale contemplated by
this Agreement constitutes an “applicable asset acquisition” within the meaning
of Section 1060(c) of the Internal Revenue Code of 1986, as amended (the
“Code”). The parties expressly agree that the Purchase Price shall be allocated
among the Business Assets as follows:

 

(a)                                  The parties agree that, unless they agree
otherwise as provided for in this Section 3.6,
(and subject to the provisions of Subsection 3.6(b)
below) the Purchase Price shall be allocated among the Business Assets as
follows: (i) the Purchase Price shall be allocated to the fixed assets of the
Business (i.e. the Biloxi Bell, II, the Real Estate, the Gaming Equipment, the
Personal Property) in an amount equal to the tax net book value of fixed
assets, as shown on the Seller’s books as of the Closing, (ii) the Purchase
Price shall be allocated to Inventory based on Seller’s cost, and (iii) the
balance of the Purchase Price shall be allocated to good will and/or to the
other Intangibles. Seller has notified Buyer that Seller believes that an
allocation of the Purchase Price among the Business Assets on this basis fairly
reflects the actual current fair market value of the respective assets and
therefore reflects an appropriate basis for allocating the Purchase Price under
Section 1060(c) of the Code.

 

(b)                                 Buyer shall have thirty (30) days after the
Effective Date of this Agreement to notify Seller at to whether it has any
objections to the proposed allocation of the Purchase Price, as reflected in
Subsection 3.6(a)  (the “Seller’s
Allocation”). Any such objection(s) shall be made in writing and shall specify
the nature of Buyer’s objection, the specific Business Assets affected by the
objection and the change in the Seller’s Allocation which Buyer proposes to
make.  If Buyer does not object to the
Seller’s Allocation within the said thirty (30) day period, then Seller and
Buyer shall prepare and timely file an IRS Form 8594 (the “Asset
Allocation Statement”) with each of

 

8

 

their
respective federal income tax returns reflecting the Seller’s Allocation.  If Buyer does timely object to the Seller’s
Allocation, then Buyer and Seller shall use good faith efforts to resolve any
dispute with respect to the Purchase Price allocation.  If within 15 days after delivery of Buyer’s
objections to Seller, Seller and Buyer are unable, in good faith, to reach such
an agreement, Seller and Buyer will each use their respective proposed
allocation statements (with Seller to use the Seller’s Allocation and Buyer to
use the Seller’s Allocation, as modified by its proposed changes).  If, within 15 days after delivery of Buyer’s
objections to Seller, Seller and Buyer shall have agreed on an allocation, then
Seller and Buyer shall prepare and file an Adjusted Asset Allocation Statement
in the form so agreed and will act in accordance with the Adjusted Asset
Allocation Statement in the preparation, filing and audit of any Tax Return.

 

(c)                                  If an adjustment is made with respect to the
Purchase Price pursuant to Section 10.4 or 13.9, and such adjustment has
not been taken into account previously, then the Asset Allocation Statement
shall be adjusted in accordance with Section 1060 of the Code.  Purchaser and Seller agree to file any
additional information return required to be filed pursuant to
Section 1060 of the Code.

 

Neither
Buyer nor Seller will take a position inconsistent with the allocation of the
Purchase Price as determined pursuant to this Section 3.6; provided,
however, that, if the Internal Revenue Service takes a position with respect to
either Buyer or Seller that is inconsistent with such allocation, then either
Buyer or Seller, as the case may be, may take a protective position adopting
the Internal Revenue Service’s contention until the controversy has been
resolved.

 

3.7                                 Transfer Documents. On the Closing Date, Seller shall sell,
assign, transfer and convey the Business Assets to Buyer by deed, bill of sale,
assignments and such other applicable title transfer documents as may be
required to sell, assign, transfer and convey title thereto, or a valid and
subsisting leasehold estate in any Business Assets held under a lease. At the
Closing, Seller shall deliver to Buyer control and possession of all the
Business Assets.

 

4.                                       Buyer’s Approval of Condition of Business
Assets, Obligation to Pursue Licensing and Certain Other Matters.

 

4.1                                 Completion of Due Diligence. 
Buyer acknowledges that prior to the execution of this Agreement it has
had ample opportunity to review all of the Business Assets and to determine
their suitability for Buyer’s purposes, except for the Environmental Reports,
the Title Commitment and the Marine Survey called for in Sections
4.5, 4.6 and 4.7 . Buyer agrees that the only

 

9

 

representations
and warranties being made by Seller with respect to the Business Assets and the
Business are those representations and warranties specifically set forth in
Section 5, and Buyer is not relying on any other representations and
warranties of Seller or any other person (including any representations and
warranties that may be implied, whether by law or otherwise) in entering into
this Agreement and in consummating the transactions contemplated hereby.

 

4.2                                 MGC Approval. 
Buyer covenants and agrees that it shall file with the Missouri Gaming
Commission (“MGC”) an application for a license to conduct gambling games on
the Biloxi Bell, II  gambling boat at St.
Joseph, Missouri (the “Application”) by not later than thirty (30) days after
the Effective Date of this Agreement. 
Buyer agrees to promptly provide any additional information required by
the MGC to process the Application and to cooperate fully (and to cause its
officers, directors and employees and agents to cooperate fully) with all
investigations being performed by or on behalf of MGC in connection with the
Application.

 

4.3                                 Effect of Disapproval.  If
Buyer timely files its Application and uses its commercially reasonable efforts
to obtain MGC approval, but MGC nonetheless denies Buyer’s Application, or
Buyer withdraws the Application upon or after receiving advice from MGC that
MGC intends to deny Buyer’s Application (such withdrawal, a “Withdrawal in Lieu
of Denial”), then upon receipt of such denial or Withdrawal in Lieu of Denial
Buyer may terminate this Agreement and receive a return of the Deposit and all
interest, if any, accrued thereon. If (A) Buyer fails to provide any
information required by the MGC to process its Application within a reasonable
amount of time after being requested to do so and/or Buyer or its officers,
directors, employees or agents fails to cooperate with the MGC investigations
for the Application, or (B) Buyer voluntarily withdraws its Application (other
than a Withdrawal in Lieu of Denial), then Buyer shall be deemed to have not
used its commercially reasonable efforts to obtain MGC approval, unless Buyer’s
failure to provide information or to cooperate, or Buyer’s withdrawal (other
than a Withdrawal in Lieu of Denial) results from Seller’s failure to comply
with the provisions of Section 7.2. 
Buyer agrees that in the event that it claims that a withdrawal is a
Withdrawal in Lieu of Denial, then Buyer shall waive any confidentiality
requirement with the MGC in order to allow the Seller to confirm that the
withdrawal was a Withdrawal in Lieu of Denial.

 

4.4                                 Effect of IRGC and MGC Disapproval of Related
Agreements.  The parties acknowledge that pursuant to
Section 36 below, Buyer must close both this transaction and the
transactions described in the SIG Agreement and the Mark Twain Casino Agreement
(each as defined in Section 36) simultaneously.  The parties further acknowledge that the Mark
Twain Casino

 

10

 

Agreement
must be approved by the MGC and the SIG Agreement must be approved by the IRGC,
which in each case must approve both the sale of the assets described in those
Agreements to Buyer and the issuance of gaming licenses to Buyer (or Buyer’s
permitted designees, as the case may be), for the described locations (the
“Other Approvals”).  Buyer agrees that it
will use its commercially reasonable efforts to obtain the Other Approvals in
the same manner as it will seek MGC approval of the Application.  If, however, the IRGC and/or the MGC fails to
grant the Other Approvals (or any of them) in a manner that would permit Buyer
to terminate the SIG Agreement and/or the Mark Twain Casino Agreement and
receive a return of its deposit made thereunder (i.e. on terms comparable to
Section 4.3 ), then Buyer may terminate this Agreement and receive a return
of its Deposit (even if it has received MGC approval prior to such time) unless
the parties mutually agree to waive the requirement of Section 36 that all
three contracts must close simultaneously (in which event each contract shall
stand on its own).

 

4.5                                 Environmental Reports.  
Promptly after the execution of this Agreement, Seller shall obtain and
deliver to Buyer a Phase I Investigation (as defined in Section 7.9 above)
dated no earlier than the date that is 6 months prior to such delivery covering
all of the Real Estate.  If the Phase I
Investigation discloses any fact or circumstance that the Buyer or its lenders
reasonably believes requires additional investigation, then the provisions of
Section 7.9 shall control.

 

4.6                                 Title
Insurance.

 

(a)                                  On
the Closing Date, Seller shall, at Seller’s expense, cause to be issued and
delivered to Buyer a policy of title insurance (the “Title Policy”) respecting
the owned real property and the leased real property included in the Business
Assets and conforming to the following specifications:

 

(i)                                     The form of the
policy will be ALTA Owner’s Policy Form B 1970 (amended 10/17/70), or as to
leasehold estates, ALTA Leasehold Owner’s Policy – 1975, or the current
approved form for the jurisdiction in which the owned real property is located,
with an endorsement deleting any exclusion or exception for creditors’ rights;

 

(ii)                                  The policy will be
issued and underwritten by Lawyer’s Title Insurance Company (the “Title
Company”);

 

(iii)                               The insured will be
Buyer;

 

(iv)                              The policy will be in an
amount equal to that portion of the Purchase Price that is allocated to Real
Estate under Section 3.6 above;

 

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(v)                                 The policy will be
dated concurrent with or subsequent to the Closing;

 

(vi)                              There will be no
exceptions to coverage other than the Permitted Liens;

 

(vii)                           To the extent available in
the applicable jurisdiction, the policy shall contain a zoning endorsement in
the form of ALTA Form 3.1 (or the equivalent form in the applicable jurisdiction)
showing the zoning classification of the owned real property and the leased
real property and confirming that the current use of the owned real property
and the leased real property is in conformance with the applicable zoning laws
and use restrictions;

 

(viii)                        In the event that the portions
of the owned real property and/or the leased real property included in the
Business Assets and identified on Exhibit A-1 as non excess property consists
of more than one parcel, the policy shall contain an affirmative statement of
insurance to the effect that all parcels of land constituting such identified
real property are contiguous; and

 

(ix)                                The policy shall also
contain such other affirmative statements of insurance and endorsements (for
example, but not by way of limitation, an “access endorsement”) as Buyer may
reasonably require, provided that such endorsements are available in the
jurisdiction in which the Business is located and that Buyer pays the cost of
any endorsements requested by Buyer.

 

(b)                                 Promptly after the
execution of this Agreement, Seller shall deliver to Buyer (A) a current
commitment from the Title Company setting forth the basis upon which the Title
Company is willing to insure title to the owned real property and the leased
real property included in the Business Assets (the “Title Commitment”), and (B)
a current Alta/ACSM “as built” Land Title Survey of such real property;
prepared at Seller’s expense, which shall be, together with such additional
certifications as may be required (and provided at Seller’s expense),
sufficient for the Title Company to issue its Title Policy as required by Section 4.6(a)
(the “Survey”).  Without limiting the
generality of the foregoing, the Survey shall be reasonably satisfactory in
form and substance to Buyer, prepared and certified to Buyer by a registered
land surveyor or licensed civil engineer (registered or licensed in the state
where the owned real property is located) showing (i) the boundaries and legal
descriptions of such owned real property, (ii) the location of all roadways and
other accessways upon, across or adjacent to such premises, (iii) the location
and book and page or document number of all easements and rights-of-way
affecting such real estate which are of record, visible upon inspection of such

 

12

 

property or otherwise known to the person
rendering such survey, (iv) all structures and improvements including
sidewalks, parking and paved areas, and the relation thereof to parcel boundary
lines, easements and established building and set-back lines, (v) utility lines
(water, sewer, gas, electric and telephone), as either above or below grade,
and (vi) any encroachments by or on adjoining property.  The surveyor shall locate or set bars at all
corners of the surveyed property and shall reflect the same on the Survey.

 

(c)                                  Buyer shall have thirty (30) days after
receipt of the Title Commitment and
the Survey, together with copies of all matters shown as exceptions thereon, to
review the status of title disclosed in the Title Commitment.  Buyer shall approve the Title
Commitment and the Survey unless Buyer
determines, in its commercially reasonable judgment, that any title defect
would materially interfere with the operation of the Business or make title to
the Real Estate unmarketable.  If Buyer
timely objects to any material defect in title to the Real Estate, then Buyer
and Seller shall negotiate in good faith to determine whether the defect can be
cured to Buyer’s satisfaction.  If Buyer
and Seller are unable to agree on a satisfactory cure for any defect within
fifteen (15) days after Buyer delivers its objections, then Buyer shall have
the right to terminate this Agreement and receive a return of the Deposit by
written notice to Seller and the Deposit Holder delivered within ten (10) days
after the negotiation period ends.  If
Buyer fails to terminate this Agreement within the said ten (10) day period,
Buyer shall be deemed to have waived its objections and to have accepted title
as shown on the Title Commitment.

 

4.7                                 Marine Survey. 
Within forty five (45) days after the execution of this Agreement,
Seller shall obtain and deliver to Buyer a Marine Survey carried out no earlier
than six (6) months prior to the date of such delivery with respect to the
Biloxi Bell, II  showing that the Biloxi
Bell, II  is watertight and in good
operating condition.  In the event such
survey is not timely delivered to Buyer, and such failure continues for more
than fifteen (15) days after Buyer gives Seller written notice of  such failure, Buyer may terminate this
Agreement by written notice to Seller and Deposit Holder and receive a return
of the Deposit.

 

5.                                       Representations and Warranties of Seller. Seller represents and warrants to Buyer as
follows, which representations and warranties are true and accurate on the date
hereof, and shall be true and accurate on the Closing Date. The following
representations and warranties of Seller shall survive the Closing for a period
of eighteen (18) months, except for the representations and warranties in
Section 5.1 (Organization, Standing and Authority of Seller), which shall
survive the Closing indefinitely and for the representations and warranties in
Section 5.4

 

13

 

(Litigation)
which shall survive the Closing for the applicable statutes of limitation and
appeal period of any litigation associated with Seller.

 

5.1                                 Organization, Standing and Authority of
Seller. Seller is an
Missouri general partnership, duly organized, validly existing and in good
standing under the laws of the State of Missouri. Seller is duly licensed and
qualified to do business in the State of Missouri and to carry on the Business
in the State of Missouri. Seller has the power and authority to execute,
deliver and perform this Agreement and has taken all action required by law for
such execution, delivery and performance. This Agreement is a valid and legally
binding agreement of Seller enforceable in accordance with its terms except to
the extent that enforcement thereof may be limited by (a) bankruptcy,
reorganization, moratorium, fraudulent conveyance or similar laws now or
hereafter in effect relating to creditors’ rights generally and
(b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). There are no contractual or
other limitations on Seller’s power to enter into this Agreement and to
consummate the transactions contemplated hereby other than the requirement to
obtain the approval of the MGC.

 

5.2                                 No Conflict. The execution, delivery and performance of this Agreement by Seller
and the consummation of the transactions contemplated by this Agreement are not
contrary to the partnership agreement of Seller. Except for the required approvals
listed in the last sentence of Section 5.1, the execution, delivery or
performance of this Agreement by Seller and the consummation of the
transactions contemplated by this Agreement will not (a) with the passage of
time, the giving of notice or otherwise, result in a violation or breach of, or
constitute a default under, any term or provision of any indenture, mortgage,
deed of trust, lease, instrument, contract, agreement or other restriction to
which Seller is a party or to which any of Business Assets is subject, (b)
result in the creation of any lien or other charge on any of the Business
Assets, (c) result in an acceleration or termination of any note, loan or
security agreement or similar agreement or instrument to which Seller is a
party or by which any of Business Assets are bound, or (d) result in a
violation of any order, judgment, decree, rule, regulation or law applicable to
Seller.

 

5.3                                 Ownership of Business Assets. Seller has title to each of the Business
Assets, including, without limitation, all leasehold estates and all other
material tangible and intangible assets, free and clear of Encumbrances (as
defined below) except for Encumbrances (a) that are reflected in Seller’s
financial statements, (b) that constitute statutory liens arising in the
ordinary course of business, (c)  that constitute the Assumed
Obligations,  (d) that will be paid
in full at Closing out of Seller’s proceeds from the consummation of the
transactions contemplated hereby, (e) that are to be pro-rated upon
Closing

 

14

 

hereunder
(e.g. real estate taxes and assessments), and/or (f) that have been consented
to in writing by Buyer (collectively, the “Permitted Liens”).  For purposes of this Agreement, the term
“Encumbrance” shall mean all charges, claims, mortgages, liens, options,
pledges, security interests, rights of first refusal, adverse claims and
restrictions of any kind, including, without limitation, all restrictions on
transfer or other assignment, as security or otherwise, of or relating to use,
quiet enjoyment, voting, transfer, receipt of income or exercise of any other
attribute of ownership, on the
Business Assets. At the Closing, the Seller shall cause the Business and the
Business Assets to be released from the 
Encumbrances other than the Assumed Obligations and current real estate
taxes, either by paying the Encumbrances in 
full or by causing the Business and the Business Assets to be released
from any liability therefore. 
Notwithstanding the foregoing, Seller may contest the validity of any
such Encumbrance, in which event (A) Seller shall post a statutory bond, cause
the Title Company to insure over, or otherwise cause the lien of any such
Encumbrance to be released as of the Closing, or (B) Seller shall deposit with
the Deposit Holder, from Seller’s proceeds, an amount equal to 110% of the
contested Encumbrance (each a “Contested Encumbrance Deposit”) at Closing from
the Purchase Price, and the Contested Encumbrance Deposit shall continue to be
held by Deposit Holder until any dispute with respect to such Encumbrance has
been resolved or the lien on the Business Assets applicable to such Encumbrance
has been fully released. Upon consummation of the transactions contemplated
hereby, Buyer shall receive the Business Assets free and clear of any
Encumbrances except for the Assumed Obligations and current real estate
taxes.  The Business Assets constitute
all of the assets, property and rights necessary and sufficient for the conduct
of the Business as currently conducted by Seller or currently proposed to be
conducted by Seller, other than any required gaming licenses or approvals,
liquor licenses and/or other governmental permits and approvals which Buyer
must obtain as a new operator of the Business.

 

5.4                                 Litigation. Except as set forth on Schedule 5.4,
Seller is not a party to any suit, claim, action or proceeding pending or, to
the best of Seller’s knowledge, threatened by or before any court,
administrative or regulatory body, or governmental agency, or to any
investigation pending or, to the best of Seller’s knowledge, threatened by any
governmental agency which is not covered by insurance and where, to the best of
Seller’s knowledge, there is a substantial likelihood of a judgment, order,
decree, liability or other determination materially and adversely affecting the
consummation by Seller of the transactions contemplated by this Agreement or
materially affecting Seller or any of the Business Assets or the Business.

 

5.5                                 Financial Statements; Financial Condition. Attached hereto as Exhibit
“D” and incorporated herein by this reference are copies of
Seller’s

 

15

 

audited
financial statements for the 2001, 2002 and 2003 calendar years (the “Seller’s
Financial Statements”).  The Seller’s
Financial Statements and the unaudited balance sheet of Seller, dated as of
May 31, 2004, and the unaudited statement of operations for the five (5)
months then ended (collectively, the “Interim Financial Statements”), a true and
complete copy of which was delivered to Buyer on or prior to the date hereof,
(i) are complete, in accordance with the books and records of Seller,
(ii) accurately reflect the assets, liabilities and financial condition
and results of operations of the Business as at the respective dates thereof
and for the respective periods indicated therein, except as otherwise noted
therein and subject, in the case of the Interim Financial Statements, to normal
and recurring year-end adjustments that will not, individually or in the
aggregate, be material, and (iii) have been prepared in accordance with
GAAP consistently applied (except as may be indicated in the notes thereto, and
except, in the case of the Interim Financial Statements, for the inclusion of
notes).  Except as set forth on Schedule 5.5, since the date of
Seller’s Balance Sheet dated as of December 31, 2003, none of the
following has occurred or arisen in the operation of the Business:

 

(a)                                  (i) Any change, event, development,
circumstance or condition that has caused or reasonably may be expected to
cause, in any one case or in the aggregate, a material adverse condition or
material adverse change in or affecting (x) the transactions contemplated by
this Agreement, or (y) the condition (financial or otherwise), results of
operations, assets, liabilities or prospects of the Business, taken as a
whole,  (a “Material Adverse Change”).

 

(i)                                     For a change in the historical
operating results of the Business to constitute a Material Adverse Change such
change must result in either (I) the EBITDA of the Business for the most
recently completed rolling twelve month period being less than ninety percent
(90%) of the EBITDA of the Business for the year ended December 31, 2003
or (II) the EBITDA of the Business in each of any two consecutive months after
May, 2004 being less than 70% of the EBITDA of the Business for the
corresponding months in the prior year.

 

(ii)                                  If Buyer desires to
terminate this Agreement due to the occurrence of a Material Adverse Change, it
must do so within forty five (45) days after it receives notice of the event
giving rise to the Material Adverse Change. 
For example, if the EBITDA of the Business  for August and September of 2004
are less than 70% of the EBITDA of the Business for the August and
September of 2003, then Buyer must elect to terminate this

 

16

 

Agreement within 45 days after it receives the monthly financial report
for September 2004 which shows the second consecutive month of reduction.  If Buyer fails to timely elect to terminate
this Agreement due to such Material Adverse Change, then Buyer’s right to
terminate this Agreement due to such Material Adverse Change shall terminate as
to that 2 month period, provided that (A) if subsequently the EBITDA of the
Business in for September and October of 2004 are less than 70% of
the EBITDA of the Business for the September and October of 2003,
then this will constitute a new Material Adverse Change with a new time period,
and (B) the failure of Buyer to terminate this Agreement due to a 2 month drop
in EBITDA shall not affect Buyer’s right to terminate the Agreement due to a
rolling 12 month drop.

 

(iii)                               In determining the
EBITDA for December 2003 and December 2004 only, all normal and customary
year end adjustments made to the Business’s financial statements shall be
annualized over the entire year in question (i.e. only one-twelfth of the year
end adjustments shall be allocated to December) to avoid any year-end
distortions of EBITDA.

 

(iv)                              A reduction in  EBITDA caused by
a non-recurring expense (such as a casualty loss or other one-time expense)
shall be ignored for purposes of determining whether a Material Adverse Change
has occurred (subject to Buyer’s rights under Section 15 below).

 

(b)                                 Any material casualty, loss, damage or
destruction to any of the Business Assets (as defined in Section 15
below);

 

(c)                                  Except for normal, periodic increases in the
ordinary course of business and consistent with past practices, increase in
compensation payable by Seller to any officer, employee or other representative
or agent of Seller (collectively “Personnel”), and employee welfare, pension,
retirement, profit-sharing or similar payment or arrangement made or agreed to
by Seller for any Personnel except pursuant to the existing plans and
arrangements described on Schedule F;

 

(d)                                 Sale, assignment or transfer of any of the
properties or assets of Seller used in the Business, other than in the ordinary
course of business;

 

17

 

5.6                                 Taxes. Seller has timely filed or will timely file or cause to be timely
filed all tax returns required by applicable law to be filed in respect to any
period ending before or as of the Closing Date. All taxes payable by Seller, or
otherwise arising from, imposed in connection with, or applicable to the
Business Assets, the operations and/or the Business, in respect to any period
ending before or as of the Closing Date, have been paid on or before the
Closing Date, or, where payment is not yet due, Seller will pay all such Taxes
when due. No income tax audits are pending or being conducted with respect to
Seller. Seller has not received notice from the Internal Revenue Service or any
state or local taxing authority that it intends to audit Seller for income tax
purposes for any open year, nor is there any income tax audit currently in
progress. Buyer acknowledges that Seller is currently undergoing, or expects to
undergo, periodic routine audits by the State of Missouri for gaming and sales
tax purposes.  Seller agrees to provide
Buyer with a summary of the results of such audits promptly after they are
received by Seller.

 

5.7                                 Employees; ERISA. Upon delivery by Buyer of the Deposit,
Seller shall deliver to Buyer a complete list of the names of all officers,
directors, and employees of Seller, together with the date of hire of each of
such persons and the annual or hourly rate of compensation, the job title, job
description, job classification, and benefit plan participation of each of such
persons on the date of this Agreement.  
Seller has previously delivered to Buyer true and correct copies of the
following items: (a) all profit-sharing, deferred-compensation, bonus,
commission, pension, retirement, welfare or incentive plan or contract to which
Seller is a party or by which Seller is bound; (b) written or other formal
personnel policies; and (c) plans or agreements under which fringe benefits,
including, without limitation, vacation plans or programs, sick leave plans,
hospitalization or other medical insurance plans or programs and related
benefits afforded to any of Seller’s employees (all of such plans and
agreements described in the immediately preceding clauses (a), (b) and (c),
collectively “Employee Benefit Programs”). Seller is, and on the Closing Date
Seller shall have been, in material compliance with all federal and state laws,
rules and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, and Seller is not, and on the
Closing Date Seller shall not have been, engaged in any unfair labor practice,
provided that Buyer acknowledges that Seller has a number of litigation matters
(listed on Schedule 5.5) in which
one or more employees have alleged that Seller has engaged in unfair labor
practices.

 

5.8                                 Trademarks.  Schedule 5.8
contains a true and correct listing all tradenames, trademarks, service marks,
trademark licenses, franchises, trademark or tradename registrations,
copyrights, know how, trade secrets and

 

18

 

other
assets of a like kind, which are, in whole or in part, used in connection with
the operation of the Business (collectively, the “Trademarks”). Seller has not
been charged with infringement of, nor, to the best of Seller’s knowledge, is
Seller threatened to be charged with infringement of, any unexpired patent,
trademark, trademark registration, trade name, service mark, copyright,
copyright registration or other proprietary right of any party.

 

5.9                                 Environmental Conditions. Seller’s operation of the Business
complies, and has complied since January 1, 2000, in all material respects
with all applicable Environmental Laws. Except as set forth on Schedule 5.9, Seller has not
caused any Release or threatened Release of any Hazardous Material in, on,
under or from any property owned or leased by Seller or any neighboring
property and to the best of Seller’s knowledge there has not been any Release
or threatened Release of any Hazardous Material in, on, under or from any
property owned or leased by Seller or any neighboring property. Except as set
forth on Schedule 5.9, no
judicial or administrative enforcement action, proceeding, claim, order,
directive, notice of inspection, or notice of noncompliance by any governmental
authority pursuant to any applicable environmental law (together,
“Environmental Claims”) has been made, or is pending or, to the best of
Seller’s knowledge, has been threatened against Seller with respect to either
the property owned or leased by Seller or Seller’s operations thereon. With the
exception of radiator fluids, waste oils, greases and similar materials
generated in the maintenance of motors used to propel vehicles and vessels,
which materials have been properly handled in accordance with applicable
Environmental Laws and have all been properly disposed of off-site, and
incidental amounts of cleaning materials cooking oils and similar items
customarily used and/or sold in the operations of hotels, restaurant,
convenience store and casino operations, Seller has used no quantity of any
Hazardous Material and has conducted no Hazardous Material Activity in, on,
under or from any real property or facility used or operated by Seller in
connection with the operation of the Business. Seller has not placed,
maintained or caused to exist any underground storage tank, asbestos containing
material, polychlorinated byphenyl, in the form of electrical transformers or
any other form, or landfill or dump on any real property or facility used or operated
by Seller in connection with the operation of the Business.

 

For purposes of this Section 5.9, the following terms shall have
the meanings set forth below:

 

“Environmental
Laws” means any and all federal, state and/or local laws, regulations and legal
requirements that exist on the Closing Date pertaining to (i) the protection of
health, safety and the indoor and outdoor environment, (ii) the conservation,
management or use of

 

19

 

natural
resources and wildlife, (iii) the protection or use of surface water and
groundwater, (iv) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, Release, threatened
Release, abatement, removal, remediation or handling of, or exposure to, any
Hazardous Material or (v) pollution (including, without limitation, any Release
to air, land, surface water and groundwater), and includes, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42
U.S.C. 6901 et seq.; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. 6901 et seq.; the Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 U.S.C. 1251 et seq.; the
Clean Air Act of 1966, as amended, 41 U.S.C. 7401 et seq.; the Toxic Substances
Control Act of 1976, 15 U.S.C. 2601 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. App. 1801 et seq; the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. 651 et seq.; the Oil Pollution Act of
1990, 33 U.S.C. 2701 et seq.; the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. 11001 et seq.; the National Environmental
Policy Act of 1969, 42 U.S.C. 4321 et seq.; the Safe Drinking Water Act of
1974, as amended, 42 U.S.C. 300(f) et seq.; any similar, implementing or
successor law to any of the foregoing and any amendment, rule, regulation,
order or directive issued thereunder.

 

“Hazardous
Material Activity” means any activity, event or occurrence involving a
Hazardous Material, including, without 
limitation, the manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, Release, threatened Release,
abatement, removal, remediation, handling of or corrective or response action
to any Hazardous Material.

 

“Hazardous
Material” means any substance, chemical, compound, product, solid gas, liquid,
waste, byproduct, pollutant, contaminant or material that is hazardous or
toxic, and includes, without limitation, (i) asbestos, polychlorinated
biphenyls and petroleum; and (ii) any such material classified or regulated
as “hazardous” or “toxic” or as a “contaminant” or “pollutant” under the laws
of the State of Missouri or any Environmental Law provided that cleaning
materials and other items customarily used by commercial businesses in the
operation and maintenance of restaurants and other public facilities in the St.
Joseph, Missouri area shall not be deemed to be Hazardous Materials for

 

20

 

purposes
of this definition so long as such materials or other items are used in their
customary manner for such purposes.

 

“Release”
means any soiling, migrating, seeping, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
any Hazardous Material into the indoor or outdoor environment, including,
without limitation, the abandonment or discarding of barrels, drums,
containers, tanks and other receptacles containing or previously containing any
Hazardous Material.

 

5.10                           Labor Disputes and Complaints. Except as set forth on Schedule 5.5,
no person, party or labor organization, including, without limitation,
governmental agency of any kind, has made, brought, commenced, or to the best
of Seller’s knowledge, threatened any claim or action, within the last twelve
(12) months, regarding a labor dispute, unfair labor practice, employee
representation proceeding, wage and hour claim, occupational safety and health
claims, employee arbitration, worker’s compensation claims or any other labor
dispute proceeding or investigation, with respect to Seller, the Business or
any of Business Assets. Seller has not entered into a binding agreement with
organized labor that would cover the employees of Seller.

 

5.11                           Consents. Except for (i) the consent and approval of the MGC and other
governmental agencies or authorities in connection with the operation of the
Business, including, without limitation, filings, consents, approvals and
clearances by the US Federal Trade Commission and the Antitrust Division of the
US Department of Justice, as may be required by the Hart Scott Rodino Antitrust
Improvements Act of 1976 (collectively, the “HSR Approvals”) (ii) the consent
and approval of the City of St. Joseph, and (iii) and as set forth on Schedule 5.11 (which consents
Seller shall use commercially reasonable efforts to obtain prior to Closing,
with the reasonable cooperation of Buyer, as such cooperation may be reasonably
requested by Seller) and except for consents and approvals already obtained by
Seller, no consent, approval or agreement of any person, entity, party, court,
agency or government is required to be obtained by Seller in connection with
the execution and delivery of this Agreement or the performance of the terms of
this Agreement or the consummation of the transactions contemplated by this
Agreement.

 

5.12                           Brokerage and Finder’s Fees. Except for Libra Securities (“Broker”) (who
Seller will pay a commission pursuant to a separate agreement between Seller
and Broker if and only if the transaction described in this Agreement closes),
neither Seller nor anyone on Seller’s behalf has any actual or potential
liability to any broker, finder or agent, and Seller has not agreed to pay any
brokerage fee, finder’s fee or commission, with respect to

 

21

 

the
transactions contemplated by this Agreement. Seller shall indemnify, hold
harmless and defend Buyer against all claims and liabilities asserted against
Buyer, any of the Business Assets, or any combination of them, by any person
acting or claiming to act as a broker or finder on behalf of Seller.

 

5.13                           Options. Except as set forth in Schedule 5.13,
there are no rights of first refusal, options or similar rights granted with
respect to any of the Business Assets. 
Buyer acknowledges that the options listed on Schedule 5.13
are part of the Assumed Obligations and therefore will remain in place as of
the Closing (unless exercised by the parties entitled thereto under the
applicable agreement prior to the Closing).

 

5.14                           Affiliate Contracts. Except for employment agreements and except
as specifically identified on Schedule 5.14,
there does not exist any contract, agreement or other arrangement between
Seller and (a) any affiliate of Seller, (b) any entity in which
Seller directly or indirectly owns more than a five percent (5%) interest or
(c) any of the managers or members of Seller that will not be cancelled by
Seller simultaneously with the Closing hereunder.

 

5.15                           Complimentaries. Seller is not committed to any
complimentary arrangement for food or beverage for any guest or client of the
Business as of the Closing Date, or for any period thereafter, except in
accordance with prior practices.

 

5.16                           Approval of Agreement by Partners. The form of this Agreement and each of the
transactions contemplated hereby will be approved by Seller’s partners at a
partnership meeting duly held by Seller prior to the Closing.

 

5.17                           Maintenance of Insurance. Seller carries insurance (including self
insurance) in such amounts and covering such risks as set forth on Schedule 5.17 and will continue
to carry such insurance until the Closing hereunder.

 

22

 

5.18                           Compliance with Laws; Permits.

 

(a)                                  Seller is and has been since January 1,
2001 in compliance in all material respects with all statutes, laws, ordinances
or regulations applicable to the conduct or operation of the Business and the
ownership or use of the Business Assets. 
Neither Seller nor any of its executive officers has received since
January 1, 2001, nor is there any basis for, any notice, order, complaint
or other communication from any governmental authority or any other person that
Seller is not in compliance in all material respects with any such laws.

 

(b)                                 Seller is in possession of, and Schedule 5.18 sets forth a true
and complete list of, all Permits necessary for Seller to own, lease and
operate the Business Assets and to carry on the Business in all material
respects as currently conducted (the “Permits”).  Seller is and has been in compliance in all
material respects with all such Permits. 
As of the date hereof, no suspension, cancellation, modification,
revocation or nonrenewal of any Permit is pending or, to the knowledge of
Seller, threatened

 

5.19                           Real Property.

 

(a)                                  Seller has (i) title in fee simple to all
owned real property and (ii) leasehold title to all leased real property, in
each case, subject only to the matters disclosed on the Title Commitment and
Survey to be delivered pursuant to Section 4.6.  No parcel of owned real property or leased
real property is subject to any governmental decree or order to be sold or is
being condemned, expropriated or otherwise taken by any public authority with
or without payment of compensation therefore, nor, to the knowledge of Seller,
has any such condemnation, expropriation or taking been proposed.  All leases of leased real property and all
amendments and modifications thereto are in full force and effect, and, except
as disclosed on Schedule 3.2 (list of
Assumed Obligations) there exists no default under any such lease by Seller or
to the best knowledge of Seller by any other party thereto, nor any event
which, with notice or lapse of time or both, would constitute a default
thereunder by Seller or to the best knowledge of Seller by any other party
thereto.  Except as disclosed on
Schedule 3.2, all leases of leased real property shall remain valid and
binding in accordance with their terms following their assignment to Buyer at
the Closing.

 

(b)                                 There are no contractual or legal
restrictions that  materially preclude or
restrict the ability to use any owned real property or leased real property by
Seller or the Business for the purposes for

 

23

 

which
it is currently being used.  There are no
material latent defects or material adverse physical conditions affecting the
owned real property or leased real property, or improvements thereon.  All structures and other buildings on the
owned real property or leased real property are adequately maintained and are
in good operating condition and repair for the requirements of the Business as
currently conducted.

 

5.20                           Personal Property.  The
personal property included in the Business Assets has been maintained in all
material respects in accordance with past practice and generally accepted
industry practice.  The personal
property, taken as a whole, is in all material respects in good operating
condition and repair, ordinary wear and tear excepted.  All such personal property that is leased is
in all material respects in the condition required of such property by the
terms of the lease applicable thereto.

 

5.21                           Knowledge.  As used herein, “Seller’s knowledge” or other
references herein to Seller’s knowledge mean the actual knowledge, after due
and careful inquiry (and without personal liability), of Larry Seckington, and
Bruce Schmitter, who Seller represents and warrants are the individuals
primarily involved with the development and operation of the Business and the
other Business Assets on behalf of Seller.

 

6.                                       Representations and Warranties of Buyer. 
Buyer represents and warrants to Seller as follows, each of which is
true and accurate on the date hereof and shall be true and accurate on the
Closing Date. The following representations and warranties of Buyer shall
survive the Closing for a period of eighteen (18) months.

 

6.1                                 Organization, Standing and Authority of Buyer. Buyer is a Nevada company, duly organized,
validly existing and in good standing under the laws of the State of Nevada.
Buyer has the power to execute and deliver this Agreement and has taken all
action required by law for such execution, delivery and performance. This
Agreement is a valid and legally binding agreement of Buyer enforceable in
accordance with its terms except to the extent that enforcement thereof may be
limited by (a) bankruptcy, reorganization, moratorium, fraudulent
conveyance or similar laws now or hereafter in effect relating to creditors’
rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Except as set forth on Schedule 6.5,
there are no contractual or other limitations on Buyer’s power to enter into
this Agreement or to consummate any of the transactions contemplated by this
Agreement other than the requirement to obtain the consent of the MGC.

 

6.2                                 No Conflict. The execution, delivery and performance of this Agreement by Buyer,
and the consummation of the transactions contemplated

 

24

 

by
this Agreement, are not contrary to the articles of incorporation or operating
agreement of Buyer. Except as set forth on Schedule 6.5,
the execution, delivery, performance or consummation of this Agreement by Buyer
will not (a) with the passage of time, the giving of notice or otherwise,
result in a violation or breach of, or constitute a default under, any term or
provision of any indenture, mortgage, deed of trust, lease, instrument,
contract, agreement or other restriction to which Buyer is a party or to which
any of Buyer’s property is subject, (b) result in the creation of any lien
or other charge on any of the assets of Buyer, (c) result in an
acceleration or termination of any loan or security interest agreement or
similar agreement or instrument to which Buyer is a party or (d) result in
a violation of any order, judgment, decree, rule, regulation or law applicable
to Buyer.

 

6.3                                 Litigation.  Buyer is not a party to any
suit, claim, action or proceeding now pending or threatened before any court,
administrative body or regulatory body, or by any governmental agency, or any
investigation now pending or, to the best of Buyer’s knowledge, threatened by
any governmental agency in which there is a substantial likelihood of a
judgment, order, decree, liability or other determination affecting the
consummation by Buyer of the transactions contemplated by this Agreement.

 

6.4                                 Compliance with Laws. Buyer has not violated any statute, law,
ordinance or regulation applicable to Buyer’s operations and properties that would
materially affect the consummation of the transactions contemplated by this
Agreement.

 

6.5                                 Consents. Except (i) as set forth on Schedule 6.5, (ii) with
respect to such consents and licenses required to be obtained from the MGC or
other governmental agencies or authorities including, without limitation, HSR
Approvals and (iii) as set forth on Schedule 5.11, (a) no consent,
approval or agreement of any person, entity, party, court or government is
required to be obtained by Buyer or the partners of Buyer in connection with
the execution and delivery of this Agreement or the performance of the terms of
this Agreement or the consummation of the transactions contemplated by this
Agreement; (b) Buyer’s obligations under this Agreement do not and will not
require any registration with, consent or approval of, notice to or any action
by any person or governmental authority (except as may be required by the
Nevada gaming authorities); and (c) Buyer is not required to obtain any permit
of any kind from any regulatory or governmental authority in order to
consummate the transactions contemplated by this Agreement. Buyer shall use its
commercially reasonable efforts to obtain before the Closing Date, with the
reasonable cooperation of Seller, as such cooperation may be reasonably
requested by Buyer, all requisite consents of third parties, including, without
limitation, governmental or other regulatory agencies, foreign or domestic,

 

25

 

required
to be received by or on the part of Buyer for the execution and delivery of
this Agreement and the performance of its terms.

 

6.6                                 Brokerage and Finder’s Fees. Except for Lehman Brothers Inc., neither Buyer nor anyone on
Buyer’s behalf has any liability to any broker, finder or agent, and Buyer has
not agreed to pay any brokerage fee, finder’s fee or commission, with respect
to the transactions contemplated by this Agreement. Buyer shall indemnify and
hold harmless Seller from and against all claims or liabilities asserted against
Seller by any person acting or claiming to act as a broker or finder on behalf
of Buyer.

 

6.7                                 Good Standing in Other States. 
Buyer represents and warrants to Seller that it has licenses to conduct
gambling games in Nevada and that its licenses in such jurisdiction are valid
and in good standing as of the date hereof and as of the Closing.  Buyer further represents and warrants that
Buyer has no knowledge of any circumstances that would prevent Buyer from
obtaining MGC approval of its Application.

 

7.                                       Seller’s Obligations.

 

7.1.                              Seller’s Covenants. From the date hereof to the Closing Date,
Seller shall continue to conduct the Business in the ordinary course of
business, consistent with past practices, in accordance with standards of
operation existing as of the date hereof and in accordance with Seller’s annual
budget or budgets, copies of which have been or will be provided to Buyer on or
prior to the Effective Date.  
Notwithstanding the foregoing, Buyer and Seller agree that (I) Seller
shall have no obligation to purchase or lease any Gaming Equipment, whether or
not called for in Seller’s annual budget, but (II) Seller shall be obligated to
make the other planned capital expenditures provided for in its current annual
budget.  By way of amplification and not
limitation, between the date of this Agreement and the Closing Date, Seller
shall not do or propose to do, directly or indirectly, any of the following in
connection with the Business or the Business Assets without the prior written
consent of Buyer:

 

(a)                                  issue, sell, pledge, dispose of or otherwise
subject to any Encumbrance any Business Assets, other than sales or transfers
in the ordinary course of business consistent with past practice;

 

(b)                                 enter into any lease of real or personal
property or any renewals thereof in connection with the Business;

 

(c)                                  increase the compensation payable or to
become payable or the benefits provided to any employee, except for normal
merit and

 

26

 

cost-of-living
increases consistent with past practice in salaries or wages of employees who
receive less than $50,000 in total annual cash compensation from Seller, or
increase the compensation payable or to become payable or the benefits provided
to any employee of Seller who receives more than $50,000 in total annual cash
compensation from Seller by more than 5%, or grant any severance or termination
payment to, or pay, loan or advance any amount to, any employee, or establish,
adopt, enter into or amend any employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by Seller
for any Personnel except pursuant to the existing plans and arrangements
described on Schedule 3.5.3. Buyer
agrees that Seller shall be free to offer and pay retention bonuses (to retain
employees during the uncertainties caused by this transaction) and/or to pay
bonuses at or after Closing to employees of the Business to reward past
service, so long as such payments do not result in an increase in the base pay
to such employees;

 

(d)                                 enter into any contract or agreement with any
related party of Seller in connection with or affecting the Business or the
Business Assets;

 

(e)                                  make any change in any method of accounting
or accounting practice or policy affecting the Seller’s Financial Statements,
except as required by GAAP;

 

(f)                                    cancel, compromise, waive or release any
right or claim relating to the Business or the Business Assets, other than in
the ordinary course of business consistent with past practice, and except that
Seller shall be free to deal with any Excluded Assets and Excluded Liabilities
as it sees fit;

 

(g)                                 permit the lapse (without comparable
replacement coverage) of any existing policy of insurance relating to the
Business or the Business Assets;

 

(h)                                 use any 
of the Business Assets other than cash or cash equivalents to pay any
costs or expenses arising out of or relating to the transactions contemplated
by this Agreement;

 

(i)                                     commence or settle any action, claim or
proceeding relating to the Business, the Business Assets or the Assumed
Obligations,  except that Seller shall be
free to deal with any Excluded Assets and Excluded Liabilities as it sees fit;

 

27

 

(j)                                     take any action, or intentionally fail to
take any action, that would cause any representation or warranty made by Seller
in this Agreement to be untrue or result in a breach of any covenant made by
Seller in this Agreement or any Ancillary Agreement, or that would have a
Material Adverse Change;

 

(k)                                  enter into any purchase order for the
Business involving a commitment of $50,000 or more which would not be fully
paid by the Closing without first providing Buyer notice thereof and an
opportunity to disapprove such purchase order.

 

7.2                                 Pre-Closing Assistance. Before the Closing Date, at the request of
Buyer, Seller shall use commercially reasonable efforts to provide reasonably
requested information to Buyer for the purpose of assisting Buyer in obtaining
MGC approval; provided, however, that Seller shall have no
liability whatsoever for or associated with such licensing. Buyer agrees to
indemnify and hold harmless Seller and any representative or agent of Seller,
including, but not limited to, Bruce Schmitter and Larry Seckington, from any
liability, claim, expense or cost associated with assisting Buyer in obtaining
MGC approval.

 

7.3                                 Exclusivity.  Seller agrees that between the
date of this Agreement and the earlier of the Closing and the termination of
this Agreement, Seller shall not, and shall take all action necessary to ensure
that none of its representatives or agents shall:

 

(a)                                  solicit, initiate, consider, encourage or
accept any other proposals or offers from any person relating to any direct or
indirect acquisition or purchase of all or any portion of the Business or the
Business Assets, whether effected by sale of assets, sale of stock, merger or
otherwise; or

 

(b)                                 participate in any discussions,
conversations, negotiations or other communications regarding, or furnish to
any other person any information with respect to, or otherwise cooperate in any
way, assist or participate in, facilitate or encourage any effort or attempt by
any other person to seek to do any of the foregoing.  Seller immediately shall cease and cause to
be terminated all existing discussions, conversations, negotiations and other
communications with any persons conducted heretofore with respect to any of the
foregoing.

 

(c)                                  Seller shall use good faith efforts to notify
Buyer promptly, but in any event within 24 hours, orally and in writing if any

 

28

 

such
proposal or offer, or any inquiry or other contact with any person with respect
thereto, is made.  Any such notice to
Buyer shall indicate in reasonable detail the identity of the person making
such proposal, offer, inquiry or other contact and the terms and conditions of
such proposal, offer, inquiry or other contact. 
Seller shall not release any person from, or waive any provision of, any
confidentiality or standstill agreement to which Seller is a party entered into
in connection with Seller’s proposed sale of the Business, without the prior
written consent of Buyer.

 

7.4                                 Non-Competition; Non-Solicitation.

 

(a)                                  For a period of five (5) years following
the Closing, Seller shall not engage, directly or indirectly through any person
or contractual arrangement, in any gaming business anywhere within 120 miles of
St. Joseph, Missouri (the “Territory”), or directly or indirectly through any
person or contractual arrangement, perform management, executive or supervisory
functions with respect to, operate, join, control, render financial assistance
to, receive any economic benefit from, exert any influence upon, or participate
in any gaming business within the Territory. 
Notwithstanding anything to the contrary herein, the provisions of this
Section 7.4 shall not apply to the operation by Seller or its affiliates
of the White Cloud casino, or the Woodlands Racetrack. For purposes of the
preceding sentence, the Woodlands Racetrack shall include any gaming activities
that may in the future be added to the Woodlands Racetrack and also any new
casino or racetrack located within a three (3) mile radius of the Woodlands
Racetrack.  In addition, after the term
of the consulting agreement provided for in Section 7.12
, nothing herein shall limit the right of Larry Seckington or Bruce Schmitter
to obtain employment in the gaming business in the Kansas City area,
notwithstanding the fact that some or all of such area may be within the Territory.  Finally, nothing herein shall be deemed to
prevent Seller, or any affiliate of Seller, from acquiring less than a five
percent (5%) in aggregate interest in any publicly held company, regardless of
the location of any businesses operated by the said public company.

 

(b)                                 For a period of two (2) years following the
Closing, Seller shall not, and shall cause its affiliates and persons who act
at the request of or otherwise for the benefit of Seller or its affiliates in
connection with the recruitment, retention or hiring of employees not to,
solicit, recruit or hire any person who at any time on or after the date of
this Agreement is a Business Employee (as defined below).  The foregoing shall not prohibit (i) a
general solicitation to the public of

 

29

 

general
advertising or similar methods of solicitation by search firms not specifically
directed at Business Employees or (ii) Seller or any of its affiliates from
soliciting, recruiting or hiring any Business Employee who has ceased to be
employed or retained by Buyer for at least 12 months.  For purposes of this Section 7.4,
“Business Employee” means, any current or former employee of Seller who is or
was employed in the Business, except that Larry Seckington, Bruce Schmitter,
Gary Voss, Sandy Hale, Nancy Wheatley and Pam Murphy are expressly excluded
from the definition of Business Employee for purposes of this Section 7.4.

 

(c)                                  As additional consideration for this
Agreement, Seller agrees to use all commercially reasonable efforts to cause
the following affiliates of Seller (the “Restricted Affiliates”) to enter into
separate non-competition agreements meeting the requirements of
Section 7.4(a) (except that the term shall have been shortened to two (2)
years after Closing)(each, a “Non-Competition Agreement”, and together the
“Non-Competition Agreements”) and delivered to Buyer.

 

(1)                                  Grace Entertainment, Inc.

 

(2)                                  Larry Seckington

 

(3)                                  Bruce Schmitter

 

(4)                                  Howard Grace

 

(5)                                  Richard Deshon

 

(6)                                  John Gourley

 

Each Non-Competition Agreement shall bind each
Restricted Affiliate and its or their affiliates. For purposes of this
Section 7.4(d), an “affiliate” of a Restricted Affiliate shall mean an
entity which controls the Restricted Affiliate, is controlled by the Restricted
Affiliate, or is under common control with the Restricted Affiliate. Buyer
expressly agrees that a default by one Restricted Affiliate under its
Non-Competition Agreement shall not constitute a default by Seller or any other
Restricted Affiliate, and that Buyer shall look solely to each Restricted
Affiliate for any damages caused by any breach by that Restricted Affiliate of
its  Non-Competition Agreement.

 

(d)                                 Seller acknowledges that the covenants of
Seller set forth in this Section 7.4 are an essential element of this
Agreement and that

 

30

 

any
breach by Seller of any provision of this Section 7.4 will result in
irreparable injury to Buyer.  Seller
acknowledges that in the event of such a breach, in addition to all other
remedies available at law, Buyer shall be entitled to equitable relief,
including injunctive relief, and an equitable accounting of all earnings,
profits or other benefits arising therefrom, as well as such other damages as
may be appropriate.  Seller has
independently consulted with its counsel and after such consultation agrees
that the covenants set forth in this Section 7.4 are reasonable and proper
to protect the legitimate interest of Buyer.

 

(e)                                  If a court of competent jurisdiction
determines that the character, duration or geographical scope of the provisions
of this Section 7.4 are unreasonable, it is the intention and the
agreement of the parties that these provisions shall be construed by the court
in such a manner as to impose only those restrictions on Seller’s conduct that
are reasonable in light of the circumstances and as are necessary to assure to
Buyer the benefits of this Agreement. 
If, in any judicial proceeding, a court shall refuse to enforce all of
the separate covenants of this Section 7.4 because taken together they are
more extensive than necessary to assure to Buyer the intended benefits of this
Agreement, it is expressly understood and agreed by the parties that the
provisions hereof that, if eliminated, would permit the remaining separate
provisions to be enforced in such proceeding, shall be deemed eliminated, for
the purposes of such proceeding, from this Agreement.

 

7.5                                 Notification of Certain Matters.

 

(a)                                  Seller shall give prompt written notice to
Buyer upon Seller becoming aware of (i) the occurrence or non-occurrence of any
change, condition or event the occurrence or non-occurrence of which would
render any representation or warranty of Seller contained in this Agreement, if
made on or immediately following the date of such event, untrue or inaccurate,
(ii) the occurrence of any change, condition or event that has had or is
reasonably likely to have a Material Adverse Change, (iii) any failure of
Seller or any affiliate of Seller to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder or any event or
condition that would otherwise result in the nonfulfillment of any of the
conditions to Buyer’s obligations hereunder, (iv) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the consummation of the transactions contemplated by this
Agreement or (v) any claim, action or proceeding pending or, to

 

31

 

Seller’s
knowledge, threatened against a party or the parties relating to the
transactions contemplated by this Agreement.

 

(b)                                 Buyer shall give prompt written notice to
Seller upon Buyer becoming aware of (i) the occurrence or non-occurrence of any
change, condition or event the occurrence or non-occurrence of which would
render any representation or warranty of Buyer contained in this Agreement, if
made on or immediately following the date of such event, untrue or inaccurate,
(ii) any failure of Buyer or any affiliate of Buyer to comply with or
satisfy any covenant or agreement to be complied with or satisfied by it
hereunder or any event or condition that would otherwise result in the
nonfulfillment of any of the conditions to Seller’s obligations hereunder,
(iii) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
consummation of the transactions contemplated by this Agreement or (iv) any
claim, action or proceeding pending or, to Buyer’s knowledge, threatened
against a party or the parties relating to the transactions contemplated by
this Agreement.

 

7.6                                 Payment of Liabilities. 
Seller shall pay or otherwise satisfy in the ordinary course of business,
prior to the Closing, all of the liabilities and obligations incurred in
connection with the Business (other than the Assumed Obligations) and, after
the Closing, the Excluded Obligations.

 

7.7                                 Bulk Transfer Laws. 
Buyer hereby waives compliance by Seller with any applicable bulk sale
or bulk transfer laws of any jurisdiction in connection with the sale of the
Business Assets to Buyer (other than any obligations with respect to the
application of the proceeds therefrom). 
Pursuant to Section 18.2.1, Seller has agreed to indemnify Buyer
against any and all liabilities that may be asserted by third parties against
Buyer as a result of Seller’s noncompliance with any such law.

 

7.8                                 Cooperation for Financing. 
Seller shall at Buyer’s cost and expense provide all reasonable
cooperation to Buyer with respect to the Business and the Business Assets to
permit the completion of Buyer’s financing in connection with the transactions
contemplated by this Agreement, the SIG Agreement and the Mark Twain Casino
Agreement (each as defined in Section 36), including without limitation,
by (i) permitting the use of the Seller’s Financial Statements, the Interim
Financial Statements, any financial statements subsequently delivered by Seller
pursuant to Section 7.11 and any pro forma financial information derived
therefrom, to be used by Buyer in connection with any offering memorandum,
registration statement, prospectus or other like documentation (the “Financing
Materials”), and (ii) making Seller’s auditors available to Buyer and its
representatives, agents, attorneys

 

32

 

and
accountants for the purposes of preparing any Financing Materials or providing
“comfort letters” to any underwriters involved in such financing.

 

7.9                                 Environmental Investigations.

 

(a)                                  In the event that Buyer notifies Seller that
any Phase I Environmental Assessment pursuant to the American Society for
Testing and Materials Standard E 1527-00 (Standard Practice for Environmental
Site Assessments: Phase I Environmental Site Assessment Process) (each, a
“Phase I Investigation”) delivered to Buyer pursuant to Section 4.5
has discovered or reported any fact, matter or circumstance that reasonably
requires further investigation, Seller shall, at Seller’s sole cost and
expense, cause to be carried out by an assessor (who shall be reasonably
satisfactory to Buyer) a Phase II Environmental Assessment pursuant to the
American Society for Testing and Materials Standard E 1903-97
(Standard Practice for Environmental Site Assessments: Phase II
Environmental Site Assessment Process) (each, a “Phase II Investigation”)
on each parcel of real property with respect to which there was any such fact,
matter or circumstance discovered or reported, and upon completion of such Phase
II Investigations, if any, Seller shall provide copies to Buyer of all reports
and documents related thereto.

 

(b)                                 If required by Buyer’s lender, Seller shall,
at the sole cost and expense of Buyer, and within sixty (60) days prior to the
scheduled Closing Date (unless the Closing is delayed by more than four 4
months, in which case the relevant date for purposes of this section shall
be sixty (60) days prior to the Closing, as rescheduled), cause the
Phase I Investigation delivered pursuant to Section 4.1 to be
updated, and upon completion of such 
update, Seller shall provide copies of all reports and documents related
thereto to Buyer.

 

(c)                                  In the event that Buyer notifies Seller that
any of the Phase I Investigations delivered to Buyer pursuant to Section 4.5
or 7.9(b) have discovered or reported any fact, matter or circumstance that
reasonably requires further investigation, Seller shall, at Seller’s sole cost
and expense, cause to be carried out by an assessor (who shall be reasonably
satisfactory to Buyer) a Phase II Investigation on each parcel of real
property with respect to which there was any such fact, matter or circumstance
discovered or reported, and upon completion of such Phase II
Investigations, if any, Seller shall provide copies to Buyer of all reports and
documents related thereto.

 

33

 

(d)                                 Seller hereby agrees that any Phase I
Investigation or Phase II Investigation provided to Buyer by Seller
pursuant to this Section 7.9 or otherwise may be provided to Buyer’s
advisers, representatives, underwriters and agents for the purposes of
consummating the transactions contemplated by this Agreement and the financing
therefor.

 

7.10                           Maintenance of Seller Records. 
Seller shall keep and maintain the Seller Retained Records for a period
of three (3) years after the Closing Date, and shall allow Buyer access
during business hours to, and copies of, the Seller Records during such period,
as Buyer may reasonably request.

 

7.11                           Delivery of Financial Information.  From
the date hereof until the Closing Date Seller shall furnish to Buyer the
following documents:  (a) on a
monthly basis and within 15 days after the end of each calendar month,
unaudited balance sheets of Seller as of the end of each such month, and the
unaudited statements of operations for the month then ended (the “Subsequent
Monthly Statements”); and (b) if the Closing shall not have occurred prior to
January 31, 2005, audited financial statements for the year ended
December 31, 2004; provided that the financial statements furnished
pursuant to this Section 7.11 (i) shall be complete, in accordance
with the books and records of Seller, (ii) shall accurately reflect the
assets, liabilities and financial condition and results of operations of the
Business as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein and subject, in the case
of the Subsequent Monthly Statements, to normal and recurring year-end
adjustments that will not, individually or in the aggregate, be material, and
(iii) shall have been prepared in accordance with GAAP consistently
applied (except as may be indicated in the notes thereto, and except, in the
case of the Subsequent Monthly Statements, for the inclusion of notes).

 

7.12                           Consulting Postclosing. 
Seller agrees to use good faith efforts to make Bruce Schmitter, Larry
Seckington and Nancy Wheatley (to the extent that she is not employed by Buyer)
available to consult with the Buyer on a part-time basis for a period of up to
six (6) months after the Closing on terms and conditions to be negotiated
between Buyer and each of Bruce Schmitter and Larry Seckington after the
Effective Date of this Agreement.

 

7.13                           Purchase of Gaming Equipment. 
Notwithstanding the provisions of Section 7.1 above, Seller may, at
Seller’s option, elect to purchase or lease Gaming Equipment after the
Effective Date.  If Seller elects to
purchase or lease Gaming Equipment, the following provisions shall apply: (a)
Seller shall notify Buyer of its intent to purchase or lease Gaming

 

34

 

Equipment,
and (b) Seller shall then consult with Buyer and obtain Buyer’s approval of the
number and types of Gaming Equipment to acquire and the terms (purchase price
and/or lease terms, as appropriate), which approval shall not be unreasonably
withheld, provided that all new Gaming Equipment shall ticket in/ticket out
compatible.  If Buyer approves the
acquisition of new Gaming Equipment, then (A) the Purchase Price hereunder
shall be increased by the tax net book value of all purchased new Gaming
Equipment, and (B) all leases for new Gaming Equipment shall be treated as
Assumed Obligations.  If Buyer
disapproves the acquisition of any new Gaming Equipment, then if Seller
nonetheless acquires the said new Gaming Equipment, the said new Gaming
Equipment shall be treated as Excluded Assets.

 

8.                                       Conditions Precedent to Closing of Buyer. The obligations of Buyer under this
Agreement are subject to satisfaction of the following conditions at or before
the Closing Date; provided, however, that satisfaction of any of the following
conditions may be waived by Buyer.

 

8.1                                 Accuracy of Representations and Warranties. The representations and warranties of
Seller contained in this Agreement shall be true and accurate in all material
respects as if made at and as of the Closing Date; provided, however, that if
there has been a material change in a representation or warranty of Seller
between the Effective Date and Closing and (a) such change was not caused by a
default by Seller hereunder, (b) does not constitute a Material Adverse Change
and (c) Seller agrees at the Closing that any Damages associated with such
change shall be an Excluded Obligation and further agrees to indemnify and hold
harmless the Buyer Indemnitees in full from and against any Damages arising as
a result of such change without regard to, or in any way reducing the maximum
amount available under, the limitation of Seller’s Indemnity set forth in
Section 18.2.3, then such change shall not constitute a failure of a
condition precedent to Buyer’s obligation to close (i.e. Buyer may not cancel
this Agreement due to such change). 
Notwithstanding the foregoing, if the change relates to a potential
liability of the Business or Business Assets, Buyer may require a reasonable
increase in the amount of the security provided in Section 18.4
equal to 110% of the estimated liability.

 

8.2                                 Performance of Covenants. Seller shall have duly performed all
obligations, covenants and agreements undertaken by Seller herein and complied
with all terms and conditions applicable to Seller hereunder to be performed or
complied with before the Closing Date.

 

35

 

8.3                                 Officer’s Certificate. Buyer shall have received a certificate
from Seller, dated as of the Closing Date and executed by an officer of Seller,
to the effect that (a) all of the conditions contained in Section 9
have been satisfied; (b) all of the representations and warranties of
Seller contained in this Agreement are true and accurate in all material
respects as of the Closing Date or, with respect to those qualified as to
materiality, in all respects (or disclosing any material changes in any of the
matters addressed in the representations and warranties); and (c) all of
the covenants and agreements of Seller contained in this Agreement and required
to be performed before the Closing have been performed and Seller is not in
breach or default of any of Seller’s obligations or representations or
warranties contained in this Agreement.

 

8.4                                 Threatened or Pending Litigation. No suit, action, or other proceeding shall
be pending by or before any court or governmental agency seeking to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of any of the transactions contemplated hereby.

 

8.5                                 Gaming Approval. Buyer shall have obtained MGC approval in
accordance with Section 4 and IRGC approval of the SIG Agreement and the
Mark Casino Agreement in accordance with the terms of those Agreements.

 

8.6                                 Consents. The consents of the  MGC,  the HSR Approvals and the other consents set
forth on Schedules 5.11 and 6.5
to the transfer all of the Business Assets to Buyer in the manner contemplated
by this Agreement and to permit Buyer to operate the Business as presently
conducted after the Closing Date, shall have been obtained.

 

8.7                                 Non-Competition Agreements. 
Seller shall have delivered the Non-Competition Agreements provided for
in Section 7.4(c).

 

8.8                                 Material Adverse Change. 
There shall not have occurred any Material Adverse Change.

 

8.9                                 Title Policy. 
Seller shall have delivered to Buyer the Title Policy.

 

8.10                           Simultaneous Closing.  The
transactions contemplated by the SIG Agreement and by the Mark Twain Casino
Agreement shall be closing simultaneously with the Closing.

 

9.                                       Conditions Precedent to Obligations of Seller. The obligations of Seller under this
Agreement are subject to satisfaction of the following conditions at or

 

36

 

before
the Closing Date; provided, however, that satisfaction of any of the following
conditions may be waived by Seller.

 

9.1                                 Accuracy of Representations and Warranties. The representations and warranties of Buyer
contained in this Agreement shall be true and accurate in all material respects
as if made at and as of the Closing Date.

 

9.2                                 Performance of Covenants. Buyer shall have duly performed all
obligations, covenants and agreements undertaken by Buyer herein and complied
with all terms and conditions applicable to Buyer hereunder to be performed or
complied with before the Closing Date.

 

9.3                                 Litigation. On the Effective Date, Buyer shall have executed and delivered to
Seller, a schedule showing all litigations pending or threatened, which
would delay or prevent the closing of this Transaction.

 

9.4                                 Officer’s Certificate. Seller shall have received a certificate
from Buyer, dated as of the Closing Date and executed by an officer of Buyer,
to the effect that (a) all of the conditions contained in Section 8 have
been satisfied; (b) all of the representations and warranties of Buyer
contained in this Agreement are true and accurate as of the Closing Date; and
(c) all of the covenants and agreements of Buyer contained in this Agreement
and required to be performed before the Closing have been performed and Buyer
is not in breach or default of any of Buyer’s obligations or representations or
warranties contained in this Agreement.

 

9.5                                 Consents. The consents of  the MGC,  the HSR Approvals and the other consents set
forth on Schedules 5.11 and 6.5
to the transfer all of the Business Assets to Buyer in the manner contemplated
by this Agreement shall have been obtained.

 

9.6                                 Simultaneous Closing.  The
transactions contemplated by the SIG Agreement and by the Mark Twain Casino
Agreement shall be closing simultaneously with the Closing.

 

10.                                 Closing. Provided that all of the conditions to the close of the transaction
contemplated by this Agreement as set forth in Sections 8 and 9 and this
Section 10 have been satisfied or waived, the transaction shall close on
the date selected by Buyer that is at least ten (10) but no more than
thirty (30)  days after the later to occur
of (i) the date Buyer is approved by the MGC to operate an excursion gaming
riverboat from St. Joseph, Missouri or (ii) the date the IRGC approves Buyer’s
application pursuant to the SIG Agreement and the MGC approves the

 

37

 

Buyer’s
application pursuant to the Mark Twain Casino Agreement (collectively, the
“Other Approvals”) in accordance with Section 4.4 above (unless the
parties mutually agree to waive the requirements of Section 36 in which
event the later date referred to above shall be the date of such waiver) (the
“Closing Date”).  Notwithstanding the
foregoing, the Closing Date must occur by not later than December 31, 2004
(the “Outside Closing Date”) unless both Seller and Buyer agree to a later
date, provided that if the only remaining conditions to Closing are obtaining
the MGC consent and/or the Other Consents and/or the HSR Approvals, then at the
option of either Buyer or Seller, the Outside Closing Date may be extended for
up to two (2) ninety (90) day periods (the “Extension Periods”) by written
notice delivered by the requesting party to the other party prior to the date
of the current Outside Closing Date. 
Buyer shall give Seller written notice specifying the Closing Date not
less than five (5) business days prior thereto.

 

10.1                           Conditions to the Closing. The transaction contemplated by this
Agreement shall not close unless and until:

 

(a)                                  All parties have delivered all sums and
documents required as provided in Sections 10.2 and 10.3;

 

(b)                                 All of the conditions set forth in Sections 8
and 9 have been waived or satisfied as provided by this Agreement; and

 

(c)                                  The Closing Statements have been prepared and
delivered in accordance with the provisions of Section 13.10.

 

10.2                           Seller’s Deliveries. At the Closing, Seller shall deliver to
Buyer each of the following:

 

(a)                                  Bill of Sale for the vessel that constitute
the Biloxi Bell II;

 

(b)                                 Current U.S. Coast Guard Certificates of
Documentation (if required) ;

 

(c)                                  Current Federal Communications Commission
ship-to-shore radio licenses;

 

(d)                                 Assignments of all material agreements;

 

(e)                                  Bill(s) of sale for the Business Assets;

 

(f)                                    The Assignment and Assumption Agreement
executed by Seller;

 

38

 

(g)                                 A counterpart to each of the Non-Competition
Agreements, each executed by the respective persons named in Section 8.7;
and

 

(h)                                 Such other documents required to be delivered
under this Agreement.

 

10.3                           Buyer’s Deliveries; Payment. At the Closing, Buyer shall deliver to
Seller each of the following:

 

(a)                                  Application of Documentation for Biloxi Bell,
II;

 

(b)                                 Citizenship Declaration for Buyer;

 

(c)                                  The Assignment and Assumption Agreement
executed by Buyer;

 

(d)                                 Cash by wire transfer of funds for the
Purchase Price, or in the event of any withholding pursuant to Section 5.3,
for the balance of the Purchase Price; and

 

(e)                                  Such other documents required to be delivered
under this Agreement.

 

10.4                           Prorations. The following matters and items shall be apportioned between the
parties hereto or, where applicable, credited in total to a particular party
hereto, as of the Closing:

 

(a)                                  Taxes, including, without limitation, real
estate taxes and assessments, personal property, business, prepaid gaming and
occupation taxes, if any (based on the most current available information), and
water and sewer charges shall be prorated as of the Closing Date, or charged on
the basis of applicable governmental records, and shall be readjusted when the
actual bills are available pursuant to Section 13.10. Such taxes assessed
for the fiscal year shall be prorated as of the date on which billings are
received with respect thereto, with Seller being responsible for the taxes
accrued with respect to all periods before the Closing Date, and Buyer being
responsible for all subsequent periods.

 

(b)                                 Telephone and utility services shall be
prorated as of the Closing Date. All deposits, if any, made by Seller as
security under any public service contract shall be credited to Seller if the
same remain on

 

39

 

deposit
for the benefit of Buyer. Where possible, cut-off meter readings shall be
secured for all utilities as of the Closing Date.

 

(c)                                  Any amount prepaid or payable under any lease
or option agreement shall be prorated at the Closing and any accrued rental and
any percentage rental under space leases shall be prorated as and when
collected. All security deposits held by Seller, including customer deposits
held in the casino cage, shall be transferred to Buyer, and all obligations
with respect to such security deposits shall be assumed by Buyer on the Closing
Date.

 

(d)                                 Fees paid or payable for transferable
licenses and permits shall be prorated as of the Closing Date.

 

(e)                                  With respect to the Business Assets and
business operations then sold and conveyed to Buyer, Seller’s insurance shall
be canceled on the Closing Date, and Seller shall retain all prepaid premiums
and be responsible for any additional premiums due on or after the Closing Date
due to any insurance audit or retrospective rating adjustments that were
incurred prior to Closing and any payment of claims within the applicable
deductibles required to be paid thereunder. Buyer shall arrange for immediate
effectiveness of Buyer’s own insurance coverage as of the Closing Date.

 

(f)                                    On the Closing Date, such other items shall
be prorated as are provided for in this Agreement or as are normally prorated
and adjusted in the sale of a casino business, including, without limitation,
all deposits and prepaid items that inure to the benefit of Buyer (including,
but not limited to, prepaid insurance) and the interest on the Assumed
Obligations and on any other obligations being assumed by Buyer hereunder as of
the Closing Date.

 

In
making apportionments, all prepaid rents and similar items shall be prorated on
the basis of the number of days of occupancy before and after the time set for
such adjustments to be made, and all prepaid taxes, charges and impositions
shall be prorated on the basis of the number of days of the applicable tax
year, or on the basis of unit costs or, if this is not practicable, on the
basis of the number of days before and after that time.

 

11.                                 Closing Documents. As soon as practicable after the date of
this Agreement, Seller shall prepare and submit to Buyer for its approval,
which approval shall not be unreasonably withheld, the form of the documents to
be delivered on the Closing Date, including, without limitation, bills of sale,
assignments, assumptions, novations and other title transfer instruments,
together with such other documentation

 

40

 

as
may be required to consummate the transactions contemplated by this Agreement
on the Closing Date. On the Closing Date, Seller shall deliver to Buyer final,
executed bill(s) of sale, assignments and other title transfer instruments or
documents required to consummate the transactions contemplated by this
Agreement on the Closing Date on behalf of Seller, and Buyer shall deliver to
Seller final, executed assumption, novation or other agreements or documents
required to consummate the transactions contemplated by this Agreement on the
Closing Date on behalf of Buyer. All instruments required to be recorded shall
be in recordable form at the time of delivery by Seller or Buyer, as the case
may be.

 

12.                                 Further Assurances. At any time and from time to time after the
Closing Date, at the request of Buyer, Seller shall execute and deliver such
further instruments of transfer and assignment as Buyer reasonably may require
to more effectively transfer and assign to and vest in Buyer the Business
Assets.

 

13.                                 Transfer of Operations and Operating Cash.  The
Business shall be transferred to Buyer at 11:59 P.M. Central Time on the
Closing Date (the “Closing Time”). 
Without prejudice to the further provisions of this Section 13 set
forth below, each of Buyer and Seller agree to develop a mutually acceptable
ownership transition plan prior to the Closing Date to address gaming machine
drop procedures and other cash transfer procedures to be applied as of the
Closing Time in order to effect a fair and equitable accounting of cash and the
transfer of possession of Operating Cash.

 

13.1                           Possession of Biloxi Bell, II. Seller shall give, assign and transfer to
Buyer complete possession of the Biloxi Bell, II  at the Closing Time on the Closing Date.
Buyer and Seller shall pre-close the transaction not later than the day
immediately preceding the Closing Date. At such pre-closing, Buyer and Seller
shall deliver for inspection all documents required of either party, except to
the extent that any delivery is waived by either party, in accordance with this
Agreement, to complete the transfer of ownership of the Business Assets from
Seller to Buyer following the procedures set forth herein to the extent
applicable. Except as provided below, the bars and restaurant and the casino on
the Biloxi Bell, II  shall be operated by
Seller for Seller’s benefit until the Closing Date.

 

13.2                           Outstanding Chip Obligations. Buyer agrees that it will assume all of
Seller’s obligations with respect to any uncashed chips as of the Closing
Time.  At the Closing Buyer shall receive
a credit, applied to the Operating Cash for the purposes of Sections 1(d)
and 2(a), for a percentage of the face value of such outstanding chips based on
industry standards.

 

13.3                           Transfer of Gaming Operations. With the exception of the slot machines,
the transfer of the gaming operations associated with the Business,

 

41

 

including
the Gaming Equipment, shall take place starting at the Closing time, and
effective as of the Closing Time, on the Closing Date. Seller shall control and
Buyer shall review and verify the physical count of the drop boxes and gaming
tables. All of Seller’s Cash in the casino cages or banks shall be counted and
included as Operating Cash for the purposes of Sections 1(d) and 2(a).

 

13.4                           Final Slot Drop. Starting at the Closing Time and effective
as of the Closing Time, the cash or tokens in the hoppers, buckets (or slot
drops) and the bill acceptors in all slot machines shall be collected and
counted (by emptying and counting the cash in the loads of all machines) by
Seller and verified by Buyer (the “Final Slot Drop”), and shall be included as
Operating Cash for the purposes of Sections 1(d) and 2(a).

 

13.5                           Progressive Jackpots. Buyer shall assume and be responsible for
the accrued liability starting at the Closing Time and effective as of the
Closing Time, shown by the progressive meter readings on all progressive slot
machines (including video poker) and all progressive table games as of the
Closing Date, and the amount of such liability shall be deducted from the
Purchase Price.

 

13.6                           Promotions. Buyer understands that Seller, in the ordinary course of business,
has conducted, and will continue to conduct such promotions in the ordinary
course of business and consistent with past practices from the Effective Date
until the Closing, special events or promotions designed to attract customers
to the Riverboats one or more of which special events or promotions involved
the issuance of discount or other customer entitlement coupons. Buyer agrees to
accept and honor all such valid and unexpired discount or entitlement coupons
tendered to the Riverboats after the Closing Time in accordance with the terms
thereof, provided, however, that the amount of the accrued liability pursuant
to all Players Club entitlements shall be deducted from the Purchase Price.

 

13.7                           Slot Machine Wide Area Progressive Liability. In the event that Seller participates in
slot machine wide area progressive networks, Buyer shall assume such contracts
as of the Closing Time, but shall have the option to require Seller to deliver
an appropriate termination notice consistent with the terms of any or all of
such wide area network contracts. Buyer shall assume all liability associated
with the wide area progressive network contracts, provided, however, that the
amount of the accrued liability so assumed shall be deducted from the Purchase
Price if and to the extent that accrued liability is not already funded as of
the Closing.

 

42

 

13.8                           Seller’s Post Closing Access. For a period of not more than one hundred
twenty (120) days after the Closing Date, Buyer shall make available to Seller
and Seller’s representatives, on a rent-free basis, an exclusive license to use
a secured office sufficient for two or three persons for the purpose of
permitting Seller  to complete Seller’s
audits for 2004 and/or 2005, and for such other post-closing activities as are
reasonably necessary after the Closing Date. Conditional upon the execution by
Seller of a non-disclosure agreement in form reasonably satisfactory to Buyer,
Buyer agrees to provide Seller with access to the existing data processing
equipment for the Business for a period of one hundred twenty (120) days after
the Closing Date.  Buyer further agrees
to assist Seller in processing final payrolls, accounts payable and general
ledger runs for Seller on the system at no cost to Seller, and Seller shall
allow Buyer to use the same programs at no cost to Buyer for Buyer’s own
transitional use during such one hundred twenty (120) days period,
provided that such use by Seller is not in violation of any applicable software
license.

 

13.9                           Closing Statements. Seller shall prepare and deliver to Buyer
on the Closing Date a preliminary closing statement (a “Preliminary Closing
Statement”) as of the Closing Date, which shall show the net amount due either
to Seller or Buyer based on items for which a specific credit or debit is
provided in this Agreement, which statement shall be in form and substance
acceptable to Buyer. Such net amount shall be added to or subtracted from the
payment of the cash balance of the Purchase Price to be paid to Seller pursuant
to Section 3 on the Closing Date. Within sixty (60) days after the Closing
Date, Buyer shall deliver a final closing statement (a “Final Closing
Statement”) to Seller setting forth the final determination of all items to be
included in the Closing Statements. To the extent that amounts are determined
to be owing by Seller to Buyer or by Buyer to Seller which are not disputed,
such amounts shall be settled in cash between Buyer and Seller. Should Buyer
and Seller disagree on the amount due either Buyer or Seller as reflected in
the Preliminary Closing Statement, or the Final Closing Statement, any such
dispute where less than $50,000 is in dispute shall be resolved by Buyer’s and
Seller’s accountants (whose mutual decisions shall be final and binding on each
of Buyer and Seller); provided, however, that should such accountants be unable
to resolve any dispute with respect to the Preliminary Closing Statement within
ten (10) business days of the Closing Date or any dispute with respect to the
Final Closing Statement within ten (10) business days following Seller’s
receipt of the Final Closing Statement from Buyer, such disputes, as the case
may be, shall be resolved by arbitration. In the event that Buyer’s and
Seller’s accountants are the same accounting firm, Seller shall be allowed to
appoint its own representative to represent Seller with respect to the dispute
which representative shall be a nationally recognized public accounting firm.
If at any time within ninety (90) days after the Closing Date either Buyer or
Seller discovers items that should have been included in the

 

43

 

Closing
Statements but were omitted therefrom, then such items shall be adjusted in the
same manner as if their existence had been known at the time of the preparation
of the Closing Statements, and any payment owing as a result thereof shall be
made as provided above in this Section 13.

 

13.10                     Employee Obligations. 
Buyer shall have no liability, cost or obligation whatsoever under or by
reason of any severance pay, compensation, accrued vacation time, personal
time, bereavement time, sick-leave time, salary, bonus, fringe benefit, welfare
benefit, pension benefit or other employee benefit or claim of any kind
affecting the employees of Seller prior to the Closing Date. Seller shall have
no liability, cost or obligation whatsoever under or by reason of any
compensation, benefit plan, or bonus or profit sharing program of Buyer
affecting the employees of Buyer after the Closing Date.

 

13.11                     Material Purchase Orders. Buyer shall acquire all rights and assume
all obligations under all open  purchase
orders made in the ordinary course of business consistent with past practice
and existing as of the Closing Date; provided, however, that Seller shall provide
Buyer notice of, and an opportunity to consult with respect to, every  purchase order that is in excess of
$50,000.00 which will not be paid in full prior to the Closing.  Seller shall provide Buyer with a list of all
such purchase orders approximately thirty (30) days prior to the Closing and
shall update that report as of the Closing.

 

13.12                     No Control. Before the Closing Date, Buyer shall not directly or indirectly
control, supervise, direct or interfere with the Business Assets or the
operation of the Business or attempt any of the foregoing. Until the Closing
Date, the operations and affairs of Seller are the sole responsibility of
Seller and under Seller’s complete control. 
After the Closing Date, the operations and affairs of Buyer, including
the Business, are the sole responsibility of Buyer and under Buyer’s complete
control.

 

14.                                 MGC Requests for Information. Buyer and Seller shall make available, upon
written request by the MGC or any of its duly authorized representatives, the
contracts, books, documents and records that are necessary to ascertain the
nature and extent of the agreement between Buyer and Seller in connection with
the licensing of Buyer. To the extent that either party hereto receives such a
request, the other party hereto shall provide copies of such documents to the
other in order to respond to such request.

 

15.                                 Risk of Loss of Business Assets. Between the date of this Agreement and the
Closing Date, Seller assumes all risk of destruction, loss or damage to the
Business Assets due to fire or other casualty, and Seller, at Seller’s sole
expense,

 

44

 

shall,
until the Closing Date, keep all of the Business Assets fully insured as
presently maintained by Seller. If any of the Business Assets is damaged by
fire or other casualty, Buyer and Seller shall have the following rights and
obligations:

 

(a)                                  If the damage is not substantial (as
hereinafter defined), Buyer shall take title to the Business Assets without
abatement of the Purchase Price and be entitled to receive the insurance
proceeds arising out of such damage to the extent Seller has not theretofore
used such proceeds to repair such damage.

 

(b)                                 If the damage is substantial (as hereinafter
defined), Buyer shall have the option of canceling this Agreement within sixty
(60) days of receiving notice of such damage, or Buyer may accept the Business
Assets and thereupon be entitled to receive the insurance proceeds arising out
of such damage (including, without limitation, business interruption insurance
proceeds to the extent the Business is interrupted after the Closing Date)
without abatement to the Purchase Price.

 

(c)                                  If damage occurs, then such damage shall be
deemed “substantial” if the same would materially interfere with the operation
of the gaming operations of the Business and cannot be substantially repaired
or restored within ninety (90) days after such damage occurs.

 

16.                                 Termination.

 

16.1                           Grounds for Termination. This Agreement may be terminated at any
time before the Closing Date:

 

(a)                                  By mutual written agreement of Buyer and
Seller;

 

(b)                                 By Seller if (i) Buyer fails to deliver
the Deposit  to the Deposit Holder by the
Effective Date, or (ii) Buyer voluntarily withdraws the Application, or
(iii) Buyer fails to file an Application with the MGC within thirty (30)
days after the date of this Agreement;

 

(c)                                  By Seller or Buyer if Buyer has not obtained
MGC approval of its Application (or in the event of a Withdrawal in Lieu of
Denial) by the Outside Closing Date;

 

(d)                                 By Seller or Buyer  in accordance with Section 4.4 hereof,
if Buyer has not obtained the Other Approvals, or in the event of a Withdrawal
in Lieu of Denial with respect to the Other Approvals (if Seller and Buyer have
not jointly waived the requirements of Section 36) by the Outside Closing
Date;

 

45

 

(e)                                  By Seller or Buyer if all HSR Approvals have
not been obtained by the Outside Closing Date;

 

(f)                                    By Seller if any of the conditions set forth
in Section 9 is not satisfied and has not been waived by Seller;

 

(g)                                 By Buyer if any of the conditions set forth
in Section 8 is not satisfied and has not been waived by Buyer;

 

(h)                                 By Seller in the event of a material breach
of any provision of this Agreement by Buyer not cured within the applicable
cure period;

 

(i)                                     By Buyer in the event of a material breach of
any provision of this Agreement by Seller not cured within the applicable cure
period;

 

(j)                                     By Buyer in the event that any one or more of
the Environmental Investigations provided for in Section 7.9 discover
actual or potential environmental liabilities, or any condition or state of
affairs that would require remediation work to be carried out, in either case
at a cost, individually or in the aggregate, in excess of $150,000 but less
than $2,000,000, unless Seller agrees that Seller shall be solely responsible
for such liability or for carrying out such remediation work;

 

(k)                                  By Buyer in the event that any one or more of
the Environmental Investigations provided for in Section 7.9 discover
actual or potential environmental liabilities, or any condition or state of
affairs that would require remedial work to be carried out, in either case at a
cost, individually or in the aggregate, in excess of $2,000,000; or

 

(l)                                     By mutual agreement of Seller and Buyer if
the requirements of Section 36 of this Agreement cannot be satisfied.

 

16.2                           Automatic Termination. This Agreement shall automatically
terminate in the event that the transaction contemplated by this Agreement has
not closed by the Outside Closing Date, unless Seller and Buyer mutually agree
to any extension.

 

17.                                 Remedies. The following shall be the exclusive remedies of the parties hereto
in the event of a breach of this Agreement.

 

17.1                           Buyer’s Remedies. If (x) Seller materially breaches this
Agreement before the Closing Date which breach is not cured within thirty

 

46

 

(30)
days after Seller receives written notice of such breach, (y)  any of the conditions set forth in
Section 8 to be satisfied by Seller at or prior to the Closing Date have
not been satisfied by Seller or waived by Buyer, or (z) Buyer has not obtained
MGC approval of its Application (or in the event of a Withdrawal in Lieu of
Denial) and the Other Approvals (if Seller and Buyer have not waived the
requirements of Section 36) by the Outside Closing Date, Buyer’s remedies
shall be as follows:  (i) Buyer may
terminate this Agreement and recover the full amount of the Deposit, or
(ii) in the case of each of clauses (x) and (y) above, Buyer may
specifically enforce this Agreement, and in the case of each of clauses (i) and
(ii) Buyer shall have all other legal and equitable remedies available to
it.

 

17.2                           Seller’s Remedies.

 

(a)                                  In the event that Buyer fails to file its
Application with the MGC within thirty (30) days after the execution of this
Agreement  then, and only in such events,
Seller may, as its sole remedy therefor, terminate this Agreement, and, demand
payment of the full amount of the Deposit.

 

(b)                                 If Buyer materially breaches this Agreement
before the Closing Date other than as specifically provided in
Section 17(a), which breach is not cured within thirty (30) days after
Buyer receives written notice of such breach, (i) Seller may terminate this
Agreement and demand payment of the full amount of the Deposit, and
(ii) Seller shall have all other legal and equitable remedies available to
it.

 

17.3                           Attorneys’ Fees. If a dispute arises with respect to this
Agreement, then the party prevailing in such dispute shall be entitled to
recover all expenses, including, without limitation, reasonable attorneys’ fees
and expenses, incurred in enforcing and/or defending such party’s rights under
this Agreement.

 

18.                                 Indemnification.

 

18.1                           Buyer’s Indemnification. For a period of eighteen (18) months after
the Closing Date or earlier termination of this Agreement, Buyer shall
indemnify, defend and hold harmless Seller and/or any of Seller’s officers,
directors, managers, employees, shareholders, or agents (including, but not
limited to, Seller’s financial advisor), from and against any and all
incidents, claims, demands, actions, causes of action, suits, obligations,
liabilities, losses, costs, damages or expenses, costs of investigation and
defense, counsel or attorneys’ fees, whether under retainer or salary or
otherwise, including,

 

47

 

without
limitation, interest, penalties and court costs (collectively, “Damages”),
suffered or incurred by Seller and/or any or all of Seller’s officers,
directors, managers, employees or agents, which directly or indirectly arise,
result from or relate to (a) any breach of, or any failure by Buyer to perform,
any of Buyer’s representations, warranties, covenants or agreements contained
in this Agreement, (b) matters that occur or arise as a result of Buyer’s
action or failure to take action after the Closing Date, except as to such
incidents, claims, demands, actions, causes of action, suits, obligations,
liabilities, losses, costs, damages or expenses that are caused or claimed to
be caused by or are a result of the acts or omissions of Seller or Seller’s
respective agents or employees, (c) any and all claims of any kind and
description of employees that relate to their, hiring, employment and/or
termination by Buyer, provided that the facts or events giving rise to such
claims occurred after the Closing Date, (d) any and all debts, obligations and
liabilities of Seller specifically assumed by Buyer hereunder and any Damages
resulting from the operation of the Business by Buyer after the Closing Date,
(e) damage done by Buyer or Buyer’s representatives during the inspection and
due diligence of the Business, (f) the Assumed Obligations, and (g) any and all
claims made by any broker, finder or agent claiming a fee or commission through
Buyer. Notwithstanding any provision of this Section 18.1 to the contrary,
the obligations of Buyer to indemnify Seller for any and all debts, obligations
and liabilities of Seller arising from or related to any Assumed Obligations,
shall extend for the length of the remaining term of such agreements and shall
not be limited to claims made prior to the expiration of the eighteen (18)
month period following the Closing Date. If and to the extent Seller notifies
Buyer in writing of a claim for indemnification for any matter covered by
clause (a) above on or prior to the expiration of the eighteen (18) month
period after the Closing Date, Buyer shall continue to be obligated to provide
indemnification hereunder with respect to such claim until such time that such
claim is resolved and satisfied.

 

18.2                           Seller’s Indemnification.

 

18.2.1                  For
a period of eighteen (18) months after the Closing Date, Seller shall
indemnify, defend and hold harmless Buyer and/or any or all of their officers,
directors, managers, employees or agents (including, without limitation, its
financial advisor) (collectively a “Buyer Indemnitee”) from and against any and
all Damages suffered or incurred by Buyer and/or any or all of their officers,
directors, managers, employees or agents, which directly or indirectly arise,
result from or relate to (a) any breach of, or any failure by Seller to
perform, any of Seller’s representations, warranties, covenants or agreements
contained in this Agreement, (b) matters that occur or arise as a result of
action or failure to take action by Seller or any of Seller’s agents,

 

48

 

employees
or partners before the Closing Date, and, to the extent of the obligations in
Sections 7.6 and 7.7, after the Closing Date, whether or not such action
or failure to take action constitutes a breach of any provision of this
Agreement, (c) any and all claims of any kind and description of employees that
relate to their hiring, employment and/or termination by Seller, provided that
the facts or events giving rise to such claims occurred before the Closing, (d)
any and all debts, obligations and liabilities of Seller not specifically
assumed by Buyer hereunder, including, without limitation, the Excluded
Obligations, (e) any and all claims made by any broker, finder or agent
claiming a fee or commission through Seller and (f) the fraud or willful
misconduct of Seller. Notwithstanding the foregoing, (x) the indemnification
obligations regarding litigation, fraud and willful misconduct shall continue
for the applicable statutes of limitation and appeal periods related thereto,
(y) if and to the extent Buyer notifies Seller in writing of a claim for
indemnification for any matter covered by clause (a) above on or prior to the
expiration of the eighteen (18) month period after the Closing Date, Seller
shall continue to be obligated to provide indemnification hereunder with
respect to such claim until such time that such claim is resolved and satisfied
and (z) the indemnification obligations regarding Section 5.1 shall
continue indefinitely.

 

18.2.2                  Seller
shall indemnify, defend, and hold harmless the Buyer Indemnitees from all of
the debts, liabilities and obligations of Seller not expressly assumed by Buyer
under this Agreement and all claims, suits, actions, losses, damages, costs and
expenses, including, without limitation, reasonable attorneys’ fees and
disbursements, arising therefrom or from any failure by Seller or the shareholders
of Seller to pay or discharge such liabilities and obligations (including,
without limitation, any Excluded Obligation) as and when they become due.  The obligations of Seller to indemnify Buyer
for such debts, liabilities and obligations of Seller shall extend for the
length of the remaining term of such agreements and shall not be limited to
claims made prior to the expiration of the eighteen (18) month period following
the Closing Date.

 

18.3                           Limitations on Seller Indemnification. Notwithstanding any other provision hereof
or of any applicable law, the Buyer Indemnitees shall not be entitled to make a
claim as a result of a breach of representation, warranty or covenant which
survives the Closing pursuant to Section 5 hereof against Seller unless
such claim, together with all other claims of the Buyer Indemnitees  under Section 18.2.1 hereunder and under
the equivalent provisions of the SIG Agreement and the Mark Twain Casino
Agreement (each as defined in Section 36), exceed in the aggregate
$200,000 (in which

 

49

 

case
only the excess over $200,000 of such Claims will be paid); provided, however,
that (i) such $200,000 minimum threshold with respect to indemnifiable Damages
shall not apply to any claim for indemnification made by Buyer under this
Agreement with respect to (w) the breach or inaccuracy of any of the
representations or warranties contained in Section 5.1 (Organization,
Standing and Authority), Section 5.3 (Title), or Section 5.4
(Litigation), (x) the gross negligence, willful misconduct or fraud of Seller,
(y) any Excluded Obligation, or (z) Seller’s indemnification obligation
pursuant to Section 18.2.2, (the items described in the immediately
preceding clauses (w), (x), (y) and (z), collectively, the “Seller Retained
Liabilities”), and (ii) except with respect to an indemnification obligation in
respect of a Seller Retained Liability, Seller’s indemnification obligations
for Damages under Section 18.2.1 of this Agreement (including, without limitation,
indemnification obligations with respect to environmental claims under
Section 5.11) shall not exceed, together with Seller’s equivalent
indemnification obligations under the SIG Agreement and the Mark Twain Casino
Agreement, in the aggregate $14,375,000. The amount of any indemnifiable
Damages under Section 18.2.1 shall be reduced by any insurance proceeds
actually received with respect thereto (it being understood that after the
satisfaction in full of indemnifiable Damages hereunder, the Buyer Indemnitees
shall assign to Seller all of its rights to unpaid insurance proceeds with
respect to insurance coverage, but only to the extent applicable to such
Damages).

 

18.4                           Security for Seller Indemnity.  As
security for the Seller Indemnity obligations under this Agreement and under
the SIG Agreement and the Mark Twain Casino Agreement) (the “Secured Indemnity
Obligations”), the Seller (and the sellers under the SIG Agreement and the Mark
Twain Casino Agreement shall deposit with the Deposit Holder at the Closing
hereunder (A) the sum of Seven Million One Hundred Eighty Seven Thousand Five
Hundred Dollars ($7,187,500.00) in cash (which cash shall be withheld by
Deposit Holder pro-rata from the proceeds otherwise payable to the Sellers
under this Agreement and the SIG Agreement and the Mark Twain Casino Agreement)
and (B) an irrevocable letter of credit in the amount of Seven Million One
Hundred Eighty Seven Thousand Five Hundred Dollars ($7,187,500.00) (the “Seller
Letter of Credit”).  The Seller Letter of
Credit shall be issued by Bank of America, N.A., or a comparable bank or
financial institution acceptable to Buyer in its sole discretion.  The Letter of Credit shall be for a minimum
term of two (2) years (or one (1) year with a right to renew for a second year
and provisions allowing the Seller Letter of Credit to be drawn on if not
renewed within thirty (30) days prior to its expiration).  The Seller Letter of Credit shall provide
that it may be drawn upon by written notice from Deposit Holder.  Upon any draw on the Letter of Credit, all
proceeds therefrom shall be paid to Deposit Holder and held by Deposit

 

50

 

Holder
in accordance with this Section 18.4 and the Indemnity Escrow Agreement.
All sums held by Deposit Holder hereunder shall invested by Deposit Holder in
interest-bearing accounts in federally insured institutions selected by Seller
and reasonably acceptable to Buyer (Buyer agreeing that Bank of America, N.A.
or Wells Fargo Bank, N.A. would be acceptable to Buyer).  All sums of cash referred to in this
Section 18.4 and the Letter of Credit shall be held by the Deposit Holder
and distributed, as appropriate, in accordance with the terms of an indemnity
escrow agreement in, or substantially in, the form attached hereto as Exhibit “E” (the
“Indemnity Escrow Agreement”), to be entered into on or prior to Closing by the
Deposit Holder (as escrow agent), Seller and Buyer.

 

(a)                                  On the date that is six (6) months after the
Closing, the aggregate amount of the Secured Indemnity Obligations shall be
reduced to 50% of its original amount, subject to and in accordance with the
provisions of the Indemnity Escrow Agreement.

 

(b)                                 On the date that is  one (1) year after the Closing, the aggregate
amount of the Secured Indemnity Obligations shall be further reduced to 25% of
its original amount, subject to and in accordance with the provisions of the
Indemnity Escrow Agreement.

 

(c)                                  On the date that is eighteen (18) months
after the Closing,  all remaining cash and
the Seller Letter of Credit shall be returned to  Seller, subject to an in accordance with the
Indemnity Escrow Agreement.

 

18.5                           Procedure
for Claims.

 

(a)                                  Any
person who desires to seek indemnification under any part of this
Section 18 (each, an “Indemnified Party”) shall give written notice in
reasonable detail (a “Claim Notice”) to each party responsible or alleged to be
responsible for indemnification hereunder (an “Indemnitor”)  and the Deposit Holder prior to any
applicable Expiration Date (as defined below). 
Such notice shall briefly explain the nature of the claim and the
parties known to be invoked, and shall specify the amount thereof.  If the matter to which a claim relates shall
not have been resolved as of the date of the Claim Notice, the Indemnified
Party shall estimate the amount of the claim in the Claim Notice, but also
specify therein that the claim has not yet been liquidated (an “Unliquidated
Claim”).  If an Indemnified Party gives a
Claim Notice for an Unliquidated Claim, the Indemnified Party shall also give a
second Claim Notice (the “Liquidated Claim Notice”) within 60 days after the
matter giving rise to the claim becomes finally resolved, and the second Claim
Notice shall specify the amount of the claim. 
Each Indemnitor to which a Claim Notice is given

 

51

 

shall respond to
any Indemnified Party that has given a Claim Notice (a “Claim Response”) within
30 days (the “Response Period”) after the later of (i) the date that the Claim
Notice is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is
given.  Any Claim Response shall specify
whether or not the Indemnitor giving the Claim Response disputes the claim
described in the Claim Notice.  If any
Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice.  If any Indemnitor elects
not to dispute a claim described in a Claim Notice, whether by failing to give
a timely Claim Response in accordance with the terms hereof or otherwise, then
the amount of such claim shall be conclusively deemed to be an obligation of
such Indemnitor.

 

(b)                                 If
any Indemnitor shall be obligated to indemnify an Indemnified Party pursuant to
this Section 18, such Indemnitor shall pay to such Indemnified Party the
amount to which such Indemnified Party shall be entitled within 15 business
days after the day on which such Indemnitor became so obligated to the
Indemnified Party.  If the Indemnified
Party is  Buyer or another Buyer Indemnitee, it shall seek
payment solely from the funds escrowed in accordance with Section 18.4
above.  If any Indemnitor fails to pay
all or part of any indemnification obligation when due, then such Indemnitor
shall also be obligated to pay to the applicable Indemnified Party interest on
the unpaid amount for each day during which the obligation remains unpaid at an
annual rate equal to the prime rate plus 5%.

 

(c)                                  If,
during the Response Period, an Indemnified Party receives a Claim Response from
the Indemnitor, then for a period of 45 days (the “Resolution Period”) after
the Indemnified Party’s receipt of such Claim Response, the Indemnified Party
and the Indemnitor shall endeavor to resolve any dispute arising
therefrom.  If such dispute is resolved
by the parties during the Resolution Period, the amount that the parties have
specified as the amount to be paid by the Indemnitor, if any, as settlement for
such dispute shall be conclusively deemed to be an obligation of such
Indemnitor.

 

(d)                                 If
the Indemnified Party is a Buyer
Indemnitee, then within two business days from the date on which such Buyer Indemnitee became entitled to
such funds, Buyer and Seller shall
provide joint written instructions to the Escrow Agent as to (i) the amount of
funds, if any, to be dispersed from the Escrow Funds and (ii) instructions as
to the manner in which such funds shall be dispersed by the Escrow Agent.

 

18.6                           Claims
Period.  Any claim for
indemnification under this Section 18 shall be made by giving a Claim
Notice under Section 18.5 on or before the 
dates set forth in Section 18.1 as to indemnification by Buyer and
in Section 18.2.1 as to indemnification by Seller (in each case, the
“Expiration Date”). So long as an Indemnified Party gives a Claim Notice for an
Unliquidated Claim on or before the

 

52

 

applicable
Expiration Date, such Indemnified Party shall be entitled to pursue its rights
to indemnification regardless of the date on which such Indemnified Party gives
the related Liquidated Claim Notice.

 

18.7                           Third
Party Claims.  An Indemnified Party
that desires to seek indemnification under any part of this Section 18
with respect to any actions, suits or other administrative or judicial
proceedings (each, an “Action”) that may be instituted by a third party shall
give each Indemnitor prompt written notice of a third party’s institution of
such Action.  After such notice, any
Indemnitor may, or if so requested by such Indemnified Party, any Indemnitor
shall, participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that
such Indemnified Party shall have the right to participate at its own expense
in the defense of such Action; provided, further, that the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement, except with the written consent of the Indemnitor (which consent
shall not be unreasonably withheld).  Any
failure to give prompt written notice under this Section 18.6 shall not
bar an Indemnified Party’s right to claim indemnification under this
Section 18, except to the extent that an Indemnitor shall have been harmed
by such failure.

 

19.                                 Assignment; Third Parties; Binding Effect. Neither party hereto may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party, provided, however, that Buyer may designate
a wholly owned subsidiary to take title to the Business Assets and to assume
the Assumed Obligations but Buyer shall not be relieved of any of its
obligations hereunder as a result.. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person or entity, other than
the parties hereto and their successors in interest, any right or remedy under
or by reason of this Agreement unless so stated expressly herein to the
contrary. All covenants, agreements, representations and warranties of the
parties hereto contained herein shall be binding on and inure to the benefit of
Buyer and Seller and their successors and assigns.

 

20.                                 Expenses. Except as otherwise provided herein, Buyer and Seller shall bear all
of their own respective expenses, including, without limitation, counsel and
accountants’ fees, in connection with the transactions contemplated by this
Agreement.

 

21.                                 Notices. Any notice or communication to be given under the terms of this
Agreement (“Notice”) shall be in writing and shall be personally delivered or
sent by overnight delivery or registered or certified mail, return receipt
requested. Notice shall be effective (a) if personally delivered, when
delivered; (b) if by overnight delivery, on the day after delivery thereof to a
reputable overnight courier service; and (c) if mailed, at midnight on the
third business day after deposit in the mail, postage prepaid. Notices shall be
addressed as follows:

 

53

 

	
  To
  Buyer at:

  	
  Herbst
  Gaming Inc.

  
	
   

  	
  5195
  Las Vegas Blvd.

  
	
   

  	
  Las
  Vegas, Nevada  89119

  
	
   

  	
  Attention:  Ed Herbst and Sean Higgins

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Gibson,
  Dunn & Crutcher LLP

  
	
   

  	
  333
  South Grand Avenue

  
	
   

  	
  Los
  Angeles, California  90071-3197

  
	
   

  	
  Attention:  Peter Ziegler

  
	
   

  	
   

  
	
  To
  Seller at:

  	
  St.
  Joseph Riverboat Partners.

  
	
   

  	
  P.O. Box 385

  
	
   

  	
  St. Joseph, Missouri  64502

  
	
   

  	
  Attention:  Bruce Schmitter and Larry Seckington

  
	
   

  	
   

  
	
  With
  copy to:

  	
  Howard
  Grace

  
	
   

  	
  7575 North 16th Street

  
	
   

  	
  Suite 1

  
	
   

  	
  Phoenix, AZ  85020

  
	
   

  	
   

  
	
  And To:

  	
  Tobin & Hoff, P.L.C.

  
	
   

  	
  4250 North Drinkwater
  Boulevard

  
	
   

  	
  Suite
  170

  
	
   

  	
  Scottsdale,
  Arizona 85251

  
	
   

  	
  Attention:
  Shawn Tobin

  

 

or
at such other address as either Buyer or Seller from time to time may designate
by Notice hereunder.

 

22.                                 Captions. The captions appearing at the commencement of the Sections hereof are
descriptive only and/or for convenience in 
reference to this Agreement and in no way whatsoever define, limit or
describe the scope or intent of this Agreement or in any way affect this
Agreement.

 

23.                                 Waivers and Amendments. The parties hereto may amend this Agreement
in any respect only by mutual written agreement. The waiver by either party
hereto of any breach of any term, covenant or condition of this Agreement shall
not be deemed a continuing waiver of such term, covenant or condition, or a
waiver of any subsequent breach of the same or any other term, covenant or
condition of this Agreement.

 

24.                                 Further Assurances. Each of the parties hereto shall cooperate
in the effectuation of the transactions contemplated hereby and shall execute
any and all

 

54

 

additional
documents or take such additional actions as may be reasonably necessary or
appropriate for such purpose.

 

25.                                 Schedules and Exhibits. The Schedules and Exhibits described herein
form a part of this Agreement for contractual purposes. Schedules and Exhibits
may be separately bound and initialed by the parties hereto, and such Schedules
and Exhibits as referred to in this Agreement are incorporated in this Agreement
for all purposes. All Schedules and Exhibits referred to in this Agreement are
by reference specifically incorporated in this Agreement and are made a part
hereof as though set forth herein, whether or not attached hereto at the time
of execution of this Agreement.

 

26.                                 Severability. If any term, provision, covenant or
condition of this Agreement, or any application thereof, is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then the remaining
provisions, covenants and conditions of this Agreement, and all applications
thereof, not held invalid, void or unenforceable, shall continue in full force
and effect and shall in no way be affected, impaired or invalidated thereby.

 

27.                                 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Missouri.

 

28.                                 Gender and Number. Whenever used in this Agreement and as
required by context, the masculine gender includes the feminine and/or neuter,
and the singular number includes the plural.

 

29.                                 Time is of the Essence. Time is of the essence of this Agreement
and in the performance and enforcement of each of the promises, covenants,
representations and warranties of Buyer and Seller contained herein. For the
purpose of computing any period of time prescribed herein or relating hereto,
the first day shall be excluded. If the period of time is six (6) days or more,
weekends and public holidays shall be included. An act required to be performed
on a day shall be performed at or before the close of business on such day. If
an act is required to be performed on a certain day, and such day is not a
regular business day, then the time of performance or measurement shall be
extended to and include the next regular business day.

 

30.                                 Entire and Sole Agreement. This Agreement, including all Schedules and
Exhibits hereto, and all documents and instruments to be delivered on or before
the Closing Date pursuant to its terms, constitutes the entire agreement
between the parties hereto and supersedes all agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. The parties hereto further
acknowledge and agree that, in entering into this Agreement and in delivering
the documents and instruments to be delivered on or before the Closing Date,
the parties hereto have not in any way relied, and shall not in

 

55

 

any
way rely, on any oral agreement, representation, warranty, statement, agreement
in principle, promise or understanding not specifically set forth in this
Agreement, in the Schedules or Exhibits hereto or in such documents or
instruments.

 

31.                                 Publicity. Except as may be required in connection with the submissions or
approvals by the parties hereto to the MGC or as otherwise required by law, and
except pursuant to the Financing Materials, before the Closing no party hereto
shall make or cause to be made any press release or public announcement with
respect to any of the transactions contemplated by this Agreement or the
execution of this Agreement, including without limitation any disclosure of the
Purchase Price payable hereunder, or otherwise communicate with any news media
with respect thereto without the prior written consent of the other party
hereto. If any such announcement is so required by law, then Buyer and Seller
shall cooperate as to the timing and contents of any such press release or
public announcement.

 

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

 

33.                                 Authority. Each entity signing this Agreement, and each agent, officer,
director, manager or employee signing this Agreement on behalf of such an
entity, represents and warrants that this Agreement is duly authorized by and
binding on such entity.

 

34.                                 MGC Approval. This Agreement is subject to the approval
of the MGC. Approval of this Agreement by the MGC shall not in any manner
constitute approval of Buyer’s application to operate an excursion gaming
riverboat from St. Joseph, Missouri

 

35.                                 Post Closing Insurance.  For
a period of five (5) years after the Closing hereunder, or until Buyer sells
the Business to an unrelated third party, Buyer shall maintain general
liability insurance on the Business from companies authorized to do business in
the State of Missouri with at least Best’s Financial Rating XIII and Best’s
Policy Holder Rating B+ with minimum limits per occurrence of $5,000,000 and
shall name Seller and its shareholders (collectively the “Indemnified Parties”)
as additional insureds on such policies, which policies shall provide primary
coverage for any losses suffered by the Indemnified Parties with respect to the
Business and/or the Business Assets.

 

36.                                 Simultaneous Closings.  The
obligations of the parties to close the transactions contemplated by this
Agreement are expressly conditioned upon Buyer simultaneously closing its
acquisitions of the assets of (A) Southern Iowa Gaming, Co., pursuant to
that certain Asset Purchase and Sale Agreement of even date herewith (the “SIG
Agreement”) and (B) Mark Twain Casino, L.L.C., a Missouri

 

56

 

limited
liability company pursuant to that certain Asset Purchase and Sale Agreement of
even date herewith (the “Mark Twain Casino Agreement”).  If for any reason this Agreement and the
acquisitions called for in the SIG Agreement and the Mark Twain Casino
Agreement shall not have closed by the Outside Closing Date, then this
Agreement shall terminate unless Seller and Buyer may mutually agree to waive
the requirement that the transactions close simultaneously.  Notwithstanding any other provision hereof,
if this Agreement is canceled by Buyer as a result of the failure to satisfy
the condition set forth in Section 8.10
or by Seller as a result of the failure to satisfy the condition set forth in Section 9.6 due to the failure
of the SIG Agreement and the Mark Twain Casino Agreement to close
simultaneously with this Agreement, and the acquisitions called for in the SIG
Agreement and the Mark Twain Casino Agreement failed to close for a reason that
would have permitted either of the sellers under the SIG Agreement or the Mark
Twain Casino Agreement to retain the deposit made under the applicable other
Agreement, then Seller shall be entitled to receive and retain the Deposit made
hereunder.

 

37.                                 Enforcement.  The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.  Accordingly, each of
the parties shall be entitled to specific performance of the terms hereof,
including an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which they are entitled at law or in
equity.  Each of the parties further
hereby waives any defense in any action for specific performance that a remedy
at law would be adequate.

 

38.                                 Proof of Financing. 
Simultaneously with the execution of this Agreement, Buyer shall deliver
to Seller a copy of a commitment from Lehman Brothers to Buyer committing to provide
funding to the Buyer in the aggregate amount of the Purchase Price hereunder
and the Purchase prices payable under the SIG Agreement and the Mark Twain
Casino Agreement.

 

***Signature Page Follows***

 

57

 

IN
WITNESS WHEREOF, Buyer and Seller have duly executed and delivered this
Agreement as of the date first written above.

 

 

	
  BUYER:

  	
  SELLER:

  
	
   

  	
   

  
	
  Herbst
  Gaming, Inc.,

  a Nevada corporation

  	
  St.
  Joseph Riverboat Partners, a Missouri

  general partnership

  
	
   

  	
   

  
	
   

  	
  By:
  Continental Gaming, Inc., a Missouri

  corporation, its managing partner

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Edward J. Herbst

  	
   

  	
  By:

  	
  /s/
  Bruce Schmitter

  	
   

  
	
   

  	
  Edward
  J. Herbst

  	
   

  	
  Its:
  Vice President

  
	
  Its:

  	
  President

  	
   

  	
   

  

 

 

EXHIBITS AND SCHEDULES

 

	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “A”

  	
   

  	
  Legal
  Description of Real Estate

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “A-1”

  	
   

  	
  Map
  showing general location of Real Estate

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “B”

  	
   

  	
  Deposit
  Escrow Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “C”

  	
   

  	
  Assignment
  and Assumption Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “D”

  	
   

  	
  Financial
  Statements

  
	
   

  	
   

  	
   

  
	
  Exhibit
  “E”

  	
   

  	
  Indemnity
  Escrow Agreement

  
	
   

  	
   

  	
   

  
	
  Schedules:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1(d)

  	
   

  	
  List
  of Gaming Equipment

  
	
   

  	
   

  	
   

  
	
  Schedule 1(h)

  	
   

  	
  List
  of Contracts

  
	
   

  	
   

  	
   

  
	
  Schedule 2

  	
   

  	
  Excluded
  Assets

  
	
   

  	
   

  	
   

  
	
  Schedule 3.2

  	
   

  	
  Assumed
  Obligations

  
	
   

  	
   

  	
   

  
	
  Schedule 3.5.3

  	
   

  	
  Employee
  Benefits

  
	
   

  	
   

  	
   

  
	
  Schedule 5.4

  	
   

  	
  Litigation
  Matters

  
	
   

  	
   

  	
   

  
	
  Schedule 5.5

  	
   

  	
  Changes
  in Financial Condition since 12/31/03

  
	
   

  	
   

  	
   

  
	
  Schedule 5.8

  	
   

  	
  List
  of Tradenames, Trademarks, etc.

  
	
   

  	
   

  	
   

  
	
  Schedule 5.9

  	
   

  	
  Environmental
  Disclosures

  
	
   

  	
   

  	
   

  
	
  Schedule 5.11

  	
   

  	
  Seller
  Required Consents

  
	
   

  	
   

  	
   

  
	
  Schedule 5.13

  	
   

  	
  List
  of Options

  
	
   

  	
   

  	
   

  
	
  Schedule 5.14

  	
   

  	
  List
  of Affiliate Contracts

  
	
   

  	
   

  	
   

  
	
  Schedule 5.17

  	
   

  	
  List
  of Insurance Coverages

  

 

E&S-1

 

	
  Schedule 5.18

  	
   

  	
  List
  of Required Permits

  
	
   

  	
   

  	
   

  
	
  Schedule 6.5

  	
   

  	
  Buyer
  Required Consents

  

 

E&S-2Exhibit 10.82

 

St. Joseph Deposit Escrow

 

DEPOSIT
ESCROW AGREEMENT

 

This DEPOSIT ESCROW AGREEMENT (“Escrow
Agreement”) is entered into as of this 20th day of July, 2004 by and between St. Joseph Riverboat Partners, a Missouri
general partnership  (together with its
respective affiliates, “Seller”) and Herbst Gaming, Inc., a Nevada corporation, (“Buyer”) and Lawyers Title of Arizona
(“Escrow Agent”).

 

Recitals

 

WHEREAS, concurrently herewith, Seller and
Buyer are entering into that certain Asset Purchase and Sale Agreement (the
“Agreement”), a copy of which is attached hereto as Exhibit A and by this
reference incorporated herein.

 

WHEREAS, as a material inducement to execute
and deliver the Agreement and as a condition to the consummation of the
transactions contemplated by the Agreement, Buyer and Seller have agreed to
perform certain acts on or before agreed to dates and in connection therewith
Buyer has agreed to make the Deposit.

 

WHEREAS, Buyer and Seller now desire to
evidence their agreement regarding the disbursement of the Deposit pursuant to
the terms of this Escrow Agreement.

 

Agreements

 

NOW THEREFORE, for and in consideration of the mutual covenants and promises contained
herein and in the Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Escrow Agent, Seller
and Buyer hereby agree as follows:

 

1.               Defined Terms.  Capitalized terms used in this Escrow
Agreement without definition shall have the meanings ascribed to them in the
Agreement.  

 

2.               Appointment of
Escrow Agent.  Buyer and Seller
hereby appoint the Escrow Agent  to act
as escrow agent hereunder and the Escrow Agent agrees to act as such.

 

3.               Establishment of
the Deposit Fund.  (a)  On the Effective Date, Buyer shall deliver
cash or an irrevocable letter of credit (the “Letter of Credit”) in the
amount of $1,702,000 (the “Deposit Amount”) to the Escrow Agent, in
accordance with the terms of Section 3.1 of the Agreement.  The Escrow Agent shall promptly acknowledge
in writing to Buyer and Seller receipt thereof.

 

(b)         The Escrow Agent shall
hold the Deposit Amount and all interest and other amounts earned thereon
(collectively, as it shall exist from time to time, the “Deposit Fund”),
in escrow pursuant to the terms hereof. 
Upon receipt of any cash representing any portion of the Deposit Amount,
whether on the Effective Date or upon any drawdown of the Letter of Credit, the
Escrow Agent agrees to deposit such portion of the Deposit Amount in a separate
special interest-bearing account in a federally chartered bank with security
for the amount of the Deposit Amount

 

 

in excess of the
federally insured amount (the “Escrow Account”).  At no time shall any portion of the Deposit
Amount be invested in either Buyer or Seller, or in any affiliate of either of
them.

 

4.               Payments from
the Deposit Fund.  (a)  Seller or Buyer (the “Notifying Party”) shall
initiate a claim against the Deposit Fund by delivering to the other party (
the “Receiving Party”), with a copy to the Escrow Agent, a written notice (a “Payment
Notice”), which Payment Notice shall state that an event has occurred under
the Agreement pursuant to which the Notifying Party is entitled to payment of
all amounts held in the Deposit Fund.

 

(b)         If the
Receiving Party shall object in good faith to the payment to the Notifying
Party of the amounts held in the Deposit Fund, the Receiving Party shall,
within ten (10) business days after receipt (or deemed receipt pursuant to
Section 10 hereof) by the Receiving Party of such Payment Notice, deliver
to the Escrow Agent, with a copy to the Notifying Party, a certificate,
executed by an authorized officer of the Receiving Party (a “Certificate of
Objections”), specifying in reasonable detail the nature and basis for each
such good faith objection.

 

(c)          If the
Escrow Agent shall not have received a Certificate of Objections objecting to
the Payment Notice on or prior to the tenth (10th) business day after
receipt (or deemed receipt pursuant to Section 10 hereof) by the Receiving
Party of such Payment Notice, the Receiving Party shall be deemed to have
acknowledged that such Payment Notice is correct and final and the Escrow Agent
shall thereafter transfer to or to the order of Notifying Party all amounts
held in the Deposit Fund.

 

(d)         If the
Receiving Party delivers to the Escrow Agent, on or prior to the tenth (10th)
business day after receipt (or deemed receipt pursuant to Section 10
hereof) by Receiving Party of a Payment Notice, a Certificate of Objections
objecting to the payment to the Notifying Party of the amount held in the
Deposit Fund, the amounts held in the Deposit Fund shall be held by the Escrow
Agent and shall not be released from the Deposit Fund, except in accordance
with either:

 

(i)                                     a
written memorandum pursuant to Section 5(a) hereof, executed by an
authorized signatory of each of Buyer and Seller, or

 

(ii)                                  written
instructions executed by an authorized signatory of each of Buyer and Seller
and a copy of the final judgment of the arbitrator having jurisdiction over the
matters relating to the claim, as provided in Section 5,

 

upon receipt of which the Escrow Agent shall distribute to the party
identified in such memorandum or written instructions, as the case may be, the
amount of the funds held in the Deposit Fund.

 

(e)          In the event that at the time for any payment
to be made by the Escrow Agent to Seller pursuant to this Escrow Agreement
there shall be insufficient cash in the Deposit Fund for such payment to be
made, the Escrow Agent shall make a draw down against the Letter of Credit, in
accordance with the terms thereof, in such amount as shall be necessary to
satisfy such payment obligation, and shall disburse the cash proceeds of such
draw down in accordance with the terms of this Escrow Agreement.

 

2

 

(f)            Notwithstanding any other provision to the
contrary herein, if for any reason the Agreement has not closed by the date
which is thirty (30) business days prior to the expiration date of the Letter
of Credit, and Buyer and Seller have not otherwise agreed in writing to
terminate this Deposit Escrow Agreement, or to otherwise dispose of the Deposit
Fund,  then the Escrow Agent shall draw
down against the full amount of the Letter of Credit and such cash proceeds
shall become part of the Deposit Fund and shall be disbursed in accordance with
the terms of this Escrow Agreement. 
Buyer hereby irrevocably authorizes Escrow Agent to draw on the Letter
of Credit in such circumstances and agrees to release and hold Escrow Agent
harmless from any liability for drawing on the Letter of Credit (it being
expressly understood and agreed that if Buyer and Seller are in dispute as to
how the Deposit is to be disposed of, then the Escrow Agent is to draw on the
Letter of Credit before its expiration and hold the proceeds therefrom until
such dispute is resolved).

 

(g)         On the
Termination Date, if the amounts held in the Deposit Fund shall not previously
have been paid out in accordance with this Section 4, the Escrow Agent
shall (i) pay any amount of cash held in the Deposit Fund to Seller (to be
set off against the Purchase Price, in accordance with Section 3.1 of the
Agreement), (ii) deliver to Buyer for cancellation the Letter of Credit,
to the extent any amounts are then outstanding thereunder and (iii) provide to
each of Buyer and Seller an accounting of all such payments and deliveries.

 

(h)         Notwithstanding
any other provision of this Escrow Agreement to the contrary, at any time prior
to the termination of this Escrow Agreement, the Escrow Agent shall, if so
instructed in writing signed by an authorized signatory of each of Buyer and
Seller, pay from the Deposit Fund, as instructed, to or to the order of the
party identified in such writing, the amount of cash or other property so instructed.

 

5.               Resolution of
Conflicts.  (a)  In case a Receiving Party shall timely object
in writing to any claim or claims by a Notifying Party made in any Payment
Notice, as provided in Section 4(b), Seller and Buyer shall attempt in
good faith for thirty (30) calendar days following delivery of the Certificate
of Objections to agree upon the rights of the respective parties with respect
to each of such claims.  If Seller and
Buyer should so agree, a memorandum setting forth such agreement shall be prepared
and signed by an authorized signatory of both parties and shall be delivered to
the Escrow Agent.  The Escrow Agent shall
be entitled to rely on any such memorandum and shall distribute amounts from
the Deposit Fund in accordance with the terms thereof.

 

(b)         If no such
agreement can be reached within thirty (30) calendar days after delivery of the
Certificate of Objections, either Buyer or Seller may, by written notice to the
other, with a copy to the Escrow Agent, demand arbitration of the matter in accordance
with the provisions of Section 11 of this Escrow Agreement.  The decision of the arbitrator as to the
validity and amount of any claim in such Payment Notice shall be binding and
conclusive upon the parties to this Escrow Agreement, and the Escrow Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Deposit Fund in accordance therewith.

 

6.               Taxes.  (a) 
The parties agree to treat the Deposit Fund as owned by Buyer and not
received by Seller, in all cases to the extent not paid to Seller pursuant to
Section 4 hereof, and to file all Tax Returns on a basis consistent with
such treatment.

 

3

 

(b)                                 All
dividends, distributions, interest and gains earned or realized on the amounts
in the Deposit Fund (“Earnings”) shall be treated as having been
received by Buyer for United States federal income tax purposes.  Unless otherwise required by law, the parties
agree that, for United States federal income tax purposes, Buyer shall report
Earnings as its income.

 

(c)                                  Any
disbursement of amounts in the Deposit Fund to Seller shall be treated for
United States federal income tax purposes as consisting, in part, of imputed
interest on the amount of such payment from the date of this Escrow Agreement
until the date of payment in accordance with the Code and Treasury Regulations
promulgated thereunder.

 

(d)                                 Buyer
shall timely file information statements with the IRS (to the extent required
by law).  Buyer may require Seller to
provide Buyer with an IRS Form W-9 or W-8BEN, as applicable, and any other
forms and documents that Buyer may reasonably request to complete such
information returns and payee statements (collectively, the “Tax Reporting
Documentation”).  The parties hereto
understand that if such Tax Reporting Documentation is not provided to Buyer,
then Buyer may be required by the Code to withhold a portion of any imputed
interest or other payments made to Seller. 
All tax withheld pursuant to this subsection (d) shall be treated
as having been paid to the person from whom such amounts were withheld for
purposes of determining any further amounts to which such person is entitled
hereunder.

 

7.               Assignment of
Rights to the Deposit Fund; Assignment of Obligations; Successors.  This Escrow Agreement may not be assigned by
operation of law or otherwise without the express written consent of Buyer and
Seller (which consent may be granted or withheld in their sole discretion), and
any assignment in violation of this requirement shall be void; provided,
however, any corporation or association into which the Escrow Agent may
be converted or merged, or with which it may be consolidated, or to which it
may sell or transfer all or substantially all of its corporate trust business
and assets as a whole or substantially as a whole, or any corporation or
association resulting from any such conversion, sale, merger, consolidation or
transfer to which the Escrow Agent is a party, shall be and become the
successor Escrow Agent under this Escrow Agreement and shall have and succeed
to the rights, powers, duties, immunities and privileges as its predecessor,
without the execution or filing of any instrument or paper or the performance
any further act, provided such corporation or association is a bank or trust
company having a corporate trust office in Phoenix, Arizona and assets in
excess of $100 million.  This Escrow
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their permitted assigns.

 

8.               Escrow Agent.  (a) 
Except as expressly contemplated by this Escrow Agreement or by joint
written instructions from Buyer and Seller, the Escrow Agent shall not sell,
transfer or otherwise dispose of, in any manner, all or any portion of the
Deposit Fund, except pursuant to an order of a court of competent jurisdiction.

 

(b)         The duties
and obligations of the Escrow Agent shall be determined solely by this Escrow
Agreement, and the Escrow Agent shall not be liable except for the performance
or non-performance of such duties and obligations as are specifically set forth
in this Escrow Agreement.

 

4

 

(c)          In the
performance of its duties hereunder, the Escrow Agent shall be entitled to rely
upon any document, instrument or signature believed by it in good faith to be
genuine and signed by any party hereto or an authorized officer or agent
thereof and shall not be required to investigate the truth or accuracy of any
statement contained in any such document or instrument.  The Escrow Agent may assume that any person
purporting to give any notice in accordance with the provisions of this Escrow
Agreement has been duly authorized to do so.

 

(d)         The Escrow
Agent shall not be liable for any error of judgment, or any action taken,
suffered or omitted to be taken, hereunder while acting in good faith and in
the exercise of reasonable judgment.  The
Escrow Agent may consult with independent counsel of its own choice and shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the reasonable
opinion of such counsel.

 

(e)          The Escrow
Agent shall have no duty as to the collection or protection of the Deposit Fund
or income thereon, nor as to the preservation of any rights pertaining thereto,
beyond the safe custody of any such funds actually in its possession.

 

(f)            As
compensation for its services to be rendered under this Escrow Agreement, for
each year or any portion thereof, the Escrow Agent shall receive a fee in the
amount specified in Schedule A to this Escrow Agreement and shall be
reimbursed upon request for all expenses, disbursements and advances, including
reasonable fees of outside counsel, if any, incurred or made by it in connection
with the preparation of this Escrow Agreement and the carrying out of its
duties under this Escrow Agreement.  All
such fees and expenses shall be paid by Seller.

 

(g)         The Escrow
Agent may at any time resign by giving twenty (20) business days’ prior written
notice of resignation to Buyer and Seller. 
Buyer and Seller may at any time jointly remove the Escrow Agent by
giving ten (10) business days’ prior written notice signed by each of them to
the Escrow Agent.  If the Escrow Agent
shall resign or be removed, a successor Escrow Agent, which shall be a bank,
trust company, or title insurance company having a corporate office in Phoenix,
Arizona or St. Joseph, Missouri and assets in excess of $100 million, and which
shall be reasonably acceptable to Buyer, shall be appointed by Seller by
written instrument executed by Seller and Buyer and delivered to the Escrow
Agent and to such successor Escrow Agent and, thereupon, the resignation or
removal of the predecessor Escrow Agent shall become effective and such successor
Escrow Agent, without any further act, deed or conveyance, shall become vested
with all right, title and interest to all cash and property held hereunder by
such predecessor Escrow Agent, and such predecessor Escrow Agent shall, on the
written request of Seller, Buyer or the successor Escrow Agent, execute and
deliver to such successor Escrow Agent all the right, title and interest
hereunder in and to the Deposit Fund of such predecessor Escrow Agent and all
other rights hereunder of such predecessor Escrow Agent.  If no successor Escrow Agent shall have been
appointed within twenty (20) business days of a notice of resignation by the
Escrow Agent, the Escrow Agent’s sole responsibility shall thereafter be to hold
the Deposit Fund until the earlier of its receipt of designation of a successor
Escrow Agent, a joint written instruction by Buyer and Seller and termination
of this Escrow Agreement in accordance with its terms.

 

5

 

(h)         In the
event of any disagreement (other than as evidenced by a Certificate of
Objections) between any of the parties (other than Escrow Agent) to this Escrow
Agreement, or between them or any of them and any other person or entity
resulting in conflicting or adverse claims or demands being made in connection
with the Deposit Fund, or in the event that Escrow Agent, in good faith, shall
be in doubt as to what action it should take hereunder, Escrow Agent at its
option may refuse to comply with any claims or demands on it, or refuse to take
any other action hereunder, so long as such disagreement continues or such
doubt exists, and, in any such event, Escrow Agent shall not be or become
liable in any way or to any person or entity for its failure or refusal to act,
and Escrow Agent shall be entitled to either;

 

(i)                                     continue
so to refrain from acting until (A) the rights of all parties shall have been
determined by a final and unappealable order of a court of competent
jurisdiction or by a final and unappealable award of arbitrators, or (B) all
differences shall have been resolved by agreement among all of the interested
persons or entities, and Escrow Agent shall have been notified thereof in
writing signed by all such persons or entities, or

 

(ii)                                  file
an interpleader action in any court of competent jurisdiction.

 

(i)             Buyer
and Seller shall jointly and severally indemnify, defend and hold the Escrow
Agent harmless from and against any and all loss, damage, tax (other than any
tax associated with the receipt by the Escrow Agent of fees, expenses and other
payments hereunder), liability and expense that may be incurred by Escrow Agent
arising out of or in connection with its duties, obligations or performance as
Escrow Agent hereunder, except as caused by Escrow Agent’s gross negligence or
willful misconduct, including the legal costs and expenses of bringing an
interpleader action pursuant to Section 8(h)(ii) of this Escrow Agreement
and of defending itself against any claim or liability in connection with its
performance or non-performance hereunder. 
The terms of this Section 8(i) shall survive the termination of
this Escrow Agreement and, with respect to claims arising in connection with
Escrow Agent’s duties while acting as such, the resignation or removal of
Escrow Agent.

 

9.               Termination.  This Escrow Agreement shall terminate (the “Termination
Date”) on the earlier of: (a) the date the transactions described in
the Agreement close, or (b) the date on which the Letter of Credit has been
fully drawn on and there are no funds or other property remaining in the
Deposit Fund, or (c) the date all remaining funds and/or the Letter of Credit
are returned to Buyer.

 

10.         Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given (a) upon personal delivery
to the party to be notified or delivery by facsimile (with acknowledgment of
complete transmission), (b) one (1) business day after the business day of
deposit with a nationally recognized overnight courier service for next day
delivery, freight prepaid, or (c) three (3) business days after deposit
with the United States Post Office for delivery by registered or certified
mail, postage prepaid.  Any such
communication shall be addressed to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):

 

6

 

	
   

  	
  (i)

  	
  If
  to Buyer:

  	
  Herbst
  Gaming Inc.

  
	
   

  	
   

  	
   

  	
  5195
  Las Vegas Blvd.

  
	
   

  	
   

  	
   

  	
  Las
  Vegas, Nevada 89118

  
	
   

  	
   

  	
   

  	
  Attention:
  Ed Herbst and Sean Higgins

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  	
  Gibson,
  Dunn & Crutcher, LLP

  
	
   

  	
   

  	
   

  	
  333
  S. Grand Avenue

  
	
   

  	
   

  	
   

  	
  Los
  Angeles, California 90071-3197

  
	
   

  	
   

  	
   

  	
  Attention:
  Peter Ziegler

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  If
  to Seller:

  	
  St.
  Joseph Riverboat Partners

  
	
   

  	
   

  	
   

  	
  P.O. Box 385

  
	
   

  	
   

  	
   

  	
  St. Joseph, Missouri 64505

  
	
   

  	
   

  	
   

  	
  Attention: Bruce Schmitter and Larry Seckington

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  	
  Howard
  Grace

  
	
   

  	
   

  	
   

  	
  7575
  North 16th Street

  
	
   

  	
   

  	
   

  	
  Suite
  1

  
	
   

  	
   

  	
   

  	
  Phoenix,
  Arizona 85020

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  If
  to Escrow Agent:

  	
  Lawyers
  Title of Arizona

  
	
   

  	
   

  	
   

  	
  1850
  North Central Avenue, Suite 125

  
	
   

  	
   

  	
   

  	
  Phoenix,
  Arizona 85004-4590

  
	
   

  	
   

  	
   

  	
  Attention:
  Sandy Butler

  

 

11.         Arbitration.  Any and all questions,
disputes or controversies arising in connection with this Escrow Agreement
(with the exception of any remedy seeking equitable relief which shall not be
subject to this Section 11), in interpretation, application, performance,
nonperformance of any instructions executed and delivered hereunder
(collectively “Disputes”) shall, at the demand of any party hereto, be
determined by arbitration.  Buyer and
Seller shall appoint a single arbitrator (“Arbitrator”) who is licensed by the
American Arbitration Association (“AAA”) to arbitrate such Disputes.  In the event Buyer and Seller cannot agree on
the selection of the Arbitrator, each party shall select one Arbitrator who
shall together select the single Arbitrator who shall arbitrate the
matter.  Upon making a determination with
respect to any dispute, the Arbitrator shall submit a written decision on each
such Dispute to Seller and Buyer.  Any
determination by the Arbitrator with respect to any Disputes shall be final and
binding on each party to this Escrow Agreement. 
The forum for any arbitration will be Los Angeles, California.  The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the AAA as in effect for
commercial arbitrations conducted by the AAA. 
Seller and Buyer agree that the costs of the Arbitrator shall be borne
as determined by the Arbitrator. 
Judgment upon the award of the Arbitrator may be entered in any Court
having jurisdiction thereof.

 

12.         Governing Law.  This Escrow Agreement shall be governed by,
and construed in accordance with, the laws of the State of Arizona applicable
to contracts executed and to be performed entirely within that State.  Any controversy or claim arising out of or
relating to this Escrow Agreement or a breach hereof shall be settled in
accordance with the arbitration provisions set forth in Section 11 of this
Escrow Agreement.

 

7

 

13.         Amendments.  This Escrow Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf
of, Buyer, Seller and the Escrow Agent or (b) by a waiver in accordance
with Section 14 of this Escrow Agreement.

 

14.         Waiver.  Buyer, Seller and the Escrow Agent may
(a) extend the time for the performance of any obligation or other act of
any other party hereto or (b) waive compliance with any agreement or
condition contained herein.  Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by Buyer, in the case of a waiver or extension by Buyer, Seller,
in the case of a waiver or extension by Seller, or the Escrow Agent, in the
case of a waiver or extension by the Escrow Agent.  Any waiver of any term or condition shall not
be construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Escrow Agreement.  The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.

 

15.         Severability.  In the event that any provision of this
Escrow Agreement or the application thereof, becomes or is declared by a court
of competent jurisdiction to be illegal, void or unenforceable, the remainder
of this Escrow Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto.  Buyer, Seller and the Escrow Agent further
agree to use commercially reasonable efforts to replace such void or
unenforceable provision of this Escrow Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.

 

16.         Entire Agreement; No
Third-Party Beneficiaries.  This
Escrow Agreement, the Agreement and the Indemnity Escrow Agreement constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter of
this Escrow Agreement.  This Escrow
Agreement is not intended to confer upon any Person other than the parties any
rights or remedies.

 

17.         Counterparts.  This Escrow Agreement may be executed in one
or more counterparts (including by facsimile), all of which shall be considered
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.

 

***Signature Page Follows***

 

8

 

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

 

	
   

  	
  BUYER

  
	
   

  	
   

  
	
   

  	
  Herbst Gaming, Inc.,

  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward J. Herbst

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Edward J. Herbst

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  ESCROW AGENT

  
	
   

  	
   

  
	
   

  	
  Lawyer’s Title of Arizona

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLER

  
	
   

  	
   

  
	
   

  	
  St.
  Joseph Riverboat Partners,

  a Missouri general partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Continental
  Gaming, Inc.,

  a Missouri corporation,

  its managing partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce Schmitter

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce Schmitter

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 

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

 

	
   

  	
  BUYER

  
	
   

  	
   

  
	
   

  	
  Herbst Gaming, Inc.,

  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ESCROW AGENT

  
	
   

  	
   

  
	
   

  	
  Lawyer’s Title of Arizona

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sandra J. Butler

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Sandra J. Butler

  	
   

  
	
   

  	
   

  	
  Title:

  	
  VP

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLER

  
	
   

  	
   

  
	
   

  	
  St.
  Joseph Riverboat Partners,

  a Missouri general partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Continental
  Gaming, Inc.,

  a Missouri corporation,

  its managing partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce Schmitter

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce Schmitter

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 

SCHEDULE A

 

1.                           The Escrow Agent shall be
paid a one-time fee of Three Hundred Dollars ($300.00) upon any draw-down of
the Letter of Credit (it being understood that no such fee shall be payable in
the event that there is no draw down of the Letter of Credit pursuant to this
Escrow Agreement).

 

2.                           The Escrow Agent shall be
paid a one-time fee of Twenty Five Dollars ($25.00) with respect to each check
issued by the Escrow Agent in connection with any partial or full release of
cash funds held by the Escrow Agent pursuant to the terms of this Escrow
Agreement.

 

A-1

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