Herbst Gaming 8K Acquisition or disposition of assets | SEC 10 Mar 03

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EXHIBIT 2.01

ASSET PURCHASE AGREEMENT

By and Among

ANCHOR COIN

and

HERBST GAMING, INC.

and

MARKET GAMING, INC.

and

E-T-T, INC.

dated as of

November 21, 2002

TABLE OF CONTENTS

		Page
ARTICLE I PURCHASE AND SALE OF THE ASSETS
1.1	Purchase and Sale of Assets	1
1.2	Excluded Assets	3
1.3	Assumed Liabilities	3
1.4	Excluded Liabilities	4
1.5	Consideration for the Assets	4
1.6	Closing	5
1.7	Pre-Closing Adjustments	5
1.8	Purchase Price Adjustment for Capital Expenditures	6
1.9	No Licenses	7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER
2.1	Organization	7
2.2	Authority; Enforceability	7
2.3	No Breach	7
2.4	Brokers	8
2.5	Financial Statement; Liabilities	8
2.6	Absence of Certain Developments	8
2.7	Consents	9
2.8	Actions and Proceedings	9
2.9	Taxes and Tax Returns	9
2.10	Title to Property; Principal Equipment; Sufficiency of Assets	9
2.11	Intellectual Property	10
2.12	Compliance with Legal Requirements	10
2.13	Employment Matters	10
2.14	Environmental Matters	11
2.15	Permits	11
2.16	Contracts	11
2.17	Smith Contract	12
2.18	Location Contracts	12
2.19	No Other Representations or Warranties	12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1	Organization; Authority and Enforceability	13
3.2	No Breach	13
3.3	Consents	13
3.4	Brokers	13
3.5	Actions and Proceedings	14
3.6	Financing	14
ARTICLE IV COVENANTS OF SELLER
4.1	Conduct of Business	14
4.2	Inspections	15
4.3	Financial Statements	15
4.4	Material Adverse Change	15

4.5	Non-Competition	15
ARTICLE V ADDITIONAL AGREEMENTS
5.1	Further Actions	17
5.2	Certain Notifications	17
5.3	Employees	17
5.4	Tax Matters	17
5.5	Press Releases; Public Announcements	18
5.6	No Solicitation	18
5.7	Financing	19
ARTICLE VI CONDITIONS PRECEDENT TO CLOSING
6.1	Conditions Precedent to Obligations of Purchaser	19
6.2	Conditions Precedent to Obligations of Seller	20
ARTICLE VII TERMINATION
7.1	Grounds for Termination	20
7.2	Procedure for Termination	21
7.3	Effect of Termination	21
ARTICLE VIII INDEMNIFICATION
8.1	Obligations of Seller	21
8.2	Obligations of Purchaser	22
8.3	Certain Tax Matters	22
8.4	Procedure	23
8.5	Survival	24
8.6	Notice by Seller	24
ARTICLE IX MISCELLANEOUS
9.1	Confidentiality	24
9.2	Survival of Representations and Warranties	24
9.3	Costs and Expenses	24
9.4	Notices	25
9.5	Counterparts	25
9.6	Entire Agreement	25
9.7	GOVERNING LAW	26
9.8	No Third Party Rights; Assignment	26
9.9	Waivers and Amendments	26
9.10	Interpretation	26

INDEX OF DEFINED TERMS

The following terms have the respective meanings specified in the indicated Sections of the Agreement:

Term		Agreement Section
Accounts Receivable		1.1(c)
Acquisition Transaction		5.6
Adjustment Period		8.3(c)
Affiliate		1.4
Aggregate Claims		8.1(b)
Agreement		Recitals
Asset Acquisition Statement		5.4(c)
Assignment and Bill of Sale		Recitals
Associate		1.4
Assumed Leases		1.1(a)
Assumed Liabilities		1.3
Assumption Agreement		Recitals
Benefit Plans		2.13(c)
Business		Recitals
Business Employees		2.13(a)
Business Records		1.2(c)
Capital Expenditure Adjustment		1.8(a)
Capital Expenditure Calculation Statement		1.8(b)
Closing		1.6(a)
Closing Date		1.6(a)
Code		2.13(c)
Collateral Agreements		Recitals
Consent		2.7
Continuing Employees		5.3(a)
Contracts		1.1(g)
Deficiency Period		8.3(c)
EBITDA		1.5(d)
EBITDA Calculation Statement		1.7(b)
Encumbrances		1.1
Environmental Laws		2.14
ERISA		2.13(c)
ERISA Affiliate		2.13(c)
ETT		Recitals
Excess Amount		8.3(c)
Excluded Assets		1.2
Excluded Liabilities		1.4
Expiration Date		9.2
Financial Statements		2.5(a)
GAAP		1.5(d)
Governmental Authority		2.3(c)
Hazardous Materials		2.14
HGI		Recitals
HSR Act		2.7
Hypothetical Tax Rate		8.3(c)
Indemnification Cap		8.1(b)

Indemnification Deductible		8.1(b)
Indemnified Party		8.4
Indemnifying Party		8.4
Independent Firm		1.7(c)
Intellectual Property Agreement		Recitals
Judgments		2.3(c)
Laws		2.3(c)
Lease Assignment		Recitals
Liability, Liabilities		2.5(b)
Location Contracts		1.1(g)
Losses		8.1(a)
Material Adverse Effect		2.1
Material Adverse Change		4.4
MGI		Recitals
Operating Cash		1.1(b)
Permitted Encumbrances		1.1(i)
Permits		2.3(b)
Personal Property		1.1(e)
Pre-Closing Adjustment		1.5(c)
Principal Equipment		1.1(d)
Proceeding(s)		2.8
Progressive Jackpot Credit		1.3(e)
Property, Plant and Equipment		1.8(a)
Proprietary Information		1.1(f)
Purchased Assets		1.1
Purchase Price		1.7(a)
Purchaser		Recitals
Purchaser Disclosure Schedule		Article III
Quarterly Financial Statements		4.3
Representatives		5.6
Seller		Recitals
Seller Agreements		2.16(a)
Seller Benefit Plans		2.13(c)
Seller Disclosure Schedule		Article II
Smith Contract		Recitals
Supply Agreement		Recitals
Target EBITDA Range		1.5(b)
Target Purchase Price		1.5(a)
Tax Item		8.3(c)
Tax Returns		2.9
Taxes		2.9
WARN Act		5.3(a)

ASSET PURCHASE AGREEMENT ("Agreement"), dated as of November 21, 2002, between, ANCHOR COIN, a corporation organized under the laws of Nevada ("Seller"), and HERBST GAMING, INC., a corporation organized under the laws of Nevada ("HGI"), MARKET GAMING, INC., a corporation organized under the laws of Nevada ("MGI"), and E-T-T, INC., a corporation organized under the laws of Nevada ("ETT" which together with HGI and MGI will be collectively be referred to as"Purchaser").

WHEREAS, Seller is, among other things, engaged in the business of operating and maintaining a gaming machine route in the State of Nevada (the "Business");

WHEREAS, Seller is an indirect wholly owned subsidiary of International Game Technology, a Nevada corporation ("IGT");

WHEREAS, the Business is composed of certain assets that are currently owned by Seller and certain liabilities in respect of which Seller is currently obligated;

WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase the Purchased Assets (as hereinafter defined), and to assume the Assumed Liabilities (as hereinafter defined), in each case, as more fully described and upon the terms and subject to the conditions set forth herein; and

WHEREAS, Seller and Purchaser desire to enter into each Assignment and Bill of Sale in substantially the form set forth asExhibit A(each an "Assignment and Bill of Sale"), each Assumption Agreement in substantially the form set forth asExhibit B(each an "Assumption Agreement"), including the Lease and Sublease Agreement between Smith's Food & Drug Center, Inc. and Seller and amendments thereto (the "Smith Contract"), each assignment agreement with respect to a Lease in substantially the form set forth asExhibit C(each a "Lease Assignment") and a license agreement with respect to Double Down Stud, in substantially the form set forth asExhibit D(the "Intellectual Property Agreement") (each Assignment and Bill of Sale, each Assumption Agreement, each Lease Assignment and the Intellectual Property Agreement are collectively, the "Collateral Agreements").

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants, agreements and undertakings contained or referred to in this Agreement, the parties hereby agree as follows:

ARTICLE I
PURCHASE AND SALE OF THE ASSETS

1.1 Purchase and Sale of Assets. Upon and subject to the terms and conditions of this Agreement, on the Closing Date, Seller shall sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall purchase, acquire and accept from Seller, free and clear of any lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, covenant or other similar restriction or right affecting the Purchased Assets, other than Permitted Encumbrances (collectively, "Encumbrances"), all right, title and interest in, to and under the Purchased Assets as the same shall exist on the Closing Date. For purposes of this Agreement, the term "Purchased Assets" means the assets, properties and rights used or held for use by Seller primarily in the operation or conduct of the Business and set forth below:

(a) The Assumed Leases, including Seller's interest therein, to be assumed by the Purchaser pursuant to a Lease Assignment and identified on Schedule 1.1(a) (the "Assumed Leases"). Prior to the date hereof, Seller shall have furnished to or provided access to Purchaser of copies of each of the Assumed Leases;

(b) Operating Cash in game loads (net of tokens), location change banks and drawers, LAT drawers, bill loads, bill dispensers, bill dispenser inventory, coin and currency inventory, markers

(at 5:00 p.m. on the Closing Date), imprest bank balances, remaining collector credits, together with operating vault cash ("Operating Cash"). Each of Purchaser and Seller agree to develop a mutually acceptable ownership transition plan prior to the Closing to address gaming machine drop procedures and other cash transfer procedures to be applied as of the Closing in order to effectuate a fair and equitable accounting of cash and the transfer of possession of Operating Cash. Operating Cash on the Closing Date in excess of $3,700,000 shall be paid over to Seller and, in the event that Operating Cash on the Closing Date is less than $3,700,000, Seller shall make up such shortfall by making a cash payment to Purchaser.

(c) All accounts receivable (including, without limitation, all accounts receivable arising from sales prior to the Closing Date), notes receivable, prepaid items, deferred charges, credits, reserves and deposits paid by Seller with respect to the Assumed Leases and Contracts, which are set forth on Schedule 1.1(c), except for (i) accounts receivable collected in the ordinary course of business consistent with past practice on or after the date hereof prior to the Closing Date and (ii) inter-company accounts receivable ("Accounts Receivable");

(d) The gaming machines and equipment and other similar items used or held for use by Seller in the operation or conduct of the Business as set forth on Schedule 1.1(d) (the "Principal Equipment"). Principal Equipment includes all outstanding right, title and interest in and to the warranties received from the manufacturers and distributors of such items and to any related claims, credits, rights of recovery and setoff with respect to such items, but only to the extent such rights are assignable;

(e) The tangible personal property of Seller set forth on Schedule 1.1(e) (the"Personal Property");

(f) The Proprietary Information being licensed pursuant to the Intellectual Property Agreement.

"Proprietary Information" means all information (whether or not protectable by patent, copyright, mask works or trade secret rights) not generally known to the public (except for patents), including works of authorship, inventions, discoveries, patentable subject matter, patents, patent applications, industrial models, industrial designs, trade secrets, trade secret rights, software, works, copyrightable subject matters, copyright rights and registrations, mask works, know-how and show-how, trademarks, trade names, service marks, emblems, logos, insignia and related marks and registrations, specifications, technical manuals and data, libraries, blueprints, drawings, proprietary processes, product information and development work-in-process;

(g) All third-party contracts, agreements, leases, subleases, supply contracts, purchase orders, sales orders and instruments, whether written or oral, used or held for use primarily in the operation or conduct of the Business, to which Seller is a party or by which any Purchased Asset may be bound or affected, and which is listed on Schedule 1.1(g) (the "Contracts") and all location contracts, which constitutes (i) all space lease agreements; and (ii) all participation agreements as set forth on Schedule 1.1(g) (the "Location Contracts"). Prior to the date hereof, Seller shall have furnished to or provided access to Purchaser copies of each of the Contracts and Location Contracts; and

(h) all rights, claims or causes of action of Seller against any third parties relating to the Purchased Assets under manufacturer's and vendor's warranties.

For purposes of this Agreement, "Permitted Encumbrances" means any interests of licensors under any license agreements under which Seller is a licensee or any interests under any leases under which Seller is a lessee.

1.2 Excluded Assets.

Anything in Section 1.1 to the contrary notwithstanding, the Purchased Assets shall not include, and Seller is not selling, transferring, assigning, conveying or delivering to Purchaser, and Purchaser is not purchasing, acquiring or accepting from Seller, any of the rights, properties or assets set forth or described in paragraphs (a) through (f) below (the rights, properties and assets expressly excluded by this Section 1.2 being referred to herein as the "Excluded Assets"):

(a) except for Operating Cash, any cash, cash equivalents, bank deposits or similar cash items, lines of credit, banking facilities, employee receivables of Seller or any Affiliate of Seller, inter-company accounts receivable, or any accounts of Seller or any Subsidiary not set forth on Schedule 1.1(c);

(b) any Proprietary Information of Seller or any Affiliate of Seller, other than that being assigned pursuant to the Intellectual Property Agreement;

(c) Copies of the books, records, historical financial information, ledgers and files or other similar information, whether in hard copy or computer format, used primarily in the operation or conduct of the Business, including price lists, customer lists, vendor lists, mailing lists, warranty information, catalogs, sales promotion literature, advertising materials, brochures, records of operation, standard forms of documents, manuals of operations or business procedures, research materials, marketing studies and product testing reports required by any Governmental Authority (the "Business Records"), provided however, that Seller shall maintain the Business Records for at least three years following the Closing Date, and Purchaser shall have the right to request copies of such Business Records at any date prior to the third anniversary of the Closing Date;

(d) any (i) personnel and medical records pertaining to any employee of Seller which Seller determines, in its exercise of reasonable business judgment, are confidential; (ii) other books and records that Seller or any Affiliate of Seller is required by Law to retain or that Seller is prohibited by law from transferring; provided, that Purchaser shall have the right to make copies of any portions of such retained books and records that directly relate to the Business or any of the Purchased Assets; and (iii) any information management system of Seller or any Affiliate of Seller, other than those used or held for use primarily in the operation or conduct of the Business and contained within computer hardware included as a Purchased Asset pursuant to Section 1.1(d);

(e) any claim, right or interest of Seller or any Affiliate of Seller in or to any refund, rebate, abatement or other recovery for Taxes, together with any interest due thereon or penalty rebate arising therefrom, for any period prior to the Closing Date;

(f) any insurance policies or rights of proceeds thereof; and

(g) all other assets, properties, interests and rights of Seller or any Affiliate of Seller other than the Purchased Assets.

1.3 Assumed Liabilities. On the Closing Date, Purchaser shall execute and deliver to Seller one or more Assumption Agreements, one or more Lease Assignments and one or more Intellectual Property Agreements pursuant to which Purchaser shall accept, assume and agree to pay, perform or otherwise discharge, in accordance with the respective terms and subject to the respective conditions thereof, the liabilities and obligations of Seller pursuant to and under the Assumed Liabilities. For purposes of this Agreement, the term "Assumed Liabilities" means only the liabilities and obligations set forth or described in paragraphs (a) through (d) below, whether or not any such obligation has a

value for accounting purposes or is carried or reflected on or specifically referred to in the Financial Statements of the Business:

(a) the liabilities and obligations arising on or after the Closing Date under the Assumed Leases and the transferred Contracts;

(b) the liabilities assumed by Purchaser pursuant to the Assumption Agreements arising after the Closing Date;

(c) with respect to the Business, any warranty liabilities arising from the operation of the Principal Equipment in the ordinary course of business;

(d) the liabilities assumed by Purchaser pursuant to the Intellectual Property Agreement; and

(e) the obligation to make all payments arising from the play, commencing with the Closing Date, of the gaming machines being operated under any of the Assumed Leases and transferred Contracts including all progressive jackpot games; provided, however, that the payment due to Seller at the Closing Date shall be reduced by the incremental amount of progressive jackpot liabilities accrued as of the Closing Date (the "Progressive Jackpot Credit").

1.4 Excluded Liabilities. Purchaser shall not assume or be obligated to pay, perform or otherwise assume or discharge any liabilities or obligations of Seller or of any Affiliate of Seller or any of their respective predecessors, whether direct or indirect, known or unknown, absolute or contingent, other than Assumed Liabilities and shall not assume any Excluded Liabilities. For purposes of this Agreement, the term "Excluded Liabilities" means (a) all liabilities of Seller to any Affiliate of Seller, except for liabilities arising under the Intellectual Property Agreements and other agreements contemplated by this Agreement and (b) all liabilities or obligations other than Assumed Liabilities, including any liability or obligations relating to an Excluded Asset, whether or not any such liability or obligation has a value for accounting purposes or is carried or reflected on or specifically referred to in the Financial Statements of the Business.

For purposes of this Agreement, "Affiliate" means, with respect to any person, any other person controlling, controlled by or under common control with such person, with "control" for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities or voting interests, by contract or otherwise. For purposes of this Agreement, "Associate" means, with respect to any person, any corporation or other business organization of which such person is an officer or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such person has a substantial beneficial interest, or as to which such person serves as a trustee or in a similar capacity and any relative or spouse of such person, or any relative of such spouse, who has the same home as such person.

1.5 Consideration for the Assets.

(a) The aggregate consideration to be paid by Purchaser for the Purchased Assets shall be U.S. Sixty-Two Million Dollars ($62,000,000) (the "Target Purchase Price"), plus or minus the Pre-Closing Adjustment (as defined below), if any.

(b) The Target Purchase Price will not be adjusted and the Target Purchase Price will be the Purchase Price as long as the trailing twelve month EBITDA of the Business is no less than $10,738,998 and no greater than $10,955,948 ("Target EBITDA Range"). The trailing twelve month EBITDA of the Business shall be calculated (i) as of the last day of the month immediately preceding the Closing Date if the Closing Date occurs between the 15th day of a month and the last day of the month and (ii) as of the last day of the second month immediately preceding the month in which the Closing Date occurs if the Closing Date occurs between the 1st day of the month and the 14th day of the month.

(c) In the event that the trailing twelve month EBITDA of the Business is less than the bottom of the Target EBITDA Range or the trailing twelve month EBITDA of the Business is greater than the top of the Target EBITDA Range, then the Target Purchase Price shall be adjusted down or up, respectively, in an amount equal to 5.72 times the amount of such deficiency or excess, as the case may be (the"Pre-Closing Adjustment").

(d) "EBITDA" is defined as net income for such period plus: (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an asset sale, to the extent such losses were deducted in computing such consolidated net income in accordance with Generally Accepted Accounting Principles ("GAAP"); plus (ii) provision for taxes based on income or profits for such period, to the extent that such provision for taxes was included in computing such consolidated net income; plus (iii) consolidated interest expense for such period, whether paid or accrued and whether or not capitalized, to the extent that any such expense was deducted in computing such consolidated net income; plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash expenses for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such consolidated net income; plus (v) non-recurring corporate allocation expense to the extent that any such expense was deducted in computing such consolidated net income; plus (vi) salary, bonus and benefits for the Seller's Chief Operating Officer; minus (vii) non-cash items increasing such consolidated net income, for such period, other than the accrual of revenue in the ordinary course of business in each case, on a consolidated basis and determined in accordance with GAAP. EBITDA shall then be adjusted by dividing EBITDA by the actual number of days in the relevant measurement period and multiplying the quotient by 365. This adjusted EBITDA number shall be the number used for purposes of Section 1.5(b) and (c) hereof.

1.6 Closing.

(a) The closing of the transactions contemplated in this Agreement (the "Closing") shall be held at 10:00 a.m. at the offices of Kummer Kaempfer Bonner & Renshaw at 3800 Howard Hughes Parkway, 7th Floor, Las Vegas, Nevada 89109, or at such other place as Purchaser and Seller shall mutually agree, on the fifth business day after each of the conditions set forth in Article VI of this Agreement shall have been fulfilled or waived in accordance herewith, or at such other time, date or place as the parties hereto may agree. The date on which the Closing occurs is referred to as the "Closing Date."

(b) At the Closing (i) the parties shall exchange the Collateral Agreements and the documents referred to in Article VI and (ii) Purchaser shall pay to Seller the Purchase Price by wire transfer of immediately available funds to an account identified by Seller to Purchaser in writing no later than two business days prior to the Closing.

1.7 Pre-Closing Adjustments.

(a) The "Purchase Price" shall be the Target Purchase Price adjusted by the Pre-Closing Adjustment and any Capital Expenditure Adjustment pursuant to Section 1.8 below.

(b) At least seven (7) days prior to the Closing Date, Seller shall cause to be prepared a statement documenting the calculation of the EBITDA of the Business for the trailing twelve month period (such period to be determined in accordance with Section 1.5 hereof) ("EBITDA Calculation Statement"). Purchaser will be afforded full access to all books and records of the Business and work papers used by Seller in preparing the EBITDA Calculation Statement.

(c) Within three (3) days following the date on which EBITDA Calculation Statement is delivered pursuant to Section 1.7(b), Purchaser shall give notice to Seller as to whether or not Purchaser concurs with the EBITDA Calculation Statement (such notice to contain Purchaser's comments and exceptions to the EBITDA Calculation Statement, if any). If Purchaser gives notice that it does not concur with the EBITDA Calculation Statement and the parties are unable to mutually resolve Purchaser's

exceptions prior to the Closing Date, then the Closing Date shall be extended for up to twenty-one (21) days. During the first four (4) days of such 21-day period Purchaser and Seller shall jointly select and retain an independent firm of certified public accountants of national standing and reputation (the "Independent Firm") for the purpose of resolving all remaining unresolved issues with respect to the EBITDA Calculation Statement. In the event that Seller and Purchaser are unable to agree upon the firm to be selected as the Independent Firm within the first four (4) days of such twenty-one (21) day period, then such selection shall be made by an independent arbitrator agreed upon from a list of three arbitrators supplied, at Purchaser's request, within two days after the expiration of the four (4) day period, to Purchaser and Seller from the American Arbitration Association, and the retention of the Independent Firm shall be made by Seller and Purchaser within two (2) days after such list is supplied.

(d) Within three (3) days following such retention of the Independent Firm, Seller and Purchaser shall present to the Independent Firm the issue or issues that must be resolved with respect to the calculation of the Purchase Price.

(e) Seller and Purchaser shall use commercially reasonable efforts to cause the Independent Firm to render its decision as soon as is reasonably practicable, including, without limitation, prompt compliance with all reasonable requests by the Independent Firm for information, papers, books, records and the like; provided that Seller and Purchaser agree that the purpose of retention of the Independent Firm shall not include the conduct of its own independent audit, but rather shall be limited to resolving the issues presented to it and matters related thereto. All decisions of the Independent Firm with respect to the EBITDA Calculation Statement shall be final and binding upon both Seller and Purchaser.

(f) Payment of all fees, costs, disbursements and other expenses of the Independent Firm which are incurred pursuant to this Section 1.7 shall be split evenly between Seller and Purchaser.

1.8 Purchase Price Adjustment for Capital Expenditures.

(a) The Capital Expenditure Adjustment (the "Capital Expenditure Adjustment") shall be the difference between the net book value of "Property, Plant and Equipment" as reflected on the balance sheet dated June 29, 2002 that is part of the Financial Statements and the net book value of Property, Plant and Equipment (i) as of the last day of the month immediately preceding the Closing Date if the Closing Date occurs between the 15th day of a month and the last day of the month and (ii) as of the last day of the second month immediately preceding the month in which the Closing Date occurs if the Closing Date occurs between the 1st day of the month and the 14th day of the month.

(b) At least seven (7) days prior to the Closing Date, Seller shall cause to be prepared a statement documenting the calculation of the Capital Expenditure Adjustment ("Capital Expenditure Calculation Statement"). Purchaser will be afforded access to books and records of the Business and work papers used by Seller in preparing the Capital Expenditure Calculation Statement. The parties to this Agreement acknowledge that the Property, Plant and Equipment is not currently being depreciated as it has been determined to sell the business but that for purposes of the calculations to be made under this Section 1.8, any Property, Plant and Equipment acquired after the date of this Agreement shall be depreciated (consistent with the past practices of Seller) for the time period covered by and for purposes of preparing the Capital Expenditure Calculation Statement.

(c) Within three (3) days following the date on which the Capital Expenditure Calculation Statement is delivered pursuant to Section 1.8(b), Purchaser shall give notice to Seller as to whether or not Purchaser concurs with the Capital Expenditure Calculation Statement (such notice to contain Purchaser's comments and exceptions to the Capital Expenditure Calculation Statement, if any). If Purchaser gives notice that it does not concur with the Capital Expenditure Calculation Statement and the parties are unable to mutually resolve Purchaser's exceptions prior to the Closing Date, then the

procedures in Section 1.7(c) through Section 1.7(f) shall be followed in resolving the determination of the Capital Expenditure Adjustment.

1.9 No Licenses. Unless expressly set forth herein, no title, right or license of any kind is granted to Purchaser pursuant to this Agreement with respect to any Proprietary Information of Seller or any Affiliate of Seller, either directly or indirectly, by implication, by estoppel or otherwise.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller has not, as of the date hereof, delivered disclosure schedules (the "Seller Disclosure Schedule") to Purchaser. Seller agrees that it is a condition to Buyer's obligation to close, that Seller shall deliver Seller Disclosures Schedule to Purchaser prior to the Closing Date, which shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article II and the disclosure in any paragraph shall qualify other paragraphs in this Article II only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs. Seller represents and warrants to Purchaser that:

2.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Seller is duly qualified, licensed or admitted to do business and is in good standing in those jurisdictions specified on the Seller Disclosure Schedule, which are the only jurisdictions in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except where a failure to be so qualified, licensed or admitted would not have a Material Adverse Effect.

For purposes of this Agreement, a "Material Adverse Effect" means any effect that has resulted in a Material Adverse Change (as defined in Section 4.4).

2.2 Authority; Enforceability. Seller has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder and to consummate the transactions contemplated hereby, including, without limitation, to sell and transfer the Purchased Assets. The execution and delivery of this Agreement, the Collateral Documents and any agreements to be executed and delivered by Seller in connection therewith, and the consummation of the transactions provided for hereby have been duly authorized by the Board of Directors of Seller and no other corporate proceeding on the part of Seller is necessary to authorize the execution or delivery of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Seller and, assuming due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or law).

2.3 No Breach. Neither the execution and delivery of this Agreement nor the performance by Seller of its obligations hereunder nor the consummation of the transactions provided for hereby does or will except as set forth in Section 2.3 of the Seller Disclosure Schedule:

(a) conflict with or violate any provision of the articles of incorporation or bylaws of Seller;

(b) to the knowledge of Seller, violate, conflict with or result in the breach or termination of, or constitute (with or without notice or lapse of time, or both) a default or event of default under the terms of, any Contracts or Assumed Leases or any permits, authorizations, approvals, registrations or licenses granted by or obtained from any governmental, administrative or regulatory authority ("Permits") to which Seller is a party or by which its properties or assets are bound;

(c) to the knowledge of Seller, constitute a violation by Seller of any laws, rules or regulations ("Laws") of any governmental, administrative or regulatory authority ("Governmental Authority") or any judgments, orders, rulings or awards ("Judgments") of any court, arbitrator or other judicial authority or any Governmental Authority, except in the case of (b) or (c) for any such matters that individually or in the aggregate would not have a Material Adverse Effect;

(d) result in the creation of any lien upon any of the Purchased Assets.

2.4 Brokers. No Person has acted directly or indirectly as a broker, finder, consultant, intermediary or financial advisor for Seller in connection with the transactions contemplated hereby and no person is entitled to any fee or commission or like payment from Seller in respect thereof based in any way on any agreement, arrangement or understanding made by or on behalf of Seller. For purposes of this Agreement, "Person" means any natural person, corporation, limited liability company, general partnership, limited partnership, limited liability partnership, proprietorship, other business organization, trust, union, association or Governmental Authority.

2.5 Financial Statement; Liabilities.

(a) Seller shall, in accordance with Section 4.3 hereof, deliver to Purchaser copies of the audited financial statements of the Business for the years ended June 30, 2002, 2001 and 2000, together with the related schedules and notes (the "Financial Statements"). The Financial Statements shall fairly present in conformity with GAAP, applied on a consistent basis from year to year, the financial position of the Business at the dates thereof and the results of its operations, changes in financial condition and cash flows for the periods then ended.

(b) As of June 30, 2002, the Business did not have any indebtedness, liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise, and whether due or to become due) that would have been required to be reflected in, reserved against or otherwise described in the Financial Statements in accordance with GAAP (collectively, "Liabilities" and individually, a "Liability"), that were not reflected or reserved against in the Financial Statements for the year ended June 30, 2002 or disclosed or provided for in the notes thereto. Except as set forth in Section 2.5(b) of the Seller Disclosure Schedule, since June 30, 2002, the Business has not incurred any Liability except Liabilities that are not material to the financial condition of the Business and for Liabilities incurred in the ordinary course of business consistent with past practices.

(c) Since June 30, 2002, Seller has operated the Business only in the ordinary and usual course in substantially the same manner as previously conducted, has not taken any of the actions described in subparagraphs (e) through (k) of Section 4.1 of this Agreement except as set forth in Section 2.5(c) of the Seller Disclosure Schedule and has not undergone or suffered any change in its financial condition or results of operations that are materially adverse to the Business.

(d) All accounts receivable of the Business have arisen from bona fide transactions in the ordinary course of business consistent with past practice.

2.6 Absence of Certain Developments. Except as expressly contemplated by this Agreement and as set forth in Section 2.6 of the Seller Disclosure Schedule, since June 30, 2002:

(a) there has not been any Material Adverse Change in the Business;

(b) there has not been any damage, destruction or loss in connection with the operation of the Business, not covered by insurance, with respect to the property and assets of the Business having a replacement cost of more than $50,000 for any single loss or $150,000 for all such losses;

(d) the Business has not instituted or settled any material Proceeding;

(e) there has not been any sale or transfer of any material properties or assets of the Business, other than in the ordinary course of business and consistent with past practice; or

(f) the Business has not entered into any transaction or Contract or conducted its business other than in the ordinary course consistent with past practice.

2.7 Consents. Except as set forth in Section 2.7 of the Seller Disclosure Schedule, no consent, waiver, approval, authorization, registration, license or declaration of or by, or filing with, any Governmental Authority or any third party, which individually or in the aggregate would have a Material Adverse Effect or would delay the consummation of the transactions contemplated by this Agreement (a "Consent"), is required to be made or obtained by Seller in connection with the execution and delivery of this Agreement or the consummation of any of the transactions provided for hereby, except for (a) the filing with the Federal Trade Commission and the Antitrust Division of the Department of Justice of a premerger notification and report form by Seller under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and (b) a determination that the transactions contemplated by this Agreement are acceptable to the Nevada Gaming Commission.

2.8 Actions and Proceedings. Except as set forth in Section 2.8 of the Seller Disclosure Schedule, there is no action, suit, claim or legal, administrative, arbitration or other alternative dispute resolution proceeding or investigation (each, a "Proceeding" and collectively, "Proceedings") pending or, to the best knowledge of Seller, threatened against the Business. The Business is not subject to any judgment, order or decree of any court or governmental agency and is not engaged in any legal action to recover monies due it or for damages sustained by it.

2.9 Taxes and Tax Returns. Except for any matter that would not reasonably be expected to have a Material Adverse Effect individually or in the aggregate: (i) Seller has filed on a timely basis all returns and reports in respect of Taxes ("Tax Returns") for which Seller may be liable taking into account all validly obtained extensions to file such Tax Returns and all such Tax Returns are true, complete and correct in all material respects; (ii) all Taxes required to be paid by Seller that were due and payable prior to the date hereof have been paid, and the most recent Financial Statements reflect adequate reserves in accordance with GAAP for all Taxes accrued but not yet payable with respect to the Business for all taxable periods and portions thereof through the date of such Financial Statements; (iii) there are no pending or to the knowledge of Seller threatened audits or investigations relating to Taxes for which Seller may become liable; and (iv) no deficiencies for any Taxes have been assessed against Seller. Except for statutory liens for taxes not yet due and payable, there are no liens for Taxes upon any of the Purchased Assets. "Tax" or "Taxes" means all federal, state, local or foreign income, gross receipts, transfer, windfall profits, severance, property, production, sales, use, license, excise, franchise, employment, withholding, alternative minimum tax or similar taxes of any kind imposed on the income, properties or operations of the Business, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

2.10 Title to Property; Principal Equipment; Sufficiency of Assets.

(a) Section 2.10(a) of the Seller Disclosure Schedule lists all personal property used or held for use primarily in the Business which is included as "Property and Equipment" in the June 30, 2002 Financial Statements and lists all material Personal Property leased by Seller in connection with the operation of the Business at June 30, 2002.

(b) Seller has good and valid title to, or a valid and binding leasehold interest or license in, all real and personal tangible Purchased Assets free and clear of any Encumbrance other than Permitted Encumbrances, except as set forth in Section 2.10(b) of the Seller Disclosure Schedule.

(c) Except as set forth in Section 2.10(c) of the Seller Disclosure Schedule, each material item of Principal Equipment is in good operating condition, in light of its age, for the purposes for which it is currently being used, and has been serviced and maintained in the ordinary course of business, but is otherwise being transferred on a "where is" and, as to condition, "as is" basis.

(d) Except for the items set forth in Sections 1.2(a), 1.2(b), 1.2(c), 1.2(d), 1.2(e), 1.2(f), and 1.2(g) and the assets and services listed on Schedule 2.10(d), the Purchased Assets and the Business Employees and the rights to be acquired under this Agreement and the Collateral Agreements include all material assets, personnel and rights that are used or held for use by Seller primarily in the operation or conduct of the Business, and are sufficient in all material respects for the conduct of the Business immediately following the Closing in substantially the same manner as currently conducted.

2.11 Intellectual Property. Except as would not reasonably be expected to have a Material Adverse Effect, Seller owns or has the right to use all of the Proprietary Information being licensed pursuant to the Intellectual Property Agreement. Seller has a valid right to grant the license pursuant to the Intellectual Property Agreement. There have been no written claims made and the Seller has not received any written notice that any of the foregoing is invalid or conflicts with the asserted rights of others and, to the Seller's knowledge, Seller is not infringing upon or otherwise acting adversely to the right or claimed right of any person or entity with respect to the Intellectual Property Agreement. None of the Proprietary Information being licensed pursuant to the Intellectual Property Agreement and that is material to the operation of the Business has been adjudged invalid or unenforceable in whole or part. To knowledge of Seller, the Intellectual Property Agreement is valid and enforceable.

2.12 Compliance with Legal Requirements. Except for instances of non-compliance that would not reasonably be expected to have a Material Adverse Effect, Seller is currently conducting the Business in compliance with all applicable Laws, Judgments and Permits.

2.13 Employment Matters.

(a) Section 2.12 of the Seller Disclosure Schedule sets forth a list of all current employees of Seller who are employed in the Business and render services primarily in connection with the Business (the "Business Employees").

(b) The Seller Disclosure Schedule sets forth all current consulting, employment and severance agreements of Seller with any Business Employee, other than agreements terminable by Seller at will without material expense or liability to Seller (except for payments required by applicable Laws or in accordance with customary severance practices of Seller).

(c) The Seller Disclosure Schedule sets forth a list of each material "employee welfare benefit plan" (as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or material "employee pension benefit plan" (as defined in Section 3(2) of ERISA) maintained, sponsored, contributed to, or required to be contributed to, by Seller or by any entity or trade or business, whether or not incorporated, which, with the Seller, constitutes a group described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code") (an "ERISA Affiliate") (collectively, the "Benefit Plans") and under which any Business Employee becomes entitled to benefits (the "Seller Benefit Plans"). Each of the Seller Benefit Plans is in substantial compliance with Laws, including ERISA and the Code, as applicable, other than any failures to comply with Law that would not be expected to result in a Material Adverse Effect.

(d) Seller has made available to Purchaser copies of the agreements listed on Schedule 2.12(b) and copies of the plan documents evidencing the Seller Benefit Plans listed on Schedule 2.12(c) of the Seller Disclosure Schedule.

(e) No Seller Benefit Plan is subject to Title IV of ERISA.

(f) No Benefit Plan which covers any Business Employees has an "accumulated funding deficiency" within the meaning of Section 412 of the Code or Section 302 of ERISA. To Seller's knowledge, no transaction or event has occurred with respect to any Seller Benefit Plan that could reasonably subject Seller to a tax under Chapter 43 of the Code, or to a penalty under Part 5 of Subtitle B of Title I of ERISA, that would have a Material Adverse Effect.

(g) All contributions required to be made by Seller and its ERISA Affiliates to any Seller Benefit Plan before the Closing Date have been or will be timely made before the Closing Date. Neither Seller nor any of its ERISA Affiliates has failed to make any contribution or payment to any Seller Benefit Plan that has resulted in the imposition of a lien or the posting of a bond or other security under ERISA or the Code.

(h) No Seller Benefit Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and Seller has not incurred, directly or indirectly, any liability to any multiemployer plan that remains unsatisfied.

2.14 Environmental Matters. Except to the extent that any of the following would not reasonably be expected to have a Material Adverse Effect, to the knowledge of Seller: (a) Seller complies with all Laws, orders, Permits, conditions, requirements and agreements relating to (i) the protection of the environment, (ii) human health or safety or (iii) the storage, treatment, disposal, transportation or other handling of hazardous or toxic substances, petroleum and its fractions, byproducts and derivatives, solid and hazardous wastes, asbestos, polychlorinated biphenyls, pollutants or contaminants (collectively, "Hazardous Materials") or (iv) protection of rivers and other water bodies (collectively, "Environmental Laws," including without limitation, as amended, the federal Oil Pollution Act of 1990, Clean Water Act, Rivers and Harbors Acts, Clean Air Act, Comprehensive Environmental Response, Compensation and Liability Act, Solid Waste Disposal Act, Resource Conservation and Recovery Act and related or analogous state and local laws or other requirements and common law) and is in compliance with all licenses, permits and other authorizations required under any Environmental Law; (b) there is no claim pending or threatened against Seller, alleging liability or noncompliance under any Environmental Law; and (c) there have not been any releases on any property or facility now owned, leased or otherwise operated by Seller of any Hazardous Materials in such form or quantity as to make Seller liable under any Environmental Law.

2.15 Permits. Section 2.15 of the Seller Disclosure Schedule contains a true and complete list of all Permits used in and material to the operations of the Business, setting forth the owner, the function and the expiration and renewal date of each. Except as disclosed in Section 2.15 of the Seller Disclosure Schedule:

(i) Seller owns or validly holds all Permits that are material to the Business as it is currently conducted;

(ii) each Permit listed on the Seller Disclosure Schedule is valid, binding and in full force and effect; and

(iii) Seller is not in default and has not received any notice that it is in default (or with the lapse of time would be in default), and, to Seller's knowledge, no event has occurred that with notice (or with lapse of time) would cause Seller to be in default, under any such Permit.

2.16 Contracts. (a) As of the date of this Agreement, except as set forth on the Seller Disclosure Schedule, Seller is not, with respect to the Business, a party to or bound by:

(i) any contract or option for the purchase or sale of real property;

(ii) any contract for the purchase of raw materials, supplies, services or equipment that Seller reasonably anticipates will involve the annual payment of more than $25,000 after the date hereof;

(iii) any contract for the sale of products or services of its business that Seller reasonably anticipates will involve the annual payment of more than $25,000;

(iv) any consignment, distributor, dealer, manufacturer's representative, sales agency, advertising representative or advertising or public relations contract which Seller reasonably anticipates will involve the annual payment by it of more than $25,000 after the date hereof;

(v) any agreement which provides for the incurrence by Seller of debt for borrowed money in excess of $25,000 including capitalized leases;

(vi) any agreement containing confidentiality obligations, or competitive restraints on the ability of Seller to purchase supplies, sell any products or services or otherwise conduct its business; or

(vii) any Tax sharing arrangement with any entity or person pursuant to which Purchaser will have to make any payments based on the transactions contemplated by this Agreement ((i)-(vii), collectively, the "Seller Agreements").

(b) Each of the Seller Agreements constitutes a valid and binding obligation of Seller, enforceable in accordance with its terms (subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors' rights and to general equity principles). Seller is not in breach or default under any of the Seller Agreements where the aggregate impact of all such breaches and defaults would have a Material Adverse Effect on the Business. No condition exists or has occurred which, with the giving of notice or lapse of time, or both, would constitute a default or accelerate the maturity of, or otherwise modify, any of the Seller Agreements, and no default by any other party to any of the Seller Agreements is known by Seller where the aggregate impact of all of such defaults or modifications would have a Material Adverse Effect on the Business. All of the Seller Agreements are in full force and effect. Complete and correct copies of each of the Seller Agreements have been made available to Purchaser by Seller or will be made available prior to delivery of the Seller Disclosure Schedule.

2.17 Smith Contract. Seller has delivered to Purchaser a true and complete copy of the Smith Contract, together with all amendments and supplements thereto. The Smith Contract is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of Seller and, to the knowledge of Seller, of each other party thereto. Seller is not in violation or breach of or default under the Smith Contract. Seller has the right to assign the Smith Contract to MGI, subject to required regulatory approvals, and obtaining the consent of Smith's, which consent cannot be unreasonably withheld.

2.18 Location Contracts. Seller shall deliver to Purchaser prior to delivery of the Seller Disclosure Schedule a true and complete list of the Location Contracts (true and complete copies or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto, have been delivered or made available to Purchaser prior to the execution of this Agreement or will be made available prior to delivery of the Seller Disclosure Schedule), to which Seller is a party. Each Location Contract required to be disclosed in Section 2.18 of the Seller Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of Seller and, to the knowledge of Seller, of each other party thereto. Seller is not in violation or breach of or default under any Location Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Location Contract) which Location Contract during the twelve (12) month period ended on June 30, 2002, accounted for Fifty Thousand Dollars ($50,000) or more: (i) in total win (if such location is operated under a space lease agreement) or (ii) net win (if such location is operated under a participation agreement), the effect of which would reasonably be expected to result in the termination of Seller's rights under such Location Contract. Schedule 2.18 sets forth the amount of any future payments exceeding $25,000 required of Seller under the terms of any Location Contract.

2.19 No Other Representations or Warranties. Except for the representations and warranties of Seller expressly contained in this Agreement, neither Seller nor any other person acting for Seller makes any other representation or warranty, express or implied, and Seller hereby disclaims any such representation or warranty, with respect to the execution, delivery or performance by Seller of this Agreement notwithstanding the delivery or disclosure to Purchaser or any of its affiliates or any other

person of any documentation or other information by Seller or any of its representatives or any other person with respect to any of such matters. Without limiting the generality of the foregoing, Seller disclaims any representations and warranties that could be deemed to have been made in any of the information set forth any confidential descriptive memorandum furnished to Purchaser.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER

The disclosure schedule delivered by Purchaser to Seller on or before the date of this Agreement (the "Purchaser Disclosure Schedule"), shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III and the disclosure in any paragraph shall qualify other paragraphs in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs. Purchaser represents and warrants to Seller that:

3.1 Organization; Authority and Enforceability. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Purchaser has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions provided for hereby have been duly authorized by the Board of Directors of Purchaser and no other corporate proceeding on the part of Purchaser is necessary to authorize the execution or delivery of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and, assuming due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser, enforceable against it in accordance with its terms.

3.2 No Breach. Neither the execution and delivery of this Agreement nor the performance by Purchaser of its obligations hereunder nor the consummation of the transactions provided for hereby does or will:

(a) conflict with or violate any provision of the certificate of incorporation, bylaws or any other governing document of Purchaser;

(b) to the knowledge of Purchaser, violate, conflict with or result in the breach or termination of, or constitute a default, event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default), under the terms of, any contracts, agreements, commitments, undertakings, leases, licenses, mortgages, bonds, notes or other instruments or Permits to which Purchaser is a party or by which it or any of its properties or assets are bound; or

except in the case of (b) or (c) for any such matters that would not, either individually or in the aggregate, have a material adverse effect on the ability of Purchaser to perform its obligations under this Agreement.

3.3 Consents. No material Consent is required to be made or obtained by Purchaser in connection with the execution, delivery or enforceability of this Agreement or the consummation of any of the transactions provided for hereby, except for: (a) the filing with the Federal Trade Commission and the Antitrust Division of the Department of Justice of a premerger notification and report form by Purchaser under the HSR Act and (b) a determination that the transactions contemplated by this Agreement are acceptable to the Nevada Gaming Commission.

3.4 Brokers. No person has acted directly or indirectly as a broker, finder, consultant, intermediary or financial advisor for Purchaser in connection with the transactions contemplated hereby

and no person is entitled to any fee or commission or like payment from Purchaser in respect thereof based in any way on any agreement, arrangement or understanding made by or on behalf of Purchaser.

3.5 Actions and Proceedings. There is no action or Proceeding pending or, to the knowledge of Purchaser, threatened against Purchaser or any of its affiliates that questions the validity of this Agreement or any action taken or to be taken by Purchaser in connection with, or which seeks to enjoin or obtain monetary damages in respect of, the consummation of the transactions contemplated hereby, or which would reasonably be expected to impair materially Purchaser's ability to effect the Closing.

3.6 Financing. Purchaser has discussed with its financial advisor the funding required by Purchaser to consummate the transactions contemplated by this Agreement and has been advised and determined that adequate funding to consummate the transactions contemplated by this Agreement should be available to Purchaser.

ARTICLE IV
COVENANTS OF SELLER

4.1 Conduct of Business. During the period from the date of this Agreement to the Closing, except as specifically contemplated by this Agreement, including the Seller Disclosure Schedule, or as otherwise consented to in writing by Purchaser, Seller will with respect to the Business:

(a) carry on the Business only in the ordinary course in substantially the same manner as heretofore conducted;

(b) use commercially reasonable efforts to (i) preserve intact the present business organization and reputation of the Business, (ii) keep available (subject to dismissals, voluntary departures and retirements in the ordinary course of business consistent with past practice) the services of the present officers, employees and consultants of the Business, (iii) maintain the assets and properties of the Business in good working order and condition, ordinary wear and tear excepted, (iv) maintain the goodwill of customers, suppliers, lenders and other persons to whom Seller sells goods or provides services or with whom Seller otherwise has significant business relationships and (v) continue all current sales, marketing and promotional activities relating to the operations of the Business;

(c) except to the extent required by applicable Law, cause the Business Records to be maintained in the usual, regular and ordinary manner;

(d) (i) use commercially reasonable efforts to maintain in full force and effect until the Closing substantially the same levels of coverage of insurance on the Business' properties and assets as are currently in effect, and (ii) to the extent requested by Purchaser prior to the Closing Date, use commercially reasonable efforts to cause such insurance coverage held by any person (other than Seller) for the benefit of Seller to continue to be provided at the expense of Seller for up to 180 calendar days after the Closing on substantially the same terms and conditions as provided on the date of this Agreement;

(e) not acquire any single asset having a value in excess of $25,000 or more that will be a Purchased Asset;

(f) except to the extent required by applicable Law, not permit any material change in (i) any pricing, investment, accounting, financial reporting, inventory, credit, allowance or tax practice or policy of the Business, (ii) any method of calculating any bad debt, contingency or other reserve of the Business for accounting, financial reporting or tax purposes, (ii) its accounting procedures or practices unless mandated by GAAP or (iv) the fiscal year of the Business;

(g) not violate, breach or default under in any material respect, or take or fail to take any action that (with or without notice or lapse of time or both) would constitute a material violation or breach of, or default under, any term or provision of any Permit or Consent held or used by the Business to which Seller is a party or by which any of the Purchased Assets are bound;

(h) not fail to make capital expenditures in the ordinary course of business;

(i) not dispose of, or incur any lien (other than a Permitted Encumbrance) on, any assets and properties of the Business, other than in the ordinary course of business consistent with past practice;

(j) not write off or write down any of its assets and properties of the Business, other than in the ordinary course of business consistent with past practice; or

(k) not agree to take any of the actions set forth in the foregoing subparagraphs (e) through (j).

4.2 Inspections. During the period from the date of this Agreement to the Closing, Seller shall permit Purchaser and its representatives full access to the books, records, facilities, properties, assets and operations of the Business; provided that such access is reasonable and shall not interfere with the normal business and operations of the Business. Seller shall arrange for Purchaser and its representatives to discuss with appropriate officers, employees and representatives of Seller such matters related to the transactions provided for herein as Purchaser may reasonably request.

4.3 Financial Statements. Following the signing of this Agreement, Seller shall use commercially reasonable efforts to promptly prepare and deliver to Purchaser copies of the Financial Statements. Seller will deliver to Purchaser copies of the unaudited comparative financial statements of the Business for each calendar quarter ending prior to the Closing Date commencing with the calendar quarter ending September 30, 2002, (the "Quarterly Financial Statements"). The Quarterly Financial Statements will be delivered in a format and time frame consistent with financial reports to be filed by Purchaser with the Securities and Exchange Commission. Seller also agrees to deliver to Purchaser copies of unaudited financial statements of the Business for each calendar month after the date hereof and prior to the Closing Date which month or months are not otherwise included in the Quarterly Financial Statements. Seller shall, if required, authorize Deloitte & Touche to consent to the inclusion of the Financial Statements in filings made by HGI with the Securities and Exchange Commission or in HGI's Rule144A offering memorandum.

4.4 Material Adverse Change. From the date hereof to the Closing Date, Seller shall use its reasonable efforts to keep Purchaser informed from time to time concerning any Material Adverse Changes that may occur affecting the Business. For purposes of this Agreement, a "Material Adverse Change" means any material adverse change in the Business, properties, results of operations, condition (financial or otherwise) of the Business, taken as a whole. For a period of up to sixty (60) calendar days prior to the Closing Date, a senior executive of Seller shall meet with Purchaser on a biweekly basis to provide Purchaser with an overview and assessment of the Business. Purchaser acknowledges, agrees and understands that such meetings are to provide information about the Business and that Purchaser shall not be entitled to supervise, instruct or manage the Business.

4.5 Non-Competition.

(a) For a period of five (5) years from the Closing Date, Seller shall not, and shall cause its officers, directors, employees, subsidiaries, Affiliates, successors and assigns not to, directly or indirectly, conduct in Nevada a business that offers to or does install and operate gaming machines in grocery stores, drug stores, merchandise stores, convenience stores, restaurants, taverns or similar business enterprises (except to the extent that such businesses are located in casinos or casino complexes), whether on a space lease or participation basis, similar to the Business as conducted on the

Closing Date, including, without limitation, as a stockholder, consultant, partner, owner, lender (other than in the ordinary course of business), principal, member, officer, employee or otherwise, of any entity that is conducting such business in the State of Nevada.

(b) The restrictions set forth in Section 4.5(a) shall not apply to:

(i) the design, manufacture, sale or leasing of gaming products by Seller or any of its existing or future Affiliates;

(ii) the design, manufacture, sale, leasing or operation of linked or stand-alone participation gaming machines in which Seller or any of its existing or future Affiliates participates in the revenue from gaming machines operated by customers, including customers that own and operate slot routes;

(iii) the installation and operation of gaming machines at the Reno/Tahoe International Airport located in Reno, Nevada whether on a space basis or a participation basis under Seller's existing agreement and under any new agreement that may be obtained by Seller or any of its affiliates in the future;

(iv) the making of loans or advances of any nature by Seller or any of its existing or future Affiliates to purchasers and operators, including proposed operators, of gaming machines and the acquisition by Seller or any of its existing or future Affiliates of an interest in a slot route operator through the enforcement or other collection of such loans provided that Seller shall thereafter use commercially reasonable efforts to divest itself of the acquired slot route operations;

(v) restrict Seller or any of its existing or future Affiliates from acquiring a Person or a business whose operations or that of any of its Affiliates would otherwise violate the restrictions set forth in Section 4.5(a), provided that the offending operations represented less than 25% of the acquired Person's or business revenues during the 12 complete months preceding the acquisition and Seller shall thereafter use commercially reasonable efforts to divest itself of the acquired slot route operations;

(vi) any surviving entity in a merger or consolidation involving IGT where the shareholders of IGT immediately prior to the merger or consolidation own less than 50% of the surviving entity immediately following such transaction; and

(vii) the ownership by IGT or any of its Affiliates of (a) an ownership interest in Purchasers or (b) not more than 5% of the outstanding equity securities of any entity that would otherwise violate the provisions of Section 4.5(a), if such stock is listed on a national securities exchange or regularly traded on the Nasdaq Stock Market or in the Over-the-Counter market by a member of a national securities exchange.

(c) In addition, Seller agrees that neither Seller nor any of its Affiliates will bid on any proposed contract to replace the Smith Contract prior to January 1, 2011.

(d) Seller and Purchaser agree that the period of time and the geographic areas applicable to the covenants contained in this Section 4.5 are reasonable in light of (i) the business conducted by Seller prior to the Closing Date, and (ii) Seller's knowledge of the Business, including but not limited to the manner and processes of the conduct of the Business.

(e) If any such period or such area should be adjudged in excess of that permitted by Law in any judicial proceeding, then the period of time shall be reduced by such number of years or such areas shall be reduced by elimination of such portion of such area, or both, as deemed in excess of that permitted by Law so that this Section 4.5 may be enforced in such area and during such period of time as are adjudged permitted by Law.

ARTICLE V
ADDITIONAL AGREEMENTS

5.1 Further Actions. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under all applicable Laws to consummate and make effective the transactions contemplated by this Agreement. Subject to the terms and conditions herein provided. Seller and Purchaser will, and will cause each of their respective affiliates to, (a) use their commercially reasonable efforts to obtain all Consents or Permits necessary or advisable to consummate and make effective the transactions contemplated by this Agreement, including without limitation the Consents required from the Nevada Gaming Commission and the expiration of the waiting period under the HSR Act provided, however, that this undertaking shall in no event require Seller or any of its affiliates be required to dispose of any assets or to limit the operation of its business or that of any of its affiliates, and (b) use their commercially reasonable efforts to cause each of the conditions precedent to their respective obligations provided for in Article VI to be satisfied provided, however, that this undertaking shall in no event require Seller or any of its affiliates be required to make any payment to or forfeit any deposit previously made under the Smith Contract or to agree to any modifications to the Smith Contract. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers or directors of Seller or Purchaser, as the case may be, shall take all such necessary action.

5.2 Certain Notifications. At all times prior to the Closing Date, each party shall promptly notify the other in writing of the occurrence of any event which will or may result in the failure of any of the conditions contained in Article VI to be satisfied.

5.3 Employees.

(a) Purchaser shall offer employment to and will continue such employment of a sufficient number of Business Employees such that Seller will not have been obligated to provide the notices required by the federal Worker Adjustment and Retraining Notification Act ("WARN Act"). The Business Employees accepting employment by Purchaser shall be referred to hereafter as the "Continuing Employees." Purchaser's offers of employment shall be at such wage, salary and benefit levels as Purchaser may determine in its own absolute discretion.

(b) Seller shall remain responsible for any and all obligations which may arise as a result of the election of Purchaser not to employ certain Business Employees consistent with the provisions of Section 5.3(a) and Seller shall defend, indemnify and hold Purchaser harmless against any and all such obligations. Purchaser shall assume responsibility for any and all obligations which may arise as a result of the termination of any Continuing Employees from and after the Closing Date and Purchaser shall defend, indemnify and hold Seller harmless against any and all such obligations.

(c) Purchaser shall not be responsible for any accrued benefit, vacation pay, incentive compensation, wages or salaries of any Continuing Employees arising prior to the Closing Date. To the extent that Purchaser employs Continuing Employees, Purchaser shall only be responsible for the payment of the salaries, wages, incentive compensation or benefits of such Continuing Employees accruing on or after the Closing Date.

5.4 Tax Matters.

(a) Seller and Purchaser acknowledge and agree that (i) Seller will be responsible for and will perform all withholding, payment and reporting duties with respect to Taxes attributable to any wages and other compensation paid by Seller to any of Seller's employees in connection with the operation or conduct of the Business prior to or on the Closing Date and (ii) Purchaser will be responsible for and will perform all withholding, payment and reporting duties with respect to Taxes attributable to any wages and other compensation paid by Purchaser to any Continuing Employee.

(b) Seller and Purchaser acknowledge and agree that Purchaser shall be responsible for all sales and transfer taxes incurred as a result of the transactions contemplated by this Agreement.

(i) Seller and Purchaser recognize their mutual obligations pursuant to Section 1060 of the Code to file timely IRS Form 8594 (the "Asset Acquisition Statement") with each of their respective federal income Tax Returns. Accordingly, Seller and Purchaser shall, within the later of (A) 60 days after the Closing and (B) 14 days after the Purchase Price is finally determined under Section 1.7, each deliver to the other party a proposed statement, allocating the Purchase Price (plus Assumed Liabilities and any other consideration, to the extent required to be taken into account under Section 1060 of the Code) among the Purchased Assets and the covenants of Seller (including those set forth in the Collateral Agreements) and the statutory jurisdictions in which these assets reside.

(ii) Following the delivery of the proposed statements, the parties will use reasonable commercial efforts to agree on an allocation and an Asset Acquisition Statement. If, within 15 days after delivery of the proposed statements, Seller and Purchaser are unable, in good faith, to reach such an agreement, Seller and Purchaser will each use their respective proposed allocation statements. If, within 15 days after delivery of the proposed statements, Seller and Purchaser shall have agreed on an allocation and an Asset Acquisition Statement, then Seller and Purchaser shall file the Asset Acquisition Statement in the form so agreed and will act in accordance with the Asset Acquisition Statement in the preparation, filing and audit of any Tax Return.

(iii) If an adjustment is made with respect to the Purchase Price pursuant to Section 1.7, and such adjustment has not been taken into account previously, then the Asset Acquisition 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.

5.5 Press Releases; Public Announcements. Purchaser and Seller will consult with each other as to the form, substance and timing of the initial public disclosure of matters related to this Agreement, or any of the transactions contemplated hereby, and no public disclosure will be made by one without the consent of the other, which consent will not be unreasonably withheld or delayed; provided that each of Purchaser and Seller may make such disclosures as are necessary to comply with any requirement of law after making good faith efforts under the circumstances to consult in advance with the other.

5.6 No Solicitation. Until the earlier to occur of the Closing Date and the termination of this Agreement in accordance with Section 7.1, Seller will not, and will not cause or permit its directors, officers, employees, representatives or agents (collectively, the "Representatives") to, directly or indirectly, (i) discuss, negotiate, undertake, authorize, recommend, propose or enter into, either as the proposed surviving, merged, acquiring or acquired corporation, any transaction involving a merger, consolidation, business combination, purchase or disposition of all or substantially all of the assets of the Business other than (i) the transactions contemplated by this Agreement or (ii) the sale by Seller of the capital stock of one or more of its subsidiaries not involved in the Business (an "Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate discussions, negotiations or submissions of proposals or offers in respect of an Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person, any information concerning the Business or assets of the Business in connection with an Acquisition Transaction, or (iv) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. Seller will inform Purchaser in writing immediately following the receipt by Seller or any Representative of any proposal or inquiry in respect of any Acquisition Transaction.

5.7 Financing. Purchaser will use commercially reasonable efforts to obtain all financing necessary to consummate, on or before January 31, 2003, the transactions contemplated in this Agreement.

5.8 Smiths Consent. Purchaser shall, within five business days of the receipt from Seller of the Smiths Consent advise Seller in writing whether such consent is not satisfactory to it and unless it so advises Seller, Purchaser shall be deemed to have approved of the Smiths Consent. If Purchaser advises Seller that the Smith Consent is not satisfactory, then either Seller of Purchaser may thereafter terminate this Agreement.

ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING

6.1 Conditions Precedent to Obligations of Purchaser. The obligations of Purchaser to purchase the Purchased Assets at the Closing are subject to the satisfaction at or prior to the Closing of each of the following conditions (unless satisfaction of any such condition is expressly waived by Purchaser in writing):

(a) The representations and warranties of Seller contained in Article II shall be accurate in all material respects as of the date hereof and as of the Closing Date as though restated on and as of such date (except in the case of any representation or warranty that by its terms is made as of a date specified therein, which shall be accurate in all material respects as of such date);

(b) Seller shall have performed and complied with, in all material respects, all agreements, covenants and obligations required by this Agreement to be performed or complied with by it prior to or at the Closing;

(d) No Proceeding by any Governmental Authority shall be pending which seeks to prohibit or declare illegal the transactions contemplated by this Agreement and no Law or Judgment shall be in effect having any such result;

(e) The consent of the Nevada Gaming Commission and any Permits or Consents for officers and directors of Purchaser from the Nevada Gaming Commission, shall have been obtained and all waiting periods specified under the HSR Act, shall have expired or been terminated;

(f) Seller shall have executed and delivered the Collateral Agreements;

(g) Seller shall have obtained (and delivered a copy to Purchaser) the written consent of Smith, in a form and on terms, including any changes made to the Smith Contract after the date hereof, satisfactory to Purchaser, to the assignment of the Smith Contract to Purchaser;

(h) Seller shall have entered into the Intellectual Property Agreement with Purchaser in substantially the form of Exhibit D hereto;

(i) Seller shall have received a duly executed and delivered guaranty by IGT of the indemnification obligations of Seller hereunder substantially in the form of Exhibit E hereto;

(j) Purchaser shall have received from Seller a certificate, signed by an appropriate officer of Seller, as to the satisfaction of the conditions set forth in paragraphs (a) and (b) of this Section 6.1; and

(k) Purchaser shall have received the Seller Disclosure Schedule and shall be satisfied with the content and information disclosed therein.

6.2 Conditions Precedent to Obligations of Seller. The obligations of Seller to sell the Purchased Assets at the Closing are subject to the satisfaction at or prior to the Closing of each of the following conditions (unless satisfaction of any such condition is expressly waived by Seller in writing):

(a) The representations and warranties of Purchaser contained in Article III shall be accurate in all material respects as of the date hereof and as of the Closing Date as though restated on and as of such date (except in the case of any representation or warranty that by its terms is made as of a date specified therein, which shall be accurate in all material respects as of such date);

(b) Purchaser shall have performed and complied with, in all material respects, all agreements, covenants and obligations required by this Agreement to be performed or complied with by it prior to or at the Closing;

(c) No Proceeding by any Governmental Authority shall be pending which seeks to prohibit or declare illegal the transactions contemplated by this Agreement and no Law or Judgment shall be in effect having any such result;

(d) The consent of the Nevada Gaming Commission, shall have been obtained and all waiting periods specified under the HSR Act, shall have expired or been terminated;

(e) Purchaser shall have delivered the Target Purchase Price to Seller as provided in Section 1.5;

(f) Seller shall have executed and delivered the Collateral Agreements;

(g) Seller shall have obtained the written consent of Smith to the assignment of the Smith Contract to Purchaser and the release of Seller from any post-assignment liability under the Smith Contract, in a form and on terms, including any changes made to the Smith Contract after the date hereof, satisfactory to Seller; and

(h) Seller shall have received from Purchaser a certificate, signed by an appropriate officer of Purchaser, as to the satisfaction of the conditions set forth in paragraphs (a) and (b) of this Section 6.2.

ARTICLE VII
TERMINATION

7.1 Grounds for Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) By the written agreement of each of Purchaser and Seller;

(b) By Seller if it shall have determined in good faith that one or more of the conditions set forth in Section 6.2 cannot be fulfilled as a result of an occurrence or event beyond the control of Seller;

(c) By Purchaser if it shall have determined in good faith that one or more of the conditions set forth in Section 6.1 cannot be fulfilled as a result of an occurrence or event beyond the control of Purchaser;

(d) By either Purchaser or Seller if any permanent injunction or Proceeding by any Governmental Authority of competent jurisdiction enjoining, denying approval of or otherwise prohibiting consummation of any of the transactions contemplated by the Agreement becomes final and nonappealable;

(e) By Purchaser at any time during the five business day period after Seller has delivered to Purchaser the Seller Disclosure Schedule if, within such time period, Purchaser determines it is not satisfied with the content and information disclosed therein;

(f) By either Purchaser or Seller if the Closing shall not have occurred on or prior to January 31, 2003; provided, that the failure to close by such date was not caused by the terminating party; or

(g) By either Purchaser or Seller in accordance with Section 5.8 hereof.

7.2 Procedure for Termination.

(a) In the event of termination and abandonment by Purchaser or Seller, or both, pursuant to Section 7.1 hereof, written notice thereof shall forthwith be given to the other party or parties, and this Agreement shall terminate, and the purchase of the Purchased Assets hereunder shall be abandoned, without further action by Purchaser or Seller.

(b) In the event of termination and abandonment for any reason, each party shall redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, including all copies thereof, whether so obtained before or after the execution hereof, to the party furnishing the same, including, but not limited to, information furnished to Purchaser relating to the business of Anchor, slot location leases, licenses, operating agreements, financial information and financial projections.

7.3 Effect of Termination. In the event that this Agreement is validly terminated as provided herein and in accordance with Article VII hereof, then each of the parties shall be relieved of their duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to Purchaser or Seller; provided, however, that the obligations of the parties set forth in Sections 9.1 hereof shall survive any such termination and shall be enforceable hereunder; provided, further, however, that nothing in this Section 7.3 shall relieve Purchaser or Seller of any liability for a breach of this Agreement.

ARTICLE VIII
INDEMNIFICATION

8.1 Obligations of Seller.

(a) Seller agrees to indemnify and hold harmless Purchaser, and its directors, officers, employees, affiliates, agents and assigns from and against any action, cost, damage, disbursement, expense, liability, loss, deficiency, diminution in value, obligation, penalty or settlement of any kind or nature, whether foreseeable or unforeseeable, including but not limited to, interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims and amounts paid in settlement, that may be imposed on or otherwise incurred or suffered by the specified person (collectively, "Losses") of Purchaser, directly or indirectly, as a result of, or based upon or arising from:

(i) any material inaccuracy in or material breach or nonperformance of any of the representations, warranties, covenants or agreements made by Seller in or pursuant to this Agreement;

(ii) any other matter as to which Seller in other provisions of this Agreement has agreed to indemnify Purchaser;

(iii) any liability or obligation of Seller or any of its Affiliates not expressly assumed by Purchaser pursuant to Section 1.3 hereof without regard to the date of origination; or

(iv) any Excluded Liabilities.

(b) Notwithstanding the provisions of Section 8.1(a) above, Purchaser shall be entitled to indemnity from Seller for claims arising under Section 8.1(a)(i) only after the aggregate claims thereunder ("Aggregate Claims") exceeds $200,000 (the "Indemnification Deductible"), and then only for the amount of such excess. In no event shall Purchaser be entitled to indemnification under Section 8.1(a)(i) for an amount, in the aggregate, in excess of $6,200,000 (the "Indemnification Cap").

8.2 Obligations of Purchaser.

(a) Purchaser agrees to indemnify and hold harmless Seller, and its respective directors, officers, employees, shareholders, affiliates, agents and assigns, from and against any Losses of Seller, directly or indirectly, as a result of, or based upon or arising from:

(i) Any material inaccuracy in or material breach or nonperformance of any of the representations, warranties, covenants or agreements made by Purchaser in or pursuant to this Agreement;

(ii) any other matter as to which Purchaser in other provisions of this Agreement has agreed to indemnify Seller;

(iii) any of the Assumed Liabilities;

(iv) any third party claims in respect of the Purchased Assets, Assumed Liabilities or the Business (or regarding the conduct of the Business) which arise after the Closing; or

(v) any loss, claim, damage, liability or expense as a result of a claim brought by a purchaser of securities to which Seller may become subject, under the Securities Act of 1933, the Securities and Exchange Act of 1934 or other federal or state statutory law or regulation, insofar as such claim, damage, liability or expense arises out of or is based upon the untrue statement or alleged untrue statement of a material fact contained in Purchaser's private offering memorandum, subsequent registration statement or other required SEC disclosure document or arises out of or is based upon the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;provided, however, that the foregoing indemnity shall not affect the Purchaser's ability to seek recovery for any loss, claim, damage, liability or expense incurred by the Purchaser for breaches of Seller's representations and warranties.

8.3 Certain Tax Matters.

(a) Seller Indemnity. Seller agrees to indemnify, defend and hold harmless Purchaser against (i) any Tax payable by or on behalf of Seller or any of its Affiliates, (ii) any deficiencies in any Tax payable by or on behalf of Seller or any of its Affiliates with respect to any period ending (or treated by this Agreement as ending) on or prior to the Closing Date, (iii) Taxes of any member of a consolidated or combined tax group of which Seller or any of its Affiliates are, or were at any time, a member, for which Purchaser is jointly or severally liable, (iv) any claim or demand for reimbursement or indemnification resulting from any transfer by Seller prior to the Closing to any other person of any Tax benefits or credits attributable to the Business, the Purchased Assets or the Assumed Liabilities, or assumption of any Tax liability arising out of the transfer of the Purchased Assets, including assumption of the Assumed Liabilities, and (v) with respect to any Taxes payable by Purchaser with respect to the operation of the Business and the ownership of the Purchased Assets (other than Purchaser's income or franchise taxes) due for periods commencing on or prior to and ending after the Closing Date (whether or not assessed prior to the Closing Date), a pro-rata share of such Taxes, calculated as if the period ended on the Closing Date. Notwithstanding the foregoing, Seller shall not be liable to Purchaser and Seller shall not indemnify Purchaser for any Taxes payable pursuant to Section 5.4(b).

(b) Audit Matters. Seller shall have the responsibility for, and the right to control, at Seller's expense, the audit (and disposition thereof) of any Tax Return relating to periods ending on or prior to the Closing Date and shall have the right to participate in the disposition of the audit of any Tax Return relating to the periods ending after the Closing Date if and to the extent that such audit or disposition thereof could give rise to a claim for indemnification hereunder. Purchaser shall have the right directly or through its designated representatives, to review in advance and comment upon all submissions made in the course of audits or appeals thereof to any Governmental Authority relating to

periods ending (or treated by this Agreement as ending) on or prior to the Closing Date and to approve the disposition of any audit adjustment with respect to such periods if such disposition will or might reasonably be expected to result in an increase in Taxes of Purchaser for any period beginning at or after the Closing.

Without in any way limiting Seller's or Purchaser's obligation to make indemnification payments under this Agreement, if any Loss or Tax with respect to which any claim for indemnification is made under this Agreement (a "Claim") gives rise to a Tax Benefit to the person making the Claim or any Affiliate of such person (such person or Affiliate, the "Claimant") in a taxable period, or portion thereof, beginning after the Closing Date, then the amount of the related indemnity payment shall be reduced by the amount of such Tax Benefit. For purposes of this Agreement, "Tax Benefit" means the amount by which the Tax liability of a Claimant for a taxable period is reduced (including, without limitation, by deduction, reduction of income upon a sale, disposition or other similar transaction as a result of increased Tax basis, receipt of a refund of Taxes or use of a credit of Taxes) plus any related interest (net of Taxes payable thereon) received from the relevant Tax authority, as a result of incurring or suffering any such Loss or Tax. The amount of any Tax Benefit for a Claimant for a taxable period shall be calculated by comparing (x) the Tax liability of such Claimant computed without regard to any losses, deductions, credits or other Tax items attributable to such Loss or Tax, to (y) the Tax liability of such Claimant computed taking into account any losses, deductions, credits or other Tax items attributable to such Loss or Tax; provided, however, that if the Tax liability in question pertains to a consolidated, combined or unitary Tax Return that includes Claimant, the Tax Benefit shall be computed by reference to the consolidated or combined Tax Liability of the affiliated companies included in such Tax Return rather than to the separate Tax Liability of Claimant; provided further that if the party obligated to make such indemnity payment under this Agreement (the "Paying Party") receives evidence demonstrating that such Claimant has not previously used, and will not be able to use in the taxable period in which such indemnity payment is to be made, all or a portion of such Tax Benefit, then (i) the amount of the indemnity payment shall be reduced only by the portion of such Tax Benefit (if any) that such Claimant has previously used or will be able to use in such taxable period and (ii) the party entitled to receive such indemnity payment under this Agreement (the "Payee") will be obligated to pay to such Paying Party the amount of any unused portion of such Tax Benefit at such times or times as and to the extent that such Claimant actually uses such portion. Seller and Purchaser agree to provide (and agree to cause any Affiliate or Claimant to provide) each other and each other's designated representatives with assistance and such documents and records reasonably requested by them that are relevant to their ability to determine whether there is, and the amount of, a Tax Benefit, including copies of Tax Returns, schedules, and related supporting documents.

8.4 Procedure.

(a) Notice. Any party seeking indemnification (an "Indemnified Party") with respect to any Loss shall give notice thereof to the party required to provide indemnity hereunder (the "Indemnifying Party"). Notwithstanding the foregoing, (i) no Indemnified Party shall have any obligation to give any notice of any asserted liability by a third party unless such assertion is in writing, and (ii) the rights of any Indemnified Party to be indemnified in respect of any Loss resulting from the asserted liability shall not be adversely affected by the Indemnified Party's failure to give or delay in giving notice unless (and then only to the extent that) the Indemnifying Party is materially prejudiced thereby.

(b) Defense. If any claim, demand or liability is asserted by any third party against any Indemnified Party, the Indemnifying Party shall upon the written request of the Indemnified Party, defend any action or proceeding brought against the Indemnified Party in respect of matters embraced by the indemnity. The parties shall cooperate in the defense of all third party claims which may give rise to any Loss for or against which any party is entitled to indemnification under this Agreement. In connection with the defense of any claim, each party shall make available to the party controlling such

defense, any books, records or other documents within its control that are necessary or appropriate for such defense.

8.5 Survival.

This Article VIII shall survive any termination of this Agreement.

8.6 Notice by Seller.

Seller agrees to notify Purchaser of any liabilities, claims or misrepresentations, breaches or other matters covered by this Article VIII upon discovery or receipt of notice thereof (other than from Purchaser), whether before or after Closing. Purchaser agrees to notify Seller of any liabilities, claims or misrepresentations, breaches or other matters covered by this Article VIII upon discovery or receipt of notice thereof (other than from Seller), whether before or after Closing.

ARTICLE IX
MISCELLANEOUS

9.1 Confidentiality. Each party hereto will hold, and will use its best efforts to cause its Affiliates, and in the case of Purchaser, any Person who has provided, or who is considering providing, financing to Purchaser to finance all or any portion of the Target or Final Purchase Price, and their respective representatives to hold, in strict confidence from any Person (other than any such Affiliate, Person who has provided, or who is considering providing, financing or representative), unless (a) compelled to disclose by judicial or administrative process (including, without limitation, in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental Authorities) or by other requirements of Law or (b) disclosed in a Proceeding brought by a party hereto in pursuit of its rights or in the exercise of its remedies hereunder, all documents and information concerning the other party or any of its Affiliates furnished to it by the other party or such other party's Representatives in connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (i) previously known by the party receiving such documents or information, (ii) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (iii) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential; provided that following the Closing the foregoing restrictions will not apply to Purchaser's use of documents and information concerning the Business furnished by Seller hereunder. In the event the transactions contemplated hereby are not consummated, upon the request of the other party, each party hereto will, and will cause its Affiliates, any Person who has provided, or who is providing, financing to such party and their respective Representatives to, promptly (and in no event later than five (5) business days after such request) redeliver or cause to be redelivered all copies of confidential documents and information furnished by the other party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the party furnished such documents and information or its representatives.

9.2 Survival of Representations and Warranties. All representations and warranties made by either party pursuant to this Agreement shall survive and continue in full force and effect until the first anniversary of the Closing Date (the "Expiration Date"), and any claim for breach thereof must be asserted in writing by the Expiration Date. None of such representations and warranties shall survive the termination of this Agreement pursuant to Section 7.1.

9.3 Costs and Expenses. Whether or not the transactions contemplated by this Agreement are consummated, each of the parties to this Agreement shall bear its own expenses incurred in connection

with the negotiation, preparation, execution and closing of this Agreement and the transactions provided for hereby.

9.4 Notices. All notices or other communications required or permitted by this Agreement shall be effective upon receipt and shall be in writing and delivered personally or by overnight courier, or sent by facsimile, as follows:

If to Purchaser, to:

Herbst Gaming, Inc.
3440 West Russell Road
Las Vegas, Nevada 89118
Attn: Sean Higgins
Fax: (702) 798-8079

with a copy to:

Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway, 7^th Floor
Las Vegas, Nevada 89109
Attn: John N. Brewer
Fax: (702) 796-7181

If to Seller, to:

International Game Technology
9295 Prototype Drive
Reno, Nevada 89511
Attn: Thomas J. Matthews
Chief Operating Officer
Fax: (775) 448-

with a copy to:

International Game Technology
9295 Prototype Drive
Reno, Nevada 89511
Attn: Sarah Beth Brown and
Ken Creighton
Fax: (775) 448-0120

or to such other address as hereafter shall be furnished as provided in this Section 8.3 by any of the parties hereto to the other parties hereto.

9.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument.

9.6 Entire Agreement. This Agreement (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) sets forth the entire understanding and agreement between the parties as to the matters covered herein and supersedes and replaces any prior understanding, agreement or statement of intent, in each case, written or oral, of any and every nature with respect thereto. Purchaser acknowledges hereby that it has conducted its own independent review and analysis of the Business and the Purchased Assets and Assumed Liabilities and that it has been provided access to the properties, records and personnel of the Business for this purpose. In entering into this Agreement, Purchaser has relied solely upon its own investigation and analysis and the representations and warranties set forth in this Agreement and acknowledges that neither Seller nor any of its affiliates, directors, officers, employees, agents, representatives or advisors makes any representation or warranty,

either express or implied, as to the accuracy or completeness of (and agrees that none of such persons shall have any liability or responsibility to it in respect of) any of the information provided or made available to Purchaser or its agents or representatives, except as and only to the extent expressly provided for in this Agreement.

9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEVADA, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

9.8 No Third Party Rights; Assignment. This Agreement is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto and shall not be assignable without the prior written consent of the other parties.

9.9 Waivers and Amendments. No modification of or amendment to this Agreement shall be valid unless in a writing signed by the parties hereto referring specifically to this Agreement and stating the parties' intention to modify or amend the same. Any waiver of any term or condition of this Agreement must be in a writing signed by the party sought to be charged with such waiver referring specifically to the term or condition to be waived, and no such waiver shall be deemed to constitute a waiver of any other breach of the same or of any other term or condition of this Agreement.

9.10 Interpretation. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" and "including" are used in this Agreement., they shall be deemed to be followed by the words "without limitation."

[SIGNATURES ON FOLLOWING PAGE.]

IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first written above.

		ANCHOR COIN
		By:	/s/ JOSEPH MURPHY
		Name:	Joseph Murphy
		Title:	Vice President/COO of Gaming Operations


		HERBST GAMING, INC.
		By:	/s/ EDWARD J. HERBST
		Name:	Edward J. Herbst
		Title:	President


		MARKET GAMING, INC.
		By:	/s/ EDWARD J. HERBST
		Name:	Edward J. Herbst
		Title:	President


		E-T-T, INC.
		By:	/s/ EDWARD J. HERBST
		Name:	Edward J. Herbst
		Title:	President

S-1

ANCHOR COIN

ROUTE SALE

SCHEDULE 1.1(a) ASSUMED LEASES

Lease Agreement between Anchor Coin and Freddie's Roost, 6590 North Wingfield Parkway, Sparks, Nevada, dated March 10, 2000.

Lease Agreement between Anchor Coin and B&L Distributing, Inc. dbas The Pantry Food and Spirits, 151 North Sierra Street, Reno, Nevada, dated May 8, 2002.

Lease and Sublease Agreement between Smith's Food & Drug Centers, Inc. and Anchor Coin, dated July 28, 1993.

First Amendment to Lease and Sublease Agreement, dated June 30, 1994.

Second Amendment to Lease and Sublease Agreement, dated January 25, 1995.

Third Amendment to Lease and Sublease Agreement, dated March 28, 1995.

Fourth Amendment to Lease and Sublease Agreement, dated February 27, 1996.

Fifth Amendment to Lease and Sublease Agreement, dated April 26, 1996.

Sixth Amendment to Lease and Sublease Agreement, dated November 13, 1996.

Seventh Amendment to Lease and Sublease Agreement, dated February 21, 1997.

Eighth Amendment to Lease and Sublease Agreement, dated December 19, 1997.

Ninth Amendment to Lease and Sublease Agreement, dated August 4, 1998.

Tenth Amendment to Lease and Sublease Agreement, dated September 29, 1998.

Eleventh Amendment to Lease and Sublease Agreement, dated May 3, 1999.

Twelfth Amendment to Lease and Sublease Agreement, dated March 29, 2000.

Thirteenth Amendment to Lease and Sublease Agreement, dated January 12, 2001.

Fourteenth Amendment to Lease and Sublease Agreement, dated October 9, 2002.

First Affiliate Amendment to Lease and Sublease Agreement between Ralphs Grocery Company (an affiliate of Smith's Food & Drug Centers, Inc.) and Anchor Coin, dated August 23, 2002.

Hold Harmless Agreement between Smith's Food and Drug Centers, Inc. and Anchor Coin, dated September 2, 1993 (the "Hold Harmless Agreement").

Lease Agreement between Anchor Coin and V.N.N. Corporation dbas Splash N' Go, 1100 East Lake Mead Drive, Henderson, Nevada, dated July 12, 2001.

Master Lease and EZ Route Software License Agreement, dated December 1, 1997.

Letter Agreement dated December 5, 1997 regarding EZ Route Lease.

Addendum to Lease Schedule for Master Lease & EZ Route Software License Agreement, dated December 1, 1997, between IGT and Anchor Gaming, dba Anchor Coin.

SCHEDULE 1.1(c) ACCOUNTS RECEIVABLE

Anchor Coin has the following notes receivable, of which the repayment is set off against amounts due to Location pursuant to participation agreements (amounts listed below for the principal amounts of the notes and do not necessarily reflect the current amounts due):

Club Monaco		$115,829.36 (reduced by weekly payments)
Note: Anchor Coin has been informed that Club Monaco is being sold and that this note will be paid off at time of sale.
Play of the Day		$25,000 (reduced by weekly payments)
Village Pub		$600,000 (reduced by weekly payments)

The following are consideration payments made by Anchor Coin to the location. These payments are depreciated over the term of the agreement; in the event of early termination, the contract provides for repayment of the pro rata balance of the consideration.

There are additional consideration payments which have been removed from the Seller's books but have similar contractual provisions.

Club Diamond		$50,000 (prior to 6/29/02)
Arco—Craig		$30,000 (prior to 6/29/02)
Lighthouse		$30,000 (8/28/02)
Arco Tropicana & Ft. Apache		$30,000 (10/1/02)
Duffy's		$35,000 (10/4/02)
City Stop No. 8		$50,000 (to be paid)

Anchor Coin has Markers from certain Locations in the Vault.

SCHEDULE 1.1(d) PRINCIPAL EQUIPMENT

See the attached spreadsheet titled "Appendix 1.1" which contains the information for Schedule 1.1(d).

SCHEDULE 1.1(e) PERSONAL PROPERTY

See the attached spreadsheet titled "Appendix 1.1" which contains the information for Schedule 1.1(e).

SCHEDULE 1.1(f) ASSIGNED INTELLECTUAL PROPERTY

License Agreement for Double Down Stud

IGT Multi-Hand Poker Intellectual Property License Agreement, dated June 13, 2002.

Master Lease and EZ Route Software License Agreement, dated December 1, 1997.

Letter Agreement dated December 5, 1997 regarding EZ Route Lease.

Addendum to Master Lease and EZ Route Software License Agreement, dated May 18, 1998.

SCHEDULE 1.1(g) CONTRACTS; LOCATION CONTRACTS

Those Lease Agreements listed in Schedule 1.1(a) are hereby incorporated in this Schedule 1.1(g) by reference.

Participation Agreement between Anchor Coin and Harold J. Spickler dbat 7-11 #13681, 4950 West Charleston, Las Vegas, Nevada, dated April 11, 2002.

Participation Agreement between Anchor Coin and Fre Kapel LLC dbat Arco AM PM, Craig Road and Rainbow, Las Vegas, Nevada, dated February 8, 2002 (Arco #81928).

Participation Agreement between Anchor Coin and United Brothers Enterprises, Inc. dbas Arco AM/PM #81948, Lamb and Owens, Las Vegas, Nevada, dated April 23, 1998 (Arco #81948.

Participation Agreement between Anchor Coin and Rhino Investments LLC dba Hacienda Decatur Mini Mart, 5325 S. Decatur, Las Vegas, Nevada, dated December 23, 1999, as amended by that certain Addendum to Participation Agreement, dated October 2, 2001 (Arco #82057).

Participation Agreement between Anchor Coin and United Brothers L.L.C. dbas Arco AM/PM #82070, S.E. Corner Lamb & Craig, Las Vegas, Nevada, dated September 7, 1999.

Participation Agreement between Anchor Coin and John Milk LLC @ Arco #82094, 1500 West Bonanza, Las Vegas, Nevada, dated January 9, 2001.

Participation Agreement between Anchor Coin and Arco #82153, 209 East Flamingo, Las Vegas, Nevada, dated November 15, 2001.

Participation Agreement between Anchor Coin and Arco #82154, 4380 West Spring Mountain Road, Las Vegas, Nevada, dated November 15, 2001.

Participation Agreement between Anchor Coin and Arco #82155, 3885 East Charleston, Las Vegas, Nevada, dated November 15, 2001.

Participation Agreement between Anchor Coin and Arco #82156, 1619 South Las Vegas Blvd., Las Vegas, Nevada, dated November 15, 2001.

Participation Agreement between Anchor Coin and Mountain Vista LLC dbat Arco Super Store, Mountain Vista and Russell Road, Las Vegas, Nevada, dated March 6, 2000.

Participation Agreement between Anchor Coin and Pale Horse LLC, Las Vegas Blvd. and Lake Mead Drive, Las Vegas, Nevada, dated May 24, 2000 (Arco #7).

Participation Agreement between Anchor Coin and Grizzly Investments LLC dbas Arco (# to be assigned), Tropicana and Fort Apache, Las Vegas, Nevada, dated October 2, 2001.

Participation Agreement between Anchor Coin and Auntee M's, 4275 South Arville, Las Vegas, Nevada, dated January 25, 2001.

Amended and Restated Participation Agreement between Anchor Coin and Bartnel Corporation dba The Barking Frog, 5150 Spring Mountain Road, Las Vegas, Nevada, dated April 1, 1999.

•: Promissory Note and Security Agreement by Bartnel Corporation d.b.a. Barking Frog, to Anchor Coin in the aggregate amount of $126,666.66 at 9% per annum, dated April 1, 1999 and maturing July 1, 2005. (Anchor credits Bartnel for amounts due as payments each month that Anchor operates its machines at Bartnel's location. If term of Participation Agreement is completed, no amounts are due to Anchor.)

Participation Agreement between Anchor Coin and Lodge Inc. dba Blue Frog, 4755 Spring Mountain, Las Vegas, Nevada, dated March 1, 2002, as amended by that certain Addendum dated August 15, 2002 and effective as of March 1, 2002, changing the name of Location to Lighthouse.

Participation Agreement between Anchor Coin and Martha's Vineyard LLC dbas Cactus Depot, 1571 N. Buffalo, Las Vegas, Nevada, dated October 21, 1999.

Participation Agreement between Anchor Coin and LIPSTX LLC dba Café Michele, 1350 East Flamingo Road, Las Vegas, Nevada, dated June 24, 2002.

Participation Agreement between Anchor Coin and Capri Pizza Inc. dba Capri Pizza Italian Restaurant and Lounge, 4080 South Paradise, Nos. 6, 7, & 8, Las Vegas, Nevada, dated January 5, 2001.

Participation Agreement between Anchor Coin and Cavalier Lounge, 3850 E. Desert Inn, Las Vegas, Nevada, dated March 3, 1995, as amended by that certain Amendment to Participation Agreement, dated October 24, 1995.

•: Promissory Note and Security Agreement by Jay Phillipi and Linda Phillipi, to Anchor Coin, dated March 3, 1995, as amended by that certain Amendment to Promissory Note and Security Agreement, dated October 24, 1995, in the aggregate amount of $180,000 at 10% per annum.
•: Personal Guaranty of Jay Phillipi and Linda Phillipi, dated March 3, 1995.
•: Agreement between Anchor Coin and Jay and Linda Phillippi, dated October 24, 1995 amending the Promissory Note and Security Agreement.
•: Letter Agreement (Participation Agreement) between Anchor Coin and Cavalier LLC dbas Cavalier Lounge, 3850 E. Desert Inn Road, Las Vegas, Nevada, dated March 3, 1995.

Participation Agreement between Anchor Coin and Gorilla Investments LLC dbat Exxon, 6075 W. Spring Mountain Road, Las Vegas, Nevada, dated November 20, 2000 (Chevron #404).

Participation Agreement between Anchor Coin and CityStop Gaming, Inc. (City Stop #7), 7591 Cimarron, Las Vegas, Nevada, dated November 22, 2000.

Participation Agreement between Anchor Coin and CityStop Gaming, Inc. (City Stop #8), Tenaya & Alexander S.E. Corner, Las Vegas, Nevada, dated November 30, 2000.

Participation Agreement between Anchor Coin and M.D.C. Ent. Inc. dba Club Diamond, 840 North Decatur Suites D, E and F, Las Vegas, Nevada, dated April 19, 2002.

Participation Agreement between Anchor Coin and Monaco, Inc. dbas Club Monaco, 1487 E. Flamingo Road, Las Vegas, Nevada, dated August 16, 2000.To be Superceded by next line item in February 2003.

Participation Agreement between Anchor Coin and Jo-Par, Inc. dbas Club Monaco, 1487 E. Flamingo Road, Las Vegas, Nevada, dated June 20, 2002.

•: Promissory Note and Security Agreement by Monaco, Inc., to Anchor Coin, dated October 18, 2001, in the aggregate amount of $115,829.36. This promissory note will be paid in full upon entering into the new agreement described in the preceding paragraph.
•: Personal Guaranty of John Monaco, dated October 18, 2001.

Participation Agreement between Anchor Coin and Cooler Lounge, 1905 N. Decatur Boulevard, Las Vegas, Nevada, dated June 7, 1994. This agreement remains in effect per verbal agreement on a month-to-month basis.

Participation Agreement between Anchor Coin and JRG Enterprise dba Coyotes West, 1750 Rainbow #8, Las Vegas, Nevada, dated December 1, 2000.

Participation Agreement between Anchor Coin and JAGLV dba Crowbar Lounge, 1113 South Rainbow, Las Vegas, Nevada, dated June 7, 2002. Participation Agreement between Anchor Coin and Dealers Choice Inc. dba Dealers Choice, 4552 Spring Mountain, Las Vegas, Nevada, dated March 8, 2001.

Participation Agreement between Anchor Coin and Jimmie Lee L.L.C. dbas Dean's Den, 48085 Nellis Blvd., Las Vegas, Nevada, dated June 13, 2001, as amended by that certain Amendment to Participation, dated February 11, 2002.

Participation Agreement between Anchor Coin and Joel Selznick dbas Dew Drop Inn, 4200 Boulder Highway, Las Vegas, Nevada, dated March 3, 1999.

Participation Agreement between Anchor Coin and Four Horsemen LLC dbas Duffy's Tavern, 4420 East Charleston, Las Vegas, Nevada, dated April 2, 2002.

Participation Agreement between Anchor Coin and Lee Card Enterprises Inc. dbas R&R Stations, 4708 W. Charleston, Las Vegas, Nevada, dated September 21, 2000(Exxon).

Participation Agreement between Anchor Coin and F.L. Smith LLC, Lake Mead & Mariner, Las Vegas, NV, dated August 28, 1997. (Fabulous Freddies)

Participation Agreement between Anchor Coin and 24 Play Inc. dbas Free Zone, 610 Naples, Las Vegas, Nevada, dated January 9, 1998. This agreement remains in effect per verbal agreement on a month-to-month basis.

Participation Agreement between Anchor Coin and GORF Inc. dba Sunrise Frog, 1602 N. Nellis Boulevard, Las Vegas, Nevada, dated May 19, 2000, as amended by that certain Addendum to Participation Agreement, dated November 22, 2000, and as further amended by that certain Addendum to Participation, dated March 29, 2001 (Frog Lodge).

Participation Agreement between Anchor Coin and Gino's II, 1151 So. Main, Las Vegas, Nevada, dated August 14, 1989.

Participation Agreement between Anchor Coin and Gourmet Café, 330 S. Third Street, Las Vegas, Nevada, dated June 10, 1997, as amended by that certain Addendum to Participation Agreement, dated May 15, 1998, and as further amended by that certain Addendum to Participation Agreement, dated November 21, 2000.

Participation Agreement between Anchor Coin and Sportspage Inc. dba Hank's Place, 6000 S. Eastern, Las Vegas, Nevada, dated May 30, 2000.

Participation Agreement between Anchor Coin and Big Daddy's Ichabod's I, Inc., 3300 East Flamingo, Las Vegas, Nevada, dated December 11, 2001.

Participation Agreement between Anchor Coin and Idle Spurs of Sandy Valley, 189 Quartz Avenue, Sandy Valley, Nevada, dated November 17, 1999, as amended by that certain Addendum to Participation Agreement, dated February 23, 2000.

Participation Agreement between Anchor Coin and Eminence Enterprises d.b.a. Irene's Gaming Lounge, 6125 West Tropicana, Las Vegas, Nevada, dated April 30, 2001 (F/K/A Foothills Lounge).

Participation Agreement between Anchor Coin and Losee L.L.C. dbas Losee Mini Mart, 300 West Lake Mead North, Las Vegas, Nevada, dated July 2, 2001, as amended by the Addendum to Participation, dated October 31, 2001.

Participation Agreement between Anchor Coin and Jamim Inc. dba Mobil Food Shop No. 2, 6525 West Sahara, Las Vegas, Nevada, dated April 17, 2001.

Participation Agreement between Anchor Coin and O'ski's Pub & Grille, 840 Victorian Avenue, Sparks, Nevada, dated May 10, 2000.

Participation Agreement between Anchor Coin and Play of The Day Inc. dbas Play of The Day Bar, 1590 East Flamingo, Las Vegas, Nevada, dated August 7, 2001.

•: Promissory Note and Security Agreement by Play of the Day, Inc. to Anchor Coin, dated February 15, 2002.
•: Personal Guaranty of George Anast.

Participation Agreement between Anchor Coin and Pizza Pub Inc. dba Loading Dock, 4510 S. Arville, Las Vegas, Nevada, dated October 6, 1999. (Name change to Royal Frog)

Participation Agreement between Anchor Coin and Eric Von Goerken dba Cold Shot Bar & Grill, 4601 W. Sahara, Las Vegas, Nevada, dated October 6, 1999, as amended by that certain Addendum to Participation Agreement, dated March 21, 2002, with da Silva-Brammall dba Beefy's.

Participation Agreement between Anchor Coin and Anna-Ria, Inc. dba Spiro's Bar and Grille, 4690 Longley Lane, #30, Reno, Nevada, dated January 5, 2001.

Participation Agreement between Anchor Coin and Farquhar Racing Ltd. dba Sullivan's Bar & Grille, 1290 East Plumb Lane, Reno, Nevada, dated June 3, 2002.

Participation Agreement between Anchor Coin and Tenaya Point LLC dbas Tenaya Creek Restaurant & Brewery, 3101 N. Tenaya Way, Las Vegas, Nevada, dated August 3, 1999.

Participation Agreement between Anchor Coin and T-Bird #2 LLC, 8025 Farm Road, Las Vegas, Nevada, dated February 7, 2001.

Participation Agreement between Anchor Coin and Lisa/Carrison Ltd. dbat T-Bird, 3330 E. Tropicana Avenue, Las Vegas, Nevada, dated September 18, 1998, as amended by that certain Addendum, dated January 20, 1999.

Participation Agreement between Anchor Coin and Greenfoot L.L.C. dba Thumpers, 3870 East Flamingo, Las Vegas, Nevada, dated January 22, 2002.

•: Letter Agreement, dated May 29, 2002, among Anchor Coin, Maley's Enterprises and Green Foot, LLC.

Participation Agreement between Anchor Coin and Village Pub & Casino-Summerlin, 2610 Regatta Drive, Las Vegas, Nevada, dated July 20, 1998, as amended by that certain Addendum to Participation Agreement, dated February 19, 1999.

•: Loan Extension Agreement between Village Pub & Casino—Summerlin and Anchor Coin, dated September 3, 1999.
•: Loan Extension Agreement between Village Pub & Casino—Summerlin and Anchor Coin, dated October 26, 2000.
•: Promissory Note Secured by Deed of Trust by Village Pub & Casino—Summerlin to Anchor Coin, dated July 20, 1998, in the amount of $600,000.
•: Guaranty of Payment and Performance by Gary Ellis, dated July 20, 1998.

Participation Agreement between Anchor Coin and M&L Inc. dbas Woody's Bar & Grill, 3101 West Sahara Avenue, Las Vegas, Nevada, dated December 8, 2000.

Contract between Anchor Coin and Stan Arachikavitz, dated February 25, 1997, as amended by that Addendum to Contract between Anchor Coin and Stan Arachikavitz, dated January 9, 1998. (Service contract for gaming devices in Smith's food centers in Pahrump)

Contract between Anchor Coin and Brandon Abbott, dated July 16, 1997. (Service contract for gaming devices at Smith's food center at No. 342 Mesquite, Nevada.)

Agreement between Anchor and K&R Vending, dated June 18, 2001. (Agreement for K&R to provide drinks at 4 Smith's stores on a trial basis.)

Addendum to Lease Schedule for Master Lease & EZ Route Software License Agreement, dated December 1, 1997, between IGT and Anchor Gaming, dba Anchor Coin.

Participation Agreement between Anchor Coin and Joseph Kevin Jordan, as sole proprietor of Don Ricardos, 4930 W. Flamingo Road, Las Vegas, Nevada, dated October 3, 2002.

Purchase Orders

Anchor Coin has entered into the following purchase orders:

Buyer Number	Or Ty	PO Number	Item Description	UM	Promised Date	QTY	QTY Open	Unit Cost	Open Amount	Vendor
194044	OM	125361	AS-03210-0060 TKT ASSY DNL W	EA	10/7/2002	7	7	395	2,765.00	BALLY GAMING, I
194044	OM	125361	A-04380-0008 CHUTE,ITHACA PRN	EA	10/7/2002	7	4	250	1,000.00	BALLY GAMING, I
194044	OM	127387	CPM2056 14" OVERLAY	EA	12/18/2002	12	12	210	2,520.00	CERONIX INC
194044	OM	127387	CPM2115 T/S BRD	EA	12/18/2002	12	12	140	1,680.00	CERONIX INC
194044	OM	127663	CPM 1711C CRT	EA	1/8/2003	10	10	87.5	875	CERONIX INC
194044	OM	127663	CPM 2115 TOUCH SCREEN BOARDS	EA	1/8/2003	15	15	140	2,100.00	CERONIX INC
194044	OM	124226	20B4V212 DBV 200-B4	EA	8/29/2002	10	9	52	468	IGT — LV
194044	OM	126681	17" UR G/K MULTI DENOM	EA	11/20/2002	6	6	949.5	5,697.00	IGT — LV
194044	OM	126893	³/5 PLAY CHIPS	EA	11/26/2002	5	5	1,295.00	6,475.00	IGT — LV
194044	OM	127556	75426108 PCB 960 COMM SYS V2	EA	12/31/2002	10	10	147.35	1,473.50	IGT — LV
194044	OM	127556	65805400 PLUNGER SW SQ	EA	12/31/2002	100	100	0.56	56	IGT — LV
194044	OM	127556	67411400 SPCR SQ	EA	12/31/2002	25	25	0.43	10.75	IGT — LV
194044	OM	127556	65205100 BEZEL BUEATY SQ	EA	12/31/2002	25	25	0.69	17.25	IGT — LV
194044	OM	127556	66103800 RETAINER SW	EA	12/31/2002	25	25	0.56	14	IGT — LV
194044	OM	127556	65805500 PLUNGER SW RECT	EA	12/31/2002	100	100	0.53	53	IGT — LV
194044	OM	127556	51606400 SW BODY SQ	EA	12/31/2002	50	50	1.41	70.5	IGT — LV
194044	OM	127556	51000190 SNAP SW	EA	12/31/2002	500	500	0.84	420	IGT — LV
194044	OM	127556	29203490 COUNTER 24VAC 6DGT	EA	12/31/2002	10	10	6.49	64.9	IGT — LV
194044	OM	127556	51015190 DOOR SW MINI ROLLER	EA	12/31/2002	10	10	1.71	17.1	IGT — LV
194044	OM	126371	063360 SENSOR BD UPPER	EA	11/8/2002	5	5	175.77	878.85	JCM
194044	OM	126371	063359 SENSOR BD LOWER	EA	11/8/2002	5	5	118.14	590.7	JCM
194044	OM	126371	300-100059 CPU BD FLASH WBA10	EA	11/8/2002	3	3	135.71	407.13	JCM
194044	OM	126373	063839 CPU BRD FLASH²²/23	EA	11/8/2002	10	10	146.57	1,465.70	JCM
194044	OM	126373	300-100053 CPU BRD FLSH WBA12	EA	11/8/2002	5	5	235.13	1,175.65	JCM
194044	OM	126375	066813 CPU BD FLASH 24	EA	11/8/2002	20	20	149.14	2,982.80	JCM
194044	OM	126680	24" B-11 FLEX	EA	11/20/2002	15	15	228	3,420.00	AMMONITE LLC

SELLER DISCLOSURE SCHEDULES

ANCHOR COIN

ROUTE SALE

2.1 Organization

Seller is a Nevada corporation and is admitted to do business and is in good standing in the State of Nevada.

Seller is also qualified to do business and is in good standing in a number of other jurisdictions; however, qualification in these additional jurisdictions is not required to operate the Business.

2.3 No Breach

Those agreements and leases listed in Section 2.7 of this Disclosure Schedule require consent to assign.

Those permits listed in Section 2.15 of this Disclosure Schedule require prior consent and approval to transfer.

The terms of that certain Armored Service Agreement between Loomis, Fargo & Co. and Anchor Coin, dated February 4, 2002 are to be treated as confidential.

Exclusive Gaming Device Operation Agreement between Eastern Avenue Tavern Holdings, LLC, 9465 Eastern Avenue, Las Vegas, Nevada, and Anchor Coin, dated February 6, 1998, as amended by that certain Addendum to Participation Agreement, dated February 13, 2001, and further amended by that certain Agreement, dated October 19, 2001. (Eastern Avenue has the right to renegotiate or terminate this agreement on 60 days notice in the event that there is a change in the "Executive Management" of Anchor Coin (excluding the IGT transaction))

2.5 Financial Statements; Liabilities

(b)

There are additional consideration payments which have been removed from the Seller's books but have similar contractual provisions.

Lighthouse		$30,000 (8/28/02)
Arco Tropicana & Ft. Apache		$30,000 (10/1/02)
Duffy's		$35,000 (10/4/02)
City Stop No. 8		$50,000 (to be paid)

The following machines were purchased subsequent to 6/29/02:

Purchased 4 machines from IGT		7/27/02	33,278.39
Purchased 32 machines from IGT		9/28/02	264,566.01
Purchased 30 machines from IGT		10/4/02	268,841.43
	Total of machines purchased		566,685.83

Locations for 66 machines purchased:

Smith's 389		2
Food 4 Less- 2 locations @ 15 each		30
Crowbar		15
Café Michelle		15
	Total machines to be placed	62

(c)

See the list of machines purchased subsequent to 6/20/02 in subparagraph (b) hereof.

2.6 Absence of Certain Developments

None.

2.7 Consents